Lieb v. Milne , 95 N.M. 716 ( 1980 )

OPINION

ANDREWS, Judge.

This action arises out of the sale of a specially constructed truck to the plaintiffs, Henry and Jackie Lieb. On January 17, 1977, the Liebs entered into an agreement calling for the purchase of a 1977 Chevrolet van from defendant, Milne. Milne was to convert that van into a refrigerated carrier. Milne purchased the van from Sacramento Chevrolet and had it transported to Stewart Equipment Company in El Paso for installation of the refrigeration that was necessary under the' contract. Stewart, in turn, had the refrigeration equipment installed by Western Battery and Magneto, under contract.

The truck was delivered to the Liebs on February 22, 1977. The retail sales agreement covering this transaction included a limitation on the implied warranty — those warranties were limited to the one year express warranty given by Chevrolet. Though there is conflicting evidence as to exactly what the truck was warranted to do, read in the light most favorable to defendant it appears that the truck was to maintain temperatures down to 35 degrees Fahrenheit. During the four months after delivery the Liebs had repeated difficulties with the refrigeration portion of the truck. Other mechanical difficulties also resulted from the fact that both the refrigeration unit and the truck’s air conditioner were run off the same compressor. This dual use overtaxed the available equipment.

On June 22, the Liebs met with Milne and requested that the terms of the warranty be met; they noted repeated problems with the truck and unsatisfactory repair under the warranty. At that time, they also requested an extension of the 12,000 mile limitation on the warranty which was soon to run out. Milne refused, and the Liebs were unable to reach any satisfactory resolution of this problem. During the next several months the Liebs continued to use the truck. Late in January, 1978, the Liebs unsuccessfully attempted to rescind the contract of sale. This suit followed.

At trial the Liebs proceeded under four theories: misrepresentation, revocation of acceptance and cancellation of the contract, breach of the implied warranty of merchantability, and breach of the implied warranty of fitness for particular purpose. Although the trial court made only four findings of fact, it did note whether each of the one hundred seventeen requested findings submitted by the plaintiff were given or rejected. It concluded:

8. There was implied in the contract of January 1977, an implied warranty of merchantability and an implied warranty of fitness for particular purpose.

9. The Plaintiff had the burden of proving that under said warranty the vehicle must carry frozen products.

10. The Plaintiff failed to carry its burden of proof in Counts III and IV.

11. Plaintiffs Exhibit 1, the Retail Sales Agreement of January, 1977, properly modified or limited the implied warranties pursuant to Sec. 2-316 of the U.C.C.

12. The implied warranties expired prior to the filing of this lawsuit. (Emphasis added.)

Those conclusions were based on Findings 1 and 2 that plaintiffs failed to carry the burden of proof on Counts I and II. The court’s findings relating to Counts III and IV were:

3. There is contained in plaintiff’s Exhibit I, a Retail Sales Agreement, limiting the implied warranties to the term of the express warranty by Chevrolet Motor Company.

4. At the time this action was commenced, the express warranty had expired.

Additionally, although not indicated in the court’s Findings of Fact and Conclusions of Law that it adopted and incorporated certain requested findings of defendant, the court did mark “given” beside these pertinent findings requested by defendant:

7. Plaintiffs did not attempt to rescind the contract between the parties until January of 1978, which attempt was untimely and additionally, the plaintiffs’ use of the motor vehicle for some 64,000 miles was inconsistent with the equitable remedy of rescission.

8. The motor vehicle carried a warranty of 12,000 miles or 12 months, both of which had expired prior to bringing this lawsuit and the attempted rescission of the plaintiffs in January of 1978.

13. Plaintiffs’ acceptance of the motor vehicle and plaintiffs’ use thereafter have estopped plaintiffs from asserting any claim against defendant for nonconformity.

14.Plaintiffs have waived any claim against defendant because of any nonconforming use.

and also marked as “given” defendant’s requested conclusion that all four counts should be dismissed with prejudice “because of lack of substantial evidence, waiver and estoppel.”

Fitting the “given” findings and conclusions together with the court’s findings and conclusions, it appears to us that Counts III and IV were dismissed because the trial court believed that suit on the implied warranties had to be brought within the one-year warranty period stated in the Retail Sales Agreement.

The Liebs contend that three errors occurred. First, that the trial court erred in holding that a suit brought after the expiration of the one-year time limit or the 12,000 mile limit, barred any action on the implied warranties. Second, that the trial court in its four findings of fact, failed to find either way on facts material to the issues in the case, and thus committed reversible error. Third, that the findings of the trial court particularly with regard to revocation were not supported by substantial evidence. We hold that the first of these issues is dispositive. The trial court clearly erred in considering the one-year warranty limitation period as being a jurisdictional bar to an action under the implied warranties. We therefore reverse and remand this action.

The original complaint filed by the Liebs stated, “[tjhat at the time of said sale . . . Defendant . . . knowing that Plaintiffs owned and operated a specialty food store, warranted and represented to Plaintiffs that said goods would remain at a temperature compatible with bringing frozen items intact from California to Alamogordo, New Mexico. . . . ” The evidence most favorable to the defendants, however, is that this was not the case. Representations were made that the truck would maintain temperatures of 35 degrees Fahrenheit and could be used to transport non-frozen items. Thus reviewing either the theory of implied warranty of merchantability or the implied warranty of fitness for particular purpose, the correct consideration is whether the truck would have maintained that 35 degree temperature.¹

The issues of implied warranty of merchantability and implied warranty for a particular purpose were both litigated in the District Court, as recognized in the trial court’s Conclusion No. 8. We find an error in the conclusion of the trial court as to the terms and effects of these warranties. It is clear that the contention that “[t]he plaintiff had the burden of proving that under said warranty the vehicle must carry frozen products,” must be considered in light of both of the implied warranties.

