Petition — Dresser Industries, Inc. v. Community Television Services, Inc.
Supreme Court brief1979
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IN THE be MIGYAR
Supreme Court of the United States
October Term 1978
No___#8=13'76
DRESSER INDUSTRIES, INC.,
Petitioner,
V.
COMMUNITY TELEVISION SERVICES, INC.,
Respondent.
PETITION FOR WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE EIGHTH CIRCUIT
HOPKINS, SUTTER, MULROY, DAVIS
& CROMARTIE
THOMAS R. MULROY
ROBERT W. PATTERSON
One First National Plaza
Suite 5200
Chicago, Illinois 60603
FAEGRE & BENSON
G. ALAN CUNNINGHAM
DAVID P. PEARSON
1300 Northwestern Bank Building
Minneapolis, Minnesota 55402
May, JOHNSON, DoYLE, BECKER &
FISHER, P.C.
HAROLD C. DOYLE
412 West Ninth Street
Sioux Falls, South Dakota 57104
Attorneys for Petitioner
Dresser Industries, Inc.
March 8, 1979
Pandick Press Midwest, inc., Chicago °* 454-0900
i
TABLE OF CONTENTS
PETITION FOR WRIT OF CERTIORARIL.............ccceeeesceeseceeeeees |
I i cininainiikngicinpicciiivaldintelalaiialdbseaesalaiiil l
a a 2
IT PRE asic tiicntitiettdicictslntscbitetlones nin 2
Constitutional And Statutory Provisions Involved ... 2
nee Ge Tae Ca ae sctelicidds eiividicheieticviices 3
Reasons For Granting The Writ ..................ccccccc0eee0s 13
I. The Theory Developed by The Court Of
Appeals Was Not Argued At Trial Or On
PE eisai adds itiianiliilitaniaiinin ini i inieinens 13
II. The Decision Rendered By The Court Of
Appeals Is Predicated On Legal Determina-
tions Not Raised Or Argued By The Parties. 19
III. The Court Of Appeals Violated Basic Prin-
ciples Of Appellate Review In This Case...... 24
IV. Petitioner Was Denied Its Right To A Jury
Trial By The Disposition Of This Case In
The Comst OF Apnea onc sn cis ccstlicdeicccccessiecs. 26
V. The Court Of Appeals Decision Leaves
Commercial Transactions In A State Of
5 SIR IESE ea Ig CO EEE 29
VI. This Court Should Exercise Its Responsi-
bility To Supervise The Administration Of
Justice In The Federal Courts........................ 32
I le 34
APPENDIX A
Opinion Of The Court Of Appeals ................cccccccsseeesseeees A-1
APPENDIX B
Denial Of Petition For Rehearing.................ccccccccscscsseeees A-16
APPENDIX C
Memorandum Opinion Of District Court ................ccc000 A-19
APPENDIX D ( Bound Separately )
i A-29
ii
ar I BW ssc i ernocosess cadsocesentsenrtdadarscacesseaniccns’ A-130
Plaintiff’s Post Trial Brief................cc.sccsscssssssccsscseeees A-130
PIE TIE harap cls his cha shijascnecdcvscqncnsuseisuceatacanseste A-172
isis cnnhancasticstchajnieshovioseetioepis onessaeiee A-220
PT IS TITIDE i. saccpccoccssedstusneasneccnnsonaszcoesosen A-270
EN I a a ok cts cases veh leneobenpasodenouunbens A-292
COMERS FOF BRIG OT CO WOE oii sss csi iss ecsiscsesdscysececsescsccccise A-308
TABLE OF AUTHORITIES
Cases
Page
Alan Wood Steel Co. v. Capital Equipment Enterprises,
Inc., 39 Ill.App.3d 48, 349 N.E.2d 627 (1976) ............. 28
Binkley Co. v. Teledyne Mid-America Corp., 332 F.Supp.
1183, aff'd. 460 F.2d 276 (8th Cir. 1972)... eee
Fountain v. Filson, 336 U.S. 681 (1949) woo ceeeceeeeeee 32
Geldermann and Co. v. Lane Processing, Inc., 527 F.2d
ENGI TO Foncscitaisah igs cotheoisessssonaeedsdoeenedindaceyetocsih 30
Gillette Dairy, Inc. v. Hydrotex Industries, Inc., 440 F.2d
I I Wc icstcnastskssrcsieyian eth sscceseotansadubancestes 28
Hormel v. Helvering, 312 U.S. 552 (1941) oceans 24
Lutcher & Moore Lumber Co. v. Knight, 217
Ra er ee Rakeback Sealed enncctincaqncdinaneyincesneysenseess 32593
Matlack, Inc. v. Rupp Corporation, 57 F.R.D.
OE Ee Fe TT iia dashne ss coca ipups vosinecdececsersbbaas 27
Pacific Marine Schwabacher, Inc. v. Hydroswift Corp.,
ee ee SE PED idk harscssebynsaasdicdegueseondsdecescoses
Putensen v. Clay Adams, Inc., 91.Cal. Rptr. 319 (Ist
BR OU BE iota ced bis eh RIB Zen cen aainchvcde ss concscpeeseccensses 28
S-C Industries vy. American Hydroponics System, Inc.,
re Oe es FN oa cbrchettdbnasescaccaccncccesctncodcesss
Securities Exchange Comm’n. v. Chenery Corp., 318 U.S.
I ccoee cia eoshettavas pcceintnthOtepsgesshanshasncccadnconsasengenninds 27
Securities Investor Protection Corp. v. Morgan, Kennedy
& Co., 533 F.2d 1314 (2nd Cir.), cert. denied, 426
OR So 80 RS SRARRIMRR Srna agen SRS E No ORE
Sinka v. Northern Commercial Co., 9 U.C.C. Rep. 1350
OE. 8 Ra ESE Per te RVORA? CRO © eae an
Smith v. American Guild of Variety Artists, 368 F.2d 511
(8th Cir. 1966), cert. denied, 387 U.S. 931 (1967) ......
Spokane County v. Air Base Housing, Inc. 304 F.2d 494
eg SERED ER ESE eo
United States v. White, 454 F.2d 435 (7th Cir.), cert.
CORIO, GER iy 08 TED iicresecerserciicsscscincecconscosoeseces
Statutes
S.D. Compiled Laws § 57-4-34, U.C.C. § 2-316(1) .........
Page
27
28
25
IN THE
Supreme Court of the United States
October Term 1978
No.
DRESSER INDUSTRIES, INC.,
Petitioner,
Vv.
COMMUNITY TELEVISION SERVICES, INC.,
Respondent.
PETITION FOR WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE EIGHTH CIRCUIT
The Petitioner, Dresser Industries, Inc., respectfully prays
that a Writ of Certiorari issue to review the judgment and
opinion of the United States Court of Appeals for the Eighth
Circuit or, alternatively, to vacate the judgment and remand to
the Court of Appeals for further proceedings consistent with
accepted judicial practice.
OPINIONS BELOW
The opinion of the Court of Appeals is reported at 586
F.2d 637 and is set forth as Appendix A. The order of the
Court of Appeals denying a petition for rehearing and the
dissent therefrom are set forth as Appendix B. The
Memorandum Opinion of the District Court is set forth as
Appendix C.
2
JURISDICTION
The Court of Appeals judgment of which review is sought
was entered September 13, 1978. Petitioner’s timely Petition
For Rehearing was denied November 24, 1978. By order of
this Court, Petitione:’s time to file this Petition was extended to
March 8, 1979. The jurisdiction of this Court is invoked under
28 U.S.C. § 1254(1).
QUESTIONS PRESENTED
1. Whether the Court of Appeals violated basic principles
of appellate procedure when it searched the record for
evidence to support a legal rationale which it had
conceived, but which had never been urged by Re-
spondent at trial or in the Appeal and to which
Petitioner has never had an opportunity to respond.
2. Whether Petitioner was deprived of its constitutionally
protected right to have a jury decide the claim against
it when the Court of Appeals relied exclusively upon
evidence which could not have been considered by the
jury and was expressly rejected by the Trial Court.
CONSTITUTIONAL PROVISION, RULES OF
PROCEDURE AND STATUTES INVOLVED
The United States Constitution, Amendment VII, provides:
“In suits at common law, where the value in con-
troversy shall exceed twenty dollars, the right of trial by
jury shall be preserved, and no fact tried by a jury, shall be
otherwise reexamined in any Court of the United States,
than according to the rules of the common law.”
The Court of Appeals’ decision raises questions involving
federal appellate practice generally and, in particular, as
embodied in Rule 28 of the Federal Rules of Appellate
a
3
Procedure reproduced in Appendix D. The power of this Court
to supervise the Federal courts is embodied in Supreme Court
Rule 19, which is also reproduced in Appendix D.
As presented in the District Court and in the Court of
Appeals, this case involved various sections of the Uniform
Commercial Code as enacted in South Dakota, including:
ucc S.D.C.L.
1-102 §7-1-5
1-204 57-1-14
2-313 57-4-27
2-316(1)-(4) 57-4-34 to -39
2-317 57-4-40
2-719(1)-(4) 57-8-49 to -51
2-725(1)-(4) 57-8-61 to -64
The foregoing sections are reproduced in Appendix D.'
STATEMENT OF THE CASE
At its inception, this case was no more than a dispute
concerning principles of commercial law. But the events which
transpired in its appeal reveal a serious miscarriage of justice
which deserves, if not demands, the exercise of this Court’s
power of supervision. The result—left untouched—will unjusti-
fiably and seriously impact the Petitioner in this case and in a
related case yet to be tried? and could impose a significant
1 Appendix D is bound separately and contains in addition to the
text of the statutes, excerpts from the record which Petitioner deems to
be of crucial importance.
2 The Court’s decision arguably may seriously impact two cases
brought by Respondent’s television stations. These suits are for the
consequential damages allegedly suffered by the stations as a result of
being off the air after the tower’s collapse. The aggregate claim by the
stations is for $1,856,000. The cases are captioned Midcontinent
Broadcasting Co. v. Dresser Industries, Inc., (File #77-4104) and
Forum Communications Co. v. Dresser Industries, Inc. (File #77-
4042). Both cases are pending in the United States District Court for
South Dakota, Southern Division.
4
burden on the business community. More importantly, the
decision could establish a precedential seed which could
materially alter our traditional adversary system.
Instead of limiting itself to a review of the record and to
the legal issues framed by the parties, the Court of Appeals
became an advocate of both the facts and the law. Stated
differently, this case presents a situation where the Court of
Appeals decided that—despite the fict that the record was
deficient—the verdict should be sustained even though that
required a strained and convoluted rationale which had no
support in the record and was not briefed or otherwise argued
in the appeal by either party.
In short, the quality of justice dispensed by the Court of
Appeals in this case is far less than what litigants are entitled to
receive and substantially below that which this Court has
tolerated in the past.
The Factual Background
Of This Litigation
This controversy arose after a tall (2,000 feet) television
transmission tower erected by Petitioner collapsed during a
severe winter blizzard in South Dakota on January 11, 1975.
The tower had been purchased. by Respondent, Community
Television Services, Inc. in 1968 and became operational in
May of 1969. During the intervening five years prior to its
collapse, Respondent was exclusively responsible for its oper-
ation and maintenance. The tower had been erected as a
replacement for one (also purchased from Petitioner) that had
been destroyed when a guy wire was severed by a low flying
plane approximately nine months after it became operational.
Prior to its purchase of the first tower, Respondent thor-
oughly investigated and initiated negotiations with all
manufacturers of tall towers before entering into a contract with
Petitioner in July of 1966. Respondent had purchased tall
towers before from other manufacturers and was no stranger to
the process involved in the purchase of such sophisticated
equipment.
The contract for the second tower—which is the one at
issue here—was signed in 1968 without renegotiation, except as
to price, and in form substantially identical to the first contract.
Both towers were erected pursuant to detailed technical specifi-
cations. For purposes of this case, the crucial specification was
that:
“The tower shall be designed to resist a uniform wind load
per drawing T-5172, Sheet S-1, 60 psf on flats.” (A-310)
It was common knowledge in the industry that this specification
meant that the tower would be designed and constructed to
withstand a horizontal wind force of 120 miles per hour, absent
other factors such as ice.
