United States Pipe & Foundry Co. v. City of Waco

• Decision Date: 02 June 1937
• Docket Number: No. 7239.,7239.
• Citation: 108 S.W.2d 432
• Parties: UNITED STATES PIPE & FOUNDRY CO. et al. v. CITY OF WACO et al.<SMALL><SUP>*</SUP></SMALL>
• Court: Texas Supreme Court

Page 432

108 S.W.2d 432

UNITED STATES PIPE & FOUNDRY CO. et al. v. CITY OF WACO et al.^*

No. 7239.

Supreme Court of Texas.

June 2, 1937.

Error to Court of Civil Appeals of Tenth Supreme Judicial District.

Action by the City of Waco and others against the United States Pipe & Foundry Company and others. A judgment for plaintiffs against named defendant was

affirmed by the Court of Civil Appeals [100 S.W.(2d) 1099], and named defendant brings error.

Affirmed.

Naman & Howell, of Waco, for U. S. Pipe & Foundry Co.

Bryan & Maxwell, of Waco, Bromberg, Leftwich, Carrington & Gowan, and Paul Carrington, all of Dallas, and John Maxwell, of Waco, I. J. Walker, of Dallas, and C. B. Emery, of Waco, for Floyd and Lochridge.

Witt, Terrell & Witt, of Waco, Worsham, Burford, Ryburn & Hincks, of Dallas, and A. S. Rollins, of Greenville, for Callahan & Co.

Sam Darden, City Atty., Allen V. McDonnell, McClellan, Lincoln & Jones, and John McGlasson, all of Waco, for City of Waco.

MARTIN, Commissioner.

An exhaustive statement of the facts out of which the present controversy grew has been made by the Court of Civil Appeals in its original opinion and on motion for rehearing. See 100 S.W.(2d) 1099, 1107 (opinion on motion for rehearing not published.) Only controlling facts will be here mentioned, and these, where possible, will be abbreviated to mere conclusions.

The City of Waco had installed by contract an underground pipe line for the conveyance of water from its storage lake to the city, a distance of some 5 miles, at a cost to it of approximately $387,000. Within a comparatively short time about seventy breaks appeared in this line, and it is described by witnesses as practically worthless except as a temporary line. The actors in the transactions which culminated in a judgment in favor of the city against the manufacturer of the pipe used in said line were: the United States Pipe & Foundry Company, hereafter referred to as the manufacturer, W. E. Callahan Construction Company, hereafter referred to as the contractor, Floyd and Lochridge, referred to as engineers, and the City of Waco, referred to hereafter as the city.

The city desired to build the said line, but had limited funds, a fact well known to the contractor and communicated to the manufacturer. The last two agreed to make an effort to have the city specify Hi-tensile pipe to be used in the construction of said line. It appears that cast-iron pipe and concrete were competitive material, and that the latter material was the one favored most, owing to its low original cost. To meet such competition, it was necessary to have some cheaper material than cast-iron pipe. Hi-tensile pipe was claimed by the said manufacturer to be such. It was of comparatively recent origin and little known to users of pipe line material. It was made lighter, and consequently cheaper, than cast iron, but many claims of merit were made for it, as will hereafter briefly appear. The manufacturer agreed to sell such material to the said contractor as cheaply as it sold it to any one. It actually thereafter quoted and sold it for a price to the said contractor under that quoted to any one else. A "drive" was successfully made to secure its specification by the city in its plan for the construction of said line.

The contract was let to the aforesaid contractor, and Hi-tensile pipe purchased from the manufacturer and used with the result mentioned.

The city sued the three above parties, alleging a conspiracy and in the alternative for damages severally against each. One theory of the city in short was that the situation was so manipulated as to insure the sale of Hi-tensile pipe by the manufacturer, and the award of the construction job to the contractor, and we think the facts and circumstances tend to support this theory. Many of these appear in the opinion of the Court of Civil Appeals, and will not be repeated.

The pipe used appeared strong enough to resist the internal, but not the external pressure. Otherwise expressed, the numerous breaks occurring in same were shown to be caused by external pressure, presumably of the earth which covered same in varying depths along the route of the line.

