LeSueur Creamery, Inc. v. Haskon, Inc., 80-2003

• Decision Date: 17 September 1981
• Docket Number: No. 80-2003,80-2003
• Citation: 660 F.2d 342
• Parties: 32 UCC Rep.Serv. 683 LeSUEUR CREAMERY, INC., a Minnesota Corporation, Appellee, v. HASKON, INC., a Delaware Corporation; Hercules, Inc., a Delaware corporation, Appellants.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 342

660 F.2d 342

32 UCC Rep.Serv. 683

LeSUEUR CREAMERY, INC., a Minnesota Corporation, Appellee, v. HASKON, INC., a Delaware Corporation; Hercules, Inc., a Delaware corporation, Appellants.

No. 80-2003.

United States Court of Appeals Eighth Circuit.

Submitted June 17, 1981.

Decided Sept. 17, 1981.

Stephen J. Snyder, argued, Diane Hollern, Gray, Plant, Mooty, Mooty & Bennett, Minneapolis, Minn., for appellants Haskon, Inc. and Hercules Inc.

W. M. Gustafson, argued, Daniel J. Sheran, MacKenzie, Gustafson & Lucas, Ltd., St. Peter, Minn., for appellee LeSueur Creamery, Inc.

Before HEANEY and HENLEY, Circuit Judges, and NICHOL, ^* Senior District Judge.

HEANEY, Circuit Judge.

LeSueur Creamery, Inc., commenced an action against Haskon, Inc., and Hercules, Inc., ¹ alleging breach of warranty, negligence and misrepresentation with respect to the sale, installation and servicing of pasteurizing equipment. The action was tried to a jury and special interrogatories were submitted by the district court on each of the three theories but with a single damages question. The jury found in favor of LeSueur on each cause of action and awarded it $605,250. It also found that LeSueur was contributorily negligent and twenty-five percent of LeSueur's damages were caused by that negligence. The district court entered judgment in favor of LeSueur for $583,523.65, the amount of the jury verdict less $16,016.58 awarded to Haskon on a counterclaim. Haskon appeals, contending that the award cannot be sustained on any theory, and that if the award can be sustained, the trial court erred in not reducing it by twenty-five percent. While the issues are not free from doubt, we affirm the award on a theory of negligence and reduce it by twenty-five percent to $437,920.92. ²

I. Facts.

LeSueur operates a cheesemaking plant in LeSueur, Minnesota. Haskon is engaged in the sale and installation of dairy equipment. In October, 1969, LeSueur purchased a used pasteurizer and related equipment (referred to as an HTST in the industry) from Haskon for $5,000. The pasteurizer's function in cheesemaking is to heat milk sufficiently to meet health requirements. Haskon initially installed the HTST with a capacity of 20,000 pounds of milk per hour.

At the time of the original purchase, LeSueur's president, discussed with the Haskon representative, Edward Donohue, its plans for increasing its cheese production and the HTST's capabilities for expansion. Within ninety days of the purchase of the HTST, LeSueur proceeded to implement its plans to expand production. Haskon was hired to design a new cheese room and cheese facility to increase LeSueur's production capacity to 35,000 pounds of milk per hour. Haskon also installed the necessary equipment, piping and cheese vats. LeSueur paid Haskon an additional $167,687, exclusive of the vats, for the design, equipment, piping and installation of the cheese room and facility. During this time period, LeSueur's president talked with Donohue several times about expanding the capacity of the HTST to 35,000 pounds per hour. Donohue concedes that he represented that "Haskon could and would expand (the capacity of LeSueur's HTST) to 35,000 pounds per hour."

In January and February, 1971, LeSueur moved its operations into the new cheese room. At that time, Haskon restreamed ³ the HTST to increase its capacity to 26,000 pounds per hour and installed the unit in appellee's new cheese facility. As soon as the HTST was installed, the unit developed temperature control problems. The heat produced by the HTST was both fluctuating and excessive, and the temperature of the milk moving between the HTST and the cheese vat was either too high or too low. From Spring, 1971, to May, 1973, Haskon made several unsuccessful attempts to correct the temperature problems with the HTST. In May, 1973, LeSueur again called in Haskon to restream the HTST to increase its capacity to 35,000 pounds of milk per hour. After this restreaming, the HTST continued to produce excessive heat. Haskon made several additional unsuccessful efforts to correct the temperature problems through June, 1974. In August, 1974, LeSueur brought in John McNamara, a pasteurizer dealer with over twenty years experience to examine the HTST. McNamara made four basic changes in the HTST which solved the temperature problems.

