Seely v. White Motor Co.

• Decision Date: 23 June 1965
• Court: California Supreme Court
• Parties: , 403 P.2d 145, 2 UCC Rep.Serv. 915 Daniel J. SEELY, Plaintiff and Appellant, v. WHITE MOTOR COMPANY, Defendant and Appellant. L. A. 27618.

Page 17

45 Cal.Rptr. 17

63 Cal.2d 9, 403 P.2d 145, 2 UCC Rep.Serv. 915

Daniel J. SEELY, Plaintiff and Appellant, v. WHITE MOTOR COMPANY, Defendant and Appellant.

L. A. 27618.

Supreme Court of California, In Bank.

June 23, 1965.

Rehearing Denied July 21, 1965.

John M. Nairn, Bakersfield, for plaintiff and appellant.

Baker, Palmer & Wall and Oran W. Palmer, Bakersfield, for defendant and appellant.

TRAYNOR, Chief Justice.

In October 1959 plaintiff entered into a conditional sales contract with Southern Truck Sales for the purchase of a truck manufactured by defendant, White Motor Company. Plaintiff purchased the truck for use in his business of heavy-duty hauling. Upon taking possession of the truck, plaintiff found that it bounced violently, an action known as 'galloping.' For eleven months after the purchase, Southern, with guidance from White's representatives, made many unsuccessful attempts to correct the galloping. On July 22, 1960, when slowing down for a turn, plaintiff found that the brakes did not work. The truck overturned, and plaintiff, who was not personally injured, had the damage repaired for $5,466.09. In September 1960, after paying $11,659.44 of the purchase price of $22,041.76, plaintiff served notice that he would make no more payments. Southern thereafter repossessed the truck and resold it for $13,000.

Plaintiff brought this action against Southern and White seeking (1) damages, related to the accident, for the repair of the truck, and (2) damages, unrelated to the accident, for the money he had paid on the purchase price and for the profits lost in his business because he was unable to make normal use of the truck. During the trial plaintiff dismissed the action against Southern without prejudice. The court found that White breached its warranty to plaintiff and entered judgment for plaintiff for $20,899.84, consisting of $11,659.44 for payments on the purchase price and $9,240.40 for lost profits. It found that plaintiff had not proved that the galloping caused the accident and therefore denied his claim for $5,466.09 for the repair of the truck. Both plaintiff and White appeal from the judgment.

Defendant contends that the trial court erred in awarding damages for lost profits and for the money paid on the purchase price of the truck. We do not agree with this contention. The award was proper on the basis of a breach of express warranty.

Defendant included the following promise in the printed form of the purchase order signed by plaintiff: 'The White Motor Company hereby warrants each new motor vehicle sold by it to be free from defects in material and workmanship under normal use and service, its obligation under the warranty being limited to making good at its factory any part or parts thereof. * * *' This promise meets the statutory requirement for an express warranty: 'Any affirmation for an express warranty: 'Any affirmation of fact or any an express warranty if the natural tendancy of such affirmation of promise is to induce the buyer to purchase the goods, and if the buyer purchases the goods relying thereon.' (Civ. Code, § 1732; cf. Com. Code, §§ 2313, 2314.) ¹ The natural tendency of White's promise was to induce buyers to rely on it, and plaintiff did so rely in purchasing the goods. The reliance on the warranty, and the warranty itself, are manifested by plaintiff's continued efforts to have the truck repaired, and by defendant's acceptance of the responsibility to correct the galloping. The statute requires only that plaintiff rely on the warranty. It does not additionally require that he be aware that it was made by the manufacturer instead of the dealer to reach the one who in fact made it. Surely if plaintiff sought to have a part replaced that was covered by the warranty, White could not escape its obligation by showing that plaintiff thought the warranty White made was made by the dealer.

Defendant contends that its limitation of its obligation to repair and replacement, and its statement that its warranty 'is expressly in lieu of all other warranties, expressed or implied,' are sufficient to operate as a disclaimer of responsibility in damages for breach of warranty. This contention is untenable. When, as here, the warrantor repeatedly fails to correct the defect as promised, it is liable for the breach of that promise as a breach of warranty. (Rose v. Chrysler Motors Corp., 212 Cal.App.2d 755, 762-763, 28 Cal.Rptr. 185, 99 A.L.R.2d 1411; Allen v. Brown, 181 Kan. 301, 308, 310 P.2d 923.) Since there was an express warranty to plaintiff in the purchase order, no privity of contract was required. (See Burr v. Sherwin Williams Co., 42 Cal.2d 682, 696, 268 P.2d 1041.) Plaintiff also gave reasonable notice of the defect. (Civ. Code, § 1769; cf. Com. Code, § 2607.)

