Betaco, Inc. v. Cessna Aircraft Co., No. 93-2819

CourtUnited States Courts of Appeals. United States Court of Appeals (7th Circuit)
Writing for the CourtBefore FLAUM and ROVNER, Circuit Judges, and WILLIAMS; ILANA DIAMOND ROVNER
Citation32 F.3d 1126
Docket NumberNo. 93-2819
Decision Date12 August 1994
Parties24 UCC Rep.Serv.2d 718 BETACO, INC., Plaintiff-Appellee, v. CESSNA AIRCRAFT COMPANY, Defendant-Appellant.

Page 1126

32 F.3d 1126
24 UCC Rep.Serv.2d 718
BETACO, INC., Plaintiff-Appellee,
v.
CESSNA AIRCRAFT COMPANY, Defendant-Appellant.
No. 93-2819.
United States Court of Appeals,
Seventh Circuit.
Argued Jan. 18, 1994.
Decided Aug. 12, 1994.

Page 1127

Brian T. Hunt, J.C. Buehler (argued), Indianapolis, IN, for plaintiff-appellee.

Ariane Schallwig-Johnson, Stephen L. Vaughan (argued), Locke, Reynolds, Boyd & Weisell, Indianapolis, IN, for defendant-appellant.

Before FLAUM and ROVNER, Circuit Judges, and WILLIAMS, District Judge. *

ILANA DIAMOND ROVNER, Circuit Judge.

Betaco, Inc. ("Betaco") agreed in 1990 to purchase a six-passenger CitationJet from the Cessna Aircraft Company ("Cessna"). Betaco's decision was based in part on Cessna's representation in a cover letter accompanying the purchase agreement that the new jet was "much faster, more efficient and has more range than the popular Citation I," a model with which Betaco was familiar. After advancing $150,000 toward the purchase of the new plane, Betaco became convinced that the CitationJet would not have a greater range than the Citation I with a full passenger load and decided to cancel the purchase. When Cessna refused to return Betaco's deposit, Betaco filed suit in diversity claiming, inter alia, that Cessna had breached an express warranty that the CitationJet had a greater range than the Citation I. The district court rejected Cessna's contention that the purchase agreement signed by the parties was a fully integrated document that precluded Betaco's attempt to rely on this warranty. A jury concluded that the cover letter's representation as to the range of the plane did amount to an express warranty and that Cessna had breached this warranty, and Betaco was awarded damages of $150,000 with interest. We reverse the district court's entry of partial summary judgment in favor of Betaco on the threshold integration issue, concluding that a question of fact exists as to the parties' intent that can be resolved only after a factual hearing before the district court.

I. BACKGROUND

A. Facts

Betaco is a Delaware corporation headquartered in Indiana; it is a holding company that acquires aircraft for sale or lease to other companies and also for the personal use of J. George Mikelsons, the company owner. Betaco leases aircraft to Execujet and also to American Transair, an airline that Mikelsons founded in 1973 and of which he is the chairman and chief executive. Both companies interlock with Betaco. Mikelsons is himself an experienced pilot.

In late 1989, Betaco became interested in a new aircraft known as the CitationJet to be manufactured by Cessna, a Kansas corporation. Mikelsons contacted Cessna and asked for information about the forthcoming plane. On January 25, 1990, Cessna forwarded to Mikelsons a packet of materials accompanied by a cover letter which read as follows:

Dear Mr. Mikelsons:

We are extremely pleased to provide the material you requested about the phenomenal new CitationJet.

Although a completely new design, the CitationJet has inherited all the quality, reliability, safety and economy of the more than 1600 Citations before it. At 437 miles per hour, the CitationJet is much faster, more efficient, and has more range than the popular Citation I. And its luxurious first-class cabin reflects a level of comfort and quality found only in much larger jets.

And you get all this for less than an ordinary turbo-prop!

If you have questions or need additional information about the CitationJet, please

Page 1128

give me a call. I look forward to discussing this exciting new airplane with you.

Sincerely,

Robert T. Hubbard

Regional Manager

App. 97. Enclosed with Hubbard's letter was a twenty-three page brochure providing general information about the CitationJet, including estimates of the jet's anticipated range and performance at various fuel and payload weights. A purchase agreement was also enclosed. The preliminary specifications attached and incorporated into that agreement as "Exhibit A" indicated that the CitationJet would have a full fuel range of 1,500 nautical miles, plus or minus four percent, under specified conditions. App. 108.

