Case Title: Ford v. Starr Fireworks, Inc.

Citation: 

Docket Number: 

State: wyoming

Court: Wyoming Supreme Court

Date: 1994-05-10T00:00:00Z

Document:
Ford v. Starr Fireworks, Inc.1994 WY 52874 P.2d 230Case Number: 93-124Decided: 05/10/1994Supreme Court of Wyoming
Vince 
FORD, d/b/a Fireworks Unlimited,

Appellant 
(Defendant),

v.

STARR 
FIREWORKS, INC.,

Appellee 
(Plaintiff).

 

Appeal 
from the District Court, Niobrara County,

Keith 
G. Kautz, J.

 

Representing 
Appellant:

Vince 
Ford, pro se.

Representing 
Appellee:

Jerry 
M. Smith and David W. Holbrook, Sigler and Smith Law Office, 
Torrington.

 

Before 
MACY, C.J., and THOMAS, CARDINE, GOLDEN and TAYLOR, 
JJ.

TAYLOR, 
Justice.

[¶1]      A dispute over 
the merchantability of fireworks sold to a retailer by a wholesaler resulted in 
this appeal. The district court awarded damages to the wholesaler. The retailer 
contends that all the fireworks received were unmerchantable. Additionally, the 
retailer argues that he properly rejected the fireworks, never exercised 
ownership of the fireworks, and used reasonable care in returning the fireworks 
to the wholesaler.

[¶2]      We 
affirm.

I. 
ISSUES

[¶3]      Appellant, the 
retailer, presents four issues:

I. 
Whether the trial judge should have been disqualified because of bias and 
prejudice against the appellant Vince Ford.

II. 
Whether the lower court erred in ruling that only some of the fireworks were not 
merchantable.

III. 
Did the district court err in holding that the appellant exercised ownership of 
the rejected goods by selling some of the goods and by holding them in outlying 
retail outlets for an unreasonable amount of time. 

IV. 
Did the lower court err when ruling that the appellant did not use reasonable 
care in returning the fireworks, and did not follow reasonable instruction given 
by the appellee.

II. 
FACTS

[¶4]      In the spring of 
1991, retailer Vince Ford (Ford) formed a contract with wholesaler Starr 
Fireworks, Inc. (Starr) for the sale of fireworks. Ford purchased various types 
of fireworks, including bottle rockets, in differing assortments from Starr. In 
May, 1991, Starr delivered the fireworks in one lot to Ford's warehouse in Lusk, 
Wyoming. The agreed price was $6,748.86. Ford did not immediately inspect the 
fireworks; instead, he distributed them to his retail outlets throughout Wyoming 
for resale to the public.

[¶5]      Approximately a 
week to ten days after the fireworks were distributed to the retail outlets, 
Ford discovered some fireworks were unsalable because of water damage and 
packaging problems. However, Ford did not inspect the remainder of the fireworks 
from the shipment. Ford telephoned Starr's sales representative to report the 
problems. Ford claimed that he instructed his employees not to sell any products 
received from Starr. Nevertheless, approximately one month later, Ford's 
Torrington, Wyoming store sold several cases of bottle rockets that had been 
purchased from Starr to another fireworks retailer. The buyer reported no 
problem with those fireworks and they were subsequently sold to customers of 
that retailer without reported problems.

[¶6]      On July 1, 1991, 
Ford travelled to Starr's office in Denver, Colorado to obtain replacements for 
the unsalable fireworks. Starr's sales representative refused to replace any 
goods until Ford either returned the fireworks or paid for them. The next day, 
Starr's sales representative sent two employees to Lusk to pick up the fireworks 
at Ford's warehouse. Ford only had a few of the fireworks in Lusk and refused to 
return any of the merchandise. Ford was aware of the planned July 2nd trip to 
Lusk by Starr's employees.

[¶7]      On August 3, 
1991, Starr's sales representative travelled to Lusk to pick up the fireworks. 
Ford returned $1,476.87 worth of fireworks to the sales representative. Ford 
signed an acknowledgement indicating he still owed $5,251.99 to 
Starr.

[¶8]      Ford alleges that 
he returned the remaining fireworks to Starr's Denver office on August 13, 1991. 
Ford claims no one was available at the office, so he left the fireworks outside 
a side door. Starr never received those fireworks.

[¶9]      Starr filed a 
complaint on February 10, 1992 seeking damages. Ford answered and counterclaimed 
seeking $8,436.00 for expenses incurred in returning merchandise to Starr, for 
lost profits due to unsalable merchandise, and for damage to Ford's reputation 
as a fireworks retailer.

