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COURT OF APPEALS DECISION DATED AND FILED June 13, 2007 David R. Schanker Clerk of Court of Appeals |
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NOTICE |
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This opinion is subject to further editing. If published, the official version will appear in the bound volume of the Official Reports. A party may file with the Supreme Court a petition to review an adverse decision by the Court of Appeals. See Wis. Stat. § 808.10 and Rule 809.62. |
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APPEAL and CROSS-APPEAL from a judgment of the circuit court for Racine County: emily s. mueller, Judge. Affirmed.
Before Snyder, P.J., Brown and Anderson, JJ.
¶1 PER CURIAM. Elumatec
USA, Inc., has appealed from a judgment awarding damages and costs of
$392,267.86 to Cornerstone Design, Ltd.
Cornerstone has cross-appealed from the same judgment. We affirm the judgment in its entirety.
¶2 This is a
Uniform Commercial Code (UCC) case involving the sale of goods under Wis. Stat. § 402.105(1)(c) (2005-06).[1] The litigation arose from Cornerstone’s
purchase of two automated custom saws from Elumatec. Cornerstone ordered the saws for use in two
assembly cells that it was designing and building for Boone International Ltd.,
a subsidiary of Fortune Brands. Boone
manufactured dry erase boards and cork boards, framed in aluminum, wood or
vinyl. The assembly cells being built by
Cornerstone were to be used in Boone’s manufacture of aluminum-framed dry erase
boards.
¶3 The
manufacture of the saws was problematic.
Ultimately, Cornerstone accepted the saws from Elumatec, and did
extensive repair and rebuilding work on both saws before and after providing
them to Boone as part of the assembly cells.
¶4 Cornerstone
commenced this action against Elumatec in September 2002. Cornerstone made claims for breach of
contract, breach of warranty, breach of implied warranty of merchantability,
and breach of implied warranty of fitness for a particular purpose. Elumatec counterclaimed for $115,389.92, the
amount that remained owing by Cornerstone on the contract for the purchase of
the saws.
¶5 After a
multi-day trial, the jury returned a verdict finding that Elumatec did not
breach its contract with Cornerstone by failing to deliver the saws by July 1,
2001. However, the jury found that
Elumatec breached the contract by failing to provide saws that met its
contractual obligations. The jury
further found that Cornerstone provided Elumatec with notice of the alleged
nonconformity, and that Elumatec’s failure to provide saws that met its
contractual obligations caused damages to Cornerstone. It found that damages of $328,523 would
reasonably compensate Cornerstone for its costs to rebuild and/or repair the
saws, and that $180,000 was the value of Cornerstone’s lost profits.
¶6 In
motions after verdict, Elumatec requested a directed verdict on its
counterclaim in the amount of $115,389.92.
Elumatec also moved to change the jury’s answers to special verdict
questions 4 and 5, wherein the jury found that Elumatec breached the contract
by failing to provide saws that met its contractual obligations and was
provided with notice of the alleged nonconformity. It also moved to change the jury’s answers to
special verdict questions 7A and 7B, wherein the jury determined damages. In addition, Elumatec moved for a new trial
pursuant to Wis. Stat. § 805.15(1),
alleging, among other things, errors in the jury instructions and special
verdict, that the verdict was contrary to the great weight and clear
preponderance of the evidence, and that a new trial was warranted in the
interest of justice.
¶7 After
briefing and oral argument, the trial court denied Elumatec’s motion to change
answers or for a new trial. However, it
granted Elumatec’s motion for a directed verdict on its counterclaim. It therefore deducted $115,389.92 from the
total of $508,523 found as damages by the jury.
After the offset and an adjustment for costs, judgment in the amount of
$392.267.86 was awarded to Cornerstone.
We affirm the judgment.
¶8 Evidence
at trial indicated that Cornerstone and Elumatec entered into a contract in
March 2001. Paul Zens, the president and
CEO of Cornerstone, testified that prior to entering the contract, he told
Craig Cocanig, Elumatec’s sales representative, that he was looking for a
world-class provider of aluminum saws for use in a manufacturing process
destined for Boone, a company related to Cornerstone’s largest customer,
Fortune Brands. Zens testified that he
told Cocanig that the saws were so pivotal to the process that if the saws
failed, everything would fail, and if Cornerstone failed to satisfy Fortune
Brands, Cornerstone “may likely fail as well.”
¶9 Zens
testified that Cocanig showed him a saw manufactured by a German company called
Sturtz in a catalog of equipment that Elumatec could provide. Zens testified that he traveled with Cocanig
to Republic Window in Chicago to view a Sturtz saw. Zens testified that the saws Cornerstone was
ordering needed to be able to machine aluminum extrusions in such a way that
they could be bent around the dry erase boards, rather than being cut
through. He testified that the saws
needed to be robust and able to run day in and day out. He testified that he was satisfied with the
quality of the Sturtz saw that he was shown, and that Cocanig represented to
him that Elumatec could provide him with Sturtz saws.
¶10 Zens
testified that he also explained to Cocanig that Boone needed the assembly
cells by July 15, 2001, to increase productivity for the back-to-school
season. Cornerstone subsequently sent
Elumatec purchase orders for two saws, specifying a delivery date of June 15,
2001.
¶11 In late
April 2001, Steve Van Tongeren, vice-president for Elumatec, advised Zens that
Sturtz would not be manufacturing the saws, and recommended a company called
Brogantech. Zens testified that he was
very concerned that the project had not yet been started, and went with
Cornerstone’s project manager, Scot Johnson, to meet with Van Tongeren and Jim
Brogan of Brogantech. Zens testified
that he told Van Tongeren that failure to produce the saws in June would put
the entire manufacturing process in jeopardy and jeopardize Cornerstone’s
ability to satisfy its customer, Boone and Fortune Brands. However, after being shown a sample of what
was purported to be a Brogantech saw that appeared to be constructed as well as
a Sturtz saw, Zens agreed that Brogantech could produce the saws and consented
to changing the delivery date to July 15, 2001.
