Holmes Packaging Machinery Corp. v. Gingham

• Decision Date: 26 July 1967
• Citation: 60 Cal.Rptr. 769,252 Cal.App.2d 862
• Court: California Court of Appeals Court of Appeals
• Parties: HOLMES PACKAGING MACHINERY CORP., Plaintiff and Appellant, v. Byrum C. BINGHAM, Defendant and Respondent. Civ. 23357.

Page 769

60 Cal.Rptr. 769

252 Cal.App.2d 862

HOLMES PACKAGING MACHINERY CORP., Plaintiff and Appellant, v. Byrum C. BINGHAM, Defendant and Respondent.

Civ. 23357.

Court of Appeal, First District, Division 1, California.

July 26, 1967.

Rehearing Denied Aug. 18, 1967.

Hearing Denied Sept. 21, 1967.

O'Donnell, Waiss & McComish, San Francisco, for appellant.

William L. Ferdon, Chickering & Gregory, San Francisco, for respondent.

MOLINARI, Presiding Justice.

In this action brought by plaintiff, Holmes Packaging Machinery Corp., to recover from defendant, Byrum C. Bingham, money allegedly due in the form of rent under two leases of personal property, further to recover attorney's fees under these agreements, and finally to have the respective rights of the parties under these agreements determined, Holmes appeals from a judgment in favor of Bingham. ¹ The basis of the trial court's judgment being that Bingham was entitled to rescind the leases because of Holmes' breach of implied warranties that the property leased thereunder was of merchantable quality and fit for the purpose for which it was leased, ² Holmes' contention on appeal is that such implied warranties are not applicable in the instant case.

In the early months of 1963 ³ Dulasur Equipment Company marketed a process for converting blackwall automobile tires into whitewall tires. The equipment which Dulasur marketed to accomplish this operation consisted of a commercial trailer, the interior of which was specially equipped with vulcanizing equipment. The trailer was designed to be towed from location to location and connected to the local electrical supply of a particular used tire or automobile dealer.

While in Sacramento sometime in February or March, Bingham had occasion to inspect one of such specially equipped trailers marketed by Dulasur. As a result of the interest which Bingham displayed in this apparatus and the operation it performed, he was visited at his Redding place of business by William Werden, the general sales manager of Dulasur. Werden made various representations to Bingham concerning the equipment and in addition delivered to Bingham a brochure and colored photograph describing the virtue of the whitewall vulcanizing process which Dulasur had developed and further setting forth the benefits to be derived from becoming a franchisee of the Dulasur process and equipment. Thereafter in March Bingham and Dulasur executed two agreements by which the former purchased two franchises for the use of Dulasur's process and equipment, these franchises covering territories in the vicinity of Redding and San Diego. Both agreements contemplated Bingham's leasing of the specially equipped trailers from Dulasur.

Following the execution of these two franchise agreements Werden approached Holmes' manager, George Husvar, with a proposal that Holmes purchase two of Dulasur's specially equipped trailers and lease them to Bingham. At this time Holmes had had no prior dealings with Dulasur or with tire vulcanizing equipment and no employee of Holmes knew anything about such equipment or had ever seen or inspected Dulasur's specially equipped trailer. In addition Holmes and Bingham had had no prior dealings and had never heard of one another. Thereafter, based on the approval of Bingham's credit, Holmes, through Husvar, executed two identical lease agreements, one for each unit of equipment Werden then presented these agreements to Bingham, who signed them and returned them by mail to Holmes. Each agreement provided for the lease of one '21 Hood Commercial Trailer Complete with Whitewall Vulcanizing Equipment,' further provided for a lease term of 50 months commencing on the date of delivery of the equipment, which was specified as April, and finally provided for a monthly rental in the amount of $440. Included in the 'General Conditions' of each lease were the following provisions: '1. Lessee agrees that it will, within forty-eight (48) hours after the delivery of the personal property herein leased, inspect said personal property and notify Lessor in writing of any objections as to its condition. The failure of Lessee to so inspect and notify Lessor within said period as to any defect therein shall be held to be a waiver of any and all defects in said equipment and conclusively presumed that Lessee shall have accepted the same in good order and condition. * * * 17. Lessee agrees that in executing said lease that it has satisfied itself that the equipment leased hereunder is of a size, design, and/or capacity as selected and approved by it and that Lessee is satisfied that the same is suitable for its purposes and that there have been no representations on the part of Lessor with respect to the quality, suitability, or design for a particular purpose on the part of Lessor had and made other than herein expressed.'