Mikelsons signed the purchase agreement on January 29, 1990 and returned it to Cessna, whose administrative director, Ursula Jarvis, added her signature on February 8, 1990. The agreement occupied both sides of a single sheet of paper. As completed by the parties, the front side reflected a purchase price of $2.495 million and a preliminary delivery date of March, 1994, with Betaco reserving the right to opt for an earlier delivery in the event one were possible. The payment terms required Betaco to make an initial deposit of $50,000 upon execution of the contract, a second deposit of $100,000 when Cessna gave notice that the first prototype had been flown, and a third deposit of $125,000 at least six months in advance of delivery. The balance was to be paid when the plane was delivered. The agreement expressly incorporated the attached preliminary specifications, although Cessna reserved the right to revise them "whenever occasioned by product improvements or other good cause as long as such revisions do not result in a reduction in performance standards." Item number 9 on the front page stated:

The signatories to this Agreement verify that they have read the complete Agreement, understand its contents and have full authority to bind and hereby do bind their respective parties.

Following this provision, in a final paragraph located just above the signature lines (written in capital lettering that distinguished this provision from the preceding provisions), the agreement stated:

PURCHASER AND SELLER ACKNOWLEDGE AND AGREE BY EXECUTION OF THIS AGREEMENT THAT THE TERMS AND CONDITIONS ON REVERSE SIDE HEREOF ARE EXPRESSLY MADE PART OF THIS AGREEMENT. EXCEPT FOR THE EXPRESS TERMS OF SELLER'S WRITTEN LIMITED WARRANTIES PERTAINING TO THE AIRCRAFT, WHICH ARE SET FORTH IN THE SPECIFICATION (EXHIBIT A), SELLER MAKES NO REPRESENTATIONS OR WARRANTIES EXPRESS OR IMPLIED, OF MERCHANTABILITY, FITNESS FOR ANY PARTICULAR PURPOSE, OR OTHERWISE WHICH EXTEND BEYOND THE FACE HEREOF OR THEREOF. THE WRITTEN LIMITED WARRANTIES OF SELLER ACCOMPANYING ITS PRODUCT ARE IN LIEU OF ANY OTHER OBLIGATION OR LIABILITY WHATSOEVER BY REASON OF THE MANUFACTURE, SALE, LEASE OR USE OF THE WARRANTED PRODUCTS AND NO PERSON OR ENTITY IS AUTHORIZED TO MAKE ANY REPRESENTATIONS OR WARRANTIES OR TO ASSUME ANY OBLIGATIONS ON BEHALF OF SELLER. THE REMEDIES OF REPAIR OR REPLACEMENT SET FORTH IN SELLER'S WRITTEN LIMITED WARRANTIES ARE THE ONLY REMEDIES UNDER SUCH WARRANTIES OR THIS AGREEMENT. IN NO EVENT SHALL SELLER BE LIABLE FOR ANY INCIDENTAL OR CONSEQUENTIAL DAMAGES, INCLUDING, WITHOUT LIMITATION, LOSS OF PROFITS OR GOODWILL, LOSS OF USE, LOSS OF TIME, INCONVENIENCE, OR COMMERCIAL LOSS. THE ENGINES AND ENGINE ACCESSORIES ARE SEPARATELY WARRANTED BY THEIR MANUFACTURER AND ARE EXPRESSLY EXCLUDED FROM THE LIMITED WARRANTIES OF SELLER. THE LAWS OF SOME STATES DO NOT PERMIT

Page 1129

CERTAIN LIMITATIONS ON WARRANTIES OR REMEDIES. IN THE EVENT THAT SUCH A LAW APPLIES, THE FOREGOING EXCLUSIONS AND LIMITATIONS ARE AMENDED INSOFAR AND ONLY INSOFAR, AS REQUIRED BY SAID LAW.

App. 99 p 9 (emphasis in original). On the reverse side, the agreement included the following integration clause among its "General Terms":

This agreement is the only agreement controlling this purchase and sale, express or implied, either verbal or in writing, and is binding on Purchaser and Seller, their heirs, executors, administrators, successors or assigns. This Agreement, including the rights of Purchaser hereunder, may not be assigned by Purchaser except to a wholly-owned subsidiary or successor in interest by name change or otherwise and then only upon the prior written consent of Seller. Purchaser acknowledges receipt of a written copy of this Agreement which may not be modified in any way except by written agreement executed by both parties.

App. 100, Section IV p 7.

In early 1992, Paul Ruley and another Betaco employee visited Cessna's facilities in order to select the radio and navigational equipment to be installed in the plane. In the course of his work as an administrator for Execujet and American Transair, Ruley assesses the suitability of aircraft for particular charter flights based on the distance, passenger load, fuel, aircraft weight, and runway requirements. After his visit to Cessna, Ruley completed some calculations concerning the CitationJet and showed them to Mikelsons. By Ruley's estimate, the new jet would have a greater range than its predecessor, the Citation I, when carrying three to five passengers; but with a full passenger load of six (plus two crew members), the CitationJet would have a range no greater than or slightly less than that of the Citation I. Ruley also believed that the new plane would not meet the full fuel range of 1,500 nautical miles set forth in the preliminary specifications.

