Title: MASSEY-FERGUSON v BROWN

State: montana

Issuer: Montana Supreme Court

Document:

No. 13126 I N THE SUPREME C O U R T O F THE STATE OF M O N T A N A ' 1976 MASSEY-FERGUSON CREDIT CORPORATION, a corporation, P l a i n t i f f and Respondent, BRUCE BROWN, Defendant and Appellant. Appeal from: District Court of the Tenth J u d i c i a l D i s t r i c t , Honorable LeRoy L. McKinnon, Judge presiding. Counsel of Record: For Appellant : James C. Wilkins, Jr. argued, Lewistown, Montana For Respondent : Leonard H. McKinney argued, Lewistown, Montana Submitted: February 2, 1976 Decided : !'!!!4;i 2 4 1 9 7 6 C ,- Filed : ,!i,;i 2 A - :-fc M r . J u s t i c e John Conway Harrison d e l i v e r e d t h e Opinion of t h e Court. This i s an appeal from a judgment f o r p l a i n t i f f entered i n t h e d i s t r i c t c o u r t , Fergus County. P l a i n t i f f Massey-Ferguson C r e d i t Corporation brought t h e a c t i o n t o recover t h e balance due on a r e t a i l i n s t a l l m e n t c o n t r a c t involving t h e s a l e of farm machinery. T r i a l was held October 4 , 1974, before Hon. LeRoy L. McKinnon, s i t t i n g without a jury. Judgment was entered on April 9, 1975 f o r p l a i n t i f f . Defendant Bruce Brown appeals from t h a t judgment. Appellant Brown i s a l o c a l farmer and rancher i n t h e Lewistown, Montana,area. Respondent i s t h e assignee of t h e former Dan Morrison & Sons, a now defunct Massey-Ferguson im- plement d e a l e r i n t h e c i t y of Lewistown. I n e a r l y August, 1970, a p p e l l a n t Brown began n e g o t i a t i n g with t h e firm Dan Morrison & Sons f o r a used Model 990 New Holland combine farm machine. To a s c e r t a i n t h e condition of t h e used machine, Brown inquired of Morrison concerning h i s d e a l i n g s with t h e former owner, one B i l l S e i l s t a d . Morrison o f f e r e d t o c a l l S e i l s t a d and Brown was a b l e t o speak with him while Morrison l i s t e n e d on an extension telephone. S e i l s t a d informed Brown of t h e machine's d e f i c i e n c i e s and Morrison promised t o r e p a i r them. O n August 22, 1970, a purchase order was signed and t h e machine was d e l i v e r e d t o Brown s e v e r a l days l a t e r . Brown used t h e machine t o c u t a few a c r e s of barley, but a broken s h a f t made f u r t h e r use of t h e machine impossible. Several weeks later, approximately October 1, 1970, Brown r e p a i r e d t h e machine and again began t o c u t , but problems with t h e combine forced him t o s t o p before f i f t e e n a c r e s had been covered. Throughout t h e period between August 22, 1970 and Octo- ber 1, 1970, Morrison made s e v e r a l v i s i t s t o a p p e l l a n t ' s ranch i n hopes of securing h i s s i g n a t u r e on a r e t a i l s a l e s agreement, but without success. O n October 2 , 1970 Brown went t o town and t o l d Morrison t h a t he could not accept t h e machine. Appel- l a n t ' s reasons f o r t h i s decision and h i s testimony concerning t h e events which thereafter occurred appear i n t h e record: "A. The work t h a t it needed done and the con- d i t i o n t h a t it was i n , and Don said they would f i x a l l t h i s , and I wasn't very interested i n t h e deal yet, but anyway, he wrote down a l l the s t u f f I said t h a t needed done, and he guaranteed t h a t it would be done, and - "Q. W h o wrote t h i s down? A. Don did. * * * " Q . And he got the information from whom? A. A s t o what t o do? "Q. Right. A . I did. I was the one t h a t told him what was needed done o r what I f e l t needed t o be done, and he said there is no problem. " Q . Is t h i s a t t h e time you signed the contract? A. This was actually, probably f i f t e e n minutes p r i o r t o m e signing t h e contract. "Q. Did M r . Koch [Massey-Ferguson representative and witness t o t h e s a l e s contract] take any p a r t , make any comments o r say o r do anything? A. H e said t h a t he had been with Massey f o r so many years and t h a t he knew Don, * * * and he said you know h i s word is good. I f he says h e ' s going t o f i x it, h e ' l l f i x it." The items t o be repaired were apparently written down, but never made a p a r t of t h e contract. There is, however, no question t h a t these representations o r promises t o r e p a i r t h e machine were i n f a c t made, a s they were never denied by Morrison and t h e above- quoted