. After the tower’s collapse, Respondent filed suit in the
United States District Court for South Dakota, Southern Divi-
sion on the basis of diversity of citizenship. Recovery was
sought against Petitioner under four counts. In the tort counts,
Respondent claimed Petitioner had been negligent in the design
and construction of the tower, or that Petitioner should be held
strictly liable for the tower’s collapse. Under its contract counts,
Respondent claimed that the tower’s collapse breached express
and implied warranties under the Uniform Commercial Code
as enacted in South Dakota.
The Trial
Respondent based its case on liability primarily on the
testimony of expert witnesses. That evidence—considered most
favorably to Respondent—established that the wind velocity at
the height of the storm was less than 120 miles per hour and
that the tower did not collapse because of a build up of
6
ice—which was one of Petitioner’s key defenses. However,
none of Respondent’s experts testified nor was there any other
evidence that the tower failed to conform to any of the contract
specifications or that it was carelessly or negligently erected. In
fact, all of Respondent’s technical experts “unequivocally”
agreed that the tower did meet the wind loading specification of
“60 psf on the flats.” Finaily, there was no evidence of any sort
that the tower collapsed because of the force of the wind.
As observed by the Eighth Circuit:
“Community’s experts testified that they had eliminated
metallurgical or mechanical failure or abnormal wind
loading as the cause of collapse. (A-3)
Thus, the jury did not find that Dresser’s product or
construction was defective in materials or workmanship or
failed to meet the applicable specifications. (A-12)
‘ The only causational evidence offered by Respondent to
explain the collapse was expert opinion that the tower’s failure
occurred because of a phenomenon (mherent in all guyed
structures) known as harmonic resonance. These experts
conceded that engineering avoidance of harmonic resonance
was beyond the state of the art for tall towers.3 In severe cases,
harmonic resonance can—and in this case according to Re-
spondent’s experts did—so fatigue the structure that it is
literally shaken down.
In defense, Petitioner’s experts sought to establish that the
tower had collapsed because of a build up of ice on the tower
members, which magnified the effect of the wind far beyond the
120 mile per hour wind loading specification.
Petitioner moved for a directed verdict on all counts. The
District Court dismissed the implied warranty count by enforc-
3A finding acknowledged by the Court of Appeals. (A-4)
7
ing the disclaimer contained in the parties’ contract. That
provision (herein referred to as “Item 9”) also contains time
and damage limitations on Petitioner’s warranties, which were
the subject of considerable dispute at trial and in the Appeal.
Item 9 states in pertinent part as follows:
“9. WARRANTY AND LIMITATION OF LIABILITY:
Seller warrants, for a period of six months, that products of
its own manufacture and any construction performed
hereunder by the Seller shall meet the applicable specifica-
tions incorporated in this contract, and be free from defects
in material and workmanship. Provided Buyer submits a
claim in writing to Seller immediately upon its discovery
and in any event within six (6) months after shipment if no
construction is performed hereunder or within six (6)
months after final acceptance by Buyer if construction
work is performed (or within six months from notification
of completion by Seller if Buyer wrongfully refuses or
delays final acceptance), Seller shall, at Seller’s sole op-
tion, repair, replace or refund an equitable portion of the:
purchase price of any prodct or work which Seller
determines to have been derective or failed to meet
applicable specifications. . . .
Except for obligations expressly and specifically as-
sumed under the other clauses of these Sales Terms, the
foregoing is Seller’s only warranty, obligation, and
liability, under tort (including alleged negligence ) contract
or otherwise for or in connection with its products, work
and services or use thereof. THE FOREGOING IS
EXPRESSLY IN LIEU OF ALL OTHER WAR-
RANTIES WHATSOEVER, EXPRESS, IMPLIED AND
STATUTORY, INCLUDING WITHOUT LIMITATION,
THE IMPLIED WARRANTIES OF MERCHANT-
ABILITY AND FITNESS. IT IS SPECIFICALLY UN-
DERSTOOD SELLER’S PRICE IS BASED UPON THE
FOREGOING LIMITATION OF LIABILITY AND
BUYER’S WAIVER OF ANY AND ALL CLAIMS FOR
DAMAGES.” (Emphasis as in original. The full text of
the “Terms and Conditions of Sale” appears at A-318 and
the other contract provisions at A-308. )
8
Despite some serious misgivings about whether Respon-
dent had any proof to establish a breach of its express warranty
claim, (A-55, 61), the District Court denied Petitioner’s motion
except as to the implied warranty count.
The case was given to the jury under standardized instruc-
tions regarding negligence, strict liability and breach of express
warranty. (A-108) The only express warranty mentioned in
the instructions was the 60 psf design specification, which the
District Court found to be a warranty as a matter of law. (A-
120) Consistent with this, the District Court described Re-
spondent’s claim to the jury as follows:
“In its third cause of action, and as an alternative plaintiff
alleges that defendant is liable for damages on the ground
that the defendant expressly warranted to plaintiff, in the
sale of the tower, that the tower would withstand wind
pressure of 60 pounds per square foot on its flat surfaces,
when in fact the tower collapsed under less wind pressure
than that for which it was warranted.” (A-111)
The jury returned a verdict pursuant to special interroga-
tories under which it found that Petitioner was not negligent
and not strictly liable. Its verdict against the Petitioner was
premised solely on the claim that the tower’s collapse con-
stituted a breach of the express warranty.
The Appeal
On appeal, Petitioner advanced two grounds for reversal.
The first was that Item 9 of the parties’ contract had been
erroneously interpreted by the District Court. Four issues
pertaining to the claimed time and damage limitations on the
specification warranty were raised by Petitioner and argued at
length. The second ground was that there was no evidence to
support the verdict based on a breach of the design specifica-
tion warranty, because Respondent had introduced no evidence
that the force of the wind had caused the collapse. Throughout
9
both its briefs, Petitioner repeatedly asserted that the only
warranty involved in the proceedings was the design warranty.
(A- 185, 214, 272)
The Respondent never challenged Petitioner’s assertion
that only the design specification was at issue and its brief
simply mirrors the legal issues raised by Petitioner. Respondent
sought to sustain factually the jury verdict in a very simplistic
manner. (A-267) It argued that since the specification guaran-
teed that the tower would be designed to resist a wind velocity
of 120 miles per hour and since the wind velocity was less than
that when the tower collapsed, that circumstance was sufficient
causational proof to establish a breach of “the express [design ]
warranty.’’4 It made this argument despite the fact that its own
experts had testified that the tower’s collapse resulted, not from
the force of the wind, but rather from harmonic resonance —the
avoidance of which had been established to be beyond the state
of the art for tall towers.
The Opinion Of The
Court of Appeals
The Opinion acknowledges that Respondent’s experts
“unequivocally” agreed that the tower met the design specifica-
tions. Indeed, the Opinion says that Petitioner had convinced
the Court of Appeals that Respondent had not proved a breach
of that express warranty. (A-6)
But the Court of Appeals goes on to sustain the ver-
dict—not on the basis of any argument advanced by the
4Respondent persisted throughout the trial and the appeal in
relying on the totally inapplicable theory of res ipsa loquitur, despite
the fact that the District Court had quite properly instructed the jury
that:
“The defendant was not an insurer of the safety of the tower nor
does the mere occurrence of a collapse create any inference of a
breach of any warranty.” (A-116)
If Respondent was relying on the warranty perceived by the Court of
Appeals, it would not have been necessary to resort to such a tenuous
argument in support of the jury verdict.
10
parties—but rather on a theory it apparently concocted on its
own. The essence of the Court’s rationale sustaining the verdict
against Petitioner was that two of its advertising bro-
chures—reviewed by Respondent prior to its purchase of the
first tower in 1966—con.ained “affirmations” which the Court
said created a warranty regarding the tower’s durability and
performance. This new warranty the Court said was not limited
in any way by Item 9 of the contract and was of presumably
unlimited scope and duration. The so-called “affirmation”
seized upon by the Eighth Circuit from the advertising bro-
chures was:
“Wind force creates the most critical loads to which a
tower is normally subjected. When ice forms on tower
members thereby increasing the surface area resisting the
passage of wind, the load is increased.
Properly designed towers will safely withstand the
maximum wind velocities and ice loads to which they are
likely to be subjected. Dresser-Ideco can make wind and
ice load re ommendations to you for your area based on
U.S. Weather Bureau data.”5 (A-6)
The advertising brochures, although introduced in evi-
dence (Exhibits | and 2), were received for a limited purpose
and had never been urged by Respondent in the appeal or
otherwise as the source of a separate and broader warranty. On
the contrary, they were relied upon by Respondent exclusively
to establish the origin of the design specification and to
establish that “60 psf on the flats” equated to a wind velocity of
120 miles per hour. (A-241, 243) Nevertheless, the Court of
Appeals construes the brochure language to mean that Petition-
er had warranted that its towers would forever “withstand the
maximum wind velocity and ice load to which it would likely be
subjected.” ( A-7)
5Exhibit 2, which is the brochure containing the quoted
language, is reproduced in Appendix D at page A-292. Exhibit | is a
fold out pamphlet and not readily reproducible.
Having created this new warranty, the Court of Appeals
was faced with the dilemma of finding evidence of a breach.
Respondent’s experts had unequivocally stated that neither the
wind nor ice nor a combination thereof were factors in the
collapse of the tower, but that harmonic resonance was the
most likely cause. Not to be discouraged in its effort to find a
breach of its weather related warranty, the Court of Appeals
adopts Petitioner’s evidence that ice loading had caused the
tower to collapse and speculates that the wind and ice loading
testified to by Petitioner’s experts could have been found by the
jury to be the cause of the collapse and resultant breach of the
warranty fashioned by the Court of Appeals.
The tortured analysis offered by the Court of Appeals is
pathetically anomolous—at least from Petitioner’s point of
view. Respondent went to great pains during the trial to prove
that no ice existed and the District Court’s Memorandum
Opinion states that:
“The jury apparently found that the presence of ice and
snow on the tower at the time of collapse, if any, had been
re ge in amount to be a causal factor in the collapse.”
(A-20)
Respondent’s perception of what the jury did with the ice and
snow theory advanced by Petitioner is that it was “rejected” by
the jury. (A-241)
Having gone outside the written contract between the
parties to find a warranty and having developed its own theory
of breach, the Court of Appeals then had to overcome the
hurdles posed by Item 9. The Eighth Circuit simply begs these
questions by saying it is unnecessary to consider whether the
duration of Petitioner’s warranty and the remedy available in
the event of a breach were limited by Item 9, since the new
warianty was “outside” the contract. (A-12)
The Court of Appeals could not escape Item 9 entirely,
since it purports to disclaim a// warranties not in the contract
and would presumably nullify this new extra-contractual war-
12
ranty. Despite not a word in the briefs and no ruling below on
this issue, the Court of Appeals proclaims that its 'extra-
contractual warranty is immune from Item 9 because to enforce
the disclaimer contained therein would ostensibly create an
inconsistency forbidden by the U.C.C. (A-14)
The Petition For
Rehearing En Banc
Petitioner duly filed a petition for rehearing urging the
serious errors committed by the Court. Perhaps the most
dramatic evidence that the panel Opinion is utterly confounding
is expressed in the dissent to the denial of the petition for
rehearing.
The author of the dissent is the Chief Judge of the Court
and had originally joined in the panel Opinion sustaining the
District Court. In his dissent, Chief Judge Gibson severely
criticized the panel Opinion for its unpardonable trespass on the
parties’ agreement based on convoluted reasoning. The dissent
concludes with this observation:
“To suppose that the limitation on remedy contained in the
contract was intended to apply only to the warranties
contained in the written agreement but not to those in the
catalog, is to build a fantasy on top of a fiction. Under
U.C.C. § 2-719(1), S.D. Compiled Laws, § 57-8-49, the
parties are entitled to limit remedies. To further certainty
in commercial relationships and justice between these
parties, we ought to enforce the contract as written.” (A-
17)
13
THE WRIT SHOULD BE GRANTED
FOR THE FOLLOWING REASONS
I. The Theory Developed By The Court of Appeals Was Not
Argued At Trial or On Appeal
When the Court of Appeals determined, sua sponte, that
the verdict was sustainable on the basis of an express warranty
contained in advertising brochures, it effectively deprived Peti-
tioner of its day in court both at trial and in the Appeal. The
theory adopted and advanced by the Court of Appeals was
never considered by the parties or by the District Court as a
basis for Petitioner’s liability. That fact is obvious from the
record.
