Jensen v. Seigel Mobile Homes Group

• Decision Date: 24 February 1983
• Docket Number: No. 13608,13608
• Citation: 105 Idaho 189,668 P.2d 65
• Parties: , 35 UCC Rep.Serv. 804 James E. JENSEN and Donna Jensen, husband and wife, Plaintiffs-Appellants, v. SEIGEL MOBILE HOMES GROUP, a corporation, d/b/a Falls Mobile Homes, Defendant-Respondent.
• Court: Idaho Supreme Court

Page 65

668 P.2d 65

105 Idaho 189, 35 UCC Rep.Serv. 804

James E. JENSEN and Donna Jensen, husband and wife, Plaintiffs-Appellants, v. SEIGEL MOBILE HOMES GROUP, a corporation, d/b/a Falls Mobile Homes, Defendant-Respondent.

No. 13608.

Supreme Court of Idaho.

Feb. 24, 1983.

Rehearing Denied Sept. 7, 1983.

Jack G. Voshell, of Voshell & Wright, Idaho Falls, for plaintiffs-appellants.

William Charles Carr, of Petersen, Moss & Olsen, Idaho Falls, for defendant-respondent.

SHEPARD, Justice.

This is an appeal from a judgment in favor of defendant-respondent Seigel Mobile Homes Group in an action arising from Seigel's sale of a mobile home to the Jensens. Plaintiffs-appellants Jensens had brought the action for rescission and punitive damages against Seigel and its agents and for breach of warranty against both Seigel and Fleetwood, the manufacturer of the trailer. We affirm in part and reverse in part.

In July of 1978, the Jensens, who were approaching the age of retirement, were interested in selling their home and purchasing a mobile home. The evidence could be viewed as demonstrating the following:

Seigel's agent showed Mrs. Jensen several models and she expressed an interest in a "new" 1977 Fleetwood. The agent gave her brochures which can be described as advertising and descriptive materials praising the virtues of Fleetwood mobile homes, together with a brochure entitled "FULL ONE YEAR WARRANTY." She was informed that "all new mobile homes do come with a year warranty from the manufacturer." Mrs. Jensen inspected the 1977 Fleetwood and discovered three problems, i.e., a cracked bathroom wash basin, a sagging closet door and missing closet rods. Seigel's agent assured her that those three problems would be fixed under the manufacturer's warranty. In fact, the 1977 Fleetwood had been in storage for 16 months and had suffered water damage, only some of which had been repaired.

On August 2, 1978, Mrs. Jensen signed an "agreement" to purchase the mobile home for a price of $20,848.25, at which time she paid $100 as a down payment. That agreement was conditioned upon the Jensens' obtention of financing, and on August 14, the financing was obtained and the balance due was paid the following day. No other terms of the contract were explained to Mrs. Jensen. Between August 17 and August 20, the mobile home was delivered and "set up" on the Jensens' lot. During and after that time the Jensens discovered problems in addition to those enumerated above. Throughout August and September, Seigel was informed of those newly discovered problems and Seigel attempted to remedy the defects. Some were quickly corrected, but some were poorly repaired and still others were not satisfactorily fixed because of difficulty in obtaining parts. The Jensens lived in the mobile home only three days, found it unlivable and moved back to their previous residence.

On September 26, 1978, a pipe in the mobile home ruptured, leaving a pool of water under the home and drenching the insulation and underbelly. Upon notification, Seigel repaired the leak, but did not replace the insulation; Seigel rather contemplated, after a two to four week period of allowing the insulation to dry, further repairs would be made. On September 27, 1978, the Jensens notified the manufacturer, Fleetwood, of defects in the home. An agent for the manufacturer inspected the mobile home and found some 16 defects, including an unsealed underbelly, insulation that needed replacing, improperly attached duct work, water-stained paneling, improperly set toilet and tub drain, and defective drawers. The Fleetwood agent agreed to send the Jensens a listing of the 16 items which would be promptly repaired, but that listing, when sent, was improperly addressed and never reached the Jensens. On September 29, the Jensens placed a notice on the mobile home listing their phone number and requiring that no work on the mobile home be performed prior to notifying the Jensens.

On October 10, 1978, an attorney for the Jensens wrote a letter of rescission to Seigel demanding return of the purchase price of the mobile home. That demand was refused. Later, on October 17, the listing of the 16 defects was received from the manufacturer, and on November 8, a state inspector discovered 32 violations of the housing code. Many of the defects were minor and could be easily repaired, such as the paneling that needed replacing, but some constituted health hazards, such as the improper seals beneath the house and the improperly connected bathtub drain which was allowing sewage fumes to enter the home.

