Wilk Paving, Inc. v. Southworth-Milton, Inc.

WILK_PAVING_V_SOUTHWORTH-MILTON.93-487; 162 Vt. 552; 649 A.2d 778


 [Filed 16-Sep-1994]

 NOTICE:  This opinion is subject to motions for reargument under V.R.A.P. 40
 as well as formal revision before publication in the Vermont Reports. Readers
 are requested to notify the Reporter of Decisions, Vermont Supreme Court, 109
 State Street, Montpelier, Vermont 05609- 0801 of any errors in order that
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                           No. 93-487


 Wilk Paving, Inc.                         Supreme Court

                                           On Appeal from
   v.                                      Rutland Superior Court

 Southworth-Milton, Inc.                   March Term, 1994



 Richard W. Norton, J.

 Frank E. Talbott of Wilson Powell Lang & Faris, Burlington, for 
 defendant-appellant

 Bernard J. Boudreau of Edward R. Seager, P.C., Rutland, for 
 plaintiff-appellee


 PRESENT:  Allen, C.J., Gibson, Dooley, Morse and Johnson, JJ.

 

     ALLEN, C.J.   Defendant Southworth-Milton, Inc. appeals from a judgment
 in favor of plaintiff, Wilk Paving, Inc., in the amount of the purchase price
 of an asphalt roller that plaintiff had purchased from defendant.  After a
 bench trial, the court ruled that plaintiff was entitled to revoke acceptance
 and effectively had revoked acceptance under the Uniform Commercial Code
 (UCC), see 9A V.S.A.  2-101 to 2-725 (Article 2, Sales).  We affirm. 

      On October 10, 1989, plaintiff purchased the roller, relying in part on
 representations in a brochure provided by defendant that the machine was
 versatile, well-suited for plaintiff's typical paving jobs, reliable, and
 easy to maintain.  As part of the purchase contract, defendant warranted
 repair and replacement of defective parts for one year and disclaimed all
 other warranties.  On December 8, 1989, plaintiff discovered that the right
 rear vibratory motor was leaking oil and that the electrical system required
 repair.  Plaintiff was advised to deliver the roller to defendant's place of
 business, and on December 18, 1989, the repair work was done 

 

 to correct the foregoing problems.  In addition, defendant replaced a blown
 fuse, tightened loose hydraulic lines that were leaking oil, resealed a
 hydraulic feedline to the vibratory motor, and gave the roller a general
 tune-up.  Thereafter, plaintiff did not use the roller until the spring, when
 weather permitted resumption of paving projects. 

     On June 7, 1990, oil was observed to be leaking from the brake housing,
 requiring replacement of the housing and seals.  On June 21, 1990, defendant
 found that the front drive motor was leaking oil from the parking brake
 piston.  On June 29, 1990 the water pump seal was leaking and required
 disassembly, cleaning, and resealing.  On August 16, 1990, the starter failed
 because of loose wiring in the principal wiring harness and starter.  On
 August 28, 1990, the oil plug broke off, causing oil to leak over the surface
 of the pavement being applied.  As a result, plaintiff had to replace the
 affected surface.  All but the last of these problems were reported to
 defendant.  Plaintiff also complained that the problems with the internal
 hydraulics made it difficult to drive the roller onto a trailer for
 transporting. 

     In September 1990, plaintiff's president informed defendant that he no
 longer wanted the machine and requested a return of the purchase price, less
 a reasonable rental fee for the time plaintiff used the roller during the
 summer.  In November 1990, the roller was parked in plaintiff's lot and
 covered with a tarp.  Examinations of the roller by experts in 1992 in
 preparation for trial disclosed that it was still leaking oil. 

     After trial, plaintiff was awarded the purchase price of the roller, but
 was denied recovery for consequential damages.  Defendant then moved to alter
 or amend the judgment to provide defendant a setoff of the reasonable rental
 value of the roller.  Defendant also moved to amend its answer to assert
 setoff as an affirmative defense.  Both motions were denied. 

