Southwest Forest Indus., Inc. v. Westinghouse Elec. Corp.

• Citation: 422 F.2d 1013
• Decision Date: 09 February 1970
• Docket Number: No. 22696.,22696.
• Parties: SOUTHWEST FOREST INDUSTRIES, INC., Appellant, v. WESTINGHOUSE ELECTRIC CORP., Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)

422 F.2d 1013 (1970)

SOUTHWEST FOREST INDUSTRIES, INC., Appellant, v. WESTINGHOUSE ELECTRIC CORP., Appellee.

No. 22696.

United States Court of Appeals, Ninth Circuit.

February 9, 1970.

James H. O'Connor (argued), Richard E. Mitchell, of O'Connor, Cavanagh, Anderson, Westover, Killingsworth, & Beshears, Phoenix, Ariz., for appellant.

John J. Flynn (argued), James Moeller, Paul G. Ulrich, of Lewis, Roca, Beauchamp & Linton, Phoenix, Ariz., for appellee.

Before DUNIWAY and HUFSTEDLER, Circuit Judges, and PENCE,^* District Judge.

DUNIWAY, Circuit Judge:

In 1963 Southwest Forest Industries, Inc. Southwest brought suit against Westinghouse Electric Corp. Westinghouse for damages resulting from defects in a 25,000 kilowatt turbine generator sold by Westinghouse to Southwest.¹ Jurisdiction in the district court rested on diversity of citizenship. Southwest appeals from the district court's judgment for Westinghouse. We affirm.

After preliminary feasibility studies, Southwest and Rust Engineering Company Rust entered into an agreement under which Rust was to construct a pulp and paper mill for Southwest near Snowflake, Arizona. Pursuant to this agreement, Rust initiated negotiations with Westinghouse for the purchase of the generator in 1960. There followed a warranty battle, the outcome of which is disputed by the parties. Westinghouse built the unit and it was installed in the Southwest plant in late 1961. The bulk of the damages claimed by Southwest are for "lost time, labor, materials, and loss of business" suffered as the result of subsequent slowdowns and shutdowns in Southwest's Snowflake plant in late 1961 and 1962, allegedly caused by defects in the Westinghouse generator.

1. The proceedings in the trial court.

The parties are in sharp disagreement about how to characterize the proceedings in the trial court, and many of their arguments on appeal rely on one or another interpretion of those proceedings. We therefore resolve that issue at the outset. The best way to arrive at an understanding of what happened in the trial court is to review briefly the history of the litigation in this case.

Southwest's original complaint claimed negligence and breach of warranty. In response to a Westinghouse interrogatory asking for "a copy of the document or documents which plaintiff considers to contain the terms of the warranty in question," Southwest in 1964 submitted correspondence containing the Westinghouse form of warranty.² From that date until the eve of trial in 1967, discovery and trial preparation proceeded on the theory that the Westinghouse warranty controlled. In 1966 Southwest twice amended its complaint, once to add a count alleging malfunction of an "exciter" unit in 1964, once to add a count in strict liability in tort. Shortly before trial Westinghouse filed two motions for partial summary judgment: one was on the strict liability count, contending that the rationale of the doctrine was inapplicable to the situation in this case; the other urged that the Westinghouse warranty barred recovery of consequential damages and that all the damages claimed were concededly consequential. At the following pretrial conference, Southwest voluntarily abandoned its warranty count and the court granted Westinghouse's motion for summary judgment on the strict liability count. This left only the negligence claims relating to the basic unit and the "exciter" unit. Then, literally on the eve of trial, Southwest filed a motion to amend its complaint to reallege the warranty theory, and to amend its 1964 answers to the Westinghouse interrogatories asking which documents contained the warranty. Southwest now wished to take the position that its own much broader warranty applied.³ The trial court granted the motion and continued the trial for several days to allow for additional discovery. Westinghouse then renewed its motion for summary judgment on the warranty count. In denying that motion, the district court said:

"I think, gentlemen, by the vehemence of your own argument, what you are both trying to do is argue from your version of the testimony in the various depositions and interpreting from there to the exhibits and asking the court to evaluate in many instances the testimony of the persons being deposed, which I don\'t think is the function of a court in a motion like this."

