B & B Asphalt Co., Inc. v. T. S. McShane Co., Inc.

• Decision Date: 19 May 1976
• Docket Number: Nos. 2--56772,2--57159,s. 2--56772
• Citation: 242 N.W.2d 279
• Parties: B & B ASPHALT CO., INC., Appellant, v. T. S. McSHANE CO., INC., a corporation, et al., Appellees. B & B ASPHALT CO., INC., a corporation, Appellant, v. T. S. McSHANE CO., INC., a corporation and American Hoist and Derrick Co., a corporation, Appellees.
• Court: Iowa Supreme Court

Page 279

242 N.W.2d 279

B & B ASPHALT CO., INC., Appellant, v. T. S. McSHANE CO., INC., a corporation, et al., Appellees.

B & B ASPHALT CO., INC., a corporation, Appellant, v. T. S. McSHANE CO., INC., a corporation and American Hoist and Derrick Co., a corporation, Appellees.

Nos. 2--56772, 2--57159.

Supreme Court of Iowa.

May 19, 1976.

David E. Green and William G. Polking, Carroll, for appellant B & B Asphalt Co., Inc.

Kindig, Beebe, McCluhan, Rawlings & Nieland, Sioux City, for appellees T. S. McShane Co., Inc., and T. C. Jones.

Thomas R. Eller of Nash, Eller & Brink, Denison, for appellee American Hoist and Derrick Co.

Heard before MOORE, C.J., and LeGRAND, UHLENHOPP, REYNOLDSON and McCORMICK, JJ.

McCORMICK, Justice.

Two related appeals have been consolidated for decision. In each case plaintiff B & B Asphalt Co., Inc. sought damages from defendants T. S. McShane, Co., Inc. (McShane) and American Hoist and Derrick Co. (American). T. C. Jones, president of McShane, was a defendant in the first action but not in the second. Each action was based on the same transaction, the lease-purchase by plaintiff of an allegedly defective asphalt plant from McShane. American was the manufacturer and McShane was American's dealer. In the first action, the trial court entered judgment for defendants on an order sustaining motions for directed verdict. In the second action, the court entered summary judgment for defendants. Plaintiff has appealed from both judgments. We affirm on both appeals.

Plaintiff's first action was brought at law based on allegations of fraud. The petition was in a single division. Trial was to the court. After two days of evidence, just prior to resting, plaintiff moved for leave to amend the petition to conform to proof to add allegations of breach of warranty. The trial court reserved ruling on the motion, plaintiff rested, and the court later overruled the motion. Defendants then moved for directed verdict on the ground of insufficiency of proof of the fraud action. Since the action was tried to the court without a jury, the motions should have been called motions to dismiss, but since a motion to dismiss during trial is equivalent to a motion for directed verdict, the misnomer is not material. See Quad County Grain, Inc. v. Poe, 202 N.W.2d 118, 120 (Iowa 1972). The trial court sustained the motions, later entering judgment for defendants. Plaintiff gave timely notice of appeal.

Then plaintiff filed the second action. Its petition contained three divisions, seeking recovery on alternative theories of express warranty, implied warranty, and negligence. Defendants answered. In their answers they alleged the judgment in the first action was a bar to the second action. Then defendants moved for summary judgment on this ground. The parties stipulated that the entire record of the first action could be considered by the court in making its ruling on the motion. They agreed the first action was based on a fraud theory and plaintiff had been unsuccessful in seeking to amend the petition to seek recovery on a warranty theory.

The trial court sustained the motion for summary judgment. Plaintiff gave timely notice of appeal, and the two appeals were consolidated.

THE FIRST APPEAL

Three questions are presented in plaintiff's appeal from judgment in the first action. The first is whether the petition in that case contained sufficient allegations to support the action on theories of express and implied warranty as well as fraud.

The second is whether the trial court abused its discretion in refusing to allow plaintiff to amend the petition to add breach of warranty allegations. The third is whether the trial court erred in sustaining the motions for directed verdict.

In order to fix the background for resolution of these questions, we will summarize the evidence in its light most favorable to plaintiff.

Plaintiff is a road contractor. It wished to purchase a batch-type asphalt plant for use at Carroll, Iowa, to increase its capacity so that it could bid on state road work. William Launderville, president of plaintiff, commenced negotiations with Herman Snipes, a salesman for McShane, in the fall of 1969 for the purchase of a batch-type plant. McShane was dealer for American, whose Littleford division manufactured such equipment. Launderville met with Snipes and Mike Pregont, district manager of American. He told them that the plant plaintiff purchased would have to meet specifications of the Iowa highway commission so the asphalt it produced could be used to perform state road contracts on which plaintiff planned to bid in March 1970.

