H.B.H. Enterprises, Inc. vs. Quitman Cates, et al.

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I N THE COURT OF APPEALS OF TENNESSEE EASTERN SECTI ON FILED February 25, 1997 Cecil Crowson, Jr. Appellate C ourt Clerk H. B. H. ENTERPRI SES, I NC. Pl a i nt i f f - Appe l l a nt v. QUI TM AN CATES a nd J OHN DOE PARTNERS, Al l d/ b/ a CATES M NTENANCE AI De f e nda nt s - Appe l l e e s ) ) ) ) ) ) ) ) ) ) ) ) ) ) KNOX COUNTY 03A01- 9608- CV- 00253 HON. DALE C. W ORKM AN, J UDGE AFFI RM ED AND REM ANDED J. M YERS M ORTON OF KNOXVI LLE FOR APPELLANT PAUL D. HOGAN, J R. , OF KNOXVI LLE FOR APPELLEES O P I N I O N Godda r d, P. J . Thi s i s a n a ppe a l f r om a j udgme nt e nt e r e d by t he Ci r c u i t Cour t of Knox Count y. The Pl a i nt i f f , H. B. H. Ent e r pr i s e s , I n c . , s ought da ma ge s unde r br e a c h of c ont r a c t a nd wa r r a nt y t h e o r i e s a r i s i ng f r om t he s a l e of us e d l a undr y e qui pme nt by t he De f e nd a nt Qui t ma n Ca t e s . 1 The De f e nda nt f i l e d a c ount e r - c o mp l a i nt s e e ki ng a n a wa r d f or t he Pl a i nt i f f s f a i l ur e t o pa y f o r t he e q u i pme nt t ha t i s t he s ubj e c t of t hi s s ui t , a s we l l a s ot he r e q u i p me nt s ol d a nd s e r vi c e s r e nde r e d. A j ur y t r i a l wa s he l d on Nove mbe r 30, 1995. At t he c o n c l u s i on of t he Pl a i nt i f f s c a s e i n c hi e f , t he Cour t gr a nt e d i n c a me r a t he De f e nda nt ' s mot i on f or a di r e c t e d ve r di c t on t he wa r r a nt y i s s ue s . The Pl a i nt i f f s br e a c h of c ont r a c t c l a i m a nd t h e De f e nda nt ' s c ount e r - c l a i m pr oc e e de d t o a c onc l us i on be f or e t h e j u r y, a l t hough t he Tr i a l Cour t di d not i nf or m t he j ur y of t h e d i r e c t e d ve r di c t or i ns t r uc t t he m t o di s r e ga r d a ny t e s t i mony p e r t a i n i ng t o wa r r a nt i e s . f a v o r o f t he De f e nda nt . The j ur y r e t ur ne d a $15, 000 ve r di c t i n The Pl a i nt i f f f i l e d a mot i on f or ne w t r i a l , whi c h t he Tr i a l Cour t s ubs e que nt l y de ni e d. The Pl a i nt i f f i s a c or por a t i on whi c h ha s be e n ope r a t i n g a d r y c l e a ni ng a nd l a undr y bus i ne s s s i nc e 1989. I n 1993 t he Pl a i n t i f f s pr i nc i pa l owne r a nd pr e s i de nt , Ba r t Howe l l , e xpa nd e d t h e b u s i ne s s by c ont r a c t i n g t o i r on l i ne n na pki ns a nd t a bl e c l o t h s f o r a r e s t a ur a nt s uppl i e r . The Pl a i nt i f f di d not ha ve t he pr op e r e q u i p me nt t o pe r f or m t he ne w c ont r a c t , s o t he Pl a i nt i f f s ought t o p u r c h a s e e qui pme nt f r om s e ve r a l s our c e s , i nc l udi ng t he De f e nda n t . Th e De f e nda nt i nf or me d M . Howe l l t ha t he ha d t wo i ndus t r i a l r i r o n e r s f or s a l e , a r e bui l t i r one r f or a ppr oxi ma t e l y $15, 000, a n d 1 I t a p p e a r s t h a t M . Ca