testimony appears i n t h e record without objection. Several days a f t e r the contract was signed, Morrison sent a mechanic out t o repair the combine, but f o r some reason he did not repair it. The machine was never repaired. ~ u r i n g t h e summer 1971, Morrison closed h i s business a s a farm implement dealer. O n July 1 4 , 1971, Morrison wrote appellant t o inform him of t h i s f a c t , and t o o f f e r the services of another implement dealer t o r e p a i r the machine, but a s a t i s f a c t o r y arrangement could not be made. The c o n t r a c t , which had been assigned t o respondent on t h e day of its execution, c a l l e d f o r an i n i t i a l payment on November 1, 1971, and contained an a c c e l e r a t i o n c l a u s e i n case of d e f a u l t . Appellant f a i l e d t o make any payment on t h e agree- ment, and on December 9, 1971, wrote t h e respondent i n an attempt t o explain h i s p o s i t i o n . The machine was repossessed nine months l a t e r and was f i n a l l y sold t o another implement d e a l e r f o r $1850. Respondent deducted t h e sales p r i c e and sued f o r deficiency. Appellant counterclaimed f o r t h e p r i c e of h i s trade-in, t h e r e n t a l paid f o r use of another combine f o r t h e 1971 season, and f o r h i s labor and p a r t s expended i n t h e r e p a i r of t h e combine. Two b a s i c i s s u e s a r i s e on appeal: 1) Did t h e s e l l e r breach and render unenforceable h i s c o n t r a c t with t h e buyer i n f a i l i n g t o perform h i s promise t o r e p a i r . 2) May t h i s defense be v a l i d l y a s s e r t e d a g a i n s t s e l l e r ' s assignee under s e c t i o n 87A-9-206(1), R.C.M. 1947? I t is t h e p o s i t i o n of respondent t h a t t h e c o n t r a c t is complete on its f a c e , t h a t par01 evidence may not be admitted t o vary t h e terms s t a t e d t h e r e i n , and t h a t no breach could have occurred which i s provable i n a c o u r t of l a w . Section 87A-2-202, R.C.M. 1947, provides: "Final w r i t t e n expression--par01 o r e x t r i n s i c evidence. T e r m s with r e s p e c t t o which t h e confirm- a t o r y memoranda of t h e p a r t i e s agree o r which a r e otherwise set f o r t h i n a w r i t i n g intended by t h e p a r t i e s a s a f i n a l expression of t h e i r agreement with r e s p e c t t o such t e r m s a s a r e included t h e r e i n may not be contradicted by evidence of any p r i o r agreement o r of a contemporaneous o r a l agreement but may be explained o r supplemented " ( a ) by course of d e a l i n g o r usage of t r a d e ( s e c t i o n 87A-1-205) o r by course of per- formance ( s e c t i o n 87A-2-208); and " ( b ) by evidence of c o n s i s t e n t a d d i t i o n a l t e r m s unless t h e c o u r t f i n d s t h e w r i t i n g t o have been intended a l s o a s a complete, and ex- c l u s i v e statement of t h e terms of t h e agreement." The Uniform Commercial Code a s adopted i n Montana, operates t o exclude e x t r i n s i c o r parol evidence only where t h e d i s t r i c t c o u r t f i n d s t h a t t h e writing is, on its f a c e , a f u l l and f i n a l i n t e g r a t i o n of t h e p a r t i e s embracing a l l t h e t e r m s of t h e agree- ment, o r where t h e evidence offered i s inconsistent o r contra- d i c t o r y t o t h e t e r m s of t h e w r i t t e n instrument. Martel Construc- t i o n Inc. v. Gleason Equipment, Inc., 166 Mont. 479, 534 P.2d 883, 32 St.Rep. 402; 2 Williston on S a l e s B 13-9, p. 88 (1974); 67 Am J u r 2d Sales, B 194. Under t h e f a c t s and circumstances presented, t h e parol evidence r u l e cannot be applied t o exclude evidence of t h e promise t o r e p a i r . H e r e t h e d i s t r i c t c o u r t d i d not f i n d t h e writing w a s a f u l l and f i n a l i n t e g r a t i o n of t h e p a r t i e s . Rather, t h e c o u r t s p e c i f i c a l l y found " t h e s e l l e r s promised t o make necessary r e p a i r s " . In l i g h t of the testimony and e x h i b i t s , it i s c l e a r t h e d i s t r i c t c o u r t could not reasonably f i n d otherwise. While t h e parol evi- dence i s s u e was r a i s e d by respondent i n its t r i a l b r i e f , a l l testimony and e x h i b i t s which w e r e offered t o prove t h e existence of an independent agreement t o r e p a i r w e r e admitted without objec- t i o n . A s a r e s u l t t h e record not only