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PRESSURE CAST PRODUCTS CORP. v. PAGE
The plaintiff corporation has its office and principal place of business in the city of Detroit, Michigan, and for years has been engaged in the business of producing precision, pressure castings and accurate, aluminum, pattern equipment, while the defendants, up until the time of entering into the contract with the plaintiff, had had no experience in such field, but were skilled wood patternmakers engaged in business in the city of Menasha, Wisconsin.
On January 31, 1947, a written contract was entered into by plaintiff and defendants. The material provisions of such contract are as follows: The plaintiff was to build and have manufactured for the defendants "the essential and absolutely necessary specialized equipment" for defendants' plant at Menasha. Plaintiff warranted that such equipment was to be of the same kind and type as was being successfully used by it and that when such equipment was used properly it would perform successfully. An inventory of such equipment was attached to the contract, and the price of the same payable by defendants was $8,950. The defendants were to send two employees to Detroit, and the plaintiff was to instruct them "in all applications and uses of material and equipment" necessary in order to produce precision pressure castings. When the defendants ran into temporary trouble on production, the plaintiff agreed to send one of its employees to adjust such production troubles. The defendants were to pay the salary and expenses of such employee while so engaged. Plaintiff further agreed to furnish employees to install the equipment referred to at Menasha, but defendants were to pay such employees wages at time and one half, plus expenses. The defendants were to sell their pressure castings only in the territory of Wisconsin and Illinois and were to pay the plaintiff five per cent of the gross sales from production of pressure castings. The agreement was to remain in force and effect for a period of ten years from September 15, 1947, with the option on the part of the defendants to renew for another ten years. If either party should fail to perform the terms and conditions of the agreement, the other party might terminate by giving thirty days' written notice of intention to terminate. However, if the default should be cured within such thirty-day period, then the agreement would remain in full force. All machinery and equipment which were to be supplied by the plaintiff arrived at Menasha by December, 1947, and installation was completed toward the end of January, 1948. In order to save expense, the defendants did their own installing. They had trouble from the start in their efforts to manufacture the pressure castings successfully and made repeated complaints (chiefly by telephone but in some instances by letter) to plaintiff. Plaintiff sent its vice-president, Marshall, and later one of its skilled workmen to Menasha in an attempt to discover what was wrong, but they were unable to remedy the difficulties.
Finally, on May 14, 1948, defendants served a written notice upon plaintiff wherein they pointed out the defects in the various items of equipment, itemized the damages which they claimed to have sustained, and notified the plaintiff that unless the defects were remedied within thirty days the contract would be considered terminated. However, after the expiration of the thirty days the defendants continued to use the equipment and never at any time offered to return any of the same to plaintiff. The plaintiff finally instituted action against defendants to recover $4,475 due on a note given for the balance of the total purchase price of equipment, and $1,132.03 allegedly due on open account for materials sold to defendants. The defendants in an amended answer and counterclaim demanded judgment in the sum of $13,926.15 alleged to be due for violation of contract and breach of warranty by plaintiff. The action was tried to the court without a jury.
The court made the following findings of fact, among others:
"4. that on or before September 15, 1947, the defendants, entered into a contract with the plaintiff, . . . calling for the purchase from the plaintiff by the defendants of certain necessary equipment . . .; that the full purchase price agreed upon by the parties was $8,950; that one half of said sum had been paid to the plaintiff by the defendants on September 15, 1947.
"5. That the defendants, . . . executed on September 15, 1947, a noninterest bearing note for the balance of the sum, or $4,475, payable within twelve months, and that no part of said principal, or interest from September 15, 1948, has been paid thereon.
"6. That the defendants, . . . purchased from the plaintiff during the period from October, 1947, to December, 1947, on an open account, raw materials in the amount of $1,132.03, which $218 had been paid prior to January 5, 1948, but that no part of the balance of $935.78 has been paid from January 5, 1948, until the date of trial; that a balance is due and owing by the defendants to the plaintiff in the amount of $935.78. . . .
"9. That plaintiff made, during the course of the trial, formal offer of judgment in the amount of $2,000 on defendants' counterclaim; that such offer represents an adequate and fair determination of any damages sustained by the defendants.
Following are the court's conclusions of law:
"1. That the plaintiff is entitled to judgment on the note against the defendants and each of them in the first cause of action in the amount of $4,475 together with interest at the rate of five per cent since the 15th day of September, 1948, amounting to $615.35, or a total of $5,090.35.
"2. That the plaintiff is entitled to judgment against the defendants and each of them on the balance due for merchandise purchased, on the second cause of action, in the amount of $935.78 together with interest at the rate of five per cent from the 1st day of January, 1948, amounting to $165.72, or a total of $1,101.50.
"3. That the defendants are entitled to set off the sum of $2,000 together with interest at the rate of five per cent from the 15th day of September, 1948, amounting to $275, or a total of $2,275, thereby leaving a net balance due and owing by the defendants to the plaintiff in the amount of $3,916.85."
The case was tried on May 15 and 16, 1950, but the judgment was not entered until July 7, 1951.
FAIRCHILD, J.
