McCarty v. E. J. Korvette, Inc.

⁴²³ Davidson, J., delivered the opinion of the Court. On 25 February 1971, Frances McCarty bought four tires manufactured by Denman Rubber Manufacturing Co., at Korvettes Tire & Auto Centers, a retail outlet located on Baltimore National Pike, which was allegedly operated, pursuant to a franchise and lease from E. J. Korvette, Inc., by Tires, Inc. On the back side of the invoice given to Mrs. McCarty, under the title “Korvette Tire Centers All-Road-Hazards Tire Guarantee,” the following language appears: “The tires identified hereon are guaranteed for the number of months (or miles) designated [36,000 miles] against all road hazards including stone bruises, impact bruises, blow out, tread separation, glass cuts and fabric breaks, only when used in normal, non-commercial passenger car service. If a tire fails to give satisfactory service under the terms of this guarantee, return it to the nearest Korvette Tire Center. We will replace the tire charging only the proportionate part of the sale price for each month elapsed (or mileage used) from date of purchase, plus the full federal tax. “The above guarantee does not cover tires run flat, or simply worn out; tires injured by a fire, collision, vandalism, misalignment or mechanical defects of the vehicle.

Radial or surface fissures, discoloration or ordinary repairable punctures, do not render tires unfit for service. Punctures will be repaired free. “Neither the manufacturer nor Korvette Tire Centers shall be liable for any consequential damage and our liability is limited solely to replacement of the product.” (Emphasis supplied.) On 14 June 1971, the appellants, Frances McCarty and her husband, Warren McCarty (consumers), were involved in an automobile accident. As a result of an alleged blowout of the right rear tire, their vehicle swerved off the road and turned over several times causing personal injury to each of them ⁴²⁴ as well as property damage to their car. In the Circuit Court for Baltimore County, the consumers sued E. J. Korvette, Inc., Tires, Inc., and Denman Rubber Manufacturing Co., the appellees, for damages resulting from their alleged breach of express and implied warranties and negligence.

At the conclusion of the consumers’ case, Judge John Grason Turnbull granted the appellees’ motions for directed verdicts. On 4 November 1974, final judgment was entered. It is from that judgment that this appeal is taken. I The appellees initially contend that the language contained in the Korvette Tire Centers All-Road-Hazard Tire Guarantee, when read as a whole, does not constitute an express warranty against blowouts, but rather constitutes a guarantee that if a blowout occurs, the tire will be replaced.

We do not agree. Maryland Annotated Code, Comm.L.Art., § 2-313 (1975) 1 [hereinafter referred to as Comm.L.Art.], defines an express warranty, in pertinent part, as follows: “(1) Express warranties by the seller are created as follows: (a) Any affirmation of fact or promise made by the seller to the buyer which relates to the goods and becomes part of the basis of the bargain creates an express warranty that the goods shall conform to the affirmation or promise.” 2 ⁴²⁵ In considering the definition of an express warranty, the Court of Appeals long ago recognized the distinction which exists between an express warranty and an executory promise or contractual undertaking. In White Automobile Co. v. Dorsey, 119 Md. 251 , 86 A. 617 (1913), it was alleged, in a special count, that the seller represented to the buyer of an automobile that: “said automobile was sound, free from defects in workmanship, and materials, and would be satisfactory to the plaintiff, and that said defendants would keep the same in satisfactory running condition, without expense to the plaintiff, for a period of one year from the date of said purchase.” Id. at 254, 86 A. at 619 . (Emphasis in original.) In the same count, the buyer alleged that the contract had been breached because the automobile was “unsound and defective as to workmanship and material,” and “constantly required repairs,” and because the sellers failed and refused to put the car “in good order and repair.” The Court of Appeals held that a demurrer to this count should have been sustained, stating: “The count combines two distinct causes of action; first, a breach of the express warranty that the automobile ‘was sound, free from defects in workmanship and material, . . .’; and secondly, a breach of a contract on the part of the defendants ‘to keep the same in satisfactory running condition, without expense to the plaintiff, for a period of one year from the date of said purchase.’ ” Id. at 256 , 86 A. at 619 .

