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KOPPERS COMPANY v. BRUNSWICK CORPORATION (03/27/73)

decided: March 27, 1973.

KOPPERS COMPANY, INC.
v.
BRUNSWICK CORPORATION, APPELLANT



Appeals from judgment and order of Court of Common Pleas, Civil Division, of Allegheny County, Jan. T., 1969, No. 2064, in case of Koppers Company, Inc., a Delaware corporation v. Brunswick Corporation, a Delaware corporation.

COUNSEL

Alan Bruce Bowden, with him Robert L. Frantz, and Buchanan, Ingersoll, Rodewald, Kyle & Buerger, for appellant.

J. Richard Lauver, with him Kirkpatrick, Lockhart, Johnson & Hutchison, for appellee.

Wright, P. J., Jacobs, Hoffman, Spaulding, Cercone, and Packel, JJ. (Watkins, J., absent.) Opinion by Hoffman, J.

Author: Hoffman

[ 224 Pa. Super. Page 252]

This is an appeal from a judgment entered in favor of Koppers Company, Inc., the plaintiff below, on August 22, 1972, by the court en banc of Allegheny County. This action involved a suit by Koppers for damages arising out of the breach of a written purchase order (numbered DN16-0243), dated June 15, 1966, between Universal Moulded Fiber Glass Corporation (hereinafter, "Universal") and Brunswick Corporation (hereinafter, "Brunswick"). Universal was subsequently merged by statutory merger into Koppers. The plaintiff was a subcontractor and the defendant a prime contractor on a contract with the United States Government.

The case was tried before a jury on January 17, 1972. After hearing all the testimony, the trial court concluded that the plaintiff had met its burden of proof to establish a right to a verdict and further concluded that there were no factual issues to be resolved by the jury. The court thereupon granted plaintiff's motion for a directed verdict. Post-trial motions were entertained, and thereafter the court sitting en banc denied said motions and enter judgment in favor of the plaintiff in the amount of $72,627.77. It is from that judgment that defendant has appealed to this Court. We have examined the record carefully and studied the

[ 224 Pa. Super. Page 253]

    opinion of the court below. We believe that the trial court action was proper.

In 1964, Universal was awarded a contract ("Contract 430") whereby Universal agreed to furnish 115 millimeter rocket containers to the United States Government. In November of 1964, Universal purchased lug fittings, end caps and screws to be used in the production of these rocket containers under Contract 430.

In October of 1965, the Government and Universal agreed to a no-cost termination of Contract 430 for the convenience of the Government. The lugs, caps and screws produced by Universal were not allocated to the 430 contract as termination inventory although they would have been allocable had they been listed. Universal, instead, elected not to charge these items to the 430 contract, but under the agreement with the Government chose to retain these items for its own account.

On March 10, 1966, the Government awarded to the defendant, Brunswick, a contract under which Brunswick was required to supply 35,900 completed rocket containers and 8,847 tubes. A representative of Universal, Mr. York, thereafter met with a representative of Brunswick, advising him that Universal had for sale certain hardware items which were previously acquired under the 430 contract.

On April 27, 1966, representatives of Brunswick visited Universal's plant to inspect the hardware items, and took a number of end cap assemblies to its plant for further inspection. On May 13, 1966, Mr. Wegner of Brunswick called Universal and advised that "the castings assembly checked out O.K." A second shipment of hardware items were subsequently shipped to Brunswick for inspection.

A 24-page purchase order was prepared by Brunswick and forwarded to Universal on June 15, 1966, acceptance of which ratified the incorporation of all the enclosed documents including 3 pages containing provisions

[ 224 Pa. Super. Page 254]

    of Armed Services Procurement Regulations (hereinafter, "ASPR"). Page 2 of the bold type contained provisions for a unit credit or debit for items shipped either in shortage or in excess of delivery schedule, and also for any parts found to be "non-acceptable parts". Consistent with these bold-type provisions were listed warranties among which included the following: "[G]oods not in accordance therewith may be returned to Seller with Charge for transportation both ways and Purchaser shall have the option of returning such goods to Seller at any time within thirty days after delivery for credit or replacement at the price charged."

The Additional Terms and Conditions attached to Brunswick's Purchase Order provided, inter alia, as follows:

Termination

Buyer may terminate work under this purchase order in whole or in part at any time by written or telegraphic notice to Seller. Upon notice of such termination to Seller for any reason other than default or delay of Seller (except when due to causes beyond Seller's control and without Seller's fault or negligence), the respective rights and duties of Buyer and Seller shall be as provided in, and settlement shall be made in accordance with the approved Government termination article applicable to the Prime between the Prime Contractor and the United States referred to on the face of this order as said termination article may be amended and in effect as of the date of such notice of termination. All terms of such approved Government termination article shall be deemed to be incorporated herein and made a part hereof by this reference.

Brunswick's Purchase Order, furthermore, incorporates ASPR provisions expressly made applicable to the contract with Universal. Among those provisions

[ 224 Pa. Super. Page 255]

    and highly pertinent to the legal issues involved in the instant matter is Section 8-209.1 which provides as follows: "8-209.1 Subcontractor's Rights. A subcontractor has no contractual rights against the Government upon the termination of a prime contract. The rights of a subcontractor are against the prime contractor or immediate subcontractor with whom he has contracted. Upon termination of a prime contract, the prime contractor and each subcontractor are responsible for the prompt settlement of the termination claims of immediate subcontractors."

The detailed specifications attached to the Purchase Order fix specific dimensions for each hardware item. These dimensions are given with certain tolerances. For example, the outside dimension of the milled slot in the rear end cap is given as 4.150 inches, with a tolerance of minus .005 inches; thus any measurement of the slot could vary from 4.145 and 4.150 inches and still meet the specifications. Included in the Purchase Order is the provision that acceptance of the hardware items would be based on a sample inspection plan per Military Standard 105D at an Acceptable Quality Level ("AQL") of 1%. This meant that if a deviation from the tolerances existed in any batch of items certain levels would prompt rejection of defective parts if below a 1% out of tolerance. However, if the out of tolerance level reached 1% or more, the consequences would be that the entire lot or shipment of the particular item would be 100% inspected and all defective items rejected; the remaining items which met specifications could be accepted.

The testimony reveals that Universal conducted its own pre-shipment inspection of the hardware items, and on June 17, 1966, Mr. York of Universal called Mr. Wegner at Brunswick advising him of the results of this inspection. On the same day, a letter ...


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