Zens further testified that he reiterated that he “expected a Sturtz saw
no matter who built it.”
¶12 Zens
testified that in August 2001, Scot Johnson and Art Campbell, Elumatec’s
engineer, traveled to the Brogantech facility, and discovered that the first
saw was incomplete and the second one had not yet been started. Evidence indicated that Johnson prepared a
list dated August 16, 2001, identifying issues and detailing items remaining to
be done on the first saw. In addition,
Johnson sent a fax transmission to Jim Brogan and Art Campbell dated August 17,
2001, adding to the August 16, 2001 list of things that needed to be
completed.
¶13 Zens
testified that he was concerned that the situation was out of control at this
time, with the first saw “not remotely complete” and the second saw not yet
started. He testified that he expressed
this concern to Van Tongeren, Campbell, and Brogan.
¶14 Zens’
testimony indicated that Scot Johnson went back to Brogantech for more tests on
August 28, 2001, and that Johnson again created a list of things that remained
to be done on the first saw, more extensive than the first list. Zens testified that because the first saw was
not remotely ready for transmittal to Boone and there was no sign of the second
saw, on September 4, 2001 Cornerstone demanded delivery of the first saw.
¶15 Zens
testified that the saw provided through Brogantech absolutely failed to meet
the quality of a Sturtz saw. He
testified that it was made of bolted-together aluminum rather than welded steel
construction with a vibration-isolating leveling pad. He testified that it failed to meet the
specifications of the contract with Elumatec, including the requirement that
the tooling be capable of being changed out in five minutes. He testified that the tooling was barely capable
of being changed out at all, that material could not be pushed through the
machine to come out the other side, and that the saw simply did not work.
¶16 Zens
testified that a substantial amount of work was performed on the first saw at
Cornerstone before the first assembly cell was delivered to Boone. He testified that the saw still had problems
and failed to perform to specifications when the first cell was installed at
Boone in September 2001. Zens testified
that, among other deficiencies, the saw could not operate continuously for four
hours. He also testified that he sent a
fax letter to Van Tongeren on October 3, 2001, demanding delivery of the second
saw by October 8, 2001. In the letter
demanding transmission of the second saw, Zens stated: “We further expect to expend efforts to bring
it and first saw up to level of professional and OSHA compliance that Stirtz
(sic) demonstrated when we visited Republic Window.”
¶17 The second
saw was delivered to Cornerstone on or about October 8, 2001. Zens testified that it was “not remotely”
complete. Zens testified that after work
by Cornerstone, it was delivered to Boone in late 2001.
¶18 Zens
testified that Cornerstone spent the fall and winter of 2001 attempting to get
both saws to work properly. On December
20, 2001, Zens wrote a letter to Gus Jimenez, director of engineering at Boone,
enclosing billing invoices for the assembly cells and requesting payment. In the letter, Zens stated: “The capability of the machines when operated
with the proper level of understanding had been demonstrated to your personal
satisfaction during my last visit to your facility.”
¶19 Zens also
wrote to Van Tongeren on January 4, 2002, stating:
I just received your final invoices from your accounting department. I assume this was an error. In our dealings with vendors we are more than cooperative when it comes to paying for goods received in accordance with our PO specification and delivery date.
Your organization failed to deliver any machines on time and failed to deliver industrial quality both in the area of build standards or more importantly safety.
You were fully aware that we had assumed the task of completing the machines that we had hired your organization to deliver. This was especially burdensome to us both financially and more importantly with respect to our relationship with our customer which I’m sure Elumatec will agree is more valuable than the one single sale.
I remember telling you that when this is done we would look at costs. We have run the costs related to the successful delivery of the saws.
…
… The difference between the cost of the machines had they been completed correctly and what we had to do ourselves is $52,547.48. I will await your answer as to how Elumatec can reimburse Cornerstone for completing your work.
¶20 Zens
testified that although he believed that the saws were working satisfactorily
when he wrote the December 20, 2001 letter, problems with the saws remained
ongoing. Zens testified that despite
hundreds of hours of work by Cornerstone, the saws functioned for only short
periods of time, could not consistently cut properly, and did not do what they
were intended to do under the contract.
He testified that the saws could not produce a consistent product over
an extended period of time in an industrial environment. Exhibits demonstrating poor-quality cuts made
by the saws at the Boone plant after January 2002 were shown to the jury.
¶21 Zens
testified that in February 2002, Cornerstone agreed to take the saws back from
Boone to tear them down and rebuild them.
Eventually, after rebuilding by Cornerstone, the saws were returned to
Boone, with the last saw being delivered on September 20, 2002. Zens testified that the saws did not meet the
requirements of the contract with Elumatec until they were rebuilt, and denied
that they were rebuilt to meet demands outside of that contract. He further testified that Cornerstone did not
involve Elumatec in the work performed on the saws after September 27, 2001,
because it had lost confidence in Elumatec’s ability to do the job.
¶22 Zens’
testimony regarding the problems encountered by Cornerstone was corroborated by
the testimony of Art Campbell, Elumatec’s engineer. Campbell testified that he went to Brogantech
during the weeks of August 15 and August 28, 2001, that the first saw was
unfinished and not ready to be tested, and that there was no sign of the second
saw. He testified that Boone’s delay in
sending testing materials did not delay the construction of the saws, that Scot
Johnson was expressing concern about the whereabouts of the second saw in
August 2001, and that the items on the to-do lists created by Johnson in August
2001 were legitimate and needed to be done.