The Court then concluded that the two separate causes of action should have been pleaded in separate counts. The Court thus recognized that language relating to the existing qualities, capabilities and condition of goods con ⁴²⁶ stituted an express warranty. Language promising that the seller would repair goods in the event of a breach of the warranty, did not relate to the existing qualities, capabilities or condition of the goods, and, consequently, did not constitute an express warranty, but rather an executory contractual undertaking to be performed in the future. In the case of Rittenhouse, Winterson Auto Co. v. Kissner, 129 Md. 102 , 98 A. 361 (1916), 3 it was alleged that the seller represented to the buyer of a truck that it: “was a first class car, was as good as new and was in sound and first class condition; and that if it was not abused but handled with care, it would last the plaintiff at least four years.” Id. at 104, 98 A. at 362 .

(Emphasis added.) The breaches charged in the same count were that the truck was “unsound and in bad condition” and “did not last the plaintiff at least four years.” In Rittenhouse, as in White, a demurrer was filed, contending that the special count for breach of warranty was improper because the assurance as to the serviceability of the truck for the period of four years was not a warranty, but, at most, an executory undertaking which could not properly be combined in one count with the warranties as to the truck’s quality and condition. In considering the applicability of White, the Court said: “In that case, however, the averment held objectionable, when made in combination with the breach of warranty declared on in the same count, was that the defendants failed to perform their agreement to keep the automobile sold by them to the plaintiff in satisfactory running order, without expense to him for one year from the date of the purchase. This assumption of an affirmative contractual duty was essentially different from the representation here relied upon as to the time ⁴²⁷ during which the motor truck was capable of rendering efficient service. The assurance to that effect was not an executory promise, but had reference to an existing quality or capacity, and was hence closely akin to the other representations with which it was joined.

In our opinion the demurrer was properly overruled.” Id. at 104-05 , 98 A. at 362 . (Emphasis added.) Thus, the Court of Appeals reasserted its previously drawn distinction between an express warranty and an executory promise. An assurance that a truck would perform in a certain way for a given period of time in the future constituted an express warranty because it had reference to the existing quality, capacity or condition of the goods. An assurance that the seller would, at some time in the future, perform certain services in the event that the goods should not conform to the representation, so that the warranty was breached, constituted an executory promise or contractual undertaking because it had reference, not to the existing quality, capacity or condition, of the goods, but rather to the assumption of an affirmative contractual duty to be performed in the future.

There is nothing in the language of Comm.L.Art., § 2-313 which requires a departure from these basic principles which were applied under both the common law and the Uniform Sales Act. Applying these principles to the instant case produces a clear result. Here the language on the invoice given to the buyer to the effect that “the tires identified hereon are guaranteed for 36.000 miles . .. against all road hazards, including .. . blow out. . .” constitutes an affirmation that the tires are of such existing quality, capacity and condition as to make them capable of rendering service without blowing out before they have been used for 36,000 miles. This assurance of the serviceability of the tires for a given number of miles, because it is a representation as to the existing quality, capacity and condition of the tires, constitutes an express warranty that the tires will not blow out during the first 36.000 miles of use. ⁴²⁸ Questions remain as to what impact the additional language appearing on the invoice has upon the scope and extent of the express warranty.

Comm.L.Art., § 2-316 4 specifically recognizes a right on the part of the warrantor to negate, modify or limit an express or implied warranty under certain circumstances. It also implicitly recognizes that warranties may be limited in two different ways — one by “disclaiming” the warranty or a part of the warranty itself in the manner prescribed by subsections (1) — (3), and the other by “limiting the remedy” available upon breach (subsection (4)) in the manner prescribed by Comm.L.Art., §8 2-718 and 2-719 . 5 ⁴²⁹ Here the language which says that the guarantee applies only when the tires are used in normal non-commercial passenger car service, and does not apply to tires that are run flat, or simply worn out, injured by a fire, collision, vandalism, misalignment or mechanical defects of the vehicle, constitutes a disclaimer under Comm.L.Art., § 2-316 (1). The language which not only promises to replace the tire if a blowout occurs, but also attempts to avoid consequential damages and restrict the remedies of the buyer solely to replacement, constitutes a limitation of remedies under Comm.L.Art., § 2-316 (4), governed by the provisions of Comm.L.Art., § 2-719. 6 Comm.L.Art., § 2-316.1 is inapplicable. 7 Comm.L.Art., § 2-719 gives the parties considerable latitude in which to fashion their remedies to their ⁴³⁰ particular requirements. 8 It expressly recognizes that parties may limit their remedies to repair and replacement. The parties, however, must accept the legal consequence that there be some fair remedy for breach of the obligations or duties outlined in the contract.

