Fairchild Industries v. Maritime Air Service, Ltd.

• Citation: 274 Md. 181,333 A.2d 313
• Decision Date: 10 March 1975
• Docket Number: No. 4,4
• Parties: , 16 UCC Rep.Serv. 663 FAIRCHILD INDUSTRIES v. MARITIME AIR SERVICE, LTD. Misc.
• Court: Court of Appeals of Maryland

Page 181

274 Md. 181

333 A.2d 313, 16 UCC Rep.Serv. 663

FAIRCHILD INDUSTRIES v. MARITIME AIR SERVICE, LTD.

Misc. No. 4.

Court of Appeals of Maryland.

March 10, 1975.

James T. Wharton, Rockville (McCarthy & Wharton, Rockville, on the brief), for petitioner.

John J. Kenny, Rockville (Peter F. Axelrad, Baltimore, on the brief), for respondent.

Argued before MURPHY, C. J., and SINGLEY, SMITH, DIGGES, LEVINE, ELDRIDGE and O'DONNELL, JJ.

LEVINE, Judge.

In this case, we are called upon to determine two questions arising under Maryland Code (1957, 1964 Repl.Vol.) Art. 95B, § 2-316 ('Exclusion or modification of warranties'), which have been certified by the United States District Court for the District of Maryland pursuant to the Uniform Certification of Questions of Law Act, Code (1974) Courts and Judicial Proceedings Article, §§ 12-601 to 12-609.

This litigation commenced with a suit brought against Fairchild Industries, formerly Fairchild Hiller Corporation (Fairchild), designated as appellant herein pursuant to Maryland Rule 896 a(iv), by Maritime Air Service, Ltd. (Maritime), appellee. The suit, which was originally filed in the Superior Court of Baltimore City and then removed to the federal court, claimed damages for alleged breaches of express warranty and implied warranties of merchantability and fitness arising out of the sale of a helicopter by Fairchild to Maritime. The questions prompting the certification emerged when Fairchild filed a motion to dismiss under the Federal Rules of Civil Procedure.

On May 9, 1969, the parties entered into a lease agreement in which Fairchild leased the helicopter to Maritime for an initial term of one year, with options to extend the lease for an additional two years, subject to an option to purchase the aircraft during the term of the lease. Maritime exercised the option to purchase and on March 19, 1970, the parties entered into a purchase agreement which consisted of a printed form, furnished by Fairchild, on which relevant provisions were inserted by typewriter. Among those typewritten provisions was the following:

'It is specifically understood and agreed by the parties that the Aircraft is sold in an 'As is' condition. Seller makes no representation or warranties express or implied whatsoever except Warranty of Title. Buyer acknowledges that before entering into this Agreement he has examined the Aircraft as fully as he desires.'

The interposition of this 'disclaimer' to Maritime's allegations that Fairchild had breached implied warranties of merchantability and fitness in the sale of the aircraft led to the certification of these questions:

'1. Does the requirement found in Article 95B, § 2-316(2) . . . that 'to exclude or modify the implied warranty of merchantability or any part of it the language must mention merchantability and in case of a writing must be conspicuous, and to exclude or modify any implied warranty of fitness the exclusion must be by a writing and conspicuous' apply to the provisions for exclusion of warranties set forth in Article 95B, § 2-316(3)(a) . . .? (emphasis in original).

'2. In the event that the requirement of conspicuousness found in Article 95B, § 2-316(2) . . . may, but need not always, apply to provisions for exclusion of warranties set forth in Article 95B, § 2-316(3)(a), are any of the following circumstances relevant in determining the necessity for such conspicuousness?

'(1) The course of business dealings between the buyer and seller.

(2) The circumstances surrounding the transaction.

(3) Whether or not the buyer has examined or used the goods prior to the sale.

(4) The relative commercial skills of the buyer and seller.'

In pertinent part, § 2-316, provides:

'(2) Subject to subsection (3), to exclude or modify the implied warranty of merchantability or any part of it the language must mention merchantability and in case of a writing must be conspicuous, and to exclude or modify any implied warranty of fitness the exclusion must be by a writing and conspicuous. Language to exclude all implied warranties of fitness is sufficient if it states for example, that 'There are no warranties which extend beyond the description on the face hereof.'

'(3) Notwithstanding subsection (2)

'(a) Unless the circumstances indicate otherwise, all implied warranties are excluded by expressions like 'as is,' 'with all faults' or other language which in common understanding calls the buyer's attention to the exclusion of warranties and makes plain that there is no implied warranty; and

'(b) When the buyer before entering into the contract has examined the goods or the sample or model as fully as he desired or has refused to examine the goods there is no implied warranty with regard to defects which an examination ought in the circumstances to have revealed to him; and

'(c) An implied warranty can also be excluded or modified by course of dealing or course of performance or usage of trade.'

