Fire Association of Phila. v. Allis Chalmers Mfg. Co.

• Decision Date: 14 March 1955
• Docket Number: Civ. A. No. 775.
• Citation: 129 F. Supp. 335
• Parties: FIRE ASSOCIATION OF PHILADELPHIA, a corporation; Merchants Fire Assurance Corporation of New York, a corporation; Mercury Insurance Company, a corporation; Michigan Fire & Marine Insurance Company, a corporation; North River Insurance Company, a corporation; Philadelphia Fire & Marine Insurance Company, a corporation; Springfield Fire & Marine Insurance Company, a corporation; Transcontinental Insurance Company, a corporation, Plaintiffs, v. ALLIS CHALMERS MANUFACTURING COMPANY, a corporation, Defendant.
• Court: U.S. District Court — Northern District of Iowa

129 F. Supp. 335

FIRE ASSOCIATION OF PHILADELPHIA, a corporation; Merchants Fire Assurance Corporation of New York, a corporation; Mercury Insurance Company, a corporation; Michigan Fire & Marine Insurance Company, a corporation; North River Insurance Company, a corporation; Philadelphia Fire & Marine Insurance Company, a corporation; Springfield Fire & Marine Insurance Company, a corporation; Transcontinental Insurance Company, a corporation, Plaintiffs, v. ALLIS CHALMERS MANUFACTURING COMPANY, a corporation, Defendant.

Civ. A. No. 775.

United States District Court, N. D. Iowa, W. D.

March 14, 1955.

Sylvester F. Wadden, Harry H. Miller, of Sifford & Wadden, Sioux City, Iowa, for plaintiffs.

Wiley E. Mayne, of Shull & Marshall, Sioux City, Iowa, John H. Schlosser, Milwaukee, Wis., for defendant.

GRAVEN, District Judge.

The defendant is a corporation organized and existing under the laws of the State of Delaware. All of the plaintiffs are corporations. They were organized and exist under the laws of States other than Delaware. The plaintiffs and the defendant have all qualified to do business in Iowa. The amount in controversy, exclusive of interest and costs, is in excess of $3,000.

The Iowa Public Service Company is a corporation organized and existing under the laws of the State of Iowa. It is engaged, among other things, in the generation, transmission, sale, and distribution of electricity in Northern Iowa and elsewhere. At Waterloo, Iowa, at what is known as Maynard Station, it maintains and operates an electric generating plant. In 1951 it completed the construction of a new switch house at its Maynard Station. For a considerable period of time in advance of the completion of the switch house, the Iowa Public Service Company had been planning for and negotiating for the purchase of electrical equipment to be placed in it.

The defendant is engaged, among other things, in the manufacture and sale of electrical equipment. Its principal place of business is at Milwaukee, Wisconsin. Its plant for the manufacture of electrical equipment is located at Boston, Massachusetts. It maintains a District Office at Kansas City, Missouri. J. F. Pritchard & Company was the agent of the Iowa Public Service Company in connection with the purchase and installation of the electrical equipment in the new switch house. The Iowa Public Service Company purchased from the defendant for use in the new switch house certain electrical equipment known as switchgear equipment. That equipment was installed by the Iowa Public Service Company. The equipment was contained in nine metal cubicles placed in a row in the switch house. The cubicles are referred to by Numbers 1 to 9.

On the morning of April 14, 1952, around 7:20 A. M., an employee of the defendant, in connection with the routine operation of the Station, operated the switch to put the equipment contained in Cubicle No. 2 in operation. In about ten minutes there occurred in the switch house what is described as fire and explosion followed by complete power failure. The mishap had its origin in Cubicle No. 2 due to unusually high heat that had been generated in it. The high heat almost completely destroyed Cubicle No. 2 and the equipment contained therein. It damaged Cubicles No. 1 and No. 3 so badly that they had to be replaced. Extensive fire and heat damage was also caused to the switch house and other equipment therein.

