William A. Johnson, Cooper, Schwartz, Diamond & Reich, Baskin, Boreman, Wilner, Sachs, Gondelman & Craig, Jerome M. Libenson, Pittsburgh, for appellant.
Robert W. Doty, Peter C. Baggerman, Eckert, Seamans, Cherin & Mellott, Pittsburgh, for appellee.
Eagen, O'Brien, Roberts, Pomeroy, Nix and Manderino, JJ. Jones, former C. J., did not participate in the decision of this case.
The issue in this appeal concerns what damages for a breach of warranty are legally payable by the appellant, R. I. Lampus Co. (Lampus), to appellee, Neville Cement Products Corporation (Neville) under the Uniform Commercial Code, Act of April 6, 1953, P.L. 3, §§ 2-714 and 2-715, 12A P.S. § 2-714 and § 2-715(2).
Appellant Lampus is a concrete block manufacturer which supplied appellee Neville with certain kinds of cement block between 1963 and May of 1970. Neville used these blocks as components in the production of structural planks which were fitted together to form floor and ceiling systems in the construction of buildings. The blocks were delivered to Neville in bound "cubes" containing a number of blocks. These "cubes" were kept in Neville's inventory until needed on Neville's production line for the manufacture of the structural planks. The manufacturing of the planks involved (1) grinding the ends of the blocks to make them smooth; (2) assembling the blocks end to end to form a plank of the desired length; (3) placing reinforcing rods and a prestressing cable through the holes in the concrete block units and stressing the plank; (4) inserting grout around the reinforcing rods and cable and (5) curing the completed plank. The manufactured planks were fit together by tongue and groove to form the floor and ceiling systems in various types of buildings. After installation in a building, the grooves between the planks on the floor surfaces were filled in with grout to make a solid level floor. On the ceiling surface, the points formed by the abutting planks were filled with a cement caulking and any chips or defects were filled in and textured. The floor surface was then
ready to receive carpeting and the ceiling surface was ready for painting.
In 1963, when Neville began purchasing cement blocks from Lampus, Neville instructed Lampus as to its requirements for the block which it desired to use in the assembly of the floor and ceiling systems. These instructions included dimension, strength, and material requirements. From 1963 until 1967 Neville ordered block of a type known as "Dox" block. Beginning in 1967 Neville also began to order "Celdex" block, a block of a different size than "Dox" block. From August, 1968, until May, 1970, Neville purchased "Celdex" block exclusively.
During the 1967-1968 transition from the manufacture of "Dox" block to "Celdex" block, Lampus experienced certain manufacturing problems resulting in the delivery of some defective blocks to Neville. By letter dated July 21, 1968, Neville made claims against Lampus in the amount of $51,990.24 for damages suffered as the result of defective blocks received. On August 15, 1968, Lampus settled the claim by crediting Neville's account for $25,000.00. Lampus, however, did not solve its manufacturing problems and some of the blocks it delivered afterwards were also defective, either in structural soundness or aesthetic appearance. Complaints by Neville resulted in repeated meetings between the parties. At these meetings Lampus representatives were shown samples of the defective blocks. Lampus representatives were also shown finished ceilings which did not have the required appearance because of defects in the blocks. Lampus acknowledged it was having manufacturing problems and indicated that they could be solved.
During the time of these meetings, Neville continued to order the Celdex blocks as needed and received deliveries until May, 1970. Subsequently, by letter dated July 15, 1970, Neville submitted a claim for damages allegedly sustained after July 31, 1968, as a result of the defective blocks. Shortly thereafter, Lampus brought an action in assumpsit to recover over $97,000 allegedly due for the concrete block units and related equipment and supplies. Neville filed a
counterclaim for damages totaling approximately $178,000 claiming breach of express and implied warranties. The damages were alleged to be both the direct and consequential result of Lampus' ...