Aldon Industries, Inc. v. Don Myers & Associates, Inc., 74-2215

• Decision Date: 07 August 1975
• Docket Number: No. 74-2215,74-2215
• Citation: 517 F.2d 188
• Parties: 17 UCC Rep.Serv. 1002 ALDON INDUSTRIES, INC., Plaintiff-Appellant Cross Appellee, v. DON MYERS & ASSOCIATES, INC., and Donald F. Myers and Ruth E. Myers, Individually, Defendants-Appellees Cross Appellants.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 188

517 F.2d 188

17 UCC Rep.Serv. 1002

ALDON INDUSTRIES, INC., Plaintiff-Appellant Cross Appellee, v. DON MYERS & ASSOCIATES, INC., and Donald F. Myers and Ruth E. Myers, Individually, Defendants-Appellees Cross Appellants.

No. 74-2215.

United States Court of Appeals Fifth Circuit.

Aug. 7, 1975.

Kenneth L. Ryskamp, John L. Britton, Miami, Fla., Edward B. Bergman, John R. Padova, Richard D. Solo, Philadelphia, Pa., for plaintiff-appellant cross appellee.

Marc M. Watson, Guy B. Bailey, Jr., Miami, Fla., for defendants-appellees cross appellants.

Appeals from the United States District Court for the Southern District of Florida.

Before BELL, DYER and SIMPSON, Circuit Judges.

DYER, Circuit Judge:

Aldon Industries, Inc., a manufacturer of carpeting, brought suit against Don Myers & Associates, Inc., an Aldon dealer, for the price of carpeting which it sold to Myers. Myers counterclaimed for lost prospective profits because of defective carpeting claiming breach of express and implied warranties, and negligence in the manufacture and inspection of carpeting. Judgments were rendered upon jury verdicts for Aldon in the amount of $50,913.45, and for Myers in the amount of $170,000, on their respective claims. Both parties appeal. We affirm the judgment on the principal claim and reverse the judgment on the counterclaim. We remand for a determination of Donald and Ruth Myers' individual liability as guarantors of the corporation's debt.

ALDON'S CLAIM

Myers argues that a computer printout of Aldon's accounts receivable, absent actual invoices or bills of lading, is insufficient to prove that carpet was actually delivered to Myers. Under the Uniform Commercial Code a seller is entitled to recover the price of accepted goods. F.S.A. § 672.2-709(1)(a). Aldon's manager of accounts receivable, credits and collections traced the company's procedure from receipt of an order to delivery. The accounts receivable information is not entered into the computer until delivery is made. This uncontradicted evidence supports an inference that goods, reflected as accounts receivable on the computer printout, were actually delivered. See Olympia Insurance Co. v. H. D. Harrison, Inc., 5 Cir. 1969, 418 F.2d 669. We thus agree with Aldon that its recovery was proper. We must pause to note here, however, that the district court failed to pass on Aldon's claim against Donald and Ruth Myers, individually, as guarantors of the corporation's debts. We therefore remand this issue to the district court for further appropriate proceedings.

MYERS' COUNTERCLAIM

The primary dispute between the parties is the propriety of Myers' recovery against Aldon of $170,000 ($200,000 less 15% for contributory negligence) based upon Aldon's alleged breach of express and implied warranties, and negligence in the manufacture and inspection of defective carpet. Aldon, a Pennsylvania corporation, argues that Pennsylvania law should apply. The district court applied Florida law to resolve the dispute.

Under the Uniform Commercial Code, which has been adopted in both Florida and Pennsylvania, damages for breach of warranty comprise general damages (measured by the difference between the value of the goods accepted and the value they would have had as warranted), and, in a "proper case," incidental and consequential damages. F.S.A. §§ 672.2-714(2)-(3), 672.2-715. Myers did not seek general damages, but sued for consequential damages for lost prospective profits resulting from injury to its business of equipment sales to Florida schools by reason of the identification of Myers with the defective carpet.

There is substantial evidence that express and implied warranties of merchantability and fitness for a particular purpose were breached, and Aldon does not attack these findings. The issue on appeal, therefore, is whether this is a "proper case" for awarding consequential damages. Because the Code does not define what is a "proper case," we must look to state common law to resolve the issue. See F.S.A. §§ 672.2-103 and 672.2-715, Comment 2; see also Peters, Remedies for Breach of Contracts Relating to the Sale of Goods Under the Uniform Commercial Code: A Roadmap for Article Two, 73 Yale L.J. 199, 272 (1963).