t e s i s t h e o n l y p a r t y i n t h i s c a s e , r ope r a t e s i ndi vi dua l l y r a t he r t ha n as a pa r t ne r s hi p. 2 and a u s e d a nd di s a s s e mbl e d i r one r f or $1000, pl us $4000 f or de l i v e r y a n d s e t up. Al t hough M . Howe l l kne w t ha t t he l a t t e r i r one r h a d r b e e n i n a f i r e , he pur c ha s e d t he di s a s s e mbl e d i r one r . The De f e nda nt a n d hi s r e pr e s e nt a t i ve s i ns t a l l e d t he i r o n e r a t t he Pl a i nt i f f s f a c i l i t y. The Pl a i nt i f f wa s r e s p o n s i bl e f or c onne c t i ng t he pl umbi ng a nd e l e c t r i c i t y t o t he i r o n e r , but t hi s wor k wa s not c ompl e t e d whi l e t he De f e nda nt s r e p r e s e nt a t i ve s we r e i ns t a l l i ng t he i r one r . Al t hough t he i r on e r wo r k e d f or a ppr oxi ma t e l y e i ght mont hs , i t di d not wor k a s we l l a s t h e Pl a i nt i f f ha d e xpe c t e d a nd wa s s ubj e c t t o ma ny pr obl e ms wh i c h a f f e c t e d t he qua l i t y a nd pr oduc t i on r a t e of t he i r one r . Howe v e r , t h e Pl a i nt i f f wa s a bl e t o us e t ha t i r one r a nd a not he r t o pe r f o r m t h e l i n e n c ont r a c t . The c ont r a c t r e s ul t e d i n $92, 181. 93 i n s a l e s , $79, 117. 74 i n e xpe ns e s , a nd $13, 064. 19 i n pr of i t f or t h e Pl a i nt i f f . $6500. Af t e r t hi s p e r i od, t h e Pl a i nt i f f s ol d t he i r one r f o r The Pl a i nt i f f ne ve r pa i d t he De f e nda nt f or t he i r one r . Al t hough t he Tr i a l Cour t di r e c t e d a ve r di c t a ga i ns t t h e wa r r a n t y c l a i ms by t he Pl a i nt i f f , t he Cour t di d not a dvi s e t he j u r y t h a t i t ha d done s o. The Tr i a l Cour t s i ns t r uc t i ons p e r mi t t e d t he j ur y t o f i nd f or t he Pl a i nt i f f i f t he j ur y f ound e i t h e r a br e a c h of c ont r a c t or a br e a c h of a ny wa r r a nt y by t he s el l er . The Tr i a l Cour t a l s o de f i ne d a c a l c ul a t i on f or a s s e s s i n g d a ma ge s i f e i t he r a br e a c h of c ont r a c t or wa r r a nt y we r e f ound. Ad d i t i o na l l y, t he Tr i a l Cour t i ns t r uc t e d t he j ur y a bout e xc l us i o n 3 o f i mp l i e d a nd e xpr e s s wa r r a nt i e s , i nc l udi ng a n " a s i s " i ns t r u c t i on: Th e buye r a nd s e l l e r ma y a gr e e t ha t t he r e be no e x pr e s s e d wa r r a nt i e s r e l a t i ng t o t he goods , or t he y ma y a gr e e t ha t o nl y c e r t a i n wa r r a nt i e s s ha l l a ppl y, a nd a l l o t he r s e xc l ude d. I f s uc h a n a gr e e me nt ha s be e n ma de , t he r e c a n be n o e xpr e s s e d wa r r a nt y c ont r a c t 2 t o i t s t e r ms . Unl e s s t he c i r c ums t a nc e s i ndi c a t e ot he r wi s e , a l l i mpl i e d wa r r a nt i e s a r e e xc l ud e d by a n e xpr e s s i on l i ke " a s i s " , o r " wi t hout f a ul t s " , or ot he r l a ngua ge whi c h i n c ommon u n de r s t a ndi ng c a l l s t o a buye r s a t t e nt i on t he e x c l us i on of wa r r a nt i e s , a nd ma ke s i t pl a i n t ha t t he r e a r e no i mpl i e d wa r r a nt i e s . Ho we v e r , t he Tr i a l Cour t d i d not de f i ne f or t he j ur y t he me a ni n g o f i mp l i e d or e xpr e s s wa r r a nt i e s . 