He conceded that not all of these things were done when the first saw
was shipped from Brogantech on September 4, 2001, and that Cornerstone was
expressing exasperation with the delay and the quality of the saw.
¶23 Campbell
further testified that upon receipt of the first saw by Cornerstone,
Cornerstone complained that it was not working.
He testified that he went to Cornerstone the week of September 9, 2001,
to try to correct the problems. He
admitted that Cornerstone’s complaints about the saw were valid and legitimate,
including complaints that there were “OSHA problems” with the wiring. He testified that the fixturing did not work
satisfactorily and that the tooling was not capable of holding a piece of
aluminum. He testified that Cornerstone
was conveying a sense of urgency to him about getting the saws running and
delivered to Boone in the assembly cells, but that when he left at the end of
the week, work remained to be done on the first saw, and there was still no
sign of the second saw.
¶24 Campbell
testified that he was sent to Boone the week of September 21, 2001, to work on
the saw. He testified that he left Boone
with the permission of Scot Johnson on September 27, 2001, after observing an
entire shift run.
¶25 Campbell
testified that he knew Cornerstone was dissatisfied and frustrated with the
first saw. He further testified that
when Cornerstone demanded delivery of the second saw on October 3, 2001, the
second saw was not even remotely complete.
He conceded that Cornerstone was very frustrated and completed the
second saw itself. He testified that
Elumatec was fully aware that Cornerstone was finishing the second saw and
that, to his knowledge, no one at Elumatec objected to Cornerstone’s actions or
stated that Elumatec wanted to complete the work. He acknowledged observing Cornerstone working
on the second saw in November 2001, and conceded that the Cornerstone employees
seemed to know what they were doing.
Campbell also conceded that even though the specifications in the
contract between Cornerstone and Elumatec did not specify the quality of the
cuts to be made by the saws, they did not need to. He testified that Elumatec knew that the saws
should not make bad cuts or routinely break down after running four hours. In addition, he testified that the saws were
supposed to have a welded steel base construction with vibration-isolating
leveling pads, but did not satisfy this requirement until reconstruction by
Cornerstone.
¶26 Zens’
testimony regarding deficiencies in the saws was also corroborated by the
testimony of John Troglia. Troglia was
an electrical engineer who testified regarding electrical problems and safety
defects in the saws as manufactured by Brogantech, concluding that they failed
to comply with national electrical codes and standards for wiring industrial
equipment. He opined that a reasonably
competent manufacturer would not have designed and installed wiring like that
in the saws provided by Brogantech.
¶27 Cornerstone
also presented the deposition testimony of Stanley Johnson, an industrial
designer who testified that when the saws were delivered to Cornerstone, they
were functionally defective and did not conform to OSHA standards and other national
safety standards. He testified that
bolted aluminum framing was inappropriate for a working industrial saw and that
it should have been welded steel. He
detailed numerous safety defects and testified that, as delivered, the saws
could not perform the quantity and quality of cuts that they were intended to
perform as part of the assembly cells.
He also testified that schematics and other necessary documentary
materials were not provided with the saws.
¶28 Zens’
testimony was also corroborated by Boone’s director of engineering, Gus
Jimenez. Jimenez testified that the saws
were the major problem in the assembly cells delivered by Cornerstone, and that
with the exception of the saws, problems with the assembly cells were
minor. Jimenez testified that Boone
continued to have major problems with the saws after December 20, 2001, and
that this ultimately led to Cornerstone taking the cells back to rebuild the
saws. He testified that after rebuilding
by Cornerstone, the saws worked properly.
¶29 We have
described the evidence in detail because it controls many of the issues raised
by Elumatec on appeal. Elumatec’s first
argument is that the trial court failed to apply the correct legal standard to
the notice issue. It correctly contends
that because Cornerstone accepted the saws, it could not recover for breach
unless it first provided Elumatec with notice of the alleged breach as required
by Wis. Stat. § 402.607(3)(a). It contends that Cornerstone failed to provide
notice of the alleged breach in accordance with § 402.607(3)(a), and that
its claims are therefore precluded as a matter of law.
¶30 Initially,
we reject Elumatec’s contention that an issue of law is presented concerning
notice. Wisconsin Stat. § 402.607(3)(a) states that, when a
tender has been accepted, the buyer must “within a reasonable time after the
buyer discovers or should have discovered any breach notify the seller of
breach or be barred from any remedy.”
Whether Cornerstone provided sufficient notice of the breach presented
an issue of fact for the jury. See
Marvin Lumber and Cedar Co. v. PPG Indus., Inc., 401 F.3d 901,
907 (8th Cir. 2005).
¶31 In question
5 of the special verdict, the jury found that Cornerstone provided Elumatec
with notice of the alleged nonconformity of the saws. The trial court denied Elumatec’s motion to
change the jury’s answer.
¶32 A motion
challenging the sufficiency of the evidence to support a verdict and asking the
trial court to change the jury’s answer may not be granted unless, considering
all credible evidence and the reasonable inferences therefrom in the light most
favorable to the nonmoving party, there is no credible evidence to support the
jury’s finding. Richards v.
Mendivil¸ 200 Wis. 2d 665, 670, 548 N.W.2d 85 (Ct. App. 1996). In addressing a motion to change a jury’s
special verdict answer, the trial court must defer to the jury’s assessment of
the credibility of witnesses and the weight to be given their testimony, and
must accept the reasonable inferences drawn by the jury. Id. at 671. On appeal, we are guided by these same
rules. Id. Moreover, we afford special deference to a
jury determination in situations like this where the trial court has approved
the findings of the jury. Morden
v. Continental AG, 2000 WI 51, ¶40, 235 Wis. 2d 325, 611 N.W.2d
659. In such circumstances, we will not
overturn the jury’s verdict unless there is such a complete failure of proof
that the verdict must be based on speculation.
