Dixon Ticonderoga Co. v. Winburn Tile Mfg. Co.

• Decision Date: 29 April 1996
• Docket Number: No. 95-812,95-812
• Citation: Dixon Ticonderoga Co. v. Winburn Tile Mfg. Co., 324 Ark. 266, 920 S.W.2d 829 (Ark. 1996)
• Parties: DIXON TICONDEROGA COMPANY, Appellant, v. WINBURN TILE MANUFACTURING COMPANY, Appellee.
• Court: Arkansas Supreme Court

Page 829

920 S.W.2d 829

324 Ark. 266

DIXON TICONDEROGA COMPANY, Appellant, v.WINBURN TILE MANUFACTURING COMPANY, Appellee.

No. 95-812.

Supreme Court of Arkansas.

April 29, 1996.

Appeal from Pulaski Circuit, Seventh Division, Hon. John B. Plegge, Judge.

H. William Allen, Little Rock, for appellant.

Leon Holmes, John E. Tull, III, Katharine R. Cloud, Little Rock, for appellee.

GLAZE, Justice.

Winburn Tile Manufacturing company filed this lawsuit against Dixon Ticonderoga Company, alleging negligence, breach of express and implied warranty and deceit in the sale of products called saggers.A sagger is a type of open-top box used in the manufacturing process of tile.Specifically, newly pressed tile is placed in saggers that are then stacked on small rail-type cars that ride on a track through a kiln where extreme heat is applied to glaze the tile.Because saggers must endure shifts in temperatures from around 2300 degrees to room temperature within a twenty-four-hour period, their life span is limited.

At trial, Winburn Tile offered proof in its attempt to show Dixon had intentionally misrepresented that its saggers were manufactured with a PT-250 formula, when, in fact, another mix, PT-250A, was being used.Winburn Tile contended that Dixon's pattern of fraudulent concealment injured Winburn in the sum of $99,682.45.The jury agreed, awarding compensatory damages in the full amount requested.The jury also awarded Winburn Tile punitive damages in the same amount.On appeal, Dixon claims the trial court erred in (1) submitting punitive damages to the jury and (2) refusing to grant a new trial due to an erroneous verdict for compensatory damages.

In its first argument, Dixon grudgingly concedes that, given this court's standard of review, Winburn Tile's evidence at trial was sufficient to prove its allegations of deceit.Nevertheless, Dixon argues deceit, alone, is insufficient to justify the imposition of punitive damages; it urges Winburn tile also had to show Dixon knew its deceit or misrepresentation would cause injury to Winburn.

Both parties agree the correct law is set out in AMI3d 2217, which was given the jury.That instruction reads as follows:

In addition to compensatory damages for any actual loss that Winburn Tile may have sustained, it asks for punitive damages from the Dixon Company.Punitive damages may be imposed to punish a wrong-doer and to deter others from similar conduct.In order to recover punitive damages from the Dixon Company, Winburn Tile has the burden of proving either:

First, that Dixon Ticonderoga knew or ought to have known, in light of the surrounding circumstances, that its conduct would naturally and probably result in damage and that it continued such conduct in reckless disregard of the consequences from which malice may be inferred; or

Second, that Dixon Ticonderoga intentionally pursued a course of conduct for the purpose of causing damage;

Or both.

You are not required to assess punitive damages against the Dixon Company, but you may do so if justified by the evidence.(Emphasis added.)

In referring to the first prong of AMI 2217 above, Dixon argues that, before punitive damages could be awarded, Winburn Tile had the burden to show Dixon knew or should have known that its deceit would cause Winburn injury, and Dixon continued its deceit in reckless disregard of the consequences.Dixon claims no evidence of such malicious knowledge or conduct was shown on its part.In sum, Dixon admits it had originally sold and shipped Winburn Tile saggers comprised of one mix, PT250, and later changed that formula or mix to PT250A without informing Winburn Tile, but Dixon argues no evidence was introduced showing it intended Winburn any harm when making that change in formula.To the contrary, Dixon relates it offered evidence that it had some problems of thermal shock with its original PT250 formula, and it was merely trying to improve its product with the new PT250A mix.In reviewing the record, we believe there is strong evidence to support the theory that Dixon not only knew it had misrepresented its product to Winburn, but also it continued selling and shipping that defective product in reckless disregard of the consequences.That being so, malice could have been inferred, thereby entitling Winburn to the AMI 2217 and its request for punitive damages.SeeStein v. Lukas, 308 Ark. 74, 823 S.W.2d 832(1992);see alsoAllred v. Demuth, 319 Ark. 62, 890 S.W.2d 578(1994).

Winburn Tile had been using saggers purchased from two companies, Ferro Corporation and Shenango Corporation, when Dixon approached Winburn about buying its saggers, which were composed of the PT250 formula.Winburn began purchasing Dixon's product in August 1987, and carefully monitored Dixon's first shipments to determine if the quality was equal to that of Ferro's and Shenango's saggers.Dixon's second shipment in October 1987, revealed serious problems, but a replacement shipment was sent in January 1988, and no further problems were detected--at least not until 1989.Winburn, being satisfied with Dixon's saggers, used all saggers from the three companies interchangeably.

Unknown to Winburn, Dixon developed a new sagger...