Kaiser Cement & Gypsum Corp. v. Allis-Chalmers Mfg. Co., ALLIS-CHALMERS

• Decision Date: 12 December 1973
• Docket Number: ALLIS-CHALMERS
• Citation: 111 Cal.Rptr. 210,35 Cal.App.3d 948
• Parties: KAISER CEMENT & GYPSUM CORPORATION, Plaintiff, Appellant and Respondent, v.MANUFACTURING COMPANY, a corporation, Defendant, Respondent and Appellant. Civ. 31132.
• Court: California Court of Appeals Court of Appeals

Page 210

111 Cal.Rptr. 210

35 Cal.App.3d 948

KAISER CEMENT & GYPSUM CORPORATION, Plaintiff, Appellant and Respondent, v. ALLIS-CHALMERS MANUFACTURING COMPANY, a corporation, Defendant, Respondent and Appellant.

Civ. 31132.

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

Dec. 12, 1973.

Rockwell, Keenan & Mathewson, San Francisco, for Kaiser cement.

Carnes & Bailey, Thomas M. Carnes, San Francisco, for Allis-Chalmers.

TAYLOR, Presiding Justice.

In these consolidated appeals, ¹ the major questions are the propriety of the order granting a new trial on the sole ground that the verdict was 'against the law' and the sufficiency of the evidence to support the verdict in favor of Kaiser on the bifurcated issue of liability on Kaiser's causes of action for breach of warranty against Allis-Chalmers. We have concluded that the order granting the new trial must be reversed, the matter remanded for trial on the amount of damages, and the order denying the motion for a judgment notwithstanding the verdict, affirmed.

The record indicates that the new trial was granted solely on the ground that 'the verdict is against the law.' Kaiser's cause of action was barred by the statute of limitations. The rule that on appeal every intendment is in favor of the order granting a new trial is not applicable where the question presented is purely one of law, and if there is any substantial evidence to support the judgment, the new trial order must be reversed unless some error of law is actually demonstrated (Treber v. Superior Court, 68 Cal.2d 128, 136, 65 Cal.Rptr. 330, 436 P.2d 330; Reusche v. California Pac. Title Ins. Co., 231 Cal.App.2d 731, 733--734, 42 Cal.Rptr. 262; Hawkinson v. Oesdean, 61 Cal.App.2d 712, 143 P.2d 967).

Viewing the evidence most strongly in favor of the verdict and judgment, the following facts appear: On December 1, 1961, Kaiser submitted its request for quotation for motors to drive the raw and finished mills of its new automated cement plant in Montana City, Montana. The specifications for a 2500 h.p. and a 1000 h.p. ball mill auto synchronous ² electric motor were submitted to several manufacturers, including Allis-Chalmers. The specifications required that the motors fulfill specific operating requirements and required the manufacturer-seller to provide all necessary protection devices as a unit bid, including 'automatic protection against damage' from operating conditions 'in excess of the equipment rating.'

Allis-Chalmers submitted a proposal agreeing to fabricate the motors pursuant to Kaiser's specifications. The proposal specifically provided that the motors would be 'self-ventilating' and operate within a 'guaranteed temperature rise of 40 C., over an ambient temperature ³ of 40 C.' On January 29, 1962, Kaiser accepted the Allis-Chalmers proposal.

As these motors were to operate the automated plant, their reliability was a crucial factor. The minimal life expectancy of motors like these is 20 years. The safeguards the manufacturer provides in respect to temperature rise, particularly in relation to motor design for such rise and insultation of the windings, determines the life expectancy of the motors and their reliability from failure. The pertinent portion of the contract documents contained the following separate provisions: 'Seller warrants that said merchandise will correspond with the description of the same on the reverse side of this order, will conform to any applicable specifications, and shall be of good merchantable quality and fit for the known purpose for which it is sold.'

'QUALITY. The equipment furnished under this specification shall be of the highest degree of reliability and freedom from maintenance obtainable by existing fabrication methods and the application of all engineering data available to the fabricator. The evaluation of proposals will be based on reliability, anticipated freedom from mill down-time for maintenance quality, cost of maintenance, engineering and delivery schedules and the proposed quotation.' ⁴

'GUARANTEE. 13.1. All equipment furnished under this specification shall be guaranteed against defective material and workmanship for a period of one year from the date of acceptance by Purchaser.

'13.2. The Vendor shall guarantee the performance of all equipment in accordance with the requirements of this specification.