The three men reviewed specification books of the highway commission in Launderville's office to determine state specifications. In reliance on his examination of the specification books, without checking directly with the highway commission, Pregont told Launderville American's Littleford asphalt plant model #123--80 would conform to Iowa specifications.

On October 23, 1969, McShane submitted a written proposal to sell plaintiff a Littleford #123--80 plant for.$106,088. Pregont promised American would make whatever alterations might be necessary to meet highway commission specifications. Pregont said the plant would produce 100 tons of asphalt an hour. Snipes furnished plaintiff with a brochure of American indicating the basic structure of a similar plant could be assembled by six men in six hours. Pregont told Launderville the entire plant could be erected in five days.

Negotiations continued. On December 29, 1969, plaintiff signed an order to purchase the plant basically on the terms of the October proposal, subject to obtaining financing. Delivery was promised in 20 to 22 weeks of the time the order was placed.

Plaintiff could not obtain financing but nevertheless admonished defendants it needed the plant in time to commence work on Carroll County road contracts May 5, 1970. On March 4, 1970, plaintiff and McShane executed an addendum to the October 1969 proposal under the terms of which plaintiff would enter a lease-purchase agreement for the plant. The purchase price with interest would be spread over the five-year lease period. McShane separately ordered and purchased the plant from American.

Launderville showed a brochure on the plant to Ed Lamoureaux, a field inspector for the highway commission, and Lamoureaux noted the design showed a vibratory feeder. He informed Launderville the highway commission required such plants to have belt-type feeders instead. Launderville notified Pregont who verified Lamoureaux's opinion with the highway commission. As a result, American altered the plant and delivered it with the required belt-type feeder. Delivery of plant components started in April 1970.

Various startup problems were encountered. The agreement required plaintiff to furnish labor for assembly of the plant. McShane was obliged to furnish service personnel for five days to assist with expert advice. Because of delivery delays and installation problems of other kinds, it took 25 days to assemble the plant. Assembly was complete on June 22, 1970. A delivery-installation certificate and the lease-purchase agreement were executed by plaintiff on that date.

In the meantime plaintiff had successfully bid on 12 Carroll County road projects in March, ten county projects and two state projects. Work was to commence May 4, 1970, and to be completed September 5, 1970.

When the plant was assembled, Lamoureaux came to the site to calibrate the plant so the asphalt mix would conform with highway commission requirements. He inspected the installation and refused to calibrate it because he found it did not conform to highway commission specifications in five respects. It lacked a revolution counter on the feed unit, lacked a sampling spigot on the asphalt line, the asphalt line was not jacketed, the plant lacked a deaeration chamber, and it lacked a return line which would run from the deaeration chamber to the metering pump. Launderville notified Pregont who called a highway commission engineer. The engineer agreed in behalf of the highway commission to accept the plant so long as the asphalt produced met highway commission standards; the plant was then calibrated, and it commenced operating June 23, 1970.

Plaintiff continued to have trouble with the plant. The meter which controlled the quantity of oil delivered to the mixture did not work correctly and had to be replaced two or three times. Meter problems caused the work to be shut down four or five times during two and one-half month period for a total of 40 to 50 hours of 'downtime', estimated to cost plaintiff $108 per hour in overhead. A problem with the weigh hopper which prevented it from dumping aggregate correctly was also encountered. It caused an additional 60 to 70 hours of downtime. Minor problems with the plant caused another 10 to 20 hours of downtime.

Other delays of undisclosed duration were caused by weather and breakdowns of other equipment.

The ten county projects were started first. The state projects were started August 19 and September 8. Although all projects were scheduled for completion by September 5, the least project was actually completed November 28. The county and highway commission accepted and paid for all this work. No penalty was assessed for delay.

Plaintiff successfully bid on two additional state projects in Carroll County on August 18, 1970. Because it was delayed on the other projects, it was unable to complete these additional jobs. Plaintiff's bonding company was required to complete them. Plaintiff lost its bondability and ceased to function as a going business in December 1970. Its net worth went from $32,542.54 as of March 31, 1970, to a deficit worth of $118,705.07 as of March 31, 1971.

I. The nature of the original cause of action. The first question is based on plaintiff's contention the trial court should have recognized in ruling on defendants' ...