Lewis v. Mobil Oil Corporation

• Citation: 438 F.2d 500
• Decision Date: 16 February 1971
• Docket Number: No. 20244.,20244.
• Parties: Paul LEWIS, d/b/a Lewis Lumber Company, Appellee, v. MOBIL OIL CORPORATION, a Corporation, Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (8th Circuit)

438 F.2d 500 (1971)

Paul LEWIS, d/b/a Lewis Lumber Company, Appellee, v. MOBIL OIL CORPORATION, a Corporation, Appellant.

No. 20244.

United States Court of Appeals, Eighth Circuit.

January 7, 1971.

Rehearings Denied February 16, 1971.

COPYRIGHT MATERIAL OMITTED

Ronald L. Neill, Dallas, Tex., John C. Calhoun, Jr., Owens, McHaney & McHaney, Little Rock, Ark., for appellant; E. L. McHaney, Little Rock, Ark., of counsel.

Daily, West, Core & Coffman, Fort Smith, Ark., for appellee; Ben Core, Fort Smith, Ark., of counsel.

Before MATTHES, Chief Judge, MEHAFFY and GIBSON, Circuit Judges.

GIBSON, Circuit Judge.

In this diversity case the defendant appeals from a judgment entered on a jury verdict in favor of the plaintiff in the amount of $89,250 for damages alleged to be caused by use of defendant's oil.

Plaintiff Lewis has been doing business as a sawmill operator in Cove, Arkansas, since 1956. In 1963, in order to meet competition, Lewis decided to convert his power equipment to hydraulic equipment. He purchased a hydraulic system in May 1963, from a competitor who was installing a new system. The used system was in good operating condition at the time Lewis purchased it. It was stored at his plant until November 1964, while a new mill building was being built, at which time it was installed. Following the installation, Lewis requested from Frank Rowe, a local Mobil oil dealer, the proper hydraulic fluid to operate his machinery. The prior owner of the hydraulic system had used Pacemaker oil supplied by Cities Service, but plaintiff had been a customer of Mobil's for many years and desired to continue with Mobil. Rowe said he didn't know what the proper lubricant for Lewis' machinery was, but would find out. The only information given to Rowe by Lewis was that the machinery was operated by a gear-type pump; Rowe did not request any further information. He apparently contacted a Mobil representative for a recommendation, though this is not entirely clear, and sold plaintiff a product known as Ambrex 810. This is a straight mineral oil with no chemical additives.

Within a few days after operation of the new equipment commenced, plaintiff began experiencing difficulty with its operation. The oil changed color, foamed over, and got hot. The oil was changed a number of times, with no improvement. By late April 1965, approximately six months after operations with the equipment had begun, the system broke down, and a complete new system was installed. The cause of the breakdown was undetermined, but apparently by this time there was some suspicion of the oil being used. Plaintiff Lewis requested Rowe to be sure he was supplying the right kind of oil. Ambrex 810 continued to be supplied.

From April 1965 until April 1967, plaintiff continued to have trouble with the system, principally with the pumps which supplied the pressure. Six new pumps were required during this period, as they continually broke down. During this period, the kind of pump used was a Commercial pump which was specified by the designer of the hydraulic system. The filtration of oil for this pump was by means of a metal strainer, which was cleaned daily by the plaintiff in accordance with the instruction given with the equipment.

In April 1967, the plaintiff changed the brand of pump from a Commercial to a Tyrone pump. The Tyrone pump, instead of using the metal strainer filtration alone, used a disposable filter element in addition. Ambrex 810 oil was also recommended by Mobil and used with this pump, which completely broke down three weeks later. At this point, plaintiff was visited for the first time by a representative of Mobil Oil Corporation, as well as a representative of the Tyrone pump manufacturer.

On the occasion of this visit, May 9, 1967, plaintiff's system was completely flushed and cleaned, a new Tyrone pump installed, and on the pump manufacturer's and Mobil's representative's recommendation, a new oil was used¹ which contained certain chemical additives, principally a "defoamant." Following these changes, plaintiff's system worked satisfactorily up until the time of trial, some two and one-half years later.

Briefly stated, plaintiff's theory of his case is that Mobil supplied him with an oil which was warranted fit for use in his hydraulic system, that the oil was not suitable for such use because it did not contain certain additives, and that it was the improper oil which caused the mechanical breakdowns, with consequent loss to his business. The defendant contends that there was no warranty of fitness, that the breakdowns were caused not by the oil but by improper filtration, and that in any event there can be no recovery of loss of profits in this case.

