Gulf American Industries v. Airco Indus. Gases

• Decision Date: 01 June 1990
• Docket Number: No. 89-CA-709,89-CA-709
• Citation: Gulf American Industries v. Airco Indus. Gases, 573 So.2d 481 (La. App. 1990)
• Parties: GULF AMERICAN INDUSTRIES v. AIRCO INDUSTRIAL GASES.
• Court: Court of Appeal of Louisiana

Page 481

573 So.2d 481

GULF AMERICAN INDUSTRIES v. AIRCO INDUSTRIAL GASES.

No. 89-CA-709.

Court of Appeal of Louisiana Fifth Circuit.

June 1, 1990.

Michael H. Ellis, Appellate Counsel, Chehardy, Sherman, Ellis & Breslin, Metairie, Clarence F. Favret, Jr., Favret, Favret, Demarest & Russo, New Orleans, for Airco Indus. Gases, defendant-appellant.

John H. Brooks (Gordon Konrad, of counsel), Gretna, for plaintiff-appellee, Gulf American Industries.

Before KLIEBERT, BOWES and GOTHARD, JJ.

BOWES, Judge.

Plaintiff/appellee, Gulf American Industries (Gulf American) filed suit against defendant/appellant, Airco Industrial Gases (Airco), for damages for breach of contract, false representation and redhibition arising out of a lease-purchase agreement. Airco filed a reconventional demand against Gulf American for balance due on account and attorney's fees. After a judge trial on the merits, judgment was rendered in favor of Gulf American and against Airco for $680,000.00. Airco's reconventional demand against Gulf American was dismissed. The trial judge gave well-written reasons for judgment and we affirm some of his decisions, but amend the judgment in favor of the plaintiff, Gulf American, to award damages of $66,775.00.

After oral argument, and without leave or permission of this court to file same, and without any kind of stipulation or agreement from opposing attorneys, counsel for Gulf American filed a supplement to his brief, with an order from the trial court attached to it, stating that the trial court had considered the deposition of Noel Blackman in reaching its decision. Counsel then filed a second motion seeking to supplement the record with this deposition. Both motions were taken under advisement and, for reasons expressed later in this opinion, are denied.

In the late 1970's, Gulf American was a seafood company which bought, processed and sold shrimp. At the time of the lease purchase agreement at issue, it was owned and operated by Charles Turan.

In 1975, Turan hosted a convention at which he met Noel Blackman, president of the Shore Lobster Company. According to Turan's testimony, Turan and Blackman discussed the possibility of opening up a market for Individually Quick Frozen (IQF) Shrimp. Also according to Turan, at some time thereafter, Blackman offered Turan an agreement wherein Shore Lobster Co. would purchase from Gulf American two million pounds of IQF shrimp per year. Shore Lobster agreed to pay Gulf American 30 cents per pound for processing the shrimp, and an additional 40 cents a pound for profit. Shore Lobster also provided $50,000.00 in advance to finance the arrangement.

During that period of time, Turan says he was approached by Airco through its sales representative, Mr. Amos Beecher. Airco is a company which manufactures and sells cryogenic gases and fluids. It also sells and leases equipment which utilizes these gases and fluids. At the time of initial contact, Turan says he had no interest in Airco's products. However, according to Turan, after Gulf American and Shore Lobster Co. had come to an agreement for a future contract, Turan asked Beecher whether Airco could provide machines to produce IQF shrimp. Turan provided Airco with written details of the seafood which Gulf American wanted to process by freezing. At one point in the trial, Turan testified that he informed Beecher of the agreement Gulf American had entered into with Shore Lobster and, at another point, said he had done so, but indirectly. At a third point, Turan testified that he had told them that he had entered into a contract, but he did not tell them with whom. Beecher testified that he was not informed of the Shore Lobster agreement. Turan also testified that Beecher told him that Airco had machines at plants in Oregon which were producing IQF shrimp. Beecher testified that he could not remember whether any plants were producing IQF shrimp when he was negotiating with Turan.

By a letter dated February 25, 1977, Airco submitted to Gulf American a proposal to sell a Model KF 13-200 Kwikfreeze spiral freezer (Freezer). The proposal included several assertions, including the following which was of paramount interest to Turan and Gulf American.

"This spiral freezer has the following capabilities at the stated conditions:

* * * * * *

Product: Raw, peeled shrimp, 100-150 count.

Temperatures: Inlet 80 F Outlet 0 F

Belt Loading Density: 1 lb./square feet of belt.

Approximate CO Consumption: 1.75 lbs. of CO /lb. of shrimp.

