Horizons, Inc. v. Avco Corp.
| Decision Date | 13 September 1982 |
| Docket Number | No. CIV80-5079.,CIV80-5079. |
| Citation | 551 F. Supp. 771 |
| Parties | HORIZONS, INC., Plaintiff, v. AVCO CORPORATION, Defendant. |
| Court | U.S. District Court — District of South Dakota |
COPYRIGHT MATERIAL OMITTED
Wayne F. Gilbert, Rapid City, S.D., for plaintiff.
Ronald Clabaugh, Rapid City, S.D., for defendant.
This case was tried to the Court on January 25 and 26, 1982. This Court, having considered the evidence, oral arguments, and briefs of the parties, now makes and enters these Findings of Fact and Conclusions of Law. See Fed.R.Civ.P., Rule 52.
1. Horizons, Inc. is a South Dakota corporation with its principal place of business in Rapid City, South Dakota. Horizons is in the business of providing aerial photographic and photogrammetric services, including topographic surveying and mapping.
2. Avco Corporation is incorporated in a state other than South Dakota. Avco/Lycoming, one of Avco's wholly-owned subsidiaries, manufactures and sells remanufactured engines for utility aircraft.
3. Avco does not sell its remanufactured engines directly to the public, but does so only through its authorized domestic distributors. See, Exhibit 66. Aviation Sales, Inc. is an authorized distributor of Avco in Denver, Colorado. Horizons originally contacted Aviation Sales concerning the purchase of a remanufactured engine. James Spell, president of Horizons, told management personnel at Aviation Sales the nature of Horizons' business. Those persons then requested that Horizons order the engine through a "fixed base operator," such as Casper Air Service, a dealer in Casper, Wyoming. In December, 1977, Horizons ordered an Avco remanufactured engine, type TIO-540-A2B, serial No. RL-162-61, from Casper Air Service. Horizons paid the purchase price of $12,767.00 for the engine.
4. When Horizons negotiated with Aviation Sales and Casper Air Service concerning the purchase, there was no discussion of the warranty, if any, which would cover the engine. When the engine was delivered to Horizons, in either December 1977, or January 1978, Exhibit 59, Avco's "Limited Standard Warranty," was inside a packet of materials attached to the engine. Robert Collett, of Horizons, filled out and mailed to Avco a warranty registration form which also was attached to the engine. Exhibit 59, and the contents thereof, were not bargained for as a basis for the contract for the sale of the engine.
5. The engine was installed in a Cessna 310 aircraft owned by Horizons about mid-June 1978. Horizons' employees discovered several problems with the engine during its installation and during pre-flight testing. These problems included fuel running from a fuel injector, and difficulties requiring replacement of the turboabsolute controller, condenser in the left magneto, and one intake pipe. Horizons contacted Aviation Sales concerning some of these problems. After the engine was installed and tested, Horizons personnel attempted to operate the aircraft. They experienced a series of mechanical failures and breakdowns due primarily to backfiring in the Avco engine. As a result of these difficulties, Horizons personnel expended numerous hours for both unscheduled maintenance and trouble-shooting in an attempt to restore the engine to ordinary operating condition.
6. During July and August of 1978, Horizons attempted to operate its Cessna 310, with the Avco engine, in the course of its aerial photography business. Horizons also owned and utilized a Cessna 206 aircraft in its business. The Cessna 310, however, is capable of greater speed and altitude and may cover greater distances than may the Cessna 206. The Cessna 310 also carries more elaborate photographic equipment. During the 1978 flying season, the Cessna 206 was assigned to perform contracts in North and South Dakota, while the Cessna 310 was assigned to work in Montana, Wyoming and western South Dakota. Horizons had contract work available in 1978 for every day on which both planes were operable.
7. The aircraft engine, type TIO-540-A2B, serial No. RL-162-61, remanufactured by Avco and purchased by Horizons was not fit for the ordinary purposes of an engine of this type. The testimony at trial established that the engine was defective in that the exhaust valve guide on the No. 1 cylinder of the engine was internally "bell-shaped." The valve guide, therefore, could not make uniform contact with the No. 1 exhaust valve and could not properly conduct heat away from the valve. The valve became coated with carbon and would stick and operate erratically. Dr. Wilkov testified that the defective and erratic operation of the valve was further indicated by the presence of wear and burn marks on the No. 1 exhaust valve and by peens, or indentations on the cam which pushes the No. 1 exhaust valve. Dr. Wilkov also testified that these defects would impair the ability of the engine to reach and sustain an altitude of 24,000 feet and would cause the backfire problems experienced by Horizons. The defects significantly impaired Horizons's use of the Cessna 310 on contracts which required high altitude flights. The backfire and detonation problem precluded the achievement of the straight and level flight line required in aerial photography. The defect in the valve train of the engine existed at the time the engine was remanufactured and was not caused by normal engine wear.
