Addressograph-Multigraph Corp. v. Zink

Singley, J., delivered the opinion of the Court. In February, 1970, George Zink, trading as Peacock Printing Company, leased from C.I.T. Leasing Corporation (C.I.T.) a VariTyper, a Headliner and a Waxer, all manufactured by VariTyper Corporation, then a subsidiary, and now a division, of Addressograph-Multigraph Corporation (Addressograph). The equipment, purchased at an unspecified date from Addressograph by C.I.T., had been delivered to Zink’s printing plant in late December, 1969, where it had been serviced by Addressograph. Zink’s lease with C.I.T., which was for a term of five years, called for an advance payment of five monthly installments (the first and the last four) of $193.86 each, or $969.30, and the payment of the remaining 55 installments at monthly intervals commencing 30 days after delivery of the equipment.

Under a separate agreement, Zink and his wife guaranteed the payment of the rent reserved under the lease. Zink made the required monthly payments through ²⁷⁹ September, 1971, at which time there was an unpaid balance of $6,978.99. Thereafter, he made no further payments. In February, 1972, C.I.T. repossessed the leased equipment and then sold it for $3,500.00.

Later, C.I.T. brought suit in the Circuit Court for Howard County against Zink and his wife on their agreement of guaranty. The Zinks countered with a third-party complaint against Addressograph, alleging that because the VariTyper equipment was defective and inoperable, any sum found to be due C.I.T. should be the subject of a judgment in their favor against Addressograph. Addressograph pleaded the general issue, and the Zinks’ third-party claim ultimately came on for trial, after a consent judgment had been entered in C.I.T.’s favor against the Zinks. The third-party action resulted in a judgment for $4,332.32 1 and costs in the Zinks’ favor against Addressograph, and this appeal followed.

In response to Addressograph’s interrogatories, the Zinks had said that they were relying on Addressograph’s express warranty, which they maintained had been breached by the failure of the equipment to operate properly after continuous service calls. The warranty, titled “Machine Warranty,” was delivered to Zink with the equipment: “For a period of thirty days from date of invoice, the VariTyper Corporation agrees to render any normal mechanical repair service, such as adjustments, which may be required on all machines, without charge to purchaser and further guarantees for one year after date of invoice all new, demonstrator and factory rebuilt equipment it sells to be free of defects in material and workmanship, its obligation under the guarantee being limited to the correction of defective workmanship or the replacement of defective parts, not caused by misuse, accident or neglect.” ²⁸⁰ Addressograph argues that there are three reasons why we should reverse the judgment entered below: (i) The Zinks did not establish the privity with Addressograph necessary to enable them to recover on the Machine Warranty; (ii) The Zinks did not sustain their burden of proving a breach of warranty; (iii) Damages were improperly measured and assessed by the trial court. (i) The General Assembly, by enacting Chapter 249 of the Laws of 1969, has virtually eliminated the requirement of privity in actions for damages for personal injury grounded on breach of an express or implied warranty, compare Maryland Code (1957, 1964 Repl. Vol., 1974 Cum.

Supp.) Art. 95B, Uniform Commercial Code (the UCC), § 2-318 with Blankenship v. Morrison Machine Co., 255 Md. 241, 246-47 , 257 A. 2d 430, 433 (1969) (which involved an injury sustained by an operator of a machine sold before § 2-318 was amended). Privity of contract remains an essential ingredient, however, in a breach of express warranty action not involving personal injury, because privity between the plaintiff and defendant is requisite to maintain a contract action unless the plaintiff is either a donee beneficiary or a creditor beneficiary, Mackubin v. Curtiss-Wright Corp., 190 Md. 52, 56 , 57 A. 2d 318, 321 (1948). The trial court, quite properly, we think, treated this case as an action for damages for breach of an express warranty. That the equipment was delivered to Zink where it was serviced by Addressograph is significant.

Equally significant was the delivery of Addressograph’s Machine Warranty to Zink. Most compelling of all was the testimony of William T. Wells, service manager for Addressograph, that the numerous service calls made between December, 1969 and July of 1971 were made without charge, as a consequence of Addressograph’s having voluntarily extended the 30-day guaranty period because the VariTyper ²⁸¹ would no,t stay in adjustment. 2 Under the facts of this case we are ¡satisfied that Addressograph is estopped from denying Zink the benefits of the express warranty. In this connection, we observe that the sale to C.I.T. and the lease to Zink more than a month after the delivery and installation of the Equipment may well have been a financing mechanism, 3 although the record is silent as regards this. It seems to us that even assuming that there was no privity between Zink and Addressograph, Addressograph, by its course of conduct is now equitably estopped from asserting lack of privity as a defense, or, in the language of Benson v. Borden, 174 Md. 202, 219 , 198 A. 419, 427 (1938) is inhibited from asserting lack of privity as a defense “from the mischief that has followed [its acts].” The mischief here is that for about a year and a half Addressograph faithfully, if unsuccessfully, performed its obligations under the guaranty contained in the Machine Warranty.