     On appeal, defendant contends that it was not afforded an opportunity to
 cure the roller's defects, that plaintiff failed to prove a non-conformity
 sufficient to create a right of revocation of acceptance, and that any such
 right to revoke was waived when plaintiff continued to use the roller. 
 Defendant also challenges the trial court's ruling regarding the right to
 setoff.  Plaintiff 

 

 cross-appeals the denial of consequential damages. 

     On review, this Court will not disturb the trial court's findings of
 fact or conclusions of law unless the party challenging them demonstrates
 they are clearly erroneous.  V.R.C.P. 52(a); Estate of Sawyer v. Crowell, 151
 Vt. 287, 291, 559 A.2d 687, 690 (1989).  Findings of fact will stand if
 supported by any reasonable and credible evidence, even if contrary evidence
 exists. Community Feed Store v. Northeastern Culvert Corp., 151 Vt. 152, 155,
 559 A.2d 1060, 1069 (1989). 

                                     I.
                                     A.
     Defendant first argues that plaintiff should be barred from any recovery
 for revoking acceptance without first giving defendant an opportunity to cure
 defects in the roller.  As a general rule, once a buyer accepts tender the
 buyer must, within a reasonable time after discovery of a breach, notify the
 seller of the breach or be barred from any remedy.  9A V.S.A.  2-607(3)(a).
 This notice requirement affords a seller the opportunity to cure the claimed
 defects or minimize the buyer's losses.  Desilets Granite Co. v. Stone
 Equalizer Corp., 133 Vt. 372, 375, 340 A.2d 65, 67 (1975).  The right to cure
 has limits, however:  "[t]he buyer . . . is not bound to permit the seller to
 tinker with the article indefinitely in the hope that it may ultimately be
 made to comply with the warranty."  Orange Motors of Coral Gables, Inc. v.
 Dade County Dairies, Inc., 258 So. 2d 319, 321 (Fla. Dist. Ct. App. 1972). 

     The record amply supports the trial court's conclusion that defendant
 had a reasonable opportunity to cure but failed to do so.  The court's
 findings are based on evidence that a series of mechanical problems plagued
 the roller from the start of plaintiff's ownership.  Almost without
 exception, plaintiff reported the problems to defendant, who, at various
 times over nine months, attempted repairs sufficient to keep the roller
 working as promised.  Under the circumstances of this case, plaintiff
 afforded defendant adequate opportunity to make good on its representations
 before revoking acceptance. 

 

                                 B.

     Defendant next asserts that plaintiff failed to prove a nonconformity
 sufficient to create a right of revocation.  Revocation of acceptance is
 governed by UCC  2-608(1), which provides: 

              The buyer may revoke his acceptance of a . . . commercial
         unit whose non-conformity substantially impairs its value to him
         if he has accepted it . . .

              (b)  without discovery of such non-conformity if his
         acceptance was reasonably induced either by the difficulty of
         discovery before acceptance or by the seller's assurances.

 9A V.S.A.  2-608(1).

         Defendant argues that the warranty was not breached because each oil
 leak was from a different seal, and defendant repaired or was prepared to
 repair all such leaks within the warranty period.  The trial court took a
 broader view of the evidence, and concluded that defendant breached the
 express warranty that the roller required only simple and light maintenance,
 was ideal for base surface application, and would perform exceptionally well
 on plaintiff's usual jobs.  This conclusion is amply supported by the
 findings with respect to the deficiencies.  A seller cannot bar revocation by
 repairing or agreeing to repair numerous defects; at some point a buyer may
 say "enough is enough" and revoke acceptance.  Rester v. Morrow, 491 So. 2d 204, 210 (Miss. 1986).  Defendant's argument that it never repaired or
 replaced the same part twice is not persuasive because the string of
 malfunctions substantially impaired the value of the roller.  Moreover, the
 breakdowns undermined plaintiff's confidence in the ability of the machine to
 do the job.  In light of these findings, the court reasonably concluded that
 the roller did not conform to defendant's warranties, notwithstanding
 defendant's repair efforts. 

