Innovative Office Systems, Inc. v. Johnson

• Decision Date: 31 May 1995
• Docket Number: No. 12-93-00104-CV,12-93-00104-CV
• Citation: Innovative Office Systems, Inc. v. Johnson, 906 S.W.2d 940 (Tex. App. 1995)
• Parties: 29 UCC Rep.Serv.2d 200 INNOVATIVE OFFICE SYSTEMS, INC., Appellant, v. Jim JOHNSON d/b/a Electro Image, Appellee.
• Court: Texas Court of Appeals

Page 940

906 S.W.2d 940

29 UCC Rep.Serv.2d 200

INNOVATIVE OFFICE SYSTEMS, INC., Appellant, v. Jim JOHNSON d/b/a Electro Image, Appellee.

No. 12-93-00104-CV.

Court of Appeals of Texas Tyler.

May 31, 1995.

Rehearing Overruled July 7, 1995.

HOLCOMB, Justice.

This is an appeal from a judgment that was entered in a DECEPTIVE TRADE PRACTICES-CONSUMER PROTECTION ACT case. Appellee, Jim Johnson d/b/a Electro Image ("Johnson"), sued Appellant, Innovative Office Systems, Inc. ("Innovative"), to recover damages resulting from the lease of a color copier, computer equipment, and computer software. Johnson alleged causes of action under DTPA, common law fraud, breach of contract, breach of warranties, negligent misrepresentation and rescission. Innovative counterclaimed for declaratory judgment alleging that Johnson had breached his lease agreement on the computer equipment. In a non-jury trial, Johnson restricted his claims against Innovative to DTPA violations, breach of contract, and breach of warranty. The trial court found that Innovative was liable for: (1) violations of "the laundry list" of the DTPA; (2) unconscionable conduct; and (3) breach of express or implied warranties. The court further found that Innovative's conduct was done "knowingly," and awarded Johnson actual damages in the amount of $146,335.00, additional damages in the amount of $100,000, and attorney's fees. Innovative challenges the legal and factual sufficiency of the evidence to support the court's findings. Innovative also contends that the court erred when it failed to find, as a matter of law, that Johnson did not mitigate his damages, Innovative did not accept the lease, and that Johnson did not breach the lease. We will affirm.

Beginning in 1989, Johnson owned and operated Electro Image, a computer graphics business in Tyler. Electro Image is a service bureau that accommodates advertising agencies and corporate graphics departments that need high caliber art work on printed materials, such as sales brochures.

Innovative sells and services office equipment. In January, 1991, Innovative's Regional Sales Manager, Mike Dobbins ("Dobbins"), convinced Johnson to enter into a long-term lease for a new Canon color laser copier ("CLC-200"). Johnson used the Canon CLC-200 solely as a color copier. To produce high quality color graphics, Johnson created the original art work in black and white, colored the black and white graphic by hand, and reproduced the original on the multi-color copier. Although Johnson considered this method undesirable, he was not aware that a more efficient, fully computerized color machine was available on the market.

In July 1991, the ceiling of Johnson's building fell on top of the CLC-200. Johnson contacted Innovative and began a series of conversations with Dobbins that resulted in Dobbins proposing that Johnson upgrade his equipment to an interfaced computerized color printing system. The system Dobbins proposed included an upgraded copier, the Canon CLC-500 copier, an independent processing unit, a memory board, and a software package that was new on the market called SuperPrint.

The key component of the proposed upgraded system was the SuperPrint software program. Using the special software, the proposed system would enable Johnson to design an image directly on the computer screen and the CLC-500 copier would serve as a printer and reproduce the color graphic image. By upgrading to a new, more expensive color copying system, Johnson reasoned that he could eliminate the time intensive step of creating the original art work by hand, which would allow him to produce high quality graphics on a more affordable basis.

Johnson had reservations and concerns about the upgraded system, and Dobbins referred Johnson to Innovative President, Harry Farnham, ("Farnham"). Farnham had an "almost unlimited hardware capability" to determine the viability of any software that was new on the market. As part of his expertise, Farnham gave feed-back to developers of software, such as Canon, on the effectiveness of any new software that entered the market.

