Ehlers v. Chrysler Motor Corp.

• Decision Date: 21 February 1975
• Docket Number: No. 11381,11381
• Citation: 226 N.W.2d 157,88 S.D. 612
• Parties: , 16 UCC Rep.Serv. 737 Don EHLERS, Plaintiff and Respondent, v. CHRYSLER MOTOR CORPORATION, Defendant and Appellant.
• Court: South Dakota Supreme Court

Page 157

226 N.W.2d 157

88 S.D. 612, 16 UCC Rep.Serv. 737

Don EHLERS, Plaintiff and Respondent, v. CHRYSLER MOTOR CORPORATION, Defendant and Appellant.

No. 11381.

Supreme Court of South Dakota.

Feb. 21, 1975.

R. E. Morgan, Morgan & Fuller, Chamberlain, for defendant and appellant.

Walley Eklund and Charles Rick Johnson, Johnson, Johnson & Eklund, Gregory, for plaintiff and respondent.

WINANS, Justice.

This is an action for breach of warranty arising out of the sale of a Chrysler automobile by the Ryan Motor Company of Sioux Falls, South Dakota. The alleged breach, and the jury so found, was that the vehicle was delivered with an undersized crankshaft, the car was noisy, windows were incorrectly installed and the transmission would not shift properly.

Upon realizing the existence of these defects respondent returned the car to Ryan Motors for repairs under the warranty. Warranty repair work was refused because in Chrysler's opinion the car's mileage had been altered by disconnecting the speedometer cable. Such an action would negate the warranty under the condition contained therein that 'this warranty will not apply to any vehicle on which the odometer mileage is altered'.

We must first decide the question of the admissibility of a letter written by the plaintiff-respondent to the officers of chrysler Corporation outlining the problems respondent had experienced with the car, and demanding that Chrysler honor the warranty. The letter contained the following statement: 'Further a Chrysler Dealer informed me there have been parts placed in this car that are not the proper parts * * * also * * * in his opinion we would never hold a transmition (sic) in this car with this motor in it.'

It is contended by appellant that this statement is inadmissible as hearsay, and as opinion evidence concerning a subject of a highly technical nature, which is beyond the everyday knowledge of most jurors.

Respondent answers, and we agree, that the letter was properly admissible to show notice of the defect had been given to the seller. SDCL 57--7--15, which is the counterpart of the Uniform Commercial Code, Section 2--607(3), reads as follows:

'Where a tender has been accepted

(1) The buyer must within a reasonable time after he discovers or should have discovered any breach notify the seller of breach or be barred from any remedy * * *.'

Due to this action being litigated as one for breach of warranty, the burden was on respondent, as the buyer, to show that he had given proper notice pursuant to statute. The letter in question served this purpose.

This proposition is supported by Jan Ree Frocks v. Pred, 1942, 68 S.D. 356, 359, 2 N.W.2d 696, 697. Referring to a forerunner of SDCL 57--7--15, Notice to seller of breach, the court stated:

'Acceptance of goods, however, does not discharge the seller from liability in damages or other remedy for breach of the contract, unless the buyer fails to give notice to the seller of the breach within a reasonable time after he knows or ought to know of it. * * * The purchaser has neither a right of action for the breach of a promise or warranty nor a defense for the purchase price, unless the required notice has been given. * * * The giving of such notice must be pleaded and proved by the purchaser seeking to recover or defend for the breach of warranty.' (citations omitted and emphasis supplied)

Clearly, the notice provision of SDCL 57--7--15 (U.C.C. 2--607(3)), is a fundamental prerequisite of a buyer's recovery for breach of warranty. We hold therefore that the letter transmitted from respondent to Chrysler was properly admitted to establish that the statutorily required notice of breach was given in a timely fashion.

Appellant next maintains that the trial court committed error by not granting its motion for a directed verdict at the close of the testimony. See SDCL 15--6--50(a).

On a motion for a directed verdict the trial judge:

'must accept that evidence which is most favorable to the party against whom the motion is sought, and indulge all legitimate inferences in his favor that can fairly be drawn therefrom. * * * If, when so viewed, there is any substantial evidence to sustain the cause of action or defense it must be submitted to the jury.' Myers v. Quenzer, 1961, 79 S.D. 248, 254, 110 N.W.2d 840, 843.

In ruling on this motion it was not the trial court's function, and is not now ours, to weigh the evidence or judge the credibility of witnesses. Our review is limited to the sole question of whether, in the light most favorable to the nonmoving party, there was 'any substantial evidence to sustain the cause of action.' In other words, was there a failure of proof on the part of the plaintiff-respondent to establish a valid cause of action?

