Data Processing Services, Inc. v. L.H. Smith Oil Corp.

• Citation: 492 N.E.2d 314
• Decision Date: 28 April 1986
• Docket Number: No. 4-485A97,4-485A97
• Parties: 1 UCC Rep.Serv.2d 29 DATA PROCESSING SERVICES, INC., Appellant (Defendant Below), v. L.H. SMITH OIL CORPORATION, Appellee (Plaintiff Below).
• Court: Indiana Appellate Court

Page 314

492 N.E.2d 314

1 UCC Rep.Serv.2d 29

DATA PROCESSING SERVICES, INC., Appellant (Defendant Below), v. L.H. SMITH OIL CORPORATION, Appellee (Plaintiff Below).

No. 4-485A97.

Court of Appeals of Indiana,

Fourth District.

April 28, 1986.

Bruce M. Pennamped, Forbes, Kias & Pennamped, P.C., Indianapolis, for appellant.

Aaron E. Haith, Indianapolis, for appellee.

CONOVER, Judge.

Defendant-Appellant Data Processing Services, Inc. (DPS), appeals an adverse breach of contract judgment in favor of plaintiff-appellee, L.H. Smith Oil Corporation (Smith).

We affirm.

ISSUES

The issues presented for review, restated, are:

1. Whether Smith's claim was barred for failure to assert it as a compulsory counterclaim in an earlier action?

2. Whether the contract was for 'goods' and subject to the sales provisions of the Uniform Commercial Code ¹ or for 'services' and therefore governed by common law principles?

3. If subject to article 2 of the Uniform Commercial Code (UCC), whether DPS was entitled to notice of breach before legal action was taken?

4. Whether Smith's alleged 'judicial admission' waived its claim against DPS and discharged any breach?

5. Whether DPS was excused from performance by Smith's refusal to make payment?

6. Whether evidence was properly admitted?

7. Whether damages were properly measured?

8. Whether DPS was properly denied recovery?

FACTS

DPS is in the business of custom computer programming. Smith sells petroleum products. The business relationship between these parties occurred between 1979 and 1981. Smith and DPS entered into an oral agreement ² under which DPS was to develop computer software for Smith's IBM System-32 computer. Later, DPS was engaged to develop and implement a data processing system for Smith's new IBM System-34 computer. ³ DPS was to develop an accounting system to meet Smith's specific needs.

In 1981, after having paid several billings submitted by DPS, Smith refused to pay DPS's billing of $7,166.25. DPS sued Smith in Marion Municipal Court (Municipal Court). DPS there alleged breach of contract and open account. Smith answered, then later filed a petition to amend its answer to assert a counterclaim. This petition was denied. Smith then sued DPS in Marion Superior Court (Superior Court), asserting substantially the same claims as those it would have asserted had the Municipal Court granted its petition to amend. Smith moved the Superior Court to consolidate the cases. DPS then moved to dismiss Smith's complaint. DPS's motion to dismiss was denied and the causes were ordered consolidated.

Following trial before the court without the intervention of a jury, judgment was rendered in Smith's favor. Upon timely motion by DPS the trial court entered findings of fact and conclusions of law. DPS appeals.

Additional facts necessary to resolve the issues presented are discussed below.

DISCUSSION AND DECISION

When findings of fact and conclusions of law are requested by the parties, we will not set aside the judgment premised thereon unless it is clearly erroneous, i.e., unless we are definitely and firmly convinced the trial court reached the wrong conclusion. The findings must disclose a valid basis for the result reached and the evidence must support each specific finding of material fact, with deference given to the court where the evidence is conflicting. Campins v. Capels (1984), Ind.App., 461 N.E.2d 712, 717; Town of Rome City v. King (1983), Ind.App., 450 N.E.2d 72, 77. We may not add to the findings by way of presumption or inference. Town of Rome City, supra. The findings must disclose a valid legal basis which supports the judgment entered below. Campins, supra.

We will not reweigh the evidence nor assess the credibility of witnesses. We will affirm if there is sufficient evidence of probative value as reflected in the court's findings to support the decision. We view the evidence and the reasonable inferences to be drawn therefrom in a light most favorable to the judgment. Campins, supra.

Special findings are those which contain all the facts necessary for recovery by the party in whose favor the conclusions of law are found. They should contain a statement of the ultimate facts from which the trial court determined the legal rights of the parties. Shrum v. Dalton (1982), Ind.App., 442 N.E.2d 366, 371; Hunter v. Milhous (1973), 159 Ind.App. 105, 121, 305 N.E.2d 448, 458. The purpose of special findings is to provide the parties and the reviewing court with a clear illustration of the theory upon which the case was decided, thus facilitating review. Kimbrell v. City of Lafayette (1983), Ind.App., 454 N.E.2d 73, 74; Morphew v. Morphew (1981), Ind.App. 419 N.E.2d 770, 773. Findings are adequate if they are sufficient to support a valid legal basis for the result reached by the trial court. Kimbrell, supra; Sandoval v. Hamersley (1981), Ind.App., 419 N.E.2d 813, 816. The trial court need not recite the evidence in detail as long as the ultimate facts found are stated in the findings. Sandoval, supra; cf. Salk v. Weinraub (1979), 271 Ind. 115, 118, 390 N.E.2d 995, 997-998.