The Evidentiary Status
Of The Advertising Brochures
The advertising brochures cannot and should not have
been given the probative weight attached to them by the Court
of Appeals. Respondent never urged to the jury that the
brochures were introduced for the purpose of establishing a
broad express warranty. Moreover, the trial judge expressly
negated—in the presence of the jury—the evidentiary import
which the Court of Appeals attached to those exhibits.
Respondent’s first witness identified Exhibits | and 2 and
none of Respondent’s witnesses ever testified about them again.
He characterized the material as sales “propaganda sheets,”
which were received prior to the first tower contract in 1966.
The insignificance of these brochures to the transaction is borne
out by a review of the meager and_ superficial testimony
concerning them. (A-36 to 43) Most significantly, when the
exhibits were offered in evidence the following colloquy took
place in the presence of the jury:
14
Mr. Doyle: If the Court please, we have no objection to the
admissibility of Exhibit number 2, as it’s our understanding
that this material is only preliminary, and that in accord-
ance with our discussion with the Court, at least at this
point, we do not object to the exhibit, as such, if it’s only
preliminary.
The Court: Well, I don’t know whether Mr. Evans is going
to concede that it’s only preliminary.
Mr. Evans: Well, I think it’s part of the plaintiff's case,
Your Honor, as I put the pieces together.
The Court: Well, I guess I better take a look at it if I’m
going to have to rule on it. J might just add that I don’t
regard Exhibits 1 or 2, either one of them, as being part of
the contract, and if there’s a later contract that’s to be
introduced, that would supersede {20| the brochures, but
Exhibit 2 will be—the objection to Exhibit 2 is overruled
and it may be received in evidence. (Emphasis supplied ).
(A-42)
Since Respondent did introduce the contract, which under
the District Court’s ruling superseded the brochures, they could
not have been relied upon by the jury to “amplify” or expand
that written agreement between the parties. Respondent’s
counsel was silent after the District Court’s ruling and through-
out the remainder of the trial never once—before the jury or
otherwise—suggested that Petitioner had guaranteed in its
brochures that the durability and performance of the tower
would exceed the specification design criteria.
Respondent’s Case Was
Predicated Exclusively
On the Specification Warranty
At no time did Respondent suggest, either explicitly or by
implication, that the brochures’ function was the creation of a
separate and expanded warranty. Yet it had numerous
opportunities to do so. °
15
In his argument in support of a directed verdict counsel for
Petitioner asserted that:
“(t)he testimony was clear that the only express warranty
that is claimed is sixty pounds per square feet on the
flats...” (A-51)
To this assertion, Respondent remained silent. Furthermore,
on two occasions during the course of the same argument, the
District Court commented on Respondent’s failure to offer any
evidence that Petitioner had breached the 60 psf design specifi-
cation warranty. (A-55, 61) Yet Respondent did not attempt
to remedy that potentially fatal evidentiary defect with any
suggestion that some other express warranty might be avail-
able.
The most liberal construction of the evidence usually
appears in a party’s closing argument to the jury. (See A-76)
But counsel for Respondent never once suggested to the jury
that the brochures contained an express warranty, other than
the specification warranty allegedly breached by Petitioner.
Moreover, Respondent’s counsel never urged that these bro-
chures somehow “amplified” the contract specification beyond
its intended and clear meaning as presumed by the Court of
Appeals.6 While the advertising exhibts were alluded to in
closing argument, counsel’s statements (A-77, 101) never sug-
gested they were the source of a contractual guarantee beyond
the specification warranty. Moreover, it offered not a single
6 It is clear from Respondent’s brief that the “amplification” it
was referring to was that the brochures contained a wind table to
equate the specification to a wind velocity. As stated by Respondent
in its brief to the Court of Appeals:
“The District Court held as a matter of law that the 60 psf
specification, as amplified in the brochure of Dresser, created an
express warranty that the tower would withstand a wind velocity
of approximately 120 miles per hour. This warranty was
subsequently breached when the tower collapsed under the force
of an 80 mile per hour wind.” (A-244)
16
instruction which would have permitted the jury to consider the
brochures as the source of a separate warranty.
Even more telling, Respondent allowed the following
instruction to the jury:
“If you find that the pertinent tower specifications were set
by the plaintiff or by its direction, and if you find that the
tower supplied by the defendant conformed to those
specifications, then there can be no breach of an express
warranty on the part of the defendant.” (A-121)
If Respondent had intended to rely on some extra-
contractual warranty it could not have allowed this instruction,
since it is fatal to the very theory which the Court of Appeals
evolved and Respondent now urges.
Perhaps the most compelling evidence that Respondent
never “tried” to the jury the question of whether the brochures
contained a warranty is found in Respondent’s comprehensive
brief in opposition to Petitioner’s motion for judgment notwith-
standing the verdict. (A-130) In the very first sentence of its
brief, Respondent characterizes the jury verdict as follows:
“By its verdict, the jury found that the Defendant had
breached the express warranty contained in the typewritten
specifications of the contract to-wit...” [60 psf on the
flats }
Respondent then goes on to list eleven separate grounds
why the verdict should be sustained, not one of which even
hints at a warranty contained in the advertising brochures. For
that matter, Exhibits | and 2 are not even referred to or cited in
the entire brief. Respondent concludes its lengthy legal argu-
ment with this parting statement:
“The Defendant made an explicit and specific warranty
when it stated:
17
‘The tower shall be designed to resist a uniform
wind load per drawing T-5172, Sheet S-1, 60 psf on
flats.’
When the tower failed there was a breach of this express,
specific warranty.” (A-170)
Finally, it is clear from the Memorandum Opinion that, at
least in the District Court’s view, the only warranty Petitioner
had made and the only warranty the jury could have found
breached was contained in the contract specifications.”
In The Appeal, A “New”
Warranty Was Never Urged
By The Respondent
If the Court of Appeals’ perception of the record is
legitimate, one would expect to find—either in Petitioner’s or
Respondent’s brief—some hint that the brochures compel such
a dispositive result. Yet one can search with meticulous care
and find not even a suggestion that they create an express
warranty outside of and going beyond the contract or that such
a warranty was ever breached. On the contrary, beginning with
the “Statement of Issues” the briefs of both parties are devoted
exclusively to the legal and factual disputes surrounding the
specification design warranty. (See A-172, A-220, A-270)
Respondent’s brief never once challenges the repeated
assertion by Petitioner that the on/y warranty at issue is the
7“The specifications incorporated in the contract for sale dis-
closed that ‘The tower shall be designed to resist a uniform wind load
per drawing T-5172, Sheet S-1, 60 psf on flats.’ ... Defendant’s
advertising brochures stated that the wind velocity necessary to create
this amount of pressure would be approximately 120 miles per hour,
absent any other factors. This court found as a matter of law that this
specification created an express warranty... .
The jury’s answers to the special interrogatories submitted to
them by the Court show that they based Defendant’s liability on a
breach of the express warranty.” (A-21)
18
design specification. There are, indeed, some passing refer-
ences by Respondent to the brochures, but never in the context
of a separate and broader warranty. In fact, all such references
relate to establishing that the 60 psf warranty was first ex-
plained by Petitioner in its advertising and later codified in the
written contract. (A-229, 241, 245, 249, 255)
Moreover, why is there no discussion in any of the briefs
about what turned out to be the crucial legal decision by the
Court of Appeals—namely whether Item 9 operated to disclaim
the new extra-contractual warranty? The reason is painfully
obvious! That question had never been considered by the
District Court because there was no occasion for the parties to
address that issue at trial.
While it is obviously very tempting for Respondent to
denounce righteously the charge that it was the Court of
Appeals—not it—which molded a theory to sustain the verdict,
the opening paragraph of Respondent’s “Argument” to the
Court of Appeals suggests otherwise:
“During the negotiation process for the tower contract, in
its brochure and in the final order form, Dresser explicitly
guaranteed that the subject tower was designed to safely
withstand a horizontal wind pressure of 60 psf on flat
surfaces. This is equivalent to an actual wind velocity of
approximately 120 miles per hour. The District Court
properly held as a matter of law that this design guarantee
created an express warranty. The tower design proved
inadequate.” (A-241 )
Respondent Expressly Rejected
The Theory Adopted By the
Court of Appeals
The Court of Appeals overlooked an admission in Re-
spondent’s brief which is directly contrary to the dispositive
19
conclusion it made. In discussing Petitioner’s defense that ice
and snow in combination with the wind had caused the
collapse, Respondent made this fatal concession:
“Dresser’s theory, if correct, provided a complete defense
to the breach’of warranty cause of action.” (A-236)
Yet the Court of Appeals speculates that the evidence of ice and
snow plus the wind could have been found by the jury as the
cause of the collapse and the basis for its verdict that Petitioner
had breached the newly created advertising warranty. There is
no conceivable way to square Respondent’s statement with the
rationale seized upon by the Court of Appeals. It reveals,
perhaps more than anything else, that the idea to elevate the
brochures to their dominant position in this case was conceived
solely by the Court of Appeals.®
Il. The Decision Rendered By The Court Of Appeals Is
Predicated On Legal Determinations Not Raised Or
Argued By The Parties
Having found what it perceived to be evidentiary support
for the verdict, the.Court of Appeals was then required to
resolve a number of legal issues—none of which had been
briefed or argued by the parties.
The Application Of The Parol Evidence Rule. The Opinion
of the Court of Appeals literally begs for a discussion of the
parol evidence rule in connection with the brochures. Given the
fact that the District Court said that the written contract “would
8 This admission renders incredible the indignant assertions by
Respondent that the references to the brochures in its brief show that
it urged in the appeal the theory seized upon by the Court of Appeals.
20
supercede the brochures,” some explanation was necessary to
explain how this rule can be legitimately avoided. Petitioner
never raised this issue on appeal because Respondent had never
relied on the brochures as the source of a warranty. Respond-
ent’s assertion in the response to the Petition for Rehearing that
Petitioner had “waived” this issue is simply specious. The very
fact that no parol evidence argument was made by either party
at trial or in the appeal is convincing proof that no one ever
perceived that the brochures could be elevated to the eviden-
tiary stature suggested, in the first instance, by the Court of
Appeals.
The creation of a warranty through the advertising bro-
chures was both factually and legally impossible. Those
brochures, submitted three years before and in connection with
a separate transaction, are by definition extrinsic to the contract
in this case. As such, they may be given legal significance only if
that contract was either vague or ambiguous, or failed to be a
final and intergrated expression of the parties’ intent. But at no
time was the contract argued or found to be so deficient.9
Warranty Disclaimer Provision. Having elevated the bro-
chures to contractual stature, the Court of Appeals was faced
with a serious dilemma. Item 9 of the contract said, in what the
District Court found to be clear and conspicuous language, that:
“THE FOREGOING IS EXPRESSLY IN LIEU OF ALL
OTHER WARRANTIES WHATSOEVER, EXPRESS,
IMPLIED AND STATUTORY, INCLUDING WITH-
OUT LIMITATION, THE IMPLIED WARRANTIES OF
9In this connection, the Court of Appeals conveniently ignored
the very first paragraph of the “Terms and Conditions of Sale.” “1.
General: All sales by DRESSER ... (hereinafter called Seller) are
made subject only to these terms and conditions and no others unless
expressly modified in writing and signed by an authorized representa-
tive of the Seller at its home office. Verbal arrangements and the
terms and conditions of any purchase orders submitted by the Buyer
shall be of no force and effect.” (A-318)
~
Zl
MERCHANTABILITY AND FITNESS. IT IS SPECIF-
ICALLY UNDERSTOOD SELLER’S PRICE IS BASED
UPON THE FOREGOING LIMITATION OF LIA-
BILITY AND BUYER’S WAIVER OF ANY AND ALL
CLAIMS FOR DAMAGES.”
