Perfecting Service Co. v. Product Development & Sales Co., 240

• Decision Date: 22 May 1963
• Docket Number: No. 240,240
• Citation: 259 N.C. 400,131 S.E.2d 9
• Parties: PERFECTING SERVICE COMPANY, a corporation, v. PRODUCT DEVELOPMENT AND SALES CO., a corporation, and Radiator Specialty Company, a corporation.
• Court: North Carolina Supreme Court

Page 9

131 S.E.2d 9

259 N.C. 400

PERFECTING SERVICE COMPANY, a corporation, v. PRODUCT DEVELOPMENT AND SALES CO., a corporation, and Radiator Specialty Company, a corporation.

No. 240

Supreme Court of North Carolina.

May 22, 1963

Pierce, Wardlow, Knox & Caudle, Stuart R. Childs, Charlotte, for plaintiff.

Weinstein, Waggoner & Sturges (formerly Weinstein, Muilenburg, Waggoner & Bledsoe), Charlotte, for defendants.

MOORE, Justice.

There are more than 200 pages of evidence in the record. A detailed review of the evidence is not essential for decision of the questions raised on this appeal. General summaries of the contentions of the parties, which find support in their evidentiary offerings, will suffice.

Plaintiff's contentions: When requested by defendant to manufacture the Fan-O-Matic, plaintiff advised that it had had no experience in the automotive field. To make the type of instrument defendant wanted die casting was necessary, and this process of manufacture was outside plaintiff's usual field of operation. Plaintiff suggested two or three manufacturers defendant might deal with. Defendant stated it wanted plaintiff to do the job because plaintiff was located in Charlotte, there were problems to be 'ironed out,' plaintiff was close at hand and defendant could follow the work and help expedite it. In every step of planning and designing there were extended conferences and close cooperation between the engineers and executives of plaintiff and defendant. Defendant's approval was had with reference to each decision. Plaintiff first made studies and drawings for production of a satisfactory design and model, and to determine price. The first price plaintiff quoted was $15 per unit. Defendant insisted that to market the device the manufacturer's price had to be much lower. By revisal of manufacturing methods, choice of materials, and reduction of the scope of plaintiff's work and responsibilities the unit price was finally lowered to $6.86. Defendant agreed that plaintiff would not furnish the fan, defendant would gather the necessary information concerning clearance space in the makes of automobiles on which the Fan-O-Matics were to be used (this information was necessary for determination of the size of the instrument), defendant would be responsible for problems related to installation on customers' cars and would prepare installation instructions, and plaintiff would not assemble the units but would deliver sub-assemblies in bulk. It was agreed that the drive plate and attachments would be die castings of aluminum material, and the hub of cast iron. After many conferences and the incorporation of the suggestions of defendant's engineer and executives, dies and molds were procured. Ten soft die models were made for initial testing. After tests by plaintiff and defendant, the latter approved enthusiastically. It was then agreed that a lot of 300 units would be made and sold to the trade, which would provide a test throughout the country in actual use. In the meanwhile defendant had advertised the Fan-O-Matic on a nationwide scale, and orders had begun to come in. Defendant had made a test at the Indianapolis Speedway. The responsible executive of defendant told plaintiff: 'Forget about testing. We have enough proof now. Our entire organization is satisfied with it. * * * I want Fan-O-Matic coming out of our ears. ' Defendant placed an order for 10,000 units (including the 300 test units), to be delivered at the rate of 2000 per month. Plaintiff purchased materials necessary to supply the units and went into production. Shortly after the 300 units were put on the market a few broken units were returned. In collaboration with defendant's engineer several changes were made to avoid installation errors. There were complaints that the hub was pulling out in installation or breaking out in operation. Plaintiff suggested steel inserts to strengthen the instrument at the hub. Defendant's engineer insisted that the mere insertion of a washer would solve the difficulty, and this plan was adopted. Defendant had advertised that Fan-O-Matic was adaptable to all cars, including sport cars and racers, and the cut out speed was at 40 miles per hour. The instrument, in accordance with defendant's instructions, was designed to cut out at the speed of 30 to 35 miles per hour, to be operated on motors having a maximum of 4800 revolutions per minute, and to be used on such standard cars in the moderate price field as clearance dimensions would permit. Defendant had drawn up installation instructions without consultation with plaintiff, and to make it adaptable to a wider range of cars sent along washers and other adapters, of which plaintiff had no knowledge. According to plaintiff's tests the instrument operated perfectly when installed so as to be in balance, and when the fan used was staticly in balance and not too heavy. The failures of the instrument in use were due to faulty installation. About two months before defendant cancelled the order, defendant's engineer had begun work on another model. Defendant was making its own Fan-O-Matic and selling it within a few months after the contract with plaintiff was cancelled. Plaintiff's warranty was that the Fan-O-Matic would be manufactured 'in accordance with the approved design' and would be functioning correctly 'in accordance with the data supplied by Radiator Specialty Company. ' Defendant had approved the design, and it was manufactured in accordance therewith. It did function in accordance with the data furnished by Radiator. The materials used had been approved by defendant. Plaintiff agreed and stood ready to replace any units in which there were faulty materials or workmanship. (There are two defendants, but for the sake of simplicity the singular 'defendant' is used in this opinion except when the discussion requires differentiation.)

