General Elec. Capital Corp. v. Rauch, 21741

• Decision Date: 19 May 1998
• Docket Number: No. 21741,21741
• Citation: 970 S.W.2d 348
• Parties: 35 UCC Rep.Serv.2d 791 GENERAL ELECTRIC CAPITAL CORP., Plaintiff, v. Thomas RAUCH d/b/a Quality House Printing, Defendant/Third Party Plaintiff-Respondent, v. Carl TEMPLETON d/b/a Midwest Office Systems and Templeton's, Inc., Third Party DefendantsAppellants.
• Court: Missouri Court of Appeals

Page 348

970 S.W.2d 348 35 UCC Rep.Serv.2d 791 GENERAL ELECTRIC CAPITAL CORP., Plaintiff,
v.
Thomas RAUCH d/b/a Quality House Printing, Defendant/Third
Party Plaintiff-Respondent,
v.
Carl TEMPLETON d/b/a Midwest Office Systems and Templeton's,
Inc., Third Party DefendantsAppellants. No. 21741. Missouri Court of Appeals,
Southern District,
Division Two. May 19, 1998.

Page 350

William Petrus, Springfield, for Appellant.

J. Kevin Checkett, Checkett & Pauly, P.C., Carthage, for Respondent.

BARNEY, Judge.

Carl Templeton and Templeton's Inc. d/b/a Midwest Office Systems, Third Party Defendants (Sellers), appeal from the trial court's judgment awarding $128,434.00 in damages to Thomas Rauch d/b/a Quality House Printing, Third Party Plaintiff (Buyer). See Rule 52.11, Missouri Court Rules (1992).

The judgment relates to claims made by Buyer in Counts I and II of his petition against Sellers for breach of warranty and negligent misrepresentation, respectively, in connection with Sellers' activities as vendor or "supplier" of equipment for two equipment leases between Buyer and Lease America Corporation, predecessor in interest to General Electric Capital Corporation.

In reviewing the facts, we do so in the light most favorable to the judgment. Gibson v. Adams, 946 S.W.2d 796, 799 (Mo.App.1997).

This suit was initiated in August 1992, by General Electric Capital Corporation against Buyer for breach of the two equipment leases. The first lease, signed March 20, 1991,

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consisted of a computer system and related hardware and software, referred to as "front end" equipment. The second lease, signed April 18, 1991, related to a "Birmy 300 Imagesetter." As more fully explained below, soon after executing the second lease, Buyer became dissatisfied with the output performance of the combined package of equipment. Buyer then refused to make payments in accordance with the terms of the two leases and this suit followed. We glean from the record that General Electric Capital Corporation obtained a consent judgment against Buyer based on a settlement price of $73,834.00. ¹

Buyer has operated its printing business in Aurora, Lawrence County, Missouri, for approximately twenty years. Buyer publishes various maps, directories and other printed products. Prior to 1991, in preparing to print these various publications Buyer would hand cut and paste up art work. He then sought to speed up the process so as to "set type fast," particularly in the preparation of high school directories. Consequently, Buyer decided to employ a computer typesetting system to automate this process.

Seller Carl Templeton is the Vice President of Midwest Office Systems and an officer in Templeton's, Inc., owner of Midwest Office Systems, located in Springfield, Missouri. In 1990 or 1991, Seller Carl Templeton met with Buyer and discussed the purchase of a system Buyer needed to automate his printing process. Buyer showed Seller Carl Templeton the kind of materials and directories he needed to publish. The equipment was to replace Buyer's process of hand cutting images with the automation of a modernized printing program.

With the new system, there would be a "stripping" program which would place the pages on the appropriate places to be set on a press sheet. It was anticipated that Buyer would be able to get a disk from its customers, scan the logos, and place them on the press sheet.

Buyer subsequently entered into two leases with Lease America Corporation, the predecessor in interest to General Electric Capital Corporation, through the assistance of Sellers as supplier of the equipment.

The first lease was for a front end computer system and attendant hardware/software, and the second lease provided for a Birmy 300 Imagesetter.