The issue of whether this contractual provision effectively
disclaimed the new advertising warranty had never been raised,
argued, bricfed or ever discussed by anyone at any stage of the
entire proceeding. Despite this, the Court of Appeals simply
declares that the warranty disclaimer is inoperative because it
cannot be construed consistently with the new warranty which it
found outside the contract. Of course not! That was precisely its
purpose—to exclude all warranties except those expressly
agreed upon by the parties in their contract.
The Court of Appeals justifies its bizarre and extremely
prejudicial holding on Section 57-3-34 of the South Dakota
Uniform Commercial Code. (A-13) However, with a rather
surprising display of judicial myopia, the Court of Appeals
overlooks the fact that this provision is expressly subject to the
parol evidence rule.'° We are left to wonder just what sort of
legal manipulation can justify obliteration of such a contractual
provision. Twice Respondent executed that contract. Twice its
representatives signed directly below Item 9. And twice it paid
a price which it knew was predicated on the very disclaimer
which it now repudiates.
It is shockingly apparent that in order to justify a pre-
conceived theory the Court of Appeals was merely bootstrap-
ping. First, the Court ignores the parol evidence implications
inherent in establishing a new ‘*«arranty through the brochures
in the first instance. Then it cempounds that error by not even
addressing itself to the express parol evidence caveat in the very
10§.D. Compiled Laws Ann. § 57-4-34, U.C.C. § 2-316(1),
provides: Construction of words or conduct tending to negate or limit
express warranty inoperative. Words or conduct relevant to the
creation of an express warranty and words or conduct tending to
negate or limit warranty shall be construed wherever reasonable as
consistent with each other; but subject to the provisions of chapter 57-3
on parol or extrinsic evidence (§ 57-3-4) negation or limitation is
inoperative to the extent that such construction is unreasonable.
(Emphasis supplied )
22
statute it relies on to immunize the newly discovered warranty
from certain extinction."'
Ironically, if the Respondent had actually attempted to
assert and prove at trial that the brochures were the source of
an express warranty, it is likely that the District Court would
have ruled that they could not be as a matter of law. The
District Court had enforced the warranty disclaimer to negate
all implied warranties, which are nothing more than extra-
contractual guarantees which the law presumes exist unless
disclaimed. Furthermore, the trial court did, in fact, apply the
parol evidence rule when it said the brochures would be
“superseded” by the contract. '2
Limitation of Remedy. At trial and in its briefs to the Court
of Appeals, the Petitioner vigorously sought to enforce a
provision that was at the very heart of the parties bargain—a
limit on its financial exposure. Given the expensive nature of
the structures it sold and recognizing that prices were escalating
in the industry, Petitioner prudently placed a limit on the
amount for which it would be liable to its purchasers in the
event of a defect—the maximum amount being a refund of the
entire purchase price.
1! The case offered by the Court of Appeals to support its holding
demonstrates how superficially this issue was considered by the Court.
In S-C Industries vy. American Hydroponics System, Inc., 468 F.2d 852
(Sth Cir. 1972), the issue was whether a technical specification
contained in the written plans for the structure was a warranty and, if
so, whether it was negated by exclusionary language in the purchase
order. Obviously, this was a clear case of an inconsistency within
contemporaneous contract documents as opposed to an inconsistency
between the contract disclaimer and extrinsic and prior language
which the Court of Appeals was faced with here. Stated differently,
the Court in the §-C Industries case had no occasion to consider the
parol evidence rule. ,
12 Carried to its logical extreme, what the Court of Appeals is
suggesting by its holding is that no warranty disclaimer can ever be
etfective because by its very nature it would be inconsistent with all
extra-contractual warranties.
23
The Court of Appeals ignores the legal discussion offered
by the parties and avoids a decision about whether Petitioner’s
contractual damage limitation is valid. The Court takes the
easy way out by concluding that the limitation applies only to
damages arising out of breaches of contractual warranties—but
of course (says the Court) the express warranty here involved is
outside the contract.
The Chief Judge of the Court of Appeals was so outraged
by this convoluted and specious reasoning (which he said
“presents a serious question of injustice”) that he authored a
dissent to the denial of the petition for a rehearing. In taking
the court to task for its actions the Chief Judge said:
“To suppose that the limitation on remedy contained in the
contract was intended to apply only to the warranties
contained in the written agreement but not to those in the
catalog, is to build a fantasy on top of a fiction.” (A-17)
Finally, it should be observed that the opinion of the Court of
Appeals is internally inconsistent. When the Court said it did
not have to consider that issue because the new warranty was
outside the contract, it was ignoring the language in its own
opinion which said that the “affirmation” appearing in the
brochures only “amplified” and gave full meaning to the
contractual specification. (A-6) If the advertising warranty was
actually only an amplification, rather than a separate warranty,
then it would be subject to the same limitations as the
specification. If that is the basis of the Court’s decision, we
respectfully suggest that the Court of Appeals could not proper-
ly avoid considering whether Petitioner’s damage limitation
provision is operative.
Petitioner would most assuredly wish to have been heard
on the foregoing legal issues decided by the Court of Appeals.
Not only was Petitioner prejudiced in the resolution of this
dispute, but in other disputes that may arise in the future
regarding its towers. The opinion arguably establishes a
24
warranty on all of Petitioner’s towers that they will stand
forever absent a _ storm of proportions not con-
templated—whatever that means.’ Of more immediate con-
cern, the Court of Appeals’ rejection of the Item 9 warranty
disclaimer and its refusal to apply the damage limitation
provision could seriously impact the Petitioner in the pending
consequential damage action brought by Respondent’s two
television stations. (See fn. 2 at page 3 above)
Ill. The Court Of Appeals Violated Basic Principles Of
Appellate Review In This Case
The judicial performance of the Court of Appeals in this
case makes a mockery of Petitioner’s right to have the trial
record scrutinized by an impartial court of review within the
context of issues framed by the parties. The foregoing illus-
trates beyond any doubt that the decision rendered by the
Court was, for all practical purposes, arrived at in a total
vacuum without the benefit of any written or oral ventilation by
the parties.
A reviewing court is not free to reshape the case presented
to it. Cases must be decided on the basis of the facts developed
at trial and the issues presented to the reviewing court, not on
the basis of theories for which the reviewing court assumes
evidence could have been provided. This concept, central to
our adversary system, was outlined by this Court in Hormel v.
Helvering, 312 U.S. 552 (1941):
13 The Opinion states that the 6 month warranty limitation in
Item 9 is inapplicable to the express warranty found outside the
written contract, because it applies only to warranties contained in the
contract. This reasoning does hot establish that this warranty was still
in effect because the U.C.C. provides that, in the absence of express
language, all warranties—whether in a contract or not—last only 4
years. See Binkley Co. v. Teledyne Mid-America Corp., 333 F.Supp.
1183, aff'd, 460 F.2d 276 (8th Cir. 1972), and the discussion in
Petitioner's Brief, A-195 to 198.
25
“Ordinarily an appellate court does not give consideration
to issues not raised below. For our procedural scheme
contemplates that parties shall come to issue in the trial
forum vested with authority to determine questions of fact.
This is essential in order that parties may have the
opportunity to offer all the evidence they believe relevant
to the issues which the trial tribunal is alone competent to
decide; it is equally essential in order that litigants may not
be surprise on appeal by final decision there of issues upon
which they have had no opportunity to introduce evi-
dence.” (312 U.S. at 556)
The Court of Appeals ignored its own rules in deciding this
case. One of the underlying purposes of Rule 28 of the Federal
Rules of Appellate Procedure is to establish the scope of the
appeal so that the reviewing court will have before it precisely
what errors the Appellant claims and the reasons why the
Appellee believes no errors were committed and why the
verdict should be affirmed. Proper judicial administration—let
alone basic fairness to the parties—dictates that there be a
semblance of order to the appellate process. In Smith v.
American Guild of Variety Artists, 368 F.2d 511 (8th Cir.
1966), cert. denied, 387 U.S. 931 (1967), the Court of Appeals
for the Eighth Circuit acknowledged that the briefs of the
parties should control the scope of the court’s review.
“Questions not raised, briefed nor argued will ordinarily
be given no consideration by an appellate court. Trail-
mobile Co. v. Whirls, 331 U.S. 40, 50, 67 S.Ct. 982, 91
L.Ed. 1328; Pacific States Box & Basket Co. v. White, 296
U.S. 176, 186, 56 S.Ct. 159, 80 L.Ed. 138.
* . *
We believe that this case falls within the general rule to the
effect that issues not raised in the trial court or upon appeal
cannot be considered.” (368 F.2d at 514-15)
The Court of Appeals for the Seventh Circuit expressed the
rule in even stronger terms. In United States v. White, 454 F.2d
435 (7th Cir.), cert. denied, 406 U.S. 962 (1972), the court
said:
26
“Rule 28 of the Federal Rules of Appellate Procedure (28
U.S.C. Rules) has been interpreted to require that all
issues be set out in the appellant’s brief and the respon-
dent’s answer, and failure to comply may constitute a
waiver.” (454 F.2d at 439)
The Court of Appeals apparently forgot about this Rule
because it totally ignored the issues as framed by the parties
and decided the appeal solely on its own perception of the facts
and law.
In the rare instances when consideration of the issues not
briefed to the reviewing court and fully litigated below is
appropriate, the reviewing court should not proceed without the
benefit of arguments from the parties. In Spokane County v.
Air Base Housing, Inc., 304 F.2d 494 (9th Cir. 1962), the court
made this observation:
*.. appellee may support the judgment by any reasoning
from facts disclosed in the record, no matter when the
objection is raised, although the appellant must of course
have an opportunity to answer.” (304 F.2d at 497)
When, as here, a reviewing court develops its own legal
theory for a case, and proceeds to base its decision upon it, the
parties are deprived of an opportunity to demonstrate to the
court the flaws of its reasoning. Errors of fact or law are
invariably made to the prejudice of at least one party and to the
detriment of our entire judicial system.
IV. Petitioner Was Denied Its Right To A Jury Trial By The
Disposition Of This Case In The Court Of Appeals
s
One of the dangers in allowing appellate courts to reshape
the issues is that in doing so the courts will proceed to
determine the facts necessary to support those theories and
thereby usurp the function of the trier of facts. This Court has
cautioned against the exercise of such power. In Securities
27
Exchange Comm’n. v. Chenery Corp., 318 U.S. 80 (1943), Mr.
Justice Frankfurter said:
“But it is also familiar appellate procedure that where the
correctness of the lower court’s decision depends upon a
determination of fact which only a jury could make but
which has not been made, the appellate court cannot take
the place of the jury.” (318 U.S. at 88)
Litigants, like Petitioner, have a right under the Seventh
Amendment to a determination by a jury of the claim alleged
against it. When a reviewing court bases its decision on facts
not determined at trial, as the Court of Appeals did in this case,
this constitutionally protected right is seriously abridged. As
observed in Securities Investor Protection Corp. v. Morgan,
Kennedy & Co., 533 F.2d 1314 (2nd Cir.), cert. denied, 426
U.S. 936 (1976):
“The Supreme Court has cautioned against the consid-
eration, on review, of issues not reached by the lower court
and not adequately presented in the reviewing tribunal. . . .
Where, as here, there may be a need for findings of fact
before a decision can be rendered, that caution takes on
added dimension. [Citations omitted.] (533 F.2d at
1322)
But the Court of Appeals decided this case by developing its
own “theory” of the case, and by manipulating the facts and
the law to make that theory superficially defensible.
One fact essential to the Court of Appeals’ theory is that
the advertising brochures created a warranty. Whether extra-
contractual statements can rise to the stature of an express
warranty is a question of fact for the jury. That question cannot
be determined by either the trial court on a motion for
summary judgment, or by a reviewing court considering the
question for the first time on appeal. See, e.g., Matlack, Inc. v.
