R. E. B., Inc. v. Ralston Purina Co.

• Decision Date: 21 October 1975
• Docket Number: No. 74--1895,74--1895
• Citation: 525 F.2d 749
• Parties: 18 UCC Rep.Serv. 122 R.E.B., INC., Plaintiff-Appellee, v. RALSTON PURINA CO., Defendant-Appellant.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 749

525 F.2d 749

18 UCC Rep.Serv. 122

R.E.B., INC., Plaintiff-Appellee, v. RALSTON PURINA CO., Defendant-Appellant.

No. 74--1895.

United States Court of Appeals Tenth Circuit.

Argued Sept. 3, 1975.

Decided Oct. 21, 1975.

David H. Carmichael, Hanes, Carmichael, Gage & Speight, a Professional Corp., Cheyenne, Wyo., for plaintiff-appellee.

James L. Applegate, Hirst, Applegate & Dray, Cheyenne, Wyo., for defendant-appellant.

Before HILL, BARRETT and DOYLE, Circuit Judges.

DOYLE, Circuit Judge.

The judgment appealed from in this implied warranty action arose under the Wyoming Uniform Commercial Code, Wyo.Stat. §§ 34--2--314, 34--2--315 (Cum.Supp.1973).

The allegations of plaintiff R.E.B., Inc. are that it operated a hog ranch that produced purebred hogs for fattening and breeding purposes; that during the period commencing about August 1, 1970, and continuing to April 1, 1971, Ralston Purina, appellant herein, furnished defective feed to it; that the defective feed injured its animals, whereby some of them died and others were unable to conceive and produce offspring, while others gave birth to stillborn offspring. R.E.B. further claims that its herd thus deteriorated, causing loss of its property in the hogs, loss of profits and loss of good will.

The cause has been before this court previously. See R.E.B., Inc. v. Ralston Purina, No. 73--1627 (10th Cir., filed April 17, 1974). In that prior case, in which Ralston Purina was adjudged liable for breach of its implied warranty of fitness for a particular purpose for furnishing defective feed, the trial court had not given any instruction on the issue of damages. Ralston Purina had tendered an instruction which would have told the jury that generally loss of profits of a commercial business are too uncertain, speculative and remote, and are to be allowed only if rendered reasonably certain by positive evidence. Our holding was that the trial court committed error in refusing to give Ralston's instruction or one similar to it, and indeed, in failing to instruct on damages On the remand, R.E.B., Inc. was allowed to amend its complaint so as to redefine its damages claims and so as to greatly increase the amount demanded. Following retrial, a verdict was awarded to R.E.B., Inc. in the amount of $262,000. (The original verdict had been substantially less. It had amounted to the sum of $114,773.)

altogether. We remanded for retrial of the issue of damages only.

The evidence established that R.E.B., Inc., commenced business in 1963. At that time it acquired 57 Specific Pathogen Free gilts plus two boars. Its object was to develop and sell high quality breeding stock for the purpose of sale to farmers. To accomplish this it used a so-called 'closed herd.' By means of a process of selection and reselection it was able to develop a herd of 210 high quality sows by July 1970.

The defective feed furnished to it by Ralston was the cause of the injuries to the sows and offspring described above. A further result was that the herd became inferior to that which had existed and R.E.B.'s reputation as a source of breeding stock suffered. Because of a lack of reserve capital, the entire operation was sold on June 8, 1973.

Reversal is here sought on the following grounds:

1. The trial court's allowing recovery for both loss of future profits as well as diminution in the sale value of the hog farm. The argument is that this permitted a double recovery.

2. That damages for diminution of the value of the hog farm as well as loss of future profits went beyond the contemplation of the parties and therefore were not recoverable.

3. The evidence was insufficient to establish to the level of reasonable certainty that there would in fact be future profits.

4. The alleged error of the trial court in allowing the jury to consider future profits during a period after the plaintiff ceased the use of the hog feed.

I. AMENDMENT OF THE COMPLAINT

The amendments which were offered by R.E.B., Inc. following the remand included a claim for the capital loss which allegedly resulted from the sale of the business as of April or June 1973, which latter dates were some two years after the use of the bad feed. The other items were in essence specified demands which dealt with R.E.B.'s being prevented from conducting its normal business as a consequence of the use of bad feed.

In our opinion the trial court did not abuse its discretion in either allowing the particular amendments or in doing so after remand. ¹

Authority for granting amendments stems from Rule 15(a). It contemplates allowing amendments freely when justice requires. Changes or expansion are not to be allowed on remand if to do so would run counter to the mandate of the appellate court. Moore's Federal Practice $15.11; Britton v. Dowell, 243 F.2d 434 (10th Cir. 1957). In this case the mandate neither expressly nor implicitly dealt with the propriety of pleading changes.

