Hahn v. Ford Motor Co., Inc.

• Decision Date: 12 May 1982
• Docket Number: No. 2-1280A419,2-1280A419
• Citation: 434 N.E.2d 943
• Parties: 33 UCC Rep.Serv. 1277 Michael HAHN and Judith Hahn, Appellants (Plaintiffs below), v. FORD MOTOR COMPANY, INC., and Dick Lorey Ford, Inc., Appellees (Defendants below).
• Court: Indiana Appellate Court

Page 943

434 N.E.2d 943

33 UCC Rep.Serv. 1277

Michael HAHN and Judith Hahn, Appellants (Plaintiffs below), v. FORD MOTOR COMPANY, INC., and Dick Lorey Ford, Inc. Appellees (Defendants below).

No. 2-1280A419.

Court of Appeals of Indiana, Second District.

May 12, 1982.

George Clyde Gray, Robert Koor, Douglas N. Ryan, Indianapolis, for appellants.

Busby, Austin, Cooper & Farr by Stephen R. Hardacre and Michael D. Austin, Anderson, Phillip E. Stephenson, Browne, Torrance, Spitzer, Herriman, Browne & Stephenson, Marion, for appellees.

SHIELDS, Judge.

Appellants Michael and Judith Hahn initiated an action against Ford Motor Company (Ford) and Dick Lorey Ford, Inc. (Lorey) for breach of warranties on a 1977 Ford LTD II. Lorey counterclaimed for the balance due on the purchase price of the vehicle. At trial the jury rendered a verdict in favor of Ford and Lorey and against the Hahns on the breach of warranties action; the jury also held in favor of Lorey on its counterclaim, awarding damages of two thousand nine hundred dollars ($2,900). The Hahns present the following issues on appeal:

1) Did the trial court err in admitting the Ford warranty facts booklet into evidence?

2) Did the trial court err in admitting Lorey's warranty disclaimer into evidence?

3) Did the trial court err in granting a judgment on the evidence in favor of Ford on the issue of punitive damages?

4) Did the trial court err in refusing to give Hahns' tendered instruction number 16?

5) Did the trial court err in failing to allow Hahns as counter defendants to assert rejection or revocation as a defense to Lorey's counterclaim for the balance due on the vehicle?

We affirm.

On June 27, 1977 Michael Hahn went to the Dick Lorey Ford dealership in Muncie to inquire about purchasing a new car. Hahn had observed advertisements on television and in magazines in which general statements were made concerning the quality of Ford cars. He indicated to the salesman he was interested in an auto which would be durable enough to haul a camper-trailer on family vacations. The next day Hahn, accompanied by his wife Judith, returned to the dealership and test-drove a 1977 Ford LTD II. On June 29 the Hahns once again returned to the agency and expressed a desire to purchase the same LTD II they had driven the previous day. That same date Michael Hahn executed a purchase agreement with Lorey and signed a dealers warranty disclaimer entitled "As Is Manufacturers Warranty Only." He and Mrs. Hahn executed a Merchants National Bank of Muncie retail installment sales agreement. The dealers warranty disclaimer represents dealer Lorey's attempt to disclaim all warranties, express and implied. It limits purchasers to recourse against the manufacturer and does not purport to affect warranties that may be provided by Ford.

The Hahns took delivery of the vehicle July 1, 1977. When Mr. Hahn arrived home with the new car he found a Ford warranty facts booklet in the glove box. According to Hahn, this was the first opportunity he had to read the pamphlet. He further claims the contents of the booklet were not discussed prior to the consummation of the sale.

Shortly after the date of purchase the Hahns began to experience persistent difficulties with the vehicle. According to service orders contained in the record, the car was taken to the dealership for repairs on numerous occasions. The Hahns also claim there were additional instances when the car was taken to the dealer and no formal service order prepared.

The most frequently reported defects included persistent oil and transmission leaks, difficulties with the electrical and heating systems, and a defective cruise control. Many of the problems ensued after the period of 12,000 mile and/or 12 months. However, Ford made repairs at no cost to purchaser even though this is not necessarily the company's policy.

On January 20, 1979, nearly 18 months after the date of purchase, the Hahns attempted to permanently return the car to the dealership. The tender was refused by Lorey. When proceedings were initiated in April 1979 the Hahns placed the vehicle in storage alleging continual problems with the electrical system prevented the car from starting.

I

The Hahns contend the trial court erred when it admitted in evidence the Ford warranty facts booklet which limited the duration of implied warranties and disclaimed liability for incidental and consequential damages. They argue the booklet was inadmissible as a matter of law because the modification of implied warranties and the limitation of remedy were (A) inconspicuous, (B) not part of the bargain, (C) unconscionable, and (D) in violation of the Federal Magnuson-Moss Warranty Act.

A

Mr. Hahn claims to have found the booklet in the car's glove box after he had taken delivery of the vehicle and driven it home. The pertinent language of the booklet reads:

"ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS IS LIMITED TO THE 12-MONTH/12,000 MILE DURATION OF THIS WRITTEN WARRANTY.

