No. 12613 INTHE SUPREME COURT OF TF'E STATE OF MONTANA 1974

CHARLES S PURGEON, Plaintiff and Respondent,

JAMIESON MOTORS, a corporation, Defendant and Appellant.

Appeal from: District Court of the Twelfth JudicialDistrict, Honorable Thomas Dignan, Judge presiding. Counsel of Record: ForAppellant: Burns, Solem and MacKenzie, Chinook, Montana WilliamM. Solem argued, Chinook, Montana For Respondent: Sias and Hendrickson, Chinook, Montana Oscar Hendrickson argued, Chinook, Montana

Submitted: March 

### 19, 1974 Decided:

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## 1974 Filed:

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## 51974Mr. JusticeWesley Castlesdelivered the Opinion of the Court. This isan appeal from a judgment of the district court of Blaine County, sitting without a jury, in favor of the plaintiff in an action to rescind a purchase contract for breach of warranties. Defendant, Jamieson Motors, is a corporation engaged in I the business of sellingmachinery. Plaintiff,Charles Spurgeon, is engaged in farming and ranching operations. In January 1970, plaintiff entered into a contract topurchase fromdefendant a used 16'Case Combine approximately ten years old for the sum of $1,700. Prior to entering into the contract,plaintiff examined the combine and it was agreed that certainwork would be performed on the combine and that itwould be made "field ready". The agreed-upon wark was performed and the combine was "fieldready" when plaintiff took delivery. Plaintiff took delivery of the combine in July of 1970at defendant's lot and drove it some 62 miles over gravel roads to his farm. Early inAugust, 1970,plaintiff began to use the combine to harvest grain; after harvesting approximately five acres, the variable drive on the combine broke. After 5 or 6 repair attemptsby plaintiff and defendant approximately 15more acres

were harvested. The combine then broke down again and was not repaired untilmid-November 1970. In 1971plaintiff used the combine to harvest approximately 5 acres and again the combine broke down. After repairs, 3 more acres were harvested and then the strawwalker broke. Plaintiff phoned defendant and defendant offered the use of another combine. Plaintiff refused this offer and hired combines to finish the harvest of his 1971 crop. In September, 1971,plaintiff returned the combine to defendant's lot. Subsequently,defendant offered to repair and attempt to sell the combineonplaintiff's behalf but no agreementwas reached.The only representationsmade as to the condition of the combine were that it would be "field ready"when delivered. The district court found that the combinewas in fact "field ready" when plaintiff took possession. The purchase contract was for

a "used combine" and provided in pertinent part: 

### " 

## * * * This warranty is in lieu of all other warranties, expressed, implied,or statutory,and all other obligations or liabilities on the part of the Dealer and Company. No representative of the Company has authority to change the terms of thiswarranty in any manner whatsoever and no assistance to Purchaser by the Dealer or Company in the repair or operation of the Case product shall constitutea waiver of the conditionsof thiswarranty, nor shall such assistance extend or revive it. This warranty does not apply to used or second-handmachines." (Emphasisadded.) Undisputed testimony in the record indicates that the custom and usage in the area was that used machinery was not warranted. The only exception to this practice was the so called 50-50 warranty given on late model equipment under which the dealer pays onehalf the cost of repairs and the purchaser pays the other half. During 1970 and 1971 defendantpaid one-half the cost of repairs to the combine. In 1970 plaintiff paid the other half. Plaintiff refused the cost of one-half of the repairs in 1971 thus giving rise to defendant'scounterclaim for $139.90, which represents one-half of the cost of repairsperformed during 1971 at plaintiff's request.The district court based its judgment forplaintiff on conclusions of law that the implied warranties as tomerchantability and fitness forpurpose of use were notmet, and that plaintiff returned the combine within a reasonable time after discovery of the breach of these warranties. Plaintiff raises two issues on this appeal. First, that thedistrict court erred in finding implied warranties ofmerchantability and fitness for purpose applicable. Second, that even

### if thewarranties of merchantability and fitness for purpose were applicable itwas error to find thatplaintiff rescinded within

a reasonable time. Defendant raises three separate arguments in support of the contention that the district court erred in finding implied warranties of merchantability and fitness forpurpose applicable. First,defendant asserts that the warrantiesdid not apply to used goods. Second, defendant claims that the implied warranties

were excluded under the terms of the contract. Finally,he asserts that the warranties were excluded by usage of trade. If any one of these claims are valid, then it will be unnecessary to consider any of the other issues raised. The implied warranties on which plaintiff relies are created by 87A-2-314, R.C.M. 

