Court Opinion

ID: 9646803
Source: CourtListenerOpinion
Date Created: 2023-08-23 13:11:41.119262+00
Date Added: 2024-06-11T14:59:06.712275
License: Public Domain

RENDLEN, Judge.
Warren and Alice Kawin brought their action against the manufacturer Chrysler Corporation (Chrysler) and Robert G. Spell-brink, Chrysler’s St. Louis area field service engineer, for breach of warranty and fraudulent merchandising practices in their sale to plaintiffs of a Chrysler Airtemp central air conditioner.1 At the close of the evidence, plaintiffs dismissed as to Spellbrink and the court granted Chrysler’s motion for directed verdict on Kawins’ fraud claim. The breach of warranty claim was submitted to the jury which found for Chrysler and judgment was entered on that verdict. Chrysler’s motion for attorney’s fees under § 407.025, RSMo 1978, was denied by the trial court and plaintiffs and defendant Chrysler each sought review in the Court of Appeals, Eastern District, where the judgment was affirmed. Transferred here, the cause is reviewed as though on original appeal. Art. V, § 10, Mo.Const., Rule 83.09.
Plaintiffs contend the trial court erred: (1) in overruling plaintiffs’ motion for directed verdict on Count I (breach of warranty) and rejecting instruction “A” proffered by plaintiffs, which would have declared as a matter of law that Chrysler’s warranty for replacement of a defective compressor required replacement with a new rather than a rebuilt compressor, (2) by granting defendant-Chrysler’s motion for directed verdict as to Count II (fraud) because the uncontroverted evidence established a fraudulent concealment by defendant of a material limitation of the warranty on its air conditioner, and (3) in refusing to take judicial notice of certain Federal Trade Commission regulations and rejecting their admission into evidence.
Chrysler asserts the trial court erred in denying its motion for attorney’s fees to which it was entitled as a prevailing party under § 407.025, RSMo 1978, the Missouri Merchandising Practices Act.
*42On September 3,1968, plaintiffs contracted with American Allied Air Conditioning Company for the purchase of a Chrysler Airtemp air conditioner for their home. Shopping for an air conditioner backed by a reputable company which gave the most favorable warranty terms, Mr. Kawin investigated several other brands and before purchasing the Chrysler unit, obtained a specimen warranty from the American Allied representative, relevant portions of which are as follows:
Airtemp Division of Chrysler Corporation warrants its Packaged Air Conditioning or Heating Product identified below to be free of defects in workmanship and material under normal use and service. Air-temp’s obligation under this warranty is limited solely to repairing or replacing parts F.O.B. Dayton, Ohio, which in its judgment are defective in workmanship or material and which are returned, freight prepaid, to its Dayton, Ohio plant or other designated point.
⅝5 ⅜! * * * ⅜
The above warranty applies for a period of one year from date of original installation.
The Hermetic Compressor ... is warranted for a period of five (5) years from date of original installation.
‡ ⅜ * * ⅜ *
GENERAL PROVISIONS
Airtemp makes this warranty in lieu of all other warranties, express or implied. In no event shall Airtemp be liable for special or consequential damages... . (Emphasis added).
Installation was completed in October, 1968, and plaintiffs operated the air conditioner that fall for about one week. The unit, next operated in June and July, 1969, functioned poorly, and required six service calls during that period. The problems ended when the unit’s air compressor was replaced in July of that year.
The air conditioner functioned properly until the end of July, 1972, when it again began running poorly. Plaintiffs were then informed by George Gilbert, in the Chrysler parts department, that a rebuilt compressor was available. Mr. Kawin called Mr. Spell-brink, Chrysler’s field service engineer in St. Louis, advising that he was willing to pay the installation cost as required in the warranty, but he wanted a new, not a rebuilt compressor. Spellbrink responded that under the warranty Chrysler could furnish new or remanufactured compressors, and it was their policy to furnish the latter. Mr. Kawin refused the offer of a rebuilt compressor and purchased another air conditioner.
At trial, Mr. Kawin admitted neither the specimen warranty he examined before purchase nor the warranty received from Spell-brink contained representations that Chrysler would replace defective parts with new parts. In addition, Spellbrink testified he was not aware of any Chrysler literature, advertisement, or specification that replacement would be with a new, vis-a-vis a rebuilt part. Further it was Chrysler’s policy to replace, rather than repair, as the cost and quality of work in remanufacturing plants was superior to those of servicemen in the field.
I.
Plaintiffs first contend the trial court erred in overruling their motion for directed verdict as to Count I, the breach of warranty claim, and in refusing their proffered Instruction A which declared as a matter of law that Chrysler’s warranty provision for replacement meant replacement with new rather than rebuilt parts.2
The contested portion of the warranty provided that “Airtemp’s obligation ... is limited solely to repairing or replacing parts *43. .Plaintiffs seek to extrapolate the phrase by inserting the words “with new”, so the challenged phrase would read “Air-temps obligation ... is limited solely to repairing or replacing [with new] parts . . . ”. The term “replace”, given its plain and ordinary construction, means to supplant with a substitute or equivalent. Olenick v. Government Employees Insurance Co., 42 A.D.2d 760, 346 N.Y.S.2d 320, 321 (1973); Black’s Law Dictionary 1168 (5th ed. 1979). Clearly, a remanufaetured part in good condition is the equivalent of a part employed in a unit for a period of time as here. Because a new part is more than equivalent to a used part, plaintiffs are alleging an interpretation of “replacing” beyond its ordinary meaning.3
A party asserting a special meaning of an unambiguous commonly used term bears the burden of establishing that such a construction was intended. Rhoden Investment Company, Inc. v. Sears, Roebuck and Company, 499 S.W.2d 375 (Mo.1973); Landau Grocery Co. v. Hart, 223 S.W. 793 (Mo.App.1920). In this regard plaintiffs adduced no evidence other than their personal interpretation of the term “replacing”. They offered nothing such as business or trade usage or course of dealing between the parties, to demonstrate that under the circumstances, replacement was intended to be accomplished with new rather than rebuilt parts. On plaintiffs’ failure to meet their burden, the trial court would have been justified in directing a verdict for defendant, but instead submitted construction of the warranty phrase for the jury’s determination. The jury appropriately held for defendant, and plaintiffs may not be heard to complain of error (if error it was) committed in their favor.
II.
Plaintiffs next allege the trial court erred in directing a verdict against their claim of fraud under Count II. They assert it was Chrysler’s legal duty to disclose the material limitation of the warranty, that replacement of a defective air conditioner compressor meant with a rebuilt rather than new part, and Chrysler’s failure to disclose this limitation constituted actionable fraud.
