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Consolidated Water Power & Paper Co. v. Spartan Aircraft Co.

filed: December 13, 1950.


Author: Goodrich

Before GOODRICH, KALODNER and HASTIE, Circuit Judges.

GOODRICH, Circuit Judge.

This case involves the responsibility of a seller to a buyer either for breach of warranty or a statutory liability in the nature of an action for deceit. The seller won in the trial court and the buyer appeals to us on the basis that the conclusion reached by the learned Trial Judge is clearly erroneous under Rule 52(a).*fn1

The case is in federal court because of diversity only. Plaintiff seller is a Wisconsin corporation with its principal place of business in that state. The defendant buyer is a Delaware corporation and its principal place of business is in Oklahoma. In this type of case we take our choice of law rules from the state in which the court sits. Klaxon Co. v. Stentor Electric Mfg. Co., 1941, 313 U.S. 487, 61 S. Ct. 1020, 85 L. Ed. 1477. The parties in this case have endeavored to provide choice of law rules by the novel expedient of stipulating that breach of warranty matters are to be governed by the laws of Wisconsin and that liability for misrepresentation in the nature of fraud is to be governed by the law of Oklahoma. While the stipulations of parties in the contract as to choice of law governing a contract are sometimes given effect by courts, no stipulation made after litigation has begun as to the law which is to determine it has ever been upheld so far as we know. Nor do we think it likely to be. The stipulation should be disregarded and we think from the way counsel backed away from it at oral argument that they think so too.It has little bearing on the case anyhow. As will be demonstrated below, the Oklahoma statute upon liability for innocent misrepresentation does not become operative on the facts of this litigation. To the extent we disregard the stipulation we disagree with the trial court's conclusions of law.This does not affect the outcome of the case however because, as will be seen, it depends upon examination of facts, not rules of law.

The defendant buyer, Spartan Aircraft Company, was, in 1946, engaged in the manufacture of a trailer for human habitation which was called by the fancy name of "Spartan Manor." When it could get plywood it supplied a 3/4" or 5/8" floor of plywood for the trailers, insulated below the floor with material called Kimsul (or sometimes Celotex). When plywood was unavailable Spartan used a matched lumber flooring consisting of ordinary boards grooved together. This, too, was insulated below. Whether plywood or this matched wood was used, a cover of waterproof substance designed to protect the floor insulation from the weather was placed underneath the insulation.

Plywood was very hard to get in 1946. Through a man named Folk, who served as a sort of broker for scarce materials, the plaintiff's salesman and the defendant's purchasing agent were brought together through a visit by the plaintiff's salesman to the defendant's factory in the latter part of March, 1946.*fn2 The seller's salesman, Plzak, came armed with some samples of material called "Consoweld." It is a plastic made of sheets of paper, mixed with adhesive material and run through a heating and rolling process.*fn3 As a result of this salesman's visit there was shipped soon thereafter to the Spartan people several sets of 1/4" Consoweld cut to fit the floor of Spartan Manor trailers. This shipment was followed by others and Spartan, through the months which followed, gave Consolidated additional orders for flooring material up to and including June 13, 1946.*fn4 On November 25, 1946, Spartan gave notice of cancellation of the undelivered portion of the last order.*fn5 No complaint was made by the buyer at that time concerning any breach of warranty on the part of the seller.

The buyer had paid for a substantial portion of the flooring material purchased. It refused to pay for the rest and when sued, set up a defense and counterclaim (1) breach of express warranty, (2) breach of implied warranty, (3) statutory liability in the nature of deceit, as provided in the Oklahoma statute.*fn6 Judgment went for the seller for the unpaid balance of the purchase price and against the buyer on the counterclaim.

Some of the interesting facts are undisputed. A test of the tensile strength of Consoweld ws made in salesman Plzak's presence in the Spartan factory. The test showed the flooring was strong enough for a floor and no complaint is made on this point. It is likewise undisputed that after this plastic material began to arrive at the factory, Spartan, following the direction of Mr. Getty, the President, eliminated the insulating material and the wooden cross pieces from beneath the floor, likewise the strip of covering which previously had been fastened beneath the insulation. The Consoweld was laid directly on the metal frame of the trailer. It is likewise undisputed that some doubts concerning the suitability of this thin floor without insulation arose in the minds of trailer retailers. They made their doubts known to a man named Boynton, who was a distributor of Spartan and other trailers to retailers. He brought the doubts to Spartan. This was some time after contracts between buyer and seller had been made and when the trailers were in active production with this 1/4" Consoweld floor laid on the metal supports. Another fact which is abundantly brought out by the testimony is that these uninsulated Consoweld floors were very cold in low temperatures. There is much testimony concerning work done by Spartan crews in insulating these trailers during the cold weather in the winter which followed their sale. But none of this undisputed testimony bears upon the question of what representations, if any, were made by Consolidated's salesman, Plzak, to the officials of Spartan Aircraft Company and their reliance on such representations, if any.

The Trial Judge has made several findings bearing upon the question of express warranties. For instance, he finds that: "15. No express affirmation of fact relating to the insulating value or characteristics of the 'Consoweld' flooring, upon which reliance was placed by defendant in purchasing such flooring, was made to defendant by plaintiff's representatives."

Further, he finds: "23. Defendant did not purchase the material in reliance upon any statements of plaintiff's agent or employees with respect to the insulating characteristics of said material."

These and similar findings are attacked by Spartan as being without adequate basis in fact. They dispose of the buyer's contentions that seller breached any express warranties or that it is liable for misrepresentations in the nature of fraud under the Oklahoma statute. We shall proceed to see whether the findings are supported by the evidence.

The long record presents the type of contradictory stories by witnesses which are commonplace in cases of Collision of vessels at sea and automobile accidents. Judges dealing constantly with the latter have said they never heard of a collision in which the defendant, according to his story, was going more than fifteen miles an hour.Every federal trial judge has sat in maritime collision cases where, if witnesses for the respondent's side were believed, the conduct of the navigation of the accused ship would make a model for beginners in that difficult art. So, here, plaintiff's witnesses have testified repeatedly that Plzak made representations which included statements that the Consoweld material had remarkable insulating qualities and that they, the officials in charge of Spartan, knowing nothing of the matter relied completely upon those representations. Perhaps the Trial Judge felt as the Queen when she told her son Hamlet "The lady doth protest too Much, methinks."*fn7

On the other hand, the salesman, Plzak, was equally firm that he made no representations about the insulating qualities of Consoweld. Spartan says that Plzak is unworthy of belief. It devotes considerable effort to pointing out alleged inconsistencies in the story he told. This is a matter perfectly appropriate to argue to the trier of fact. But a conclusion reached by that trier is one with which an appellate court must be very careful in interfering.The statement in Rule 52(a) is not simply a precatory one, we think. And the policy back of that rule is especially appropriate where the point at issue is not that of inference from established facts, but whether witness A or witness B is telling the truth. We are quite conscious of our power to override the findings of a trial judge if, on the whole, we are convinced that a mistake has been made. United States v. United States Gypsum Company, 1948, 333 U.S. 364, 395, 68 S. Ct. 525, 92 L. Ed. 746.

We are here far from convinced that any mistake was made. Indeed, there is circumstantial evidence indicating that what the builders of these trailers had in mind was a substitution of this new material for the plywood, but not its substitution for the entire bottom of the trailer house consisting of (a) flooring, (b) the insulation and (c) the sheathing material below the insulation. The Trial Judge found: "12. Defendant, after placing the original order, contemplated the application of the plastic material as a substitute for plywood or center match ...

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