741 F.2d 1569 (10th Cir. 1984), 82-1813, Daitom, Inc. v. Pennwalt Corp.

Docket Nº:82-1813.
Citation:741 F.2d 1569
Party Name:DAITOM, INC., Plaintiff-Appellant, v. PENNWALT CORPORATION, Defendant-Appellee.
Case Date:August 17, 1984
Court:United States Courts of Appeals, Court of Appeals for the Tenth Circuit
 
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Page 1569

741 F.2d 1569 (10th Cir. 1984)

DAITOM, INC., Plaintiff-Appellant,

v.

PENNWALT CORPORATION, Defendant-Appellee.

No. 82-1813.

United States Court of Appeals, Tenth Circuit

August 17, 1984

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James M. Warden, Blackwell, Sanders, Matheny, Weary & Lombardi, Olathe, Kan. (Alan P. Blinzler and Peter A. Martin, Blackwell, Sanders, Matheny, Weary &

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Lombardi, Olathe, Kan., with him on the briefs), for plaintiff-appellant.

Leo P. Dreyer, Shook, Hardy & Bacon, Kansas City, Mo. (David K. Hardy and J. Richard Golub, Shook, Hardy & Bacon, Kansas City, Mo., and David M. Druten, Rushfelt, Meuller, Lamar, Druten & Moran, Kansas City, Kan., with him on the brief), for defendant-appellee.

Before BARRETT, DOYLE and LOGAN, Circuit Judges.

WILLIAM E. DOYLE, Circuit Judge.

I. STATEMENT OF THE CASE

This is an appeal from the grant of summary judgment against Daitom, Inc. (Daitom), the plaintiff below. The result was dismissal by the United States District Court for the District of Kansas of all three counts of Daitom's complaint.

Daitom had brought this diversity action in federal court on March 7, 1980 against Pennwalt Corporation and its Stokes Vacuum Equipment Division (Pennwalt). Counts I and II of Daitom's complaint alleged breach of various express and implied warranties and Count III alleged negligent design and manufacture by Pennwalt of certain rotary vacuum drying machines sold to and used commercially by Daitom in the production of a vitamin known properly as dextro calcium pantothenate and commonly as Vitamin B-5.

Daitom is a Delaware chartered corporation having its principal place of business in Kansas. It was formed to implement a joint venture between Thompson-Hayward Chemical Company, Inc. of Kansas City, Kansas and Daiichi-Seiyakii Co., Ltd., of Tokyo, Japan. Pennwalt is a Pennsylvania chartered corporation with its principal place of business in Pennsylvania.

Daitom requests a reversal of the district court's grant of summary judgment against Daitom on all counts of its complaint and seeks a remand for a trial on the merits.

We have concluded that there should be a reversal with respect to Counts I and II, together with a remand to the district court for a trial on the merits of those claims. On the other hand, we have concluded that there should be an affirmance of the summary judgment against Daitom on Count III of its complaint.

II. FACTS

The essential facts so far as they pertain to the issues presented in this appeal are as follows.

For the purpose of implementing its joint venture, Daitom planned to construct and operate a manufacturing plant to commercially produce dextro calcium pantothenate. The design of the plant was undertaken and handled on behalf of Daitom by Kintech Services, Inc. (which company will be referred to as Kintech), an engineering design firm located in Cincinnati, Ohio. Kintech had the responsibility not only for designing the plant; it also was responsible for investigating various means of drying the product during the production process, and for negotiating the purchase of certain equipment to be used in the plant. Included in the equipment was automated drying equipment to be used in removing methonol and water from the processed vitamin as part of the purification process.

There were numerous tests made and conducted at Kintech's request by equipment manufacturers. Kintech formulated specifications for the automated drying equipment. (This is referred to as Kintech Specification 342, Record, Volume I, at 59-65). On behalf of Daitom, Kintech invited various vendors to bid on the needed equipment.

Pennwalt, on September 7, 1976, submitted a proposal for the sale of two rotary vacuum dryers with dust filters and heating systems to dry dextro calcium pantothenate. The typewritten proposal specified the equipment to be sold, the f.o.b. price, and delivery and payment terms. A pre-printed conditions of sale form was also attached to the proposal and explicitly made an integral part of the proposal by the typewritten sheet.