Approximate Dwell Time: 4.5 to 5 minutes.

Capacity: 1200 pounds per hour."

This proposal was drawn up by John Harr, who was the Southern manager for Airco. Harr testified at trial that he knew of no freezer already producing 100-150 count IQF shrimp at the time he prepared the proposal. Steven Anthony, who was a Field Application Engineer, was consulted and he testified that he concurred in the assertion that the freezer could process 100-150 count IQF shrimp.

After Turan read the proposal, he says he decided to purchase the Freezer. Turan was told by Airco that, for financing purposes the transaction would be conducted as a lease-purchase agreement.

On February 28, 1977, the parties signed a five-year lease-purchase agreement. The pre-printed portion of the agreement contains, among other agreements, the following waivers:

* * * * * *

6. AIG [Airco] makes no representations or warranties with respect to the Equipment other than that it shall meet the description thereof set forth elsewhere in this Agreement.

* * * * * *

14. AIG [Airco] shall have no liability hereunder to User for consequential damages, under any circumstances.

Turan testified that these waiver clauses were not called to his attention nor were they explained to him when he signed the agreement. Further, Addendum # 1 of the typewritten portion of the agreement gives plaintiff the option to purchase the Freezer at any time during the lease term (5 years) for the price of $58,700, plus applicable taxes, less $400.00 for each monthly rental paid during the lease period. Additionally, the addendum contains the following lease cancellation provision, which was bargained for and demanded by the plaintiff:

"If during the initial six month term of the lease the user notifies AIG [Airco] in writing of User's desire to return the Kwikfreeze to AIG, AIG will accept such return in accordance with Paragraph 7 [deals with care, maintenance and condition of the lease equipment] and the termination of this agreement for the sum of $10,000.00 less $400.00 for each month lease payments have been paid."

Gulf American and Airco also entered into a carbon dioxide sales and rental agreement whereby Airco would supply the carbon dioxide to be used by the freezer.

In preparation for the Freezer and to automate the entire process, Gulf American purchased equipment and modified its physical plant. The petitions and pleadings in this case allege that Turan spent around $80,000.00 for these purposes. However, the only evidence submitted to corroborate this statement were two folders of invoices, receipts, etc., which were simply identified "in globo" and there was not even an adding machine tape to show the total amount, nor were the contents identified specifically with the plant renovation. The Freezer was then delivered and installed and Turan began production.

The Freezer failed to adequately process the 100-150 count shrimp from the very beginning. Turan contacted Airco and began what was to be a six-month attempt to remedy the problem, ultimately concluding with the cancellation of the lease. Despite repeated attempts by Beecher and Anthony, the Freezer was never able to process 100-150 IQF shrimp. The shrimp would get caught in the mesh of the Freezer's conveyor belt and would continually re-enter the machine, instead of coming off at its final turn. Airco initially installed a scraper blade at the end of the belt's final turn to knock the shrimp off the belt. The blade, however, cut the shrimp in half. This created a layer of frozen shrimp meat on the belt, which continually went around and re-entered the machine until the conveyor belt would freeze solid and jam the machine, causing it to stop. Airco then fabricated and installed a heavier stainless steel blade; however, the problem continued.

Airco next recommended that, when the machine would jam, Turan should hose the conveyor belt with water to remove the layer of shrimp meat which was frozen to the belt. Every time Turan did this, the shrimp in the conveyor belt fell to the floor, rendering them unmarketable.

In addition, the shrimp that did not get cut in half also did not process satisfactorily. These shrimp were extremely dehydrated and white and sometimes came out in clumps of two or three.

To alleviate the clumping problem, Turan, at Airco's suggestion, installed a feeding machine and then a shaker/dryer machine. These measures failed to correct the clumping problem. At trial, John Harr testified that the only way to prevent clumping would have been hand-feeding the shrimp into the machine. Other Airco representatives, Beecher and Anthony, testified that hand feeding was not the answer. Airco's proposal stated that the machine could process 1,200 pounds of 100-150 count shrimp, or from 120,000 to 180,000 shrimp per hour. The Freezer's conveyor belt is 13 inches by 200 feet. Only a two-foot portion of the belt is outside of the machine.

At trial, Steven Anthony testified that he had anticipated sticking problems. However, both he and Harr testified that they did not inform Turan of the potential sticking problem.

On November 10, 1977, Gulf American sent Airco notice terminating the lease and requesting that the Freezer be removed from its premises.

Because of the failure of the Freezer to perform satisfactorily, Turan testified that Gulf American apparently could not meet its contract with Shore Lobster and ultimately lost the contract and the...