Bowers Manufacturing Co. v. Chicago MacHine Tool Co.

Citations: 453 N.E.2d 61; 117 Ill. App. 3d 226; 72 Ill. Dec. 756; 37 U.C.C. Rep. Serv. (West) 103; 1983 Ill. App. LEXIS 2169Docket: 82-820

Court: Appellate Court of Illinois; August 17, 1983; Illinois; State Appellate Court

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Bowers Manufacturing Company, Inc. appealed the dismissal with prejudice of its three-count amended complaint against Chicago Machine Tool Company (CMTC) and others. The plaintiff argued that counts I and II sufficiently stated claims for breach of oral contract and express warranty, while count III asserted breaches of express and implied warranty. Bowers contended that the defendants' motion to dismiss lacked sufficient affirmative matter to justify the dismissal. 

In count I, Bowers alleged that CMTC orally assured them that a turret punch manufactured by Di-Acro would meet their specifications, leading Bowers to purchase the machine and enter into an Equipment Lease Purchase Agreement with Matco, a CMTC subsidiary. Bowers paid $94,663 for the machine, which was later found defective and unsuitable for its intended purpose, constituting a breach of contract. Count II reiterated these facts, claiming an express warranty that was violated under the Uniform Commercial Code (UCC) section 2-313. Count III reasserted the same allegations, claiming violations of the implied warranties of merchantability and fitness for a particular purpose under UCC sections 2-314 and 2-315. The defendants moved to dismiss the complaint under section 2-619 of the Code of Civil Procedure. The court affirmed the dismissal.

Defendants claimed in their motion that all warranties relied upon by the plaintiff were legally disclaimed, citing section 2-316(2) of the Uniform Commercial Code (UCC). They argued that both express and implied warranties of fitness for a particular purpose and merchantability were excluded in the 'Equipment Lease Purchase Agreement' and the manufacturer's written warranty from Di-Acro. Additionally, they referenced sworn interrogatory answers from John Bowers, the plaintiff's president, which indicated that the warranties the plaintiff was asserting were written and provided by Matco Leasing. Defendants contended that section 2-202 of the UCC prohibits introducing parol evidence to contradict a written agreement. The court, after hearing arguments, ruled that defendants had clearly disclaimed the relevant warranties, found no fatal ambiguity in the warranty language of the Matco agreement, and concluded that Bowers' claims of an oral agreement were an attempt to circumvent the terms of the written contract. The court deemed the written agreement binding and granted the defendants' motion to dismiss all counts, leading to the plaintiff's appeal. The appeal raised two main issues: the validity of the breach of contract or warranty claims based on an alleged oral agreement versus the written contract, and the effectiveness of the disclaimers by Matco and Di-Acro regarding warranties of fitness and merchantability.

The trial judge ruled in favor of the defendants, acknowledging the plaintiff's claim of an oral agreement but determining that a written 'Equipment Lease Purchase Agreement' existed between the parties, which was incorporated in the complaint. The judge cited section 2-202 of the Uniform Commercial Code, which prohibits the introduction of evidence regarding prior or contemporaneous oral agreements that contradict a written agreement. The judge noted that the plaintiff, Bowers, was attempting to circumvent the written agreement by asserting that prior negotiations constituted an enforceable agreement. 

Bowers argued that the only relevant written agreement was the Matco lease, which he claimed was separate from the contract with CMTC, thereby making the oral agreement and related express warranties admissible. He also compared the Matco lease to a security agreement, suggesting it was not intended as a final expression of the agreement, thus allowing for oral evidence. However, the court found these comparisons inapplicable, as Bowers had previously alleged that Matco was affiliated with CMTC and payments were made to CMTC through arrangements with Matco Leasing. 

