CARLYLE BUTCHER, Respondent, v. GARRETT-ENUMCLAW COMPANY, Appellant.
No. 4908-1
Division One
June 8, 1978
361
Ruthford, Lind, Van Valin & Watts and Charles E. Watts, for respondent.
DORE, J.—Plaintiff Butcher sued the defendant Garrett-Enumclaw Company, a manufacturer, for breach of express and implied warranties relating to the 1973 sale of its portable sawmill called the “Ecologizer.” The Ecologizer was a new and unique concept for a commercial sawmill incorporating log cutting and log handling principles not found in ordinary sawmills. The jury awarded damages to the plaintiff of $56,011.22 for expenses, lost and reduced business profits, return of his purchase money, and the cost of modifying the waste disposal system. Defendant appeals on various assignments of error including the improper admission of evidence, jury instructions and denial of defendant‘s counterclaim.
FACTS
The Ecologizer was invented and patented by a man named Cockle. It was touted by the defendant manufacturer at various fairs and in written public relation statements and brochures to be “the first truly portable small log sawmill that turns waste wood into valuable lumber.”
The defendant, apparently intending to go into mass production with the Ecologizer, prepared a handsome brochure depicting the Ecologizer on one side, and on the back
Now it pays to harvest the small logs you‘ve always left because they didn‘t pay. The Garrett Ecologizer makes dimension lumber from small logs in one pass at infinitely variable feed speed, and nothing left over but sawdust, which is 100% biodegradable. No slabs. No edgings.
The portable Garrett Ecologizer can be trailed to any woods site—be in operation in minutes. Just park it and start it up—no leveling or blocking needed. It‘s only 8 ft. wide, 7 1/2 ft. high and 16 ft. long in travel position. All moving parts are completely housed for safety, and all compartments are vandal proofed and locked.
A 3-man crew of your “regulars” can operate the Ecologizer. You don‘t need an experienced “sawyer.” The operator feeds in logs up to 10” diameter and the machine squares them, first on two sides, then top and bottom, and rips into the desired dimension lumber. It handles any species of marketable timber, and the lumber quality is excellent, with the majority being select structural grade.
(Italics ours.)
In 1973 the defendant began the development of the Ecologizer and about that time the plaintiff, a successful sawmill operator, having read defendant‘s literature became interested in purchаsing one. At that time the defendant was operating a prototype Ecologizer at its Enumclaw test area and plaintiff inspected the prototype there on several occasions and test-ran random logs on the prototype.
On May 9, 1973, the plaintiff signed a purchase order to buy the “first production model” for $38,700. The subject matter of the written order read: “One Garrett Ecologizer—to be delivered—first production model.” At the time of the signing of the purchase order there was no production model in existence. At the trial it developed that there was only one prototypе of the Garrett Ecologizer, not two as previously represented when plaintiff inspected the Ecologizer at Enumclaw. There was evidence that in the 5 months subsequent to the signing of the purchase order
The plaintiff used the machine from November 1973 to November 1974 based on the continued assurance by defendant personnel that all of his problems with the Ecologizer would be solved. In spite of all the changes and redesign efforts and the continued assurances of the manufacturer, the prototype machine ran only for an hour or so at a time. The final straw that broke the camel‘s back was when the plaintiff tried to commercially cut cedar logs; the machine became inoperative and was shut down.
In December 1974 plaintiff returned the inoperative machine to the dеfendant. There was testimony at the trial that all of the defects of the machine could have easily been observed by the manufacturer if it had tested the machine under field conditions. The inventor of the Ecologizer testified that over his objection defendant‘s personnel had incorporated important design changes in the prototype with only a very limited testing of the modifications.
On its return defendant sold the Ecologizer at a public sale leaving a balance on the purchase price of $13,494.95 which they charged to plaintiff.
ISSUE 1: Whether the trial court erred in excluding defendant‘s exhibit 17 (the рurchase order) and exhibit 18 (the security agreement) on the basis that they contained language that was unreasonable and unconscionable under the provisions of the Uniform Commercial Code,
ISSUE 2: Whether the trial court erred in allowing the plaintiff to testify to conversations with defendant regarding the capabilities of the Ecologizer?
ISSUE 3: Whether a brochure of the defendant (exhibit 38) limiting the warranties of the manufacturer was properly excluded?
