Superwood Corporation v. Larson-Stang, Inc.

• Citation: 311 F.2d 735
• Decision Date: 07 January 1963
• Docket Number: No. 17054.,17054.
• Parties: SUPERWOOD CORPORATION, formerly Superior Wood Products, Inc., Appellant, v. LARSON-STANG, INC., Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (8th Circuit)

311 F.2d 735 (1963)

SUPERWOOD CORPORATION, formerly Superior Wood Products, Inc., Appellant, v. LARSON-STANG, INC., Appellee.

No. 17054.

United States Court of Appeals Eighth Circuit.

January 7, 1963.

Richard H. McGee, of McGee, Van Sickle & Hankla, Minot, N. D., made argument for appellant and Patrick D. O'Brien, of Johnson, Bruess, O'Brien & Boyd, Duluth, Minn., was with him on the brief.

Dean Winkjer, Williston, N. D., made argument for the appellee and Fred A. McKennett, Williston, N. D., was with him on the brief.

Before JOHNSEN, Chief Judge, and MATTHES and RIDGE, Circuit Judges.

MATTHES, Circuit Judge.

This is an appeal by Superwood Corporation, defendant, from the judgment entered on jury verdict in favor of Larson-Stang, Inc., plaintiff. Jurisdiction rests on diversity of citizenship and the requisite amount in controversy.

During the seven years immediately preceding plaintiff's fiscal year ending April 30, 1961, plaintiff was a building contractor engaged in constructing new houses for sale in Williston, North Dakota.¹ Defendant was engaged in the manufacture and sale of wood products, including "Superwood tempered hardboard siding" for use in surfacing the exterior of new houses. Plaintiff purchased a sufficient quantity of Superwood siding from defendant on nine different occasions between February 18, 1955, and March 28, 1957, to enable plaintiff to side 60 new houses constructed by it during approximately the same period of time.²

Plaintiff alleged in its complaint, contended at trial and argues here, that it purchased the siding material from defendant in reliance upon an express or an implied warranty of fitness of the material for the use intended, and that defendant breached the warranty since all of the siding material was defective and expanded, contracted, delaminated, decomposed and swelled after it had been placed on the buildings. For breach of warranty, plaintiff claimed damages for, first, the amount it had paid to defendant for the siding, $15,011.11; the cost of labor in installing the siding on the 60 houses, $8,770.71; the cost of painting the siding on all 60 houses, $6,330; the cost of removing the siding from all 60 houses, $1,223.51; the cost of nails and corners in installing the siding on all 60 houses, $480; and the cost to plaintiff in attempting to repair and repaint defects in the siding, $4,535; or a total of $36,350.33. Second, the loss of profits plaintiff had suffered in the amount of $50,000. Third, the damage to plaintiff's reputation in the amount of $50,000. The jury awarded plaintiff $36,350 on the first item, $10,000 on the second, and $15,000 on the third, or a total of $61,350.

Defendant's motion for directed verdict after the close of the whole case and after-trial motion for judgment notwithstanding the verdict, or, in the alternative, for a new trial, were denied. Defendant prosecutes this appeal, contending that a submissible case was not made and that the court erred in denying its motion for a directed verdict and motion n. o. v. This basic contention presents these specific questions: (1) whether plaintiff is the real party in interest and has standing to maintain this action; (2) whether there was any substantial evidence that the material did not conform to the warranty and was defective when purchased; and (3) whether the evidence to establish plaintiff's damage was too speculative and uncertain to sustain an award for any amount.

At the outset it should be observed that the parties and the trial court apparently were of the view that North Dakota law controlled the disposition of all issues.³ Section 51-01-13 of the North Dakota Century Code (Uniform Sales Act) provides in part that: "Any affirmation of fact or any promise by the seller relating to the goods is an express warranty if the natural tendency of such affirmation or promise is to induce the buyer to purchase the goods, and if the buyer purchases the goods relying thereon." There was evidence from which the jury could find that defendant had given plaintiff an express warranty within the contemplation of the foregoing statute.

