Neff v. Western Cooperative Hatcheries

• Decision Date: 16 January 1957
• Docket Number: No. 5425.,5425.
• Citation: 241 F.2d 357
• Parties: Gordon S. NEFF, individually as the surviving partner of Stanley B. Neff and Sons, a co-partnership; and as Administrator of the Estate of Stanley B. Neff, deceased, Appellants, v. WESTERN COOPERATIVE HATCHERIES, a corporation, Appellee.
• Court: U.S. Court of Appeals — Tenth Circuit

241 F.2d 357 (1957)

Gordon S. NEFF, individually as the surviving partner of Stanley B. Neff and Sons, a co-partnership; and as Administrator of the Estate of Stanley B. Neff, deceased, Appellants, v. WESTERN COOPERATIVE HATCHERIES, a corporation, Appellee.

No. 5425.

United States Court of Appeals Tenth Circuit.

January 16, 1957.

Elias Hansen, Salt Lake City, Utah (J. Grant Iverson, Salt Lake City, Utah, on the brief), for appellants.

Arthur H. Nielsen, Salt Lake City, Utah, for appellee.

Before PHILLIPS, MURRAH and LEWIS, Circuit Judges.

LEWIS, Circuit Judge.

This appeal was taken from a judgment rendered upon a verdict in favor of plaintiff-appellee, Western Cooperative Hatcheries, on its complaint for money due under a contract with defendants-appellants for the sale of turkey poults, and against defendants on a counterclaim for damages accruing because of an alleged misrepresentation. Diversity of citizenship of the parties and a demand for the payment of $6,015.45 provided the jurisdictional requirements for trial in the United States District Court for the District of Utah. The seller of the turkeys is a Washington corporation and the buyer a Utah partnership.

The issues were determined at pretrial and designated to be:

1. Did the seller expressly or impliedly warrant the turkeys, and if so, did it breach such warranty to the buyer's damage?

2. Did the seller fraudulently supply diseased turkeys to the buyer's damage?

3. Was there an accord and satisfaction that discharged liability, if any?

On appeal numerous assignments of error are made, the essence of which can be abstracted to a claim of error by the court in (1) instructing the jury that the seller made no express or implied warranty of the birds; (2) instructing the jury relative to the elements of fraud; (3) ruling upon questions of evidence relating to warranty, fraud and damage; and (4) allowing a recovery greater than the amount prayed for in the plaintiff's complaint.

On or before February 5, 1954, plaintiff delivered 8,017 Broad Breasted Bronze turkey poults to the defendants at Sandy, Utah, pursuant to a written order dated January 15, 1954. Defendants agreed to pay 85¢ per poult, totalling $6,814.45. The contract contained the following provisions with respect to warranties of the turkeys:

"This order is subject to the following conditions:

"Prices are subject to change upon thirty days notice. Prices given include delivery to you, or express charges prepaid to your nearest express office where delivery by truck is not practical.

"We guarantee full count of live chicks or poults at time of delivery; that they are true to breed; and that they will reach you as near delivery date ordered as possible.

"The Cooperative is using its bests efforts to produce good chicks and poults. Due to the nature of the business and the fact that we have no control over their feeding and care after they leave our hands, you will understand that we can not be responsible for them after delivery. We therefore make no warranty, express or implied, as to health, quality, or productivity of chicks or poults delivered, and no agent of the Cooperative is authorized to make any warranty or representation to the contrary. We do reserve the right to make refund for, or replace, any birds proven to our satisfaction to be defective upon delivery." (Emphasis added.)

An acceptance of the order, containing the same stipulations was mailed by plaintiff to defendants from Washington and the poults were delivered to defendants in Utah.

