Firestone Tire and Rubber Co. v. Cannon

• Decision Date: 09 November 1982
• Docket Number: No. 1028,1028
• Parties: , 34 UCC Rep.Serv. 1564 FIRESTONE TIRE AND RUBBER COMPANY v. James H. CANNON t/a Cannon Trucking et al.
• Court: Court of Special Appeals of Maryland

Page 106

53 Md.App. 106

452 A.2d 192, 34 UCC Rep.Serv. 1564

FIRESTONE TIRE AND RUBBER COMPANY v. James H. CANNON t/a Cannon Trucking et al.

No. 1028.

Court of Special Appeals of Maryland.

Nov. 9, 1982.

Deborah E. Jennings, Baltimore, with whom was Edward S. Digges, Jr., Baltimore, on the brief, for appellant.

William H. Adkins, III, Easton, with whom were Henry, Hairston & Price, Easton, on the brief, for appellees.

Argued before LOWE, WILNER and WEANT, JJ.

WILNER, Judge.

The narrow question presented in this appeal is whether a buyer of goods may sue a person other than his immediate seller for breach of implied warranty without having given that person timely notice of the alleged defect. Restated: Does Md.Code Ann., Comm.Law art. § 2-607(3)(a) require a buyer to give notice of a claimed breach of implied warranty to a "remote" seller--someone in the marketing chain other than the person from whom he bought the goods? The question has not previously been decided in Maryland.

The facts of the case are not in dispute. On September 21, 1978, appellee, a trucker, purchased a tire for one of his tractors from Elliott Equipment Company. Elliott had obtained the tire from Swann Tire Center, a wholesaler, which had, in turn, purchased it from Commercial Tire Co. Commercial obtained the tire from Seiberling Tire Co., a subsidiary of appellant Firestone Tire and Rubber Company. ¹ The tire was manufactured by Firestone, but it had Seiberling's name on it. It was mounted on appellant's tractor by Swann's employees at Elliott's facility.

On September 28, 1978, while the tractor was hauling a trailer in Arizona, the tire in question "blew out," causing the tractor to cross a median strip and strike two trees. As a result of that occurrence, appellee suffered extensive damage to his tractor; he also lost some $8,100 in profits from his inability to use the tractor during the fourteen-week period it was undergoing repairs.

Within a few days after the accident, appellee notified Elliott of the occurrence. No such notice was given to Swann, Commercial, Seiberling, or to Firestone, however, until this suit was filed against them in January, 1980. ² Evidence elicited by Firestone permits a fair inference that Firestone was prejudiced by the lack of earlier notice in that (1) certain evidence that may have been relevant in establishing the cause of the "blow-out" was lost during the interim; ³ (2) actions could have been taken by Firestone shortly after the accident to mitigate appellee's economic losses; ⁴ and (3) earlier notice may have prompted or enhanced an amicable settlement of the controversy.

The case proceeded to trial against Firestone ⁵ on the theories of negligence, strict liability, and breach of implied warranties of merchantability and fitness for a particular purpose. As the result of certain rulings below, which the parties do not dispute here, appellee's claim for lost profits was submitted to the jury only under the breach of warranty counts, the court having declared such lost profits to be unrecoverable in an action of negligence or strict liability.

The jury returned a verdict for appellee which included a sum for the lost profits. It is apparent, therefore, that the verdict rested, at least in part, upon appellee's breach of warranty claims. Firestone contends that, because of appellee's failure to give it prior notice of the defect, appellee had no valid claim against it for breach of warranty and that the court erred in submitting that claim to the jury.

The issue is essentially one of statutory interpretation; but it is one that has significant public importance.

Title 2 of the Uniform Commercial Code (Md.Code Ann., Comm. Law art.) deals generally with the sale of goods. Subtitle 3 thereof, and in particular §§ 2-314--2-318, provides for certain implied warranties arising from the sale of goods. Subtitle 6 sets forth the rights and remedies that flow from the breach of a sales contract, including the breach of implied warranties imposed by subtitle 3. We start with this latter part--subtitle 6.

Section 2-601 gives a buyer three options "if the goods or the tender of delivery fail in any respect to conform to the contract...." He may "[r]eject the whole," "[a]ccept the whole," or "[a]ccept any commercial unit or units and reject the rest." The immediately succeeding sections (2-602-2-605) speak to the effect of a rejection by the buyer; sections 2-606 and 2-607 then discuss the effect of an acceptance. Section 2-606 defines an "acceptance." In relevant part, it provides that an "acceptance" occurs,

"(a) After a reasonable opportunity to inspect the goods signifies to the seller that the goods are conforming or that he will take or retain them in spite of their nonconformity; or

(b) Fails to make an effective rejection... or

(c) Does any act inconsistent with the seller's ownership; but if such act is wrongful as against the seller it is an acceptance only if ratified by him." (Emphasis supplied.)