Trial to a jury began the following day.⁴ At trial, Southwest's file on the purchase of the generator was produced for the first time. (Southwest had previously said that the file was lost or destroyed.) This file suggested that Southwest's own executives had assumed throughout the relevant period that the Westinghouse warranty was in effect.

It was at this juncture that Westinghouse renewed its motion for "partial summary judgment," a procedure to which Southwest's trial counsel agreed:

"Mr. Perry counsel for Southwest: If the court please, Mr. Flynn has indicated that he desires to renew his motion for summary judgment at this time, and on behalf of the plaintiff, I have agreed that it is appropriate that it be done at this time since I believe that the issues he raises are legal ones and that there is sufficient uncontradicted evidence in the record from which a determination of those legal issues can be made.

Counsel has raised the point in two separate motions for summary judgment that consequential damages cannot be recovered in this action, in an action based upon negligence, for the reason that he takes the position that consequential damages are never recoverable in a negligence action; and for the second reason that he believes the warranty clause, which is the effective clause in this case, has the effect of barring a right to recover in tort. We, of course, resist both of those positions.

In addition, there is a dispute which we believe is a legal one about which if any warranty provision is effective to control the contractual relationship between the parties, the contention of Westinghouse, the defendant, being that the disclaimer of limitation of warranty in their documents that are before your Honor is effective and limits any right of recovery on the part of the plaintiff.

The position of Southwest Forest Industries as plaintiff is that the warranty is as broad as the language contained on the back of the purchase orders issued on behalf of Southwest Forest Industries, and that language is broad enough to permit recovery of the damages we seek in this action. The damages we seek being so called consequential damages, and more specifically being damages for overhead expenses incurred while the mill was not operating as it would have, but for the turbine generator problems and the exciter problems.

Have I stated the issues fairly?

Mr. Flynn counsel for Westinghouse: I think that\'s true. * * *"

The parties supplemented the record by stipulating to those additional documents and depositions which they wished the court to consider.

The argument of both counsel was devoted to drawing inferences from the evidence before the court. In granting the Westinghouse motion for "partial summary judgment," the court said:

"THE COURT: Well, I feel rather reluctant to determine in a summary manner as we have here a matter of this magnitude, but after going through all of the documents and the depositions last night and hearing counsel\'s sic argument today, I can only conclude that both of their actions prior to installation and start-up of the turbine and by the actions of Southwest subsequent to that, that at all times in the negotiations and in the contracts all of the parties were going on the assumption that the warranty in the original Rust-Southwest inquiry, an invitational letter, and as modified to some extent by the proposal and later order acknowledgement of Westinghouse, was the contract warranty regardless of at what stage along the line of proceedings a final contract was entered into. I don\'t think that the conduct of the parties during the entire time can be reasonably or logically explained on any other assumption."

The warranty referred to by the trial court is what we have described as the Westinghouse warranty. The court also determined as a matter of law that the language in the warranty was successful in relieving Westinghouse of all liability for consequential damages, including any liability on a straight tort theory. The jury was then dismissed and the proceedings closed. The court later entered a formal order and an opinion.

At this point, Southwest changed counsel and filed a motion to alter or amend the judgment. Southwest's memorandum in support of that motion made many of the arguments now pressed here on appeal. In denying the motion, the trial judge made the following remarks:

"* * * I think it\'s really, in the court\'s mind at least, immaterial whether you characterize the proceeding as a request for an interlocutory summary adjudication on a point in this case as to what constituted the warranty or whether it was a waiver of a jury finding. * * *

The only thing that bothers the court and has bothered me all the time is whether or not a summary judgment under these circumstances was proper for just the considerations that Mr. O\'Conner Southwest\'s new counsel has raised. * * *"

On appeal the parties persist in their disagreement over the nature of the trial court proceedings. The issue was extensively briefed, Southwest maintaining that the district court disposition was an improper summary judgment since there were issues of material fact, Westinghouse claiming that the district court proceedings were actually a trial to the judge, by agreement of the parties, on a limited record supplemented by stipulations.

Whatever Southwest's current counsel's current position may be, we think the record shows that the trial court, with the consent of both parties, decided all the issues raised by the final amended complaint, including the negligence in manufacture and repair issues. The parties...