Petition for Writ of Certiorari — Rockwell-Standard Corp. v. Scaife Co.

Supreme Court brief1972

Ask Donna

What actually matters in this document.

Text

IN THE 2

Supreme court of the United Stutes

October Term, 1972

No. 71 — 1 3 6 7

ROCRWELL-STANDARD CORPORATION,

Petitioner

SCAIFE COMPANY,

Respondent

PETITION FOR WRIT OF CERTIORARI TO THE

SUPREME COURT OF THE

COMMONWEALTH OF PENN SYLVANIA

AND APPENDIX

JCHN C. BANE, JR.

GILBERT J. HELWic

J. TOMLINSON Fort ~

ROBERT W. HARTLAND

REED, SMITH, SHAW &

McCLay

747 Union Trust Building

Pittsburgh, Pa. 15230

Attorneys for Petitioner

Of Counsel:

DONALD S. MACLEopD

WILLIAM F. SWANSON, Jr.

SMITH BROS... LAW PRINTERS, 620 SECOND AVENUE, PITTSBURGH, PA. 18219 ö

een .

e eee ere P A 4.9 ae eee

Opinions Below ;

snp ny sian, FA PPR ce DE ARE SANS eae 2 1

Question Presentd F ;

Statutory Provisions Involved. 3 —

Statement of 2 ... Se i . 4

Reasons for Granting the Writ. ao 6

I. The Decision of the Supreme Court Denies

the Litigant Its Due Process Right to a

Meaningful Review of the Jury’s Verdict

by the Trial Judge. 6

II. The Case Should Be Remanded to the Tria]

Court for a Statement as to the Reasons

2 CCC manage

for the Finding of Excessiveness....... 5

r ETE Oe CEE TLD: n 13

Appendix :

Opinion of the Court of Common Pleas of Alle- .

gheny County, Pennsylvania, Smith, J = f

e x ees i

Opinion of Pennsylvania Supreme Court, Jones,

— VV 34a ;

Dissenting Opinion, Bell, Chief Justice. 46a t

Petition For Re argument. 8 49a :

Order of Pennsylvania Supreme Court. 54a ;

TABLE OF CASES ; F

Arkansas Valley Land & Cattle Co. v. Mann, 130

. ² eee ae

Blunt v. Little, 2 Mason 602, Fed. Cas. No. 1,57

„ f . 8 *

Brotherhood of Locomotive Engineers v. Chicago

RI. & P. R. Co., 382 U.S. 423 (19660) 11

Wood v. Gunston, 82 Eng. Rep. 869 (K.B. 1655).... 8

TEXT BOORS

; ™. Blackstone, n. (Lewis's ed. 1903) 8

1 Index.

5 Cass PAGE

: Burlington Truck Lines v. United States, 371 U. 8.

4 EVT F 12

Capital Traction Co. v. Hof, 174 U.S. 1 .

Cluhaunt v. United States, 364 U.S. 350 (1960) . 11

i Dimick v. Schiedt, 293 U.S. 474 (1935)............ |

4 Duncan v. Louisiana, 391 U.S. 145 (1968) 3 7

GBerman Alliance Ins. Co. v. Hale, 219 U.S. 307

15 9). 4c es Cr ee 8

4 Gila Valley, G. & N.R. Co. v. Hall, 232 U.S. 94 (1914) 8

4 G. E. Herron v. Southern Pacific Co., 283 U.S. 91

; „ oes Shseen ees st ee 10

Hook v Turnbull, 6 Call 85 (Va. . 8

A Kennon v. Gilmer, 131 U.S. 22 Z 3

4 Koenigsberger v. Richmond Silver Min. Co., 1585

f — f eet ee ie Dek rt 8

f NLBB v. Metropolitan Life Insurance Company, 380

; ee ee o ˙¹m. Soe eee 12

g Northern P. R. Co. v. Herbert, 116 U.S. 642 ( 1886) . 8

f Reid v. Covert, 354 U.S. 1 (1957))))))j:: 7

| Secretary of Agriculture v. United States, 347 U.S.

