Sharp Electronics Corp. v. Shaw

• Decision Date: 30 October 1987
• Citation: 524 So.2d 586
• Parties: SHARP ELECTRONICS CORPORATION v. Stanleigh C. SHAW, d/b/a Shaw Business Equipment, now known as Cheaha Business Machines 83-110.
• Court: Alabama Supreme Court

Page 586

524 So.2d 586

SHARP ELECTRONICS CORPORATION v. Stanleigh C. SHAW, d/b/a Shaw Business Equipment, now known as Cheaha Business Machines

83-110.

Supreme Court of Alabama.

Oct. 30, 1987.

Fournier J. Gale III, Cathy S. Wright, Lee E. Bains, Jr., and James L. Priester of Maynard, Cooper, Frierson & Gale, Birmingham, and Robert D. Piliero, of Wender, Murase & White, New York City, and Andrew D. Rackear, Assoc. Gen. Counsel, Sharp Electronics Corp., Paramus, N.J., for appellants.

Andrew W. Bolt II, of Bolt, Isom, Jackson & Bailey, Anniston, for appellee.

ON APPLICATION FOR REHEARING

PER CURIAM.

The original opinion in this case is withdrawn and the following opinion is substituted in its place. On application for rehearing, appellee, Stanleigh C. Shaw, vigorously contends that this Court's statement of facts in the original opinion was incorrect in certain aspects, and that this Court would reach a different conclusion if the facts were properly stated. The office of a rehearing is to call to the Court's attention any errors of fact, as well as of law, and to provide the Court with a final opportunity to see that justice is done. This Court should stand with an open mind throughout all stages of the appellate process, including the rehearing stage. In this case, we agree with the appellee that certain inaccuracies appeared in our original opinion.

FACTS

Appellee, Stanleigh C. Shaw, attended a meeting of office machine dealers in Florida, where he first became acquainted with the photocopiers being introduced to the United States market by Sharp Electronics Corporation. There he saw the model 710 for the first time, having first gotten a pass to go to a hotel room where the machine was being demonstrated. Sharp had been marketing calculators, but had not been in the copier business prior to August 1975, when it introduced the model 710.

The Sharp 710 copier is a plain paper copier; that is, it will copy on virtually any kind of paper. For 20 years, until 1974 or 1975, Xerox Corporation was the only copier firm in the United States with a plain paper copier. Sharp was one of the first to enter the plain paper copier market after the Xerox patent expired.

Shaw was impressed with the good quality of the copies made by the 710, which he considered superior to the Xerox machines. At the Florida meeting, Shaw was told by the Sharp people that the machines were of good quality; that they would compete well on the open market, specifically with the Xerox 3100; and that they were capable of running up to 8,000 copies a month.

At that meeting Shaw and Phillips, Shaw's partner, decided to take the Sharp copier as another product line for their business to market in the Anniston area.

Sharp made other representations about the quality of the 710 copier in written materials furnished Shaw, which were in evidence as defendant's exhibits 4, 5, 7, and 18. After taking on the line, Shaw began marketing and servicing the Sharp copiers, relying upon the representations as to the competitive quality of these copiers that were made to him by Sharp's sales people and service people and in documents furnished by Sharp after the machines were received.

As alleged in Shaw's counterclaim, this lawsuit involves representations about three models of the Sharp photocopier. Sharp introduced model 720 as a replacement for the 710 in August 1976. The 720 was replaced by the 726 in November 1977. The model 726 was produced until December 1978.

Shaw testified at considerable length. He described the servicing of the three models and the experiences he had with his customers who owned them. Shaw said he relied upon the statements made to him about the model 710 when he first saw it, upon statements to him by Sharp's sales people and service people and upon statements made in Sharp's sales brochures, that the machines were of good quality, that they would produce without having much service, and that they would compare well with other makes of copiers. He also said that because the representations were not true, he was almost forced out of business.

Shaw identified a box of service records pertaining to Sharp copiers owned by his customers. That box was introduced into evidence as defendant's exhibit 21. Testimony also was given as to how each document in the box had been given a sequential number with the Bates numbering machine. Summaries were prepared from these service records and were used to calculate the number of service calls Shaw made for which he did not charge the owner of the copier. Using Shaw's hourly rate charge, a determination was made that Shaw's business lost $25,184.25. Defendant's exhibit 18 is a copy of those calculations.

