Overland Bond & Inv. Corp. v. Howard

• Decision Date: 15 December 1972
• Docket Number: No. 55942,55942
• Citation: 292 N.E.2d 168,9 Ill.App.3d 348
• Parties: , 11 UCC Rep.Serv. 945 OVERLAND BOND AND INVESTMENT CORPORATION, Plaintiff-Appellee, v. Learthurman HOWARD and Faith Howard, Defendants-Appellants.
• Court: United States Appellate Court of Illinois

Page 168

292 N.E.2d 168

9 Ill.App.3d 348, 11 UCC Rep.Serv. 945

OVERLAND BOND AND INVESTMENT CORPORATION, Plaintiff-Appellee, v. Learthurman HOWARD and Faith Howard, Defendants-Appellants.

No. 55942.

Appellate Court of Illinois, First District, Fifth Division.

Dec. 15, 1972.

Wallace C. Winter, Northwest Neighborhood Legal Services-Legal Aid Bureau, Chicago, for defendants-appellants.

ENGLISH, Justice.

This action was brought to recover a deficiency balance allegedly due after default on a retail installment contract for the purchase of an automobile which was returned to the seller and subsequently resold. The installment contract was assigned by the seller to plaintiff, who stipulated that the buyers could assert all defenses against plaintiff.

The trial court, sitting without a jury, found that defendants were entitled to total credits of $770.52, leaving a balance of $877.28 due to plaintiff, less $100 deducted by plaintiff from that amount for brake repairs, plus $92.01 in attorney's fees; and entered an order confirming judgment by confession for $869.29 plus court costs. From that order defendants appeal.

Although the testimony concerning exact dates is somewhat confused, the record discloses that on June 28, 1970, defendants signed a retail installment contract with Car Credit Corporation, an automobile dealer, for the purchase of a 1965 Oldsmobile for $1,470. The contract provided for a down payment of $200, which defendants paid, leaving an unpaid balance of $1,270 plus a finance charge of $177.80 to be paid in 12 monthly installments of $120.65 beginning July 30, 1970. The deferred payment price, including the down payment, was $1,647.80.

Defendant Learthurman Howard (hereafter 'defendant'), also signed a statement written in his own handwriting which declared that he understood there was a 30-day, 100 per cent guarantee on the block, transmission and rear end and a 30-day 50 per cent guarantee on everything else.

At the time of the purchase, defendant informed the salesman for the dealer that he was a salesman and that his job required him to have the daily use of a car.

On the morning after defendant purchased the car, he started to drive to work and the car overheated. He stopped at a service station, put water in it, and had the oil checked. He went about 15 miles further and the transmission fell out while on the Eisenhower Expressway. He called Car Credit Corporation, told them what had happened, and had the car towed in to be repaired. Defendant testified that for nine days he returned to the dealer to see if his car had been fixed, and each time received assurances that someone would 'get to it.' About 6:00 P.M. on the ninth day, the car was fixed. According to his testimony, 'right after (he) got it out of the shop,' the gas line clogged up and had to be fixed.

About a week later, between 4:00 and 4:30 P.M., he was coming home from work on the Dan Ryan Expressway when the brakes went out at 39th Street. The car rolled to a stop and he had it towed to the dealer once again. The dealer informed him that the brakes would be repaired, but after visiting the shop almost every day for three weeks, no work had been done.

Defendant thereupon informed two salesmen and the credit manager that at that time he was cancelling the contract and revoking his acceptance of the automobile.

On September 9, 1970, plaintiff, assignee of the dealer, mailed defendant a notice of resale, and on September 20, 1970, sold the automobile at auction for $500.

On January 13, 1971, the court entered the judgment in question.

Defendants-appellants have filed an extensive brief, as well as a motion for default against appellee for failure to appear in this court. In Daley v. Jack's Tivoli Liquor Lounge, Inc., 118 Ill.App.2d 264, 254 N.E.2d 814, we discussed the propriety of reversing a case for failure of appellee to file briefs, and concluded that a reviewing court should not reverse a trial court judgment except after consideration of the merits of the appeal. Therefore, the motion for pro forma reversal is denied and we turn to a consideration of the merits of the appeal.

