Gallagher v. Viking Supply Corp., 2

• Decision Date: 03 March 1966
• Docket Number: CA-CIV,No. 2,2
• Citation: 411 P.2d 814,3 Ariz.App. 55
• Parties: , 15 A.L.R.3d 1 Frederick James GALLAGHER, d/b/a Fred J. Gallagher Construction Co. and Fidelity & Casualty Co. of New York, a New York corporation, Appellants, v. VIKING SUPPLY CORPORATION, a Texas corporation, Appellee. * 72.
• Court: Arizona Court of Appeals

Page 814

411 P.2d 814

3 Ariz.App. 55, 15 A.L.R.3d 1

Frederick James GALLAGHER, d/b/a Fred J. Gallagher Construction Co. and Fidelity & Casualty Co. of New York, a New York corporation, Appellants, v. VIKING SUPPLY CORPORATION, a Texas corporation, Appellee. ^*

No. 2 CA-CIV 72.

Court of Appeals of Arizona.

March 3, 1966.

Johnson, Darrow, D'Antonio, Hayes & Morales, by Lawrence P. D'Antonio, Tucson, for appellants.

Chandler, Tullar, Udall & Richmond, by James L. Richmond, Tucson, for appellee.

HATHAWAY, Judge.

Appellants (defendants below) appeal from a judgment entered in superior court, Pima county, Arizona, in favor of appellee (plaintiff below). In the spring of 1960, the City of Tucson awarded a contract for the installation of water mains to Gallagher. The contract, referred to as Contract I-1, specified, inter alia, that all cement asbestos pipe installed be Class 150 pipe of the following or equal:

Johns-Manville, ..... 'Ringtite'

Keasbey and Mattison Century, ..... 'Fluid-tite'

S. A. Eternit, ..... 'Selftite' Viking, a pipe supplier, was familiar with the specifications of Contract I-1 concerning cement asbestos pipe, and on May 4, 1960, sent a letter to Gallagher offering to sell 27,670 feet of 8-inch cement asbestos pipe at $2.01 per foot. Gallagher accepted by a letter dated June 7, 1960, in which he reminded Viking that all materials had to conform to the specifications set forth in Contract I-1. This contract further provided:

'After execution of the Contract changes of brand named, trade named, trade marked, patented articles, or any other substitutions will be allowed only on the Superintendent's written order * * *

'Whenever the words * * * 'OR EQUAL' are used * * * it is understood that it is the judgment, discretion, or decision of the Superintendent to which reference is made.

'All materials and articles of any kind necessary for this work are subject to the approval of the Superintendent and his judgment and decision shall be final and conclusive.'

On or about June 11, 1960, Gallagher received the first shipment of pipe from Viking and noticed that it was a brand named Asbestolite. Gallagher testified that he called Viking's Arizona representative who assured him that the pipe met the specifications as set forth in Contract I-1, whereupon Gallagher proceeded to install the pipe. Although the contract required that an open-trench procedure be followed for testing ability to withstand pressure, the pipe was tested after the trenches were closed. Gallagher testified that he did not use the open-trench procedure because the City asked him not to in order to save time and also because there was no reason to as 'pipe is pipe.'

Gallagher received payment only after the pipe had been tested and accepted by the City. The first pressure test was conducted after at least 5,000 feet of pipe had been installed and completely covered by dirt. Initially, Gallagher could not get a satisfactory test as leaks had developed. He ultimately succeeded, however, after locating and repairing the leaks. When approximately 11,000 feet of Asbestolite had been installed, the City purportedly advised Gallagher to stop using Asbestolite. Gallagher switched to another brand of pipe which he procured from another supplier as Viking was unable to supply it. An inspector for the City who was called as a defense witness unequivocally denied having told Gallagher to discontinue the use of Asbestolite.

Viking filed suit against Gallagher and the bonding company to recover an alleged balance due for the materials delivered to and used by Gallagher in the performance of the subject contract. Gallagher answered and counterclaimed for damages alleging (1) breach of contract by Viking, (2) that the pipe furnished was not of merchantable quality, (3) it was not fit for the particular use or purpose intended, (4) it was not in accordance with the description required by Contract I-1 and (5) that Viking had perpetrated a fraud upon Gallagher. The case was tried to a jury which returned a verdict in Viking's favor both as to its claim and Gallagher's counterclaim. The following issues were resolved in Viking's favor:

1. Whether Viking was entitled to compensation for the pipe delivered to Gallagher.

2. Whether the pipe delivered by Viking to Gallagher was in compliance with the requirements of Contract I-1.

3. Whether the pipe was defective.

Defendants have set forth nineteen assignments of error which fall into the following categories:

(a) Trial court's refusal to direct a verdict for the defendants at the close of plaintiff's case.