ISSUE 4: Whether the trial court erred in admitting exhibits 6 and 40 (defendant‘s Ecologizer brochures) which contained express warranties of the manufacturer to buyers?
ISSUE 5: Whether the court erred in failing to rule that plaintiff was an expert on sawmills and had no right to rely on defendant‘s representations and warranties?
ISSUE 6: Whether plaintiff‘s evidence as to lost profits was sufficient to sustain loss profit damages in the verdict?
ISSUE 7: Whether plaintiff, having accepted the Ecologizer, was entitled to later revoke such acceptance pursuant to
DECISION
ISSUE 1: Purchase order and security agreement not integrated contracts.
That in reference to the purchase order (exhibit 17), we feel the trial judge properly excluded this exhibit for it contained two objectional рaragraphs, as follows:
(a) on the front of the agreement was the language:
The front and back of this Order comprise the entire agreement affecting this purchase and no other agreement or understanding of any nature concerning same has been made or entered into or will be recognized. I hereby certify that no credit has been extended to me for
the purchase of this motor vehicle except as appears in writing on the face of this agreement. I have read the matter printed on the back hereof and agree to it as part of this order the same as if it were printed above my signature. I certify that I am 21 years of age, or older and hereby acknowledge receipt of a copy of this order.
(Italics ours.)
(b) paragraph 7 on the back of the purchase order agreement had the following provision:
It is expressly agreed that there are no warranties, express or implied, made by either the dealer or the manufacturer or the Equipment, chassis or parts furnished hereunder except as may be stated on the front side of this order.
The Uniform Commercial Code
(1) Words or conduct relevant to the creation of an express warranty and words or conduct tending to negate or limit warranty shall be construed wherever reasonable as consistent with each other; but subject to the provisions of this Article on parol or extrinsic evidence (
RCW 62A.2-202 ) negation or limitation is inoperative to the extent thаt such construction is unreasonable.(2) Subject to subsection (3), to exclude or modify the implied warranty of merchantability or any part of it the language must mention merchantability and in case of a writing must be conspicuous, and to exclude or modify any implied warranty of fitness the exclusion must be by a writing and conspicuous. Language to exclude all implied warranties of fitness is sufficient if it states, for example, that “There are no warranties which extend beyond the description on the face hereof.”
Exhibits 17 and 18 were offered for the purpose of permitting defendant to make his argument that he madе no warranties incident to the sale to the plaintiff. Such exhibits contained no other relevant information to the transaction as the parties were not in dispute about the date of the sale and the other terms of the transaction including the purchase price.
(1) If the court as a matter of law finds the contract or any clause of the contract to have been unconscionable at the time it was made the court may refuse to enforce the contract, or it may enforce the remainder of the contract without the unconscionable clause, or it may so limit the applicatiоn of any unconscionable clause as to avoid any unconscionable result.
(2) When it is claimed or appears to the court that the contract or any clause thereof may be unconscionable the parties shall be afforded a reasonable opportunity to present evidence as to its commercial setting, purpose and effect to aid the court in making the determination.
(Italics ours.)
The trial court ruled as a matter of law that pursuant to the above cited sections of the Uniform Commercial Code,
We agree.
Exhibit 17, the purchase order agreement, described the subject matter of the sale as “one Garrett Ecologizer—to be delivered—first production model.” Originally it had been represented that there had been two tested prototypes of the Garrett Ecologizer and that the machine to be sold to the purchaser was to be the first production model. The evidence is undisрuted that in fact the first production model in effect was the second prototype and it had been so substantially changed it was an entirely different machine than the original prototype, which machine the plaintiff buyer had observed and which had been tested by the defendant manufacturer and the inventor.
Exhibit 17 refers to the Ecologizer as a motor vehicle.
I hereby certify that no credit has been extended to me for the purchase of this motor vehicle except as appears in writing on the face of this agreement.
(Italics ours.)
Black‘s Law Dictionary defines “motor vehicle” as follows:
In the Uniform Act Regulating Traffic on Highways, 11 U.L.A., and similar statutes, any self-propelled “vehicle,” defined as including every device in, upon, or by which any person or property is or may be transported or drawn upon а highway, except devices moved by human or muscular power or used exclusively upon stationary rails or tracts. The term “motor vehicles,” although sometimes regarded as synonymous with or limited to “automobiles,” often has a broader meaning, and includes not only ordinary automobiles, but also motorbusses and trucks, as well as motorcycles. Blashfield, Cyc. of Automobile Law and Prac., Perm. Ed., § 2.