[¶10]   The district court found that the 
fireworks Ford returned to Starr on August 3, 1991 were unmerchantable; however, 
the fireworks which Ford had not returned or inspected were found to be 
merchantable. The district court also found that Ford had properly rejected the 
goods, but had wrongfully exercised ownership of the rejected goods by selling 
some of them and holding them at outlying retail outlets for an unreasonably 
long period of time. Finally, the district court found that Ford failed to hold 
the rejected goods with reasonable care and failed to follow reasonable 
instructions in returning the fireworks to Starr. The district court awarded 
damages to Starr of $5,251.99 plus statutory interest. Ford received nothing on 
his counterclaim.

III. 
DISCUSSION

[¶11]   In reaching its judgment, the 
district court prepared detailed findings of fact and conclusions of law. In 
Hopper v. All Pet Animal Clinic, Inc., 861 P.2d 531, 538 (Wyo. 1993), we 
carefully reviewed the burden an appellant bears to persuade this court that a 
challenged finding of fact is clearly erroneous. "`A finding is "clearly 
erroneous" when although there is evidence to support it, the reviewing court on 
the entire evidence is left with the definite and firm conviction that a mistake 
has been committed.'" Id. at 538 (quoting United States v. United 
States Gypsum Co., 333 U.S. 364, 395, 68 S. Ct. 525, 542, 92 L. Ed. 746 
(1948)). The district court's conclusions of law are not binding upon this court 
and are reviewed de novo. Hopper, 861 P.2d  at 538.

[¶12]   The Uniform Commercial Code, as 
enacted in Wyoming, permits a buyer to return non-conforming goods to a seller. 
If the goods or tender or delivery fail in any respect to conform to the 
contract, the buyer is permitted to reject the whole, accept the whole, or 
accept any commercial unit or units and reject the remainder. Wyo. Stat. § 
34.1-2-601(a) (1991). The substance of this dispute involves which one of the 
three alternatives Ford exercised in returning the fireworks to Starr. Ford 
broadly argues that he rejected the whole. The evidence, however, supports a 
conclusion that Ford effectively rejected only some commercial units. Those 
units were returned to Starr and Ford's account was properly credited. 
Meanwhile, Ford's exercise of ownership over the other commercial units which he 
claimed to have rejected constituted an acceptance of those 
goods.

[¶13]   Ford asserts that the district 
court erred when it concluded that only some of the fireworks received from 
Starr were unmerchantable. Ford contends that his inspection of some of the 
fireworks disclosed packages with torn wrappings, mold or mildew on some 
fireworks, and paper wrappings which fell apart exposing the fireworks. Ford 
argues from this sampling that it was reasonable to assume all the goods 
delivered by Starr were unmerchantable.

[¶14]   While providing for an implied 
warranty of merchantability in the sale of all goods, the Uniform Commercial 
Code carefully defines when goods are merchantable:

(a) 
Unless excluded or modified (section 34.1-2-316), a warranty that the goods 
shall be merchantable is implied in a contract for their sale if the seller is a 
merchant with respect to goods of that kind. * * *

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

(i) 
Pass without objection in the trade under the contract description; 
and

(ii) 
In the case of fungible goods, are of fair average quality within the 
description; and

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

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

(v) 
Are adequately contained, packaged, and labeled as the agreement may require; 
and

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

(c) 
Unless excluded or modified (section 34.1-2-316) other implied warranties may 
arise from course of dealing or usage of trade.

Wyo. 
Stat. 34.1-2-314 (1991) (emphasis added). The official comment to Wyo. Stat. § 
34.1-2-314 explains: "Goods delivered under an agreement made by a merchant in a 
given line of trade must be of a quality comparable to that generally acceptable 
in that line of trade under the description or other designation of the goods 
used in the agreement." Id. at cmt. 2.

[¶15]   Determining whether goods are 
merchantable depends upon the facts of each individual case. Tallmadge v. 
Aurora Chrysler Plymouth, Inc., 25 Wn. App. 90, 605 P.2d 1275, 1278 (1979). 
See also C. Clifford Allen III, Annotation, What Are "Merchantable" 
Goods Within Meaning Of UCC § 2-314 Dealing With Implied Warranty Of 
Merchantability, 83 A.L.R.3d 694 (1978) (collecting cases). Merchantable 
goods are not necessarily of the best or highest quality, but instead are 
"measured by the generally acceptable quality under the description used in the 
contract." Dickerson v. Mountain View Equipment Co., 109 Idaho 711, 710 P.2d 621, 624 (1985). Merchantability does not imply the best quality or 
perfection; instead, it requires goods which operate for their ordinary 
purpose. American Fertilizer Specialists, Inc. v. Wood, 635 P.2d 592, 595 
(Okla. 1981). 

