THEOS & SONS, INC. VS. MACK TRUCKS, INC.

MARSHALL, C.J. This action arises from the sale, resale, and alleged negligent repair of a Mack truck. It concerns the effect of a manufacturer's disclaimer of an implied warranty of merchantability on a subsequent purchaser who was unaware of the disclaimer. It also concerns a manufacturer's liability under agency principles for the actions of the manufacturer's

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authorized parts and service dealer, when that dealer is engaged in nonwarranty repair work.

The plaintiff, Theos & Sons, Inc. (Theos), brought an action for damages to its Mack truck engine, against Mack Trucks, Inc. (Mack), a manufacturer of trucks, its distributor, Manchester Mack Sales, Inc. (Manchester Mack), and Vigor Diesel Injection, Inc. (Vigor), an authorized Mack parts and service dealer. A judge in the District Court granted summary judgment for Mack, without detailing his reasons, and entered final judgment as to Mack pursuant to Mass. R. Civ. P. 54 (b), 365 Mass. 820 (1974). Theos appealed to the Appellate Division of the District Court, which affirmed the judgment. We transferred the case from the Appeals Court on our own motion. Theos argues two theories of liability. First, Theos argues that Mack breached an implied warranty of merchantability and that Mack's original disclaimer of this implied warranty is not effective against Theos, a subsequent purchaser unaware of the disclaimer [Note 1]. Second, Theos argues under agency theory that Mack is vicariously liable for the dealer's negligent repair of, or failure to repair, the engine and the dealer's breach of express warranties and violations of G. L. c. 93A.

We conclude that Mack's disclaimer of the implied warranty of merchantability given to the original truck purchaser may be enforced against a subsequent purchaser without notice, such as Theos. Because Theos presented no genuine issue of Mack's liability for its dealer's conduct under an agency or any other theory, we affirm the judgment.

1. Facts. The standard of review for a grant of summary judgment is whether, viewing the facts in the light most favorable to the nonmoving party, there is no genuine issue as to any material fact and the moving party is entitled to a judgment as a matter of law. Mass. R. Civ. P. 56 (c), 365 Mass. 824 (1974).

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See, e.g., Wheatley v. American Tel. & Tel. Co., 418 Mass. 394, 397 (1994). We review the facts under that standard.

On August 31, 1989, J.E. Larkin, Inc. (Larkin), purchased from Mack and took delivery of a Mack truck [Note 2]. The terms of sale included a "Mack Mid-Liner Standard Warranty" (warranty) that covered the truck's engine for twenty-four months after delivery and a disclaimer of all other warranties, express or implied, including the implied warranty of merchantability [Note 3]. The twenty-four month engine warranty expired on August 31, 1991. On December 17, 1992, Theos bought the truck from Larkin [Note 4]. Theos was neither apprised of, nor provided with, any written copy of the warranty, nor informed of any such disclaimers.

In December, 1993, a Theos driver heard noises coming from the truck's engine compartment and towed the truck to Vigor for repairs, where it was determined that the engine block was damaged. After Vigor repaired the truck, the Theos driver drove it for a short distance before the same noise was heard again. The truck was brought back to Vigor and, while in Vigor's possession, the truck's engine failed [Note 5].

The relationship between the distributor, Manchester Mack,

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and authorized parts and service dealer, Vigor, is outlined in an agreement titled, "Authorized Parts and Service Dealer Agreement" (agreement). The agreement states that it "is not valid unless and until . . . approved by an officer of [Mack]." The agreement was executed by officers of Manchester Mack and Vigor, and "approved" by two Mack executives. We describe in greater detail in Part 2, infra, additional terms that inform our discussion.

The agreement provides that Vigor will render warranty service on Mack vehicles "in accordance with [Mack's] applicable standard warranty policy," and only on prior approval for such service from Manchester Mack. Warranty service is to be undertaken using only genuine Mack or Mack-approved parts acquired from Manchester Mack.

