Hoover's Dairy, Inc. v. Mid-America Dairymen, Inc./Special Products, Inc.

• Decision Date: 21 November 1985
• Docket Number: No. 66468,MID-AMERICA,66468
• Citation: 700 S.W.2d 426
• Parties: HOOVER'S DAIRY, INC., Respondent, v.DAIRYMEN, INC./SPECIAL PRODUCTS, INC., Appellant, and DEC International, Inc., Appellant.
• Court: Missouri Supreme Court

Page 426

700 S.W.2d 426

HOOVER'S DAIRY, INC., Respondent, v. MID-AMERICA DAIRYMEN, INC./SPECIAL PRODUCTS, INC., Appellant, and DEC International, Inc., Appellant.

No. 66468.

Supreme Court of Missouri,

En Banc.

Nov. 21, 1985.

Joseph A. Sherman, Jack T. Bangert, Sam L. Colville and John F. Murphy, Kansas City, for appellant.

Max W. Foust, Steven D. Steinhilber and James P. Frickleton, Kansas City, for respondent.

WELLIVER, Judge.

Respondent, Hoover's Dairy, Inc., brought this action against appellants, Dairy Equipment International Inc. and Mid-America Dairymen, Inc./Special Products, Inc., to recover for the negligent installation of a milking system which respondent purchased from one of the appellants. Judgment was entered upon a jury verdict in favor of respondent. The court of appeals affirmed the judgment conditioned upon a remittitur. This Court ordered transfer, and we decide the case as if on original appeal. Mo. Const. art. V, § 10. We affirm in part and reverse in part.

I

Respondent Hoover's Dairy, Inc. is owned and operated by the Hoover family. For many years, the family has maintained a dairy farm in Cedar County. In 1977, they were milking approximately 130 cows. The dairy farm had a machine that would milk four cows at a time, and the milk would pass through glass lines. These glass lines--referred to as a high line system--were positioned above the cows. Respondent decided to purchase a more modern system that would milk ten cows at a time. The newer systems use steel lines and are low line systems, with the lines positioned below the cow.

Appellant Mid-America Dairymen, Inc. (hereinafter referred to as "Mid-Am") is an organization that sells automatic milking systems. Appellant Mid-Am is a milk marketing co-operative owned by over 11,000 dairymen in thirteen states and organized to market milk produced by member dairies. Through one of its wholly owned subsidiaries, SPI, it sells equipment used by dairymen. ¹ SPI, only months before being contacted by respondent, contracted with appellant Dairy Equipment International, Inc. (DEC) to act as a distributor for DEC's automatic milking system. DEC manufactures the system under the trade name of Bou-Matic. The relevant portions of the contract between Mid-Am and DEC provided that Mid-Am would maintain an adequate number of competent trained servicemen necessary to provide reasonably prompt and efficient service, that Mid-Am would make available to its servicemen equipment to do a system analysis, that Mid-Am would conduct a systems analysis before and shortly after the installation of a Bou-Matic milking system and, immediately after the installation of Bou-Matic vacuum pumps, detachers, pulsators and claw assemblies and record the results of such analysis on forms furnished by DEC. DEC agreed to make available a DEC employee for assisting in initial sales solicitation. The contract also provided:

Special Products shall employ at least one individual whose full time responsibility shall be to promote and sell DECO products to dairymen throughout the territory. This employee shall receive training in DECO sales and service procedures and attend DECO's training schools as reasonably required to maintain his knowledge of DECO's products.

The testimony at trial suggests that Mr. Hoover was predisposed toward purchasing appellant DEC's equipment because of Mr. Hoover's prior experience. Mr. Hoover testified that, while operating his farm, he had worked for Producers Creamery for twenty years, which later became Mid-Am. He then went into a partnership operating a farm supply store which sold farm equipment, including the Bou-Matic line. Sometime after the farm supply store was sold, he went to work for DEC for a couple of years until he took another job. Mr. Hoover contacted someone about changing milking systems and he was told that SPI had taken on the Bou-Matic line as a dealership.