(b) Trial court's dismissal of defendants' fraud claim.

(c) Admission or rejection of evidence.

(d) Instructions.

We shall consider the numerous assignments of error under the applicable general category.

Motion for Directed Verdict

Defendants moved for a directed verdict at the close of plaintiff's case on the ground that plaintiff failed to make out a prima facie case. We are of the opinion that the trial court was correct in refusing to direct a verdict. Defendants contend, and correctly so, that the probata must correspond to the allegata, but we find no failure in this respect. The plaintiff alleged in substance the furnishing, at Gallagher's request, of certain pipe to be used in the performance of a contract with the City at a price agreed upon by plaintiff and Gallagher and that a certain sum was still due and owing to the plaintiff. The defendants' answer admitted that 'on or about June 7, 1960, Plaintiff and Defendant Gallagher entered into a contract whereby Plaintiff agreed to supply to Defendant Gallagher certain pipes * * * to be used by Defendant Gallagher in the performance of a certain contract * * * known as Contract I-1.'

The defendants argue that the plaintiff failed to establish a contract for Asbestolite and the reasonable value thereof and therefore failed to sustain its burden of proof. This argument is without merit. The responsive pleading filed by defendants admitted the existence of a contract for the sale of 'certain pipe.' The contract of the parties, evidenced by Viking' written offer and Gallagher's written acceptance, established the price of the goods sold and delivered to Gallagher. The correctness of the invoices for pipe delivered, with certain exceptions, was admitted by Gallagher in answers to interrogatories submitted by the plaintiff. Viking's president testified that credit had been given to Gallagher as to the excepted items and payments on account.

The plaintiff's proof corresponded with the allegations of the complaint, to wit, that pipe was furnished by the plaintiff to Gallagher at his request and that a certain sum remained unpaid. It did not devolve upon plaintiff to prove that Asbestolite met the 'or equal' requirement of Contract I-1 nor to prove a contract for the sale of pipe brand named Asbestolite. Whether the pipe failed to meet the specifications of Contract I-1 was defensive matter to be established by Gallagher who had alleged Viking's breach of contract as an affirmative defense.

Dismissal of Fraud Claim

The counterclaim seeking damages for fraud on the part of Viking was based on an alleged representation by Viking's agent that the pipe shipped to Gallagher was within and met the specifications as set forth in Contract I-1. It is a well-settled principle that there can be no actionable fraud without a concurrence of all of the nine essential elements. Wilson v. Byrd, 79 Ariz. 302, 307, 288 P.2d 1079 (1955); Cullison v. Pride O'Texas Citrus Association, 88 Ariz. 257, 259, 355 P.2d 898 (1960). A failure to prove any one of the elements is fatal. Cullison v. Pride O'Texas Citrus Association, supra.

One essential element of actionable fraud is the falsity of the alleged representation. We find that proof of this element is lacking. The record discloses the contrary--that Asbestolite met the 'or equal' classification set forth in Contract I-1 as it was accepted by the City on May 10, 1960, approximately one month before delivery to Gallagher. The defendants having failed to prove the falsity of the representation, the trial court quite properly withdrew the fraud issue from the jury. Submission to the jury for speculation as to the existence of the requisite elements would have been improper. See Wilson v. Byrd, supra.

Since the trial court correctly withdrew the fraud issue, we need not consider the assignment of error relative to the failure to instruct thereon.

Evidence

Six assignments of error are devoted to the admission or exclusion of evidence. A letter written to Viking on Gallagher's behalf by his former attorney was admitted into evidence over defendants' objection. The letter referred to the amount Gallagher felt he was entitled to offset against Viking's bill as reimbursement for pipe defects as follows:

'The legitimacy of the above claimed failures can be verified by contacting the City of Tucson. The total actual expense of these failures amounts to $6,115.00.'

Defendants claim that the letter should have been excluded as it was an offer of compromise. We agree that a statement which is in the nature of a settlement proposal or offer should be excluded. Udall, Arizona Law of Evidence § 97. However, a letter which demands an amount for an alleged claim cannot be excluded under this theory. It is admissible as an admission against interest to show that the amount claimed was less than the amount claimed in the counterclaim. J. & B. Motors, Inc. v. Margolis, 75 Ariz. 392, 395, 257 P.2d 588, 38 A.L.R.2d 946 (1953). The determining factor is the form of the statement, whether it is explicit and absolute. If its purpose is to declare a fact really to exist, rather than to concede a fact hypothetically in order to effect a settlement, the statement is admissible. 4 Wigmore, Evidence § 1061 (3d ed. 1940). Applying this criterion, the letter was properly admitted as an admission against interest. It in nowise...