India Paint & Lacquer Co. v. United Steel Products Corp.

• Decision Date: 02 March 1954
• Citation: 267 P.2d 408,123 Cal.App.2d 597
• Court: California Court of Appeals Court of Appeals
• Parties: INDIA PAINT & LACQUER CO. v. UNITED STEEL PRODUCTS CORP. Civ. 19292.

Page 408

267 P.2d 408

123 Cal.App.2d 597

INDIA PAINT & LACQUER CO. v. UNITED STEEL PRODUCTS CORP.

Civ. 19292.

District Court of Appeal, Second District, Division 2, California.

March 2, 1954.

Rehearing Denied March 31, 1954.

Hearing Denied April 29, 1954.

Chapman, Frazer & Lindley, and John S. Frazer, Los Angeles, for appellant.

Robert H. Dunlap, Pasadena, and Samuel Reisman, Los Angeles, for respondent.

FOX, Justice.

India Paint and Lacquer Company, hereinafter referred to as 'India,' sued United Steel Products Corporation, hereinafter refered to as 'United,' to recover the value of certain paint or baking enamel sold and delivered to United. By its amended cross-complaint United sought damages from India for its losses (1) due to sticky paint, and (2) for losses occasioned by flash fires in its baking oven, due to allegedly defective paint sold by India to it. United based its right to recover upon a breach of both implied and express warranties. ¹

After a trial of more than five weeks ² the court awarded United damages in excess of $104,000, and determined that United owed India more than $20,000 for paint sold and delivered. The court thereupon rendered judgment in favor of United in the net amount of $84,000. It is from this judgment that India appeals.

In 1940 United was engaged in the manufacture of aluminum and steel Venetian blind stripping. Its plant was located on Alameda Street, in Los Angeles. The material manufactured by United consisted of metal strips upon which enamel was applied on both sides through a baking process, and thereafter the stripping was rolled, layer upon layer, into coils. This stripping is known generally as either 'coiled Venetian blind stock' or 'slats' and is customarily coiled without any other inner layer or wrapper between the successive layers of enameled stripping, so that the surfaces of the successive coils came directly in contact with each other.

In the latter part of 1940 United employed Lloyd Pollett, placing him in charge of its painting and baking department. Prior to that time United did not purchase any of its paint or baking enamel from India, but purchased its requirements from other paint concerns. United was satisfied with the paint products it was then buying. At that time Lloyd's brother, Chester, was employed as a paint salesman by India, and their uncle, Burton Pennington, was the president and principal owner of India. Shortly after Lloyd was employed by United several conversations were had between him, his brother Chester, and Mr. Pennington looking toward securing United's paint business for India. Conferences occurred wherein India solicited the paint business of United, offering to sell to United paint or enamel that would be absolutely suitable and proper for use by United on its Venetian blind stripping material in the manufacturing process employed by United. It was stated to Mr. Bayer, president of United, by both Pennington and Chester Pollett on behalf of India, that 'Our paint is guaranteed. We know your requirements. We know your oven, and we know what type of paint to give you for your business.' Shortly thereafter United started buying enamel from India. From some time in 1941 until July, 1949, with very few exceptions, United purchased all of its paint requirements for baking enamel from India and became India's largest customer. However, shortly after the start of the war in December, 1941, because of the lack of available metal, United ceased manufacturing Venetian blind stock and consequently stopped buying paint. In 1945, United resumed its Venetian blind manufacturing business and once more started buying enamel from India. About this time India reiterated the representations made at the inception of the business relationship, that its product was guaranteed to produce satisfactory results. About this time United moved its place of business to Avalon Boulevard, in Los Angeles. United also maintained a plant at Jeffersonville, Indiana, but that plant did not use India's products.