[¶16]   The evidence produced at trial 
established that at least some of the fireworks Ford claimed were unmerchantable 
passed without objection in the trade. After Ford rejected the fireworks, Ford 
sold two to three cases of the bottle rockets received from Starr to another 
fireworks retailer. This resale implies the merchantability of at least some of 
the fireworks. If the fireworks were unmerchantable within trade standards, 
another retailer would not have purchased the bottle rockets. Also, no customer 
complaints were ever received about the merchantability of the fireworks sold by 
the second retailer from the lot delivered to Ford by 
Starr.

[¶17]   Furthermore, Starr indicated that 
it received no complaints from any other purchaser of the remaining fireworks 
from the same shipment Ford claimed was unmerchantable. If all the fireworks 
received by Ford from Starr were unmerchantable, then other retailers who 
received fireworks from that same shipment would have rejected those goods as 
unmerchantable. Also, Starr's sales representative testified that some of the 
merchandise which Ford claimed was unmerchantable was later sold to other 
retailers without complaint after Starr recovered it from 
Ford.

[¶18]   As used in Wyo. Stat. § 
34.1-2-314(b), "merchantable" is not synonymous with "perfect." 1 James J. White 
& Robert S. Summers, Uniform Commercial Code, § 9-8 at 476 (3d ed. 
1988). The fireworks received by Ford, while not perfect, were of an "acceptable 
quality" within the trade. Dickerson, 710 P.2d  at 624. We hold that the 
fireworks which Ford did not inspect or return to Starr were merchantable. Wyo. 
Stat. § 34.1-2-314(b)(i).

[¶19]   Next, Ford argues that the district 
court erred in concluding that Ford had wrongly exercised ownership of the 
rejected goods. While Ford admits he sold some of the rejected goods, he argues 
that the remainder was effectively rejected. Ford also contends that holding the 
goods at his retail outlets was not unreasonable.

[¶20]   The rejection of goods by a buyer 
is governed by Wyo. Stat. § 34.1-2-602(a) and (b) (1991):

(a) 
Rejection of goods must be within a reasonable time after their delivery or 
tender. It is ineffective unless the buyer seasonably notifies the 
seller.

(b) 
Subject to the provisions of the two (2) following sections on rejected goods 
(sections 34.1-2-603 and 34.1-2-604):

(i) 
After rejection any exercise of ownership by the buyer with respect to any 
commercial unit is wrongful as against the seller; and

(ii) 
If the buyer has before rejection taken physical possession of goods in which he 
does not have a security interest under the provisions of this article (section 
34.1-2-711(c)), he is under a duty after rejection to hold them with reasonable 
care at the seller's disposition for a time sufficient to permit the seller to 
remove them; but

(iii) 
The buyer has no further obligation with regard to goods rightfully 
rejected.

[¶21]   A buyer who takes any action which 
is inconsistent with the claim that the goods have been rejected risks accepting 
the goods. 1 White & Summers, supra, § 8-2 at 396. See Wyo. 
Stat. § 34.1-2-606 cmt. 4 (1991). A buyer's rejection can be converted into an 
acceptance by acts which are inconsistent with the seller's ownership rights. 
Linscott v. Smith, 3 Kan. App. 2d 1, 587 P.2d 1271, 1274 (1978). "The 
purpose of this requirement is to insure that the seller may regain possession 
of the goods in order to resell the goods or utilize them in order to minimize 
his loss." Stroh v. American Recreation & Mobile Home Corp. of 
Colorado, 35 Colo. App. 196, 530 P.2d 989, 993 (1975).

[¶22]   Lorenzo Banfi di Banfi Renzo 
& Co. v. Davis Congress Shops, Inc., 568 F. Supp. 432 (N.D.Ill. 1983) 
illustrates the obligation of a buyer to avoid the exercise of ownership of 
goods which the buyer claims are unmerchantable. The buyer, a retailer of men's 
shoes, purchased over 500 pair of shoes from the seller. Id. at 432. 
After the buyer allegedly rejected the shipment, the buyer placed the shoes in 
inventory at his store, offered the shoes for sale, and sold a number of those 
shoes to customers. Id. at 433. The buyer's actions in placing the shoes 
in inventory and offering the shoes for sale were an exercise of ownership by 
the buyer. Id. at 433 n. 7. Furthermore, the court found that offering 
allegedly defective goods for retail sale was not a reasonable use of the goods 
consistent with rejection. Id. at 434 n. 8. The court held the buyer's 
actions constituted an acceptance of the goods. Id. at 
433.