### 1947,which provides: "Implied warranty--merchantability--usage of trade. (1)Unless excluded ormodified (section 87~-2-316) 

# ;a warranty that the goods shallbe merchantable is implied in a contract for their sale if the seller is a merchant with respect to goods of that kind. Under this section the serving forvalue of food or drink to be consumed either on the premises or elsewhere is a sale. "(2) Goods to be merchantable must be at least such as "(a) pass without objection in the trade under the contract description; and "(b) in the case of fungible goods, are of fair average quality within the description; and "(c) are fit for the ordinary purposes for which such goods are used; and "(d) run,within the variations permitted by the agreement,of even kind,quality and quantity within each unit and among all units involved;and "(e) are adequately contained, packaged, and labeled as the agreementmay require; and "(f) conform to the promises or affirmations of factmade on the container or label if any. "(3) Unless excluded or modified (section 87A-2-316) other implied warranties may arise from course of dealing or usage of trade."Section 87A-2-315, R.e;M. 1947,provides: "Implied warranty--fitness for particular purpose. Where the seller at the time of contracting has reason to know any particular purpose forwhich the goods are required and that the buyer is relying on the seller's skill or judgment to select or furnish suitable goods, there is unless excluded or modified under the next section an implied warranty that the goods shall be fit for suchpurpose." Thewarranties created by these two sections are limited by section 87A-2-316, R.C.M. 1947,which provides: "Exclusion or modification of warranties. (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 chapter on par01 or extrinsic evidence (section 87A-2-202) negation or limitation is inoperative to the extent that such construction isunreasonable. 

### " (2) Subject to subsection (3), to exclude or modify the implied warranty of merchantability or any part of it the languagemust mention merchantability and in case of a writing must be conspicuous, and to exclude or modify any impl&ed warranty of fitness the exclusion must be by/writing and conspicuous. Language to exclude all implied warranties of fitness is sufficient if it states, for example, that 'Thereare no warranties which extend beyond the description on the facehereof.'

" (3) Notwithstanding subsection (2) 

### " (a) unless the circumstances indicate otherwise, all implies warranties are excluded by expressions like 'asis,' 'with all faults' or other language which in commonunderstanding calls the buyer's attention to the exclusion of warranties and makes plain that there isno implied warranty; and 

### " (b) when the buyer before entering into the contract has examined the goods or the sample or model as fully as he desired or has refused to examine the goods there isno implied warranty with regard to defects which an examination ought in the circumstances to have revealed to him; and 

### " (c) an implied warranty can also be excluded or modified by course of dealing or course of performance or usage of trade. "(4) Remedies for breach of warranty can be limited in accordancewith theprovisions of this chapter on liquidationor limitation of damages and on contractualmodification of remedy (sections 87A-2-718 and 87A-2-719)

# ."Applied to the facts of this caseprovisions of 87A-2-316(3)(c), R.C.M. 1947,which provide for the limitation of warrantiesby usage of trade are particularly relevant. Section 87A-1-205(2), R.C.M. 1947,defines the term usage of trade saying: 

### "Ausage of trade is any practice or method of dealipg having such regularity of observance in a place, vocation or trade as to justify an expectation that it will be observed with respect to the transaction in question. 

## * * 

## *" Undisputed testimony in the record indicates that used farm machinery,particularly used combines, was not warranted with the exception of the 50-50warranty under which each party to the transactionpaid for one-half of the cost of repairs. If the plaintiff-purchaserwas or should have been aware of this trade usage it will effectively exclude the warranties on which he relies. Preliminary to a discussion of plaintiff's knowledge,it should be noted that he owned a large farm-ranch operation and had been in the farming business for a substantial length of time. While there isno direct evidence by the plaintiff in the record which shows that he was aware of the trade usage with regard to used equipment, it isnot disputed that he paid for one-half,of the repairsduring the firstyear he had the combine. This willingness to pay in part for repairs is inconsistent with the existence of the warranties plaintiff now claims existed. Plaintiff bargained for a combinewarranted to be "field readynwhen he took delivery and this he received. He knewor should have known that used machinery was customarilynot warranted beyond a sharing of the cost of repairs, and he acquiesed for more than a year in this arrangementwith regard to the used combine. From this it appearsplaintiff was aware of the usage of trade limiting warranties on used machinery and that accordingly the implied warranties

### ofmerchantability and fitness for purpose are excluded. Sincewe have held thewarranties relied onby plaintiff to be inapplicable, it is not necessary to determine whether

or not return of the combine occurred within a reasonable time. The judgment of the district court is reversed and the

cause remanded for further proceedings not inconsistent with the foregoing.

We concur:

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