Rhodes Pharmacal Co. v. Continental Can Co.

• Decision Date: 27 June 1966
• Docket Number: No. 50825,50825
• Citation: 219 N.E.2d 726,72 Ill.App.2d 362
• Parties: , 3 UCC Rep.Serv. 584 RHODES PHARMACAL COMPANY, Inc., a corporation, Plaintiff-Appellant, v. CONTINENTAL CAN COMPANY, Inc., a New York corporation, Defendant-Appellee.
• Court: United States Appellate Court of Illinois

Page 726

219 N.E.2d 726

72 Ill.App.2d 362, 3 UCC Rep.Serv. 584

RHODES PHARMACAL COMPANY, Inc., a corporation, Plaintiff-Appellant, v. CONTINENTAL CAN COMPANY, Inc., a New York corporation Defendant-Appellee.

No. 50825.

Appellate Court of Illinois, First District, First Division.

June 27, 1966.

Rehearing Denied July 19, 1966.

Richard F. Watt, David R. Kentoff, John M. Bowlus, Stephen M. Slavin, Cotton, Watt, Rockler & Jones, Chicago, for appellant.

Paul M. Plunkett, Edward W. Nicewick, McMahon & Plunkett, Chicago, for appellee.

MURPHY, Justice.

This is an alleged breach of implied warranty case. Plaintiff, Rhodes Pharmacal Company, Inc., is in the business of marketing various drug, cosmetic and hair beauty products. Plaintiff seeks to recover damages which resulted from leakage of aerosol cans purchased by plaintiff from defendant, Pittsburgh Railways Company, and manufactured by defendant, Continental Can Company, Inc. No personal injury is involved.

Plaintiff filed a 3-count amended complaint. Count II was directed against Continental Can, as manufacturer of the defective cans. The trial court granted the motion of Continental Can for judgment on the grounds that the complaint as against defendant Continental Can was substantially insufficient in law, in that it failed 'to set forth any contractual relationship between the plaintiff and this defendant,' or 'any legally recognizable basis or relationship between the plaintiff and this defendant, to support any warranties running from this defendant to the plaintiff.' The trial court further found 'there is no just reason for delaying enforcement or appeal of the order in accordance with Section 50(2) of the Civil Practice Act (Ill.Rev.Stat.1965, c. 110, § 50(2)).'

In substance, Count I of the amended complaint shows that plaintiff markets a hair waving and setting lotion, packaged and distributed under its trademark 'Perform.' In April 1960, plaintiff was informed by G. Barr, Inc., an Illinois corporation, whose assets were purchased by defendant Pittsburgh on April 9, 1962, that a gas propellant had been developed which would react cmpatibly with the setting solution of Perform. In June 1960, after laboratory tests had been performed, Barr informed plaintiff that these tests had revealed that the high water content of Perform caused unlined cans to rust and corrode, resulting in a discoloration and adulteration of the Perform solution.

Representatives of Barr informed plaintiff that the foregoing discoloration and adulteration could be eliminated and accordingly expressly warranted to plaintiff the following:

(a) That the use of rustproof linings in the cans would prevent discoloration and adulteration of the Perform solution;

(b) That such cans with rustproof linings were available;

(c) That these linings had been tested by Barr for their compatibility with the Perform solution;

(d) That such cans had been manufactured by defendant Continental;

(e) That its laboratory tests had demonstrated conclusively that Perform could be satisfactorily and merchantably packaged, stored and distributed in aerosol cans with rustproof linings;

(f) That the 'shelf life' of Perform in the foregoing rustproof cans during which it would remain packed without leaking, exploding, evaporating was no less than three years.

In reliance upon the alleged express warranties, plaintiff instructed Barr to package and distribute Perform in rustproof lined cans to be manufactured and acquired from defendant Continental.

Plaintiff further alleges that in July 1960, representatives of plaintiff met with representatives of defendant Continental for the purpose of deciding upon the design and format of the advertising matter to be imprinted upon the aerosol can, and in October 1960, Barr began packaging and distributing Perform in aerosol cans for plaintiff for and in consideration of plaintiff paying Barr an agreed upon per unit price.

In May 1962, defendant Pittsburgh informed plaintiff that defendant Continental had changed the structure of the aerosol cans then being used by plaintiff to improve their appearance. This structural change consisted of modifying the seam running the length of the can, so that it was sealed on the inside of the can rather than on the outside, as it had been up to that time. Pittsburgh expressly warranted that the modified aerosol can would possess the identical characteristics and qualities of the cans previously used, on which no complaints had been received.