Thereafter, as a result of correspondence between Husvar and Bingham, a written modification to the lease agreements was executed. This modification agreement provided that at the end of the 50-month lease term Bingham could continue leasing the equipment at the reduced rate of one monthly payment per year or, alternatively, that Bingham could have title to the subject equipment by paying a $2 termination charge. In addition, the modification provided that at any time during the term of the leases Bingham could accelerate the contracts and prepay all rental installments in return for which Holmes would convey to Bingham title to the subject property.

In April, following execution of the two lease agreements, Dulasur delivered the two units which were the subject matter of the leases to Bingham, one being delivered to Redding and the other to San Diego. Shortly thereafter and without seeing or inspecting either unit Holmes entered into a purchase agreement with Dulasur in regard to the two trailers and paid Dulasur for the trailers.

Shortly after the two trailers were delivered to Bingham, Bingham encountered difficulties in operating them. According to the testimony of two of Bingham's employees who were assigned to operate the whitewall vulcanizing equipment, the equipment was found to be defective in the following particulars: various tire molds became inoperable due to the fact that the thermostats burned out and jiggled loose when the equipment was moved, wires burned out, lights failed to function, the air compressor motor burned out, and the trailers were not equipped to tie into the fuse boxes located in the used car lots where the trailers were to operate and thus could not obtain power.

Commencing in July Bingham failed to make rental payments due under the two agreements and on July 24 Bingham served Holmes with a notice of rescission. In this notice Bingham enumerated the equipment's various defects, gave notice of a breach of warranty in that the equipment was not fit for the purpose for which it was manufactured nor was it of merchantable quality, and offered to return the trailers and equipment to Holmes. Holmes having taken no action in response to this notice of rescission, this action followed.

As revealed by the findings of fact and the conclusions of law which the trial court entered, the trial court's determination that Bingham was entitled to rescind the lease agreements which he had entered into with Holmes, and its further determination that after Bingham gave Holmes notice of rescission no money became due to the latter by way of rent under the two agreements, were based upon the court's determination that in leasing the trailers and vulcanizing equipment to Bingham, Holmes impliedly warranted that the equipment 'would be workable and fit for the purpose for which manufactured and of merchantable quality,' and that because the trailers and equipment 'were defective * * * failed to function and became inoperable * * * were completely unsuitable for the purpose for which they were leased * * * and * * * were not in a condition fit for their intended use,' these implied warranties were breached by Holmes. The issue which this appeal poses, therefore, is whether such implied warranties, namely, that the equipment be of merchantable equality and that it be fit for the purpose for which it was supplied, existed in the instant case so as to give Bingham a right of rescission upon their breach.

In asserting the applicability of such warranties to the instant case, Bingham relies upon the provisions of Civil Code section 1955 ⁴ which provides, in pertinent part, as follows: 'One who lets personal property must deliver it to the hirer, * * * put it in a condition fit for the purpose for which he lets it, and repair all deteriorations thereof not occasioned by the fault of the hirer and not the natural result of its use.' This section contains a statutory declaration of the obligations of a lessor of personalty (Sproul v. Cuddy, 131 Cal.App.2d 85, 93, 280 P.2d 158) and is an expression of the duty of a bailor in terms of an implied warranty of the fitness of the chattel for the use intended. (Tierstein v. Licht, 174 Cal.App.2d 835, 841, 345 P.2d 341.) It is not, however, an absolute warranty, making the bailor an insurer or guarantor. (Tierstein v. Licht, supra.) In actions for damages for personal injuries resulting from the use of the lease chattel, section 1955 has been held to provide for an implied warranty by the bailor that he has exercised reasonable care to ascertain that the chattel is safe and suitable for the purposes for which it is hired, the essential inquiry being whether the hirer complied with the standard of reasonable care in ascertaining the fitness of the chattel for the use for which he knew it was hired. ⁵ (Tierstein v. Licht, supra; Sproul v. Cuddy, supra; see Rohar v. Osborne, 133 Cal.App.2d 345, 352, 284 P.2d 125.)

The duty imposed under section 1955 that one who hires a chattel for the use of others ordinarily assumes a duty to furnish a proper and reasonably safe chattel, and that ...