2 Th e t r a n s c r i p t s h o ws t h a t t h e wo r d " c o n t r a c t " c ha r ge . Ho we v e r , i t a p p e a r s mo s t l i k e l y , i n a c c o r d a n c e wi J u r y I n s t r u c t i o n 1 0 . 3 6 , t h e wo r d " c o n t r a r y " wa s u s e d . In Pl a i n t i f f r a i s e s n o i s s u e r e l a t i v e t o t h i s p a r t i c u l a r c h a r 4 wa s u s e d i n t h e t h t h e Ci v i l P a t t e r n any e ve nt , t he ge . The Pl a i nt i f f pr e s e nt s t he f ol l owi ng i s s ue on a ppe a l : Di d t he Cour t c ommi t e r r or i n di r e c t i ng a ve r di c t d i s mi s s i ng p l a i nt i f f s wa r r a nt y c l a i ms whi c h c l e a r l y a f f e c t e d t he j udgme nt i n t hi s c a s e . I n a ddi t i on t o t he di r e c t e d ve r di c t i s s ue , t he De f e n d a nt pr e s e nt e d t he f ol l owi ng i s s ue on a ppe a l : The t r i a l c our t di d not e r r by i ns t r uc t i ng t he j u r y a s t o d i s c l a i me r s of wa r r a nt i e s be c a us e e vi de nc e s u ppor t i ng s uc h i ns t r uc t i on e xi s t s i n t he r e c or d. Al t e r na t i ve l y, i f t he t r i a l c our t e r r e d i n i ns t r uc t i ng t h e j ur y a s t o d i s c l a i me r s of wa r r a nt i e s , s uc h e r r or wa s h a r ml e s s . The Pl a i nt i f f s wa r r a nt y c l a i ms i nc l ude d br e a c h of e x p r e s s wa r r a nt i e s , i m i e d wa r r a nt y of me r c ha nt a bi l i t y, a nd pl i mp l i e d wa r r a nt y of f i t ne s s f or a pa r t i c ul a r pur pos e . Be c a us e we r e a c h t hi s c a s e on t he Pl a i nt i f f s a ppe a l f r om a di r e c t e d v e r d i c t , we mus t t a ke t he s t r onge s t l e gi t i ma t e vi e w of t he e v i d e n c e i n f a vor of t he Pl a i nt i f f . Thi s Cour t mus t uphol d t h e d e c i s i o n of t he Tr i a l Cour t onl y i f r e a s ona bl e mi nds c oul d not di f f e r . Ea t on v. M La i n, 891 S. W 2d 587 ( Te nn. 1994) . c . The Pl a i nt i f f s a r gume nt i s e s s e nt i a l l y t wo f ol d. Fi r s t , t h e Pl a i nt i f f a s s e r t s t ha t t he di r e c t e d ve r di c t i t s e l f wa s i n e r r or . Se c ond, a l t hough not f or ma l l y r a i s e d, t he Pl a i nt i f f a r g u e s t ha t t he Tr i a l Cour t s " a s i s " i ns t r uc t i on wa s i n e r r or s i n c e n o e vi de nc e e xi s t e d s howi ng t ha t t he i r one r wa s s ol d " a s i s. " 5 Expr e s s wa r r a nt i e s i nvol ve a f f i r ma t i ons of f a c t or d e s c r i p t i ons by t he s e l l e r a s s ur i ng t he buye r t ha t t he goods i n q u e s t i o n wi l l me e t or c onf or m t o c e r t a i n s t a nda r ds or s p e c i f i c a t i ons . The Pl a i