Since our answer to the first question shall be that the conspicuousness requirement in subsection (2) must be applied to the provisions for exclusion of warranties set forth in subsection (3)(a), it is unnecessary for us to respond to the second question.

In urging that we not apply the conspicuousness requirement to (3)(a), Fairchild contends that the two subsections were intended to be mutually exclusive. It says this intent of the drafters that the two subsections be independent of each other is expressed by these phrases which preface the subsections: 'Subject to subsection (3)' at the outset of subsection (2) and 'Notwithstanding subsection (2)' at the beginning of subsection (3). Thus, it maintains, these subsections, taken together, provide two alternative methods of disclaiming implied warranties: The first, under subsection (2), by language mentioning 'merchantability' where an implied warranty of merchantability is excluded, which, if in writing, must be conspicuous, and by a conspicuous writing where an implied warranty of fitness is excluded; and secondly, under (3)(a), by the use of language like 'as is' or 'with all faults.' Thus, the conspicuousness requirement would not apply to the second method. It argues forcefully that since the language of the statute is clear in supporting this position, it should be given its natural effect.

It is evident, of course, that the words 'as is' constitute an exception to the general rule, contained in subsection (2), pertaining to an exclusion or modification of warranties, but it is not clear, as Fairchild would have us hold, that those words go so far as to obviate the conspicuousness requirement in subsection (2). In the case of an implied warranty of merchantability, subsection (2) requires use of the word 'merchantability,' and if in writing, that it be conspicuous. An 'as is' disclaimer eliminates the requirement of the word 'merchantability,' but it is not clear from this language that the disclaimer, if in writing, need not be conspicuous. With respect to the exclusion of an implied warranty of fitness, subsection (2) requires that it be in writing and conspicuous, but it is unclear from subsection (3)(a) which of these requirements is dispensed with by the use of the 'as is' disclaimer.

The cardinal rule of statutory construction is to ascertain and carry out the real legislative intent, Md.-Nat'l Cap. P. & P. v. Rockville, 272 Md. 550, 555, 325 A.2d 748 (1974); Radio Com., Inc. v. Public Serv. Comm'n, 271 Md. 82, 93, 314 A.2d 118 (1974); Scoville Serv., Inc. v. Comptroller, 269 Md. 390, 393, 306 A.2d 534 (1973); Silberman v. Jacobs, 259 Md. 1, 267 A.2d 209 (1970). If there is no ambiguity or obscurity in the language of a statute, there is usually no need to look elsewhere to ascertain the intent of the Legislature, Md.-Nat'l Cap. P. & P. v. Rockville, supra, 272 Md. at 556, 325 A.2d 748; Scoville Serv., Inc. v. Comptroller, supra, 269 Md. at 393-94, 306 A.2d 534.

Where, as here, however, the language of a statute is of doubtful meaning, this Court, in determining the legislative intent, will consider not only its literal meaning, but its meaning and effect considered in the light of the setting, the objectives and purposes of the enactment, and the consequences that may result from one meaning rather than another, with the real legislative intent prevailing over the literal intent, Sanza v. Md. Board of Censors, 245 Md. 319, 340, 226 A.2d 317 (1967); Walker v. Montgomery County, 244 Md. 98, 102, 223 A.2d 181 (1966); Truitt v. Board of Public Works, 243 Md. 375, 394, 221 A.2d 370 (1966); Md. Medical Service v. Carver, 238 Md. 466, 478, 209 A.2d 582 (1965); Height v. State, 225 Md. 251, 257, 170 A.2d 212 (1961). Similarly, wherever possible, an interpretation should be given to statutory language which will not lead to absurd consequences, Blocher v. Harlow, 268 Md. 571, 584, 303 A.2d 395 (1973); Farber's Inc. v. Comptroller, 266 Md. 44, 51, 291 A.2d 658 (1972); Pan Am. Sulphur v. State Dep't, 251 Md. 620, 627, 248 A.2d 354 (1968).

The purpose of § 2-316 is set forth in Official Comment 1 to that section:

'This section is designed principally to deal with those frequent clauses in sales contracts which seek to exclude 'all warranties, express or implied.' It seeks to protect a buyer from unexpected and unbargained language of disclaimer by denying effect to such language when inconsistent with language of express warranty and permitting the exclusion of implied warranties only by conspicuous language or other circumstances which protect the buyer from surprise.' (emphasis added).

It is clear that subsection (3) aims at maintaining this protection for the buyer, as Official Comment 6 states:

'The exceptions to the general rule set forth in paragraph (a), (b) and (c) of subsection (3) are common factual situations in which the circumstances surrounding the transaction are in themselves sufficient to call the buyer's attention to the fact that no implied warranties are made...