q „„ P whbdioel at. 12

i Southern Railway v. Hattie E. Bennet, 233 USS.

i „JJ EET Oe ee OT ET HR Tee 9

4 " STATUTES

+ 2USC. 1257 (3) . F 2

United States 92 Amendment XIV,

Section 1. J ͤ ger dle MR A LACT a 3

Peg Se

ee imal

In THE

Supreme Court of the United States

October Term, 1972

ROCKWELL-STANDARD CORPORATION

Petitioner

v. 4

SCAIFE COMPANY

li Respondent

PETITION FOR WRIT OF CERTIORARI TO THE

SUPREME COURT OF THE

COMMONWEALTH OF PEN NSYLVANIA

Petitioner, Rockwell-Standard Corporation, respect-

fully prays that a writ of certiorari issue to review the

judgment and opinion of the Supreme Court of Pennsyl-

vania entered in this proceeding on December 20, 1971,

in which that Court — the Pennsylvania court of last

resort — reversed an order by which the Court of

Common Pleas of Allegheny County, Pennsylvania,

granted defendant a new trial on the issue of damages.

ee Shee tr ee ee

* PAR TMM ONIN A N NP PPL Gee

n „

erer ve e Dear eee.

ene eee en: vv ap

e e eee dee E

—

N eee

* .

Question Presented.

OPINIONS BELOW

The opinion of the Court of Common Pleas of Alle-

gheny County, Pennsylvania, Civil Division, not re-

ported, and the opinion of the Supreme Court of Penn-

sylvania, ............ VV , 285 A. 2d

451, appear in the Appendix hereto.

JURISDICTION

The judgment of the Pennsylvania Supreme Court

was entered December 20, 1971. A timely petition for

reargument was denied on January 26, 1972, and this

petition for certiorari was filed within 90 days of that

date. This Court's jurisdietion is invoked under 28 U.S. C.

91257 (3) .

QUESTION PRESENTED

Did the Supreme Court of Pennsylvania deny to a

litigant in a civil jury trial an essential element of due

process when it deprived the trial court of its-traditional

power to review the jury’s verdict for evidence of jury

bias, mistake or prejudice and substituted for this fun-

damental trial court power, the Supreme Court’s own

review of the printed record?

Statutory Provisions Involved.

STATUTORY PROVISIONS INVOLVED

The provision of the Constitution of the United

States which is involved in this case is set forth in

Amendment XIV, Section 1 of the United States Consti-

tution, which provides as follows: N

All persons born or naturalized in the United

States, and subject to the jurisdiction thereof, are

citizens of the United States and of the State where-

in they reside. No State shall make or enforce any

law which shall abridge the privileges or immunities

of citizens of the United States; nor shall any State

deprive any person of life, liberty, or property, with-

out due process of law; nor deny to any person

within its jurisdiction the equal protection of the

laws.” 7 :

Statement of the Case.

STATEMENT OF THE CASE

On June 10, 1960, Respondent, Scaife Company

(“Scaife”), filed a Complaint against Rockwell-Stand-

ard Corporation (“Rockwell”) in Common Pleas Court

of Allegheny County, Commonwealth of Pennsylvania.

The Complaint alleged, inter alia, that Scaife had been

induced to purchase a business from Rockwell by willful

and material misrepresentations deliberately addressed

to Scaife by Rockwell.

This case was tried before a judge and jury and,

after deliberation, the jury returned a verdict for Scaife

in the sum of $810,811 principal plus $389,189.28 inter-

est, making a total award of $1,200,000.28.

Rockwell filed motions for judgment non obstante

verdicto and for a new trial. The trial judge issued an

opinion dealing with these motions on August 4, 1969.

While denying Rockwell’s motion for judgment non

obstante verdicto, the court held that the jury verdict

was excessive and granted Rockwell’s motion for a new

trial limited to the question of damages unless Scaife

should enter a remittitur damnum in the sum of $756,-

001.28. Scaife refused to enter the remittitur damnum

and, accordingly, an order for a new trial on the damage

issue became effective.