'Should any part of the equipment fail to function, or to meet the required performance, the Vendor shall immediately make changes or additions at the equipment site as necessary to fulfill the conditions, including removing and replacing any parts required for the correction, all without cost to the Owner.'

Each of these provisions were restated directly or by implication in Kaiser's purchase order of January 29, 1962, with the guarantee to repair, restated in the language set forth in the footnote below. ⁵

On February 15, 1962, Allis-Chalmers accepted Kaiser's purchase order and undertook to fabricate the motors. On July 15, 1962, Allis- Chalmers forwarded to Kaiser the operating manual for the motors. This manual stated that the motors would have a temperature rise of 40 C. over an ambient temperature of 40 C. In the fall of 1962, Allis-Chalmers shipped the motors to Kaiser; both had affixed to them for future operating purposes a plate stating that the temperature rise would be 40 C. The motors were installed in the winter of 1962 and in the spring the testing and start-up of the motors and other equipment in the newly constructed plant began.

During this test period, Kaiser encountered numerous problems securing satisfactory performance from the motors and sent Allis-Chalmers a telegram outlining these difficulties. As to the temperature rise, the telegram stated: 'In addition to above problem both Allis-Chalmers mill motors are running at excessive indicated temperature. 1000 horsepower motor at approximately 85 to 90 C. and 2500 horsepower at approximately 80 to 85 C. Please take any necessary steps toward resolution of problems and advise us immediately of your planned course of action regarding same. We are running short of patience, sleep, scotch tape and paperclips in our continuous campaign to keep your motor on the line.'

After the telegram and during May 1963, Allis-Chalmers undertook certain repairs and modifications that resolved some of the problems of the motors. However, as to the temperature rise, Allis-Chalmers on June 11, 1963, sent a service representative and its motor design engineer, Mr. Richards to inspect the motors. Richards orally advised Kaiser that the higher than expected temperature rise related to a simple ventilation problem but that the temperature rise of the motors was not exceeding the capabilities of the 'B' insulation provided. Richards reassured Kaiser that the motors had no over-temperature problem.

On July 18, 1963, William B. Thompson, the Allis-Chalmers sales representative who had negotiated the transaction, wrote Kaiser that the motors required no repairs on its part with respect to the temperature rise problem. The letter further stated: 'The motors were quoted as 40 C. rise by thermometer above a 40 C. ambient with Class 'A' insulation. The motors were designed and manufactured with Class 'B' insulation throughout; Silco-Flex in the stators, mica in the rotors which provides A better motor than Class 'A' machines . . .. It is cumbersome to rate machines on the basis of thermometer temperatures, and at the same time to have resistance temperatures installed for observation. We therefore are suggesting that this problem be resolved by us furnishing new name plates, carrying temperature rise ratings on the basis of winding temperature detector readings rather than by thermometer. We are therefore sending . . . two new name plates stamped 80 C. rise by detector for installation on the machines. With the motors clean and with precautions taken to prevent air recirculation There would still be a comfortable margin to allow operating flexibility.' (Emphasis supplied.)

The letter indicates the complications involved in rating motors for temperature rise. Furthermore, the design of the motor did not permit the customer to monitor the temperature of both parts of the complex motor.

The only temperature indicator on the motors, the one on the stator, at no time disclosed temperature rises in excess of the 80 rating contained on the new name plates. No similar temperature indicators for the rotor are normally provided because of the complications of getting the information from a rotating part to a temperature indicator. Thus, there was no means for construction or plant operating personnel to determine the rotor temperature rise. Thus, it appeared to Kaiser, based on the only temperature indicator, that the rerated motors were performing within the revised temperature ratings. On July 24, 1963, a Kaiser engineer wrote to Allis-Chalmers as follows: 'I am still at somewhat of a loss as to the reason Allis-Chalmers rated these drives at 40 C. rise over a 40 C. ambient when Class 'B' insulation was supplied, which obviously has a much higher heat rating. However, as long as the motors are guaranteed for the temperature rise which these indicates continuously, our requirement is satisfied.'

In August 1963, Kaiser received new plates for the motors that indicated a temperature rise of 80 as to the stators and 85 as to the rotors. As Kaiser could only observe the temperature rise indicated for the stators, and had no information concerning the temperature rise of the rotors, Kaiser relied on Allis-Chalmers re-rated temperature rise characteristics based on the new plates that indicated a temperature rise of 85 C. over ambient temperature of 40 C. This rise was within the Class B insulation protection as outlined by the Allis-Chalmers letter of July 18, 1963.

On September 30, 1966, about 3 1/2 years after the first testing of the motors, the rotors on the 2500 h.p. motor...