Id. (citation omitted).
¶33 In
contending that Cornerstone failed to provide adequate notice under Wis. Stat. § 402.607(3)(a),
Elumatec argues that all damages are barred because Cornerstone gave it no
opportunity to minimize the problems with the saws before September 27, 2001;
it was told on September 27, 2001, that it met its contract; and Elumatec was
not provided with notice of deficiencies after September 27, 2001. It also contends that at a minimum, the
letter written by Zens to Van Tongeren on January 4, 2002, precludes recovery
of post-December 20, 2001 damages. It
argues that the letter referred to the “completion” and “successful delivery”
of the saws, and provided an end to recoverable damages by eliminating any
inference of on-going problems with the saws.
It contends that Cornerstone did not indicate in the January 4, 2002 letter
or at any time thereafter that Cornerstone remained dissatisfied or that future
rebuilding of the saws might take place.
¶34 We reject
Elumatec’s arguments and conclude that credible evidence supports the jury’s
finding that Cornerstone provided Elumatec with notice of the alleged
nonconformity. Notification of breach is
sufficient if it lets the seller know that the transaction is troublesome and
must be watched. Paulson v. Olson
Implement Co., 107 Wis. 2d 510, 523, 319 N.W.2d 855 (1982). The notice need not include a clear statement
of all the objections that will be relied on by the buyer, nor need it include
a claim for damages or notice of threatened litigation or other resort to
remedy. Id. “Inherent in notice is the concept of
reasonableness.” Id. at
523 n.8. The seller must be informed by
the buyer that the buyer considers the seller responsible for remedying a
troublesome situation. Id. The principal reason for requiring notice is
to enable the seller to make adjustments or replacements or to suggest opportunities
for cure to minimize the buyer’s loss and its own liability. Id. at 525.
¶35 A buyer is
deemed to have met the notice requirement when the seller has actual knowledge
of the product’s failure based upon the seller’s own observations. Arcor, Inc. v. Textron, Inc.,
960 F.2d 710, 715 (7th Cir. 1992). If a
seller’s employee observes the failure of a product, this constitutes notice to
the seller. Id. (citation
omitted).
¶36 As detailed
in the evidence discussed above, Cornerstone made complaints about the quality
of the first saw to Van Tongeren, Campbell and Brogan in August 2001 while it
was still at Brogantech, and continued to complain after delivery of the first
saw to Cornerstone in early September 2001.
Because of problems with the saw, Elumatec’s engineer, Campbell, was
sent to Brogantech and Cornerstone in August and September 2001, and was sent
to Boone in late September. Although he
attempted to resolve problems, and believed that the first saw was functioning
when he left Boone with the permission of Scot Johnson after observing the
running of a complete shift, Campbell’s testimony indicates that he was aware
that Cornerstone remained dissatisfied with the first saw in October 2001. In addition, he was aware that the second saw
was not remotely complete when Cornerstone demanded its delivery on October 3,
2001, a week after he left Boone. He
observed Cornerstone employees working to finish the second saw in November
2001, and testified that Elumatec did not object to Cornerstone’s actions.
¶37 Elumatec’s
contention that it had no notice of problems with the first saw after September
27, 2001, is belied by Campbell’s testimony and by Zens’ October 3, 2001 letter
demanding delivery of the second saw, wherein Zens stated that he expected to
expend efforts to bring it and the first saw up to the level of
professional and OSHA compliance demonstrated by the Sturtz saw. Elumatec, through Campbell, also knew that
the second saw was not remotely complete when delivered to Cornerstone in
October 2001, and that Cornerstone was working through the fall of 2001 to
bring it up to the standards of a functioning industrial saw that complied with
national safety standards.
¶38 Based upon
this evidence, credible evidence supports the jury’s finding that Elumatec had
adequate notice that the saws were problematic and unsatisfactory to
Cornerstone. Moreover, since the
evidence indicates that Elumatec failed to fix the first saw or provide a
completed second saw despite being given multiple opportunities to do so
through the end of September 2001, Cornerstone was not required to continue to
solicit Elumatec’s help or to offer it an additional opportunity to work on the
saws when subsequent repair and rebuilding efforts were required. See Steele v. Pacesetter Motor Cars,
Inc., 2003 WI App 242, ¶¶17-18, 267 Wis. 2d 873, 672 N.W.2d 141. This is particularly true in light of
Elumatec’s awareness of the work being done at Cornerstone in the fall of 2001,
and its failure to request an opportunity to participate. For these reasons, Zens’ mistaken and
short-lived belief that the saws were functioning properly when he wrote to
Jiminez on December 20, 2001, and to Van Tongeren on January 4, 2002, does not
foreclose damages incurred after those dates.
The jury could reasonably find that Elumatec had already been given
adequate notice of the problems with the saws and an adequate opportunity to
repair them, and that Cornerstone was not required to solicit Elumatec’s
continued help before rebuilding the saws.
¶39 Elumatec’s
next challenge is to the jury instructions and special verdict. Elumatec proposed only two jury instructions
at trial, both related to its counterclaim.
Similarly, it proposed a special verdict which contained questions
limited to acceptance and contract price.
However, at the jury instruction conference it also responded to the
instructions proposed by Cornerstone and the trial court.
¶40 A trial
court has wide discretion in framing a special verdict, Murray v. Holiday
Rambler, Inc., 83 Wis. 2d 406, 425, 265 N.W.2d 513 (1978), and
determining what jury instructions to give, Anderson v. Alfa-Laval Agri,
Inc., 209 Wis. 2d 337, 344, 564 N.W.2d 788 (Ct. App. 1997). If the instructions adequately cover the law
applicable to the facts, there is no error even though refused instructions
would not have been erroneous. State
v. Lenarchick, 74 Wis. 2d 425, 455, 247 N.W.2d 80 (1976). In addition, a party waives its right to
challenge a jury instruction on appeal if it fails to object to the
instruction, or the lack thereof, at the jury instruction conference. State v. Smith, 170 Wis. 2d
701, 714 n.5, 490 N.W.2d 40 (Ct. App. 1992); Wis.