Again, Black defines “trailer” as:
A separate vehicle, not driven or propelled by its own power, but drawn by some independent power; a semi-trailer is a separate vehicle which is not driven or propelled by its own power, but, which, to be usеful, must be attached to and become a part of another vehicle, and then loses its identity as a separate vehicle.
It is apparent that at best the subject Ecologizer was on wheels and might be defined as a “trailer.” By no stretch of the imagination could the Ecologizer be described as a motor vehicle. In view of this outright inaccuracy in the description of the subject matter of the sale, the purchase order (exhibit 17) could not be an integrated contract. To have permitted exhibit 17 to be admitted would have constituted prejudicial error. Had defendant moved to admit exhibit 17 with the two paragraphs in reference to integration and disclaimer excised, exhibit 17 would have been admissible but defendant made no such motion. We find no error by the trial court in excluding exhibit 17.
In Schroeder v. Fageol Motors, Inc., 86 Wn.2d 256, 261-62, 544 P.2d 20, 24 (1975), it was stated:
The issue of unconscionability presents a question of law for the court; not an issue of fact for the jury. Haugen v. Ford Motor Co., 219 N.W.2d 462 (N.D. 1974); Central Ohio Co-operative Milk Producers v. Rowland, 29 Ohio App. 2d 236, 281 N.E.2d 42 (1972); Zicari v. Joseph Harris Co., 33 App. Div. 2d 17, 304 N.Y.S.2d 918 (1960).
RCW 62A.2-302 states:(1) If the court as a matter of law finds the contract or any clause of the contract to have been unconscionable at the time it was made the court may refuse to enforce the contract, or it may enforce the remainder of the contract without the unconscionable clause, or it may so limit the application of any unconscionable clause as to avoid any unconscionable result.
(2) When it is claimed or appears to the court that the contract or any clause thereof may be unconscionable the parties shall be afforded a reasonable opportunity to present evidence as to its commercial setting, purpose and effect to aid the court in making the determination.
(Italics ours.)
In accordance with the requisites set forth above, a court is not authorized to disposе of this issue under the rules governing summary judgment. Zicari v. Joseph Harris Co., supra. Instead,
In Schroeder v. Fageol Motors, supra, the court reversed the trial court and sent the case back for hearing in order to give the defendant a reasonable opportunity to present evidence as to its cоmmercial setting. However, in the subject case such a hearing would be unnecessary and a duplication of what already had occurred. The trial judge ruled on the
Exhibit 18, the security agreement for “one Garrett Ecologizer, Serial No. GEE 111” under date of October 30, 1973, was executed approximately 3 weeks after the delivery of the Ecologizer. Above the signature of the parties this language appears: “No oral agreement, guaranty, promise, representation or warranty shall be binding.” The trial court ruled that this statement did not conform to the requirement of
We agree and hold that the disclaimer provision in the security agreement (exhibit 18) is unreasonable and unconscionable under the provisions of the сommercial code and that the trial court properly excluded it.
ISSUE 2: Admissibility of parties’ conversations regarding warranties and representations.
Defendant contends that the court erred in allowing testimony of a conversation between the parties concerning warranties and representations pertaining to the Ecologizer.
The trial court thought that this testimony was more in the nature of a description of what was being purchased rather than a warranty and apparently was not in conflict with the terms of the writing but only an aid in identifying the subject matter of the contract, i.e., one Garrett Ecologizer, not yet constructed.1
However, in view of our holding that the purchase order (exhibit 17) and the security agreement (exhibit 18) are not integrated agreements, such conversations of the parties would be admissible in any event to establish warranties and representations аnd the terms of the contract of purchase.
ISSUE 3: Admissibility of manufacturer‘s post-sale brochure.
The trial court correctly excluded defendant‘s brochure (exhibit 38) which contained restrictive warranties pertaining to the Ecologizer, after the consummation of the subject sale. An examination of the record indicates that
ISSUE 4: Manufacturer‘s brochures pertaining to Ecologizer distributed prior to sale.