2. Breach of implied warranty claim. We consider first Theos's contention that Mack is liable for the engine repair because Mack breached an implied warranty of merchantability. In the face of Mack's written disclaimer of the implied warranty of merchantability, Theos argues that the contract between Mack and the original purchaser, Larkin, does not bind it, a subsequent purchaser. Theos argues further that, because the implied warranty of merchantability is statutory, and because it is not unforeseeable that a truck may be resold by the original purchaser, Mack should be required as a matter of law to put subsequent purchasers on notice of the disclaimer of such warranty.

Pursuant to G. L. c. 106, s. 2-314 (1) [Note 6], a warranty of merchantability is implied in the sale of goods by a merchant unless properly disclaimed. The exclusion of implied warranties is governed by G. L. c. 106, s. 2-316 (2), which provides in relevant part: "to exclude or modify the implied warranty of merchantability or any part of it the language must mention merchantability and in case of a writing must be conspicuous." The Appellate Division correctly determined that in this case the implied warranty was properly disclaimed by Mack, as to Larkin, because it was conspicuous and specifically referred to

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the implied warranty of merchantability [Note 7]. The Appellate Division also correctly determined that the writing of the disclaimer complied with the requirements of G. L. c. 106, s. 2-316, and thus effectively disclaimed all implied warranties. The question is, therefore, whether the disclaimer of the implied warranty of merchantability is enforceable against Theos, a subsequent purchaser.

General Laws c. 106, s. 2-318, extends all warranties, express or implied, to third parties who may reasonably be expected to use the warranted product [Note 8]. Section 2-318 does not provide that subsequent (third-party) purchasers are bound by disclaimers of warranties. A comment to G. L. c. 106, s. 2-318, however, states that "where the warranty is properly excluded then [third parties] are bound by the exclusion." Massachusetts Code Comment, 13 M.G.L.A. 247-248 (West 1999). See 3A R.A. Anderson, Uniform Commercial Code s. 2-316:168 (3d ed. 1995) ("When the express warrantor specifies that a subpurchaser of the goods may apply for a transfer of the express warranty made to the original purchaser, the subpurchaser is subject to any limitation or exclusion contained in the express warranty even though the subpurchaser may not have ever received a copy of it").

While we have not directly addressed this issue, other jurisdictions have reasoned that a subsequent purchaser should be subject to disclaimers or limitations on warranties made to the original purchaser, and should not acquire greater rights than those held by the original purchaser. See Transport Corp. of Am. v. International Business Machs., Inc., 30 F.3d 953, 959 (8th Cir. 1994) (interpreting U.C.C. s.s. 2-318 and 2-316 as

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adopted in Minnesota) (disclaimers of implied warranties are extended to subsequent purchasers); Boston Helicopter Charter, Inc. v. Agusta Aviation Corp., 767 F. Supp. 363, 376 (D. Mass. 1991) (subsequent purchaser, as an assignee, "steps into the shoes of his assignor" and is subject to any limitations or exclusions contained in the express warranty even though he did not receive a copy of it); Lecates v. Hertrich Pontiac Buick Co., 515 A.2d 163, 165-166 (Del. Super. Ct. 1986) (modifications or exclusions of warranty rights are equally operative against subsequent purchasers who claim to be beneficiaries of such warranties); General Motors Corp. v. Halco Instruments, Inc., 124 Ga. App. 630, 634-635 (1971) (same). We agree with the reasoning of those courts that Theos could not possess greater warranty rights as to Mack than the original purchaser, Larkin, and is subject to the same disclaimers or other limitations on an implied warranty of merchantability [Note 9]. The subsequent purchaser bears the burden of ascertaining the existence of any limitations on the implied warranties. As Theos is subject to the disclaimer of implied warranty of merchantability that Mack made to Larkin, its warranty claim fails [Note 10].

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3. Liability of principal for agent's actions. Invoking principles of agency law, Theos asserts that Mack is liable for the actions of Vigor because Vigor, as an authorized parts and service dealer, had actual, or at least apparent, authority to work on the truck engine on behalf of Mack. Mack responds that Vigor is an independent contractor for whose malfeasance Mack is not liable. Although the question of agency is usually an issue for the fact finder, the Appellate Division determined that Theos failed to advance specific facts sufficient to establish the existence of a genuine issue of material fact as to Vigor's actual or apparent authority to act on behalf of Mack. We agree.