On appeal, defendant's contention No. 1 is predicated largely on the undisputed fact that plaintiff had parted with title to the 60 houses long before this action was tried.⁴ From this premise defendant reasons that the owners of the properties are the real parties in interest and that they, and they alone, may maintain an action for damages resulting from the defective material which remains on the houses and which has not been replaced by plaintiff. This contention lacks substance and must be denied. Section 51-01-70 of the North Dakota Century Code (Uniform Sales Act) which deals in particular with "remedies of buyer against seller upon breach of warranty," specifically provides that the buyer may, inter alia, "accept or keep the goods and maintain an action against the seller for damages for the breach of warranty." Additionally, the Supreme Court of North Dakota has defined a "real party in interest" for the purpose of maintaining an action as a person "who has a real, actual, material, or substantial interest in the subject matter of the action," a definition that would clearly seem to encompass plaintiff in this suit. Van Sickle v. McArthur, 110 N.W.2d 281 (N.D.1961). 77 C.J.S. Sales § 352 (1952) announces that a breach of warranty entitles the buyer to maintain an action against the seller for damages, and more specifically, 46 Am. Jur. Sales § 731 provides that "The fact that the buyer has resold the property to a third person in no way affects his right to maintain an action against the seller for breach of warranty." See also Cohan v. Associated Fur Farms, 261 Wis. 584, 53 N.W.2d 788 (1952).

We are not required to and do not consider or decide whether the owners of the houses surfaced by the defective material would, in the absence of privity, have standing to sue defendant, a question which is discussed in the briefs. Our determination is limited to whether plaintiff has the right to maintain this action, a right which unquestionably exists.

Defendant's assignment that the evidence was insufficient to establish that the siding material was defective when purchased is utterly lacking in merit. The evidence, viewed in the light most favorable to plaintiff, furnished adequate basis for the jury to find that the expanding and contracting of the siding and the other defects, which became manifest approximately six months after the first purchase was made and after the material had been placed on the houses, resulted because the material was not in accordance with the warranty that was given in connection with the sale.

The question as to the certainty of plaintiff's damages is the crucial issue to be determined on this appeal. Under North Dakota law, the measure of damages for breach of warranty is "the loss directly and naturally resulting, in the ordinary course of events." § 51-01-70(6) North Dakota Century Code (Uniform Sales Act). This rule has received general recognition and application. 1 U.L.A. § 69(6) (Uniform Sales Act); 46 Am.Jur. Sales § 737 (1943); 77 C.J. S. Sales § 374 (1952); Royce Chemical Company v. Sharples Corporation, 2 Cir., 285 F.2d 183, 187 (1960); Superior Combustion Industries, Inc. v. Schollman Bros. Co., 8 Cir., 271 F.2d 357, 363 (1959); Sum Wong v. Hazard, 26 Ill. App.2d 23, 167 N.E.2d 565 (1960); Torrance v. Durisol, Inc., 20 Conn.Sup. 62, 122 A.2d 589, 592 (1956); Stott v. Johnston, 36 Cal.2d 864, 229 P.2d 348, 352, 28 A.L.R.2d 580 (1951); Thurner Heat Treating Co. v. Memco, Inc., 252 Wis. 16, 30 N.W.2d 228, 232 (1947); Schaefer v. Fiedler, 116 Ind.App. 226, 63 N.E.2d 310, 314 (1945).

Where breach of warranty of quality forms the basis for the cause of action, the measure of damages in the absence of special circumstances showing the proximate damage of greater amount, is the difference between the value of the goods at the time of delivery to the buyer and the value they would have had if they had been in accordance with the warranty. § 51-01-70(7) North Dakota Century Code (Uniform Sales Act); Motion Pictures for Television v. North Dakota Broadcasting Co., 87 N.W.2d 731, 735, 68 A.L.R.2d 845 (N.D.1958); Boyce v. Fowler, 87 F.Supp. 796, 799 (D.Mass. 1949); 46 Am.Jur. Sales § 738 (1943); 77 C.J.S. Sales § 376 (1952). It becomes apparent from the record that the parties and the court were of the view that the "difference in value rule" was not applicable under the circumstances of this case. On the matter of damages, the court instructed the jury, "damages for breach of warranty is the loss directly and actually resulting in the ordinary course of events from the breach of warranty, and is not limited to the difference in value of the goods as warranted, but may include as special damages the amount of injury sustained to Plaintiff's business reputation, and profits." We do not understand defendant to contend that the foregoing submission is not a correct abstract declaration of the law, but rather that there is no probative evidence from which the jury could justifiably find that plaintiff had sustained any damages directly and actually resulting from the breach of warranty.

From the record it is evident that the defective siding material did not affect the selling price of the 60 properties, that plaintiff sold all 60 houses and was fully paid therefor, and thus in that regard, that plaintiff suffered no damage. Plaintiff's trial theory amounted to a claim that it was entitled to recover from defendant because of the amount that it might at some future date be required to expend in re-siding all of the 60 houses. In support of this theory, one of plaintiff's officers testified that "we gave essentially the same warranty to the purchasers of these houses as was given to us by the Superwood Corporation," and that "we have assured the owners of these houses that we would have to reside these houses and...