Scaife appealed to the Supreme Court of Pennsyl-

vania from the order granting a new trial on the issue

of damages, and on December 20, 1971, the Pennsylvania

Supreme Court reversed the order granting a new trial

and ordered judgment to be entered on the jury verdict.

— te 1

Statement of the Case.

In its opinion, the Pennsylvania Supreme Court

recognized that it had theretofore committed to the dis-

cretion of the trial judge the duty of protecting litigants

from jury excesses, but held that it would henceforth re-

quire a statement of the trial court’s reasons for con-

cluding that a jury verdict was “excessive.” In this

case, in the absence of such a statement, it refused to

defer to the trial court’s judgment that the jury’s ver-

dict Was so excessive as to require retrial of the damage

issue. Rather than remanding the case for a statement

of reasons by the trial court, the Supreme Court itself

undertook to review the record, and concluded that there

was evidence in the record to support the verdict and,

therefore, that the trial court’s grant of a new trial was

an abuse of discretion.

On December 30, 1971, Rockwell filed a petition for

reargument in the Supreme Court of Pennsylvania, in

which it argued that it had been denied its due process

right of a review of the jury’s verdict by the trial court,

and that the Supreme Court of Pennsylvania should re-

mand the case to the trial court in order to determine its

reasons for a finding of excessiveness. The due process

question was timely raised, as it only. became an issue

upon the rendering of the opinion of the Supreme Court

of Pennsylvania. The petition for reargument was denied

on January 26, 1972.

ren

W 2 rene (DES AWD eee

—— 2

Reasons for Granting the Writ.

REASONS FOR GRANTING THE WRIT

I. The Decision of the Pennsylvania Supreme Court

Denies the Litigant Its Due Process Right To a

Meaningful Review of the Jury’s Verdict By the

Trial Judge.

The decision of the Pennsylvania Supreme Court

raises an importarit due process issue relating to the

relative roles of the trial court and the appellate court in

reviewing a jury verdict in a civil case to determine

whether it is excessive. The Pennsylvania Supreme Court

has denied to Rockwell the right to have the jury’s ver-

dict reviewed by the trial judge, who alone among the

judiciary had the opportunity to observe and assess the

witnesses at trial.

The Pennsylvania Supreme Court ruled that it was

adding “excessiveness” to the list of terms which re-

quired explanation by a trial court in granting a new

trial. On the grounds that the trial judge in this case

failed to present such an explanation for his finding of

excessiveness, the State Supreme Court reviewed the

record on its own and, finding evidence in support of

the jury’s verdict, concluded that the trial court had

abused its discretion. The practical effect of such pro-

cedure was to penalize a litigant, Rockwell, because of

the failure of the trial court to anticipate the Supreme

Court’s requirement.

_ In the instant case, the issue of damages was highly

contested. The nature of the evidence addressed to dam-

ages was such that the trial court’s review of the jury's

verdict was extremely important to the parties in this

case, and the substitution therefor of a review of the

| 7

Reasons for Granting the Writ.

bare printed record by an appellate court denied to

Rockwell a fundamental trial right. >

In recent years, this court has considered on sev-

eral occasions the role of the jury and has acknowledged

the fundamental importance of the jury trial: Duncan

v. Louisiana, 391 U.S. 145 (1968); Reid v. Covert, 354

U.S. 1 (1957). ;

An integral part of the system of trial by jury is

the traditional responsibility and power of the trial

judge to protect a litigant from a jury’s mistakes, pas-

- sions, prejudices, and other improper motives which

may result in an excessive verdict. The present case

presents an appropriate question for this Court in that

the decision below substantially weakens this control

over the jury by taking away such power from the trial

court and resting it in an appellate court which is far

less able to evaluate the jury’s performance.