nt i f f c ont e nds t ha t t he De f e nda nt e x p r e s s l y wa r r a nt i e d t he i r one r t o M . Howe l l a f t e r M . Howe l l r r t o l d t h e De f e nda nt he woul d be us i ng t he i r one r t o pr oc e s s p o l y e s t e r na pki ns f or a t hi r d- pa r t y c ont r a c t . A br e a c h of a n e xpr e s s wa r r a nt y by de s c r i pt i on unde r T. C. A. 47- 2- 313( 1) ( b) c a n a r i s e whe n a s e l l e r s i nc or r e c t d e s c r i p t i on of t he goods i nduc e s t he buye r t o pur c ha s e t hos e goods . I n r e J a c ks on Te l e vi s i on, Lt d. , 121 B. R. 790 ( Ba nkr t c y . E. D. Te nn. 1990) . To a s s e r t a pr i ma f a c i e c a s e t ha t a n e xpr e s s wa r r a n t y e xi s t e d a nd wa s br e a c he d, a pl a i nt i f f mus t de mons t r a t e t h a t t h e s e l l e r ma de a n a f f i r ma t i on of f a c t whi c h ha s a t e nde nc y t o i n d u c e t he buye r t o pur c ha s e t he goods , t ha t t he buye r wa s i n d u c e d by t he s e l l e r s a c t s , a nd t ha t t he a f f i r ma t i on of f a c t wa s f a l s e r e ga r dl e s s o f t he s e l l e r s knowl e dge of t he f a l s i t y o r i n t e nt i on t o c r e a t e a wa r r a nt y. J af f e, Se e St a nda r d St e ve dor i ng Co. v . 42 Te nn. App. 378, 302 S. W 2d 829 ( 1956) . . Exa mpl e s of e xp r e s s wa r r a nt i e s i nc l ude a s e l l e r r e pr e s e nt i ng t ha t i t s okr a s e e ds we r e of a pa r t i c ul a r va r i e t y whe n t he y we r e not , Ag r i c u l t ur a l Se r vi c e s . As s n v. Fe r r y- M s e Se e d Co. , 551 F. 2d or 1 0 5 7 ( 6 t h Ci r . 1977) ; a s e l l e r a dve r t i s i ng t ha t i t s c r a ne c oul d l i f t 1 5 - 20 t ons whe n i t wa s a c t ua l l y a 10- t on c r a ne , St a nda r d St e v e d o r i ng Co. v. J a f f e , s upr a ; a nd a s e l l e r r e pr e s e nt i ng t ha t a 6 c a r wa s n e w whe n i n a c t ua l i t y i t wa s us e d, M s hbur n v. Thor nt o n, a 3 5 Te n n . App. 216, 244 S. W 2d 173 ( 1951) . . Howe ve r , " a n a f f i r ma t i on me r e l y of t he va l ue of t he g o o d s o r a s t a t e me nt pur por t i ng t o be me r e l y t he s e l l e r s opi ni o n o r c o mme nda t i on of t he goods doe s not c r e a t e a wa r r a nt y. " 4 7 - 2 - 3 1 3( 2) . Thus , " s ome s t a t e me nt s or pr e di c t i ons c a nnot f a i r l y b e v i e we d a s e nt e r i ng i nt o t he ba r ga i n. " Co mme n t 8. T. C. A. T. C. A. 47- 2- 313( 2) , a t Cour t s a r e r e l uc t a nt t o f i nd a n e xpr e s s wa r r a nt y wh e r e t he buye r kne w of t he c ondi t i on of t he pr ope r t y be f or e t h e pur c ha s e . I n r e J a c ks on Te l e vi s i on, Lt d. , s upr a . The Pl a i nt i f f r e l i e s on t he f ol l owi ng s t a t e me nt s ma de by i t s pr e s i de nt , M . r Ho we l l , dur i ng di r e c t e xa mi na t i on t o e s t a bl i s h t he e xi s t e nc e o f a n e x p r e s s wa r r a nt y: " he c onvi nc e d me t ha t t hi s f our - r ol l woul d d o t h e vi s