Appellant bases its contention that a directed verdict was in order on evidence which it argues shows that the vehicle's mileage meter (odometer) had been tampered with. Under the terms of the warranty such tampering would end coverage.

The only supportive evidence offered by appellant Chrysler was the testimony of several Ryan Motor Company employees who stated they observed the speedometer cable was disconnected from the 'speed set' on the car in question. From the fact of disconnection the naked inference may be drawn that respondent had tampered with the cable.

In opposition to this inference evidence was produced through several witnesses and the vehicle's oil change slips to the effect that the odometer reading on the car was accurate when it was delivered for warranty work.

Respondent's evidence stands in direct conflict with the inference of tampering relied on by Chrysler. This court believes evidential conflicts such as this are properly resolved by a jury under instruction from the Trial Judge.

Because there is substantial evidence that respondent did not meddle with the vehicle's odometer, a well-grounded cause of action was presented by respondent's claim. The trial court, therefore, correctly decided not to short-circuit respondent's case by granting the directed verdict.

Appellant attempts to avoid imposition of liability by shielding itself behind the disclaimer contained in the vehicle's warranty which limits Chrysler's obligation to repair and replacement:

'THIS WARRANTY IS IN LIEU OF ANY OTHER WARRANTIES OR CONDITIONS, INCLUDING MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. THE REMEDIES UNDER THIS WARRANTY ARE EXCLUSIVE AND NEITHER CHRYSLER CORPORATION NOR CHRYSLER MOTORS CORPORATION ASSUMES NOR AUTHORIZES ANYONE TO ASSUME FOR THEM ANY OTHER OBLIGATION.'

Although somewhat obscure, it appears to be Chrysler's contention that the disclaimer should be given effect because it complies with pertinent provisions of the Uniform Commercial Code (U.C.C.) as set forth in SDCL.

Specifically, SDCL 57--8--49 (U.C.C. 2--719(1), Agreements limiting or excluding remedies, in pertinent part provides:

'(1) The agreement may provide for remedies in addition to or in substitution for those provided in chapters 57--2 to 57--8, inclusive, and may limit or alter the measure of damages recoverable under said chapters, as by limiting the buyer's remedies to return of the goods and repayment of the price or to repair and replacement of nonconforming goods or parts; and

(2) Resort to a remedy as provided is optional unless the remedy is expressly agreed to be exclusive, in which case it is the sole remedy.'

While this statute seems to provide Chrysler the shield it seeks, another provision, SDCL 57--8--50 (U.C.C. 2--719(2)), strips away the defense:

'Failure of exclusive or limited remedy, effect.--Where circumstances cause an exclusive or limited remedy to fail of its essential purpose, remedy may be had as provided in this title.'

Respondent does not contend that the limitations contained in the disclaimer are intrinsically unfair or unreasonable. He does contend that, while the limiting of remedies is proper, Chrysler may not rely on its disclaimer because the breach has caused the limited remedy to 'fail of its essential purpose'. Chrysler's breach occurred when it failed for an unreasonably long time to repair or replace defects in respondent's automobile.

Referring to U.C.C. 2--719(2), the parallel provision to SDCL 57--8--50, it was stated that '(T)his provision 'is not concerned with arrangements which were oppressive at their inception, but rather with the application of an agreement to novel circumstances not contemplated by the parties." J. White and R. Summers, Handbook Of The Law Under the Uniform Commercial Code (1972).

Thus, what was once fair, but due to novel circumstances is no longer, is the purview of this statute. As stated in the Official Comment to U.C.C. 2--719(2) (SDCL 57--8--50):

'* * * where an apparently fair and reasonable clause because of circumstances fails in its purpose or operates to deprive either party of the substantial value of the bargain, it must give way to the general remedy provisions of this Article.'

By delaying for an unreasonable length of time the repair of respondent's vehicle, appellant deprived him of the 'substantial value of the bargain.' Stated otherwise, the warranty was breached causing the available remedy 'to fail of its essential purpose'. Such failure brings into play all otherwise available remedial devices, towit: SDCL 57--8--39 (U.C.C. 2--715(1)), Incidental damages from seller's breach; and 57--8--40 (U.C.C. 2--715(2)), Consequential damages from seller's breach.

Support for our holding is found in Riley v. Ford Motor Company, 1971, 5 Cir., 442 F.2d 670. In Riley, a case strikingly similar to our own, plaintiff purchased a new automobile, which was covered by a warranty limiting the company's responsibility to repair or replacement of improperly working parts. Numerous defects were almost immediately discovered. Because they were unsatisfactorily repaired, plaintiff brought suit against the...