Other assignments of error were that the trial court erred in admitting exhibits 6 and 40 which are brochures containing express warranties as to the capabilities of the machine. Defendant claims that plaintiff did not rely on such representations in making his purchase. Again, we point out that when the purchase order was signed on May 9, 1973, the subject of the purchase was not in existence and the final product that was manufactured was a substantial change from the first prototype. The jury could well have found that the final purchase didn‘t take place until early November 1973, some 5 months after the signing of the purchase order and that plaintiff relied on all representations by the manufacturer, whether oral or written, in making his decision whether to accept this modified prototype.
The act of purchase and use of the Ecologizer by plaintiff is evidence of his reliance on the skill and expertise of Garrett, thе manufacturer and seller. Kasey v. Suburban Gas Heat, 60 Wn.2d 468, 472, 374 P.2d 549, 552 (1962), wherein it was stated:
The act of purchase and use of a product manufactured for that use is evidence of reliance on the skill and judgment of the manufacturer; and, in the absence of evidence to the contrary, meets the requirement of reliance.
ISSUE 5: Plaintiff, although a sawmill expert, was entitled to rely on seller‘s representations and warranties.
The manufacturer assigns error for failure of the court to hold that the plaintiff was an expert in sawmills and therefore had no right to rely upon any representations or warranties of the defendant. It is true that plaintiff had considerable training and background in the manufacture and operation of sawmills. However, this was a very unique machine. In fact, defendant in its promotional literature called it “the first truly portable small log sawmill that turns waste wood into valuable lumber.” Obviously no one was an expert in the manufacture of the Ecologizer and actually the machine delivered to the plaintiff in this case had never been fully tested and was not the first production model but was the second prototype. We hold that the court correctly instructed the jury as to the weight to be given the testimony of an expert witness.
ISSUE 6: Lost profits as element of damages.
Defendant argues that the trial court erred in admitting evidence of lost profits, contending that plaintiff‘s evidence of lost profits clearly failed to meet the standard of reasonable accuracy.
In Larsen v. Walton Plywood Co., 65 Wn.2d 1, 15, 390 P.2d 677, 686 (1964), our Supreme Court stated:
Are lost profits recoverable? The modern view is that they are properly recoverable as damages when (1) they are within the contemplation of the parties at the time the contract was made, (2) they are the proximate result of defendant‘s breach, and (3) they are proven with reasonable certainty. See Hole v. Unity Petroleum Corp., 15 Wn. (2d) 416, 131 P. (2d) 150 (1942); McCormick on Damages § 25.
In Larsen, the court stated on page 16:
The third rule requires that lost profits must be proven with reasonable certainty or conversely, damages which are remote and speculative cannot be recovered...
A measuring stick, whereby damages may be assessed within the demarcation of reasonable certainty, is sometimes difficult to find. Plaintiff must produce the best evidence available and
“... if it is sufficient to afford a reasonable basis for estimating his loss, he is not to be denied a substantial recovery because the amount of the damage is incapable of exаct ascertainment. . . .” Dunseath v. Hallauer [41 Wn.2d 895, 253 P.2d 408 (1953)], p. 902.
See also Buchanan v. Hammond, 54 Wn. (2d) 354, 340 P.(2d) 556 (1959).
The usual method of proving lost profits is from profit history. It is argued that where a plaintiff is conducting a new business with labor, manufacturing and marketing costs unknown, prospective profits cannot be awarded. This is the so-called new business rule and has long been the law of Washington. Engstrom v. Merriam, 25 Wash. 73, 64 Pac. 914 (1901); Webster v. Beau, 77 Wash. 444, 137 Pac. 1013 (1914); Andreopulos v. Peresteredes, 95 Wash. 282, 163 Pac. 770 (1917); Lockit Cap Co. v. Glove Mfg. Co., 158 Wash. 183, 290 Pac. 813 (1930); Hole v. Unity Petroleum Corp., 15 Wn. (2d) 416, 131 P. (2d) 150 (1942); Ingersol v. Seattle-First Nat. Bank, 63 Wn. (2d) 354, 387 P. (2d) 538 (1963).