a ; 3 be c a us e i t wa s n t c ot t on na pki ns , a nd i t woul d be r e a l e a s y f or t hi s t o do i t . So I bought i t . " Thi s g e ne r a l s t a t e me nt i s t he t ype a ddr e s s e d by Se c t i o n 4 7 - 2 - 3 1 3( 2) a nd doe s not r i s e t o t he l e ve l of a n e xpr e s s wa r r a n t y. The Pl a i nt i f f ha s t he bur de n of e s t a bl i s hi ng t ha t t h e s t a t e me nt wa s f a l s e . Howe ve r , t h e Pl a i nt i f f i s una bl e t o me e t t h i s b u r de n s i nc e t he Pl a i nt i f f t ook pos s e s s i on of a nd us e d t he i r o n e r f or ne a r l y e i ght mont hs t o ge ne r a t e $92, 000 wor t h of s al es . As s umi ng t ha t t he De f e nda nt di d wa r r a nt t ha t t he i r one r wo u l d b e f unc t i ona l , t he f a c t t ha t t he i r one r wa s ope r a t i ona l d e f e a t s t he Pl a i nt i f f s e xpr e s s wa r r a nt y c l a i m s i nc e t he 3 Vi s a i s a p o l y e s t e r ma t e r i a l . 7 Pl a i n t i f f woul d be una bl e t o de mons t r a t e t ha t t he De f e nda nt s a f f i r ma t i on o f f a c t wa s f a l s e . Fur t he r mor e , t he f a c t t ha t t he Pl a i n t i f f wa s we l l a wa r e of t he c ondi t i on of t he i r one r be f or e p u r c h a s i ng t he i r one r mi l i t a t e s a ga i ns t a ny r e l i a nc e by t he Pl a i n t i f f o n t he De f e nda nt s a f f i r ma t i ons of f a c t . Be c a us e t h e Pl a i nt i f f wa s u na bl e a f t e r pr e s e nt i ng i t s c a s e t o e s t a bl i s h t he e l e me nt s n e c e s s a r y t o ma i n t a i n a pr i ma f a c i e c a s e f or a br e a c h of a n e x p r e s s wa r r a nt y, t he Tr i a l Cour t di d not e r r i n gr a nt i ng t h e De f e n d a nt s mot i on f or a di r e c t e d ve r di c t on t hi s i s s ue . The Pl a i nt i f f a l s o a s s e r t s t ha t t he Tr i a l Cour t e r r e d b y d i r e c t i ng a ve r di c t a ga i ns t i t s c l a i ms f or br e a c h of t he i mp l i e d wa r r a nt i e s o f me r c ha nt a bi l i t y a nd f i t ne s s f or a p a r t i c u l a r pur pos e unde r T. C. A. 47- 2- 314 a nd 47- 2- 315. Howe ve r , f o r s e c ond- ha nd goods , l i a bi l i t y unde r t he i mpl i e d wa r r a nt y of me r c h a n t a bi l i t y i s l i mi t e d . T. C. A. 4 7- 2- 314, Comme nt 3. Ad d i t i o na l l y, Se c t i on 47- 2- 316( 3) ( b) pr ovi de s f or e xc l us i on of i mp l i e d wa r r a nt i e s whe r e t he buye r ha s i ns pe c t e d t he pr oduc t s o r r e f u s e d t o do s o a nd t he de f e c t s s houl d ha ve be e n a ppa r e nt upo n s u c h a n e xa mi na t i on. Comme nt 8 t o t he Of f i c i a l Te xt of Se c t i o n 47- 2- 316 s t a t e s : " Exa mi na t i on" a s us e d i n t hi s pa r a gr a ph i s not s y nonymous wi t h i ns pe c t i on be f or e a c c e pt a nc e or a t a ny o t he r t i me a f t e r t he c ont r a c t ha s be e n ma de . I t goe s r a t he r t o t he na t ur e of t he r e s pons i bi l i t y a s s ume d by t he s e l l e r a t t he t i me of