The plaintiffs had written insurance policies insuring the Iowa Public Service Company against losses of the kind occasioned by the mishap. They paid the Iowa Public Service Company the sum of $28,842.32 in settlement of those losses. In the subrogation receipts it is recited that the payments were made by the plaintiffs to the Iowa Public Service Company "for loss and damage by fire" paid by the plaintiffs. The sum did not include Cubicle No. 2 and the equipment contained therein which was replaced by the defendant at a cost of $8,165 without charge to the Iowa Public Service Company. The plaintiffs, as subrogees of the Iowa Public Service Company, seek in this action to recover the sum of $28,842.32 so paid by them. It is the claim of the plaintiffs that the defendant was guilty of negligence in the manufacture and inspection of the electrical equipment contained in Cubicle No. 2. The defendant denies the charge of negligence. The defendant also raises an affirmative defense. It contends that the equipment in question was purchased from it by the Iowa Public Service Company under a certain contract or contracts and that under a responsibility limitation provision contained therein the Iowa Public Service Company could not assert the claim now sought to be asserted by the plaintiffs and that the plaintiffs as subrogees of the Iowa Public Service Company may not do so. The plaintiffs deny that the equipment in question was purchased under the contract or contracts referred to by the defendant. In the alternative, it is the claim of the plaintiffs that if the Iowa Public Service Company did purchase the equipment in question under the contract or contracts in question, the responsibility limitation provision contained therein is invalid. Further, in the alternative, it is the claim of the plaintiffs that if the Iowa Public Service Company did purchase the equipment in question under the contract or contracts referred to, and the responsibility limitation provision contained therein is valid, yet the claim herein asserted does not come within the scope of that provision. The contention of the defendant that the plaintiffs may not assert the claim they now seek to assert and the counter-contentions of the plaintiffs in that connection will next be considered. Since J. F. Pritchard & Company acted for the Iowa Public Service Company in connection with its purchase of the electrical equipment in question, the connection of J. F. Pritchard & Company with the purchase will be referred to as that of the Iowa Public Service Company.

It appears that the Iowa Public Service Company had sometime prior to August 17, 1948, sent to the defendant what is referred to as "purchaser's specification No. P-1251 dated 5/12/48," relating to the equipment for its Maynard Station. In response thereto, the defendant prepared specifications for the switchgear equipment of the type and kind desired by the Iowa Public Service Company. These specifications were dated August 17, 1948, and were labelled No. I-19-8A. On or about February 4, 1949, the defendant mailed to the Iowa Public Service Company a document entitled "Proposal and Contract." Submitted with and as a part of the "Proposal and Contract" were the specifications dated August 17, 1948, and labelled No. I-19-8A. On the first page of the "Proposal and Contract" the following appears in typewriting:

"This proposal covers one set of 15 KV Indoor Metal-Clad Switchgear as described and set forth in specification I-19-8A, submitted with proposal dated August 17, 1948."

In the "Proposal and Contract" there are a number of typewritten provisions. Most of them relate to the contract price for the electrical equipment described. In the provision which is designated as the "Base Proposal" the "contract price" is given as $46,669 plus $1,982 for a "Neutral Breaker." There is also included in the provisions relating to the "contract price" a number of Alternates designated as Alternate No. 1 through Alternate No. 6 inclusive. In Alternate No. 4 the "contract price" is given as $47,885 plus $1,982 for a "Neutral Breaker," or a total of $49,867. Other typewritten provisions in the "Proposal and Contract" relate to delivery and payment. The balance of the "Proposal and Contract" consists of printed provisions. Among the printed provisions is a responsibility limitation provision. The "Proposal and Contract" is on a standard form used by the defendant in connection with its sales. The "Proposal and Contract" has lines at the end for the signature of the defendant. At the end the following appears:

"Acceptance "The foregoing contract is hereby accepted this ____ day of ____, 19__ "(Purchaser's) (Firm Name) ___________________ "By ____________________________ "Title ________________________"

The "Proposal and Contract" contains the following provision:

"This contract must be accepted by the Purchaser and returned to the Company within 30 days from its date, and shall not be binding upon the Company until so accepted and returned, and approved in writing by an executive officer of the Company."

The "Proposal and Contract" sent to the defendant was signed in behalf of the defendant by C. J. Schutty. That signed copy was received by the Iowa Public Service Company on March 4, 1949.

On March 10, 1949, the Iowa Public Service Company signed a document entitled "Purchase Order" and mailed it to the defendant at its Kansas City District Office. On the front of that document there appears, among other matters, the following:

"Purchase Order To | Allis-Chalmers Mfg. Co. | Order No. 251-43 | | > Waldheim Building &gt | | | Kansas City 6, Missouri | Req. No. 7477 Farnsworth:rv Date Mar. 10, 1949 Job No. P-1251 Acct. No. see below Terms: Net cash 30 das. Mark Shipping Point By F. O. B. frt. allowed. Via prepaid ======================================================================= Item Quantity Description Price ----------------------------------------------------------------------- Confirmation A/C# 1 1 15-KV Indoor Metal-Clad Type B/M 12.05 KO Switchgear as described 12-5 and set forth in Allis-Chalmers Item #32 Specification No. I-19-8a Alternate #1, Revised August 17 1948, and Allis-Chalmers Proposal dated February 4, 1949 Alternate No. 4, and to consist of 9 units 36" wide, with total overall dimensions of 27 ft. long, 82" deep and 118½" high. * * * ========================================================================= Shipment after Jan. 1, 1950. Will Notify Preferred Date Soon." ------------------...