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Ray v. First Nat. Bank of Ariz.

Supreme Court of Arizona

November 9, 1960

James RAY, Appellant,
FIRST NATIONAL BANK OF ARIZONA, Phoenix, a national banking association, Appellee.

[88 Ariz. 339] Rhodes & Killian, Mesa, for appellant.

Kramer, Roche & Perry and Ray Huffsteter, Phoenix, for appellee.

STRUCKMEYER, Chief Justice.

The First National Bank of Arizona brought this action against James Ray to collect the balance due on a conditional

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sales contract. Both parties filed motions for summary judgment based on the pleadings and the defendant's deposition. From an order granting the bank's motion and judgment thereon defendant appeals.

The facts material to the disposition of this cause are established in the deposition of James Ray. While they are uncontradicted, the conclusions to be drawn therefrom are a source of dispute. Briefly, defendant purchased a Bearcat Forage Harvester from William Osborne, hereinafter called seller. A conditional sales contract, covering the balance due after the down payment, was executed by defendant and this contract was subsequently assigned to plaintiff.

At the onset for the purpose of its motion for summary judgment, the bank concedes that the seller impliedly warranted the machine as fit to do the work for which it was purchased and that this warranty was breached. Nevertheless, the bank urges that defendant must have relied upon the warranty at the time of purchase in order to assert a breach thereof as a defense. This is the established rule in Arizona. Murphy v. National Iron & Metal Co., 71 Ariz. 323, 227 P.2d 219. Plaintiff argues that at the time of the signing of the conditional sales contract defendant had knowledge that the harvester would not satisfactorily do the work for which it was purchased; hence, that defendant waived the warranty. This assertion requires a somewhat detailed analysis of the testimony of defendant, James Ray.

After some discussions the machine was delivered to defendant for trial on September 2, 1955. The seller then told defendant that he had the assurance of the manufacturer that 'the machine would work' and that he, the seller, would be allowed to make any alteration necessary to make it work. Defendant used the harvester for two days but it did not work satisfactorily. Seller then told defendant that he could take it to another job at Continental, Arizona, and 'see how it worked there'. Defendant then signed the conditional sales contract and moved the machine to Continental, Arizona. There it continued to perform unsatisfactorily. As a result an agent of the seller and two field men from the area distributor went to Continental for the express purpose of trying to make the harvester work properly. When they were unable to do so, the manufacturer was contacted who sent a factory representative to Arizona some time [88 Ariz. 340] in the early part of October. Apparently substantial changes, the nature of which were not described, were made on the head of the machine without successfully improving its operation. Finally defendant was told that due to what they, the factory representative and representatives of the distributor and seller, had seen, the machine would be sent back to the factory for the purpose of designing a new head.

About the first part of November the harvester was picked up from defendant, put on a railroad car and shipped back to the factory. Subsequently word was received by the seller that the manufacturer had decided there were two areas in the United States that their machine would not work and 'that they did not figure that it was feasible to completely re-tool for the business they would do in these two areas' as it would cost at least a quarter of a million dollars. At that time defendant was told that seller would be reimbursed by the manufacturer and that seller would in turn reimburse defendant. For some undisclosed reason this was not done.

It is apparent from the recited facts that defendant knew the machine was not working properly at the time of entering into the conditional sales contract. The failure of the harvester to perform in the manner expected prior to its actual purchase by the defendant could constitute a waiver of the implied warranty of fitness. But here the facts are clear that both parties knew the machine might not perform satisfactorily and the seller, with the consent of the manufacturer, thereupon expressly warranted that the machine would be made to

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work. It was within the contemplation of the parties, clearly borne out by their subsequent conduct, that the manufacturer and seller have a reasonable opportunity to perform. It was not until the manufacturer decided against making a different head that the parties considered the machine as unfit for the purposes for which it was sold. The record does not disclose any facts from which it could be concluded that the warranty of fitness was waived. Essentially an express warranty was substituted for that implied in law.

The bank next urges that a buyer under a conditional sales contract who enters into an agreement with the seller by which a machine is to be taken to the factory for repairs or rebuilding thereby waives the statutory remedies for breach of warranty. The evidence does not support in the slightest the conclusion that such a waiver of warranty took place under the circumstances in this case. Defendant testified:

'Q. All right. What happened after that? A. In the meantime he told me that Western Land Rolling Company (the manufacturer) was going to take the machine back to the factory.

[88 Ariz. 341] 'Q. By 'he,' you mean Mr. Osborne? (Seller) A. Mr. Osborne, yes, was going to take it back to the factory and ...

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