On November 9, 1978, this action was brought. Prior to trial, the Jensens sought to amend their complaint to include as an allegation fraudulent inducement to the entry into the contract. That motion was denied, but such amendment was permitted at the close of the evidence. Also at the close of evidence, plaintiffs voluntarily dismissed their claim for breach of warranty against the manufacturer Fleetwood, and the court directed verdicts in favor of the defendant on plaintiffs' claim for punitive damages. Upon submission to the jury of the remaining issues of the case, it returned a verdict in favor of the defendant. This appeal results.

On appeal the Jensens assert numerous errors on behalf of the trial court. Since the matter is to be remanded for a new trial, we deem it necessary to treat only those assertions of error relating to the direction of verdicts on punitive damages and those relating to the jury instructions which should have correctly advised the jury of the applicable provisions of the Uniform Commercial Code.

The evidence presented at trial could not have supported a grant of punitive damages and hence the trial court's action regarding punitive damages is affirmed. The essential issues in this case involved alleged breach of contract and warranty. Punitive damages may not be awarded in causes of action relating to contract absent a showing of fraud, malice, oppression or other sufficient reason for doing so. Yacht Club Sales and Service, Inc. v. First Nat. Bank of North Idaho, 101 Idaho 852, 623 P.2d 464 (1980); Boise Dodge, Inc. v. Clark, 92 Idaho 902, 453 P.2d 551 (1969). The record does not demonstrate any such misconduct on the part of any of the defendants here. By analogy, we hold the same standard should apply to claims for punitive damages based on breach of warranty.

The Jensens submitted requested instructions based upon portions of the Uniform Commercial Code, but those were rejected by the trial court. Rather, the court gave what we deem to be confusing and contradictory instructions regarding the law of revocation of acceptance of goods and the formation of express warranties, and in so doing committed reversible error. These issues, as noted by the trial court, have not been previously decided in Idaho and the court in its decision has suggested the need for guidance by this Court. Hence, we discuss these issues in some particular detail.

We note initially that the provisions of the Uniform Commercial Code governing parties to sales are expressed in terms of "buyer" and "seller." "Buyer" is one who "buys or contracts to buy goods" and the "seller" is one who "sells or contracts to sell goods." I.C. § 28-2-103(a), (d). In the present action, the Jensens are the buyers and Seigel is the seller of the goods in question, and hence the Jensens' voluntary dismissal of the manufacturer does not necessarily affect the Jensens' cause of action against Seigel.

I. RIGHT TO REVOKE ACCEPTANCE

The Jensens concede that they accepted their mobile home, but assert that breaches of contract and warranty substantially impaired the value of the mobile home to them and, therefore, they may rightfully revoke their acceptance.

There are five preconditions to effective revocation of acceptance relevant to the facts in this case:

A. Notice of revocation;

B. A nonconformity which substantially impairs the value of the mobile home;

C. Acceptance on the reasonable assumption that known defects would be cured or that acceptance was reasonably induced by the difficulty of discovery of defects;

D. Revocation occurs within a reasonable time after the nonconformity was discovered or should have been discovered; and

E. Revocation occurs "before a substantial change in the condition of the goods which is not caused by their own defects." J. White and R. Summers, Uniform Commercial Code, p. 303 (2d ed. 1980); I.C. § 28-2-608.

A notice of revocation of acceptance clearly is not effective until a buyer gives a seller notice thereof. I.C. § 28-2-608(2). While here the Jensens did not give a notice of "revocation" as such, they did give notice of rescission, and it is not argued that such notice was inadequate. It is consistently held that a notice of rescission operates as notice of revocation of acceptance for the purpose of that statute. See, e.g., Peckham v. Larsen Chevrolet-Buick-Oldsmobile, Inc., 99 Idaho 675, 587 P.2d 816 (1978); Jorgensen v. Pressnall, 274 Or. 285, 545 P.2d 1382 (Or.1976). Therefore, we hold that there was sufficient notice.

The standard for permitting revocation requires that nonconformity "substantially impairs" the value of the goods to the buyer and reflects the theory that one who has used goods for a significant amount of time should not be allowed to force used goods back on the seller unless the defect in the goods is substantial, as opposed to technical. See J. White and R. Summers, supra, at 301. There appears to be confusion as to the meaning of "substantially impairs" and it has been called a subjective test. Jorgensen v. Pressnall, 274 Or. 285, 545 P.2d 1382 (Or.1976); Keen v. Modern Trailer Sales, Inc., 40 Colo.App. 527, 578 P.2d 668 (Colo.Ct.App.1978). It is subjective in that the test is whether the nonconformities substantially impaired the value of the home to the actual buyer and not whether the nonconformities substantially impaired the...