Continental Air Lines, Inc. v. Wagner-Morehouse, Inc., 16297-16298.

• Citation: 401 F.2d 23
• Decision Date: 13 September 1968
• Docket Number: No. 16297-16298.,16297-16298.
• Parties: CONTINENTAL AIR LINES, INC., Plaintiff-Appellee, v. WAGNER-MOREHOUSE, INC., Defendant-Appellant. CONTINENTAL AIR LINES, INC., Plaintiff-Appellant, v. WAGNER-MOREHOUSE, INC., Defendant-Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (7th Circuit)

401 F.2d 23 (1968)

CONTINENTAL AIR LINES, INC., Plaintiff-Appellee, v. WAGNER-MOREHOUSE, INC., Defendant-Appellant.

CONTINENTAL AIR LINES, INC., Plaintiff-Appellant, v. WAGNER-MOREHOUSE, INC., Defendant-Appellee.

Nos. 16297-16298.

United States Court of Appeals Seventh Circuit.

July 19, 1968.

As Corrected September 13, 1968.

Gordon R. Close, Thomas W. Dempsey, Chicago, Ill., Charles W. Kenady, San Francisco, Cal., Lord, Bissell & Brook, Chicago, Ill., for Continental Airlines, Inc.; Cooper, White & Cooper, San Francisco, Cal., of counsel.

John M. Moelmann, Perry L. Fuller, D. Kendall Griffith, Chicago, Ill., for Wagner-Morehouse; Hinshaw, Culbertson, Moelmann & Hoban, Chicago, Ill., of counsel.

Before MAJOR, Senior Circuit Judge, and SCHNACKENBERG and CUMMINGS, Circuit Judges.

MAJOR, Senior Circuit Judge.

This case relates to the adequacy of four loading tubes (bridges) sold to Continental Air Lines, Inc. (Continental) by Wagner-Morehouse, Inc. (Wagner), a California engineering and manufacturing company. The tubes were designed as a facility for transferring passengers between the airport building at O'Hare Field, Chicago, and large jet airplanes. Their unique function was that they could move both horizontally and vertically and thus permit a large aircraft with its broad wingspans to taxi close to the building for loading and unloading.

Pursuant to a sales agreement, embodied in an exchange of letters, the four tubes were installed at O'Hare on April 1, April 26, June 24 and August 5, 1962. On its first day of operation the second tube fell to the ground from an elevated position. The tube was damaged, sent back to California to be modified and rebuilt, and reinstalled at O'Hare in October. On November 18, 1962, that tube, 8' in diameter and over 80' long, fell from a 35° elevated position and crashed into the wing of Continental's 720-B 118-passenger jet aircraft, causing extensive damage.

The total purchase price of the four tubes was $307,583.00, of which amount Continental had paid Wagner $224,146.00. When the tube collapsed on its airplane, Continental stopped payment on its check to Wagner for the balance due, in the sum of $83,021.00.

On June 28, 1963, Continental commenced this diversity action (sometimes referred to as the principal cause) against Wagner by means of a three-count complaint which was predicated on negligence and on the alleged breaches of the express and implied warranties arising from the sales agreement. The charge generally was that the four tubes were improperly designed and manufactured and that inadequate material had been used in their construction. Continental sought damages for the cost of repairing its airplane, for its loss of net profits while the plane was being repaired and for the loss of investment in the tubes, which represented the difference between the value of the tubes as allegedly warranted and their actual value when delivered.

Wagner denied improper conduct and that it had warranted that the tubes would be of good quality and free of defects. It also denied that Continental relied upon it to produce a fit product, and charged that Continental was equally responsible for the construction of the tubes. On February 17, 1964, it filed a counterclaim for the amount of the purchase price which Continental had refused to pay.

The jury returned a verdict in favor of Wagner in the principal cause and a verdict in favor of Wagner on its counterclaim, in the sum of $108,204.62.

The usual post-trial motions were filed by the parties and, after a hearing, the court entered judgment n. o. v. for Continental on its claim for cost of repairs and loss of net profits, in the sum of $275,688.23. The court denied Continental's motion for judgment n. o. v. and alternative motion for a new trial on its claim for loss of investment representing the difference between the value of the four tubes as allegedly warranted and as received. The court denied Continental's motion for judgment n. o. v. and alternative motion for a new trial on Wagner's counterclaim, and entered a judgment in favor of Wagner pursuant to the jury verdict. The court, however, did enter a conditional order for a new trial in the event its judgments n. o. v. are reversed by this court.