In July 1962, plaintiff began receiving complaints from its customers that the aerosol can was leaking, resulting not only in a loss of solution but also in damage to other products and inventory of drug stores and other retail outlets. Notice of these complaints was immediately communicated by plaintiff to defendant Pittsburgh, and Pittsburgh acknowledged 'that the newlymodified aerosol cans were leaking and that the leakage was probably caused by the incompatibility of the new seam with the rustproof lining used in the cans, which incompatibility, in turn, caused corrosion, rusting and leaking of the container.'

Plaintiff further alleges: 'As a result of defendant Pittsburgh Railways Company's breaches of warranty, many of plaintiff's customers and other purchasers of Perform have stopped purchasing Perform in addition to other products distributed by plaintiff; plaintiff has been forced to refund substantial sums of money to its customers throughout the United States and to pay the costs involved in the return and destruction of large quantities of Perform; plaintiff's name and good will have suffered substantial and irremedial damage in addition to the loss of profits resulting from these breaches of warranty. Plaintiff has suffered damage in the amount of $400,000.'

In Count II, which is directed against defendant Continental, plaintiff incorporates by reference the foregoing allegations, and further alleges that defendant Continental was the manufacturer of the aerosol cans and 'knew the particular purpose to which plaintiff intended and did in fact put the aerosol cans and for which they were required,' and plaintiff relied upon the skill and judgment of agents and representatives of defendant Continental in the design, engineering and utility of the aerosol cans used by it.

Plaintiff further alleges: 'Defendant Continental warranted by implication that the aerosol cans manufactured by it and delivered to defendant Pittsburgh Railways Company would be reasonably fit, useful and merchantable by plaintiff. Defendant Continental further warranted by implication that the aerosol cans would pass without objection in the trade; that the cans would be fit for the ordinary purposes for which the cans would be used; that the cans would be adequately designed, manufactured and sealed to meet the reasonable needs of the product in the trade, and that the cans would conform to the promises and affirmations of fact contained in the advertising matter on the cans to the extent that the cans would adequately contain the Perform solution for a reasonable period of time. * * * Defendant Continental has breached its implied warranties to plaintiff, as described in the immediately preceding paragraph, by virtue of the defective manufacture of the aerosol cans which resulted in the leakage and damage described in the immediately preceding paragraphs. As a result of the foregoing breaches of implied warranty, plaintiff has suffered damages in the amount of $400,000.'

Count III of the amended complaint, as amended, alleges breaches of implied warranties from Pittsburgh to plaintiff.

Plaintiff appeals on the theory 'that there were direct contractual relationships between Plaintiff and Continental and that, consequently, the defense of lack of privity is not applicable. In any event, even if it be assumed that the necessary contractual connection is lacking, the facts disclose that Continental's implied warranties of fitness and merchantability were intended for Plaintiff's benefit. On this view, Plaintiff has a direct cause of action against Continental as the third-party beneficiary of the agreement for the sale of cans by Continental to Pittsburgh,' and that 'since the defense of lack of privity is everywhere on the wane, that outmoded defense should not bar Plaintiff's suit against Continental.'

The theory of defendant Continental is that 'this is a commercial transaction, governed by the law of contracts, the Sales Act and Uniform Commercial Code. Plaintiff's complaint fails to state a contractual relationship or any other legally recognizable relationship between plaintiff and defendant to support the implied warranties which plaintiff has alleged. It is also the theory of the defendant that the doctrine of strict liability in tort has no application to the instant case, and privity of contract is necessary to plaintiff's cause.'

Initially, we note that defendant's motion for judgment for failure to state a cause of action admitted all facts well pleaded, and although the second amended complaint, as amended, is construed strictly against plantiff, it is entitled to all reasonable inferences which can be drawn from the well pleaded facts. (West Towns Bus Co. v. Street Elec. Ry. Employees, 26 Ill.App.2d 398, 403, 168 N.E.2d 473 (1960).) However, defendant's motion does not admit plaintiff's interpretation of facts or exhibits embodied in the complaint (Lustgarten v. First Federal Sav. & Loan Ass'n, 42 Ill.App.2d 86, 90, 191 N.E.2d 434 (1963)), nor does it admit conclusions of law or conclusions of fact unsupported by allegations of specific facts upon which such conclusions rest. Washington v. Courtesy Motor Sales, Inc., 48 Ill.App.2d 380, 382, 199 N.E.2d 263 (1964).

As to the privity...