contains a p p e l l a n t ' s t e s t i - mony regarding t h e agreement t o r e p a i r , but several admissions by t h e seller, i n open court, affirming t h e agreement: "Dave Morrison: "A. This was t h e day t h a t I informed Bruce [appellant] t h a t w e would take c a r e of t h e combine and we would make arrangements f o r t h e combine t o be fixed. "Q. W e l l , was it fixed? A. No, sir, it wasn't fixed." W e need not consider f u r t h e r t h e complexities of t h e parol evidence r u l e o r its a p p l i c a b i l i t y t o t h e f a c t s of t h i s case. Here t h e f a i l u r e t o object a t t h e time t h e evidence was offered was f a t a l , e s p e c i a l l y where respondent was f i r s t t o introduce parol evidence tending t o e s t a b l i s h t h e e x i s t e n c e of t h e agreement. W e apply t h e long e s t a b l i s h e d r u l e t h a t an o b j e c t i o n t o t h e admission of par01 evidence cannot be r a i s e d f o r t h e f i r s t time on appeal, and t h a t such an o b j e c t i o n is waived when no e f f o r t i s made t o preserve it a t t h e t i m e it is o f f e r e d . Anno: 92 A.L.R. 810. Having determined t h a t seller's breach of o r a l c o n t r a c t is a v a l i d defense a g a i n s t t h e a c t i o n on t h e retail i n s t a l l m e n t agreement, we now consider whether t h i s defense can be applied t o respondent, seller's assignee. Respondent asserts t h e s e l l e r ' s breach is not an a p p l i c a b l e defense a g a i n s t t h e assignee of t h i s r e t a i l i n s t a l l m e n t c o n t r a c t . Undeniably, a p p e l l a n t ' s s i g n a t u r e appears on a c o n t r a c t which s t a t e s : " * * * buyer(s) w i l l not set up any claim, o r defense which he may have a g a i n s t t h e seller a s a defense * * * i n any a c t i o n * * * by t h e s e l l e r ' s assignee." The e n f o r c e a b i l i t y of covenants of t h i s type i s governed by s e c t i o n 87A-9-206(1), R.C.M. 1947, which provides i n p e r t i n e n t p a r t : " * * * an agreement by a buyer o r l e s s e e t h a t he w i l l n o t a s s e r t a g a i n s t an assignee any claim o r defense which he may have a g a i n s t t h e s e l l e r o r l e s s o r i s enforceable by an assignee who takes h i s assignment f o r value, i n good f a i t h and without n o t i c e of a claim o r defense * * * 1'. I n our view, respondent Massey-Ferguson C r e d i t Corporation cannot be considered among those whose p r o t e c t i o n is contemplated by s e c t i o n 8724-9-206(1). The evidence shows t h a t respondent's r e p r e s e n t a t i v e p a r t i c i p a t e d , a t l e a s t t o some degree, i n making t h e sale by o r a l l y affirming t h e seller's promises t o a p p e l l a n t buyer. It i s c l e a r from t h e e x h i b i t s t h a t t h e c o n t r a c t w a s executed and assigned a t about t h e same time and upon t h e same instrument, and t h e blank form s a l e s c o n t r a c t employed w a s i n t h i s c a s e furnished by respondent corporation. Under t h e s e c i r - cumstances, it has been held t h e assignee does not t a k e t h e assignment "without n o t i c e of a claim o r defense" and i s t h e r e f o r e not e n t i t l e d t o t h e enforcement p r o t e c t i o n provided by s e c t i o n 87A-9-206(1), R.C.M. 1947. New Holland Machine Company v. L e w i s , (Tex. Civ. App. 1971),470 S.W.2d 234; Anno: 4 4 ALR2d 8, 157-161. W e f i n d t h e s e r u l i n g s i n strict accord with t h e purpose and policy behind t h i s s e c t i o n of t h e Uniform Commercial Code, as explained i n Massey-Ferguson, Inc. v. Utley, (KY. 1969) I "We consider it t o be t h e p o l i c y of t h e Uniform Commercial Code t o encourage t h e supplying of c r e d i t f o r t h e buying of goods by i n s u l a t i n g t h e lender from l a w s u i t s over t h e q u a l i t y of t h e goods. But w e conceive t h a t t h e i n s u l a t i o n was intended primarily f o r f i n a n c i a l i n s t i t u t i o n s r a t h e r than t h e manufacturer who finances h i s own s a l e s . He needs no inducement t o supply c r e d i t f o r t h e purchase of h i s goods because t h e whole o b j e c t of h i s business i s t o sell h i s goods." The judgment of t h e d i s t r i c t c o u r t is reversed. The cause i s remanded f o r consideration of a p p e l l a n t ' s counterclaim. \ L. I , J u s t i c e - .' Chief J u s t i c e J u s t i c e s