The court concluded that the 'Equipment Lease Purchase Agreement' was a complete and final expression of the parties' agreement, covering warranties and establishing a 60-month lease with an option to purchase the equipment for $1 at the end of the term. Consequently, under section 2-202, evidence of any oral agreement contradicting the written terms was deemed inadmissible. The court also highlighted a critical issue raised by Bowers regarding the failure of Matco and Di-Acro to effectively disclaim the warranties underlying his claims.

Bowers challenges the validity of the Matco agreement, arguing that its warranty disclaimer is ambiguous. The disclaimer first disclaims all express and implied warranties, then states that any warranties from the manufacturer to Matco extend to the purchaser. Bowers contends that this lack of clarity fails to inform him of what he is waiving, referencing relevant case law (Imperial Stamp, Engraving Co. v. Bailey, 1980). The Equipment Lease Purchase Agreement's paragraph 4 outlines that the lessor makes no warranties except for the possibility of transferring the manufacturer's warranty. The trial court found that Matco’s failure to delete specific phrases allowed for the passing of comparable warranties without fatal inconsistency in the disclaimer. The court emphasized that contract interpretation is a legal question. It concluded that the disclaimer adequately informed Bowers of the waiving of all warranties, subject to the manufacturer's warranty. Bowers admitted that Matco's obligation aligned with Di-Acro's warranties, indicating no contradiction in the Matco provisions. The trial court's finding of no ambiguity aligns with precedent, as seen in Walter E. Heller Co. v. Convalescent Home (1977), where a similar disclaimer was upheld for its conspicuousness. In contrast, Bowers cited Blankenship v. Northtown Ford, Inc. (1981), where a misleading warranty disclaimer was noted, highlighting the need for clarity in consumer transactions.

The transaction in Heller involved two business entities, while Blankenship was a consumer transaction, leading courts to be less inclined to enforce contracts against consumers compared to educated businessmen. Courts generally resist applying the unconscionability doctrine to negotiated contracts among businesses. Bowers contends Di-Acro did not effectively disclaim its warranties, arguing that the warranty card presents conflicting information. However, the warranty card indicates that any defective part within one year will be replaced according to the "complete warranty contract" on the reverse side, which outlines Di-Acro's liability and disclaims other warranties, a format deemed acceptable by case law. Bowers misquotes the warranty card, which undermines their argument regarding the existence of a "complete warranty." The disclaimer's clarity is consistent with the Uniform Commercial Code (UCC), which requires disclaimers to be conspicuous. Bowers asserts that the fine print on the reverse would not attract attention, but the card's clear indication about the reverse side warrants a reasonable person's attention. The court determined that the disclaimers in both agreements were conspicuous and Bowers also claimed that the defendants' motion to dismiss did not adequately address the timeliness of Di-Acro's disclaimer as per section 2-619 of the Code of Civil Procedure.

Bowers did not address the timeliness issue in its complaint or in a counteraffidavit responding to the motion to dismiss filed by the defendants. Bowers claims that the defendants bear the burden of proof regarding the timeliness of the disclaimer and argues they have failed to establish this. The defendants' motion to dismiss referenced a disclaimer of express and implied warranties under section 2-316 of the Uniform Commercial Code, which does not require that the disclaimer's timing be specified. Bowers did not provide any legal authority to support the claim that the motion must allege timeliness. 

In the case of Gideon Service Division v. Dunham-Bush, Inc., the court found that a motion to dismiss was not insufficient for failing to allege timeliness, as the affidavit indicated the disclaimer was communicated after the contract was made, rendering it ineffective. Similarly, in Midland Supply Co. v. Ehret Plumbing, the seller could not rely on a warranty disclaimer provided after the goods were delivered because no prior disclaimer was communicated. However, in this instance, the defendants included the Matco sales contract warranty disclaimer in their motion, demonstrating that Bowers was aware of the limited remedies at the time of the agreement. Consequently, the disclaimers from Matco and Di-Acro served as affirmative defenses that completely negated Bowers' cause of action, justifying the dismissal of the amended complaint under section 2-619(a)(9). The trial court's order to dismiss the complaint with prejudice has been affirmed.