28
Rupp Corporation, 57 F.R.D. 151, 156 (E.D. Pa. 1972), Pacific
Marine Schwabacher, Inc. v. Hydroswift Corp., 525 P.2d 615
(Utah 1974); Sinka v. Northern Commercial Co., 9 U.C.C.
Rep. 1350 (Alas. 1971); Putensen v. Clay Adams, Inc., 91 Cal.
Rptr. 319 (1st Dist. 1970); Alan Wood Steel Co. v. Capital
Equipment Enterprises, Inc., 39 Ill.App.3d 48, 349 N.E.2d 627
(1976).
As stated earlier, the question of whether an extra-
contractual warranty has been created is predicated on the
initial finding that the contract is deficient, either because it is
vague or ambiguous, or because it fails to be a final and
integrated expression of the parties’ intent. Even when that
preliminary determination has been made, that question may
only be taken from the jury when there is “no room for
reasonable doubt” as to the warranty’s existence. In Gillette
Dairy, Inc. v. Hydrotex Industries, Inc., 440 F.2d 969 (8th Cir.
1971), the Court of Appeals held that “the question of whether
the warranties on the sales invoices were affirmations of fact
which became part of the basis of the bargain was properly
submitted to the jury,” because “the evidence was not so
predominant as to the existence of the express warranties to
take this issue from the jury.” (440 F.2d at 974)
Under the circumstances presented here, it is pure fantasy
to suggest that the jury did or even could have made the factual
determinations necessary to support the theory advanced by the
Court of Appeals. The brochures were consulted prior to the
negotiation of the first contract in 1966, but not during the
negotiations for the second contract. Respondent’s only witness
on the subject described the brochures as “propaganda sheets.”
The jury was told by the District Court that the advertising
literature would be “superseded” by the contract. Finally, there
was no instruction suggesting that the jury could consider the
advertising statements as warranties without regard to the
warranty disclaimer contained in Item 9 of the contract or
otherwise.
29
The Court of Appeals acted beyond the scope of its proper
role as a reviewing court when it—not the jury—found that the
advertising brochures were part of the bargain; that they were
relied upon; that certain language in the brochures constituted
an express warranty, which was not nullified by Item 9; that ice
and wind had caused the tower to collapse and that this was a
breach of warranty. Such action constitutes a clear denial of
Petitioner’s right to a determination of its case by a jury as
guaranteed by the Seventh Amendment and this Court should
not condone this manifest injustice.
V. The Court of Appeals’ Decision Leaves Commercial Trans-
actions In A State of Uncertainty
The Uniform Commercial Code, now adopted in almost all
the states, was intended to establish uniformity and certainty
for increasingly compiex business transactions which now pre-
dominate our economy. To accomplish this goal, the Code
reinforces the sanctity of contract as the desirable vehicle with
which to formulate the multitude of responsibilities and risks
present in sophisticated business dealings. Section 1-102 of the
Code states as follows:
““(2) Underlying purposes and policies of this Act are
(a) to simplify, clarify and modernize the law governing
commercial transactions;
(b) to permit the continued expansion of commercial
practices through custom, usage and agreement of the
. parties;
(c) to make uniform the law among the various jurisdic-
tions.”
The decision by the Court of Appeals reflects a total
disregard for what was the actual as opposed to the judicially
presumed agreement between the parties. The rhetoric of the
Opinion reveals an alarming lack of judicial sensitivity for what
transpires in the real world of business. For example, when the
ad
30
Court theorizes that the brochures exchanged by the parties
several years before the sale in question were part of the
“fabric” of their agreement and must be read in “tandem” with
and considered part of the “basis of the bargain” between the
parties, it is fantasizing in order to justify a judicial reformation
of a complete and integrated contract in which the parties
allocated their respective risks at the time the transaction was
consummated. The Court is simply deluding itself, to justify a
result, when it suggests that either Petitioner or Respondent
“intended”—or for that matter even considered for a
moment—that the brochures were part of their bargain.
We cannot resist calling this Court’s attention to an
expression of policy made by the same panel that decided this
case. In Geldermann and Co. v. Lane Processing, Inc., 527 F.2d
571 (8th Cir. 1975) Chief Judge Gibson joined by Judges Lay
and Stephenson, said:
“It is not the province oi the courts to scrutinize all
contracts with a paternalistic attitude and summarily con-
clude that they are partially or totally unenforceable
merely because an aggrieved party believes that the con-
tract has subsequently proved to be unfair or less beneficial
than anticipated.” (527 F.2d at 576)
It is difficult to comprehend what would cause three judges
to change so dramatically their legal philosophy. The Chief
Judge obviously had second thoughts and ultimately perceived
the case, at least partially, in its proper context and recognized
the inherent danger of after the fact judicial intrusion into
delicately negotiated commercial transactions. This was not a
consumer dispute or one between a corporate giant and its
intimidated customer. Rather—as the Chief Judge correctly
observed—this is a controversy between:
“two substantial commercial corporate entities, ex-
perienced in the technical world of broadcasting. They
had dealt with one another before and were aware of the
risk that broadcast towers entail and that towers sometimes
fall.”
31
One can only speculate about the impact of this deci-
sion—and the philosophy underlying it—on the business com-
munity. What more could a seller do to disclaim extra-
contractual warranties than what Petitioner did here? Large
bold face type appearing immediately above the signature line
of the purchaser seems more than an adequate expression of the
parties intent.
In the same vein, how does a seller of expensive and
complex equipment in our inflationary economy bargain for a
limit on its financial exposure? Again, the Petitioner bargained
for what was, at the time of the transaction, a mutual wnder-
standing regarding the allocation of this risk. It now finds that
the judiciary does not agree.
Terms governing warranties and the scope of financial loss
unquestionably have a direct bearing on the price of the goods
sold. In fact, the competitor of Petitioner who installed
Respondent’s third tower testified that he would not have sold
the tower to Respondent without such terms and conditions.
(A-46) If sellers cannot effectively negotiate terms and condi-
tions with a sense of certainty that the courts will enforce them,
they will have no recourse but to reflect that risk in the price or
to refrain entirely from the development of complex equipment.
Respondent chose to pay a price for the tower which it
knew was predicated on the assumption of certain risks.
Having paid that price it should not be allowed to reap the
benefits of an entirely rewritten agreement. To allow the
judiciary to intrude itself into such commercial transactions in
the manner and under the circumstances portrayed herein
provokes a policy question of the highest magnitude affecting
the very stability of our economy. It is a question, we
respectfully suggest, that is deserving of this Court’s attention.
32
VI. This Court Should Exercise Its Responsibility To Super-
vise The Administration Of Justice In The Federal
Courts
Supervision of the Federal courts and the safeguarding of
the integrity of the appellate process is ultimately entrusted to
this tribunal. In fulfillment of this responsibility, this Court in
the past has exercised its certiorari jurisdiction to correct
manifest injustices arising out of substantial departures from
ordinary appellate practice. In Lutcher & Moore Lumber Co. v.
Knight, 217 U.S. 257 (1910), this Court exercised its certiorari
jurisdiction and remanded the case to the appellate court with
instructions to consider the case presented to it—not the case as
the court had preferred to view it. There, the trial court had
refused to admit certain evidence. The Appellate Court
affirmed this ruling, but on grounds obviously contrary to the
trial court’s understanding of the case. This Court stated that:
“in a case like this we think the judgment of the Circuit
Court of Appeals must be reversed and the case be
remanded to that court to the end that the duty to hear and
decide it may be performed.” (217 U.S. at 268)
Again, in Fountain v. Filson, 336 U.S. 681 (1949), this
Court took action when a court of appeals entered a judgment
based on theories not litigated at trial and for which the facts
had not been fully developed. There, the court of appeals
reversed summary judgment for the defendant, but then en-
tered summary judgment for the plaintiff in a suit over title to
realty. This Court reversed and remanded saying:
“TH]ere the order was made on appeal on a new issue as
to which the opposite party had no opportunity to present
a defense before the trial court. ... There was no occasion
in the trial court for [the defendant] to dispute facts
material [to the theory of the court of appeals], since the
only claim considered by that court was the claim [on
which the judgment below had been based]... [I]t was
33
error ... to deprive [defendant] of an opportunity to
dispute facts material to that claim. . .” (336 U.S. at 683)
We respectfully suggest that the same factors which
motivated this Court to reverse and remand in Lutcher and
Fountain are present and equally compelling here. The Court
of Appeals assumed the role of advocate, judge and jury in this
case. To suggest, under those circumstances, that Petitioner
was afforded its minimal rights as a Jitigant is a rationalization
without reason and a delusion with potentially dangerous
consequences. When a court of appeals so radically departs
from accepted appellate practice and impinges so acutely upon
a party’s rights, this Court should exercise its power of super-
vision to remind the Court of Appeals that its prerogatives are
not unlimited and to re-establish the faith which litigants should
have in the integrity of the adversary process.
CONCLUSION
The actions of the Court of Appeals in this case pose a
serious threat to the proper administration of justice in the
federal courts. Obviously, Petitioner is motivated in pursuing
the matter this far by the financial impact which the decision
has on its business both now and in the future. It is equally
disturbed, however, as part of the business community, by the
philosophy underlying the decision which suggests that a court
may intrude itself into a commercial transaction and virtually
rewrite the parties’ agreement in order to justify a given result.
The business community of this country should not be subjected
to such judicial excess or, if it is to be, then it should come
expressly from this Court. Accordingly, Petitioner respectfully
34
urges that a Writ of Certiorari be granted to review the decision
rendered by the Court of Appeals for the Eighth Circuit.
Dated: March 8, 1979
HOPKINS, SUTTER, MULROY, DAVIS
& CROMARTIE
THOMAS R. MULROY
ROBERT W. PATTERSON
One First National Plaza
Suite 5200
Chicago, Illinois 60603
FAEGRE & BENSON
G. ALAN CUNNINGHAM
DavipD P. PEARSON
1300 Northwestern Bank Building
Minneapolis, Minnesota 55402
May, JOHNSON, DOYLE, BECKER &
FISHER, P.C.
HAROLD C. DOYLE
412 West Ninth Street
Sioux Falls, South Dakota 57104
Attorneys for Petitioner
Dresser Industries, Inc.
APPENDIX A
A-1
C sited States Court of Ajf,-eals
FOR THE EIGHTH CIRCUIT
No. 77-1750
Community Television *
mServices, Inc., a Corporation,*
*
Appellee, ns
* ;
v. bed Appeal from the United States
District Court for the
@Dresser Industries, Inc., * District of South Dakota.
a Corporation, *
*
*
Appellant.
Submitted: February 17, 1978
Filed: September 13, 1978
Before GIBSON, Chief Judge, LAY and STEPHENSON, Circuit Judges.
LAY, Circuit Judge.
Dresser Industries, Inc. appeals from a judgment of the
Hdistrict court in the sum of $1,274,631.60,1 awarded to
‘Community Television Services, Inc. for damages arising from
the collapse of a 2,000 foot television and radio broad-
casting tower on January 1l, 1975. Dresser designed, manu-
factured, and erected the tower for Community. The jury,
answering special interrogatories, rejected Community's
alternative claims of negligence and strict liability, bet
line jury actually assessed damages in the amount of
$1,385,001.61. The trial court conditioned denial of Dresser's
motion for judgment notwithstanding the verdict or in the
alternative for new trial on remittitur of the damage award
to the amount of the judgment. Community does not challenge
the remittitur on appeal. See Community Television Serv. v.
Dresser Ind., Inc., 435 F. Supp. Z1¢-(D- 8.D. 1377).
‘A-2
found for Community under breach of express warranty. On
appeal, Dresser argues that: (1) the verdict for Community
is not supported by the evidence, and (2) the trial court
erred in failing to enforce the limitation of liability pro-
visions of the sale contract. Upon review of the entire
record, we affirm the judgment for Community.
Background.
Community Television Services, Inc. is a corporate
entity formed in about 1965 by two South Dakota based
broadcasting stations, KELO and KSOO, for construction near
Rowena, South Dakota, of a 2,000 foot tower to broadcast
television signals for both stations. Contract negotiations
were entered into with Dresser, who fabricated and erected
the tower. The tower became operational in August of 1967.
