Husky Spray Service, Inc. v. Patzer
| Decision Date | 22 May 1991 |
| Docket Number | 17243,Nos. 17222,s. 17222 |
| Citation | 471 N.W.2d 146,15 UCCRep.Serv.2d 772 |
| Parties | 15 UCC Rep.Serv.2d 772 HUSKY SPRAY SERVICE, INC., and Dayle Luedeke, Plaintiffs and Appellees, v. Robert PATZER, Monroe Chase, Lawrence F. Schmit, and Midwest Air Center, Inc., Defendants and Appellants. |
| Court | South Dakota Supreme Court |
James A. Wyly of Richardson, Groseclose, Kornmann & Wyly, Aberdeen, for plaintiffs and appellees.
John E. Mack, New London, Minn., and Lonald L. Gellhaus, Williams & Gellhaus, Aberdeen, for defendants and appellants.
Robert Patzer, Monroe Chase, Midwest Air Center, Inc., and Lawrence F. Schmit (collectively referred to as defendants) appeal from a decision of the trial court awarding damages for breach of express warranty and prejudgment interest to Husky Spray Service, Inc. and its owner Dayle Luedeke (collectively referred to as Luedeke). Luedeke has filed a notice of review, challenging the trial court's rejection of his claim based on breach of implied warranty. We affirm in part, reverse in part and remand.
This case involves a dispute over a 1966 Callair airplane purchased by Luedeke. The airplane is a spray plane that was purchased in 1982 by Robert Patzer (Patzer), who was in the aerial spraying business in Minnesota. Although Patzer did not use the plane very much, it received routine annual inspections. These inspections did not cover the plane's spraying system or its crankshaft.
In the spring of 1987, Patzer decided to retire from the aerial spraying business. He contacted Monroe Chase (Chase), president and general manager of Midwest Air Center, Inc. (MAC) in Mandan, North Dakota, to handle the sale of his four airplanes. MAC is an airplane brokerage corporation, selling used aircraft on consignment. When Patzer delivered the plane to MAC on May 10, 1987, he told Chase that it was "ready to go" but that he had not sprayed with it for several years. While at MAC, the plane was given its annual inspection by Lawrence F. Schmit (Schmit), an FAA approved mechanic. Schmit's inspection revealed no problems. In his opinion, the engine had no unusual vibrations.
Luedeke, owns Husky Spray Service of Stratford, South Dakota. In the past, Luedeke had bought and sold planes through MAC, and in May 1987, he called to inquire whether Chase had a plane suitable for his aerial spraying needs. Chase responded that he had Patzer's Callair spray plane for sale and, Luedeke claimed, Chase told him the plane was "ready to go." Chase, however, testified that in past dealings with Luedeke there had been no warranties and that when Luedeke asked about warranties on the Callair, Chase told him there were none with a used plane.
A few days later, Luedeke sent pilots Nick Yockim and Allen January to Mandan to inspect the plane. 1 January testified that after the pilots visually inspected the plane, Chase told him that the Yockim testified that Chase promised "if this quits, I will make it right." The pilots passed along these statements to Luedeke when they returned to Stratford.
Chase denied making these statements to the pilots. He stated that the pilots spent several hours inspecting the plane and its logs, and he asked them to take the plane for a test flight three times. He claims to have said "Take a test ride and if you find anything wrong when you get back, we will fix it right here," but the pilots declined because they were satisfied with the plane based on their visual inspection and review of the plane's logs. Chase also testified that he told the pilots that, as far as he knew, the plane was ready to go, "except for the sprayers."
A few days later, Luedeke telephoned Chase to buy Patzer's Callair plane. The parties agreed that Luedeke would pay MAC $6,000 cash and trade in his Cessna worth $10,000 to $12,000, and that the plane would be delivered to Luedeke at Stratford, South Dakota. In late May, 1987, MAC pilot Alan Peiler flew the Callair plane to Stratford and flew the trade-in Cessna back to Mandan. Peiler reported that the plane flew normally except for a minor oil leak due to a loose spark plug, and he testified that Yockim test flew the plane and had no complaints. When Luedeke arrived and visually inspected the plane, bad weather began to set in and Peiler was in a hurry to fly the trade-in back to Mandan. Luedeke testified that to accommodate Peiler, he signed the front of the purchase order (contract) without reading the back of the document and, in fact, the place for his signature on the back of the contract is blank. On the front of the contract, just above the place for Luedeke's signature, MAC had typed in "All times and equipment are represented to the best of our knowledge but final determination is the responsibility of the buyer." The reverse side contained an exclusion of warranties provision and a choice of law provision stating that the contract was to be governed by North Dakota law.