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Kintech recommended to Daitom that Pennwalt's proposal be accepted and on October 5, 1976, well within the thirty-day acceptance period specified in the proposal, Daitom issued a purchase order for the Pennwalt equipment. The purchase order consisted of a pre-printed form with the identification of the specific equipment and associated prices typewritten in the appropriate blank spaces on the front together with seventeen lengthy "boilerplate" or "standard" terms and conditions of sale on the back. In addition, on the front of the purchase order in the column marked for a description of the items purchased, Daitom typed the following:

Rotary vacuum dryers in accordance with Kintech Services, Inc. specification 342 dated August 20, 1976, and in accordance with Stokes proposal dated September 7, 1976.

The two rotary vacuum dryers and the equipment that went along with them were manufactured by Pennwalt and delivered to Daitom's plant in early May 1977. For the reason that there had been no construction of Daitom's plant, the crated equipment was not immediately installed. Instead, it was stored outside in crates. On June 15, 1978, the dryers were finally installed and first operated by Daitom. Daitom notified Pennwalt of serious problems with the operation of the dryers on June 17, 1978.

Daitom's contention was that the dryers suffered from two severe defects: 1) they were delivered with misaligned agitator blades causing a scraping and damaging of the dryer interiors and an uneven distribution of the products being dried; and 2) they were undersized necessitating an overloading of the dryers and a "lumping up" of the product rendering it unsuitable for further use. Pennwalt's repair personnel visited the Daitom plant to investigate the alleged operating difficulties, but Daitom contends the dryers were not repaired and have never performed as required under the specifications and as represented by Pennwalt. This was the basis for the lawsuit.

This suit was brought in federal court on March 7, 1980, after Pennwalt's alleged failure to correct the difficulties with the dryers. On Pennwalt's motion, the district court granted summary judgment against Daitom on all three counts of its complaint. The court dismissed Counts I and II after applying section 2-207 of the Uniform Commercial Code (U.C.C.) and finding that Daitom's breach of warranties claims were barred by the one-year period of limitations specified in Pennwalt's proposal. The court further concluded that alleged damages in Count III for the negligent design and manufacture of the dryers were not available in tort; the sole remedy being in an action for breach of warranties which here was barred by the period of limitations. Consequently, summary judgment was granted against Daitom. Daitom's subsequent motion for reconsideration was denied by the district court on June 3, 1982, and following that, this appeal took place.

III. DISCUSSION

  1. The Issues

    It is to be noted that the district court granted summary judgment against Daitom on Counts I and II of the complaint, finding the breach of warranties claim barred by the one-year period of limitations which was set forth in Pennwalt's proposal. In ruling against Daitom the court followed a three step analysis. First, it concluded that pursuant to U.C.C. Sec. 2-207(1), a written contract for the sale of the rotary dryers was formed by Pennwalt's September 7, 1976 proposal and Daitom's October 5, 1976 purchase order accepting that proposal. Second, the court found that the one year period of limitations specified in Pennwalt's proposal and shortening the typical four-year period of limitations available under the U.C.C. became part of the contract of sale and governed the claims for breach of warranties. Thus, the court accepted the proposal that was contained in the documents that had been submitted by the defendant-appellee. Third, the court concluded that the one-year period of limitations was not tolled by any conduct of

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    Pennwalt's, so that consequently, Daitom's claims were barred because they were brought after the expiration of the one year limitations period. The view we have of the submission and response is that the approval was initial and general and contemplated further discussion and improvement.

    The circumstances surrounding the delivery of this equipment and what occurred thereafter is of high importance. The equipment was delivered in crates and boxes, and at that time Daitom had no plant. Instead of seeking to protect the equipment in some way, Pennwalt simply delivered the boxes and left. The documents which were part of the delivery provided for this one-year period of limitations specified in the Pennwalt proposal. Seemingly, this conduct on the part of Pennwalt in making a quick delivery and quick departure took hold in connection with the motion for summary judgment, the court ruling that more than one year had passed before they were able to try out the machinery and discover the defects. The suggestion is made as to how this machinery could have been utilized or contested because of the conditions that were present. Why, then should the one-year limitations period, created by Pennwalt, be allowed to take effect?

    Daitom has challenged the district court's findings as to the terms which became a part of the contract. Daitom argues that its October 5, 1976 purchase order did not constitute an acceptance of Pennwalt's September 7, 1976 proposal. Instead, Daitom claims that its purchase order explicitly made acceptance conditional on Pennwalt's assent to the additional or different terms in the purchase order. As a consequence, Daitom argues, pursuant to U.C.C. Sec...

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