A. A. Baxter Corp. v. Colt Industries, Inc.

• Decision Date: 31 July 1970
• Citation: 10 Cal.App.3d 144,88 Cal.Rptr. 842
• Court: California Court of Appeals Court of Appeals
• Parties: , 7 UCC Rep.Serv. 1312 A. A. BAXTER CORPORATION, Plaintiff and Respondent, v. COLT INDUSTRIES, INC., et al., Defendants and Appellants. Civ. 9585.

Page 842

88 Cal.Rptr. 842

10 Cal.App.3d 144, 7 UCC Rep.Serv. 1312

A. A. BAXTER CORPORATION, Plaintiff and Respondent, v. COLT INDUSTRIES, INC., et al., Defendants and Appellants.

Civ. 9585.

Court of Appeal, Fourth District, Division 1, California.

July 31, 1970.

[10 Cal.App.3d 148] McInnis, Fitzgerald & Wilkey and Laurence L. Pillsbury, San Diego, for defendants and appellants.

Gray, Cary, Ames & Frye, J. Clifford Wallace, F. P. Crowell, and Timothy V. McFarland, San Diego, for plaintiff and respondent.

OPINION

WHELAN, Associate Justice.

A A. Baxter Corporation (plaintiff) brought this action to recover damages caused because defendants, Colt Industries, Inc. (Colt), a corporation, Fairbanks Morse, Inc., a corporation (maker), and Fairbanks, Morse & Company, a corporation (lessor) failed to deliver a truck scale according to a delivery schedule contained in a lease between lessor and plaintiff as lessee.

Plaintiff is a contractor which on August 4, 1966 knew that a corporation known as Dicco was low bidder on a bid submitted that day to the State of California (State) for construction of a nine-mile stretch of highway east of Barstow.

Plaintiff had earlier received a letter from Dicco that plaintiff would receive a subcontract from Dicco, a part of which would entail hauling borrowed earth according to weight.

Plaintiff's contract with Dicco was executed August 30, 1966, for a total of $1,213,832.50, of which $522,000 was for earth to be imported by weight in the quantity of 1,800,000 tons.

It may be assumed it was plaintiff's obligation to establish the weight of earth furnished, which required the installation of a truck scale at the job-site. The scale was not mentioned in either the prime contract or the subcontract so far as may be determined from the record.

Between August 4 and August 15, 1966, Malloy, an officer of plaintiff, negotiated with Thompson, an agent of the three defendants, to obtain a truck scale, which Malloy knew to be manufactured by maker, which could weigh a load of 325,000 pounds. The scale itself weighed 78,000 pounds. Malloy informed Thompson that plaintiff would be prepared to commence work on September 19. While at the time of their conversations the prime contract had not been awarded, an event that usually followed by two or three weeks the opening of bids, plaintiff was willing to go ahead at its own risk, a procedure permitted by State in connection with such projects.

Thompson was informed also that plaintiff would bring to the job-site, in preparation for commencing operations on September 19, equipment of the value of $1,000,000 to $1,500,000; mention was made also of penalty provisions for delay in the contract, without mention of any figure. The prime contract contained a provision for payment of $875 per day for failure of the prime contractor to complete within 200 working days. Plaintiff's contract was to reimburse Dicco for penalties imposed on the latter because of plaintiff's failure not caused by the acts of others.

On August 15 Thompson informed Malloy he had received word from the maker a scale would be produced and ready for shipping in three of four weeks, with an estimated week in transit.

On August 15 Thompson furnished Malloy with estimates of price for the sale of the scale and for its rental. Two order forms were filled out and were signed by Malloy, one to buy, the other to lease. Each contained this language: 'to be shipped to be on job week of Sept. 19th' and 'ship by truck hot line.' The latter method of shipment was suggested by Thompson as being faster than by rail and an additional $250 was included in the sale price and total rental price respectively for that method of transportation.

The face of the order incorporated by reference terms on the back of it which included the following in bold-face capitals:

'The company nowise assumes any responsibility or liability with respect to use, purpose, or suitability, and shall not be liable for damages of any character, whether direct, indirect or consequential, for defect, delay, or otherwise, its sole liability and obligation being confined to the replacement in the manner aforesaid of defectively manufactured guaranteed parts failing within the time stated.'

Plaintiff decided to lease rather than buy, and the purchase order for a proposed sale was returned to it.