The power of the trial judge to grant a new trial

on the issue of damages in the absence of an agreement

to a remittitur was recognized in the English cases prior

to the adoption of the Federal Constitution. See Dimick

v. Schiedt, 293 U.S. 474 (1935). In fact, judicial control

over the jury in the form of ordering a new trial to

review excessive damages emerged in the seventeenth

century. This control was extended until, by the middle

of the 18th century, the power of the courts to grant

new trials for all sorts of errors and mistakes on the

part of the jury was firmly established.

The power of the trial court judge to grant a new

trial was deemed essential -to protect litigants against

the mistakes, passions, prejudices or other improper

motives on the part of the jury.

Reasons for Granting the Writ. .

As BLACKSTONE stated in his COMMENTARIES:

“The exertion of these superintendent powers . . in

setting aside the verdict of a jury and granting a

new trial, on account of misbehavior in the jurors,

is of a date extremely ancient. There are instances

in the year-books of the reigns of Edward III.,

Henry IV., and Henry VII., of judgments being

stayed . . because the jury had eat and drank

without consent of the judge, and because the

plaintiff had privately given a paper to a juryman

before he was sworn. And upon these the Chief

Justice Glynn in 1655, 1 grounded the first precedent

that is reported in our books for granting a new

trial upon account of excessive damages given by

the jury; apprehending, with reason, that notorious

partiality in the jurors was a principal species of

misbehavior.” 3 W. BLACKSTONE, COMMENTARIES

387-388 (Lewis’s ed. 1903)

This trial court power was exercised in this country by

state trial judges as early as 1806: Hook v. Turnbull,

6 Call. 85 (Va. 1806), and was adopted in the federal

courts by Judge Story in Blunt v. Little, 2 Mason 602,

Fed. Cas. No. 1,578 (1822). The Supreme Court has

_ repeatedly recognized this power of the trial judge:

Northern P.R. Co. v. Herbert, 116 U.S. 642 (1886) ;

Arkansas Valley Land & Cattle Co. v. Mann., 130 U.S.

69 (1889); Kennon b. Gilmer, 131 U.S. 22 1889);

Koenigsberger v. Richmond Silver Min. Co., 158 U.S. 41

(1895) ; German Alliance Ins. Co. v. Hale, 219 U.S. 307

(1911) ; Gila Valley, G.4N.R. Co. v. Hall, 232 U.S. 94

(1914).

1. Wood v. Guston, 82 Eng. Rep. 867 (K. R 1655).

9 .

Reasons for Granting the Writ.

This Court has ruled not only that the func-

tion of the trial judge is to secure fundemental fairness

to the litigants, but also that the active participation

of a trial court judge is an essential element of a “trial

by jury”. Thus, in Capital Traction Co. v. Hof, 174 U.S.

1 (1898), this Court stated by Mr. Justice Gray:

“Trial by jury, in the primary and usual sense

‘of the term at common law and in the American

Constitutions, is not merely a trial by a jury of

twelve men before an official vested with authority

to cause them to be summoned and empaneled, to

administer oaths to them and to enter judgment and

issue execution on their verdict; but it is a trial by

a jury of twelve men, in the presence and under the

superintendence of a judge empowered to instruct

them on the law and to advise them on the facts,

and ... to set aside their verdict if in his opinion it

is against the law or the evidence.” 174 U.S. 1, 13-14

[Emphasis added].

The importance of the trial court’s review of the

question of excessiveness was recognized by Mr. Justice

Oliver Wendell ‘Holmes in Southern Railway v. Hattie

E. Bennett, 233 U.S. 80 (1913) where he remarked at

p. 86: °

“The supposed error most insisted upon is the enter-

ing of judgment upon a verdict said to be. manifestly

excessive ... But a case of mere excess upon the

evidence is a matter to be dealt with by the trial

court. It does not present e question for reexamina-

tion here upon a writ of error.”

