Kennedy Elec. Co., Inc. v. Moore-Handley, Inc.

• Decision Date: 08 July 1983
• Docket Number: INC,MOORE-HANDLE
• Parties: 38 UCC Rep.Serv. 84 KENNEDY ELECTRIC COMPANY, INC., a Corporation and Insurance Company of North America v., a Corporation; and Westinghouse Electric Corporation, a Corporation. 81-285.
• Court: Alabama Supreme Court

Page 76

437 So.2d 76

38 UCC Rep.Serv. 84

KENNEDY ELECTRIC COMPANY, INC., a Corporation and Insurance Company of North America v. MOORE-HANDLEY, INC., a Corporation; and Westinghouse Electric Corporation, a Corporation.

81-285.

Supreme Court of Alabama.

July 8, 1983.

Rehearing Denied Sept. 16, 1983.

Robert P. Denniston of Gallalee, Denniston & Cherniak, Mobile, for appellants.

Donald F. Pierce and W. Alexander Moseley of Hand, Arendall, Bedsole, Greaves & Johnston, Mobile, for appellees.

ADAMS, Justice.

This appeal involves an action based upon an alleged breach of contract, breach of good faith, and a claim of misrepresentation. The case was tried before a jury in the Circuit Court for Mobile County. A jury verdict and judgment in behalf of the plaintiff Kennedy Electric Company, Inc. (Kennedy) against defendants Moore-Handley, Inc. (Moore-Handley) and Westinghouse Electric Corporation (Westinghouse) for $1271.64, and a verdict and judgment for the defendants on a counterclaim against Kennedy and counterdefendant Insurance Company of North America (INA) for $64,437.00 were entered, with a resulting net judgment in favor of defendants Moore-Handley and Westinghouse and against Kennedy and INA for $63,165.36. Both Kennedy and INA have appealed.

Six issues are presented for our consideration by this appeal. They are:

1. Did the trial court err to reversal in granting Westinghouse a directed verdict on the fourth cause of action of fraud?

2. Did the trial court err in excluding Kennedy's evidence as to extended overhead, additional expense or other delay damage, and estimated costs of repair or replacement of certain items?

3. Did the trial court err in granting the defendant's motion to dismiss the second cause of action (based on breach of a good faith obligation)?

4. Did the trial court err in excluding plaintiff's exhibit No. 9, consisting of a schedule of projected contract completion dates prepared by Kennedy's superintendent?

5. Did the trial court err in instructing the jury to disregard any evidence which might have gone to the interpretation of the contract?

6. Did the trial court err in excluding proposed testimony of a witness as to personal knowledge of malfunction of circuit breakers involved in the litigation?

We answer the questions posed by these issues in the negative, and we affirm the judgment of the trial court.

Kennedy's original complaint stated three causes of action. The first was for a breach of contract to supply certain electrical equipment, the second sought punitive damages for breach of an alleged duty to act in good faith, and the third cause was specifically for breach of contract for failure to provide a "VAR" meter. Subsequently, the complaint was amended to add two new causes of action. The fourth cause was against both defendants for fraud. The fifth cause was against both defendants for failure to install certain "bus bars" under the contract. On defendants' motion, the trial court dismissed the second cause. The defendants then answered the final complaint with various defenses and a counterclaim alleging that a portion of their bill remained unpaid, and on motion were allowed by the trial court to add INA as a counterdefendant under its payment bond. The fourth cause of action was ultimately amended to eliminate Moore-Handley as a defendant in that cause. At the close of the case, the defendant Westinghouse was granted a directed verdict as to the fraud count in cause number four. Causes of action one, three, and five were considered by the jury.

The suit arose from the following facts:

In 1976 the Alabama State Docks Department (Docks) employed Owen S. Posey and Associates (Posey) to design a new 23-kilovolt electrical distribution system for the Docks property in Mobile. Initially the system was designed so that it did not include any isolation switches in series with the air circuit breakers at the substations. An isolation switch was defined by the National Electric Code as "a switch intended for isolating an electrical circuit from the source of power," and the Code added, "It has no interrupting rating, and it is intended to be operated only after the circuit has been opened by some other means." The isolation switches were considered by Posey to be unnecessary. After operational personnel at the Docks complained, however, Posey changed its design to include isolation switches. The design drawings were altered at one place to show reference to a "load break" switch; at all other places on the drawings, the reference was to an isolation switch or simply "switch." The testimony revealed that the load-break switch had interrupter capabilities that the isolation switch did not have. The testimony also revealed that, at the time, different types and models of both switches were available for use. Ultimately, a set of specifications, prepared by Posey, was issued by the State Docks. The specifications referred specifically to isolation switches. The testimony of the Docks engineer revealed, however, that where the specifications required four isolation switches, the Docks had really wanted load-break type switches or load-interrupter switches.