A formal written lease, dated August 19, 1966, covering the scale was executed on August 22. That part of it which is specific to the equipment and terms shows a lease for 36 months commencing October 15, 1966. It too contained a limitation of liability and another clause excusing delay caused by carrier.

The scale was ready for shipping from maker's East Moline, Illinois factory on September 20 and was delivered on that date to a rail carrier, rather than to a trucker, because the maker was informed the width of the scale made it impossible to be accommodated by a truck on the highway without obtaining many special permits. It was later discovered that delivery by truck would have been possible.

The scale arrived at the railhead near the work site on October 1, and plaintiff undertook to move it to the job-site by truck.

Lessor had undertaken the assembly and installation of the scale at the site prepared by plaintiff. That was completed on October 6, one day's delay having been occasioned by a breakdown of plaintiff's equipment used in moving the scale. The scale was then ready for use on October 7.

Plaintiff by September 19 had brought to the job-site numerous pieces of equipment and certain of its personnel.

The equipment brought by plaintiff to the operations site before the end of the week of September 19 came from two other locations: Patterson, in Tuolumne County and Desert Center, near Blythe. The job near Desert Center had been completed; the job at Patterson was not completed until October, but the bringing of equipment from there caused neither does nor delay on that job. Equipment from Patterson began to arrive at the job-site on September 8, from Desert Center on September 6.

Plaintiff sought to recover the amount of damage caused by the delay from the end of the week of September 19 to October 7. That damage it claimed consisted of the salaries of three employees and the rental value of the equipment that remained idle.

The prime contract contained a schedule of amounts State agreed to pay the prime contractor per hour for equipment idled at the instance of State. The figures so listed were used by the trial court to fix the amount of damage, in addition to payments made by plaintiff to employees.

The court rendered judgment in favor of plaintiff for $17,464, calculated as for the loss of eight working days, plus interest of $1,222.48 (from September 19, 1967).

No penalties were charged to plaintiff under its contract. Any delay in the completion of the overall project was caused by another subcontractor.

THEORIES OF RECOVERY

The complaint is in four causes of action. The first is for alleged breach of the leasing agreement that the scale would be on the job in operating order by the week of September 19; it alleged also that plaintiff would not have entered into such purchase order but for the representation and warranty as to date of delivery; that plaintiff communicated to defendants that a prompt and timely delivery was necessary in order to coordinate the moving of plaintiff's equipment to the job-site to coincide with the arrival of the scale so as to avoid costly idle time for the large number of men and large amount of expensive earth-moving equipment involved; that defendants were aware of all those facts and circumstances and the reasons for plaintiff's time requirements; and that plaintiff was relying upon the delivery date as represented and warranted by defendants, who were aware that plaintiff was moving its men and equipment to the place of delivery and the job-site, in view of the strict time requirements of plaintiff's contract with Dicco.

We have concluded the pleadings and proof sustain only a cause of action for breach of the contract provision for delivery by a certain date. For reasons we discuss hereafter, theories of warranty and negligent misrepresentation are inapplicable.

An amendment alleged that on November 18, 1966 plaintiff made demand by letter upon two of the defendants for payment of damages.

FINDINGS

The court found to be true the matters alleged as to breach of the contract provision for delivery in the week of September 19 and as to the conditions with knowledge of which the contract was made; found that during the negotiations for said scale plaintiff communicated to defendants the strict time requirements of the prime contract with State, to which plaintiff was bound by the subcontract calling for a penalty per calendar day for all delays in completing the contract.

It was found that the formal lease dated August 19 was merely a security agreement; that plaintiff was ready to commence work on the promised delivery date, but about that time was informed delivery would be late; that eight days' delay was caused to plaintiff to its damage in the sum of $17,464.

The court found additionally that plaintiff would not have entered into said purchase order with said defendants but for defendants' promise of timely delivery; that time was the essence of the bargain; that at the time of the making of the contract, defendants were well aware of all the facts and circumstances involved; that the freeway contract between the prime contractor and State provided for the measure of damages in the event State caused delay on the job and that these standby rates were reasonable under the circumstances and were a proper measure of plaintiff's damage for the delay caused by defendants.

Among the conclusions of law are these:

'4. Defendants made negligent misrepresentations to plaintiff concerning timely delivery which were reasonably relied on by plaintiff and were...