Defendant's contentions: Plaintiff represented that it could improve on the inventor's model and make practical adaptation to a wider range of cars. Plaintiff agreed to engineer and design the Fan-O-Matic. Plaintiff's engineer drew the plans 'for a die cast drive plate and specifically determined the configuration, thickness and shape of the hub. ' Defendant questioned whether the proposed die cast drive plate would be strong enough and stated that plaintiff would have to guarantee to defendant that it would be. Plaintiff assured defendant that it would be strong enough. Even so, defendant required plaintiff to make the following express warranties at the time the $8750 purchase order for dies and models was given: (a) Plaintiff 'guarantees that the Fan-O-Matic unit will be manufactured in accordance with the approved design, and will be functioning correctly in accordance with the data supplied by Radiator * * *. '; and (b) 'All material and workmanship shall be guaranteed for a period of 18 months after shipment of first production lot. ' At all stages defendant relied on plaintiff in all matters of design. When the ten soft mold models had been made and were being tested defendant wrote plaintiff, 'The metal thickness between the sharp corner at the bottom of the .750 dia. counterbore in the drive plate, and a corresponding dia. on the beveled hub outside the drive plate is only .115. Is this too weak for the work required of this part? ' Plaintiff replied, 'On the metal thickness of the aluminum drive casting, please note that the wall thickness is 1/8 inch, however, the ribs on the front side, in conjunction with the hub, make this a very strong cross-section. ' As soon as the first Fan-O-Matics were put on the market, defendant began to receive complaints from customers, some of whom returned the units. Many necessary changes were made. Because of the lack of sufficient tensile strength of the materials used and faulty design the Fan-O-Matic, even after corrections, continued to fly apart in use. After each effort to remedy defects plaintiff assured defendant that the unit was all right. Plaintiff delivered nearly 3000 units, and complaints kept coming in. The units were flying apart and damaging automobiles. They were dangerous to persons and property. The hub of the drive plate was improperly designed, it would not withstand the stresses exerted upon it. The units were not fit for the purpose intended. Defendant cancelled the order. 'It was and is the crux of the position of the defendants that the sharp corners on the neck (hub) * * * of the drive plate coupled with the brittle qualities of the casting, constituted a serious defect that prevented the unit from functioning properly or safely.'

(1). Plaintiff's engineers testified, without objection, that the breakage that appeared in the damaged units which were returned resulted from faulty installation. To counter this evidence defendants offered the testimony of experts, which was excluded. Defendants assign as error the exclusion of this testimony.

R. B. Lincoln, a professional engineer registered in the State of Pennsylvania, testified for defendant. He recounted at length his training, experience and professional connections, including graduate study at Carnegie Institute of Technology and the University of Pittsburgh, employment for 26 years by Pittsburgh Testing Company, and membership in the American Society for Testing Materials. His main experience was in testing for metal failures, particularly failures of parts of automobiles.

Mr. Lincoln made five inspections and tests of Fan-O-Matic:

(1). He put a brake block from a Fan-O-Matic drive plate in a testing machine and measured the deflection of the spring with given static loads. The deflection is the movement of the spring away from the force applied on it. Each time a load was removed he made a reading of the permanent 'set,' that is, the deflection that remained after the load was taken off.

'Q. What were the results of your tests, Sir?

'Plaintiff objected--sustained.'

The record does not...