The appellants oppose respondent's claim by seeking to show a violation on its part of the terms and conditions of the contract described in the statement of facts. Particularly do they complain of the failure to render proper and agreed assistance at critical times in the initiation and early development of their new enterprise. The facts of the case place appellants' counterclaim in the class of causes where, a breach of warranty by a seller having occurred, the buyer may, at his electron, accept and keep the goods and maintain an action against the seller for damages for the breach of warranty. Appellants raise no question on this appeal as to that part of the judgment entered upon respondent's complaint, but contend that the damages allowed by the trial court on appellants' counterclaim are entirely inadequate.
while the written notice served by appellants under date of May 14, 1948, was in the nature of a notice of rescission of the contract existing between the parties, the appellants never at any time returned or offered to return to respondent any part of the equipment which it had sold and furnished them. However, we held in Fox v. Boldt, 172 Wis. 333, 178 N.W. 467, 179 N.W. 1, that even though a purchaser gives notice to rescind for breach of warranty under circumstances wherein the purchaser is barred from rescission, nevertheless the notice may be sufficient as a notice of breach of warranty to entitle the purchaser to recover damages. We consider that the notice of May 14, 1948, served by appellants, is sufficient notice under the Uniform Sales Act to entitle them to recover damages for breach of warranty on their counterclaim.
The trial court in his decision found that the appellants were entitled to recover damages on their counterclaim, but that the evidence of damages presented was "untenable, and, except for a few items, does not represent recoverable elements of damages." Although it was impossible from the evidence to determine appellants' damages with reasonable certainty, the trial court fixed the same at the sum of $2,000, which the court stated to be the amount for which the respondent had made formal offer of judgment at the trial. However, this statement resulted from a misunderstanding, and the trial court was mistaken as to the amount. The actual offer was $2,500 rather than $2,000, and it had been rejected by the appellants. We fully agree with the conclusion of the trial court that the evidence as to the damages appellants were entitled to recover on their counterclaim was in unsatisfactory form and not sufficient to enable it to determine the amount, if any, due, from the record before us.
The respondent abandoned its claim to a percentage of the gross sales.
Appellants contend that they are entitled to recover the full purchase price of much of the equipment furnished to them by the respondent and in addition are entitled to recover loss of profits. The equipment for which they claim full purchase price fails into the following three categories:
(1) Equipment which appellants contend was so defective and wrongly constructed as to be absolutely valueless.
(2) Equipment which, while defective, could be remedied and made usable at an outlay of expense very much less than the original purchase price.
(3) Equipment which, while not defective in itself, was not needed by appellants in their operations.
The oven is typical of the type of equipment which the appellants contend was entirely valueless because wrongly designed and constructed. According to appellants' testimony, the oven was the chief cause of their trouble in manufacturing the pressure castings, and when they replaced it with another oven bought on the open market, they were able to manufacture their products successfully. The original oven purchased from the respondent, although discarded from use, still stands on appellants' premises. Its original cost was $1,646.28, and although appellants claim it has no value except for scrap, no testimony was introduced as to what such scrap value would be. Under the provisions of sec. 121.69(7), Stats., the direct damages for breach of warranty in the case of articles such as the oven, if the appellants are correct in their claim that the oven has no value except as scrap, would be the cost price less the scrap value.
Illustrative of equipment falling into the second category are the eighteen sets of flasks, having a purchase price of $2,700, which were defective because the holes in the same had not been bored at the proper places, but which were put into good usable condition at an expense of $119.12. In such case the direct damages recoverable would not be the entire purchase price, but the difference between what the articles would have been worth if as warranted and what they were actually worth as delivered. In the absence of any other evidence, the $119.12 cost of repairs would be material in establishing such differential.
As to equipment falling into the third category, which was not defective in itself but which the appellants did not need in their operations, it would appear that the appellants have lost their rights to claim any damages therefor. The appellants relied upon the respondent's superior knowledge to provide only such equipment as would be needed by the appellants in their operations. As the trial court stated in his decision:
"The plaintiff because of a vast experience in a highly specialized production business was bound to know what the defendants did not know about the amount and kind of `absolutely necessary' equipment that the defendants would need to successfully engage in the business of producing pressure cast-aluminum match plates and patterns, etc. The decision as to the amount and kind of equipment to be purchased by the defendants and delivered to their Menasha plant was made almost wholly by the plaintiff. The evidence establishes to a reasonable certainty that the plaintiff sold defendants too much equipment, some of which was never used by the defendants. . . .
However, the appellants' remedy, when they discovered that they had been supplied with too much equipment by the respondent, was to offer to return promptly such equipment and recover the purchase price. It is clear from the evidence before us that after discovering that they had been oversold equipment, the appellants took no steps to return or offer to return the unneeded equipment, and, having slept on their rights, are not now entitled to recover the purchase price thereof.
In addition to the elements of damages already discussed, the appellants would be entitled to recover any other damages directly and naturally resulting in the ordinary course of events from the breach of contract by respondent. See sec. 121.69(6), Stats. Loss of profits might fall into this category of damages if the appellants were able to establish the same by satisfactory evidence. However, the appellants' evidence of loss of profits consists only of an accountant's report showing that appellants in their operations had sustained a loss during certain specified periods. Many factors, other than defective equipment supplied by respondent, might account for such loss of profits, and such evidence as exists is entirely too speculative to permit the court to find any damages based on such loss of profits.
The respondent contended that most of appellants' trouble was attributable to the fact that appellants installed the equipment themselves instead of having employees of the plaintiff do the same, as required by the contract. However, the evidence presented by appellants disclosed that both the vice-president of the respondent and a skilled employee came to Menasha and attempted to remedy conditions but made no complaint whatever to the appellants about the method in which the equipment was installed, nor did they offer any recommendations for remedying the same.
The respondent is entitled to an affirmance of that part of the judgment granting recovery on the note and open account; but because of the failure of proper proof as to the amount of damages claimed by the appellants on their counterclaim, we conclude that in the interests of justice a retrial of that phase of the case should be had. Sec. 251.09, Stats.
By the Court. — Judgment affirmed in part, reversed in part, and cause remanded for further proceedings in accordance with this opinion.
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