Stat. § 805.13(3). A party
must articulate each of its arguments and theories regarding the jury
instructions to the trial court in order to preserve its right to appeal. Allen v. Wis. Pub. Serv. Corp.,
2005 WI App 40, ¶20, 279 Wis. 2d 488, 694 N.W.2d 420, review denied,
2005 WI 136, 285 Wis. 2d 627, 703 N.W.2d 376.
¶41 Elumatec’s
first argument is that the notice instruction was impermissibly broad because
it failed to state that notice of breach of warranty could not be premised upon
conversations prior to acceptance if the jury found no delay. This argument is waived. The instruction as given by the trial court
included language proffered by counsel for Elumatec, with the addition of
language proffered by Cornerstone and derived from Arcor.[2] Elumatec proffered the instruction while
arguing that the evidence provided no factual basis for instructing the jury on
notice of breach or asking a special verdict question about it. When the trial court concluded that a notice
instruction was warranted and stated that it was going to give the instruction
proffered by Elumatec, Elumatec did not offer any additional or alternative
language to include in the instruction.
For purposes of appeal it has therefore waived any argument that
additional limiting language should have been included in the instruction. See Allen, 279 Wis. 2d
488, ¶18.
¶42 Elumatec’s
next argument is that the jury instruction concerning express warranty was
incomplete because it failed to include qualifying language contained in Wis. Stat. § 402.313(2), which
provides that a statement purporting to be merely the seller’s opinion or
commendation of the goods does not create a warranty. This argument is also waived. While Elumatec contended at the jury
instruction conference that the instruction being given by the trial court did
not include subsec. (2) of § 402.313, its argument did not clearly convey
its theory. Moreover, it did not
subsequently renew its objection that the instruction on express warranty was
incomplete in its motions after verdict.
The issue was therefore waived. See
Suchomel v. Univ. of Wis. Hosp. & Clinics, 2005 WI App 234,
¶¶10-11, 288 Wis. 2d 188, 708 N.W.2d 13, review denied, 2006 WI 23,
289 Wis. 2d 10, 712 N.W.2d 34; Ford Motor Co. v. Lyons, 137
Wis. 2d 397, 417, 405 N.W.2d 354 (Ct. App. 1987).
¶43 Elumatec
also objects that the jury instructions given by the trial court failed to
instruct the jury on the measure of damages under Wis. Stat. § 402.714(2), which provides that the
“measure of damages for breach of warranty is the difference at the time and
place of acceptance between the value of the goods accepted and the value they
would have had if they had been as warranted, unless special circumstances show
proximate damages of a different amount.”
Again, we deem this issue waived.
At the jury instruction conference, Elumatec contended that in looking
at the warranty issues, the parties had “skipped over the limitation which is
present in § 402.714, which lays out a series of choices that are
available to the buyer in the event of accepted goods.” While Elumatec cited to the language
contained in § 402.714(2), it did not offer a particular instruction for
the trial court’s consideration, nor did it renew this issue in its motions
after verdict. Like the argument based
on Wis. Stat. § 402.313(2),
this issue is therefore waived for purposes of appeal. See Suchomel, 288
Wis. 2d 188, ¶¶10-11.
¶44 Elumatec’s
next objection is to the jury instruction regarding incidental damages, which
instructed the jury that damages could be awarded “for expenses reasonably
incurred in the inspection, receipt, transportation, care, or resale of goods
or merchandise; and for commissions, interest, and any other reasonable expense
incident to the breach of the contract.”
Elumatec contends that the instruction as given included damages
applicable only to “goods rightfully rejected” under Wis. Stat. § 402.715(1), and that the instruction should
have apprised the jury that damages were limited to “commercially reasonable”
expenses.
¶45 We conclude
that the instruction as given adequately stated the law. The language regarding “any other reasonable
expense” is taken directly from Wis.
Stat. § 402.715(1), and thus does not expand recoverable expenses
beyond the provisions of the statute.
Moreover, even though the statute specifies that a buyer who rightfully
rejects goods is entitled to expenses reasonably incurred in “inspection,
receipt, transportation and care and custody” of the goods, this does not mean
that such expenses, if incurred with regard to goods that are accepted, do not
also constitute reasonable expenses incident to a breach which may be awarded
when the defective goods are accepted.
No basis therefore exists to conclude that inclusion of this language
was error or prejudiced Elumatec.
¶46 Elumatec
next contends that the jury instruction regarding breach of warranty for a
particular purpose should not have been given.
It contends that when a seller complies with a buyer’s specifications,
it does not extend a warranty of fitness for a particular purpose. It contends that the saws met the
specifications set forth in the request for quotation (RFQ) by September 27,
2001.
¶47 We conclude
that the instruction as given was within the trial court’s discretion. As indicated in the previous discussion,
evidence presented at trial indicated that the second saw was not remotely
complete when transmitted to Cornerstone in October 2001, and that it therefore
did not meet the specifications of the RFQ.
In addition, testimony at trial indicated that the first saw failed to
consistently meet the specifications of the RFQ after September 27, 2001, as
well as before. Based upon this
evidence, Elumatec’s contention that the instruction should not have been given
must fail.[3]
¶48 Elumatec’s final
jury instruction challenge is to the instruction on consequential damages. It contends that the instruction as given by
the trial court expanded consequential damages beyond those specified in Wis. Stat. § 402.715(2)(a). While acknowledging that the instruction as
given by the trial court included the language set forth in
§ 402.715(2)(a), it contends that the failure to include the word “only”
in that portion of the instruction, when combined with the language preceding
it, expanded recoverable damages beyond those permitted by the UCC.