With this standard of review in mind we turn to the issues raised by Smith.

1. Denial of DPS's Motion to Dismiss Smith's Complaint

DPS contends the trial court erred when it denied DPS's motion to dismiss Smith's complaint. DPS argues Smith's claim was a compulsory counterclaim in the Municipal Court action. The Municipal Court denied Smith's motion to amend its answer to assert its counterclaim as untimely. DPS argues failure to dismiss Smith's Superior Court complaint permitted Smith to circumvent the requirement of timely assertion of compulsory counterclaims, thereby doing indirectly what it could not do directly.

Smith contends DPS's motion to dismiss was properly denied because (a) Smith's claim was not mature when it filed its answer in Municipal Court, thus the claim was not a compulsory counterclaim and Smith was not required to plead it; and (b) no judgment had yet been entered in Municipal Court, thus Smith's subsequent Superior Court claim was not barred.

The trial court did not err when it denied DPS's motion to dismiss Smith's Superior Court complaint.

Trial Rule 13(A) provides in part:

(A) Compulsory Counterclaims. A pleading shall state as a counterclaim any claim which at the time of serving the pleading the pleader has against any opposing party, if it arises out of the transaction or occurrence that is the subject-matter of the opposing party's claim and does not require for its adjudication the presence of third parties of whom the court cannot acquire jurisdiction. ...

In Daube and Cord v. LaPorte County Farm Bureau Co-op (1983), Ind.App., 454 N.E.2d 891, our Third District discussed the conditions under which Trial Rule 13(A) bars a subsequent claim due to failure to assert it as a compulsory counterclaim in an earlier action. Under T.R. 13(A), Daube noted, a claim is barred as an unpled compulsory counterclaim if it was not pleaded timely and

1. it arose out of the same transaction or occurrence which was the subject of the initial claim;

2. it was mature within the time of pleading; and

3. there were no third parties over whom the trial court lacked jurisdiction.

Further, following federal precedent, the Third District asserted a fourth condition. That is, a subsequent claim is not barred unless the earlier claim has been reduced to judgment. Daube and Cord, 454 N.E.2d at 893. Our Second District also has decided the subsequent claim is not barred unless the first is reduced to judgment. See, Crider v. State Exchange Bank of Culver (1986), Ind.App., 487 N.E.2d 1345, 1349; Metropolitan Real Estate Corp. v. Frey (1985), Ind.App., 480 N.E.2d 267, 271.

Here DPS's Municipal Court claim had not been reduced to judgment when Smith filed its Superior Court action. Thus, Smith's claim was not barred. The Superior Court did not err when it denied DPS's motion to dismiss.

2. Application of the Uniform Commercial Code

The trial court found Smith contracted for the development and the delivery of a "program" by DPS. It determined the program was a specially manufactured good within the meaning of IND.CODE 26-1-2-501(1)(a) and (b). ⁴ I.C. 26-1-2-501(1)(a) and (b) defines neither 'goods' nor 'specially manufactured goods.' However, these terms are defined in another section of the UCC. See, I.C. 26-1-2-105(1), infra.

DPS contends the court erred when it determined the contract was for a "good", subject to the provisions of Art. 2 of the UCC. DPS asserts it was supplying "services", not "goods." Further, DPS argues there was no evidence of what product it was to supply to Smith.

Defining 'goods', I.C. 26-1-2-105(1) of the UCC reads in part

Sec. 105. (1) "Goods" means all things (including specially manufactured goods) which are movable at the time of identification to the contract for sale other than the money in which the price is to be paid, investment securities (Article 8) and things in action. ...

Heretofore this court has not been called upon to determine whether a contract to provide computer programming is a contract for the sale and purchase of goods and thus subject to the provisions of article 2 of the UCC, or one for the performance of services, and thus subject to common law principles.

We note in passing the Second District of our court has disagreed with us concerning the proper mode of analysis when we are faced with the question of whether the UCC or the common law applies to contracts for the mixed sale of goods and services.

This district bifurcates its analysis of such transactions. Stephenson v. Frazier (1980), Ind.App., 399 N.E.2d 794, 797, trans. denied (1981), Ind., 425 N.E.2d 73 (opinion denying transfer discussed the standard of review for T.R. 41(B) motions). That is, cases involving actual goods as defined by I.C. 26-1-2-105 will be analyzed as falling within the purview of Article 2 of the UCC, whereas, cases not falling within...