Thereafter, LeSueur commenced this action, contending that the temperature control problems resulted in a loss of cheese yield caused by the effect of excessive heat on the cheese-producing properties of milk. ⁴ LeSueur sought to recover the value of its lost production as measured by the difference between its projected yield ⁵ and its actual output during the time period when the HTST installed by Haskon was defective.

The jury found Haskon liable for breach of warranty, negligence and misrepresentation as a result of LeSueur's lost yield. The trial court denied Haskon's motions for a judgment notwithstanding the verdict or, alternatively, for a new trial, and entered judgment against Haskon. Haskon appeals from this judgment. While we have serious reservations as to whether the verdict can be sustained on the implied warranty and misrepresentation counts, ⁶ it can be affirmed on the negligence theory. ⁷

II. Negligence.

Haskon challenges the jury's negligence finding on several grounds. First, it argues that there is insufficient evidence that Haskon committed any specific negligent acts or omissions, or that Haskon's conduct caused the appellee's loss. We do not agree. An appellate court cannot freely substitute its judgment for that of the jury. A jury's finding of negligence will be overturned for insufficient evidence if at all only where the verdict is clearly contrary to the evidence. Urti v. Transport Commercial Corp., 479 F.2d 766, 769 (5th Cir. 1973); Wright & Miller, Federal Practice and Procedure: Civil § 2819 (1971). See Minnesota Mutual Life Insurance Co. v. Wright, 312 F.2d 655, 659-660 (8th Cir. 1963). The jury's decision was not manifestly incorrect in this case. While Haskon correctly observes that other factors including inexperienced management, personnel turnover, and equipment and servicing obtained from companies other than the appellant might have contributed to the reduction in yield, sufficient evidence was introduced for the jury to reasonably conclude that Haskon's negligent installation and servicing of the pasteurizer was the primary cause of LeSueur's loss.

Haskon designed, installed and twice restreamed the HTST. After the pasteurizer was restreamed, it developed temperature problems resulting in lost yield which Haskon could not correct despite repeated efforts and which ended only after John McNamara made four adjustments in August, 1974. Haskon's expert witness conceded that any of the four parts changed by McNamara could have caused the excessive heat problem in the pasteurizer. Finally, through its own expert, LeSueur introduced evidence that its actual cheese yield was further below its projected yield during the defective period than after the HTST was adjusted in August, 1974. From this evidence, the jury could have rationally concluded that Haskon negligently caused LeSueur's loss of cheese yield.

Haskon also argues that the trial judge instructed the jury as to wrong standard of care. It contends that the trial court should have used the reasonable person charge rather than hold the appellant to a higher standard of care for professionals. ⁸ We disagree. Professional persons and those engaged in any work or trade requiring special skill must possess a minimum of special knowledge and ability as well as exercise reasonable care. E. g., City of Mounds View v. Walijarvi, 263 N.W.2d 420, 424 (Minn.1978); City of Eveleth v. Ruble, 302 Minn. 249, 253-255, 225 N.W.2d 521, 524-525 (1974); Prosser, Law of Torts § 32 at 161-162 (4th Ed. 1971). The evidence adduced at trial that installing and modifying the HTST required special skill and knowledge was sufficient to justify the trial court's instruction. ⁹

Finally, Haskon contends that LeSueur's claim is solely for lost profits and that such economic losses are not recoverable in negligence in the absence of property damage or personal injury. The Minnesota Supreme Court has not yet specifically addressed the issue of whether economic loss unaccompanied by personal injury or property damage can be recovered in a negligence action. The court recently suggested in dicta that it may permit loss profits to be recovered in tort even in the absence of personal injury or property damage. ¹⁰ Allied Aviation Fueling Company of Minnesota v. Dover Corp., 287 N.W.2d 657, 659 (Minn.1980). But even if the Minnesota Supreme Court follows the majority position that purely economic losses are not recoverable in tort, Haskon's argument fails because the appellee's claim is not based solely on lost profits. LeSueur also suffered property damage to its milk. The excessive heat denatured the whey proteins in the milk and reduced the solubility of the ionic calcium in the milk and this damage decreased LeSueur's cheese yield. ¹¹

LeSueur argues that the property damage it has suffered can be measured by the difference between the volume of the cheese as produced by the defective HTST and the volume of the cheese that would have been produced if the pasteurizer was operating properly, with the difference being measured by market value. Although Haskon properly argues that this measure is in form a lost profits measure, on the instant facts, it is a satisfactory method of calculating property damage because of the special nature of the harm to LeSueur's milk. See Monsanto Co. v. Thrasher, 463 S.W.2d 25, 27 (Tex.1970) (Property damage to plaintiff's corn crop caused by failure of defendant's herbicide to control weeds measured by "the difference between the value of the crop as produced with the weeds and the crop that would have been produced had the herbicide...