On June 22, 1968, the tower collapsed when an airplane
clipped and severed a supporting cable. Dresser erected a
replacement tower, which became operational in May of 1969.
Included in the terms and conditions of the contract between
Dresser and Community for the replacement tower was the
warranty and limitation of liability provision at issue in
this appeal. The only significant variance between the two
contracts was an increase in the tower's price in 1968 to
$385,000.
A relatively thin metal structure, the tower was
comprised of a mast and three interconnected legs held in
balance by guy cables set to an appropriate tension. An
*
zat the close of all the evidence, the trial court
granted Dresser's motion for directed verdict on the implied
warranty count, holding that disclaimer provisions in the
sale contract complied with the South Dakota Commercial Code —
and were effective against implied warranties.
A-3
antenna was placed on top of the tower for broadcasting
television and FM radio signals. Community had the tower
recularly inspected and properly maintained. The only
significant maintenance operation was retensioning of certain
guy cables by an independent contractor retained by Community.
On January 10 and 11, 1975, a severe winter blizzard
occurred in the area where the tower was located. During
the early morning hours of January 11, as the storm reached
its height with wind speeds near the top of the tower of up
to 80 miles per hour, the tower collapsed. Expert witnesses
called by both sides differed in their opinions as to the
cause of the collapse. Community's experts testified that
they had eliminated metallurgical or mechanical failure or
abnormal wind loading as the cause of collapse. They
theorized that the cause was high winds setting up a phenom-
enon known as mechanical resonance. They concluded that
because of the resonance, the tower members "were inadequate
to support the load that they sustained.” On the other
hand, Dresser's experts testified that a combination of ice,
snow and wind subjected the tower to a total force greater
than the ultimate capacity of its structural elements. They
theorized that a substantial accumulation of rime ice? on
the upper fourth of the tower enlarged the tower surface
area exposed to the wind, thereby subjecting the tower
members to a greater load than their designed wind loading
capacity. Community attempted to refute Dresser's rime ice
theory by calling several witnesses who testified that they
did not see any such ice on or near the area where the tower
3 Rime ice is formed when water droplets, existing in
clouds at temperatures below freezing, instantaneously
crystallize and freeze as they collide with a structure. In
contrast to the more dense and clear glaze ice, rime ice is
virtually indistinguishable from snow.
A-4
collapsed. In turn, Dresser countered Community's theory
through expert testimony that relatively constant winds were
necessary for resonance to begin, and the winds were gusty
and varied in speed and direction at the time of collapse.
Furthermore, Dresser argued that the warranty did not guar-
antee against mechanical resonance, and experts testified
that its prevention was beyond the current state of the art.
Creation and Scope of the Warranty.
The specifications incorporated in the sale contract
included a specified "Design Wind Load," which set forth the
tower's capacity to withstand wind velocity as measured in
pounds of pressure per square foot against the flat surfaces
of its members. The specification reads: "The tower shall
be designed to resist a uniform wind load per drawing T-5172,
sheet S-1, 60 psf on flats." The trial court instructed the
jury that this specification constituted an express warranty
that the structure would withstand wind exerting pressure of
60 pounds per square foot on the flat surfaces of the
tower. Dresser's advertising materials and the testimony
4u.¢.¢. § 2-313(a), (b), which was enacted by South
Dakota without change, S.D. Compiled Laws Ann. § 57=-4-25,
26 & 27 provides:
Sec. 2-313. Express Warranties by Affirma-
tion, Promise, Description, Sample.
(1) Express warranties by the seller are
created as follows:
(a) Any affirmation of fact or promise made
by the seller to the buyer which relates to the
goods and becomes part of the basis of the bargain
Creates an express warranty that the goods shall
conform to the affirmation or promise.
(b) Any description of the goods which is
A-5
of experts at trial revealed that the wind velocity necessary
to create 60 pounds of pressure on the flat surfaces of the
tower would be approximately 120 miles per hour. The evi-
dence showed that the wind loading specifications referred,
at least in engineering parlance, to "a force caused by the
wind that is introduced parallel to the ground. . . [which]
would be tending to blow the structure over.">
Dresser argues that the trial court erred in failing to
direct a verdict on the express warrgnty Claim or grant it
4 (continued)
made part of the basis of the bargain creates an
express warranty that the goods shall conform to
the description.
Dresser concedes on appeal that the specification created an
express warranty.
She mathematical formula to compute the wind velocity
necessary to exert 60 pounds of pressure per square foot is
not contested and was described by one of Community's
experts as follows:
A. The density of air at sea level, using a
standard atmosphere, is computed to be .002378
slugs per cubic foot, and if we use 60 pounds per
square foot, that would be equal to then one-half
this .002378 times the square of the air velocity
in feet per second, so if we compute it back the
other way, it would be -- I read that that would
be about 224.6 feet per second in that case for a
60 psf load, and if we converted that to miles per
hour, that would be about 153, I believe.
Q. All right. That's 153 miles an hour?
A. Yes.
This was described as a conservative figure, the highest
wind speed that could exert 60 pounds of pressure. Lower
speeds, such as the 120 miles per hour speed given in Dresser's
advertising catalog, apparently result from use of a differ-
ent figure for density, .003 or .004, in the equation.
A-6
judgment notwithstanding the verdict, because expert testi-
mony that the tower met the design specification was un-
contradicted. Community's own experts stated unequivocally
that in their opinion the tower conformed in a mathematical
or analytical sense to the 60 pounds per square foot wind
loading specification. If the warranty may be restricted to
the technical specification set forth in the written con-
tract, we would find Dresser's argument convincing. How-
ever, we agree with Community that the warranty was ampli-
fied, in advertising materials Dresser gave to Community
prior to purchase of the first tower, to promise more than
mere compliance with technical measurements. In an ad-
vertising catalog, Dresser made the following supplementary
affirmation:
Wind force creates the most critical loads to
which a tower is normally subjected. When. ice
forms on tower members thereby increasing the
surface area resisting the passage of wind, the
load is increased.
Properly designed towers will safely with-
stand the maximum wind velocities and ice loads to
which they are likely to be subjected. Dresser-
Ideco can make wind and ice load recommendations
pe yor for your area based on U. S. Weather Bureau
ata.
Although we agree with Dresser that a seller cannot be
held to be the insurer of its product, Dresser nevertheless
Son another page, in a description of the towers, the
following language appears: ;
In the winter, loaded with ice and hammered re-
peatedly with gale force winds, these towers
absorb some of the roughest punishment that towers
take anywhere in the country... yet continue to
give dependable, uninterrupted service.
A-7
provided the catalog to Community to induce purchase of its
product, and in the absence of clear affirmative proof to
the contrary, the above affirmation must be considered part
of the “basis of the bargain.” S. D. Compiled Laws Ann.
§ 57-4-26; Comment 3 to U.C.C. § 2-313; Drier v. Perfection,
Inc., ___ &.D. ___, 259 N.W.2d 496, 502 (1977); Hawkins
Construction Co. v. Matthews Co., 190 Neb. 546, 565, 209
N.W.2d 643, 654 (1973). Standing alone, the statements
provide a warranty that Dresser's tower would be properly
designed so as to safely withstand the maximum wind veloci-
ties and ice loads to which it would likely be subjected.
Dresser did not indicate that this broad affirmation was
superseded or cancelled by the technical specification in
the contract. Cf. Braniff Airways, Inc. v. Curtiss-Wright
Corp., 411 F.2d 451, 455 (2d Cir.), cert. denied, 396 U.S.
959 (1969), 400 U.S. 829 (1970). When the affirmation is
read in tandem with the contract, as part of the "fabric" of
the agreement of the parties, see Comment 3 to U.C.C. § 2-
313, it enlarges the warranty created by the technical wind
loading specification, giving evidence of its full intent
and scope. See Collins v. Uniroyal, Inc., 126 N.J.Super.
401, 315 A.2d 30 (1973), aff'd 64 N.J. 260, 315 A.2d 16
(1974); Fargo Mach. & Tool Co. v. Kearney & Trecker Corp.,
428 F. Supp. 364, 371 (E.D. Mich. 1977).
We find that the statements in the advertising catalog,
which supplement the wind loading specification, could
reasonably have been found by the jury to he an affirmation
of fact or a promise concerning the actual durability or
performance of the tower during the wind and ice storms to
which it was likely to be subjected.
Proof of Breach.
Although Dresser's defense was that the tower collapsed
A-8
by reason of excessive loading due to ice on the tower
members, no disclaimer or limitation of the warranty that a
properly designed tower would safely withstand the maximum
wind and ice loads to which it was likely to be subjected
appeared in the advertising materials or the contract.
Under the integrated warranty given, a purchaser could
reasonably assume that the tower, if properly designed for
its location, would withstand maximum wind speeds to which
it was likely to be subjected, even if ice accumulated on
the tower members. While the blizzard was a severe one, the
evidence does not support the conclusion that the wind
alone, or the combination of wind and ice which Dresser
claimed caused the collapse, was not within the range of
storm conditions to be reasonably contemplated for the
tower's location. ’ Breach of a warranty created by state-
ments describing the specific capacity of goods is proved
when the product is shown by direct or circumstantial evi-
dence to have failed to perform reasonably and safely the
function for which it was intended by the manufacturer.
Drier v. Perfection, Inc., supra, 259 N.W.2d at 504; see
also Swenson v. Chevron Chemical Co., ___ S-D- ___. 234
N.W.2d 38, 42-43 (1975); S-C Industries v. American Hydro~
ponics System, Inc., 468 F.2d 852, 855 (Sth Cir. 1972). In
view of the affirmation made in the catalog, there was
sufficient evidence for the jury to reasonably find that the
tower was not as durable as it was warranted to be.®
7whe trial judge surthised that the jury did not believe
that ice and snow were a contributing factor in the collapse.
The findings of the jury, however, are inherent in its
verdict, and a court's inquiry must simply be whether there
exists substantial evidence to sustain the verdict.
8 eroof of a specific defect was not essential to
Community's recovery on the breach of express warranty
count. Drier v. Perfection, Inc., Supra 259 N.W.2d at 504.
A-9
Viewing the evidence in the light most favorable to
Community, and assuming all conflicts in the evidence were
resolved by the jury in Community's favor, Griggs v. Firestone
Tire & Rubber Co., 513 F.2d 851, 857 (8th Cir.), cert.
denied, 423 U.S. 865 (1975); Heiser v. Rodway, _ $.D. ’
247 N.W.2d 65, 68-69 (1976), we conclude that there is Sit
sufficient evidence to support the jury's finding of breach
of express warranty.
Contractual Limitation of Liability.
On the back of each page of the two-page sale contract
is a printed form entitled “Terms and Conditions of Sale,"
which includes a warranty and limitation of liability
clause, hereafter referred to as item nine. Dresser con-
tends that this clause precludes it from incurring any
liability for breach, or alternatively, limits its liability
to the purchase price of the tower -- $385,000 less de-
preciation.?
In item nine, Dresser warrants that its product will be
free of defects in material and workmanship and will meet
applicable specifications. The warranty is limited to those
defects for which the buyer submits a written claim immedi-
ately upon discovery, and in any event, within six months
from final acceptance. The buyer's remedies for breach of
the warranty are limited to repair, replacement, or
9
Community actually recovered $950,295.24 for replace-
ment cost less depreciation of the tower and $324 9.
replacement cost less depreciation of the ete npint + Daag
jacent buildings, for a total judgment of $1,274,631.60.