An agency relationship is created when there is mutual consent, express or implied, that the agent is to act on behalf and for the benefit of the principal, and subject to the principal's control. See Kirkpatrick v. Boston Mut. Life Ins. Co., 393 Mass. 640, 645 (1985), citing Restatement (Second) of Agency s. 1 (1958); Restatement (Second) of Agency, supra at s.s. 14, 15 comments a, b. See also Patterson v. Barnes, 317 Mass. 721, 723 (1945) (fundamental element of agency relationship is that agent act on behalf and for benefit of principal). The agreement, on the one hand, specifies that Vigor "is an independent contractor." The agreement further states that Mack is not a party to the covenants between Manchester Mack and Vigor, that it "shall not in any respect make [Vigor] the agent of [Manchester Mack] or of [Mack] to transact any business . . . for either of them in any form, nor in the name nor upon the behalf of either of them to make any promises or representations." On the other hand, the agreement is quite specific in its requirements with respect to warranty work. It also appears to give Mack some control over certain aspects of Vigor's activities [Note 11]. Based on the undisputed evidence, we shall presume, without deciding, that a

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principal-agent relationship existed between Mack and Vigor, at least for purposes of doing Mack warranty work [Note 12].

Even where an agent-principal relationship exists, however, the principal has liability for the agent's acts toward third parties only if the agent was acting with the actual or apparent authority of the principal in that transaction. See Restatement (Second) of Agency s.s. 7, 8 (1958). Mack would be liable for nonwarranty work performed on Theos's truck only if Vigor had actual or apparent authority to do such repair work on behalf of Mack. Actual authority, either express or implied [Note 13], is

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the agent's power to affect the principal's relations with third parties as manifested to the agent by the principal. See Restatement (Second) of Agency, supra at s. 7.

Theos relies principally on the agreement to establish actual authority for Vigor to do this nonwarranty work on Mack's behalf. The agreement undeniably establishes several minimum requirements when such work is done by Vigor. Such service, for example, must be done in a "prompt and efficient" manner, "in accordance with [Mack's] policies and standards," and "except with the written consent of [Mack], will utilize . . . only parts manufactured or recommended by [Mack]." These requirements, however, are merely reflective of the ordinary desire of manufacturers to set sufficient minimum performance and quality standards to protect the good name of their trademark that they are allowing another to display. See Oberlin v. Marlin Am. Corp., 596 F.2d 1322, 1327 (7th Cir. 1979); Hunter Mining Labs., Inc. v. Management Assistance, Inc., 104 Nev. 568, 570-571 (1988). Cf. Billops v. Magness Constr Co., 391 A.2d 196, 197-198 (Del. 1978) (franchise agreements). They do not establish, without more, the kind of close control over Vigor's nonwarranty work that would indicate that Vigor was serving as Mack's agent for the work [Note 14]. Unlike warranty work, for example, no prior approval is required for nonwarranty work under the agreement. Moreover, although not dispositive, we consider it not without significance that the agreement expressly states that Vigor is an "independent contractor . . . not . . . [an] agent" of Mack for the purposes of transacting business in the name of Mack nor for making any promises or representations on behalf of Mack.

In addition, Theos proffers no evidence that Mack knew of, or consented to, the servicing of the truck by Vigor, much less that Mack wanted Vigor to service the truck on Mack's behalf

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and authorized Vigor to do so. To the contrary, it is undisputed that Mack did not know of Vigor's service work on the truck until after it had been completed. We agree with the judgment that Theos did not advance evidence sufficient to raise a question of Mack's liability under an agency theory premised on actual authority.