¶49 Again, this
argument is waived. The trial court
included the language from Wis. Stat. § 402.715(2)(a)
in the instruction at Elumatec’s request.
If Elumatec had wanted the word “only” added to the language, or took
the position that other language had to be removed from the instruction, it was
incumbent upon Elumatec to make this clear to the trial court. Instead, it merely noted that the trial court
had made Elumatec’s suggested change to the end of the instruction, and that
this change “appropriately states what the responsibility is in proving
consequential damages.” While it alluded
to a further objection by stating that “[t]he way this plays into the verdict
suggests that they’re entitled to get that without having to evaluate whether
or not consequential damages are something that should be provided,” this
statement did not put the trial court on notice that Elumatec was requesting
that the word “only” be added to the instruction. In addition, the statement was not
sufficiently clear as to notify the trial court as to what, if any, alternative
instruction Elumatec sought.
Consequently, the issue is waived for purposes of appeal. See Allen, 279
Wis. 2d 488, ¶18.
¶50 In related
arguments, Elumatec objects to the special verdict. However, as previously noted, the form of the
special verdict is within the discretion of the trial court. Murray, 83 Wis. 2d at
425. The special verdict will not be
disturbed if the material issues of fact are encompassed within the questions
asked and appropriate instructions are given.
Id.
¶51 Elumatec
alleges that the special verdict failed to ask all necessary questions and was
based upon instructional error. To the extent
Elumatec is contending that separate notice and breach questions should have
been asked, we conclude that the verdict fully presented the material issues of
fact related to notice and breach to the jury.
Moreover, based upon our rejection of Elumatec’s arguments challenging
the jury instructions, we also reject its claim that the special verdict was
defective based upon instructional error.
¶52 Elumatec’s
next argument is that the trial court should have changed the jury’s answer to
special verdict question 4 and determined that there was no breach as a matter
of law. Initially, we note that, like
the notice issue, the issue of whether Elumatec breached its contract with
Cornerstone presented an issue of fact for the jury, not a question of
law. The jury’s finding that Elumatec
breached the contract by failing to provide saws that met its contractual
obligations must be upheld if the finding is supported by any credible
evidence.
¶53 Credible
evidence supports the jury’s finding of a breach. In reaching this conclusion, we reject
Eluamtec’s argument that the jury’s finding of no breach based upon delay
precludes a finding that it breached its contractual obligations. The only finding of the jury related to delay
was its finding that failure to deliver the saws by July 1, 2001, was not a
breach. This finding was reasonable in
light of the evidence that Cornerstone extended the delivery date to mid-July
when Brogantech became the manufacturer.
However, this does not mean that Elumatec’s failure to deliver a
completed, working first saw in early September 2001 and its failure to deliver
a completed second saw in October 2001 could not be considered by the jury in
determining whether a breach occurred.
¶54 Credible
evidence supports a finding that Elumatec failed to provide saws that met its
contractual obligations and breached express and implied warranties. As detailed in the discussion of the evidence
set forth above, the first saw had multiple problems when delivered to
Cornerstone in early September 2001, did not meet all specifications when
transmitted to Boone later that month, and continued to experience significant
problems thereafter. When Cornerstone
demanded the second saw on October 3, 2001, it was significantly past the time the
saw was to have been completed and delivered by Elumatec under the contract,
and was not remotely complete. The
evidence indicated that neither saw was able to consistently cut properly or
operate in an industrial environment until rebuilt by Cornerstone.
¶55 Based upon
the evidence, the jury could reasonably conclude that Elumatec breached its
contractual obligation of providing two automatic V-notching saws that could
cut to length and V-notch the corner joints of aluminum frames for dry erase
and bulletin boards, with a cycle time of thirty seconds and a tooling change
time of five minutes or less. The jury
could find that the saw was not welded steel with a vibration-isolating pad as
required by the contract documents.
Based upon the testimony of Troglia and Stan Johnson, the jury could
also reasonably find that the saws provided by Elumatec did not meet safety and
industrial standards. The jury could therefore
conclude that the saws were unfit for the industrial use for which they were
intended, that they were unfit for the ordinary purposes for which such
industrial saws are used, and that they would not pass without objection in the
industrial trade for which they were being built. As such, the jury could reasonably conclude
that the saws breached implied warranties of merchantability and fitness for a
particular purpose under Wis. Stat. §§ 402.314
and 402.315. In addition, based upon
Zens’ testimony that he was shown and promised a Sturtz saw and agreed to have
Brogantech produce the saws only after reiterating that he still expected a
Sturtz-quality saw, the jury could reasonably conclude that Elumatec promised
to provide Sturtz-quality saws, and that its failure to do so constituted a
breach of express warranty under Wis.
Stat. Wis. Stat. § 402.313(1).
¶56 Nothing in
Elumatec’s arguments provides a basis for disturbing the jury’s finding that it
breached its contract with Cornerstone by failing to provide saws that met its
contractual obligations. Wisconsin Stat. § 402.607(2)
clearly provides that acceptance of goods does not impair any other remedy for
nonconformity under Wis. Stat. ch. 402.