To make a submissible claim of fraud, plaintiffs must prove defendant intended to deceive. “It is well established in our law that there must be scienter, either actual or constructive, to support an action at law for fraud and deceit. Scienter implies guilty knowledge by the tort feasor or a guilty lack of knowledge .... The misrepresentation must be made with intent to deceive, ‘or with what is recognized as the legal equivalent to a deliberately fraudulent intent to deceive.’ ” Dudley v. Dumont, 526 S.W.2d 839, 847 (Mo.App.1975).
In the case at bar, plaintiffs failed to establish Chrysler intended to deceive plaintiffs by not disclosing in its warranty or elsewhere that replacement occurred with rebuilt and not new parts. Indeed, as discussed above, the ordinary meaning of the word “replace” in the circumstance here does not require satisfaction with new parts, which negates the claim of intent to deceive. Chrysler offered evidence that it had long been the company’s policy to replace defective compressors with remanu-factured units. Plaintiffs introduced nothing in rebuttal. For example, no evidence was offered of the air conditioning industry’s practice concerning replacement of parts and whether Chrysler’s practice was contrary, or similar evidence which might support an inference of knowledge by Chrysler that its warranty limitation was deceptive. Absent a showing of scienter, there could be no finding of fraud, hence, the court properly directed a verdict for defendant on Count II.
III.
Plaintiffs next charge the trial court erred in refusing to take judicial notice of the Federal Trade Commission regulations, *4416 C.F.R. §§ 26.2 and 26.12 (1968), and in sustaining defendant’s objection to the introduction of the regulations into evidence. By congressional authority, the Federal Trade Commission is empowered to promulgate regulations implementing the provisions of 15 U.S.C.A. § 45(a)(1), which proscribes unfair methods of competition and unfair or deceptive acts and practices in or affecting commerce. 16 C.F.R. §§ 26.2 and 26.12, two such regulations, established standards for the air conditioning industry.
Section 26.2 provided:
In the sale, offering for sale, or installation of industry products, it is an unfair trade practice to use, or cause to be used, any guarantee or warranty which is false, misleading, deceptive, or unfair to the purchasing or consuming public, whether in respect to quality, construction, serviceability, or performance of any industry product.
(a) The foregoing inhibitions of this section are to be considered as applicable with respect to any guarantee or warranty in which the terms and conditions relating to the obligation of the guarantor or warrantor are impractical of fulfillment.
(b) It is also an unfair trade practice to make or offer any guarantee or warranty respecting an industry product unless the nature and extent of the undertaking, and any and all material conditions and limitations applicable thereto, are clearly and conspicuously stated in immediate conjunction therewith, and unless the obligations of the guarantor or warrantor with respect to the guarantee or warranty are scrupulously fulfilled. 16 C.F.R. § 26.2 (Emphasis added).
Section 26.12 directed:
(a) It is an' unfair trade practice to represent, directly or indirectly, that any industry product or part thereof is new, unused, or rebuilt, when such is not the fact.
(b) In the marketing of industry products which are second-hand or rebuilt, or which contain second-hand or rebuilt parts, it is an unfair trade practice to fail to make full and nondeceptive disclosure, by a conspicuous tag or label firmly attached to the products, and in all advertising and promotional literature relating thereto, of the fact:
(1) That such products are second-hand, rebuilt, or contain second-hand or rebuilt parts, as the case may be, when such products have the appearance of being new; or
(2) That the rebuilding of rebuilt products was done by other than the original manufacturer, when such is the case. 16 C.F.R. § 26.12 (Emphasis added).
Missouri courts have held that rules and regulations promulgated by government agencies, pursuant to delegation of authority by Congress, may have the force and effect of law and that such rules and regulations shall be judicially noticed. Macalco, Inc. v. Gulf Insurance Company, 550 S.W.2d 883, 887 (Mo.App.1977). Plaintiffs contend the regulations were relevant as to Count I (breach of warranty) to determine the “reasonable commercial standards of fair dealing in the trade” under § 400.2-103(l)(b), RSMo 1978, that must be met by a merchant for his conduct to be in good faith, and to establish a written trade code constituting a usage of trade under § 400.1-205(2), RSMo 1978, which explains or supplements a warranty. As to Count II (fraud), plaintiffs assert the regulations were relevant to the legal requirement that Chrysler’s warranty disclose all material conditions and limitations of the warranty. Examination of the regulations, however, reveals they are not relevant to plaintiffs’ action against Chrysler. Section 26.2 renders it an “unfair trade practice” to use “false, misleading, deceptive, or unfair” warranties, and further provides examples of warranties deemed nonconforming, including, inter alia, ambiguous specification of the warranty’s limitations. Section 26.2(b). However, because, as discussed above, we have found under the facts here that as a matter of law the warranty was not unclear and ambiguous, it therefore was not “false, misleading, deceptive, or unfair” and § 26.2 is inapt. Accordingly, this contention is denied.
*45As to § 26.12, though that section purports to require disclosure when a product or part is rebuilt (as opposed to new), application of that regulation is facially limited to the marketing of rebuilt products or parts. In the case at bar, marketing was accomplished when the air conditioner (con-cededly new) was sold to the Kawins in 1968. The replacement of the used compressor with one that was remanufactured did not occur until Chrysler’s attempt to satisfy the warranty obligations much later. Plaintiffs have cited no authority (and we find none) which holds that the “marketing” of a rebuilt product or part includes the fulfillment of the warranty terms long after the sale has been completed. Hence, we conclude that as Chrysler’s actions in replacing the compressor with a rebuilt unit, in satisfying its warranty obligation, were not encompassed within the term “marketing” of the unit, the requirements of § 26.12 were not pertinent to this cause and the trial court’s refusal to take judicial notice or admit the regulations in evidence resulted in no prejudice to plaintiffs requiring reversal.
IV.
Chrysler charges that the trial court erred in denying attorney’s fees for defendant-Spellbrink, who Chrysler claims was a prevailing party, invoking § 407.025.1, RSMo 1978, which authorizes an award of attorney’s fees to a party prevailing in an action brought under § 407.025 for violation of § 407.020. However, plaintiffs’ action was not predicated on Chapter 407, RSMo 1978 (the Missouri Merchandising Practices Act), and § 407.020 was merely cited by plaintiffs as establishing legislative policy with respect to common law actions for fraud.4 Because the original action was not brought under Chapter 407, the trial court did not err in overruling the motion for attorney’s fees sought under § 407.025.-1, RSMo 1978.
Affirmed.
DONNELLY, C. J., WELLIVER and MORGAN, JJ., concur.
BARDGETT, J., dissents in separate dissenting opinion.
SEILER and HIGGINS, JJ., dissent and concur in separate dissenting opinion of BARDGETT, J.

