Johnson v. John Deere Co.

Decision Date06 July 1981
Docket NumberNo. 12930,12930
Citation306 N.W.2d 231
Parties31 UCC Rep.Serv. 992 Walter JOHNSON, Plaintiff and Appellant, v. JOHN DEERE COMPANY and Nelson Implement, Inc., Defendants and Appellees.
CourtSouth Dakota Supreme Court

Wally Eklund of Johnson, Johnson & Eklund, Gregory, for plaintiff and appellant; Robert J. Krueger, Jr., of Devany & Krueger, Vermillion, on brief.

Timothy J. Nimick of Woods, Fuller, Shultz & Smith, Sioux Falls, for defendant and appellee John Deere Co.

Gale E. Fisher, Sioux Falls, for defendant and appellee Nelson Implement, Inc.

MORGAN, Justice.

This action was commenced for recovery of damages sustained by appellant Walter Johnson, arising from alleged breach of warranty by appellees John Deere Company, the manufacturer, and Nelson Implement, Inc., the seller of a farm tractor. John Deere Company counterclaimed for a judgment on the balance due on an installment sales contract executed in consummation of the purchase and also counterclaimed for foreclosure on the machinery. The trial court granted appellees' motion for a directed verdict after appellant had rested in its civil proceeding before a jury. The trial court entered judgment accordingly. On its own motion, the trial court also entered judgment in favor of John Deere on its counterclaim. Appellant appealed. We reverse and remand.

After the Uniform Commercial Code (UCC) was adopted by our legislature as Chapter 150 of the 1966 Session Laws, it was incorporated into the Compiled Laws of 1967 as Chapter 57, but without any correlation between the statutory section numbers and the numbering of the official UCC text as approved by the National Conference of Commissioners on Uniform State Laws. In the 1980 revision of Volume 15, which included Title 57, the code commission transferred the sections in Title 57 to new Title 57A and renumbered the sections to correspond with the official text. For the purpose of clarity, in this opinion we cite the various statutory sections by their designation in the 1980 revision and cite the official UCC text and the official comments thereto by their designation in the official text, which may be correlated to the statutes by simply interposing 57A before the citation.

For further simplification, appellant Walter Johnson will be referred to as appellant, Johnson, or buyer, whichever is more appropriate in the context. John Deere Company and Nelson Implement, Inc. will be referred to as appellees collectively, or respectively as Deere or manufacturer and Nelson or seller, as fits the context in which they are used.

Prior to farming, appellant spent four years in military service where he was trained to be a diesel mechanic. Upon his discharge from the service he attended South Dakota State University in Brookings, South Dakota, where he received a degree in agricultural education in 1959. He then worked for Commercial Credit Equipment Corporation until 1965 when he began farming in the Alcester, South Dakota, and Hawarden, Iowa, area. He began doing custom combining in the fall of 1966. In 1975 he decided to purchase a John Deere 8630 tractor in order to improve his custom operations. His custom operation consisted primarily of grain combining, hay stacking and windrowing, small grain windrowing, and some tillage work.

Before deciding to purchase the new John Deere tractor, appellant talked with several farmers in the area in which he lived to find out if he would be able to do enough outside combining to justify the purchase of the new tractor, and it appeared that he would be able to do so. In addition to the John Deere 8630 tractor, appellant also purchased a chisel plow, a disc, and a subsoiler. The value of the equipment was $71,652, but with his trade-in, appellant owed Nelson $43,749.87. At the time of the purchase both Curtis Nelson, owner of Nelson, and one of his salesmen, Lyle Larson, knew that appellant was going to be using the tractor and attachments for custom work.

The purchase order, which appellant signed when he bought the John Deere 8630 tractor, contained at the bottom a warranty limitation which read:

The Warranty on the reverse side is a part of this contract. Neither seller, John Deere Company, nor the manufacturer makes any other representations or warranties, express or implied (AND EXPRESSLY DISCLAIMS THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS) or has any obligations to the Purchaser except as provided on the reverse side.