On cross-examination, Shaw testified that it first occurred to him in the latter part of 1979, or January 1980, that Sharp's representation about the three models of the copier were not true. He said: "I think I started talking to other dealers, started buying machines through other dealers who had problems. Several of the dealers who were authorized Sharp dealers told me they had the same problem with the machines and they could not get them working. So at that time I started thinking there must be something defective about it." Shaw testified that "I would not have ordered that 726 in February 1979 if I had known that Sharp had misled me."

Over Sharp's objection, the trial court submitted to the jury both the issue of Sharp's claim of an amount due from Shaw, and Shaw's counterclaim based on misrepresentation. The jury returned a verdict in favor of Sharp for $4,224.35, ¹ and in favor of Shaw on his counterclaim for $100,000.00.

Suit was originally filed by Sharp Electronics on December 11, 1980, in the District Court of Calhoun County to collect a debt due on some 12 or 15 copying machines sold to the defendant, Stanleigh Shaw. The district court entered a judgment in favor of Sharp in the amount of $4,224.35, and Shaw appealed to the circuit court, where the case was tried to a jury, as previously stated. It was when this original suit on account was appealed to the circuit court that Shaw filed his counterclaim alleging fraud and misrepresentation as to the quality, serviceability, and productivity of Sharp's copiers; the fraud and misrepresentation were alleged to have occurred on August 17, 1981. Although Sharp's suit against Shaw for failure to pay his bill for copiers included claims related to several other models, the suit also included a claim for $2,111.73 for an SF 726 copier, and although Shaw, in his counterclaim, alleges that the fraud and misrepresentation occurred as to other copiers, he also claims that fraud and misrepresentation occurred as to the SF 726 copier. A copy of the invoice of Sharp Electronics Corporation to Shaw on this particular copier was, along with copies of other invoices, attached to the complaint.

Doctrine of Relation Back of Counterclaims

The doctrine of relation back is applicable under the facts in this case because when Sharp filed suit against Shaw for the unpaid debt on the copiers, it sued in regard to a copier that had been the subject of representations at the Miami conference in August 1975. The parties do not dispute the fact that Sharp's suit against Shaw for nonpayment of the account was within the statute of limitations, and, likewise, there can be no dispute that if Shaw had not filed his claim concerning the SF 726 as a counterclaim to Sharp's action, he would have been forever barred from making that claim, because it arose out of a transaction to which plaintiff's complaint related. It is of no moment that the suit related back to the sales of other copiers that may not have been part of the same transaction; it is sufficient that the subject of one of the claims was a part of the same transaction.

The problem in this case arises from our Rule 13, A.R.Civ.P., dealing with counterclaims and cross-claims. Rule 13(a) provides:

(a) Compulsory Counterclaims. A pleading shall state as a counterclaim any claim which at the time of serving the pleading the pleader has against any opposing party, if it arises out of the transaction or occurrence that is the subject matter of the opposing party's claim.... [Emphasis added.]

Rule 13(c) provides:

All counterclaims other than those maturing or acquired after pleading shall relate back to the time the original plaintiff's claim arose.

Rule 13(b) provides:

(b) Permissive Counterclaims. A pleading may state as a counterclaim any claim against an opposing party not arising out of the transaction or occurrence that is the subject matter of the opposing party's claim.

According to the Committee Comments to Rule 13(c), the reason for the relation back of counterclaims was to harmonize Rule 13(c) with Title 7, § 355, Code of Alabama (1940). This statute is currently codified as Code 1975, § 6-8-84, and it provides:

When the defendant pleads a counterclaim to the plaintiff's demand, to which the plaintiff replies the statute of limitations, the defendant is nevertheless entitled to his counterclaim, where it was a legal subsisting claim at the time the right of action accrued to the plaintiff on the claim in the action.

As in the majority of American jurisdictions, Alabama case law has always applied the "indestructability-of-recoupment" doctrine. (Although a somewhat broader concept, the modern compulsory counterclaim is basically equivalent to common law recoupment. See A.R.Civ.P. 81(e).) For example, Harton v. Belcher, 195 Ala. 186, 190, 70 So. 141, 142 (1915), held Defendant's claim sprung out of the contract between the parties and affected the considerations moving between them; it ran with the contract, so to speak, and, so far at least as it went to the consideration, as it did in the case here, defendant might rely on it without regard to the statute of limitation. So long as the contract, upon a breach of which the claim is predicated, subsists, and may be enforced, the...