To ensure that Innovative understood Johnson's expectations for the proposed new system, Johnson gave Dobbins a list of nine specifications of the factors that were important to Johnson if Johnson were to decide to upgrade his system. In turn, Dobbins gave all of Johnson's specifications to Farnham so that "[Farnham] would know exactly where we would be going with the software." The nine specifications that Johnson considered important were:

1. The system had to be an integrated solution from one vendor;

2. The system had to operate on Windows 3.0;

3. The system had to enable the color laser copier as a scanner;

4. The system had to produce PostScript output;

5. The system must operate on Johnson's computer, an IBM PS/2 platform;

6. The system had to work with Johnson's large library of PostScript Type I fonts;

7. The system must be suitable for a service bureau clientele and accept digital input from other IBM programs using industry standard formats;

8. The software solution must be upgradable should better hardware solution enter the market, and;

9. The system had to be cost effective.

Johnson was satisfied with the performance of his CLC-200 copier; therefore, the upgrade to the CLC-500 was only attractive to him if there was a workable software solution to make his output less time consuming and more affordable. Realizing this, Farnham sent Johnson approximately 100 pages of information on the new SuperPrint software program, including a flyer which made the following representations:

Get maximum effectiveness from your Canon color laser copier

Maximum speed

Maximum resolution

Maximum connectivity

Maximum return on your investment

SuperPrint is a software solution to Windows lack of support for color devised [and] printing quality and speed

SuperPrint is the best solution for printing to Canon Color Laser Copiers directly from such popular applications as CorelDRAW! [a graphics software used by Johnson]

SuperPrint generates scalable screen and printer fonts on-the-fly

Service bureau printing

Get fast throughput

Attract more customers who use Windows applications

Reduce headaches with easy to use page description files

Maximize the return on your investment in Canon equipment

In reliance on the representations that the proposed system would, at a minimum, satisfy Johnson's nine basic specifications, Johnson signed a 65 month lease on the upgraded hardware.

In September, 1991, Dobbins paid Johnson's expenses to attend a color laser copier software product fair and training seminar. At the software show, Johnson, Dobbins, and Farnham saw a demonstration of the software that would be compatible with Johnson's new system. The demonstration included two software packages, Colorbus and SuperPrint 3.0/Z-Script. Johnson testified that the demonstration was impressive and looked like everything Dobbins had told him it was going to be. He watched examples of the system's output and was furnished with samples of the output after the demonstration. One sample stated: "Printed to the Canon Color Laser Copier 500 PostScript interpreted by Zenographics SuperPrint Distributed by Colorbus."

That same day, Farnham and Dobbins introduced Johnson to Paul Peffer, a representative of Colorbus. Peffer informed Johnson that the SuperPrint 3.0/Z-Script that had been demonstrated was not available at the show because the packaging and the instruction manual for the software had not been completed. Although the SuperPrint 3.0/Z-Script was not available, Peffer told Johnson that he could get the SuperPrint 2.0 software, which would produce a lower grade, but similar output as the SuperPrint 3.0/Z-Script. If Johnson agreed to order the 2.0 SuperPrint software, Peffer agreed to give Johnson a good price and agreed to ship the SuperPrint 3.0/Z-Script to Johnson "the minute that it was available" at no additional charge. Peffer represented to Johnson that the SuperPrint 3.0/Z-Script would be available in November of 1991.

At the conclusion of their discussion, Colorbus sold the software to Innovative, which then leased it to Johnson. The order form for the software was attached as a supplement to Innovative's original lease. The lease, as supplemented, attempted to obligate Johnson to make 65 monthly payments totaling $96,876.00.

As Dobbins prepared the order form, Johnson discussed with Peffer the details of the manner in which the software would be adapted to Johnson's equipment. Peffer told Johnson that Innovative would install the software and would be Johnson's sole source of technical support for the system. After hearing Peffer's representations to Johnson that Innovative would be responsible for assembling, troubleshooting, and repairing Johnson's system, Dobbins decided to confirm Peffer's statement with Farnham. Thereafter, Dobbins told Johnson, "Harry [Farnham] has agreed. [Innovative is] going to take care of the whole works. We'll take care of you, Jim."

In October 1991, Johnson received the SuperPrint 2.0 software. When Johnson called Dobbins and requested that Innovative install his new equipment, Dobbins told Johnson to call Farnham to find out who was going to put the system together. Farnham told Johnson that it would probably be better if Johnson put it together himself. After Johnson protested, Farnham advised Johnson to contact a representative of Colorbus for assistance.

Johnson eventually assembled the system, but nothing worked except for the CLC-500, which he used only as a color copier. Again, Johnson called Farnham and Farnham agreed to send some Innovative technicians to assist Johnson. The technicians discovered that the cable provided by Innovative had been miswired. After a new cable was installed, Johnson's system still would not work. Again, Farnham advised Johnson to contact Colorbus. Johnson contacted Ruben Gooch with Colorbus, who...