On January 5, 1977, Kennedy executed a contract with the Docks to construct the substations. Thereafter, Kennedy obtained a quotation from defendant Moore-Handley, a distributor for Westinghouse products, to provide various electrical equipment called for by the specifications designed by Posey. Kennedy negotiated with Moore-Handley as to its price, achieved a reduction in the quoted price, and then issued a purchase order to Moore-Handley on January 18, 1977. This purchase order called for Moore-Handley to provide equipment "per the attached bill of materials," and the attached bill of materials was a complete copy of the Moore-Handley quotation. On the back of the first page of the quotation sent with the purchase order were certain provisions, printed in red, limiting Moore-Handley's liability for consequential and delay damages.

Moore-Handley ordered the Westinghouse equipment, which it had agreed to supply from Westinghouse's local sales engineer, John Cox. The testimony revealed that Cox contacted the Westinghouse engineers and ordered what he considered to be the appropriate AWP (brand) isolating switch. Subsequently, Cox was told by the engineers that another type of isolating switch would have to be used to meet the specification requirements. The type of switch ordered did not have the load-breaker, interrupter switch capabilities. Throughout this time period, Cox corresponded frequently with Kennedy and the Docks and assured them that the switches ordered would meet the specifications.

The isolation switches and certain other equipment were received in Mobile by early November, 1977, and shortly thereafter were installed on the Docks property. The "VAR METER" and the "Bus Bars," however, were not delivered at that time. In early 1978, Arnold Schwartz, an electrical engineer working for Posey, carried out an inspection of the substation equipment, which included the isolation switches. Schwartz reported that the isolation switches were not "load-break" as specified, but, were, in fact, isolation switches. Following this discovery, a series of efforts was made by Westinghouse to satisfy the Docks. Two of the isolating switches were fitted with arc chutes and flicker blades that gave them load-break capabilities. Ultimately, Posey recommended, and the Docks accepted, a proposed resolution of the problem, which required, from Westinghouse, three things: installation of two more sets of arc chutes and flicker blades, certification that the modified switches were load-break and fully warranted, and complete drawings and parts lists. Cox agreed to provide what was requested.

The issues presented by the appellants are now considered separately.

I. Directed Verdict on Fraud Cause of Action

Kennedy contends that the trial court erred to reversal by directing a verdict in favor of the defendant Westinghouse on the fourth cause of action of fraud. The basis of plaintiff's contention is that the defendant promised to supply four isolating switches as described in the plaintiff's purchase order and in the Moore-Handley customer's acknowledgement sent after the order. The switches were to meet the State Docks' specifications. The specifications said:

b. The isolating switches shall be rated at 1200 amperes continuous current and designed to withstand a momentary fault condition of 60,000 Amps at a nominal system voltage of 4160 volts. The switch shall be a Westinghouse type AWP or approved equal in a cabinet matching the circuit breaker.

The plaintiff argues that there was more than a scintilla of evidence that the agent for Westinghouse, Cox, knew that the plaintiff needed load-break interrupter switches, and, yet, delivered simple isolation switches. Generally, under the scintilla rule, the entire evidence must be viewed in a light favorable to the opponent of the motion, in this case the plaintiff, and a question must go to the jury if the evidence, or any reasonable inference arising therefrom, furnishes the smallest trace of support for the opponent's theory. Great Southwest Fire Insurance Co. v. Stone, 402 So.2d 899 (Ala.1981). This is the standard that must be applied by the trial court and is the standard we must apply upon review. Turner v. Peoples Bank, 378 So.2d 706 (Ala.1979). In judging whether a scintilla of evidence exists suggesting fraud, we must first look to see what constitutes the tort of misrepresentation in Alabama. To establish a cause of action for fraud, a plaintiff must prove that the defendant knowingly made a false representation of a material, existing fact on which the plaintiff relied to his detriment. Parker v. Thyssen Mining Construction, Inc., 428 So.2d 615 (Ala.1983). Woodard v. Woodard, 413 So.2d 1060 (Ala.1982). In cases of misrepresentation of existing facts, a reckless...