In January, 1949, United encountered increasingly strong competition in the sale of its products, and had been offered paint by an eastern concern at a lower price. United advised India of this situation. At this time India's vice president, Ray Sahm, told United that he did not believe India could lower the price of the paint it was then furnishing United but India might be able to reduce the price by reformulating the paint. United admonished India to be sure that the paint was as good as they were then furnishing. To this Mr. Sahm replied: 'You don't have to worry about this. Our paint is always good. We will always give you a guarantee, and you don't have to worry about anything.' A short time thereafter Chester Pollett brought to United's plant a small batch of paint which was run through United's equipment at his request. Chester took a coil of the stripping back to India for testing. Later India advised United that the new batch was all right, and the price would be $3.75 a gallon instead of the former price of $4.30 a gallon.

During the entire period that United purchased paint or enamel from India, United had no laboratory and employed no chemists. India, however, was familiar with United's equipment and had access to it. United always purchased from India by ordering the paint by colors and never ordered any paint or enamel from India by designation of number or formula.

The first deliveries of paint at the new price were on February 4, 1949. United immediately commenced the use of the new paint in its usual operations and soon began shipping out its completed product. About the middle of March, 1949, United began to receive complaints from its customers to the effect that the stripping stuck together and the paint peeled from the surface of the slats as the coils were unwound. Samples showing the sticky or 'tacky' condition of the stripping were returned to United by its complaining customers. These samples were turned over to India with the demand that this condition be corrected. Thereafter India's representatives advised United that they were incorporating a material into the paint that would harden the surface so that there would be no more trouble with sticking. Based upon these assurances, United continued to purchase paint from India.

Complaints about the sticky condition of the stripping continued. As each complaint was received United immediately communicated with India and requested that India do something to remedy the situation. On each occasion United was informed that India had put some further substance into the paint that would overcome the sticking. During the period from about the middle of March, 1949, to the first of July India supplied a number of different formulations of the paint or enamel to United, each of which it assured United would eliminate the sticking problem. United, however, was not advised as to the ingredients that went into any of the paint. After the stripping material was manufactured with the use of the paint furnished by India no immediate difficulty appeared and when the slats were used promptly no defect was encountered. However, if a painted coil was allowed to remain unused for a period of weeks a delayed-action defect appeared in that the painted surfaces of the coils began to stick together. This difficulty applied to both the steel and the aluminum stripping.

Based upon India's assertions as to the quality of its enamel, United guaranteed its product to its customers, and therefore United found it necessary to accept the return of the sticky stipping, and issued full credit therefor. Although United attempted to salvage the material in order to mitigate damages, it was unable to do so. By reason of the foregoing, United not only sustained loss on the material but other losses for freight for the return of the defective stripping, costs of investigation, and inspection trips. United showed it suffered substantial injury to its good will.

India's effort to solve the stickiness problem continued until about July, 1949. In the face of United's mounting dissatisfaction, Mr. Sahm informed United not to worry, 'we are taking care of everything. Everything will be O.K.' However, the promised relief did not materialize. Thereupon the business relationship ceased. United then began to purchase its paint from another concern and thereafter had no further problems with sticky stripping.

On August 5, 1949, United States Testing Corporation was engaged by United to compare the performance of India's paint with that of two of its competitors. United's equipment was stopped, cleaned, and then the regular manufacturing process was restarted under the supervision of Mr. Brennan of the testing concern. Six coils of aluminum stripping were started through United's equipment. New barrels of paint, supplied by India, Fuller, and Sherwin-Williams, were used in conducting the tests. The six strips were processed at the same time, with each brand of paint being applied to two of the strips. Two test runs were made. Samples of the test runs were taken by the testing concern, sealed, and remained in the possession of the testing corporation until the trial, when they were actually opened in court during the testimony of Mr. Brennan. When examined in court the unwinding of the coils to which India's paint had been applied was accompanied by a ripping or tearing sound and on inspection the stripping to which India's paint had been applied was found to be sticky or 'tacky,' with damaged surfaces plainly visible. On the other hand, when the samples painted with the other two brands of paint were uncoiled and inspected no stickiness was found and the stripping was in excellent condition.

For approximately three weeks in the latter part of May and the early part of June, 1949, United encountered a series of approximately 150 flash fires in its ovens. On these occasions the equipment would be in...