                                    C.

           Defendant also contends that plaintiff waived any right to revoke
 acceptance by continuing to use the roller after giving notice of revocation.
 Defendant asserts that the trial court erred in finding that revocation
 occurred in November 1990, when the machine was 

 

 parked, and in finding that the roller was used only once thereafter,
 inadvertently, by one of plaintiff's employees.  According to defendant,
 plaintiff revoked acceptance in June 1990, when plaintiff's president
 telephoned the manufacturer and offered to pay a reasonable rental fee in
 exchange for a return of the roller.  The record shows, however, that after
 additional repairs during the summer of 1990, this offer was communicated to
 the defendant on August 27, 1990. Plaintiff's president testified that he
 made the call "to see what they wanted to do for me."  In late September,
 plaintiff's president just demanded the return of his money.  The court found
 that defendant made repairs to the roller during the summer of 1990 and
 continued to assure plaintiff that the problems would be corrected up to and
 after revocation.  In August 1990, plaintiff's mechanic replaced a broken oil
 plug, a burnt-out starter and wiring.  Plaintiff's president testified that
 the roller was used on two subsequent jobs in October of that year. 

     A buyer who revokes acceptance has the same rights and duties with
 regard to the goods involved as if they had been rejected.  9A V.S.A. 
 2-608(3).  With limited exceptions, a buyer's exercise of ownership after
 rejection is wrongful as against the seller.  Id.  2-602(2)(a); see id. 
 2-603(1) (buyer under duty to attempt to sell rejected perishable goods on
 seller's account if seller has no agent or place of business at market of
 rejection), id.  2-604 (if seller gives no instructions within reasonable
 time after buyer's rejection, buyer may store, reship, or sell on seller's
 account).  Nevertheless, continued use of goods whose acceptance has been
 revoked does not vitiate the revocation if the use was reasonable. 
 McCullough v. Bill Swad Chrysler-Plymouth, 449 N.E.2d 1289, 1292 (Ohio 1983).
 Reasonable use is a question of fact that depends on whether:  (1) the
 seller tendered instructions concerning return of the rejected goods upon
 notice of the revocation; (2) business needs or personal circumstances
 compelled the buyer's continued use; (3) the seller continued to offer
 assurances that the nonconformities would be cured or that the buyer would be
 recompensed for dissatisfaction and inconvenience during the period of
 continued use; (4) the seller acted in good faith; and (5) the seller
 suffered undue prejudice as a result of the continued use.  Id. at 1293. 

 

     The court found that the continued use after revocation was a good faith
 attempt to mitigate damages, that defendant continued to assure plaintiff
 that repairs would be successful and that the use was reasonable under the
 circumstances.  The record does not disclose any instructions by the
 defendant to plaintiff regarding permanent return of the roller, or evidence
 of prejudice from continued use.  We agree with the trial court that the use
 of the roller during the month of October, after buyer had given notice, was
 not unreasonable.  Therefore, plaintiff's post-revocation use did not waive
 the revocation of acceptance. 

                                     II.

     Finally, defendant contends it was entitled to a setoff against
 plaintiff's recovery in the amount of the reasonable value of plaintiff's use
 of the roller.  Defendant did not request a setoff in its pleadings or at
 trial.  Defendant maintains that the right to setoff need not be explicitly
 pled, because the notion of a setoff inheres in the common-law remedy of
 rescission imposed by the trial court.  Setoff, however, is an affirmative
 defense that is waived if a party fails to plead it.  Wursthaus, Inc. v.
 Cerreta, 149 Vt. 54, 57, 539 A.2d 534, 536 (1987); see V.R.C.P. 8(c). 