t he ma ki ng of t he c ont r a c t . Of c our s e i f t he buye r di s c ove r s t he de f e c t a nd us e s t h e goods a nywa y, or i f he unr e a s ona bl y f a i l s t o e x a mi ne t he goods be f or e he us e s t he m, r e s ul t i ng i n j ur i e s ma y be f ound t o r e s ul t f r om hi s own a c t i on r a t he r t ha n pr oxi ma t e l y f r om a br e a c h of wa r r a nt y. 8 . . . . . . . hi s f i e l d a l l de f e c t o b s e r ve . A pr of e s s i ona l buye r e xa mi ni ng a pr oduc t i n wi l l be he l d t o ha ve a s s ume d t he r i s k a s t o s whi c h a pr of e s s i ona l i n hi s f i e l d ought t o . . . Te nne s s e e c our t s ha ve he l d t ha t i mpl i e d wa r r a nt i e s d o n o t e x i s t whe r e " de f e c t s i n t he s a me a r e known t o t he buye r , o r h e h a s knowl e dge of f a c t s s uf f i c i e nt t o put hi m on i nqui r y or t o c h a r g e hi m wi t h not i c e . No s uc h wa r r a nt y wi l l be i mpl i e d whe r e t h e s e l l e r s t a t e s e nough t o put one of or di na r y i nt e l l i ge nc e o n not i c e . " Ca r dwe l l v . Ha c ke t t , 579 S. W 2d 186 ( Te nn. App. 1978) . . Th i s i s not a c a s e whe r e t he s e l l e r wi t hhe l d t he da ma ge d c o n d i t i on of t he goods be i ng s ol d t o t he buye r . To t he c ont r a r y , t he Pl a i nt i f f ' s Pr e s i de nt , M . Howe l l , a c knowl e dge s t ha t he wa s r s o i n f o r me d. Be c a us e t he De f e nda nt s t a t e d e nough a bout t he c o n d i t i on of t he i r one r t o put a n or di na r y pe r s on, e s pe c i a l l y a p r o f e s s i ona l i n t he l a undr y bus i ne s s , on not i c e , no i mpl i e d wa r r a n t y c oul d ha ve e xi s t e d. The r e f or e , t he Tr i a l Cour t wa s n o t i n e r r o r t o di r e c t a ve r di c t on t he i s s ue of i mpl i e d wa r r a nt i e s . I n c onc l us i on, we not e t ha t t he Pl a i nt i f f ha d a f ul l p l e n a r y he a r i ng be f or e a j ur y a s t o i t s br e a c h of c ont r a c t c l a i m a nd a s t o t he c ount e r - c l a i m a ga i ns t i t by M . Ca t e s . r Be c a us e he p r e v a i l e d i n ne i t he r , we c onc l ude t ha t e ve n i f t he Tr i a l Cour t wa s i n e r r or , a s a s s e r t e d by t he Pl a i nt i f f , t he e r r or wa s h a r ml e s s a s c ont e mpl a t e d by Rul e 36 of t he Te nne s s e e Rul e s of Ap p e l l a t e Pr oc e dur e . 9 For t he f or e goi ng r e a s ons t he j udgme nt of t he Tr i a l Co u r t i s a f f i r me d a nd t he c a us e r e ma nde d f or c ol l e c t i on of c os t s b e l o w. Cos t s of a ppe a l a r e a dj udge d a ga i ns t t he Pl a i nt i f f , H. B. H. Ent e r pr i s e s , I nc . , a nd i t s s ur e t y. ___________________________ Hous t on M Godda r d, P. J . . Co n c u r : _ _ _ _ _ _ _ _____________________ Ch a r l e s D. Sus a no, J r . , J . _ _ _ _ _ _ _ _ __________________ __ Cl i f f o r d E. Sa nde r s , Sp. J . 10

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