Hoover was then contacted by Chuck Armstrong, the area zone manager for DEC, and by David Schlemeyer, a salesman for Mid-Am. Schlemeyer only recently had been hired by Mid-Am to act as the salesman in Southwest Missouri for the Bou-Matic system. Schlemeyer lacked experience in selling or installing milking systems, but had attended a training session conducted by DEC. After their first visit with respondent, Armstrong and Schlemeyer prepared a sketch of how the system could be installed in respondent's milking barn. In subsequent visits to the Hoover farm, Armstrong and Schlemeyer were accompanied on at least one occasion by Mark Heins, the regional sales manager for DEC. Although the parties disagree over the substance of some of the conversations with Mr. Hoover, either Heins or Armstrong told Mr. Hoover that Mid-Am would install the system but that DEC had confidence in Mid-Am. The discussions among Hoover, Armstrong, Schlemeyer and Heins resulted in respondent signing a purchase agreement on May 7, 1978. The total price of $9,706.51 included an $800 charge for installation. The purchase agreement was between appellant Mid-Am and respondent. ²

Together, representatives from Mid-Am and DEC drafted a final blueprint for installing the milking system. The installation began on May 15, 1978. Along with Armstrong, present on the first day of installation was Mid-Am's crew: Schlemeyer and two other employees, Bill Thomas and Al Worthington. Neither Thomas nor Worthington had any prior experience in the installation of Bou-Matic milking systems. Armstrong claims that Schlemeyer was in charge of the installation, while Schlemeyer claims that Armstrong was in charge. On the second day, Armstrong testified that while he wanted to remain on the job he had to leave the farm at 2:30 in order to attend a meeting for DEC in Wisconsin. He did not return to the job. The installation was completed on the 18th, and respondent began milking cows on the new system that evening. Schlemeyer performed a decto recording upon the completion of the installation, which checked the vacuum level of the milking system. Two weeks later he went back to the farm and performed other tests but did not do a complete systems analysis. Schlemeyer testified that a system analysis was finally performed in June or July of 1978, but he never filled out the actual system analysis check form. However, the system analysis that he performed did not include a test for "stray voltage."

Only recently has it become generally known within the industry that there is a potential problem with stray voltage when installing a milking system. Stray voltage may exist independent of any error in installation and wiring in the system itself. Current may be present in the milking barn because of poor wiring in the barn, or the current may be a product of other equipment on the farm that makes its way into the barn through any grounded neutral system. This is wholly separate from voltage created by the milking system: rather, the system merely acts as a conduit through which pre-existing stray voltage may pass to the dairy cow, which may in turn cause the cow to receive an electrical shock. The consequences of such electrical shocks is that the cows become nervous during milking time and may not give all their milk. If milk remains in a cow's udder, it may lead to a bacterial infection called mastitis.

Armstrong testified that, after installation of a milking system, a system analysis is required which would, among other things, test for stray voltage. In January 1977, the president of DEC sent a memo to all dealers; accompanying the memo was one of the pioneer articles on the effects of stray voltage on dairy cows. This same article was then included in DEC's service manual. It might be noted, however, that at the time of this installation neither the Bou-Matic Instruction Manual, Exhibit No. 52, nor the Bou-Matic System Analysis Check Sheet, Exhibit No. 123, referred to a check for stray voltage. The new instruction manual and check sheet that became effective December 1, 1978 expressly provided for a stray voltage test (Exhibits 49-c, 49-j). There was testimony suggesting that on the old system analysis form the results of the test were supposed to be recorded under the "Recommendations" section.

Several weeks after the installation, milking time increased and the cows became nervous upon entering the barn. There was an increase in an infection of mastitis. Mastitis producing organisms are present on every dairy farm, but on respondent's farm only about 1% of the herd was affected prior to installation of the Bou-Matic system. Ten months after the installation, about 40% of the herd was infected. Respondent contacted its veterinarian who was unable to curb the problem and respondent sought assistance elsewhere but without success.

In March 1979, Mr. Hoover read an article about stray voltage in one of the trade journals, and the article indicated the possible connection between stray voltage and mastitis. He purchased a voltmeter, tested for stray voltage between the steel lines and the grate where the cows stood and obtained a positive reading. He then bonded the system together in order to eliminate the stray voltage. Respondent finally brought the problem with mastitis under control, but only after losing seventy-six cows to slaughter.

Respondent commenced this action against both appellant DEC and appellant Mid-Am, alleging strict liability, negligence and express or implied warranty. It also seeks punitive damages. Before any evidence was heard, respondent informed the court that it would only submit the case on the theory of negligence. Appellant Mid-Am cross-claimed against appellant, DEC, and appellant DEC cross-claimed against appellant Mid-Am. The jury found for respondent and awarded $234,443.00 in actual damages and $1,000,000.00 in punitive damages. Fault was assessed as 40% against appellant Mid-Am and 60% against appellant DEC. The jury found against each appellant on the cross-claims. No...