I. THE EXISTENCE OF WARRANTIES

Defendant maintains that there was no warranty of fitness in this case, that at most there was only a warranty of merchantability and that there was no proof of breach of this warranty, since there was no proof that Ambrex 810 is unfit for use in hydraulic systems generally. We find it unnecessary to consider whether the warranty of merchantability was breached, although there is some proof in the record to that effect, since we conclude that there was a warranty of fitness.

Plaintiff Lewis testified that he had been a longtime customer of Mobil Oil, and that his only source of contact with the company was through Frank Rowe, Mobil's local dealer, with whom he did almost all his business. It was common knowledge in the community that Lewis was converting his sawmill operation into a hydraulic system. Rowe knew this, and in fact had visited his mill on business matters several times during the course of the changeover. When operations with the new machinery were about to commence, Lewis asked Rowe to get him the proper hydraulic fluid. Rowe asked him what kind of a system he had, and Lewis replied it was a Commercial-pump type. This was all the information asked or given. Neither Lewis nor Rowe knew what the oil requirements for the system were, and Rowe knew that Lewis knew nothing more specific about his requirements. Lewis also testified that after he began having trouble with his operations, while there were several possible sources of the difficulty the oil was one suspected source, and he several times asked Rowe to be sure he was furnishing him with the right kind.

Rowe's testimony for the most part confirmed Lewis'. It may be noted here that Mobil does not contest Rowe's authority to represent it in this transaction, and therefore whatever warranties may be implied because of the dealings between Rowe and Lewis are attributable to Mobil. Rowe admitted knowing Lewis was converting to a hydraulic system and that Lewis asked him to supply the fluid. He testified that he did not know what should be used and relayed the request to a superior in the Mobil organization, who recommended Ambrex 810. This is what was supplied.

When the first Tyrone pump was installed in April 1967, Rowe referred the request for a proper oil recommendation to Ted Klock, a Mobil engineer. Klock recommended Ambrex 810. When this pump failed a few weeks later, Klock visited the Lewis plant to inspect the equipment. The system was flushed out completely and the oil was changed to DTE-23 and Del Vac Special containing several additives. After this, no further trouble was experienced.

This evidence adequately establishes an implied warranty of fitness. Arkansas has adopted the Uniform Commercial Code's provision for an implied warranty of fitness:

"Where the seller at the time of contracting has reason to know any particular purpose for which the goods are required and that the buyer is relying on the seller\'s skill or judgment to select or furnish suitable goods, there is unless excluded or modified under the next section an implied warranty that the goods shall be fit for such purpose." 7C Ark.Stat.Ann. § 85-2-315 (1961).

Under this provision of the Code, there are two requirements for an implied warranty of fitness: (1) that the seller have "reason to know" of the use for which the goods are purchased, and (2) that the buyer relies on the seller's expertise in supplying the proper product. Both of these requirements are amply met by the proof in this case. Lewis' testimony, as confirmed by that of Rowe and Klock. shows that the oil was purchased specifically for his hydraulic system, not for just a hydraulic system in general, and that Mobil certainly knew of this specific purpose. It is also clear that Lewis was relying on Mobil to supply him with the proper oil for the system, since at the time of his purchases, he made clear that he didn't know what kind was necessary.

Mobil contends that there was no warranty of fitness for use in his particular system because he didn't specify that he needed an oil with additives, and alternatively that he didn't give them enough information for them to determine that an additive oil was required. However, it seems that the circumstances of this case come directly within that situation described in the first comment to this provision of the Uniform Commercial Code:

"1. Whether or not this warranty arises in any individual case is basically a question of fact to be determined by the circumstances of the contracting. Under this section the buyer need not bring home to the seller actual knowledge of the particular purpose for which the goods are intended or of his reliance on the seller\'s skill and judgment, if the circumstances are such that the seller has reason to realize the purpose intended or that the reliance exists." 7C Ark.Stat.Ann. § 85-2-315, Comment 1 (1961) (emphasis added).

Here Lewis made it clear that the oil was purchased for his system, that he didn't know what oil should be used, and that he was relying on Mobil to supply the proper product. If any further information was needed, it was incumbent upon Mobil to get it before making its recommendation. That it could have easily gotten the necessary...