While Elumatec contends that Cornerstone modified the contract by
demanding delivery of the second saw “as is,” contract modification requires
mutual assent. Lamb v. Manning,
145 Wis. 2d 619, 627, 427 N.W.2d 437 (Ct. App. 1988). Nothing in the evidence supports a finding
that Cornerstone assented to forgoing its remedies for the defects in the saws
when it demanded that the first saw be delivered in September and the second
saw be delivered in October. With the
first saw deficient and the second saw not “remotely complete” long after the July
15 extended deadline, delivery of testing materials to Brogantech by Boone, and
the inspection and run-off dates at Brogantech in August 2001, the jury could
conclude that Elumatec had breached its contractual obligations as to time of
delivery and quality of the saws. The
jury could also conclude that Cornerstone acted reasonably, forgoing no rights,
when it demanded delivery of first one saw and then the other, and proceeded to
repair and rebuild them.
¶57 Elumatec’s
next two arguments relate to damages.
Its first argument is that Cornerstone failed to prove that its rebuild
damages were reasonable. However, since
the jury’s award of $328,523 as the cost of rebuild and repair damages was
supported by credible evidence, we will uphold it. The jury was entitled to find damages under Wis. Stat. §§ 402.714 and
402.715(1) and (2)(a). Thomas Hughbanks
testified that Cornerstone’s records reflected time and costs to repair and
rebuild amounting to $442,345.71. Zens testified
that the repair and rebuild work, including the work done after January 2002,
was necessary to bring the saws into compliance with the contract between
Cornerstone and Elumatec. In light of
this evidence, no basis exists to conclude that the repair and rebuild costs
awarded by the jury were unreasonable or unsupported by credible evidence.
¶58 Elumatec
also challenges the $180,000 in lost profits found by the jury. It contends that lost profits were
unrecoverable in this case because they were unforeseeable and
speculative. We disagree.
¶59 As set
forth in the discussion of the evidence at trial, Zens testified that prior to
entering the contract, he informed Craig Cocanig, Elumatec’s sales
representative, of the importance of the saws and that Cornerstone’s failure to
satisfy Fortune Brands, Cornerstone’s largest customer and the parent company
of Boone, could lead to the failure of Cornerstone. When an agent has authority to deal in
general with the subject matter of a transaction, knowledge that he or she
gains in the course of the transaction is imputable to the principal. Ivers & Pond Piano Co. v. Peckham,
29 Wis. 2d 364, 369, 139 N.W.2d 57 (1966).
Nothing in the record precluded the jury from concluding that, as
Elumatec’s sales representative, Cocanig’s knowledge was imputable to Elumatec. In addition, Van Tongeren personally
acknowledged that failing to satisfy a customer might lead to the loss of the
customer. Under these circumstances, the
jury could reasonably find that it was foreseeable to Elumatec that its failure
to produce saws for use by Boone in conformity with its contract obligations
might lead Cornerstone to lose business with Boone and Fortune Brands. Cf. Hendricks & Assocs., Inc. v.
Daewoo Corp., 923 F.2d 209, 214-15 (1st Cir. 1991).
¶60 The
evidence also amply supports the $180,000 award. Jiminez testified that based on the problems
with this project, Boone rejected Cornerstone’s bids on wood and vinyl process
projects. Testimony was also presented
regarding the substantial lessening of work awarded by Fortune Brands companies
to Cornerstone after this project, and contrasted it with the steadily rising
business awarded Cornerstone before this project by Fortune Brands, a
conglomerate with billions of dollars in annual sales. While evidence indicated that many of the
jobs on which Cornerstone bid after this project were not performed or were performed
in-house, evidence also indicated that prior to this project Cornerstone was
doing much of the “in-house” work for Fortune Brands. Under these circumstances, this court
concludes, as did the trial court, that credible evidence supports the jury’s
award of $180,000 of the $1.2 million in lost profits claimed by Cornerstone.
¶61 Elumatec’s
final argument is that a new trial should be granted in the interest of justice
based upon cumulative errors at trial and the lack of evidence supporting the
jury’s findings of breach, notice and damages.
Because the evidence supported the jury’s verdict and Elumatec has
failed to establish error at trial, we deny its motion for a new trial.
¶62 In addition
to rejecting Elumatec’s arguments on appeal, we reject Cornerstone’s arguments
on cross-appeal. Cornerstone contends
that the trial court erred when it granted Elumatec’s motion for a directed
verdict and offset the damages awarded to Cornerstone by the jury with the
remaining contract price of $115,389.92.
Cornerstone acknowledges that Elumatec is entitled to the remaining
amount owed under the contract based upon Cornerstone’s acceptance of the
saws. See Wis. Stat. § 402.607(1).
However, it contends that the jury had already provided the offset in
the damages award. Specifically, it
contends that its accountant, Thomas Hughbanks, subtracted the amount remaining
on the contract from the repair and rebuild costs incurred by Cornerstone when
he calculated Cornerstone’s damages.[4] It notes that Hughbank’s deduction was
presented to the jury through his testimony and a chart shown to the jury, and
that the jury’s damages award for rebuild and repair expenses was identical to
the amount as calculated by Hughbanks after the deduction. It contends that the record therefore
establishes that the jury already applied the offset in its verdict, and that
the trial court’s decision to offset the sum in motions after verdict
constitutes a windfall to Elumatec.
¶63 Based upon
a careful review of the record, we reject Cornerstone’s argument and uphold the
trial court’s determination. The record
indicates that, at the jury instruction and special verdict conference, the
trial court agreed with the parties that Elumatec’s counterclaim for the amount
remaining due on the contract would not be submitted to the jury in the special
verdict because acceptance of the saws and the amount owing was conceded by
Cornerstone. The trial court
stated: “Our dilemma [is] … how do we
handle it for the jury so that whatever verdict they come back with, we know
whether or not they have considered that 115,000 dollar contract price.” Ultimately, the trial court agreed to
instruct the jury in accordance with an instruction proposed by Cornerstone. Cornerstone indicated that it was going to
rely on the instruction to argue that the jury needed to add the amount
remaining due on the contract back into the damages as calculated by Hughbanks.