"TO THE EXTENT ALLOWED BY LAW, NEITHER FORD NOR THE SELLING DEALER SHALL HAVE ANY RESPONSIBILITY FOR LOSS OF USE OF THE VEHICLE, LOSS OF TIME, INCONVENIENCE, COMMERCIAL LOSS OR CONSEQUENTIAL DAMAGES.

"Some states do not allow limitations on how long an implied warranty lasts or the exclusion or limitation of incidental or consequential damages, so the above limitations may not apply to you.

"This warranty gives you specific legal rights, and you also may have other rights which vary from state to state."

The Hahns contend the modification of implied warranties and limitation of remedy contained in Ford's warranty facts manual were inconspicuous as a matter of law and should have been excluded from the jury.

I.C. 26-1-2-316(2) (Burns Code Ed.) ¹ provides any attempt to exclude or modify an implied warranty of merchantability must mention merchantability and, if written, must be conspicuous, while any limitation of the implied warranty of fitness must be in writing and conspicuous. The term "conspicuous" is defined at I.C. 26-1-1-201(10) (Burns Code Ed.):

"Conspicuous: A term or clause is conspicuous when it is so written that a reasonable person against whom it is to operate ought to have noticed it. A printed heading in capitals (as: NON- -NEGOTIABLE BILL OF LADING) is conspicuous. Language in the body of a form is 'conspicuous' if it is in larger or other contrasting type or color. But in a telegram any stated term is 'conspicuous'. Whether a term or clause is 'conspicuous' or not is for decision by the court."

The purpose behind the conspicuousness requirement is to protect the buyer from unfair surprise. In the present case the language modifying the implied warranties of merchantability and fitness is printed in bold face type on the front page of the booklet. It is sufficiently conspicuous so that a reasonable person ought to be placed on notice as to the terms of modification. We thus conclude that, as a matter of law, the modification of warranties complied with the requirements of I.C. 26-1-1-201(10) and I.C. 26-1-2-316(2). ²

B

The Hahns further note the modification of implied warranties and limitation of remedy contained in the Ford warranty facts booklet were given to them subsequent to the execution of the sales contract. They argue the pamphlet was therefore inadmissible as a matter of law because it was not part of the bargain.

The U.C.C. is silent as to when disclaimers, modifications, and limitations must be made. However, modification of warranties and limitation of remedies are not favored in Indiana and are strictly construed against the seller and manufacturer on the basis of public policy. Auto-Teria Inc. v. Ahern, (1976) 170 Ind.App. 84, 352 N.E.2d 774. As professors Pratter and Townsend noted, "The burden is put on the seller to disclose to the buyer what is being done." H. Pratter and R. Townsend, Indiana Comments to I.C. 36-1-2-316 (Burns Code Ed.), commentary at 60. Therefore, in instances where seller does not attempt a modification of warranty or limitation of remedy until after the contract for sale has been made even properly worded limitations or exclusions are ineffective. Karczewski v. Ford Motor Co., (1974 N.D.Ind.) 382 F.Supp. 1346, aff'd. 515 F.2d 511; Auto-Teria; Scientific Application, Inc. v. Delkamp, (1981) N.D., 303 N.W.2d 71; Hartwig Farms v. Pacific Gamble Robinson, (1981) 28 Wash.App. 539, 625 P.2d 171; McNamera Pontiac, Inc. v. Sanchez, (1980) Fla.App., 388 So.2d 620; Willoughby v. Ciba Geisy Corp., (1980) Tex.Civ.App., 601 S.W.2d 385; Taterka v. Ford Motor Company, (1978) 86 Wis.2d 140, 271 N.W.2d 653; Whitaker v. Farmhand, Inc., (1977) 173 Mont. 345, 567 P.2d 916; Rehurek v. Chrysler Credit Corporation, (1972) Fla., 262 So.2d 452; Dougall v. Brown Bay Boat Works and Sales, Inc., (1970) 287 Minn. 290, 178 N.W.2d 217. A modification of warranty or limitation of remedy contained in a manufacturers manual received by purchaser subsequent to sale has not been bargained for and thus does not limit recovery for implied or express warranties which arose prior to sale. In essence, the parties have not consented to and are not contractually bound by the modification or limitation.

Thus, it is evident, in the absence of sufficient evidence permitting an inference the parties assented to the terms of the warranty facts booklet, the modification and limitations contained therein are ineffective as a matter of law. The specific argument advanced by the Hahns, however, alleges the booklet was inadmissible on evidentiary grounds because its relevance depended upon the existence of another conditioning fact-that it was part of the parties' contract. This is quite a distinct argument than one which overtly attacks the effectiveness of a warranty limitation on sufficiency grounds, i.e., whether the evidence is sufficient to sustain an inference the parties consented to the terms of a warranty modification and limitation. We are, of course, limited in our...