McCormick Machinery, Inc. v. Julian E. Johnson & Sons, Inc.

Decision Date11 March 1988
Docket NumberNo. BP-257,BP-257
Citation13 Fla. L. Weekly 640,523 So.2d 651
Parties13 Fla. L. Weekly 640, 7 UCC Rep.Serv.2d 51 McCORMICK MACHINERY, INC., Appellant, v. JULIAN E. JOHNSON & SONS, INC., Appellee.
CourtFlorida District Court of Appeals

Stephen J. Pajcic, III, of Pajcic & Pajcic, Jacksonville, for appellant.

John A. Meadows, of Wood, Burge & Miller, Winston-Salem, N.C., for appellee.

SMITH, Chief Judge.

Appellant, McCormick Machinery, Inc. (McCormick), seeks reversal of the trial court's final judgment in favor of appellee, Julian E. Johnson & Sons, Inc. (Johnson), in which the trial court determined that Johnson could revoke acceptance of a bulldozer sold to it by McCormick, and that Johnson was entitled to recovery of damages it incurred in connection with the transaction.

McCormick's argument on appeal focuses upon its contentions that the transaction was a "no-warranty" sale and, in addition, that the evidence was insufficient to establish that the bulldozer was in such defective condition when purchased as to justify Johnson's revocation of acceptance under the Uniform Commercial Code, section 672.608, Florida Statutes. In its final judgment, the trial court specifically found that the sale was a "no-warranty" transaction, but nevertheless found that the evidence concerning the defective condition of the bulldozer was sufficient to authorize revocation. Johnson cross-appeals the trial court's determination that the transaction was a "no-warranty" sale. We conclude that Johnson is correct on the issue raised by its cross-appeal, and we determine that the disclaimer of warranties relied upon by McCormick and the trial court was insufficient to disclaim the implied warranty of "merchantability," under the Uniform Commercial Code, section 672.314, Florida Statutes (1985). Although we agree that the evidence tends to support the trial court's findings and Johnson's arguments on appeal that the bulldozer suffered from extensive defects, we find internal inconsistencies in the findings contained in the final judgment, and our review is further hampered by reason of the posture of the case as presented on appeal to this court. We conclude that the trial court's determination in Johnson's favor must be set aside for failure to apply the proper legal standards governing claims under an implied warranty of merchantability. We are therefore compelled to reverse and remand to the trial court for further proceedings.

The bulldozer in question was sold by McCormick to Johnson for $51,000.00. After a general inspection of the machine at McCormick's place of business, Johnson's representative was generally satisfied with the appearance of the machine and discussed with McCormick the installation of a yoke, which McCormick agreed to install. McCormick, at Johnson's request, made arrangements for the financing of the purchase with C & S Bank. On November 16, 1983, prior to the execution of the formal sales agreement, the bulldozer was delivered to Johnson, at which time its chief mechanic observed oil around the cylinder heads. A couple of days later, while being operated on its first job, the blade lifter arm broke off. Shortly thereafter, on the second job, the machine would go forward, but not backward, and it was discovered that the shifting rods, which were worn out and had been held together with baling wire, had come off. These problems were corrected.

The formal conditional sales contract was executed on December 12, 1983. On the front of this document, in bold-face print, appeared the attempted disclaimer of all express and implied warranties, as follows:

Seller makes no warranties, expressed or implied, with respect to the property and Buyer accepts delivery hereof under the warranties (if any) of the manufacturer only.

Following execution of the sales contract, the bulldozer experienced a multitude of problems, including a defective steering clutch and two cracked cylinder heads, which necessitated major repairs in excess of $22,000.00. At the time of Johnson's revocation of acceptance, according to a finding made by the trial judge, the evidence revealed the need for a new undercarriage at a cost of some $16,000.00. The need for the first major repairs occurred approximately four months after delivery, at which time the bulldozer had been used only about 200 hours. There was testimony that with normal use a bulldozer should operate about 180 hours each month. Subsequent to the major repairs, the steering clutch continued to cause problems.

Finally, by letter dated November 14, 1984, one year after delivery of the bulldozer, Johnson informed McCormick of its intent to rescind the contract. During the one year period while the bulldozer was in Johnson's possession, it was operated for a total of approximately 300 hours, and was in the repair shop about five months of that time.

McCormick filed a replevin action, obtained possession of the bulldozer, and sought damages from Johnson. Johnson, in turn, filed a counterclaim for rescission of contract, breach of contract, and fraud in connection with the transaction. Following a nonjury trial, the trial court entered a final judgment in favor of Johnson, approving Johnson's revocation of acceptance and rescission of the sale, and awarded Johnson damages sustained by it in connection with the transaction. The trial court found no fraud.

