370 F.2d 73 (9th Cir. 1966), 20745, Wagner Tractor, Inc. v. Shields

Docket Nº:20745, 20758.
Citation:370 F.2d 73
Party Name:WAGNER TRACTOR, INC., and FWD Wagner, Inc., Defendants-Appellants, v. W. E. SHIELDS, Trustee in Bankruptcy for Frost Machinery Company, Ltd., Plaintiff-Appellee. W. E. SHIELDS, Trustee in Bankruptcy for Frost Machinery Company, Ltd., Plaintiff-Appellant, v. WAGNER TRACTOR, INC., and FWD Wagner, Inc., Defendants-Appellees.
Case Date:December 15, 1966
Court:United States Courts of Appeals, Court of Appeals for the Ninth Circuit

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370 F.2d 73 (9th Cir. 1966)

WAGNER TRACTOR, INC., and FWD Wagner, Inc., Defendants-Appellants,


W. E. SHIELDS, Trustee in Bankruptcy for Frost Machinery Company, Ltd., Plaintiff-Appellee.

W. E. SHIELDS, Trustee in Bankruptcy for Frost Machinery Company, Ltd., Plaintiff-Appellant,


WAGNER TRACTOR, INC., and FWD Wagner, Inc., Defendants-Appellees.

Nos. 20745, 20758.

United States Court of Appeals, Ninth Circuit.

December 15, 1966

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[Copyrighted Material Omitted]

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Marshall C. Cheney, Jr., John P. Ronchetto, of Mize, Kriesien, Fewless & Cheney, Portland, Or., for appellants.

William D. Campbell, of Freed & Campbell, Portland, Or., Walter C. Newman, Q.C., Winnipeg, Manitoba, Canada, for appellee.

Before CHAMBERS, BARNES and DUNIWAY, Circuit Judges.

BARNES, Circuit Judge:

This is a consolidation of two appeals from the United States District Court for the District of Oregon. The trial court's jurisdiction was based upon 28 U.S.C. § 1332. This court has jurisdiction under 28 U.S.C. § 1291.

Wagner Tractor, Inc. (hereinafter 'Wagner') is a manufacturer of construction and farm machinery. Shields is the trustee in bankruptcy for Frost Machinery Company, Ltd. (hereinafter 'Frost'). Frost was a dealer in Wagner products.

In April of 1959, Wagner sold a Wagner Tractor Model IND-14, Serial No. 2019, to Frost, f.o.b. Portland, Oregon. Delivery was taken by Albert Ferec, a retail customer of Frost, who took it to St. Rose DuLac, Manitoba, to be used in his road construction business. The machine did not perform properly. It was agreed that the machine, No. 2019, would be returned to Frost and Ferec would purchase a different machine.

In May of 1959, Frost purchased from Wagner a Wagner Tractor Model IND-14A, Serial No. 2033, f.o.b. Portland, Oregon. Delivery was again taken by Mr. Ferec as Frost's retail customer. Mr. Ferec used the machine in his road construction business, with minor repairs being made to the tractor. In August of 1959 a serious malfunction (after about 650 hours of work) necessitated certain major repairs which were done by Frost. Work with the machine continued until October when the weather prevented further work. In the spring of 1960, Ferec again used the No. 2033, but after only 12 hours of operation the transmission failed. Frost refused to repair it and Ferec returned the machine to Frost. Ferec was in default on his payments for the machine, but no demand for payment was made to him. There is no evidence that Ferec's contract with Frost was ever rescinded.

As to the first machine, No. 2019, a new engine was installed to provide more power. Frost paid the cost of installing the new engine as it had agreed. During 1960 it was leased on two occasions and, apparently, performed satisfactorily, the rentals being in excess of $5,000.

The dealership agreement between Frost and Wagner was terminated by Wagner according to its terms on August

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7, 1959. Later, Frost became bankrupt, and the machines were repossessed and sold by the finance company, Industrial Acceptance Corporation.

On March 22, 1963, Frost, by its trustee in bankruptcy, filed suit against Wagner and its successor for breach of warranty. After trial, the court found that Wagner had breached its warranties as to each machine and awarded damages of $4,350.14 as to No. 2019 and $32,500.00 as to No. 2033. Wagner appeals from the judgment of breach of warranty and the amount of damages. Shields, as trustee for Frost, appeals the amount of damages contending they are inadequate.

As the court's jurisdiction was based on diversity of citizenship, the case is to be determined by the law of the state where the court sits, in this case Oregon. Erie R.R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938). See also, Byrd v. Blue Ridge Rural Elec. Co-op, Inc., 356 U.S. 525, 78 S.Ct. 893, 2 L.Ed.2d 953 (1958). The parties agree that Oregon law should be applied.

I. Machine No. 2019

As to the first machine, No. 2019, Wagner contends that there was no warranty to breach. Beyond that question, however, Wagner claims that Frost suffered no injury with respect to No. 2019.

The elements of a cause of action for breach of warranty are: (1) a warranty; (2) breach of that warranty; (3) notice to the warrantor of the breach (Ore.Rev.Stats. § 75.490); 1 and (4) damages proximately caused by the breach.

There was a warranty. There is evidence to sustain the trial court's finding that there was an implied warranty of fitness. Ore.Rev.Stats. § 75.150 (1) provides:

'Where the buyer, expressly or by implication, makes known to the seller that particular purpose for which the goods are required, and it appears that the buyer relies on the seller's skill or judgment (whether he be the grower or manufacturer or not), there is an implied warranty that the goods shall be reasonably fit for such purpose.'

Ferec, the road builder, Sneva (Frost's salesman) and Ankerman (Wagner's Canadian representative) met together to discuss the equipment required by Ferec for his particular use in road building in that particular area of Canada. Ankerman specified the model which Ferec bought from Frost. (Exh. 70, p. 22, Exh. 71, pp. 15-16.) Through Ankerman, Wagner can be charged with knowing the use intended by Frost, that is, to sell it to Ferec for road construction. If it was not fit for road construction, it was also not fit to sell for that purpose. Wagner, knowing it was to be sold as road construction equipment in reliance upon Ankerman's judgment, warranted it as fit by the terms of Ore.Rev.Stats. § 75.150(1).

Wagner apparently concedes that the first machine broke down and notice thereof was given.

'Within a few days after No. 2019 arrived at St. Rose DuLac, it became apparent that the machine would not and did not perform properly (Ex. 71, Ferec dep pp 14, 64-66; Tr 44). Meetings and telephone conversations were held and an exchange of correspondence took place between Ferec, representatives of Frost and representatives of Wagner.' (Appellant's (Wagner) Opening Brief, p. 4.)

Finding a warranty as to No. 2019, a breach and notice, the only remaining question is in regard to the damages. The Supreme Court of Oregon has said that 'the measure of general damages * * * is the difference between the value of the goods actually received and the value they would have had if they

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were as warranted.' Sol-o-Lite Laminating Corp. v. Allen, 223 Or. 80, 353 P.2d 843, 848 (1960). Accord, Western Feed Co. v. Heidloff, 230 Or. 324, 370 P.2d 612 (1962). This is the general rule. E.g., Isenberg...

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