Hunt Truck Sales and Service, Inc. v. Omaha Standard

• Decision Date: 13 October 1960
• Docket Number: Civ. No. 1-300.
• Citation: 187 F. Supp. 796
• Parties: HUNT TRUCK SALES AND SERVICE, INC., Plaintiff, v. OMAHA STANDARD, Defendant.
• Court: U.S. District Court — Southern District of Iowa

187 F. Supp. 796

HUNT TRUCK SALES AND SERVICE, INC., Plaintiff, v. OMAHA STANDARD, Defendant.

Civ. No. 1-300.

United States District Court, S. D. Iowa, W. D.

October 13, 1960.

COPYRIGHT MATERIAL OMITTED

Raymond A. Smith, Philip J. Willson, Council Bluffs, Iowa, and Fred T. Saussy, Jr., Tampa, Fla., for plaintiff.

Addison C. Kistle and Maynard S. Telpner, Council Bluffs, Iowa, for defendant.

STEPHENSON, District Judge.

Plaintiff, Hunt Truck Sales and Service, Inc., hereinafter referred to as Hunt, a Florida Corporation and dealer in trucks and trailers in that State, purchased two bulk dry cement trailers from the defendant, Omaha Standard, an Iowa Corporation and manufacturer of truck bodies and trailers in Council Bluffs, Iowa. Plaintiff brings this action, claiming rescission of this sale to recover back the purchase price paid the defendant and transportation expense expended by it, less $1,201, rental charges collected by the plaintiff from its purchaser, Tank Truck Rentals, Inc., or its affiliate, Florida Tank Lines, Inc., hereinafter referred to as Florida Tank, for the use of the trailers during the time they were in operation, thereby making a net claim of $11,149. This matter proceeded to trial before this Court sitting without a jury.

The parties agree that the law of the State of Iowa is applicable to this transaction, which under the facts appears to be the correct view. Although lengthy negotiation between the parties took place through the mails, by telephone, and by telegraph of an informal nature, on June 23, 1956, G. L. Tate, Vice President of defendant, Omaha Standard, sent a letter to plaintiff setting forth the specifications and price of the trailer discussed to date as a tentative proposition. On July 13, 1956, a telegram was sent by plaintiff, Hunt, in Florida to defendant in Iowa advising it to "proceed with order." This telegram appears as the first correspondence after the letter of June 23rd. It is undisputed that plaintiff's telegram was an acceptance of the offer contained in defendant's letter of June 23rd. Delivery to the plaintiff was to take place in Iowa at Council Bluffs where the trailers were manufactured.

As this action is based upon diversity of citizenship, this Court must apply the Iowa conflict of laws rules. Klaxon Co. v. Stentor Electric Mfg. Co., 1941, 313 U.S. 487, 61 S.Ct. 1020, 85 L. Ed. 1477; Aluminum Co. of America v. Hully, 8 Cir., 1952, 200 F.2d 257; Fire Association of Philadelphia v. Allis Chalmers Mfg. Co., D.C.N.D.Iowa 1955, 129 F.Supp. 335.

Under the Iowa law it is undisputable that where the contract was to be performed wholly within the state and the place of contracting was that state, its substantive laws will be controlling. Elk River Coal & Lumber Co. v. Funk, 1937, 222 Iowa 1222, 271 N.W. 204, 110 A.L.R. 1415; Liljedahl v. Glassgow, 1921, 190 Iowa 827, 180 N.W. 870.

As stated above this sale was to take place wholly in Iowa, also the contract of sale would be considered made in Iowa as the Iowa law deems the place of acceptance, the last act necessary to complete meeting of the minds, to be the place of contracting. Haverly v. Union Construction Co., 1945, 236 Iowa 278, 18 N.W.2d 629; Burch Manufacturing Co. v. McKee, 1942, 231 Iowa 730, 2 N.W. 2d 98; Chicago, R. I. & P. R. Co. v. Lundquist, 1928, 206 Iowa 499, 221 N.W. 228; County Savings Bank v. Jacobson, 1927, 202 Iowa 1263, 211 N.W. 864.

The Iowa Court has ruled that when the acceptance is sent by a medium other than that by which the offer was received and its use was not otherwise authorized by the offeror, acceptance is deemed to take place at the point where the acceptance is received. In Lucas v. Western Union Telegraph Co., 1906, 131 Iowa 669, at page 675, 109 N.W. 191, at page 193, 6 L.R.A.,N.S., 1016, at page 1020, the Iowa Supreme Court stated:

"It is very evident on authority and principle that, in the absence of any suggestion, one transmitting an offer by mail cannot be bound by an acceptance returned in some other way until it is received or he has notice thereof."

Here, by the Iowa rule, plaintiff in accepting by telegram in lieu of mail is deemed to have accepted at the point of receipt, Iowa. Therefore, the contract was made in Iowa.