Section 2-607 commences with the requirement that "[t]he buyer must pay at the contract rate for any goods accepted." It then provides, in subsection (3)(a) that "[w]here a tender has been accepted ... [t]he 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...." (Emphasis supplied.)

The term "seller" is not defined with specific reference to subtitle 6. Section 2-103(1)(d) provides, however, that "[i]n this title unless the context otherwise requires... 'Seller' means a person who sells or contracts to sell goods." (Emphasis in the original.)

Subtitle 3, as we have noted, imposes upon sellers certain implied warranties that attach to the sale of goods; namely, a warranty of merchantability (§ 2-314(1)) and a warranty of fitness (§ 2-315(1)). Section 2-318 provides, in relevant part:

"A seller's warranty whether express or implied extends to any natural person who is in the family or household of his buyer or who is a guest in his home or any other ultimate consumer or user of the goods or person affected thereby if it is reasonable to expect that such person may use, consume or be affected by the goods and who is injured in person by breach of the warranty...."

Finally, § 2-314(1), after imposing the implied warranty of merchantability, states:

"Notwithstanding any other provisions of this title

(a) In §§ 2-314 through 2-318 of this title, 'seller' includes the manufacturer, distributor, dealer, wholesaler or other middleman or the retailer; and

(b) Any previous requirement of privity is abolished as between the buyer and the seller in any action brought by the buyer." (Emphasis supplied.)

Firestone acknowledges that through these provisions "[t]he Code expressly imposes potential warranty liability for every 'seller' in a distributive chain," without regard to any privity of contract. Its argument, founded largely upon concepts of economic fairness, is that the buyer's obligation under § 2-607 to give timely notice of defects must extend as far up the distributive chain as the seller's liability extends down the chain. In light of the potential liability arising from these implied warranties, it says, a manufacturer "is in need of the protection which that notice affords at least as much as is the immediate seller." Cf. Frericks v. General Motors Corp., 278 Md. 304, 313, 363 A.2d 460 (1976).

The Maryland appellate courts have not previously addressed this question. In Frericks v. General Motors Corp., supra, 278 Md. 304, 363 A.2d 460, and again in Mattos, Inc. v. Hash, 279 Md. 371, 368 A.2d 993 (1977), the Court of Appeals held that the notice requirement of § 2-607(3)(a) did not apply to a person who was not a purchaser of the goods in question; but those decisions are of marginal relevance here. In the first place, they involved actions for personal injuries arising under § 2-318 rather than claims for economic losses, a distinction noted by the Court. See, in particular, Frericks, 278 Md. at 309, 363 A.2d 460, and Mattos, 279 Md. at 377, 368 A.2d 993. More important, the notice requirement was held to be inapplicable because the statute clearly imposed it only upon a "buyer," and neither plaintiff fell into that category. Those cases, in other words, focused not on the persons entitled to notice, but on the persons required to give it. Compare Official Comment 5 to § 2-607.

One of the earliest cases in which the issue before us was squarely (albeit tersely) addressed was Tomczuk v. Town of Cheshire, 26 Conn.Sup. 219, 217 A.2d 71 (1965), an action against a bicycle manufacturer for injuries suffered as the result of defects in one of its bicycles. The injured plaintiff was the friend of a child whose parents had purchased the bicycle from a retailer. In terms of the notice requirement of § 2-607(3)(a), the case thus presented the situation of a non-purchaser suing a "remote" seller; and the Court addressed both aspects of the issue. It first held that the "seller" entitled to notice under § 2-607(3)(a) was only the immediate seller and not the more remote manufacturer. Each sale in the marketing chain was regarded as an independent transaction, with each buyer being obliged to notify only his seller. Although that conclusion would have sufficed to resolve the issue, the Court went on to conclude that, in any event, the notice requirement was not applicable because the claimant was not a "buyer." See also Ruderman v. Warner-Lambert Pharmaceutical Co., 23 Conn.Sup. 416, 184 A.2d 63 (Conn.Supp.1962).

The Illinois Court reached a similar conclusion in Goldstein v. G.D. Searle & Co., 62 Ill.App.3d 344, 19 Ill.Dec. 208, 378 N.E.2d 1083 (1978). The plaintiff there sued the manufacturer of an oral contraceptive that she had purchased from a drug store, claiming that it was defective. The manufacturer defended on the ground of lack of required notice under § 2-607(3), both to it...