Since Pennsylvania and Florida common law diverge, we must determine whether the district court correctly applied Florida law. Pennsylvania denies recovery for lost prospective profits as being inherently speculative. Neville Chemical Co. v. Union Carbide Corp., 3 Cir. 1970, 422 F.2d 1205. This accounts for Aldon's strenuous argument that Pennsylvania law should apply. We agree with the district court that Florida law should govern, but we need not belabor the point since the resolution of the issue under Florida law is equally favorable to Aldon.

A federal court in a diversity case must apply the conflict of laws rules of the forum state, in this case Florida. Klaxon Co. v. Stentor Manufacturing Co., 1941, 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477. Florida's Uniform Commercial Code conflict of law provision, which governs the breach of warranty claims, requires that in the absence of agreement, Florida law is to apply if the transaction has an "appropriate relation to this state." F.S.A. § 671.1-105(1). In light of Whitaker v. Harvell-Kilgore Corp., 5 Cir. 1969, 418 F.2d 1010, 1015-17, and the similarity of facts in the two cases, particularly since Aldon and Myers both knew that the carpet was to be installed in Florida and since the alleged injury occurred solely in Florida, the transaction is appropriately related to Florida. For the same reasons, Florida law should apply to the tort claim when analyzed under either the "place of injury" or the "center of gravity" choice of laws approach.

Aldon urges that even under Florida law Myers' recovery for breach of warranty cannot stand because it is based upon speculative damages. Whether damages are speculative must be determined by inquiry into both causation of the damage and measurement of damages. The term "speculative" is basically a characterization of the evidence introduced to prove the damages. 5 A. Corbin, Corbin on Contracts § 1022 (1964). Proof must show with reasonable certainty that the plaintiff suffered damages and that the damages flowed as the natural and proximate result of defendant's wrongful conduct. Twyman v. Roell, 1936, 123 Fla. 2, 166 So. 215. Once the causal connection has been demonstrated, although the impossibility of calculation with "absolute exactness" will not defeat recovery, McCall v. Sherbill, Fla.1953, 68 So.2d 362, 364, the amount of damages must be capable of proof to a reasonable certainty and not left to speculation or conjecture. Travelers Indemnity Co. v. Peacock Construction Co., 5 Cir. 1970, 423 F.2d 1153, 1157; New Amsterdam Casualty Co. v. Utility Battery Manufacturing Co., 1935, 122 Fla. 718, 166 So. 856, 860; Kenco Chemical & Manufacturing Co., Inc. v. Railey, Fla.App.1973, 286 So.2d 272, 274. Myers' proof fails on both counts.

Loss of prospective profits sought by Myers is

. . . distinguishable from loss of profits caused by inability of a plaintiff to use specific property destroyed, damaged or withheld by a defendant's wrong, and profits lost on the particular sale or contract for the performance of which the goods in question were purchased.

Neville Chemical Co. v. Union Carbide Corp., 3 Cir. 1970, 422 F.2d 1205, 1226. See also, Twyman, supra at 217; 28 A.L.R.2d 591 (1953). The Florida rule governing speculative damages has been translated in loss of prospective profits cases to a "general rule . . . that the anticipated profits of a commercial business are too remote, speculative, and dependent upon changing circumstances to warrant a judgment for their loss." New Amsterdam, supra, 166 So. at 860. Although New Amsterdam did not establish an absolute prohibition to recovery, the rule does reflect an awareness that proof of anticipated profits contains an inherent element of conjecture and therefore that a plaintiff has a more difficult time in bearing his burden of proving the fact and amount of damages to a reasonable certainty.

Fact of Damage

Myers alleged that its ability to sell carpets had been severely impaired throughout the state of Florida. Myers attempted first to prove damage to its reputation in the eyes of school boards throughout the state by showing that the boards blamed Myers for poor installation of what in fact was defective carpet. Defective carpet was delivered by Aldon and installed by Myers at a number of schools. The litigation focused upon installation of the carpet in two schools, the Kirklane Elementary School in Palm Beach County and the East Naples Middle School in Collier County. The school boards' dissatisfaction with the carpet stemmed from the uneven foam backing in the carpet causing lumping and poor seaming, the non-adherence of the backing to the carpet itself, and the installation of rolls of carpet drawn from different dye lots resulting in adjacent strips of carpeting with non-matching colors. Other problems included the streaking of colors in carpet of the same rolls and dye lots, broken tufts, and staining due to excessive water retention. Both county school boards subsequently removed Myers from their bidding...