8. Horizons notified Avco in writing of the malfunctioning of the engine. Prior to the written notice, Horizons personnel discussed the engine problems, by telephone, with Avco employees at the factory in Williamsport, Pennsylvania.
9. To correct the defects in the engine so that it could operate in a manner fit for its ordinary purposes, Horizons incurred expenses of $6,494.75, which constituted its reasonable expenses for parts, labor and services related to the repair and overhaul of the engine.1 See Exhibits 9, 10, 25, 26, 27, 28.
10. Horizons accepted the Avco engine and never revoked its acceptance of the engine. SDCL 57A-2-606 11. Plaintiff claimed as incidental damages the additional cost to Horizons to install the engine. Horizons personnel testified that the ordinary amount of time required to install an engine of this type is 24 hours. Horizons' employees, however, required 46.4 hours to install the Avco engine. Thus, Horizons seeks to recover the labor cost of the 22.4 hours above the normal installation time. See, Exhibits 4, 7. Incidental damages must either result from the seller's breach or constitute an expense incident to the breach. SDCL 57A-2-715(1). For this reason, this Court required plaintiff to show that the additional installation time was caused by the defective condition of the engine, and not by some cause not related to the breach of warranty. Tr. 43-44. For most of the hours comprising this part of Horizons' claim, it failed to establish this causal connection. Collett testified, however, that during the installation and pre-flight testing, he had to replace a fuel injector, the turboabsolute controller, a condenser in the left magneto, and one intake pipe. These were not typical installation problems. In Exhibits 6 and 35, Horizons proved it worked on these specific problems on June 23, 1978, and spent seven hours in so doing. The cost to Horizons for this unnecessary and extraordinary installation and pre-flight testing time was $124.04. (Tr. 381; 7 hours × $17.72).
12. Horizons also established that it incurred expenses of $1,075.60 in attempting to inspect the engine and diagnose the defects in the engine. Horizons incurred labor costs of $17.72 for 60.7 hours of unscheduled maintenance and test flights during the period of July 8, 1978 to August 8, 1978. None of these "troubleshooting" hours would have been necessary if the engine had not been remanufactured in a defective manner, or if the engine had been fit for its ordinary purposes.
13. When Horizons was unable to determine the problem with the engine and was forced to abort some flights, it decided to remove, disassemble and inspect the engine. The disassembly and inspection was conducted at Air Craft Co. in Broomfield, Colorado. As a result of the defects in the engine, Horizons incurred the following reasonable expenses in connection with the disassembly and inspection:
a. Bob Collett, labor expense (71 hrs. $1,258.12
at $17.72)
b. Air Craft Co. bill for parts and 1,021.86
labor
c. Collett, food and lodging 354.66
_________
$2,634.64
14. Horizons claims as an incidental expense its cost of "cover." Specifically, Horizons paid $3,500.00 for a temporary replacement engine and $16,672.00 for a permanent replacement engine. Horizons paid transportation costs of $674.87 to obtain delivery of the temporary replacement engine. Horizons contends it is entitled to recover these amounts as "expenses or commissions in connection with effecting cover ..." pursuant to SDCL 57A-2-715(1). For reasons stated in its Conclusions of Law, this Court concludes Horizons may not recover these amounts as incidental damages in this case.
15. As its final element of incidental damages Horizons seeks recovery of $265.18 which it paid to transport the defective engine from the Avco factory to Horizons, following the FAA inspection of the engine. See, Exhibit 22, Tr. 99. The FAA inspection failed to uncover any defect in the engine and Avco, therefore, denied warranty coverage.
16. From 1976 to the present, Horizons experienced steady financial growth. In 1977 and 1978, Horizons had sufficient contract work available to occupy both its aircraft in aerial photography and surveying on every available flight day. Horizons lost 11 flight days in 1978 because of the defective condition of the Avco engine. See, Exhibits 14, 21. Consequently, Horizons was unable to complete its 1978 contracts in that...
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