Section 2-314 of the Uniform Commercial Code (Ill.Rev.Stat.1969, ch. 26, par. 2-314(1)), creates an implied warranty of merchantability (unless excluded or modified), in a contract of sale 'if the seller is a merchant with respect to goods of that kind * * *.' To be merchantable, goods 'must at least be such as * * * are fit for the ordinary purposes for which such goods are used.' Section 2-314 makes no specific distinction between new and used articles the sales of which give rise to implied warranties, although the official comments state that 'A contract for the sale of second-hand goods, however, involves only such obligation as is appropriate to such goods for that is their contract description.' Uniform Commercial Code Comment SHA, ch. 26, par. 2-314, p. 232 (1963). Thus, such a contract obligation may create a warranty of merchantability in the sale of a used automobile. ^* See Chamberlain v. Bob Matick Chevrolet, Inc., 4 Conn.Cir. 685, 239 A.2d 42; Stickney v. Fairfield's Motors, Inc., 9 UCC Reporter 236. We find in this case that when the seller (a merchant with respect to automobiles) delivered to the buyers a vehicle in 'good' condition, warranties attached which were similar in character to those which attach to the sale of new cars. An appropriate implied warranty of merchantability was created by the contract for this 'good' used car which entitled defendants to revoke their obligations under the contract when the warranties were found to have been breached.

Defects which have been held to make operation of a new automobile unfit and thereby cause a breach of implied warranties may result in the breach of the same warranties on a used automobile. See Appleman v. Fabert Motors, Inc., 30 Ill.App.2d 424, 174 N.E.2d 892, a case arising under the Uniform Sales Act where the court held that a buyer had the right to expect reasonably trouble-free transportation from his recently purchased car. See also Berg v. Stromme, 79 Wash.2d 184, 484 P.2d 380. Fitness for the ordinary purpose of driving implies that the vehicle should be in a safe condition and substantially free of defects. It should be obvious that any car without an adequate transmission and proper brakes is not fit for the ordinary purpose of driving. Any other conclusion would entitle unscrupulous sellers to foist inherently dangerous and potentially worthless vehicles on unwary consumers and thereby avoid the obvious intent of the statute.

Even if Section 2-314 were held inapplicable to used car sales, Section 2-315 (Ill.Rev.Stat.1969, ch. 26, par. 2-315) states that '(w)here the seller at the time of contracting has reason to know any particular purpose for which the goods are required and that the buyer is relying on the seller's skill or judgment to select or furnish suitable goods, there is unless excluded or modified under the next section an implied warranty that the goods shall be fit for such purpose.'

An implied warranty of fitness for a particular purpose in the case of secondhand good predates the adoption of the Uniform Commercial Code and has been continued by Section 2-315. See Markman v. Hallbeck, 206 Ill.App. 465. In other jurisdictions, courts have held that there is an implied warranty of fitness for a particular purpose which may be breached when an automobile dealer sells a used car or truck which is not fit for its intended use. Brown v. Hall (Fla.App.1969), 221 So.2d 454; Green v. Northeast Motor Company (D.C.Mun.App.1961), 166 A.2d 923; Goepfert v. Town Motors Automotive Co. (Pa.1951), 1 Bucks 134.

In the present case, defendant testified that he informed the salesman for the dealer that he (defendant) was a salesman who needed his car for business purposes. We are aware that all cars need transmissions and brakes in order to function for the general purpose of driving. However, we believe the dealer was also charged with creating an implied warranty of fitness for a particular purpose when he learned that defendant was dependent on his car for his livelihood. Knowing this, and knowing that defendant was relying on the dealer's skill and judgment in selecting a suitable car for him, an implied warranty arose as a matter of law. Green v. Northeast Motor Company (D.C.Mun.App.1961), 166 A.2d 923; see Berg v. Stromme, 79 Wash.2d 184, 484 P.2d 380.

Defendants also argue that an implied warranty of merchantability may accompany the sale of a used automobile if the retail installment contract does not contain a conspicuous disclaimer mentioning merchantability, an acknowledgment of examination by the buyer, or expressions like 'as is' or 'with all faults.'

The retail installment contract which defendants signed contained the following provision in two lines of small print on the top of the first side between the names of both buyers and seller and the description of the purchased automobile.

Seller hereby sells and Buyer or Buyers, jointly and severally, hereby purchase the following motor vehicle with accessories and equipment thereon for the deferred payment price and on the terms set forth in this contract. Buyer acknowledges delivery and acceptance of said motor vehicle in good condition.

On the back side of the contract, in smaller print which is the same size as seven additional agreements of the buyer on the same side of the contract, is the following provision:

This contract contains all of the agreements of the parties relative to the retail installment sale, and no representations, promises, statements or warranties, express or implied, have been made by seller unless contained herein or imposed by law.

Despite these fine print provisions, defendants argue that the implied warranty of merchantability was not excluded in the contract for the sale of the used automobile to defendants.

Counsel for plaintiff admitted, in his final...