Carrier Corp. v. Royale Inv. Co., 49230

• Decision Date: 11 March 1963
• Docket Number: No. 1,No. 49230,49230,1
• Citation: 366 S.W.2d 346
• Parties: CARRIER CORPORATION, a Corporation, Respondent, v. ROYALE INVESTMENT COMPANY, a Corporation, Appellant
• Court: Missouri Supreme Court

Page 346

366 S.W.2d 346

CARRIER CORPORATION, a Corporation, Respondent, v. ROYALE INVESTMENT COMPANY, a Corporation, Appellant.

No. 49230.

Supreme Court of Missouri, Division No. 1.

March 11, 1963.

Rehearing Denied April 8, 1963.

Shifrin, Treiman, Agatstein & Schermer, St. Louis, for appellant.

Harry S. Gleick, Lawrence Sanders, St. Louis, for respondent, Carrier Corp., Gleick, Strauss & Friedman, St. Louis, of counsel.

Wilbur B. Jones, amicus curiae--referee, St. Louis, attorney pro se.

HOUSER, Commissioner.

Equitable action to recover $40,870 claimed due on a contract for the sale of air conditioning equipment; to establish and enforce a mechanic's lien, and for a decree of priority over a subsisting deed of trust. The trial chancellor found the issues for plaintiff on the contract, adjudged the lien and its priority, and the owner of the realty has appealed. We have jurisdiction because the record affirmatively shows that the amount in dispute exceeds the sum of $15,000.

The petition was in the usual form of an equitable mechanic's lien suit, joining as defendants another lien claimant and the trustee and beneficiary of the deed of trust.

In its original answer Royale pleaded breach of warranty. In its first amended answer it sought rescission of the contract. In its second amended answer and in its counterclaim Royale alleged that the contract 'is of no further force or effect and Plaintiff is not entitled to recover,' and sought damages on the theory that Carrier's representatives made fraudulent representations inducing Royale to purchase the equipment in question; reliance upon and falsity of the representations; consequent damage in that the equipment was worthless for its purposes and was abandoned, and Royale was forced to spend large sums for substitute equipment. Royale offered to return the equipment to Carrier. The prayer was for dismissal of the petition and judgment for the amount Royale paid on account and for expenses incurred for electric wiring, steam fitting, and duct work ($53,547.45 actual) and for $100,000 punitive damages, an aggregate total of $153,547.45.

The court appointed a referee who conducted hearings, made and entered findings of fact and conclusions of law, and recommended judgment in favor of Carrier and against Royale. The court approved the report of the referee and entered judgment for Carrier for $30,870 on its petition and against Royale on its counterclaim, adjudged a mechanic's lien and its priority, and awarded the referee an $8,000 fee.

The vital question raised by appellant is whether the contract is vitiated by fraud. On this review our duty is to determine whether Carrier, through its agents, knowingly made material representations of fact with intent that Royale act thereon; whether Royale was entitled to and did rely thereon; whether the representations were true or false, and if false, whether Royale was thereby damaged. We review the case upon both the law and the evidence as in suits of an equitable nature, Sec. 510.310(4), RSMo 1959, V.A.M.S. de novo on the whole record, making our own findings of fact, drawing our own conclusions of law, and rendering or directing the rendition of such judgment as equity and justice may require. Maas v. Dreckshage, Mo.App., 244 S.W.2d 397, and cases cited, l.c. 400. The findings of the referee, who heard the witnesses and had an opportunity to judge of their credibility, are a factor to be considered, although his report does not have the standing of a special verdict. Schwartz v. Shelby Construction Co., Mo.Sup., 338 S.W.2d 781.

From the transcript of 1,408 pages, answers to interrogatories, and the exhibits, we find these to be the facts:

In 1957 Royale Investment Comapny, owner of Ambassador-Kingsway Hotel in St. Louis, contracted for and started construction of a two-story addition adjacent to the seven-story hotel. The corporation, through Bernard Tureen, its president and chief executive officer, an experienced hotel man, retained and consulted with the firm of Rathert and Roth, architects; employed R. K. & A. Jones as general contractors, and consulted with Lester Hundelt of Consolidated Engineering & Sheetmetal Company, designers and installers of air conditioning equipment. The new two-story addition was to be air-conditioned, and Hundelt, who had previously done air conditioning work for the hotel and since 1954 had done all of Tureen's air conditioning on several other buildings under his control, was to install the duct work. Tureen discussed with Hundelt the amount of tonnage that would be required for the new addition. Tureen had on hand four 50-ton electrically driven Chrysler centrifugal air conditioning machines, complete with compressors and water chillers, ready for installation in the new two-story addition.

