Chick is an auction company. Brimm is the owner of a horse consigned for sale by Chick. Pitts purchased the horse at auction. The consignment form required disclosure of any broken bones and none was disclosed. After the horse was purchased and raced, it became lame. X-rays disclosed a broken bone re-set by pins. Pitts demanded refund of the purchase price, but Brimm refused. Apparently, the purchase price was still in the possession of Chick for Chick filed this lawsuit in which it deposited the money with the court and took the position that the court should decide whether the fund would be paid to Pitts or Brimm.
In this trial court opinion, the court awards the fund to the Pitts, the purchaser. Failure to disclose the broken bone was a breach of warranty that was not overridden by the terms of auction of the horse “as is.” Pitts was also awarded compensation for boarding expenses incurred during his possession of the horse.
In this interpleader action involving the purchase of a horse at a public sale by Frances Pitts (Pitts), I hold that the buyer is entitled to the funds deposited in court by the auctioneer. Since Charles Brimm (Brimm) failed to notify the auctioneer of any broken bones on the consignment sheet submitted to the auctioneer and a veterinary examination disclosed a surgical repair of the third distal metatarsal bone, Pitts rightfully rejected the horse and is entitled to the fund deposited by the stakeholder. Pitts is also entitled to some of the expenses incurred while caring for the horse for the benefit of the seller.
The relevant facts are as follows: On August 23, 2000, Brimm delivered the horse, "Captain's License," to Frank Chick's Harness Horse Sale (Chick's). He also submitted a consignment sheet to Chick's stating that he agreed to notify the auctioneer of any broken bones prior to the sale. On September 14, 2000, Pitts purchased the horse at public sale for the net sum of $25,605.00. On September 26, 2000, Captain's License participated in a race at the Harrington Raceway, and after the race the horse was lame. A veterinarian examined the horse on September 27, 2000, and x‑rays disclosed that a broken bone had been surgically repaired and that the horse had three screws in its leg. Pitts immediately notified the auctioneer that she wanted the sale cancelled and the money returned. On September 23, 2001, Chick's filed a complaint in interpleader and it was ordered that the sales proceeds be deposited in court. On August 10, 2001, Charles Pitts died and prior to trial, Frances Pitts was substituted as a party to the proceedings.
Applicability of the Uniform Commercial Code
Although neither of the claimants to the fund directly presented this issue, the Uniform Commercial Code as found in 6 Del.C. § 2‑101 et seq. is applicable to this transaction. The scope of Article 2 of the UCC, which governs sales, is stated as follows: "Unless the context otherwise requires, this Article applies to transactions in goods ..." 6 Del.C. § 2‑102. Section 2‑105(1) of the UCC defines goods as "all things (including specially manufactured goods) which are movable at the time of identification of the contract for sale other than the money in which the price is to be paid, investment securities (Article 8) and things in action" (emphasis added). The UCC has commonly been applied to animals, automobiles, computers, etc., so it unquestionably governs the case before this Court.
The Warranty of the Seller and the "As Is" Disclosure
The consignment sheet submitted by the seller indicates that he agrees to notify the auctioneer in writing of any broken bones prior to the sale. Although the seller did not sign the consignment sheet, it was submitted by him and signed by the auctioneer, who acted as his agent. Defendant Pitts' Exhibit No. 5. The testimony is in conflict as to whether previously broken bone should be disclosed prior to the sale, but I find that Pitts has established by a preponderance of the evidence that such a disclosure is a custom of the trade. The veterinarian and the auctioneer testified that this fact should be disclosed. Parties may supplement the terms of a contract by introducing such evidence of usage of trade at trial. 6 Del.C. §§ 2‑202(1), 1‑200(2). The affirmation of fact made by the seller to the buyer on the consignment sheet creates an express warranty and becomes a part of the basis for the bargain between the parties. 6 Del.C. § 2‑313.
Brimm contends that the terms and conditions of the sale indicate that Captain's License was sold "as is" and that there was no express warranty. I disagree.
Section 2‑316(1) of the Uniform Commercial Code states:
Words or conduct relevant to the creation of an express warranty and words or conduct tending to negate or limit warranty shall be construed wherever reasonable as consistent with each other; but subject to the provisions of this Article on parol evidence (Section 2‑202) negation or limitation is inoperative to the extent that such construction is unreasonable. 6 Del. C. § 2‑316(1).