Reasonable agreements which limit or modify remedies will be given effect, but the parties are not free to shape their remedies in an unreasonable or unconscionable way. 9 Comm.L.Art., § 2-719 (3) recognizes the validity of clauses limiting or excluding consequential damages, otherwise available under Comm.L.Art., § 2-714 (3), but expressly states that they may not operate in an unconscionable manner. That subsection also establishes that limitation of consequential damages for injury to the person in the case of consumer goods is prima fade unconscionable. 10 ⁴³¹ Comm.L.Art., § 2-302 (1) sets forth the alternatives available to a court when it finds a limitation of remedy to be unconscionable. 11 That section permits the court in its discretion, after a finding of unconscionability, to refuse to enforce the contract as a whole, if it is permeated by the unconscionability, or to strike any single clause or group of clauses which are so tainted or which are contrary to the essential purpose of the agreement, or to simply limit unconscionable clauses so as to avoid unconscionable results. 12 Thus, any clause purporting to modify or limit remedies in an unconscionable manner is subject to deletion and will not be given effect. 13 Here the executory promise to replace the tire in the event of a blowout, found in the first paragraph of the warranty, is, in and of itself, nothing more than an express statement that the remedy of replacement is available in addition to all of the other remedies provided by law. 14 But that executory promise, coupled with the clause purporting to exclude liability for consequential damages and to limit liability solely to replacement, clearly expresses an intent that replacement be the sole remedy under the contract. The record shows, however, that the warranted tires which Mrs. McCarty purchased were bought for “her” stationwagon, which was ordinarily driven about 150 miles per week; that she did not seek damages for loss of employment; and that her husband was employed as a “locomotive engineer” and did not, therefore, use an ⁴³² automobile for business purposes. This evidence supports a rational inference that the warranted tires here constitute consumer goods as defined by Comm.L.Art., § 9-109, 15 so that the provisions of Comm.L.Art., § 2-719 (3) are applicable.

The clause purporting to limit the consumers’ remedy solely to replacement of the tire purports to exclude liability for both personal injury and property damage. At trial, the appellees presented no evidence to show that the purported exclusion of consequential damages for personal injury was not unconscionable. Accordingly, to the extent that the clause purports to limit consequential damages for personal injury, it is unconscionable as a matter of law. In Collins v. Uniroyal, Inc., 64 N. J. 260, 315 A. 2d 16 (1974), the Supreme Court of New Jersey held that an express warranty against blowouts had been breached when a blowout occurred, notwithstanding the fact that a defect in the material and workmanship in the tire had not been proved.

There, the express warranty provided: “ROAD HAZARD — In addition, every such U.S. Royal Master tire, when used in normal passenger car service, is guaranteed during the life of the original tread against blowouts, cuts, bruises, and similar injury rendering the tire unserviceable. Tires which are punctured or abused, by being run flat, improperly aligned, balanced, or inflated, cut by chains or obstructions on vehicle, damaged by fire, collision or vandalism, or by other means, and ‘seconds’ are not subject to the road hazard provision of this Guarantee. “This Guarantee does not cover consequential damage, and the liability of the manufacturer is limited to repairing or replacing the tire in accordance with the stipulations contained in this ⁴³³ Guarantee. No other guarantee or warranty, express or implied, is made.” Id., 315 A. 2d at 19 . The Court cogently expressed the reasons for regarding a provision limiting the remedy to replacement of the tire to be “patently” unconscionable, and, therefore, invalid by stating: “A tire manufacturer warrants against blowouts in order to increase tire sales.