. Plaintiffs’ amended petition was in two counts, Count I for actual damages in the amount of $10,000 for breach of warranty in Chrysler’s refusal to furnish a new compressor to replace the defective unit. Count II sought actual and punitive damages of $110,000 for fraudulent merchandising practices in Chrysler’s concealment of a material limitation of the warranty, i.e. that it was Chrysler’s policy to replace defective compressors with rebuilt rather than new units.

. Instruction A directed:
Under the law, defendant, Chrysler Corporation, is liable to plaintiffs for damages in Count I of this case. Therefore, you must find the issues in favor of plaintiffs on Count I and award plaintiffs such sum as you be-heve will fairly and justly compensate plaintiffs for any damages, including incidental and consequential damages, you believe they sustained as a direct result of the breach of warranty mentioned in the evidence.

. If the compressor had failed when first operated or very soon thereafter, the term “replace” might require replacement with a “new part” so that the replacement would equate the part removed, but such is not this case.

. Section 407.025, which grants the trial court a discretionary right to award attorney’s fees to the prevailing party in an action for violation of § 407.020, was not enacted until 1973, after accrual of plaintiffs’ cause of action. Laws of Missouri 1973, H.B. 55. This newly created substantive right for attorneys fees is available in causes of actions arising after the effective date of the statute. See, State ex rel. St. Louis-San Francisco Railway Co. v. Buder, 515 S.W.2d 409 (Mo. banc 1974); Center School District No. 58 of Jackson County v. Kenton, 345 S.W.2d 120 (Mo.1961).