Although losses of young turkeys normally average from three to five per cent during the first eight weeks of their lives, defendants were apparently concerned over the condition of the poults in their brooder and took some of them to a veterinarian at intervals beginning when they were about one week old and continuing until the birds reached the age of twenty weeks. Various ailments of the turkeys at different times in different poults were analyzed as being infectious and intestinal bacteria (a condition known as "Water Bellies"), enteritis, erosion of the gizzard, paralysis, Blackhead (a disease associated with unsanitary conditions), dehydration (caused by improper feeding and drinking), paratyphoid, and Newcastle. Infectious sinusitis, the basis of appellant's claim, appeared in birds examined at the ages of 4½ weeks and 20 weeks.

On February 15, 1954, 766 poults died in the Neff coops. Defendants made a careful investigation to determine the reason for this unusual mortality; there had been no recent change in feeding, light, or temperature which would account for it. Through his own examinations and reports from a laboratory, Mr. Neff concluded that many of the dead turkeys had been afflicted with sinusitis.

Expert witnesses testified that sinusitis may be transmitted through the egg when the breeder flock is infected; that it takes from two weeks to approximately ten weeks for sinusitis to incubate. No treatment will completely eliminate the disease but treatment in combination with proper management and sanitation will control the infection and allow some of the birds to gain in normal weight pattern. There was evidence that some of the flocks maintained by plaintiff's members, who supplied plaintiff, were infected with sinusitis.

Mr. Neff testified that turkeys marketed in 1954 were each four pounds below normal weight. Thirty-eight per cent of the turkeys which he bought from plaintiff died as compared to a normal loss to the time of marketability of eight to ten per cent.

Upon this factual foundation, defendants at the conclusion of the case stipulated to their liability for the purchase price of the turkeys and asserted a counterclaim for damage for breach of warranty and in fraud.

As a consequence of the stipulation the trial court directed a verdict in favor of plaintiff for the amount of $6.814.45 on its complaint. The court further ruled, in accordance with the provisions of the contract set forth above, that the parties had contracted against any implied or express warranty of the poults, but submitted interrogatories and general verdicts to the jury on the basis of fraud, in which the jury found that the false representation was made, that plaintiff knew or should have known it to be false, but that the representation was not made with the intention to defraud defendants and, although defendants relied upon the statement, such reliance and action thereon was not the proximate cause of their injury. The interrogatories were answered as follows:

"1. Did the Plaintiff represent to the Defendants at the time of sale of the poults in question `that it, the Plaintiff, was using its best efforts to produce good poults?\'

"`Yes\'

"2. If such representation was made to the Defendants at the time of the sale of such poults was such representation false?

"`Yes\'

"3. If such representation was so made, did the Plaintiff know it to be false or did Plaintiff make such statement recklessly without sufficient knowledge of which to base such representation?

"`Yes\'

"4. If such representation was made, was it made for the purpose of inducing Defendants to rely thereon?

"`No\'

"5. If such representation was made, did the Defendants, acting reasonably and in ignorance of its falsity, in fact rely upon such representation?

"`Yes\'

"6. If such representation was so made, were Defendants induced to act in reliance thereon to their damage?

"`No\'."

In its general verdicts, the jury found in favor of the plaintiff in the amount of $6,814.45 as instructed by the court and against the defendants on their counterclaim no cause of action. Thereupon the court entered judgment for the plaintiff in the principal amount plus interest from February 5, 1954, the date of delivery, in the amount of $883.00 plus costs.

Warranty and Fraud

Defendants maintain, although they did not so argue to the trial court, that the instruction on fraud should have been given in accordance with the law of the state of Washington, where the contract was executed. The final act necessary to give validity to the contract, here the acceptance in Washington, determines the place of execution of the contract and the law of that place controls in the construction of the contract and the rights and duties of the parties under it. Kansas City Wholesale Grocery Co. v. Weber Packing Corporation, 93 Utah 414, 73 P.2d 1272; Williams v. Steamship Mutual Underwriting Ass'n, 45 Wash.2d 209, 273 P.2d 803.

Under Washington law, they further contend, the burden of proof upon one who alleges fraud is somewhat less than that levied upon them by the interrogatories and the court's instruction:

"That the elements of fraud, each of which must be proved by the defendants by clear and convincing evidence, are as follows:

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