Turning to the issues on appeal, we find it appropriate to deal first with Johnson's cross-appeal, asserting that the trial court erred in finding that the attempted disclaimer in the contract was effective as a disclaimer of all warranties in connection with the sale. We agree with Johnson's position that the disclaimer was not effective to eliminate all implied warranties, but not for the reasons asserted. Johnson argues that the disclaimer of warranties was not conspicuous, and further did not conform to the provisions of the Uniform Commercial Code because the disclaimer appeared in a document executed after delivery of the bulldozer, and was not a part of the bargain between the parties. The trial court disagreed, finding that the disclaimer was conspicuous within the meaning of section 672.316, Florida Statutes (1985), and effectively removed the property from the implied warranty provisions of the Florida Uniform Commercial Code. While we agree with the trial court's ruling that the disclaimer was "conspicuous" and part of the bargain between the parties, we disagree with the finding that it was effective under provisions of the Code.

In addition to the express terms of a contract for the sale of goods by a merchant, the law imposes a contractual term promising quality; i.e., the goods must be merchantable. § 672.314(1), Fla.Stat. (1985). However, a seller may limit his liability exposure by disclaiming the implied warranty of merchantability, provided the disclaimer mentions merchantability, and in the case of a writing, that it be conspicuous. § 672.316(2). In the case before us, as stated above, the contract states in bold-face type, in the middle of the page: "Seller makes no warranty express or implied, with respect to the property and Buyer accepts delivery thereof under the warranty (if any) of the manufacturer only." While this disclaimer is conspicuous, Rudy's Glass Const. Co. v. E.F. Johnson Co., 404 So.2d 1087 (Fla. 3rd DCA 1981), and Monsanto Agr. Products Co. v. Edenfield, 426 So.2d 574 (Fla. 1st DCA 1982), it fails to mention "merchantability." The issue, then, is whether this omission renders the attempted disclaimer ineffective. We conclude that it does.

We are not unmindful of section 672.316(3)(a), which provides: "Unless the circumstances indicate otherwise, all implied warranties are excluded by expressions like 'as is,' or 'with all faults,' or other language which in common understanding calls the buyer's attention to the exclusion of warranties and makes plain that there is no implied warranty...." At first blush, it might appear that under this section the clause found in the contract was sufficient to disclaim all implied warranties because the language "makes plain that there is no implied warranty." § 672.316(3)(a). However, to permit a disclaimer couched in the terms used here to negate the implied warranty of merchantability would effect a literal rewriting of section 672.316(2) to exclude the requirement that the disclaimer mention "merchantability." In Rehurek v. Chrysler Credit Corporation, 262 So.2d 452 (Fla. 2nd DCA 1972), cert. den., 267 So.2d 833 (Fla.1972), the court found that a disclaimer provision failing to mention the word "merchantability" was insufficient. Although the court specifically found that the disclaimer clause failed "for the lack of conspicuousness ..." (262 So.2d at 454), further discussion in the opinion emphasizes the necessity for use of the word "merchantability" in order to effectively exclude an implied warranty of merchantability. We find that most courts from other jurisdictions have similarly held that general language disclaiming warranties is insufficient to exclude the implied warranty of merchantability, thus enforcing the requirement that the word "merchantability" be included in the disclaimer. E.g., see Two Rivers Co. v. Curtiss Breeding Service, 624 F.2d 1242, reh. den., 629 F.2d 1350, cert. den., 450 U.S. 920, 101 S.Ct. 1368, 67 L.Ed.2d 348; Schultz v. Jackson, 67 Ill.App.3d 889, 24 Ill.Dec. 395, 385 N.E.2d 162 (1979); Collins Radio Co. of Dallas v. Bell, 623 P.2d 1039 (Okl.App.1980). See also, J. White and R. Summers, Uniform Commercial Code, § 12-5 (2nd Ed. 1980).

In summary, McCormick's obligation under the contract, in the light of the ineffective disclaimer, was to deliver to Johnson a specific used bulldozer of merchantable quality. Contrary to the ruling of the trial court, which found the disclaimer provision effective to exclude any and all express or implied warranties, we find the attempted disclaimer ineffective to exclude the...

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    ...any finding of "nonconformity to the contract based on the condition of the machine." McCormick Machinery, Inc. v. Julian E. Johnson & Sons, Inc. , 523 So.2d 651, 656 (Fla. Dist. Ct. App. 1988) (emphasis in original). The McCormick court went on to endorse the finding of Ohio courts that "w......
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