The standard measure of damages, difference in value as
accepted and as warranted, S.D. Compiled Laws Ann. § 57-8-
36, was not used. Dresser does no
calculating damages. not challenge the manner of
A-10
refund of an equitable portion of the purchase price of any
product Dresser determines to be defective or finds failed
to meet applicable specifications. Dresser has the sole
option of deciding which remedy it will provide. Item nine
states that this limited warranty is in lieu of all other
warranties, and the purchase price is based on the limita-
tion of Dresser's liability and the buyer's waiver of any
Claim for damages.*°
10 stem 9 provides in part:
9. WARRANTY AND LIMITATION OF LIABILITY:
Seller warrants, for a period of six months, that
products of its own manufacture and any construc-~
tion performed hereunder by the Seller shall meet
the applicable specifications incorporated in this
contract, and be free from defects in material and
workmanship. Provided Buyer submits a claim in
writing to Seller immediately upon its discovery
and in any event within six (6) months after
shipment if no construction is performed hereunder
or within six (6) months after final acceptance by
Buyer if construction is performed (or within six
months from notification of completion by Seller
if Buyer wrongfully refuses or delays final
acceptance), Seller shall, at Seller's sole
option, repair, replace or refund an equitable
portion of the purchase price of any product or
work which Seller determines to have been de-
+ at ays or failed to meet applicable specifica-
tions. ...
Except for obligations expressly and speci-
fically assumed under the other clauses of these
Sales Terms, the foregoing is Seller's only
warranty, obligation, and liability, under tort
(including alleged negligence) contract or other-
wise for or in connection with its products, work
and services or use thereof. THE FOREGOING IS
EXPRESSLY IN LIEU OF OTHER WARRANTIES WHATSO-
EVER, EXPRESS, IMPLIED AND STATUTORY, INCLUDING
WITHOUT LIMITATION, THE IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS. IT IS SPECIFICALLY
UNDERSTOOD SELLER'S PRICE IS BASED UPON THE
FOREGOING LIMITATION OF LIABILITY AND BUYER'S
WAIVER OF ANY AND ALL CLAIMS FOR DAMAGES.
A-I1
The trial court refused to enforce the limitations of
Dresser's liability set forth in item nine. Judge Nichol
specifically held that the six month period was a “manifestly
unreasonable" time for discovery and notification of breach
under Section 57-1-14 of the South Dakota Commercial Code,
in light of the tower's twenty-five year average useful
life. Dresser argues that under the South Dakota Commercial
Code, a seller's warranty does not extend to future perform-
ance absent explicit agreement to the contrary. See generally,
Binkley Co. v. Teledyne Mid-America Corp., 460 F.2d 276 (8th
Cir. 1972). Dresser also contends that the six month dis-
covery period is a reasonable commercial agreement on when
to transfer risk to the buyer, based on inspection and
maintenance obligations. In the alternative, if six months
is an unreasonably short period of time to transfer risk,
Dresser argues that five years -- the time lapse from
erection of the tower to notice of collapse -- is an un-
reasonably long period, and the trial court should have set
a reasonable time.?? In addition, Dresser urges that the
limitation of remedy provision in item nine provided the
buyer with a reasonable and adequate remedy, which contrary
to the trial court's finding, did not fail of its “essential
purpose.” South Dakota Compiled Laws Ann. § 57-8-50; U.C.C.
section §7-1-14, which is identical to U.C.C. § l-
204(1), provides in part:
Whenever this title requires any action to be
taken within a reasonable time, any time which is
not manifestly unreasonable may be fixed by agree-
ment. What is a reasonable time for taking any
action depends on the nature, purpose and cir-
cumstances of such action.
12W6 note the defense of the statute of limitations was
not raised in the pleadings and is not argued on appeal as
such.
A-12
§ 2-719(2). Dresser contends that the trial court's holding,
particularly as it affects the limited remedy agreed upon by
Community and Dresser, will create serious problems in
enforcement of commercial agreements between parties with
relatively equal bargaining power.
We conclude that it is not necessary to review the trial
court's holding that the contractual clauses limiting liabil-
ity and remedy were invalid. We find that the limitation
clauses apply only to the limited and purportedly exclusive
warranty set forth in item nine, and not to the broader
warranty created by the affirmation made in Dresser's ad-
vertising materials.
The six month notification period relates to the war-
ranty that Dresser's products and construction "shall meet
the applicable specifications incorporated in this contract,
and be free from defects in material and workmanship.”
Similarly, the limitation of remedy provision applies to "any
product or work which seller determines to have been de-
fective or failed to meet applicable specifications.” In
attempting to assert the clauses within item nine as a de-
fense, Dresser overlooks the fact that the jury found Dresser
‘was not liable on the negligence and strict liability counts.
Thus, the jury did not find that Dresser's product or con-
struction was defective in materials or workmanship or
failed to meet the applicable specifications. See McIntyre
v- Everest & Jennings, Inc., 575 F.2d 155, 159 (8th Cir.
1978). Indeed, if the advertising materials were omitted
from the bargain, we would be constrained to agree with
Dresser that the undisputed evidence showed that the tech-
nical 60 psf wind loading design specification was met.
However, Dresser's affirmation in its advertising
A-13
catalog went ~yond the limited warranty un the written
contract and created a promise concerning the tower's
durability much broader than mere compliance with the 60 psf
specification. Dresser promised Community that a nonde-
fective, properly designed tower would “safely withstand the
maximum wind velocity and ice storms to which [it is] likely
to be subjected." This broad warranty of performance
clearly falls outside the limited warranty provided in item
nine. Cf. S-C Industries v. American Hydroponics System,
Inc., supra, 468 F.2d at 855; Fargo Mach. & Tool Co. v.
Kearney & Trecker Corp., supra, 428 F. Supp. at 371. Thus,
the jury could reasonably have found that the tower was not
defective in materials or workmanship and met the technical
specifications, but did not live up to its promised per-
formance capacity. :
Item nine does not limit the duration of the express
warranty of durability or performance evident from the
overall agreement of the parties as evidenced by the cata-
log, nor limit remedy for its breach. S-C Industries v.
American Hydroponics System, Inc., supra, 468.F.2d at 855.
Nor does the general disclaimer of all warranties other than
the limited one set forth in item nine restrict Community's
right to recover. Under Section 57-4-34 of the South Dakota
Commercial Code, language which limits or negates an
1353p. Compiled Laws Ann. § 57-4-34, U.C.C. § 2-316(1),
provides:
Construction of words or conduct tending to
negate or limit express warranty inoperative.
Words or conduct relevant to the creation of an
express warranty and words or conduct tending to
negate or limit warranty shall be construed
wherever reasonable as consistent with each other;
but subject to the provisions of chapter 57-3 on
parol or extrinsic evidence (§ 57-3-4) negation or
limitation is inoperative to the extent that such
construction is unreasonable.
A-14
express warranty is inoperative when it cannot reasonably be
construed consistently with language which creates the
warranty. If the limited warranty were exclusive, it would
limit the wind loading specification to its technical con-
tent and negate the express warranty of durability or per-
formance. In S-C Industries v. American Hydroponics
System, Inc., supra, a seller argued that a printed special
warranty against defects similar to the one in question
here, which stated that it superseded all other warranties,
precluded recovery for breach of a specific express warranty
created by technical loading specifications. The court
stated:
The general language of that special warranty does
not mention the written express warranty which
{seller) had given [buyer]. The only reasonable
interpretation that can be placed on this special
warranty in light of the prior specific warranty,
is that it applies only to any defects which might
be found to exist in the various components and
other materials which [seller] sold. Thus, while
the special warranty form provided the exclusive
remedy should any component be defective, it did
not supersede the specific express warranty which
extended to the design capability of nondefective
structural members intended to perform as an
integral part of the greenhouse building.
468 F.2d at 855.
We conclude that there is sufficient evidence to
support the finding that Dresser breached its warranty that
the tower, when free from defects in materials and workmanship
and properly designed for its location, would withstand the
wind and ice loads to which it would normally be subjected.
The terms and conditions of sale in the written contract do
not apply to the warranty, and therefore cannot limit
Dresser's liability for its breach.
Accordingly, the judgment is affirmed.
A true copy.
Attest:
CLERK, U. S. COURT OF APPEALS, EIGHTH CIRCUIT.
APPENDIX B
A-16
United States Court of Appeals.
FOR THE EIGHTH CIRCUIT
fe. (tion Rear
No. 77-1750 a las “ AY
Y noy 27 1973
; Pr ale bel
Community Television Services, * m8 s TTERSON
iInc., & Cexvorstion, ROBERT W. PA
Appellee, * Appeal from the United
* States District Court
Vv. * for the District of
* South Dakota
Dresser Industries, Inc., *
a corporation,
_
Appellant.
Filed: November 24, 1978
ORDER DENYING REHEARING EN BANC
The petition for rehearing en banc is denied. Judges
Lay, Heaney, Stephenson, Henley, and McMillian vote to deny
the petition. Judges Gibson, Bright, and Ross vote to grant
the petition.
GIBSON, Chief Judge. (Judge Bright and Judge Ross join in the
following dissent.)
I respectfully dissent from the denial of a rehearing
en banc. Upon greater reflection it appears that the panel
opinion contains two areas of difficulty. First, it finds
liability based on supposed warranties contained in a catalog
@istributed years before the parties contracted for construc-
tion of this tower. Second, it refuses to enforce contractual
A-17
clauses limiting Dresser's liability to the repair or replace-
ment of the tower, or refund of the purchase price. °
In my view, the evidence was sufficient to uphold the jury
verdict of liability based on breach of the express warranty
contained in the written contract. Since I believe the evidence
supported a finding of liability on at least one theory, it
would be counterproductive to rehear the question of liability.
Failure to enforce the clause limiting Dresser's liability,
however, presents a serious question of injustice. The parties
are two substantial commercial corporate entities, experienced
in the technical world of broadcasting. They had dealt with
one another before and were aware of the risk that broadcast
towers entail and that towers sometimes fall. They also
knew that construction costs of towers had been rising from
year to year. Despite these facts, the parties entered into
an agreement expressly providing that in the event of breach
of warranty Dresser would, at Dresser's "sole option, repair,
replace or refund an equitable portion of the purchase price
of any product or work which seller determines to have been
defective or failed to meet applicable specifications * * * ,"
I cannot imagine any clearer agreement of the parties
to limit the extent of liability. Nor can I say that the
remedy fails its "essential purpose" or is "unconscionable. "*
To suppose that the limitation on remedy contained in the
contract was intended to apply only to the warranties contained
in the written agreement but not to those in the catalog, is
lone requirement that the buyer give notice of any defect
within six months of completion stands on a different footing.
If applied here it would result in the warranties and remedies
failing their essential purposes and would be unconscionable.
A-18
to build a fantasy on top of a fiction.” Under U.C.C. §
2-719(1), S.D. Compiled Laws § 57-8-49, the parties are
entitled to limit remedies. To further certainty in com-
mercial relationships and justice between these parties, we
ought to enforce the contract as written.
A true copy.
Attest:
CLERK, U. S. COURT OF APPEALS, EIGHTH CIRCUIT.
2rhe panel opinion finds the catalog representations to
be part of the “bargain.” However, it refuses to acknowledge
that in that case they become the "specifications" for the work.
They are being applied by this cougt. In short, the catalog
representations became the “applicable specifications" referred
to in the written contract. Contra slip op. at 12.
APPENDIX C
A-19
Memorandum Decision
Civ 75-4056
Messrs. Ellsworth E. Evans and Deming Smith, of Daven-
port, Evans, Hurwitz & Smith, of Sioux Falls, South
Dakota, appeared in behalf of the plaintiff;
and
Mr. Harold C. Doyle, of May, Johnson & Burke, of Sioux
Falls, South Dakota, and Mr. G. Alan Cunningham,
of Faegre & Benson, of Minneapolis, Minnesota, ap-
peared in behalf of the defendant.
This is an action by a purchaser against a seller arising
out of the collapse of a television and radio broadcasting
tower. The case was tried to a jury, commencing on No-
vember 29, 1976, with the verdict rendered on December
17, 1976. The jury found in favor of plaintiff, and as-
sessed damages in the amount of $1,385,001.61. This
matter is now before the court on post-trial motions filed
by defendant.
Defendant has submitted two motions, in the alterna-
A-20
tive. Initially, this court is requested to vacate the judg-
ment for plaintiff and enter a judgment notwithstanding
the verdict, finding for defendant. Alternatively, defendant
requests a new trial on Count III of the complaint.