In appeal No. 16297 (the principal cause), Wagner appeals from that portion of the judgment which grants Continental a judgment n. o. v. in the sum of $275,688.23, and from that portion of the judgment conditionally granting Continental a new trial. In appeal No. 16298, Continental appeals from that portion of the judgment which denies its claim for $222,646.00, the net difference between the value of the four tubes if manufactured as warranted and their actual value as manufactured; from that portion of the judgment in favor of Wagner based on the latter's counterclaim, and from that portion of the judgment which denies its motion for an n. o. v. judgment on the counterclaim or in the alternative for a new trial on Wagner's counterclaim.

Wagner in its appeal from the judgment in the principal cause states the contested issues as follows: (1) Continental waived its right to move for judgment notwithstanding the verdict by failing to move for a directed verdict at the close of all of the evidence; (2) the trial court erred in granting Continental's motion for judgment notwithstanding the verdict, and (3) the trial court erred in granting a conditional new trial.

Continental in its statement of contested issues concedes that it made no motion either oral or in writing for a directed verdict in the principal cause, but seeks to excuse its failure by relying upon a written motion for a directed verdict in the cross-claim action filed against it by Wagner. It contends that the evidence so overwhelmingly favors it that a contrary verdict based on that evidence could not stand; that it proved by direct and positive evidence that as a direct result of defendant's wrongful conduct it sustained a certain and definite amount of damages for its lost profits and cost of repairs, and that it was entitled to a judgment n. o. v. for the amount of damages so proven. It contends that the court erred in denying its motion for a judgment n. o. v. for damages representing the difference in value between the four tubes as warranted and as actually delivered. Relative to the cross-complaint, Continental contends that because Wagner breached the warranties which it made as to the quality of the tubes, the latter was not entitled to recover on its counterclaim and the court erred in denying plaintiff's motion for judgment n. o. v.

Rule 50(b) of the Federal Rules of Civil Procedure in pertinent part provides:

"Not later than 10 days after entry of judgment, a party who has moved for a directed verdict may move to have the verdict and any judgment entered thereon set aside and to have judgment entered in accordance with his motion for a directed verdict; or if a verdict was not returned such party, within 10 days after the jury has been discharged, may move for judgment in accordance with his motion for a directed verdict. A motion for a new trial may be joined with this motion, or a new trial may be prayed for in the alternative."

Continental does not and could not dispute that this rule requires that a specific directed verdict motion must precede a motion for judgment notwithstanding the verdict.

A similar contention was made in Massaro v. United States Lines Co., 3 Cir., 307 F.2d 299, 303, wherein the court stated:

"United sought, as we have said, judgment n. o. v. against Northern Metal. But United made no motion for a directed verdict under Rule 50(a). We therefore do not have the question of the sufficiency of the evidence before us. Citing cases. A motion for a directed verdict is a prerequisite of a motion for judgment n. o. v."

In Glazer v. Glazer, 5 Cir., 374 F.2d 390, 400, the court, referring to defendants' motion for judgment n. o. v., stated:

"The defendants could not assert a ground not included in their motion for a directed verdict. Citing cases. We therefore test the judgment n. o. v. by the standards of deficiency asserted by the defendants in their motions for directed verdict and judgment n. o. v. and repeated in their appeal briefs."

In support of its contention that its motion for a directed verdict on the counterclaim was sufficient to excuse its failure to move for a directed verdict in the principal cause, Continental on brief states, "The motion on the counterclaim in effect contained the identical issues and grounds as charged by the plaintiff in its principal case: that the defendant had breached its express and implied warranties to manufacture and deliver tubes which were fit for the known purposes intended." Continental argues that the issues and legal questions contained in the motion on the counterclaim are the same as those in the principal cause.

We think the issues in the two causes of action were different. A breach of warranty as to the suitability of the tubes on the part of Wagner would constitute a defense to its counterclaim and afford a legal justification for Continental's refusal to pay the balance provided by the contract. Of course, Wagner's alleged breach of warranty as to the suitability of the tubes was also an issue in the principal cause, but there, Continental had the burden of proof not only that there was a breach of warranty but that such breach was the proximate cause of its damages and that it was free from contributory negligence.

Continental cites a number of cases in support of its thesis that its motion for a directed verdict on the counterclaim should be construed as a sufficient basis for the allowance of its motion for judgment n. o. v. in the principal cause. The courts in most of such cases were considering situations in which a motion for a directed verdict was made in one form or another and the sufficiency thereof was the issue involved. In the instant case,...