The damages awarded by the trial court, 'the loss directly and naturally resulting in the ordinary course of events from the breach of warranty' (Civ. Code, § 1789, subd. 6; cf. Com. Code, § 2714), can properly include lost profits (Grupe v. Glick, 26 Cal.2d 680, 692, 160 P.2d 832; Mack v. Hugh W. Comstock Associates, Inc., 225 Cal.App.2d 583, 587, 37 Cal.Rptr. 466) as well as the amount paid on the purchase price. Defendant contends that plaintiff must elect between these remedies, relying on an analogy to the sales act requirement of election between rescission and damages. (Civ. Code, § 1789.) Since this action, however, is against the manufacturer for consequential damages and not against the immediate seller for rescission of the contract of sale, the sales act does not compel an election of remedies. The often criticized rule of election of remedies (see, e.g., Ezer, The Impact of the Uniform Commercial Code on the California Law of Sales Warranties, 8 U.C.L.A.L.Rev. 281, 330), has not been adopted by the Commercial Code (Com. Code, § 2608, comment 1), and should not be extended to apply here.

Defendant also contends that the damages awarded are excessive since the rental value of the truck was not offset against plaintiff's claim for lost profits. Plaintiff replies that, in estimating that 60 per cent of the lost gross earnings was lost profits, the trial court deducted a reasonable rental value for the truck. We cannot say that the trial court failed to take rental value into account when it evaluated the estimates of profit percentage that ranged from 25 per cent to 77 per cent. Since defendant failed to request a finding on the issue of an appropriate rental value, it cannot complain that a specific finding was not made. (Code Civ. Proc., § 634.)

It is contended that the foregoing legislative scheme of recovery has been superseded by the doctrine of strict liability in tort set forth in Greenman v. Yuba Power Products, Inc., 59 Cal.2d 57, 63, 27 Cal.Rptr. 697, 377 P.2d 897, and Vandermark v. Ford Motor Co., 61 Cal.2d 256, 261, 37 Cal.Rptr. 896, 391 P.2d 168. We cannot agree with this contention. The law of sales has been carefully articulated to govern the economic relations between suppliers and consumers of goods. The history of the doctrine of strict liability in tort indicates that it was designed, not to undermine the warranty provisions of the sales act or of the Uniform Commercial Code but, rather, to govern the distinct problem of physical injuries.

An important early step in the development of the law of products liability was the recognition of a manufacturer's liability in negligence to an ultimate consumer without privity of contract. (MacPherson v. Buick Motor Co. (1916) 217 N.Y. 382, 389, 111 N.E. 1050, L.R.A. 1916F, 696.) About the same time, the courts began to hold manufacturers liable without negligence for personal injuries. Over a score of theories were developed to support liability (see Gillam, Products Liability in a Nutshell, 37 Ore.L.Rev. 119, 153-155), and the one that was generally accepted was borrowed from the law of sales warranty. (See Prosser, The Assault Upon the Citadel, 69 Yale L.J. 1099, 1126.) 'Only by some violent pounding and twisting,' however, could the warranty doctrine be made to serve this purpose. (Patterson, The Apportionment of Business Risks Through Legal Devices, 24 Colum.L.Rev. 335, 358; see also Prosser, supra, 69 Yale L.J. 1099, 1124-1134.) Final recognition that '(t)he remedies of injured consumers ought not to be made to depend upon the intricacies of the law of sales' (Ketterer v. Armour & Co., D.C. 200 F. 322, 323; Greenman v. Yuba Power Products, Inc., 59 Cal.2d 57, 64, 27 Cal.Rptr. 697, 377 P.2d 897) caused this court to abandon the fiction of warranty in favor of strict liability in tort. (Greenman v. Yuba Power Products, Inc., supra, at p. 63, 27 Cal.Rptr. 697, 377 P.2d 897; Vandermark v. Ford Motor Co., 61 Cal.2d 256, 261, 37 Cal.Rptr. 896, 391 P.2d 168)

The fact that the warranty theory was not suited to the field of liability for personal injuries, however, does not mean that it has no function at all. In Greenman we recognized only that were developed governing warranties that were developed to meet the needs of commercial transactions cannot properly be invoked to govern the manufacturer's liability to those injured by its defective products unless those rules also serve the purposes for which such liability is imposed.' (Greenman v. Yuba Power Products, Inc., supra 59 Cal.2d 57, 63, 27 Cal.Rptr. 697, 701, 377 P.2d 897, 901.) Although the rules governing warranties complicated resolution of the problems of personal injuries, there is no reason to conclude that they do not meet the 'needs of commercial transactions.' The law of warranty 'grew as a branch of the law of commercial transactions and was primarily aimed at controlling the commercial aspects of these transactions.' (See James, Products Liability, 34 Tex.L.Rev. 192; Llewellyn, On Warranty of Quality, and Society, 36 Colum.L.Rev. 699, 37 Colum.L.Rev. 341.)

Although the rules of warranty frustrate rational compensation for physical injury, they...