Comment 1 to the above cited section states that "this section ... seeks to protect a buyer from unexpected and unbargained language of express warranty." 6 Del. C. § 2‑316(1), Comment 1. Thus, the seller who seeks to disclaim an express warranty faces a heavy burden. The terms and conditions of sale contained in Defendant Pitts' Exhibit No. 4 are primarily for the protection of the auctioneer. This document does not exclude any representation made by the owner in the consignment sheet or the document attached to the consignment sheet. It is stated in the terms and conditions of sale that the owner and/or party entering the horse are the parties responsible for all representations of the animal. Therefore I construe the "as is" provision as applicable to the auctioneer. To the extent that the "as is" provision is inconsistent with an express warranty, I hold that the disclaimer is insufficient to disclaim the express warranty on the consignment sheet.
Brimm next contends that the consignment sheet only refers to bones that are broken at the time of the delivery of the animal to the auctioneer. This contention is without merit. If the horse had broken bones at the time of the sale, the animal would be lame and could not walk into the sale. It is a reasonable interpretation of the consignment sheet that the document covers bones that were previously broken and have been surgically repaired.
The Buyer's Rightful Rejection and Claim to the Fund
Section 2‑601 of the UCC states that "if the goods or the tender of delivery fail in any respect to conform to the contract, the buyer may ... reject the whole." 6 Del.C. § 2‑601. However, rejection "must be within a reasonable time after their delivery or tender. It is ineffective unless buyer seasonably notifies the seller." 6 Del. C. § 2‑602(1) (emphasis added). The UCC states that what constitutes a "reasonable time" depends on the "nature, purpose and circumstances," and that an action is taken "seasonably" "when it is taken at or within the time agreed or if no time is agreed at or within a reasonable time." See 6 Del. C. § 1‑204(2) and (3), respectively.
Brimm contends that the rejection doctrine does not properly apply to the facts before me because Pitts' bid was accepted at a public auction and Pitts did not make a reasonable inspection before the sale. However, this contention ignores the explicit warning in Towe v. Justis Brothers, Inc., 290 A.2d 657 (Del.Super.1972) In Towe, the defendant argued that since the good was not rejected within fourteen months after delivery, the good must have been merchantable (and thus acceptable to buyer) at the time of delivery. Id. at 658. The response of the Towe court was that this argument "ignores the possibility of a latent defect. The statute [UCC § 2‑602] does not require rejection of a product for defects not yet discovered." Id. at 657‑58. Latent defects "are those which are not obvious or not discoverable by a reasonable inspection." Council of Unit Owners v. Simpler, Del.Super., C .A. No. 89C‑09‑007, Graves, J. (February 18, 1993) at 9.
Generally, "the requisites of a reasonable inspection vary with the circumstances of the individual case." Tyus v. Resta, 476 A .2d 427, 433 (Pa.Super.1984). A reasonable inspection would require an examination of the goods by the intended purchaser not an expert. See Id. Although Brimm has argued that Pitts failed to make a reasonable inspection at the auction house because she did not x‑ray the horse's leg, this argument is unpersuasive. There was uncontroverted testimony at trial that it is not the customary practice at relatively small local horse sales to have an x‑ray of a horse prior to the sale, but it is the practice at major annual sales. I conclude that Pitts conducted a reasonable inspection, and the horse's degenerative joint condition and surgically repaired bone could not have been discovered without an x‑ray.
Under Delaware law, "where an ordinary investigation would not reveal a latent defect, [a party] could properly rely upon the defendant's misrepresentation." Lock v. Schreppler, 426 A.2d 856, 862 (Del.Super.1981). Consequently, since Brimm represented that the horse's lack of race experience between March and July 2000 was a result of a mucus infection and did not even suggest the possibility that the horse was lame, Pitts had no reason to request further information or to conduct a more searching investigation into the horse's past physical condition. Pitts could therefore reasonably rely on Brimm's representation that Captain's License "got sick".