From the start, Luedeke experienced problems with the plane. Most seriously, the air baffles broke off or cracked in flight and the magnetos did not work. The pilots also reported what they felt to be excessive vibration. The emergency brake and pressure light did not work, oil leaked through a loose plug, and the safety pins were missing. The spray system had plugged nozzles, a defective pump, and rotted hoses. Luedeke called Chase and Patzer to complain about the condition of the plane. Patzer agreed to send mechanic Schmit to Stratford to look at the plane at Patzer's own expense. Schmit fixed the magnetos when he came to Stratford.
Luedeke thereafter attempted to service his regular customers with this spray plane. However, problems continued to cause the plane to be non-operational for spraying purposes and the pilots attributed this to excessive vibration. Thus, Luedeke experienced substantial down time with the plane. He testified that as a result, he lost spraying jobs of 2,000-3,000 acres at Leola, South Dakota, 3,000 acres at Valley City, North Dakota, and 4,000-5,000 acres in Montana, because the landowners needed the spraying done immediately and could not wait for Luedeke to make repairs on his plane.
On July 25, 1987, pilot January was flying the plane at about 500-800 feet, running at 2000 RPM with a manifold pressure of 26 inches. Suddenly there was a total and immediate loss of power. The crankshaft in the plane's engine had broken in two pieces, causing part of it and the plane's propeller to fall off. January was able to make an emergency landing, preventing further damage to the plane. However, the engine was a total loss. Luedeke lost the use of the plane for the remainder of the spray season.
Prior to trial, defendants brought a motion to dismiss based on lack of jurisdiction, and to determine which state's substantive law applied to the case. The trial court held that it had jurisdiction. Also, the trial court concluded that North Dakota law would be applied to the contract claims, but South Dakota law would be applied to the tort claims. The matter was then set on for a court trial.
At trial, Gordon Person, an FAA certified mechanic, inspector, and test examiner who had conducted accident investigations for the FAA, identified the cause of the Jacobs engine's failure in the spray plane as a fracture in the crankshaft. He testified that the fracture had been slowly increasing in size for an undetermined period of time, and could have started prior to the plane's last one hundred hours of use. Possible causes of the fracture, according to Person, were improper manufacture (which he stated was not indicated in this case), metal fatigue, and improper operation. He also stated that major overhauls on Jacobs engines should be conducted every 550-600 hours of use, and more frequently if the plane had a turbo charger, as the Callair did. At the time of the failure, the engine had 400-429 hours on it.
As to the possibility of improper operation, the Jacobs engine manual recommended maximum manifold pressure of no more than 22.5 inches. January testified that he was operating at 26 inches of manifold pressure at the time of the failure. Person opined that because of the excessive manifold pressure, the pilot was operating at too many RPMs, and that this could overload the bearings and cause premature wear on the engine. The trial court found that the evidence did not establish that the engine failure was due to any defect in the engine which existed prior to the sale.
The court ruled in favor of Luedeke on the theory of express warranty, awarding him $4,300 for his lost profits on the Leola job, plus prejudgment interest from June 1, 1987. The court ruled in favor of defendants on the implied warranty theory, and the tort claims. 2 Defendants appealed, and Luedeke filed a notice of review.
1. Does the language of the contract preclude recovery on a breach of express warranty theory?
2. Was prejudgment interest authorized?
3. Was there sufficient evidence to support the trial court's findings?
4. Was there sufficient evidence to "pierce the corporate veil" and hold the president of Midwest Air Center liable for the acts of Midwest Air Center?
5. Did the trial court err in not awarding damages based on an implied warranty theory?
Defendants assign as error the trial court's refusal to give effect to the exclusion of warranties provision of the contract, 4 and awarding damages based on an implied warranty of merchantability and express warranty theory. The trial court applied North Dakota law to the breach of warranty claims, in accordance with the choice of law provision in the contract. 5 The court held the exclusion of warranties clause ineffective because it was never explicitly bargained for and did not set forth with particularity the specific qualities and characteristics which were...
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