Schroeder v. Fageol Motors, Inc.

• Decision Date: 02 December 1974
• Docket Number: No. 2269--I,2269--I
• Parties: , 16 UCC Rep.Serv. 332 John SCHROEDER, Respondent, v. FAGEOL MOTORS, INC., a Washington corporation and Cummins Engine Company, Inc., a foreign corporation, Appellants. . Division 1
• Court: Washington Court of Appeals

Page 161

12 Wn.App. 161

528 P.2d 992, 16 UCC Rep.Serv. 332

John SCHROEDER, Respondent, v. FAGEOL MOTORS, INC., a Washington corporation and Cummins

Engine Company, Inc., a foreign corporation, Appellants.

No. 2269--I.

Court of Appeals of Washington. Division 1.

Dec. 2, 1974.

Rehearing Denied Jan. 29, 1975.

Ryan, Bush, Swanson & Hendel, Seattle, for Fageol Motors.

Bogle, Gates, Dobrin, Wakefield & Long, Seattle, for Cummins Engine Co.

Davies, Pearson, Anderson, Gadbow & Hayes, P.S., John C. Kouklis, Tacoma, for respondents.

JAMES, Judge.

This case concerns an aspect of the law of products liability not heretofore considered at the appellate level in Washington.

Plaintiff, John Schroeder, purchased a 1970 White freightliner truck from defendant, Fageol Motors. The truck was to be used to haul automobiles between California and Washington. It was Schroeder's normal practice to operate his trucks 24 hous a day.

Schroeder brought this action to recover damages which he incurred as a result of an engine failure. The engine had been manufactured by defendant, Cummins Engine Company, and installed in the truck by defendant, White Motor Corporation, the manufacturer of the truck.

Schroeder's complaint alleges that Fageol and White are liable because of 'an absolute guarantee for One Hundred Thousand (100,000) miles as to the engine, power train and other major components.' As to defendants Cummins Engine Company and Cummins Northwest Diesel, the complaint alleges liability for negligence in making repairs to the engine.

Prior to trial, Schroeder settled with defendants Cummins Northwest Diesel and White Motor Corporation for the sum of $4,000. The case was tried to the court.

The trial judge found that because of the engine failure, Schroeder sustained damages of $8,431.45 for out-of-pocket payments for repairs and $12,160 for lost profits while the truck was disabled. The $4,000 received from Cummins Northwest Diesel and White Motor Corporation was credited and judgment was entered against appellants Fageol Motors and Cummins Engine Company for $16,591.45.

The trial judge found that Fageol represented to Schroeder that it had repossessed the truck from its first purchaser; that the truck had been driven only 6,000 miles; and that a new truck warranty for the Cummins diesel engine would be in effect until the truck had been driven 100,000 miles. He further found that:

Prior to the sale of the truck (Schroeder) was shown a warranty book which was later placed in the glove box of the truck following purchase, and (Schroeder) was told to keep the warranty book in the glove box. . . .

Finding of fact No. 5. The 21-page 'warranty' book is entitled 'Owner Book' and on the inside of the cover page, the new truck owner is told that the book contains the 'White Truck 'Comprehensive' New Truck Warranties.'

It is undisputed that the truck performed normally for approximately 36,000 miles and that while being driven in a routine manner in the vicinity of Sacramento, California, the engine exploded. Schroeder called Fageol and was told to take the truck to the Cummins' San Francisco shop for repairs.

It is undisputed that Cummins determined that the cause of the engine failure was a casting defect in a piston rod cap. Cummins undertook the repair of the engine without cost to Schroeder except for normal maintenance items.

The trial judge found that the truck never performed properly after Cummins' first repair of the engine. Among many difficulties was a severe vibration problem. He found that Schroeder

made numerous and repeated complaints to Cummins Engine Co., Inc. and to Fageol Motors, Inc. to repair the truck. The truck was returned to the shop of Fageol and to the shops of the agents of Cummins, and additional work was done on it, . . .

(finding of fact No. 7), but that the attempts at repair were unsuccessful.

The trial judge concluded that both Fageol and Cummins were bound by an agreement to repair contained in the warranty book and that both had breached the agreement. He found that Schroeder's damages were the proximate result of the breach of the agreement to repair. By their assignments of error, Fageol and Cummins challenge the trial judge's conclusion as to liability and his findings as to damages. We find no error and affirm.

The agreement to repair the engine is contained in the 'component' warranty for the Cummins diesel engine on page 11 of the 'Owner Book.' By that warranty,

(t)he Seller warrants to the Purchaser that the Cummins Diesel engine (hereinafter called 'engine') installed in, and so long as it remains in, the new truck will be free from defects in material, workmanship and title.

The 'warranty' further provides that:

If it appears . . . that the engine does not meet the warranty specified above . . . the Seller shall correct, or cause another to correct, any defect, at the Seller's option, either by repairing any defective part or by making available, at the Seller's factory or nearest Branch Office or nearest franchised Dealer, a repaired or replacement part; . . .