This case arose after plaintiff's 2000 foot’ television
and radio broadcasting tower collapsed during a blizzard,
in the early hours of January 11, 1975. The tower, along
with the antennas and cables attached te it, was totally
destroyed. In addition, one building beneath the tower was
demolished, and another was partially damaged...
The tower which collapsed had been purchased by
plaintiff from defendant, which designed, manufactured,
and erected it.? The specifications incorporated in the con-
tract for sale disclosed that “The tower shall be designed to
resist a uniform wind load per drawing T-5172, sheet
S-1, 60 psf on flats.” As the testimony and evidence pre-
sented at trial demonstrated, this specification contem-
plated the construction of a guyed tower which would
withstand a force of 60 pounds per square foot on flat
surfaces. Defendant’s advertising brochure stated that the
wind velocity necessary to create this amount of pressure
would be approximately 120 miles per hour, absent any
other factors.’ This court found as a matter of law that
this specification created an express warranty.
1The overall height of the tower and its appendages was 1,984 feet, but
it was referred to throughout the trial as a “2000 foot” tower.
?The erection of the tower was performed by Allied Construction, which
was retained by defendant for that purpose.
3The evidence and testimony in this case demonstrated that the pres-
ence of ice and snow, separately and in combination, on the tower
would increase the size of the tower members exposed to the wind,
and would therefore decrease the velocity of wind necessary to create
the 60 pounds per square foot pressure. This fact was argued exten-
sively to the jury by defendant. The jury apparently found that the
presence of ice and snow on the tower at the time of collapse, if
a had been insufficient in amount to be a causal factor in the
collapse.
A-21
Plaintiff proceeded on various theories of liability. The
jury was ultimately instructed on negligence, strict liability
in tort, and breach of express warranty. The jury’s an-
swers to the special interrogatories submitted to them by
the court show that they based defendant's liability on a
breach of the express warranty.
Defendant’s first attack on the verdict addresses issues
determined by this court as a matter of law during the
course of the trial. Specifically, defendant takes issue with
this court’s findings that the six month warranty limitation
was manifestly unreasonable, and that the remedies pro-
vided by the contract failed of their essential purpose.
This court has carefully reconsidered these issues in light
of the record and the briefs submitted by the parties, and
is not persuaded to change its prior rulings.
Defendant’s second argument focuses on the answers
by the jury to the special interrogatories submitted by the
court. Defendant alleges that the jury’s answers are in
irreconcilable conflict, and that for this reason the verdict
should be ‘set aside and a new trial granted. The court
finds that this argument is not well founded.
Defendant contends that by finding no liability on the
basis of negligence, and no liability on the basis of strict
liability in tort, the jury was logically prevented from
finding liability based on a breach of the express warranty.
Defendant asserts that a findings of a “defect” is inherently
involved under each of these theories, and that the jury
could not find the tower “defective” for one theory and
not for the others. Defendant argues that this alleged in-
consistency necessitates a new trial.
This court has a duty to attempt to reconcile the special
interrogatories with the general verdict, if possible, to
A-22
avoid invading the province of the jury. Wright & Miller,
Federal Practice and Procedure, section 2513 (1971); cf.
Gallick v. Baltimore & Ohio R. Co., 372 U.S. 108, 119
(1963). The court has carefully reexamined the record in
this case, and concludes that the answers to the special
interrogatories are not inconsistent with themselves or
with the general verdict upon the facts in the record.
While it may be true that each of the theories consid-
ered by the jury contemplates the finding of a “defect” in
some sense, defendant’s argument glosses over the other
distinctive elements which each theory contains. Negli-
gence requires a finding of a failure to adhere to a stan-
dard of care required by law. Strict liability in tort, as ex-
plained by section 402A of the Restatement of the Law,
Torts, Second, requires a finding that the defect in the
product rendered it unreasonably dangerous to the user or
his property. See Engberg v. Ford Motor Co., 205 N.W.
2d 104 (S.D. 1973). As the comments to section 402A
point out, even if a product is defective in some manner,
that defect must render the product “unreasonably” dan-
gerous. A product can be dangerous without being unrea-
sonably dangerous. See Restatement of the Law, Torts,
Second, section 402A, comment k.
An examination of the record convinces this court that
the jury’s finding is supported by the evidence, and that
failure to find liability on the theories of negligence and
Strict liability in tort is not inconsistent with the particular
facts in this case. A new trial is not mandated on this
basis.
Defendant’s final contention is that the jury did not
properly determine the amount of damages to be awarded
plaintiff, and that a new trial should be had on this issue.
The court finds this contention meritorious.
A-23
The jury instruction relating to the measure of damages
read:
Now, plaintiff's damages may be ascertained by
determining the cost of constructing a similar tower,
replacing the antenna, repairing the damaged build-
ings, and deducting therefrom the depreciation suf-
fered by reason of age and use, unless such cost is
greater than the difference between the before and
after value of the tower, antenna and buildings dam-
aged, in which case the difference in market value
before and after the collapse would be the proper
measure of damages.
Under this instruction the jury was to award the lesser of
diminution in market value or cost of replacement less
depreciation, unless they found the two amounts to be
equal. Plaintiff asserted throughout the trial that the
amount of loss suffered by reason of the collapse of the
tower could only be measured by the replacement cost less
depreciation, owing to the special circumstances present
in this case.
The South Dakota Supreme Court has recognized re-
placement cost minus depreciation as a proper measure of
damages. Shaffer v. Honeywell, Inc., 249 N.W. 2d 251,
258 (S.D. 1976); see also Big Rock Mountain Corp. v.
Stearns-Roger Corp., 388 F.2d 165 (8th Cir. 1968).
South Dakota has also codified the measure of damages
recoverable for a breach of warranty.
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 val-
A-24
ue they would have had if they had been as warrant-
ed, unless special circumstances show proximate dam-
ages of a different amount.
SDCL 57-8-37 (1967). In addition, consequential dam-
ages are recoverable in this case, under this court’s pre-
viously announced rulings. SDCL 57-8-40 (1967). The
question in this case is what method of measuring damages
should have been applied.
As the Eighth Circuit Court of Appeals noted in Big
Rock Mountain:
Where there is more than one method of estimating
damages, that method which is most definite and
certain should be adopted. No one method is exclu-
sive where several exist, but that one should be
chosen which best achieves the fundamental purpose
of compensation to the injured person for his loss;
and, if the facts show that either of two measures of
damages will fully compensate plaintiff for his loss,
that measure must be adopted which is less expen-
sive to defendant.
388 F.2d 165, 170 (8th Cir. 1968) (quoting 25 C.J.S.
Damages section 72 (1966)).
This court has carefully examined the record in this
case in light of the general admonition that an injured par-
ty should be fully compensated for losses suffered through
the fault of another, but that he should not be allowed a
windfall. From this examination it is concluded that under
the specific circumstances of this ¢ase plaintiff will be
fully compensated for the injuries suffered only by mea-
suring the cost of replacing and repairing the damaged
A-25
and destroyed structures and equipment, and subtracting
therefrom a reasonable depreciation for the use plaintiff
had enjoyed prior to the damage. Metropolitan Life Ins.
Co. v. Farmers Co-operative Co., 2 N.W. 2d 665 (S.D.
1942); Shaffer v. Honeywell, Inc., 249 N.W. 2d 251 (S.D.
1976).
The jury assessed plainuff's damages in the amount of
$1,385,001.61. Although the jury was apparently at-
tempting to calculate the amount of damage suffered by
plaintiff through use of the replacement cost less depre-
ciation approach, the amount ultimately awarded is not
justified by the evidence. Viewing the evidence in the light
most favorable to the plaintiff, the largest recovery justi-
fied by the evidence under the court’s instructions was
$1,274,631.60.* In light of this, the court finds the ver-
dict excessive as a matter of law. The excessiveness of the
verdict, however, is not so shocking as to indicate that it
was the result of passion and prejudice on the part of the
jury. This court is of the opinion that an unconditional
new trial on the issue of damages is not warranted.
‘This figure is arrived at pei the use of plaintiff's exhibits 100 and
101. The replacement cost for the tower was $1,099,880.95. From
this figure was subtracted $20,000.00, which represented the amount
of betterment over the tower replaced due to some differences in the
construction. From the remainder of $1,079,880.95 was subtracted
$129,585.71, which represented depreciation of six years over a use-
ful life of 50 years.
The replacement cost for the antenna was $343,338.93. From this
was subtracted $8,000.00 for overstock returned to the manufac-
turer. From the remainder of $335,338.93, this court subtracted
$50,300.86, which represents six years depreciation over a useful
life of 40 years.
The repair and replacement costs on the buildings totalled $45,-
699.17. From this figure was subtracted $6,397.88, which represent-
ed seven years depreciation over a useful life of 50 years.
The total net depreciation replacement value arrived at in this
manner for the tower, antenna, and buildings was $1,274,631.60.
A-26
It is well settled that a trial court may condition the
denial of a motion for new trial in circumstances such as
these on a remittitur by plaintiff. See generally Wright &
Miller, Federal Practice and Procedure, section 2815
(1973), and cases cited therein. It is this court’s opinion
that in this case the only result which would be consistent
with the Seventh Amendment would be to require plaintiff
to remit the excess of the verdict over the maximum which
the jury could have awarded under the evidence and in-
structions as a condition of the denial of defendant’s mo-
tion for a new trial on the issue of damages. Wright &
Miller, Federal Practice and Procedure, section 2815
(1973); see also Rice v. Union Pacific R. Co., 82 F.
Supp. 1002 (D. Neb. 1949).
This court will, therefore, deny defendant’s motion to
vacate the judgment and to enter a judgment notwith-
standing the verdict. Further, this court having determined
that the verdict was excessive to the extent of $110,370.01,
it will be ordered (1) that, if and upon the condition that,
within thirty days of the entry of this memorandum deci-
sion, plaintiff, by one of its attorneys of record, shall serve
upon opposing counsel and file in this case a remittitur
of the sum of $110,370.01 upon the verdict found and
returned herein and a release, to that extent only, of the
judgment entered upon the verdict, the motion for a new
trial be denied and the judgment confirmed for the re-
maining sum; but (2) that if such remittitur and release
be not so served and filed within thirty days of the entry
of this memorandum decision, the motion for a new trial
be sustained, the judgment entered upon the verdict be
vacated and cancelled, the verdict be set aside as to the
issue of damages, and a new trial be granted in the case
solely on the issue of damages.
A-27
Done and entered at Sioux Falls, South Dakota, this
27th day of July, 1977.
BY THE COURT:
/s/ FRED J. NICHOL
Chief Judge
Order Denying Defendant’s Motion for Judgment Not-
withstanding the Verdict and Denying New Trial on
Condition of Remittitur of Damages
Civ. 75-4056
This cause came on to be heard on motion of the De-
fendant for judgment notwithstanding the verdict, or in
the alternative for a new trial on Count III of the Com-
plaint, and the Court having heard the argument of coun-
sel and being fully advised, it is
ORDERED that Defendant’s motion for judgment not-
withstanding the verdict is denied.
The Court having determined that the verdict was ex-
cessive in the sum of $110,370.01,
IT IS FURTHER ORDERED (1) that if and upon con-
dition that, on or before August 26, 1977, the Plaintiff,
by one of its attorneys of record, shall serve upon opposing
counsel and file in this case a remittitur of the sum
of $110,370.01 upon the verdict found and returned here-
in, and a release, to that extent only, of the judgment
entered upon the verdict, the motion for a new trial be,
and the same hereby is, denied, and the judgment con-
firmed for the remaining sum, that is, $1,274,631.60; but
(2) that if such remittitur and release be not so served and
A-28
filed on or before August 26, 1977, the motion for a new
trial be sustained, the judgment entered upon the verdict
be vacated and cancelled, the verdict be set aside as to
the issue of damages, and a new trial be granted in the case
solely on the issue of damages.
Dated this 8th day of August, 1977.
BY THE COURT:
FRED J. NICHOL
Chief Judge
ATTEST:
WILLIAM J. SRSTKA
Clerk
(Seal of Court)
By Nancy A. Nicolai
Deputy
eee
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