Buyer informed Seller Carl Templeton that he would not enter into the two leases unless Sellers provided Buyer with "some sort of guarantee that it's (the Birmy 300) going to work."

Seller Carl Templeton then delivered to Buyer a letter, dated April 25, 1991, on Midwest Office Systems' stationery, which recited that Sellers would "pick up" the Birmy 300 and continue to make Buyer's lease payments if the imagesetter failed to perform as warranted. Upon receipt of this letter, Buyer signed the second lease agreement. ²

After the Birmy 300 Imagesetter was delivered and installed, Buyer attempted to output its printing process. However, the system failed to function properly. Consequently, Buyer was unable to complete his 1991 High School Coaches' Directory using the Birmy 300 Imagesetter. Instead, Buyer had to rely on his standard, labor intensive method to make production.

Eventually, Buyer acquired a BridgIt imaging system that he used in conjunction with the front end equipment provided by the first lease agreement, as augmented by a

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Macintosh computer seasonably provided by Sellers free of charge. ³ Nevertheless, as a consequence of his difficulties with the Birmy 300 Imagesetter, Buyer refused to make payments under both leases and this litigation ensued.

In the trial court's judgment, it specifically found that Sellers breached "express warranties" as to the "fitness of the computer and [Birmy 300] imaging system" and "negligently misrepresent[ed]" the leased equipment's performance ability, per counts I and II of Buyer's petition. The trial court entered its judgment ⁴ assessing damages against both Carl Templeton, individually, and Templeton's Inc., as follows:

On appeal, Sellers assign five points of trial court error. First, Sellers maintain that the trial court erred in entering judgment for breach of warranty against Seller Carl Templeton in his individual capacity. Second, they maintain that there was insufficient evidence supporting the trial court's judgment against Sellers for the purported negligent misrepresentation made by Seller Carl Templeton to Buyer relating to the performance of the Birmy 300 Imagesetter. Third, they maintain that the trial court erred in entering judgment against Sellers on Buyer's breach of express and implied warranties claims because it was not supported by the evidence. Fourth, they maintain that the trial court erred in determining what constituted Buyer's damages for the purported breach of warranty by Sellers. Fifth, they maintain that the trial court erred in determining what constituted Buyer's damages for the alleged negligent misrepresentation by Carl Templeton.

Our review of the record convinces us that Sellers and Buyer entered into a commercial transaction wherein Sellers made certain warranties and representations to Buyer concerning the equipment comprising the two leases in question. See § 400.1-102(3); ⁵ Central Prod. Credit Assoc. v. Hopkins, 810 S.W.2d 108, 114 (Mo.App.1991); 2 JAMES J. WHITE AND ROBERT S. SUMMERS, UNIFORM COMMERCIAL CODE, § 13-3, at 5 (4th ed.1995).

In our review of the law in this area, the weight of the authority appears to hold that "[t]he use of the term 'transaction' rather than 'sale' in UCC § 2-102 makes it clear that Article 2 [Sales] is not to be confined merely to those transactions in which there is a 'sale,' that is, a transfer of title." 1A RONALD A. ANDERSON, ANDERSON ON THE UNIFORM COMMERCIAL CODE § 2-102:6, at 521 (3rd ed.1996).

In their respective briefs, Sellers and Buyer acknowledge having entered into a commercial transaction as vendors and vendee for the "purchase" of equipment, even though, technically, title never passed from Sellers to Buyer. In apparent recognition of the Sellers and Buyer's relationship as vendors/vendee, the two equipment leases in

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question make specific reference to the "supplier" of the equipment in the financing instrument as being the "vendor."

In view of the foregoing, we will apply Missouri's statutory provisions relating to Article 2 (Sales) in conjunction with our review of Buyer's allegations of trial court error. See §§ 400.2-102-.2-725.

In a court-tried case, such as this, the judgment of the trial court will be affirmed by the appellate court unless there is no substantial evidence to support it, it is against the manifest weight of the evidence, or it erroneously declares or applies the law. State ex rel. Boston v. Tuckness, 958 S.W.2d 325, 326 (Mo.App.1998); see also Iota Mgmt. Corp. v. Boulevard Inv...