Plaintiff grounds his action and the rescission on Section 554.70, subd. 1, par. d, Code of Iowa 1958, I.C.A., which creates this remedy for breach of warranty. Plaintiff alleges two distinct grounds: Breach of an express warranty, and breach of an implied warranty of fitness for a particular purpose.

There being no evidence introduced on the point of breach of an express warranty, plaintiff abandoned this ground, thereby leaving only the issue of the implied warranty and its breach for determination.

Section 554.16, subd. 1, Code of Iowa 1958, I.C.A., provides as follows:

"Where the buyer, expressly or by implication, makes known to the seller the particular purpose for which the goods are required, and it appears that the buyer relies on the seller's skill or judgment, whether he be the grower or manufacturer or not, there is an implied warranty that the goods shall be reasonably fit for such purpose."

Our inquiry is simply does this section apply to the facts as shown, that is: (1) did the buyer make known to the seller the purpose for which the goods were to be used and (2) did the buyer rely on the seller's skill and judgment. Under Iowa law these two elements must be satisfied in order to establish the implied warranty of fitness for a particular purpose. Davenport Ladder Co. v. Edward Hines Lumber Co., 8 Cir., 1930, 43 F.2d 63; Drager v. Carlson Hybrid Corn Co., 1952, 244 Iowa 78, 56 N.W.2d 18; see also, Brandenberg v. Samuel Stores, 1931, 211 Iowa 1321, 235 N.W. 741, 77 A.L.R. 1161.

It appears that Florida Tank became interested in hopper bottom type bulk cement trailers as a means to speed and simplify its operation of hauling bulk cement for its customers. Plaintiff, Hunt, from whom Florida Tank had purchased conventional auger type trailers previously, was contacted to supply this type of trailer. Three years previously, plaintiff Hunt had occasion to obtain information from the defendant, Omaha Standard, on a hopper type trailer for hauling lime which Omaha Standard manufactured. With a similar basic design in mind, Hunt contacted Omaha Standard, explained essentially what was needed and Omaha Standard responded by making initial suggestions and drawings, and ultimately sent Mac Hickman, its sales manager, down to Florida to discuss the matter in detail with all the parties concerned.

Hickman spent several days discussing Florida Tank's operation and facilities with Frank R. Gernert, Vice President of Florida Tank, and observing these facilities and general operations. Both James Walker, Vice President of Hunt and Gil Ryder, a salesman for Hunt, individually spent a day showing Hickman around these various points. Hickman was shown loading and unloading facilities of Florida Tank's customers, as it would be necessary to make modifications in these to accommodate hopper bottom trailers.

Hickman then went back to Omaha to discuss the "non standard points" with one Shadwick, Omaha Standard's engineer, who agreed workable trailers could be made. Later Hickman sent down exact specifications for the unloading ramp to be built for use in connection with the trailers.

Under the facts as outlined above, it is apparent that Omaha was cognizant of the purpose for which these specially made trailers were to be used by Hunt and by the ultimate purchaser, Florida Tank. It should be noted that this is not to say that the particular purpose involved is resale to Florida Tank and their complete satisfaction, but resale to Florida Tank and reasonable fitness to perform as a hopper bottom bulk cement trailer in their particular operation, regardless of any representation between Hunt and Florida Tank unknown to Omaha Standard as discussed later.

As to Hunt's reliance on Omaha Standard's skill and judgment, it is noted that the Iowa Courts have held that it is not necessary to show reliance by affirmative testimony of the buyer that he did rely, but "reliance may be shown by the circumstances of the case." Drager v. Carlson Hybrid Corn Co., 1952, 244 Iowa 78, 84, 56 N.W.2d 18, 22. There the Court said at page 83 of 244 Iowa, at page 21 of 56 N.W.2d, "a claim of implied warranty of fitness has more frequently been upheld where the seller is the manufacturer or grower of the product than when he is a mere dealer." (See discussion in Rasmus v. A. O. Smith Corp., D.S.N.D.Iowa 1958, 158 F.Supp. 70, at pages 79-80). Here the seller is the manufacturer, the product is unique and made especially for the buyer; the buyer went to the seller since he knew the seller had previously made a trailer of similar design; the buyer went to lengths to inform the seller completely of the operation in which the trailers would ultimately take part and the manner in which they would be used; the seller even instructed the buyer as to exact specifications, as determined by their engineer, of unloading docks to be built for use with the trailers. Under these circumstances there is substantial evidence to show that the buyer (plaintiff) relied upon the skill and judgment of the seller (defendant) to produce a trailer that would fulfill the specific purpose of their customer, which had been made known to the seller, and the Court therefore finds that the defendant did impliedly warrant that the goods would be reasonably fit for that purpose, that is, the trailers would be reasonably fit for hauling bulk dry cement.

Plaintiff contends that this implied warranty of fitness for a particular purpose has been breached in 7 ways:

"Said trailers were delivered to plaintiff on or about August 20, 1956 at which time and at all times subsequent thereto said trailers have failed to meet the purpose for which they were required in the following particulars:

"(a) The

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