The New Equipment Warranty, printed on the back of the purchase order, first provided, in pertinent part: "Parts which are defective in materials or workmanship as delivered to the purchaser will be repaired or replaced (.)" Thereafter followed details as to maximum months and/or hours with respect to specific parts or components, none of which provisions are at issue here. A subsequent paragraph further provided:

G. REMEDIES EXCLUSIVE.

The only remedies the purchaser has in connection with the breach or performance of any warranty on John Deere equipment are those set forth above. In no event will the dealer, John Deere or any company affiliated with John Deere, be liable for incidental or consequential damages or injuries, including, but not limited to loss of crops, loss of profits, rental of substitute equipment or other commercial loss.

SDCL 57A-2-719(1)(a) provides that the parties' agreement may limit the buyer's remedies to "repair and replacement of nonconforming goods or parts (.)" SDCL 57A-2-719(1)(b) further provides that if that remedy is expressly agreed to be exclusive, it is the sole remedy. That intent must be clearly expressed. The New Equipment Warranty under consideration clearly expressed, by its terms, the intent that the purchaser's remedy was exclusively limited to repair or replacement of defective parts by the manufacturer.

We view the key issue to be whether, under the circumstances of this case, buyer is entitled to relief through the general remedies of the UCC under SDCL 57A-2-719(2), which provides:

Where circumstances cause an exclusive or limited remedy to fail of its essential purpose, remedy may be had as provided in this title.

The first comment to the official text of the UCC states,

(I)t is of the very essence of the sales contract that at least minimum adequate remedies be available. If the parties intend to conclude a contract for sale within this Article they must accept the legal consequence that there be at least a fair quantum of remedy for breach of the obligations or duties outlined in the contract.... (U)nder subsection (2), where an apparently fair and reasonable clause because of circumstances fails in its purpose or operates to deprive either party of the substantial value of the bargain, it must give way to the general remedy provisions of this Article.

The issue, as appellant framed it, is, "Will the law protect a purchaser who buys a lemon?" The term "lemon" is, of course, not to be found in the UCC; however, it has a well-recognized connotation. 1 The trial court used the term in ruling against appellant's offer of proof related to consequential damages when saying: "Now, you know the law won't protect you from a lemon, we know that. They will protect you from a breach of any warranty." At the close of appellant's case the trial court granted appellees' motion for directed verdict on appellant's complaint. In so doing, the trial court stated,

Well, I have a certain amount of empathy, needless to say, for the plaintiff in this case. But what it all boils down to is do our statutes mean what they say and, are they effective. And I think under the state of this record that there is no unreasonable delay. Of course there were delays, there is bound to be. But any unreasonable delays upon the part of John Deere or Nelson Implement. I think the gentleman, the plaintiff when he signed the contract understood what he was signing. He was experienced. And I cannot see anything in the state of the record that would get me into any of the exceptions to allow me to go to the jury. I think the motions are well taken.

I'm going to grant the motions as to both the defendants(.)

After reviewing the record, we are inclined to agree with the trial court's characterization of the tractor as a "lemon," but we disagree that the law will not protect the purchaser of a lemon. The catalog of appellant's problems with the tractor began shortly after it was put into full use. The tractor was delivered on November 10, 1975, and it was immediately put to use, accumulating about seventy-five hours on the hour meter by January 1, 1976. Appellant began using the tractor again in the spring of 1976. Shortly thereafter, trouble began with the front wheels, and it was discovered that the wrong size bolts had been used in the manufacture of the machine. Oil leaks, transmission problems, and internal engine problems developed throughout the 1976 farming season. Appellant called upon Nelson to repair the defects, and for the most part this was done, although there were some delays in securing parts.

In mid-February of 1977 appellant returned the tractor to Nelson for transmission repairs, and Nelson also made extensive factory-ordered modifications. Shortly after the tractor was returned to appellant, he experienced additional problems with water hoses, the transmission again, and the fuel-injection system. After appellant unsuccessfully attempted to have another John Deere dealer repair the fuel-injection system by replacement of the injectors, he returned it to Nelson for service. After another attempt to use the tractor, it again broke down, whereupon it was discovered that the shaft of the injector pump was broken. The tractor was in use from May 1, 1977, until that fall when the tractor had injector seal problems. Appellant claims that it was not serviceable for the balance of the fall and winter of 1977-78. In the spring of 1978 the...

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