Nor did Theos proffer evidence sufficient to raise an issue of vicarious liability premised on apparent authority. Apparent authority, is "created as to a third person by written or spoken words or any other conduct of the principal which, reasonably interpreted, causes the third person to believe that the principal consents to have the act done on his behalf by the person purporting to act for him." Restatement (Second) of Agency, supra at s. 27. See Linkage Corp. v. Trustees of Boston Univ., 425 Mass. 1, 16, cert. denied, 522 U.S. 1015 (1997), quoting Hudson v. Massachusetts Prop. Ins. Underwriting Ass'n, 386 Mass. 450, 457 (1982) ("Apparent authority results from conduct by the principal . . ."); DeVaux v. American Home Assurance Co., 387 Mass. 814, 819 (1983). See also Kansallis Fin. Ltd. v. Fern, 421 Mass. 659, 665 (1996) ("there is little fairness in saddling the principal with liability for acts that a reasonable third party would not have supposed were taken on the principal's behalf"). Apparent authority exists only if the plaintiff reasonably relied on the principal's words or conduct at the time he entered the transaction that the agent is authorized to act on the principal's behalf. See Commercial Credit Corp. v. Stan Cross Buick, Inc., 343 Mass. 622, 626 (1962). [Note 15], See also Todd Farm Corp. v. Navistar Int'l Corp., 835 F.2d 1253, 1256 (8th Cir. 1987) (no apparent authority of equipment dealer to act for manufacturer where, inter alia, no evidence plaintiff aware of manufacturer's statements when it bought equipment nor reasonably relied on manufacturer's reputation when it did business with dealer).

As evidence of apparent authority, Theos relied on Mack's logo on Vigor's invoices, Mack's logos displayed at Vigor's place of business, that Vigor was required to display conspicu-

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ously Mack-approved service signs provided by Mack, and Vigor's statement [Note 16] to Theos that it was an authorized parts and service dealer of Mack. But the mere use of a trademark and other logos of the defendant is not sufficient to raise a genuine issue of material fact that the defendant cloaked Vigor with apparent authority. See Sherman v. Texas Co., 340 Mass. 606, 608-609 (1960). See also Gonzalez v. Walgreens Co., 878 F.2d 560, 562 (1st Cir. 1989) (franchisee's mere use of franchisor's logo, by itself, does not create genuine issue of material fact with respect to apparent authority) [Note 17]; Malmberg v. American Honda Motor Co., 644 So. 2d 888, 891 (Ala. 1994) (apparent authority based on actions of principal not agent; evidence of Honda logos on signs and literature at dealership not alone sufficient to create inference of agency); Mobil Oil Corp. v. Bransford, 648 So. 2d 119, 121 (Fla. 1995) (erroneous to give impression that "logos or other trademark symbols alone can create an apparent agency").

Similarly, Vigor's representation of itself as an authorized parts and service dealer of Mack is not a sufficient ground for Theos to reasonably believe that Vigor had apparent authority to act as Mack's agent for nonwarranty work. See Connick v. Su-

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zuki Motor Co., 174 111. 2d 482, 498 (1996), quoting Washington v. Courtesy Motor Sales, Inc., 48 111. App. 2d 380, 383 (1964) ("the term 'Authorized . . . Dealer' is in the nature of a trademark sign, which is used by independent dealers . . . and means nothing more than a dealer who sells [those] products"); Cline v. Allis-Chalmers Corp., 690 S.W.2d 764, 769 (Ky. Ct. App. 1985) (simply being "authorized dealer" is insufficient to establish true agency). See also Todd Farm Corp. v. Navistar Int'l Corp., supra at 1256 Jury could not reasonably find this authorized dealer had apparent authority to act for manufacturer); Bruce v. ICI Americas, Inc., 933 F Supp. 781, 789-790 (S.D. Iowa 1996) (insufficient control by manufacturer over authorized distributors to create question of material fact regarding existence of principal-agent relationship). Theos has established no facts to support a claim that Mack held out Vigor as Mack's agent, giving Vigor apparent authority to act on its behalf. See Todd Farm Corp. v. Navistar Int'l Corp., supra at 1256; Connick v. Suzuki Motor Co., supra at 498-499.

Moreover, Mack did not represent, persuade or otherwise manifest to Theos that it seek service from Vigor so as to create liability for Mack based on the malfeasance of Vigor. See Restatement (Second) of Agency, supra at s. 267 comment a (principal's liability through apparent authority normally applies where plaintiff submitted himself to care of apparent agent in response to invitation from principal). Theos came forward with no evidence (other than the presence of Mack's logos) to suggest that Mack influenced Theos, through acts or words, to rely on servicing its truck at Vigor. We express no opinion as to whether an authorized dealer can maintain a separate action against the manufacturer for providing negligent service information. See note 5, supra.

Judgment affirmed.