Upon learning of the horse's lameness, however, "[i]t devolves upon the buyer to give notice that she does not accept the goods, either by returning them or otherwise indicating in some way that she is not satisfied with them." 2 Williston on Sales, § 272, Rule 3 at 35‑36. The evidence has established that when Pitts discovered that the horse had a surgically repaired broken bone, she immediately notified the auctioneer of the condition. I hold that her notification was seasonable under the UCC.
Brimm also contends that the horse raced at Harrington prior to the examination by the veterinarian. However, I accept Ms. Pitts' testimony that Captain's License was examined the day after the race on September 27, 2000.
The Joinder of the Supplemental Claim
After the rejection of the goods, the buyer is required to follow any reasonable instructions from the seller with respect to the horse. 6 Del.C. § 2‑603. In the absence of such instructions, the buyer may store the rejected goods for the seller's account or reship them to him or resell them on behalf of the seller. 6 Del.C. § 2‑604. In this case the seller has given no instructions with respect to the return of the horse and the buyer has now cared for the horse for almost two years.
Since the buyer has held Captain's License for the seller's account, the buyer claims certain expenses in connection with the care of the animal. Brimm contends that the cross‑claims for the care of the animal should not be joined with this interpleader action. I disagree. Once this Court obtains jurisdiction over the main claim, it can exercise supplemental jurisdiction over the additional cross‑claims. Wright & Miller, Federal Procedure and Practice, Volume 7, Sec. 1715 The rule on joinder of claims is in no way limited by the rule on interpleader found in Civil Rule 22. Furthermore, any cross‑claim that arises out of the same transaction or occurrence must be filed in this action under Rule 13(g). Pitts' claim for the care of the animal arises out of the same transaction or occurrence as her other cross‑claim.
The Claim for the Sales Commission and Stakeholder Costs
Pitts seeks return of the sales commission that was retained by the auctioneer, as well as the attorney's fees that were paid for the filing of the complaint in interpleader. But, Pitts has not asserted any claim against the stakeholder in either her pleadings or at trial. Additionally, she consented to the net amount of the fund that the stakeholder deposited with the court. Consequently, she is not entitled to a return of the sales commission. As to the amount paid by the stakeholder for attorney's fees, both of the claimants to the fund consented to the payment of attorney's fees by the stakeholder.
The Claim for Attorney's Fees and Veterinary's Fees
In the list of expenses requested by Pitts in Defendant Pitts' Exhibit No. 6 are invoices for attorney's fees and the veterinarian's fees. Pitts conceded at the close of trial that she is not entitled to attorney's fees. Additionally, the invoices for veterinarian fees were not produced in response to discovery. The court must balance its duty to admit all relevant evidence with its duty to enforce standards of fairness and the Rules of Court. Concord Towers v. Long, 348 A.2d 325 (Del.Supr.1975). Because of the withholding of these invoices in response to discovery, the claim for veterinarian's fees is disallowed. Furthermore, the testimony concerning the veterinarian's fees constitutes hearsay evidence and is not admissible at trial.
Claim for Training and Boarding of the Horse
There is a claim on Defendant's Exhibit No. 6 for training in the amount of $485.00. The testimony of Mrs. Pitts indicates that there was very little training prior to the horse's first and only race after the auction sale. This cross‑claim for damages has not been established with reasonable probability. Therefore, I will not award damages in the amount of $485.00 for the training of Captain's License.
Pitts also has a claim for boarding of the horse in the amount of $7100.00. Pitts is entitled to reasonable compensation for the services rendered. Brimm contends that this cross‑claim should be disallowed because Pitts failed to produce invoices concerning these services in response to discovery. Brimm's contention is incorrect. The proof of these damages is based on Pitts' testimony rather than on particular invoices. She testified that the claim for boarding the animal is less than what is customarily charged. Her testimony plus Defendant Pitts' Exhibit No. 6 established this amount of damages by a preponderance of the evidence. Accordingly, I award Pitts damages in the amount of $7100.00 for the boarding of the horse.
In conclusion, Frances Pitts is entitled to receipt of the funds deposited in court by the stakeholder. It is, therefore, ordered that the funds on deposit with PNC Bank plus interest are payable to Frances Pitts. It is further ordered that judgment is entered in behalf of Frances Pitts and against Charles Brimm for the sum of $7100.00 for boarding fees plus costs of these proceedings.
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