The principal factors which are considered in connection with the offer of an amendment are, first, whether it will cause delay and, second, whether the adversary will suffer prejudice. Lateness does not of itself justify the denial of the amendment. Moore, supra, $15.08(4); 4 A.L.R.Fed. 128. And the fact that it is offered following remand does not suffice of itself to require denial. Retail Clerks International Assn. v. Lion Dry Goods, Inc., 341 F.2d 715, 722 (6th Cir. 1965). Unless the granting of the Ralston contends that the time of the amendment--five and one-half weeks before trial--deprived it of preparing a defense. ² We disagree. The amendments did not propose substantially different issues. For example, the issue of future profit loss was present in the first trial as was the diminution in the value of the property. The most important effect of the amendments was to refine the demands.

amendment after remand caused grave prejudice, the action is not an abuse of discretion. See Patton v. Guyer, 443 F.2d 79, 86 (10th Cir. 1971).

Addition of a new claim may have the effect of complicating the proceeding. See United States v. An Article of Drug, 320 F.2d 564, 573--74 (3rd Cir. 1963). Similarly, the late addition of a party could produce the same result. Derman v. Stor-Aid, Inc., 8 F.Serv. 15a.21, Case 1.

The mentioned problems are not present at bar. It was not error to allow the requested amendments.

II. WERE THE DAMAGES WITHIN THE CONTEMPLATION OF THE PARTIES?

Ralston would have us rule that R.E.B.'s losses on account of lost profits and diminished value as a producing business are not recoverable under UCC §§ 2--714 and 2--715 for the reason that such consequential damages were not contemplated by the parties when the contract was entered into.

The factor which bears on this subject most significantly is that Ralston was in close relationship with R.E.B., Inc. during the entire period, including the time when the defective feed was being fed. Mr. McMillen, a Ralston representative, was shown to have had an active role in advising R.E.B. in its breeding operations and its finances. And, of course, Ralston had reason to know about the high degree of importance in having healthy stock as well as the dire consequences of having sickness sweep through the herd. Cf. Lewis v. Mobil Corp., 438 F.2d 500 (8th Cir. 1971). A manufacturer should know that defective goods will disrupt production.

Ralston's position is that these items of damage do not flow naturally from breach of warranty as defined by the UCC. The Code does not express any such limitation. See § 2--715. And we have held that lost profits can be recovered where sufficiently proven. ³ Also, the Wyoming Supreme Court has not set itself against the award of lost profits in similar circumstances. ⁴ There were extensive offers of proof which were aimed at loss of profits and which were substantial and legally sufficient--at least for the year 1970--71.

R.E.B.'s evidence showed loss of good will and business reputation, and from outward appearances the jury gave a recovery for this loss. We have recognized that this can be proper. See Westric Battery Co. v. Standard Electric Co., Inc., 482 F.2d 1307, 1317--18 (10th Cir. 1973). No Wyoming authority is called to our attention, but there is a substantial In sum we are unable to see any merit to the contention that these heads of damage were outside the contemplation or anticipation of the appellant. Rather, in our view the troublesome problem is that which arises from the submission without limitation of both loss of profits and diminution of property value of the business. Stated differently, the serious problem is that of overlapping or double damage award.

body of case law which approves this. See Westric II, 522 F.2d 986 (10th Cir. 1975) and the cases cited in the body of that opinion.

III. THE DOUBLE DAMAGE QUESTION

During the period of sale of the defective feed (from August 1, 1970 to April 1, 1971), there was direct injury in the form of death of hogs which were in the herd and loss of newly born pigs. Breeder hogs which had been produced for sale to other farms were also lost, and according to R.E.B. there was a loss of reputation in the trade plus the impeding of its planned program to improve the quality of its herd by the application of genetics.

The parties agree on at least one issue, that the Uniform Commercial Code as per the statutes of Wyoming § 34--2--102 (1973 Supp.) is applicable. Also undisputed is that Ralston violated the warranties imposed by law. See Wyo.Stat. § 34--2--314.

On account of the breach, R.E.B., Inc. is entitled to recover the loss resulting in the ordinary course of events '. . . as determined in any manner which is reasonable.' Ordinarily damages would be measured by the difference 'between the value of the goods accepted and the value they would have had if they had been as warranted.' § 34--2--714(2) and where applicable '. . . any incidental and consequential damages.' § 34--2--714(3)....