Public advertising by defendant relative to these tires stated: ‘If it only saves your life once, it’s a bargain.’ The seller should be held to realize that the purchaser of a tire buying it because so warranted is far more likely to have made the purchase decision in order to protect himself and the passengers in his car from death or personal injury in a blowout accident than to assure himself of a refund of the price of the tire in such an event. That being the natural reliance and the reasonable expectation of the purchaser flowing from the warranty, it appears to us patently unconscionable for the manufacturer to be permitted to limit his damages for a breach of warranty proximately resulting in the purchaser’s death to a price refund or a replacement of the tire. We consequently agree with the determination of the Appellate Division that the statutory presumption of unconscionability was not here overcome and that the trial court ruled correctly on the issue.”Id., 315 A. 2d at 18 . 16 While there is no statutory presumption of unconscionability with respect to a limitation of consequential damages for injury to property in the case of consumer goods, the rationale in Collins persuades us that the clause here, which attempts to exclude liability for both personal injury and property damage is so tainted by unconscionability as to warrant deletion in its entirety. If ⁴³⁴ the appellees do not want to be liable for consequential damages, they should not expressly warrant the tires against blowouts. 17 Under the present circumstances, the clause purporting to restrict remedies solely to replacement is ineffective.

It cannot serve to convert the express warranty against blowouts into a guarantee that if a tire blew out, “the tire would be replaced.” II The appellees next contend that even assuming the existence of an express warranty, the grant of the motions for directed verdicts here was proper because there was insufficient evidence to show a breach of that warranty. Relying upon Little v. Woodall, 244 Md. 620 , 224 A. 2d 852 (1966), they initially assert that the express warranty here is not an unconditional warranty against blowouts during the first 36,000 miles, but rather is limited to or conditioned upon a defect in materials or workmanship. They assert that no evidence of such a defect was presented. In addition, they argue that there was insufficient evidence presented to show that a blowout, which was not a direct result of a warranty exclusion, had occurred.

In Little , a buyer had entered into a contract for the installation of an aluminum awning carport. The contract between the parties was printed, except that the description of the awning to be installed, the price to be paid, and the words “Fully guaranteed” were handwritten. One of the printed provisions indicated that the contract was “subject to strikes, meteorological conditions and other conditions” beyond the appellant’s control. Parol evidence showed that just before the words “Fully guaranteed” were inserted, the seller had said that the awning was guaranteed “against anything.” “This thing is up to stay.

You will never have to ⁴³⁵ worry about it... . Once this thing is up it will stay up.” “Nothing would bring it down.” The buyer testified that the carport was “never caulked right” so that there was constant leaking between the carport and the house, a condition which was never successfully remedied by the seller. Ultimately, during a snow storm in which the snow was “wet and melting fast” the carport pulled loose from the house at the place of leakage and collapsed on the buyer’s car. There was evidence to show that the accumulation of snow the night before the awning fell was about four inches and that no other carport on the street had collapsed.

The Court of Appeals found the language of the warranty to be ambiguous, and construed the guarantee as one limited to the durability of the material and quality of the workmanship. In reaching this conclusion, the Court said: “A warranty that the article sold will last for a certain time, if unconditional, is binding upon the seller. Rittenhouse, Winterson Auto. Co. v. Kissner, 129 Md. 102 , 98 Atl. 361 (1916); Williston, Sales § 212 (Rev. Ed. 1948).

However, the phrase ‘Fully guaranteed,’ of itself, means no more than that the work shall be done in a good and workmanlike manner and that the material will be adequate for the designated purpose in accordance with the contract. Pychinka v. Keystone Home Improvement Co., 4 D. & C. 2d 492 (Pa. Com.Pleas 1955). Even in the light of the oral testimony, the clear intent of the guarantee within the context of the entire contract is that the carport will stay up, as far as the materials and workmanship are concerned.

The printed clause in the contract, which is below the written guarantee, that the contract is subject to meteorological and other conditions beyond the appellant’s control, shows that the guarantee was not intended to be unconditional, but was limited to the durability of the material and the quality of the workmanship.” Id., 244 Md. at 625 , 224 A. 2d at 855 . The Court then held that there was sufficient evidence before the trier of the facts to show that the warranty, even ⁴³⁶ though confined to material and workmanship, had been breached. We have previously held that the language appearing on the invoice given to the consumers here creates an express warranty that the tires purchased will not blow out before they have been driven 36,000 miles. There is no statement on that invoice that the tires are “fully guaranteed.” Nor is there any statement that the contract is subject to conditions beyond the appellees’ control.

Indeed, the language