After seeing Ruley's numbers, Mikelsons contacted Cessna in March or April 1992. The testimony at trial was in conflict as to exactly what Cessna personnel told Mikelsons about the range of the new plane. In any case, Mikelsons was not satisfied that the CitationJet would live up to his expectations and decided to cancel the purchase. On April 16, 1992, Mick Hoveskeland of Cessna wrote to Mikelsons accepting the cancellation and offering to apply Betaco's deposit toward the purchase of another aircraft. Cessna subsequently refused Betaco's demand for a return of the deposit, however, invoking the contract's proviso that "all cash deposits shall be retained by [Cessna] not as a forfeiture but as liquidated damages for default if this Agreement is canceled or terminated by [Betaco] for any cause whatsoever...." Betaco proceeded to file this suit.

B. Proceedings Below

Betaco filed a three-count complaint against Cessna on May 12, 1992. In Count I,...

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45 practice notes
  • Payne v. Pauley, No. 02-2674.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (7th Circuit)
    • 9 July 2003
    ...Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Betaco, Inc. v. Cessna Aircraft Co., 32 F.3d 1126, 1138 (7th Cir.1994); Sarsha v. Sears, Roebuck & Co., 3 F.3d 1035, 1041 (7th Cir.1993). Rather, "[t]he court has one task and one task only: to decide......
  • Thomas v. Walton, Civil No. 02-969-GPM.
    • United States
    • United States District Courts. 7th Circuit. Southern District of Illinois
    • 19 September 2006
    ...See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Betaco, Inc. v. Cessna Aircraft Co., 32 F.3d 1126, 1138 (7th Cir.1994). In evaluating a motion for summary judgment, "[t]he court has one task and one task only: to decide, based on the evidence o......
  • Budnick Converting, Inc. v. Nebula Glass Int'l, Inc., Case No. 09–cv–646–DRH.
    • United States
    • United States District Courts. 7th Circuit. Southern District of Illinois
    • 30 March 2012
    ...terms, and the sophistication of the parties.” Id. at 1020, 273 Ill.Dec. 96, 788 N.E.2d 405 (citing Betaco, Inc. v. Cessna Aircraft Co., 32 F.3d 1126, 1132–33 (7th Cir.1994)). A merger or integration clause “is strong evidence of the parties' intent, not only to be bound by the agreement, b......
  • Kremers v. Coca-cola Co., Civil No. 09-333-GPM.
    • United States
    • United States District Courts. 7th Circuit. Southern District of Illinois
    • 27 April 2010
    ...See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Betaco, Inc. v. Cessna Aircraft Co., 32 F.3d 1126, 1138 (7th Cir.1994). In evaluating a motion for summary judgment, “[t]he court has one task and one task only: to decide, based on the evidence o......
  • Request a trial to view additional results
46 cases
  • Payne v. Pauley, No. 02-2674.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (7th Circuit)
    • 9 July 2003
    ...Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Betaco, Inc. v. Cessna Aircraft Co., 32 F.3d 1126, 1138 (7th Cir.1994); Sarsha v. Sears, Roebuck & Co., 3 F.3d 1035, 1041 (7th Cir.1993). Rather, "[t]he court has one task and one task only: ......
  • Thomas v. Walton, Civil No. 02-969-GPM.
    • United States
    • United States District Courts. 7th Circuit. Southern District of Illinois
    • 19 September 2006
    ...See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Betaco, Inc. v. Cessna Aircraft Co., 32 F.3d 1126, 1138 (7th Cir.1994). In evaluating a motion for summary judgment, "[t]he court has one task and one task only: to decide, based on the evide......
  • Budnick Converting, Inc. v. Nebula Glass Int'l, Inc., Case No. 09–cv–646–DRH.
    • United States
    • United States District Courts. 7th Circuit. Southern District of Illinois
    • 30 March 2012
    ...terms, and the sophistication of the parties.” Id. at 1020, 273 Ill.Dec. 96, 788 N.E.2d 405 (citing Betaco, Inc. v. Cessna Aircraft Co., 32 F.3d 1126, 1132–33 (7th Cir.1994)). A merger or integration clause “is strong evidence of the parties' intent, not only to be bound by the agreement, b......
  • Kremers v. Coca-cola Co., Civil No. 09-333-GPM.
    • United States
    • United States District Courts. 7th Circuit. Southern District of Illinois
    • 27 April 2010
    ...See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Betaco, Inc. v. Cessna Aircraft Co., 32 F.3d 1126, 1138 (7th Cir.1994). In evaluating a motion for summary judgment, “[t]he court has one task and one task only: to decide, based on the evidence o......
  • Request a trial to view additional results

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