Ag-Chem Equipment Co., Inc. v. Limestone Farmers Co-op., Inc., AG-CHEM

• Decision Date: 08 June 1990
• Docket Number: AG-CHEM
• Citation: 567 So.2d 250
• Parties: 12 UCC Rep.Serv.2d 725 EQUIPMENT COMPANY, INC., and Big A Equipment Company, Inc. v. LIMESTONE FARMERS COOPERATIVE, INC. 88-1096.
• Court: Alabama Supreme Court

Page 250

567 So.2d 250

12 UCC Rep.Serv.2d 725

AG-CHEM EQUIPMENT COMPANY, INC., and Big A Equipment Company, Inc. v. LIMESTONE FARMERS COOPERATIVE, INC.

88-1096.

Supreme Court of Alabama.

June 8, 1990.

Rehearing Denied Aug. 31, 1990.

Winston V. Legge, Jr. of Patton, Latham, Legge & Cole, Athens, for appellants.

Jimmy Alexander and Linda B. Lloyd of Alexander, Corder & Plunk, Athens, for appellee.

KENNEDY, Justice.

This is an appeal of a judgment entered on a jury verdict in favor of the plaintiff. We reverse and remand.

Limestone Farmers Cooperative, Inc. ("Limestone"), bought a fertilizer applicator machine from Ag-Chem Equipment, Inc., and its subsidiary, Big A Equipment Company (hereinafter together referred to as "Ag-Chem"). Ag-Chem manufactured the machine. The engine in the applicator was manufactured by Cummins Engine Company, Inc. ("Cummins"), and was installed by Ag-Chem. The purchase price of the applicator was $100,160, which was paid by a down payment of $6,165, a subsequent check for $55,485, and a trade-in allowance of $38,510 on a 1977 Big A model fertilizer applicator. Ag-Chem expressly warranted the machine to be free from defects in material and workmanship for 180 days from the first date used or for 2,400 miles or 300 hours of operation, whichever came first. Cummins warranted that the engine would be free from defects in workmanship or material for two years or for 2,000 hours of operation from the date of delivery, whichever came first.

After approximately 450 hours and 4,054 miles of use, an Ag-Chem representative inspected the applicator. At this point, the engine was in good working order. Within three months of the inspection, and after approximately 650 hours of operation, the engine had "blown." Limestone's assistant manager had the machine transported to a Cummins dealership in Decatur. The Cummins representatives determined that a rubber elbow had been incorrectly installed and that it had allowed dirt to enter the engine and that the dirt had caused the engine to blow. It is undisputed that Ag-Chem incorrectly installed the rubber elbow when the applicator was new. Ag-Chem offered to pay for Cummins to rebuild the engine, but Limestone refused, insisting that it was entitled to a new engine. Ag-Chem then sent Limestone a check for $3,615.30, the amount it estimated it would cost to rebuild the engine. Limestone never cashed the check, but ordered a new engine from Cummins at a purchase price of $13,886.

Limestone sued Cummins, alleging a breach of the express warranty Cummins had given on the engine. Limestone also sued Ag-Chem and Big A alleging a breach of express warranty, breach of warranty of fitness for a particular purpose, and negligent inspection of the applicator.

At the conclusion of the plaintiff's case-in-chief, the trial court directed a verdict in favor of Cummins on the express warranty count, thereby releasing Cummins from the case. The court also directed verdicts in favor of Ag-Chem and Big A on each count except the breach of express warranty count. After deliberation on the breach of warranty count, the jury returned a verdict against Ag-Chem and Big A for $26,218.64. The trial court denied the defendants' motion for a new trial, and this appeal followed.

The evidence at trial showed that Ag-Chem improperly installed the rubber elbow that caused the engine to malfunction. Ag-Chem does not dispute that it improperly installed the rubber elbow, and coverage under the warranty, therefore, is not an issue. Where coverage under the warranty is not at issue, we must determine what damages are recoverable for breaching the warranty. However, to determine the amount of damages, we must first determine if...