A. Implied Warranty of Merchantability

Section 55-2-314, N.M.S.A. 1978, defines the standard for determining whether a product is merchantable.

(2) Goods to be merchantable must be at least such as:

(a) pass without objection in the trade under the contract description; and

(b) in the case of fungible goods, are of fair average quality within the description and

(c) are fit for the ordinary purposes for which such goods are used; and

(d) run, within the variations permitted by the agreement, of even kind, quality and quantity within each unit and among all units involved; and

(e) are adequately contained, packaged and labeled as the agreement may require and

(f)conform to the promises or affirmations of fact made on the container or label if any.

This warranty should not be confused with an express warranty — it arises by operation of law, not through agreement of the parties.² The purpose of this section is clear; a merchant need not only supply a product in compliance with the terms of a contract, but unless expressly stated, those goods must conform to a basic standard. It is not the buyer who sets that standard, it is § 55-2-314.

Based on testimony most favorable to the defendant, the contract was for a truck which would maintain 35 degrees. There was testimony that the installation of the refrigeration equipment in conjunction with the truck’s own equipment for air-conditioning was sub-standard. Thus, the trial court erred in concluding that the plaintiffs’ burden with regard to the implied warranty of merchantability was to prove that the truck would freeze goods. Plaintiffs should have had to prove that the truck would pass without objection in the trade under the contract description — that it would satisfactorily cool to 35 degrees. Beyond this, even if it were proved that under some circumstances the truck would cool to 35 degrees, if the plaintiffs had proved that the unit was so shoddily constructed as to render the system unusable in conjunction with the truck’s air-conditioner, they would have sustained their burden of proof.

B. Implied Warranty of Fitness for a Particular Purpose ³

The argument above applied in essential part here. Again, the ability of the truck to freeze goods is not the critical issue— rather, it is whether the truck did what it was supposed to do. Under this warranty, plaintiffs were required to prove: (1) that at the time of contracting Milne had reason to know of a particular use or purpose for which the truck was being ordered; (2) that the buyers relied on Milne’s skill or judgment; and, (3) that the truck was not fit for that purpose. It is Milne’s contention that he sold the Liebs a truck to transport bean sprouts and other oriental vegetables. The plaintiffs were required to prove that it could not be used for this purpose.

C. Limitation Period

The court concluded that “[t]he implied warranties expired prior to the filing of this lawsuit.” This Conclusion No. 12 confuses the limitation period on a warranty with a statutory (jurisdictional) time limit.

The truck was delivered on February 22, 1977. The warranties (both express and implied) ran for one year from that date. The court found that the warranties ran from the inception of the contract, January 17, 1977, and therefore, the letter sent by plaintiffs’ attorney in January, 1978, was untimely. However, the court also treats the one-year period as a jurisdictional time limit for filing an action. It clearly is not. On June 22, 1977, prior to driving the vehicle 12,000 miles, plaintiffs approached defendant and informed him of their dissatisfaction. His refusal to remedy the problem at that date, and their attempts to rescind the contract should have been the subject of a factual determination. If Milne refused to provide the warranted service, the action was perfected 'at that time — subject only to the statutory time limit for filing an action. Cf. Dennin v. General Motors Corporation, 78 Misc.2d 451, 357 N.Y.S.2d 668 (1974). (Where the court held that “[t]his provision is not a one-year statute of limitation . . . but establishes by its plain language a period during which a cause of action might accrue for failure to repair or replace a defect in material or workmanship.”) As in Dennin, if a covered defect is brought to the attention of the seller during this period and the seller fails to repair, the buyer may sue any time within the statutory limitation period. However, here the trial court refused to consider the issue of implied warranty. Thus, the trial court erred as to the time limit, and this was the critical issue in this action.

Relying on Aguayo v. Village of Chama, 79 N.M. 729, 449 P.2d 331 (1969), plaintiff alleges that certain of the material facts in this action were not addressed in the findings of fact. The correct rule, however, is stated in a more recent decision, H. T. Coker Const. Co. v. Whitfield Transp., Inc., 85 N.M. 802, 518 P.2d 782 (Ct.App.1974):

[WJhere a party has the burden of proof on. an issue and requests findings on that issue, which are refused, the legal effect of the refusal of the requested findings is a finding against that party.

The requested findings of fact submitted by the plaintiffs were nothing short of epic. The trial court’s method of dealing with the requested findings of fact was wholly sufficient.

The trial court erred in holding that a suit brought after the expiration of the one-year-or-12,000-mile limit barred any action on the implied warranties. Consequently, the case is reversed and remanded for the district court to make further findings and conclusions which recognize the existence of implied warranties unless excluded by § 55-2-316(2); the distinctions between implied and expressed warranties; to determine whether implied warranties were breached on June 22, 1978 and thereafter, and to enter a judgment accordingly.

IT IS SO ORDERED.

WALTERS, J., specially concurs. SUTIN, J., dissents.

1 . Although the original complaint states that the truck was represented as being able to bring “frozen items intact,” it also stated that, “said refrigerated box maintained an average temperature of fiftyfive (sic) (55°) Fahrenheit.” Thus, although the warranties were, in fact, for a 35° truck, defendant was adequately notified of the vehicle’s failure.

2 . Note 2 of the Official Comment states, “[t]ht question when the warranty is imposed turns basically on the meaning of the terms of the agreement as recognized in the trade.” (Emphasis added.) The warranty then assures that once the terms are stated, all parties meet those terms to a standard of quality and performance which would “pass without objection in the trade.”

3 .§ 55-2-315. Implied warranty: fitness for particular purpose. Where 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 [55-2-316, N.M. S.A. 1978] an implied warranty that the goods shall be fit for such purpose.