We quote from the Court of Civil Appeals opinion: "The jury on ample evidence found that the pipe specified in the specifications for use in the Waco line was inadequate in strength for the services intended and that the pipe actually installed in the line was inadequate in strength for the depth of cover under which it was laid."

There were many statements shown to have been made by the manufacturer to the city prior to the letting of the contract in question which tended to support the city's theory of an express warranty by the manufacturer of the fitness of the pipe for the use intended, and of its quality. These are in part hereafter set out. This case was affirmed in an opinion holding that sufficient evidence appeared to support (1) an express warranty; (2) an implied warranty; and (3) fraud.

We discuss only the first of these and assume for the present that the manufacturer made statements of the nature indicated above.

Conceding this, it is claimed that since warranty exists only as an incident of contract and there being in this case no contract between the City of Waco and the manufacturer (plaintiff in error here), there could be no liability.

It is true that the manufacturer was not a formal party to the contract between the city and the contractor, nor was the city such in any agreement between the contractor and manufacturer. The city bought no pipe from the manufacturer. These were sold to the contractor, which in turn used them as per the plans and specifications of the city in constructing its line. In support of its contention, plaintiff in error invokes the familiar rule that there being no privity of contract, there is no liability to the consumer by the manufacturer where the manufacturer sells to a dealer who in turn by independent contract sells to the consumer. Looking only to the final form of the transaction under discussion, the rule is applicable. Obviously, a court may look through the form to the substance of such a situation, and proceed to judgment, not upon what it seems to be, but upon what in truth it is. Here the manufacturer, in order to secure to itself the benefits of a large sale of its pipe, induced the city by representations as to its fitness and quality, to specify same. By indirection it thus secured for itself a sale as certainly, and presumably as profitably, as if a direct contract of sale had been made with the city. Having secured the benefits, it may not now avoid the burdens of the transaction. It did not need to speak, but having done so and secured a sale of its product, the law required it to speak the truth. In form, there was one voice and another's hand that signed; in truth, "the voice was the voice of Jacob, but the hand was that of Esau."

The present case is unusual in its facts, but many precedents directly or by analogy support our conclusion respecting the point under consideration.

In Geo. O. Richardson Machinery Co. v. Brown, 95 Kan. 685, 149 P. 434, the machinery company sold a threshing machine to a dealer. To make the sale, the machinery company warranted to a farmer the fitness and quality of the machine. The farmer contracted with the dealer to do his threshing, giving his note to the dealer, who in turn indorsed same to the machinery company to secure the original purchase price, as per the original contract. The farmer sued the machinery company for damages. The Supreme Court of Kansas held: "Unusual as the circumstances are, no reason is apparent why a warranty so given and relied upon may not be the basis of a claim for whatever damages result from its breach." A like ruling under similar facts was made in the case of Timberland Lumber Co. v. Climax Mfg. Co. (C.C.A.) 61 F.(2d) 391.

In Ultramares Corporation v. Touche, 255 N.Y. 170, 174 N.E. 441, 445, 74 A.L.R. 1139, the court held public accountants liable to a third party for making a false certificate relied on by such party, under the circumstances of that case, though no immediate privity of contract existed.

In that case Justice Cardozo uses the following language: "In Glanzer v. Shepard [233 N.Y. 236, 135 N.E. 275, 23 A.L.R. 1425], the seller of beans requested the defendants, public weighers, to make return of the weight and furnish the buyer with a copy. This the defendants did. Their return, which was made out in duplicate, one copy to the seller and the other to the buyer, recites that it was made by order of the former for the use of the latter. The buyer paid the seller on the faith of the certificate which turned out to be erroneous. We held that the weighers were liable at the suit of the buyer for the moneys overpaid. Here was something more than the rendition of a service in the expectation that the one who ordered the certificate would use it thereafter in the operations of his business as occasion might require. Here was a case where the transmission of the certificate to another was not merely one possibility among many, but the `end and aim of the transaction,' as certain and immediate and deliberately willed as if a husband were to order a gown to be delivered to his wife, or a telegraph company, contracting with the sender of a message, were to telegraph it wrongly to the damage of the person expected to receive it. Wolfskehl v. Western Union Tel. Co., 46 Hun, 542; ...