     Alternatively, defendant contends that the trial court erred in denying
 its motion to amend its answer, under V.R.C.P. 15(b), to include the setoff
 defense.  This motion was made almost four months after the judgment for the
 plaintiff was entered.  We review the court's resolution of this motion to
 amend for an abuse of discretion.  Brown v. Whitcomb, 150 Vt. 106, 108-09,
 550 A.2d 1, 3 (1988).  Rule 15(b) provides in part: 

      When issues not raised by the pleadings are tried by express or
      implied consent of the parties, they shall be treated in all respects
      as if they had been raised in the pleadings.  Such amendment of
      the pleadings as may be necessary to cause them to conform to the
      evidence and to raise these issues may be made upon motion of
      any party at any time, even after judgment; but failure to so amend
      does not affect the result of the trial of these issues.

 V.R.C.P. 15(b).  The trial court found, and the record bears out, that setoff
 was neither expressly nor impliedly tried because defendant failed to raise
 the issue in its pleadings, trial 
 
 Page 

 briefs, and requests for findings and proposed questions of law.  Mere
 mention by defendant's counsel, after the close of evidence, of an intention
 to seek a setoff if plaintiff prevailed did not suffice to try the issue. 
 Therefore, the trial court reasonably concluded that permitting amendment
 would be inappropriate, and it did not abuse its discretion in denying
 defendant's motion. 

                                    III.

     Plaintiff has cross-appealed the trial court's ruling that the contract
 effectively limited available remedies in the event of breach of warranty,
 precluding recovery of consequential damages.  The relevant term provided
 that the seller would furnish only repair or replacement services on
 defective parts covered by the manufacturer's warranty, and that "under no
 circumstances shall seller or a manufacturer be held liable for any indirect,
 special, incidental or consequential damages to the purchaser. . . ."  For
 the first time on appeal, plaintiff argues that the limitation of remedies is
 invalid under  2-719(2)(FN1) because the limited remedy under the contract
 failed of its essential purpose.  Since this issue was not raised before the
 trial court, it will not be considered.  See Lanphere v. Beede, 141 Vt. 126,
 129, 446 A.2d 340, 341 (1982) ("Contentions not raised or fairly presented to
 the trial court are not preserved for appeal."). 

     Plaintiff did argue, in essence, that the limitation of remedy was
 unconscionable and thereby unenforceable.  Under 9 V.S.A.  2-719(3),
 "[c]onsequential damages may be limited unless the limitation is
 unconscionable[;] . . . limitation of damages where the loss is commercial is
 not [prima facie unconscionable]." 

      The basic test is whether, in the light of the general commercial
      background and the commercial needs of the particular trade or
      case, the clauses involved are so one-sided as to be unconscionable
      under the circumstances existing at the time of the making of the
      contract. . . .  The principle is one of the prevention of oppression
      and unfair surprise and not of disturbance of allocation of risks

 

      because of superior bargaining power.

 9A V.S.A.  2-302, Uniform Laws Comments No. 1 (citation omitted) (emphasis
 added). 

     At trial, plaintiff claimed that defendant failed to point out the
 warranty limitation, which appeared on the back of the sales contract form,
 and effectively took advantage of plaintiff's president's haste to close the
 deal on the day he signed the contract.  In response, the court noted that
 the front page of the contract signed by both parties clearly stated, in
 large capital letters:  "Additional terms and conditions on reverse side." 
 Further, plaintiff did not assert fraud or misrepresentation in the making of
 the agreement, and when the deal was struck, both parties were commercial
 entities experienced in business matters.  Plaintiff's lack of attention,
 alone, cannot justify dispensing with the unambiguous contractual limitation
 of remedy contained in the contract.  See Colgan v. Agway, Inc., 150 Vt. 373,
 375, 553 A.2d 143, 145 (1988) (if language of contract is clear, terms must
 be taken to represent intention and understanding of parties).  Absent a
 showing of unfair surprise or oppression, the disputed term cannot be
 invalidated as unconscionable, and the trial court correctly ruled the
 limitation enforceable. 

     Affirmed. 

                              FOR THE COURT:



                              ________________________________
                              Chief Justice

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                            Footnotes

FN1.    "Where circumstances cause an exclusive or limited remedy to fail
 of its essential purpose, remedy may be had as provided in this title."  9A
 V.S.A.  2-719(2).