The warranty as to defects is followed by a disclaimer in bold print as follows:

THE FOREGOING WARRANTY IS EXCLUSIVE AND IN LIEU OF ALL OTHER WARRANTIES WHETHER WRITTEN, OR ORAL OR IMPLIED (INCLUDING, BUT NOT LIMITED TO, A WARRANTY OF MERCHANTABILITY OR FITNESS FOR PURPOSE).

Concerning its liability, Cummins argues that the express agreement to repair was that of the seller, Fageol, and that Cummins was not bound thereby. Cummins' argument must be rejected. Cummins itself introduced a copy of a document entitled 'Cummins Warranty' (Exhibit E). Its terms are substantially those of the engine warranty contained in the new truck warranty book delivered to Schroeder. A witness for Cummins testified that the Cummins warranty, which accompanied every engine which it manufactured, was for the benefit of the 'end user.'

The engine was warranted to be free of defects 'for two years or 100,000 miles or 3,600 hours of Operation.' (Italics ours.) Obviously, the warranty is for the benefit of the Operator. Schroeder, the operator, was the 'end user' and as such he was a third-party beneficiary of the 'Cummins Warranty.'

A third-party beneficiary is one who, though not a party to the contract, will nevertheless receive direct benefits therefrom. In determining whether or not a third-party beneficiary status is created by a contract, the critical question is whether the benefits flow directly from the contract or whether they are merely incidental, indirect or consequential.

McDonald Constr. Co. v. Murray, 5 Wash.App. 68, 70, 485 P.2d 626, 627--628 (1971). A third party for whose direct benefit a contract is intended may sue for the breach thereof. 17 Am.Jur.2d Contracts § 305 (1964). Accord, Jeffery v. Hanson, 39 Wash.2d 855, 239 P.2d 346 (1952).

In any event, Cummins did initially honor the warranty that the engine would be free from defects in material and did undertake its repair. The trial judge's finding that the truck never thereafter performed satisfactorily is supported by substantial evidence. The trial judge did not err in concluding that the failure to repair was a breach of an express contractual agreement.

An unsuccessful effort to remedy the defects renders the seller liable on his warranty; and the buyer is not bound to allow him a second opportunity, or to permit him to tinker with the article indefinitely in the hope that it may ultimately be made to comply with the warranty.

(Footnotes omitted.) 77 C.J.S. Sales § 340 (1952). Accord, Beal v. General Motors Corp., 354 F.Supp. 423 (D.Del.1973); Jones & McKnight Corp. v. Birdsboro Corp., 320 F.Supp. 39 (N.D.Ill.1970); Seely v. White Motor Co., 63 Cal.2d 9, 45 Cal.Rptr. 17, 403 P.2d 145 (1965); Kaiser Cement & Gypsum Corp. v. Allis-Chalmers Mfg. Co., 35 Cal.App.3d 948, 111 Cal.Rptr. 210 (1973); Rose v. Chrysler Motors Corp., 212 Cal.App.2d 755, 28 Cal.Rptr. 185, 99 A.L.R.2d 1411 (1963); General Motors Corp. v. Earnest, 279 Ala. 299, 184 So.2d 811 (1966); Allen v. Brown, 181 Kan. 301, 310 P.2d 923 (1957); Rice v. Chrysler Motors Corp., 198 N.W.2d 247 (N.D.1972); Steele v. J. I. Case Co., 197 Kan. 554, 419 P.2d 902 (1966); Judd Constr. Co. v. Bob Post, Inc., 516 P.2d 449 (Colo.App.1973); Ford Motor Co. v. Gunn, 123 Ga.App. 550, 181 S.E.2d 694 (1971); Cox Motor Car Co. v. Castle, 402 S.W.2d 429 (Ky.1966).

Concerning its liability, Fageol first argues that the bold print disclaimer quoted above 'evidences conspicuous writing sufficient to waive any implied warranties.' The argument misconceives the basis of the trial judge's conclusion as to liability. The validity of the disclaimer of Implied warranties is not in issue. As heretofore pointed out, the trial judge based his conclusion as to liability of both Cummins and Fageol upon his finding that each had breached the undisputed Express contractual agreement to repair.

Fageol's second contention is that 'the court erred in holding that Fageol had breached its warranties to Schroeder.' Its argument is that:

(It) did everything it could to correct the problems arising from the engine failure near Sacramento. In effect, the warranty from Fageol to Schroeder for the engine which was covered on page 11 of the Warranty Book was merely a Cummins warranty which Fageol was passing on to the purchaser (St. 344--346.) When the Sacramento failure occurred, Cummins took the responsibility and sought to correct the problems under its warranty. Schroeder only came back to Fageol when told to do so by Cummins' warranty man who told him they would transfer the warranty up here. Fageol did not breach its warranty to Schroeder.

Again, this argument ignores Fageol's Express agreement to repair.

Concerning damages, Fageol contends that it was error to award consequential damages for lost profits. Fageol relies upon the final sentence of the 'White Truck Comprehensive New Truck Warranty' found on page 3 of the 'Owner Book'...