¶64 Cornerstone
did not request that the jury be instructed to deduct the amount that remained
owing to Elumatec from the damages found by the jury, and the trial court did
not give such an instruction. Instead,
as requested by Cornerstone, the trial court instructed the jury:
In plaintiff’s presentation of evidence relating to cost of repair … plaintiff deducted from its total repair damages an amount representing the remaining amount owed it under its contract with the defendant.
The Court instructs you that the law requires a buyer to pay the seller the total contract price for a product if as here the buyer accepts the product. The contract price still remaining to be paid is 115,389 dollars and 92 cents.
By accepting the product and including an offset in its damages calculation for the remaining contract price, plaintiff does not waive its right to allege that the product did not conform to the contract and seek damages from the seller for the non-conformity.
¶65 Counsel for Cornerstone referred to this instruction in his closing argument, arguing:
[W]ith regard to the damages associated with rebuilding it, $328,523.21. Now, this is going to get confusing, and I’m sorry.
You’re going to get an instruction that says this case is governed by the Uniform Commercial Code.
There’s a law that says if you accept a product you have to pay for it, okay? And acceptance is deemed any act by a party that is inconsistent with possession by the owner.
When they demanded these saws, give them to us, and basically took them, the law says you accepted them. Guess what? Now you got to pay for it, okay? Whether it stinks or not, you got to pay for it if you accept it. However, the instruction is going to say that doesn’t prevent you from suing for all your damages that flow thereafter.
Believe it or not, he owes them 115,000 dollars because he took the saws.
Mr. Hughbanks in his damage calculation backed that number out of the damages on the assumption that they wouldn’t have to pay it. They got to pay it. You got to add that back in, okay? … But the law is—the Court has determined the law is you got to pay for it even though it —perhaps you’re arguing it stunk. You still got to pay it because you took it. He backed that out of there. Put it back in.
(Emphasis added.)
¶66 Based upon this record, Cornerstone’s cross-appeal fails. As noted by the trial court in its decision on motions after verdict, Cornerstone argued in its closing that the jury should add the amount deducted by Hughbanks back into the damages award. The trial court concluded that it could not be certain that the jury had failed to add the amount back in and that its answer reflected the deduction. Based upon these conclusions, and because Elumatec was entitled to the remaining $115,389.92 owed on the contract pursuant to Wis. Stat. § 402.607(1), the trial court granted Elumatec’s motion for judgment in that amount, and offset it against the judgment awarded to Cornerstone.
¶67 We agree with the trial court that, based upon the record, it cannot be conclusively determined that the jury already provided for the offset. The jury was instructed that the law requires a buyer to pay the seller the total contract price when goods are accepted, and that Cornerstone had deducted the amount that remained owing on the contract from its repair costs. Cornerstone relied on the instruction to argue to the jury that it had to put $115,000 back into the damages award.[5] Based upon the record, it cannot be determined that the jury did not do so. As noted by Elumatec, it is equally plausible that the jury rejected the reasonableness of the total amount of repair and rebuilding costs claimed by Cornerstone, that it rejected the argument that all claimed costs were caused by the breach, or that it rejected the validity of the underlying accounting. Because credible evidence supported the jury’s finding that $328,523 would reasonably compensate Cornerstone for its costs to rebuild and/or repair the saws, and the record does not conclusively establish that the jury offset its award by the amount owed to Elumatec, no basis exists to disturb the trial court’s decision.[6] Judgment awarding Elumatec $115,389.92 on its counterclaim and offsetting that amount against the judgment awarded to Cornerstone is therefore affirmed.
¶68 Because Elumatec has not prevailed on its appeal, and Cornerstone has not prevailed on its cross-appeal, costs are denied to both parties.
By the Court.—Judgment affirmed.
This opinion will not be published. See Wis. Stat. Rule 809.23(1)(b)5.
[1] All references to the Wisconsin Statutes are to the 2005-06 version.
[2] Although the parties dispute who drafted the notice instruction, counsel for Elumatec stated at the jury instruction conference that “[w]e object to the notice instruction that we prepared here.”
[3] Elumatec also contends that, at a minimum, the instruction should have incorporated a statement that substantial compliance with specifications would eliminate any breach of warranty of fitness for a particular purpose. However, at the jury instruction conference, it argued only that the instruction should not be given, not that additional language should have been included. Any request for the inclusion of additional limiting language was therefore waived. See Allen v. Wis. Pub. Serv. Corp., 2005 WI App 40, ¶18, 279 Wis. 2d 488, 694 N.W.2d 420, review denied, 2005 WI 136, 285 Wis. 2d 627, 703 N.W.2d 376.
[4] As discussed by Cornerstone, at the time of trial Hughbanks believed that $113,822.50 remained owing on the contract and deducted that amount, rather than the $115,389.92 actually owed.
[5] In its cross-appellant’s brief, Cornerstone argues that it was legally entitled to deduct damages from the contract price under Wis. Stat. § 402.717. To the extent Cornerstone is relying on this argument as a basis to reverse the trial court’s judgment, it fails. As discussed above, Cornerstone argued at trial that the amount deducted by it in Hughbanks’ damages calculation should be added back in by the jury, not that Elumatec’s right to recover the remainder due on the contract was extinguished by the deduction.
[6] We reject Cornerstone’s argument that we must reverse the judgment in favor of Elumatec because there is credible evidence that it already received its damages via an offset by the jury. This argument distorts the standard of review. Elumatec was entitled to judgment pursuant to Wis. Stat. § 402.607(1) unless the record otherwise established that the jury had already awarded it the $115,389.92 in its answer to special verdict question 7A. For the reasons discussed above, the record does not conclusively establish that the jury made the offset alleged by Cornerstone.