Appeals from order of Court of Common Pleas, Civil Division, of Allegheny County, July T., 1960, No. 3342, in case of Scaife Company, a Pennsylvania corporation v. Rockwell-Standard Corporation, a Pennsylvania corporation.
Philip H. Strubing, with him Edith G. Laver, Morris M. Berger, C. William Berger, Michael Hahalyak, Pepper, Hamilton & Scheetz, and Berger & Kapetan, for plaintiff.
John C. Bane, Jr., with him J. Tomlinson Fort, John H. Scott, Jr., William F. Swanson, Jr., Albert M. Wiggins, Jr., and Reed, Smith, Shaw & McClay, for defendant.
Bell, C. J., Jones, Cohen, Eagen, O'Brien, and Roberts, JJ. Opinion by Mr. Justice Jones. Mr. Justice Cohen took no part in the decision of this case. Mr. Justice Pomeroy took no part in the consideration or decision of this case. Dissenting Opinion by Mr. Chief Justice Bell.
Following a trial by jury, a verdict was rendered in favor of Scaife Company (plaintiff below and appellant in No. 43 March Term, 1970) and against Rockwell-Standard Corporation (defendant below and appellant
in No. 41 March Term, 1970) in the amount of $1,200,000.28.*fn1 While the court en banc denied Rockwell's motions for judgment n.o.v. and for a new trial, a new trial on the issue of damages was ordered unless Scaife filed a remittitur damnum in the amount of $756,001.28. Upon Scaife's failure to file this remittitur, the court below ordered a new trial limited solely to the question of damages and these cross appeals followed.
A narration of the factual background of these appeals begins with Rockwell's merger on October 30, 1953, with the Timken-Detroit Axle Company and the concomitant acquisition of the Timken Silent Automatic (hereinafter TSA) division as a part of Rockwell's corporate structure. Although the TSA product was long considered the best in the oil-fired furnace industry, this type of business was far removed from Rockwell's chief concern, the manufacture of automotive parts. Moreover, reflecting the improvement and expansion of natural gas line facilities in the United States, the fuel furnace industry was drastically changing from oil-fired furnaces to natural gas-fired furnaces. Attempting to meet the challenge of its competitors, TSA developed and marketed its own gas-fired furnace.
Besides this factual discussion, an explanation of the mechanical operation of a gas-fired furnace is necessary. The key component of a gas-fired furnace, simple but indispensable, is the heat exchanger. However, the TSA heat exchanger was defective in two respects: it was noisy and it cracked. As best stated by the court below, "[f]or a Timken Silent Automatic furnace to make noise is one thing but for it to crack is another." For this reason the TSA gas-fired furnace was not functional and, therefore, not marketable.
Although it is a matter of some dispute whether Rockwell or Scaife initiated negotiations for the sale and purchase of the TSA division, negotiations did commence in the Fall of 1954. Reviewing the record, one fact is abundantly clear: Rockwell was very much aware of the defective condition of its heat exchanger and the effect of this defective component on the marketability of its final product. Besides numerous complaints by customers, Rockwell's cognizance of this problem is demonstrated, inter alia, by (1) its creation of a Heating Committee to scrutinize the situation; (2) its unavailing, trial-and-error method of improvement; and (3) Rockwell's establishment of an accounting reserve of $26,000.00 per month to permit the writing-off of the heat exchangers. To capsulize the controversy, Scaife allegedly knew none of these facts when the contract for the sale of the TSA division was executed on March 31, 1955.
For a period of many months, no allegation of fraud was pressed by Scaife and Scaife successfully developed a new type of heat exchanger. However, claiming that damage was already done, a complaint employing four theories of recovery was filed by Scaife. After receiving the evidence, the trial judge ruled that Scaife could go to the jury on only one of these theories: fraudulent misrepresentation.*fn2 At this point we deem it wise to separate our discussion of these appeals.
The primary issue of this appeal by Rockwell is whether there is sufficient evidence of ...