[¶23]   Similarly, Ford placed the rejected 
fireworks in inventory at his retail outlets. While he claimed to have withdrawn 
the goods from sale after the defects were discovered, Ford later sold several 
cases of the rejected bottle rockets to another retailer. Ford also held the 
rejected fireworks at his retail outlets for at least two months after providing 
notice of rejection to Starr. As a result, Starr's agents made two unsuccessful 
trips to Ford's warehouse to obtain the goods. In an industry with seasonal 
sales peaks, such a delay in making the rejected fireworks available to Starr 
was unreasonable.

[¶24]   Ford affirmed his exercise of 
ownership over the rejected fireworks when the portion of the shipment which was 
unmerchantable was returned to Starr on August 3, 1991. At that time, Ford 
indicated that he only desired to return about ten more cases of fireworks to 
Starr. There was no indication of an intent to return the entire order of 138 
cases of fireworks. At that time, Ford signed an acknowledgment of his remaining 
debt to Starr of $5,251.99. Ford's signature acknowledging his debt is 
inconsistent with his claim that the entire order was rejected. We hold Ford 
wrongfully exercised ownership of the rejected fireworks. Wyo. Stat. § 
34.1-2-602(b)(i).

[¶25]   Although Ford did not have any duty 
to return the fireworks to Denver, Wyo. Stat. § 34.1-2-602(b)(ii) requires a 
buyer to use reasonable care in holding the fireworks for the seller. A buyer 
who is also a merchant, Wyo. Stat. § 34.1-2-104(a) (1991), has a duty to follow 
reasonable instructions received from the seller. Wyo. Stat. § 34.1-2-603(a) 
(1991). Once Ford gratuitously offered to return the fireworks to Starr's Denver 
location, Ford was under a duty to return the fireworks in a reasonable manner. 
Starr's sales representative informed Ford that the fireworks were to be 
delivered to a responsible person at Starr. The evidence discloses that Ford 
left the fireworks unattended outside Starr's downtown Denver business location. 
We agree with the district court that leaving the fireworks unattended outside a 
business on a busy street is unreasonable. We hold Ford failed to follow 
reasonable instructions in returning the fireworks to Starr. Wyo. Stat. § 
34.1-2-603(a).

[¶26]   Finally, Ford contends that the 
district court judge should have disqualified himself sua sponte because of 
alleged bias and prejudice. W.R.C.P. 40.1(b)(4). This court has firmly 
established the rule that it does not review any issue raised for the first time 
on appeal. Sheridan Commercial Park, Inc. v. Briggs, 848 P.2d 811, 817 
(Wyo. 1993); Kemper Architects, P.C. v. McFall, Konkel & Kimball 
Consulting Engineers, Inc., 843 P.2d 1178, 1189 (Wyo. 1992). The only 
exceptions are jurisdictional issues and issues of such a fundamental nature 
that this court must recognize them. Neither exception exists here. See e.g., 
Oatts v. Jorgenson, 821 P.2d 108, 111 (Wyo. 1991); Epple v. Clark, 
804 P.2d 678, 681 (Wyo. 1991); Thatcher & Sons, Inc. v. Norwest Bank 
Casper, N.A., 750 P.2d 1324, 1328 (Wyo. 1988); White v. Fisher, 689 P.2d 102, 105 (Wyo. 1984); ABC Builders, Inc. v. Phillips, 632 P.2d 925, 
941-42 (Wyo. 1981); Schaefer v. Lampert Lumber Co., 591 P.2d 1225, 1227 
(Wyo. 1979). Upon careful review, we find nothing in the record suggesting that 
this issue was raised before, or argued to, the district 
court.

IV. 
CONCLUSION

[¶27]   The buyer's right to reject 
non-conforming goods represents a significant self-help remedy under the Uniform 
Commercial Code. 1 White & Summers, supra, § 8-1 at 388. However, the 
buyer must avoid any exercise of ownership of the rejected goods. The evidence 
produced in this case discloses an exercise of ownership by Ford and a 
subsequent failure to exercise reasonable care in returning the goods. As a 
result, the district court properly awarded damages to Starr and denied Ford's 
counterclaim.

[¶28]   We affirm.