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decided: March 31, 1975.


Appeal from judgment of Court of Common Pleas, Civil Division, of Allegheny County, Oct. T., 1970, No. 1182, in case of R. I. Lampus Co., a corporation v. Neville Cement Products Corporation, a corporation.


Robert W. Doty, with him Peter C. Baggerman, and Eckert, Seamans, Cherin & Mellott, for appellant.

William A. Johnson, with him Melvin Schwartz, and Cooper, Schwartz, Diamond & Reich, for appellee.

Watkins, P. J., Jacobs, Hoffman, Cercone, Price, Van der Voort, and Spaeth, JJ. Opinion by Hoffman, J.

Author: Hoffman

[ 232 Pa. Super. Page 245]

The appellee, R. I. Lampus Company ("Lampus") instituted suit against the appellant, Neville Cement Products Corporation ("Neville"), alleging that Neville had failed to pay for products it had purchased from Lampus. Neville filed a counterclaim, alleging that it had incurred damages because the goods delivered by Lampus were defective. Neville sought ten items of damages for Lampus's alleged breach of express and implied warranties, but the lower court awarded recovery on only four of the claims. It is the denial of the remaining six damage claims of Neville's counterclaim that is the subject of this appeal.

Neville is principally engaged in the production of structural floor and ceiling systems. The manufacturing process begins with concrete block units. Neville would grind the end of the blocks, assemble the blocks end to end to form a plank, place reinforcing rods and

[ 232 Pa. Super. Page 246]

    a prestressing cable through the holes in the blocks and would then cure the completed plank. The planks produced by Neville were fitted together to form the floor and ceiling systems in various kinds of structures, such as apartments, motels, office buildings and industrial buildings.

Prior to 1963, Neville manufactured the concrete block units which it incorporated into the floor and ceiling systems. In 1963, Lampus, a corporation engaged in the manufacture, sale, and delivery of concrete masonry units, was informed by a mutual acquaintance that Neville might be interested in purchasing the concrete blocks from an outside firm. After several preliminary meetings, the parties agreed that Lampus would produce concrete blocks for delivery to Neville. Donald Lampus, the appellee's Treasurer and General Manager, testified that he was under the impression that Lampus would act as Neville's sole supplier, but the parties never entered into an "output" or "requirements" contract. The procedure used throughout the existence of their business relationship (1963-1970) was for Neville to submit purchase orders for various quantities of block. Lampus would accept each offer and produce the units.*fn1

At the preliminary meetings, Neville instructed Lampus as to the specifications it required for its concrete block units. Neville's specifications regarding strength, dimensions, texture, and appearance were those generally prevailing in the industry. In addition, Neville supplied Lampus with the mold equipment. Donald Lampus testified that he was aware that the blocks Lampus was to manufacture would be incorporated

[ 232 Pa. Super. Page 247]

    into Neville's structural systems, that the systems would either be covered in some manner or left exposed, that the majority of the ceiling surfaces would be painted, that the blocks would have to be relatively free from chips and cracks, and the blocks could not have a slumped or warped face. Lampus produced samples of the units for Neville's approval before production orders were submitted.

From 1963 until the middle of 1967, Lampus manufactured a concrete block unit known as "Dox". Although some of the block was rejected on occasion, no unusual difficulties arose during this period. In 1967, however, Neville directed Lampus to begin production of a "Celdex" block unit. As it had done with the Dox unit, Neville supplied the mold box and specified the ingredients and particular physical properties it required. Eventually, Dox production was phased out and Lampus produced only Celdex units for Neville. Donald Lampus conceded at trial that the quality of the Celdex block was unsatisfactory during the initial period of production. On July 31, 1968, Neville informed Lampus by letter of various losses it had incurred as a result of the Celdex blocks' failure to meet specifications.*fn2 The total damages claimed were $51,990.24. In response to this letter, Lampus gave Neville a $25,000 credit for "Defective Material" on its August 15, 1968 invoice. Donald Lampus explained the appellee's reasoning: "Q. Was the credit shown . . . given at least in part for the reason that you did not feel Neville should have to stand any substantial problems that you

[ 232 Pa. Super. Page 248]

    had in the manufacture of block? A. This was in the inception of our manufacture of Celdex at our plant. This was at the time we realized we had some problems, yes." Mr. Lampus further testified that his company felt that it had "reasonably resolved" its problems by August 15, 1968.

Both Mr. Lampus and Mr. Hensel, President of Neville, testified that the parties continued to have meetings after August 15, 1968. Mr. Lampus claimed that Neville never suggested that Lampus was delivering unusual quantities of defective block: ". . . At almost every meeting they would point out that the texture of this particular block was a little coarse[r] than what they would like to have, . . . or we've got a block that has a chip on it, or something along that line. They were, in fact, not any more pressing the problems than they had from, let's say, '63 through '67." Neville's evidence emphatically denies the accuracy of Mr. Lampus's version of the events. Mr. Hensel testified that the Lampus representatives were shown samples of rejected block and that they were taken to a job site and shown an installed ceiling which had a defective appearance. According to Mr. Henzel, the Lampus people acknowledged the difficulties but indicated that the problems could be corrected. Charles Lanza, Neville's Vice-President for Operations, gave a similar account of the 1968 and 1969 meetings between the parties. The following testimony of George Duve, Neville's General Sales Manager, is representative of Neville's position: "Q. At these meetings were samples of the block containing the defects you have ...

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