Intrastate Credit Service, Inc. v. Pervo Paint Co.

Intrastate Credit Service, Inc. sued defendant Pervo Paint Company, Inc. upon Pervo’s promissory note for $5,000 made payable to Intrastate and Q R S Neon Corporation, Ltd.;^[2] the last named corporation had assigned to Intrastate its interest in the note. The court sustained Pervo’s plea of breach of an implied warranty on the part of Q R S and offset the damage against the amount of the note, resulting in a judgment for plaintiff Intrastate against Pervo

In 1958 and 1959 Pervo and Q B S had entered into a series of 10 lease agreements whereby Pervo leased from QRS for three year terms 10 illuminated signs which were constructed and installed by the lessor upon premises of paint dealers designated by Pervo, the lessee. One of these leases covered a sign located in the City of Alhambra and later moved to Culver City; that lease was made on December 12, 1957. Another such lease dated June 18, 1959, covered a sign located in the City of Bakersfield.^[3]

Difficulties and litigation involving all of said parties resulted in a judgment in favor of Intrastate against Pervo for $8,966.94 plus costs and a declaration that Pervo take nothing by its cross-complaint against QRS.

Thereafter, on February 5, 1962, a written compromise agreement (Ex. 1 to plaintiff’s complaint) was made between said parties. It recites the above mentioned judgment, also the fact that “PERVO is in possession of ten (10) illuminated signs” covered by separate leases, the desire of the parties “to settle their differences and terminate the rental agreements covering” all of said 10 signs, and that “PER-VO desires to obtain title to all of the signs in place, at each location whereat said signs are now installed.”^[4] It is agreed Pervo shall pay to Intrastate and QRS the sum of $26,000, in consideration of satisfaction of the judgment and transfer to Pervo of title to each of the 10 signs "and a waiver of any further rental under the executory provisions of the unexpired leases. ...” The sum of $6,000 was to be paid forthwith and the remaining $20,000 in installments of $5,000 each evidenced by four notes; title to all signs to be retained by Q R S until full payment, whereupon bills of sale were to be delivered to Pervo. Paragraphs 7 and 8 read: “It is understood that said signs have been installed in locations selected by PERVO and said PERVO accepted delivery of said signs as installed at their present locations.

“QRS warrants that it has retained and has title to said signs hereinbefore referred to and QRS warrants the title to

It is well settled law that (subject to certain inapplicable exceptions) inspection, or opportunity to inspect which is not pursued, precludes the arising of an implied warranty except as to those defects which would not be revealed upon a reasonably prudent examination (Byrne v. Jansen, 50 Cal. 624 , 627; Lacy v. Greer-Robbins Co., 4 Cal.2d 770 , 773 [ 53 P.2d 161 ]; Webster v. Klassen, 109 Cal.App.2d 583 , 592 [ 241 P.2d 302 ]; 43 Cal.Jur.2d § 116, p. 252; § 118, p. 254; 46 Am.Jur. § 338, p. 521; 77 C.J.S. § 315, p. 1158) and failure to inspect an immediately accessible subject of sale is not excused by the fact that inspection would involve trouble and expense. 46 American Jurisprudence, section 338, page 522: "Inconvenience or difficulty on the part of the buyer to make an inspection of the article sold, as, for instance, where it is contained in casks or bales, does not alter the general rule and raise by implication any warranty of quality.” (To same effect see Lacy v. Greer-Robbins Co., supra, 4 Cal.2d 770 , 773.)

Defendant at pretrial hearing contended that the damage to the Bakersfield sign was due to improper construction which made it unable to withstand even normal weather conditions and such “construction defects were latent defects.” The court did not so find and the evidence does not so show.

This was one of a group of signs which had been erected by Q B. S at locations designated by Pervo, upon premises occupied by its paint dealers and the leases indicate they were roof signs. The findings say: “It is clear that Q B S knew that the signs were to be subjected to the elements since they were installed outside of the buildings at their respective locations. Both signs were damaged by wind

The findings above quoted say “The contract of February 5, 1962, was a sale of personal property which was already in the possession of Defendant and they agreed to take th[e] signs in the condition in which they were.” This finding is not challenged.^[6] The record shows it is correct for defendant took possession under its lease in June 1959 and continued in possession through its dealers at all subsequent times. The contract of sale itself recited that “PERVO is in possession of ten (10) illuminated signs. ...” The finding of defendant’s possession establishes opportunity to make an inspection and the silence of the record with respect to any inspection establishes there was none, for the burden was on defendant to prove an inspection and failure to offer evidence on the subject required a finding that there was no inspection and hence no implied warranty.

The latter portion of the quoted finding that defendant “agreed to take the signs in the condition in which they were” which is likewise unchallenged, brings into operation the “as is” doctrine, which is stated in Roberts Distributing Co. v. Kaye-Halbert Corp., 126 Cal.App.2d 664 , 669 [ 272 P.2d 886 ]: “A provision that the buyer takes the article in the condition in which it is, or ‘as is,’ prevents representations of the seller, although relied on by the buyer, from constituting express or implied warranties.” To same effect see Lingsch v. Savage, 213 Cal.App.2d 729 , 742 [ 29 Cal.Rptr. 201 ]; 43 California Jurisprudence, Second Edition, section 103, page 239; Annotation: 58 American Law Reports 1181.