Zink was led to believe that he could rely on the warranty, as in fact, he did, when hie employed an operator at $80.00 a week, who remained ori the payroll with no duties to perform on the many occasiqns when the equipment was not usable. 3 J. Pomeroy, Equity Jurisprudence § 804, at 189 (5th ed. 1941) defines equitable estoppel as follows: “. . . Equitable estoppel is the effect of the voluntary (conduct of a party whereby he is absolutely precluded, both at law and in equity, from asserting rights which might perhaps have otherwise existed, either of property, of contract, or of remedy, as against another person, who has in good faith relied upon such conduct, and has been led thereby to change his position for the worse, ²⁸² and who on his part acquires some corresponding right, either of property, of contract, or of remedy.” See also Benson v. Borden, supra, 174 Md. at 218 quoting Sir James Fitzjames Stephen, Digest of the Law of Evidence, at 124; 28 Am.Jur.2d Estoppel and Waiver § 35, at 640-42 (1966). While Food Fair Stores, Inc. v. Blumberg, 234 Md. 521 , 200 A. 2d 166 (1964) is frequently cited for the proposition that a contract cannot be created by estoppel, this statement is overly broad, and is true only in the absence of injury or prejudice, United States v. McCay, 28 F. 2d 777 (D. Md. 1928). We think the rule is better stated by Judge Oppenheimer, for the Court, in Travelers Indemnity Co. v. Nationwide Construction Corp., 244 Md. 401, 414 , 224 A. 2d 285, 292 (1966): “We have repeatedly stated that whether or not an estoppel exists is a question of fact to be determined in each case.

Gould v. Transamerican Associates, supra, at 224 Md. 297 ; Liberty Mut. Ins. Co. v. American Auto. Ins.

Co., 220 Md. 497, 501 , 154 A. 2d 826 (1959); and cases therein cited. Wrongful or unconscientious conduct on which the other party relies, to his detriment, is generally an element of estoppel in the particular circumstances, see Liberty Mut. Ins. Co. v. American Auto.

Ins. Co., 220 Md. at 500 , but an estoppel may arise even when there is no intent to mislead, if the acts of one party cause a prejudicial change in the conduct of the other. Harrison v. McCarty, 178 Md. 377 , 13 A. 2d 544 (1940) . . . ." We think that this case is analogous to Harrison v. McCarty, supra, cited by Judge Oppenheimer. There, an injured employee was taken to a physician by his employer.

The employer told the employee “to carry out the doctor’s orders” and that “a report would be made.” When claim was made for Workmen’s Compensation nearly two years after ²⁸³ the accident, the insurer pleaded limitations. The Court held, at 380-81 of 178 Maryland: “Everybody concerned agrees that this is a meritorious case, and that the defence is strictly technical. There is not even a suggestion or suspicion that a fraud was intended or attempted on the claimant to induce him to refrain from filing a claim within the statutory period. He thought from the day after his accident that his claim had been filed, and inferred from Dr. Hammond’s remark that it would probably be a year before he could know the extent of his injury.

His employer told him to do what Dr. Hammond told him, and in the year he went to his physician for an examination, and then, on consulting an attorney, learned, to his surprise, that he had no claim pending. It appears to this court that, under these circumstances, the employer is estopped to raise the issue of limitations and this estoppel will be imputed to the insurer, which appears here resisting this claim.” Here, Zink was led to believe, to his detriment, that the equipment was covered by the Machine Warranty, and could be made to operate satisfactorily. Having performed under the agreement, Addressograph cannot, under the facts of this case, now assert a lack of privity as a defense. (ii) We think, as did Judge Mayfield, who tried the case below, that the Zinks sustained their burden of proof.

A strong inference can be drawn from Wells’ testimony that the unacceptable performance was attributable to the fact that the VariTyper would not hold adjustments. That this defect was critical is apparent. Zink testified that he wanted the equipment to reduce charges for composing, which he was having done by others. The VariTyper equipment was bought so that copy with justified margins could be produced for purposes of offset printing.

When copy with ²⁸⁴ uneven margins and erratic spacing resulted, it was necessary to resort constantly to outside composition companies until repairs could be made. Zink produced bills showing that some $2,500.00 had been spent for this purpose. While the principal operating problem was with the', VariTyper itself, it seems to us! that Judge Mayfield was" quite right when he