Respondents deny that Washington‘s continuation of the Walton Plywood Company business under the extant circumstances was a new business. They suggest that, in any event, the reasons for the rule vanish when analysis of market conditions and a profit showing of identical or similar businesses in the vicinity, operating under substantially the same conditions is made. Bigelow v. RKO Radio Pictures, Inc., 327 U. S. 251, 90 L. Ed. 652, 66 S. Ct. 574 (1946). The rule is succinctly stated in Barbier v. Barry, 345 S. W. (2d) 557, 563 (Tex. Civ. App. 1961), as follows:
“... lost profits will not be denied merely because a business is new if factual data is available to furnish a basis for computation of probable losses. . . .” Its rationale is stated as follows: “. . . Where the fact is well
established that profits would have been made and the difficulty in proving their amount is directly caused by the defendant‘s breach, a greater liberality is permitted in making estimates and drawing inferences....” 5 Corbin on Contracts § 1023, p. 133.
Respondents point out that a reasonable method of estimation of damages is often made with the aid of opinion evidence. Experts in the area arе competent to pass judgment. So long as their opinions afford a reasonable basis for inference, there is departure from the realm of uncertainty and speculation. Expert testimony alone is a sufficient basis for an award for loss of profits. Bogart v. Pitchless Lbr. Co., 72 Wash. 417, 130 Pac. 490 (1913); Bromley v. Heffernan Engine Works, 108 Wash. 31, 182 Pac. 929 (1919), and Warner v. Channell Chemical Co., 121 Wash. 237, 208 Pac. 1104 (1922).
Plaintiff had been in the manufacture and operation of sawmill businesses for nearly 35 years, and undoubtedly he was an expert in the sawmill business. Defendant agrees for in his brief he characterizes plaintiff as “an expert in the sawmill business, having many years of experience as a conventional sawmill operator and consultant.” Although the Ecologizer was a new and unique machine it was being operated within the framework of an old and established business. While plaintiff was not an expert in the design of the Ecologizer, he most certainly knew what commercial sawmills should be capable of producing. Plaintiff also knew the markets for the product and from prior experience he knew the income and expense figures for conventional sawmills. In no way could it be said that plaintiff would be operating a new business.
In Larsen it was held that “... expert testimony alone is a sufficient basis for an award of lost profits.” Plaintiff‘s testimony alone was sufficient to eliminate speculativeness and qualified plaintiff‘s case to go to the jury for proper weighting.
In the subject case plaintiff gave his opinion of anticipated costs and expenses if the Ecologizer had run in a commercial manner, the way it had been intended by both
ISSUE 7: Right to revoke acceptance of goods under Uniform Commercial Code.
Defendant argues that plaintiff cannot revoke acceptance of the Ecologizer and simultaneously avoid paying the balance of the purchase price. He contends that once the buyer has accepted goods, he incurs the obligation to pay the purchase price.
Defendant states that the plaintiff cannot revoke this acceptance of the Ecologizer because it has suffered a “substantial change in condition” through the plaintiff‘s use and modification of the machine.
Revocation of acceptance must occur within a reasonable time after the buyer discovers or should have discovered the ground for it and before any substantial change in condition of the goods which is not caused by their own defects. It is not effective until the buyer notifies the seller of it.
The trial court correctly ruled that under such evidence a fact issue existed аs to plaintiff‘s right to return the machine and defendant‘s right to recover the purchase price. The fact issue centers around the question phrased in terms of “acceptance,”
The question is two-fold: First, was there an acceptance? Second, if there was such an acceptance, did the buyer effectively revoke it thereafter? The court instructed the jury on the issue of acceptance and revocation. In its literature the defendant manufacturer states: “It handles any species of marketable timber and the quality is excellent ...” In fact, this representation wаs totally false for when plaintiff attempted to run some cedar logs into the machine, it became inoperative. It was at that point that plaintiff returned the machine. This is evidence from which the jury obviously found would justify the revocation of a previously accepted machine. The use of the machine actually constituted testing that should have been done by the manufacturer before delivery to the buyer. During the 13 months that the plaintiff had the machine and malfunctions occurred, there is substantial testimony that the seller manufacturer continually assured the plaintiff that he was going to get it corrected.
We find that although plaintiff originally had accepted the Ecologizer, there was evidence whereby the jury could
We find no error.
Judgment affirmed.
WILLIAMS, J., concurs.
FARRIS, C.J. (concurring in the result)—I concur in the result reached by the majority.
Reconsideration denied July 31, 1978.
Review denied by Supreme Court December 1, 1978.