Early in February, 1958 Harold Westphal, an employee of Laclede Gas Company, visited Charles Weiseman, chief engineer and maintenance man for Royale, and aroused his interest in absorption air conditioning, which uses gas instead of electricity to generate the necessary energy to operate. Both Tureen and Weiseman professed to know nothing about gas absorption air conditioning at that time. Westphal sent Charles E. Hartwein, of the sales department of Laclede Gas Company, to see Weiseman. Tureen was brought into the discussions and Hartwein, Weiseman and Tureen had several meetings. Hartwein stressed the advantages of utilizing a gas absorption machine. He pointed out that the hotel was on a summertime rate for gas which required them to pay a minimum amount whether that amount was used or not and that they were not consuming as much gas as they were paying for; that this gas, being paid for but not used, could be utilized in the operation of a gas absorption air conditioning system, instead of spending money for nothing. Tureen called in his air conditioning consultant, Hundelt, on at least one of these meetings. Although not then familiar with Carrier absorption cooling systems, Hundelt had some experience with gas refrigeration equipment, having installed four, five or six Servel units for a building and realty firm at a shopping center. Hundelt conferred with Tureen on the possibility of savings through the use of gas, and made notations with respect to the cost of electricity. The economy of fuel cost appealed to Tureen. Hartwein presented to Tureen two analyses, Exhibits B and B-1. Exhibit B showed the number of therms of gas used and the amount billed to the hotel during each month of the year 1957. Exhibit B-1 was a per season estimate of the cost of operating a gas absorption machine, steam-driven, as compared with that of an electrically driven machine. The estimate was based upon the assumption that 236 tons of air conditioning were installed, and that the load would be equivalent to 1400 hours of full load operation. It was estimated that 82,600 therms would be used during the months May to September. The analysis estimated that under these assumptions the cost of a gas absorption machine would be $1,152 per season and that of an electrically operated machine would be $3,430, further assuming an electric rate of 1.25cents per K.W., or $4,116 at 1.5cents per K.W.

Hartwein also handed Tureen Exhibit K, a 35-page, glossy-backed, magazine-type brochure entitled 'Carrier Automatic Absorption Refrigeration.' It contains many photographs and illustrations. It tells 'The story of the most remarkable refrigeration machine in the world,' a 'success story * * * of a major advance in cooling techniques. * * * [T]he story of a machine so simple, so compact, so quiet and so completely automatic that it has been called the most remarkable in the world.' Operation of the refrigeration machine is termed 'completely automatic. There are no valves to turn, no switches to throw. Just a tiny push button for 'Stop or Go.' Or it can be thermostatically or time-clock controlled.' It contains a section on cutting operating expenses, and gives reasons why under given circumstances steam power costs and installation costs may be relatively lower on gas absorption systems than electricity costs on electrically powered systems. It points out that there are no major moving parts, and that this type is the smallest and lightest per ton capacity of all types. In the discussion on automatic adjustment to zero capacity the statement is made that 'Because of the perfectly smooth load characteristic, the Absorption Machine requires a minimum of attention since the load can fluctuate and chilled water temperatures remain constant without the necessity for an operator to change controls or start and stop the machine.' Nine advantages are summarized, among others, the automatic Stop-and-Go feature, as to which it was said: 'Starting and stopping the Carrier Absorption Machine is as easy as ringing a doorbell. There are no valves to turn, no switches to throw. Just a single push button for 'Stop-and-Go.' If desired, the human element can be eliminated entirely. A time-clock, for example will start the unit in the morning and turn it off at night.' It indicates that 'this simplest of all refrigerating machines is as easy to operate as it is to install. Its automatic control features, combined with its completely automatic refrigeration cycle, make the Carrier Automatic Absorption unit almost completely self-operating and maintenance-free.' 'The Absorption Machine is simple and economical to install. It requires no massive foundation, heavy structural support or alignment of compressor or other components.' 'The simplicity of the system and its automatic controls are such that highly trained specialized operating personnel are not required. There are no operating hazards or chance for damage if the machine is left unattended.' 'The only moving parts on the entire machine are very small solution, evaporator and purge unit pumps and motors, that require merely simple maintenance procedure. No large drivers...