In a trial by jury, the judge is not a “mere moder-

ator”, but is the governor of the trial for the purpose

Se ek eee ne en ee SS eee

Reasons for Granting the Writ.

of assuring its proper conduct and of determining ques-

tions of law. This discharge of the judicial function as

at common law is an essential factor in the orderly

process of law which the Federal Constitution guar-

antees. G. E. Herron v. Southern Pacific Co., 238 U.S.

91 (1931). a i ;

In the instant case, the Supreme Court of Pennsyl-

vania recognized the force of the above authority by

noting that the fairness or excessiveness of a verdict is

a matter peculiarly within the decisional discretion of

the trial court and that the trial court’s action thereon

cannot be disturbed absent an abuse of discretion or a

mistake of law. The Pennsylvania Supreme Court ruled

that the trial court’s conclusory statements on the issue

of excessiveness made it difficult to review the court’s

decision, and so it added in this case the term “excessive

verdict” to a preexisting list of judicial statements

which require supporting reasons. The Pennsylvania

Supreme Court found that it could not really assess the

validity of the trial judge’s determination, because he

did not offer adequate reasons for his conclusion.2 In

the absence of a statement of supporting reasons, the

Pennsylvania Supreme Court undertook to review the

record itself and found evidence which it believed sup-

ported the jury’s verdict.

2. For example, the Supreme Court speculated

that the trial court may have accepted Scaife’s argu-

ment that certain figures should not have been presented

to the jury and, consequently, the verdict was inflated.

The Supreme Court commented: ‘Perhaps this reasoning

was accepted by the trial judge; this, however, we can-

not determine for a certainty since no explanation was

given.” (Fn. 4, p. 11 of Supreme Court Opinion). :

Reasons for Granting the Writ.

Review of a printed record by an appellate court,

however, is not an adequate substitute for an evaluation

by the trial judge who had the opportunity to observe

the witnesses. Indeed, the Pennsylvania Supreme Court

acknowledged in the opinion that a ruling on excessive-

ness is “peculiarly within the diseretion of the trial

court.” This well established common law principle

granted to the trial court discretion in an area where

it is of critical importance because he alone of the

judges reviewing the jury’s verdict had an opportunity

to observe the witnesses and evaluate all the evidence,

both recorded and unrecorded, that was presented dur-

ing the course of the trial.

II. The Case Should Be Remanded To the Trial Court

For a Statement As To the Reasons for the’ Finding

of Excessiveness.

Rockwell was denied an important right by. virtue

of the trial court’s failure to present reasons for its

grant of a new trial for the excessiveness of the verdict.

The trial court’s error may be expeditiously corrected

by the simple device of remanding the case to him for a

statement of his reasons for a finding of excessiveness.

This Court has consistently refused to pass on ques-

_tions without knowing the basis of decision by either

an administrative agency or the lower court. In the

absence of an adequate decision by the appropriate

judicial authority, this Court has remanded the matter

for a proper statement of the decision. Chaunt v. United

States, 364 U.S. 350 (1960) ; Brotherhood of Locomotive

Engineers v. Chicago RI. & P.R. Co., 382 U.S. 423

(1966).

Reasons for Granting the Writ.

This Court has held that the interference with the

exercise of discretionary power without a knowledge of

the basis for the exercise of such power is “incompatible

with the orderly functioning of the process of judicial

review.” Burlington Truck Lines v. United States, 371

U.S. 156 (1962), accord, NLRB v. Metropolitan Life

Insurance Company, 380 U.S. 438 (1965). Thus, this

Court by Mr. Justice Frankfurter has stated in remand-

ing cases to administrative agencies:

We must know what a decision means before the

duty becomes ours to say whether it is right or

wrong.” Secretary of Agriculture v. United States,

347 U.S. 645, 654 (1954). :

Paradoxically, although the Supreme Court of

Pennsylvania in the instant case established 4 rule that

a trial judge must state his reasons for a finding of

excessiveness, it has refused Rockwell’s request that

the instant case be remanded to the trial judge for a

statement of such reasons, and instead has proceeded to

examine the record on its own and render a judgment

without the benefit of such reasons.

The decision of the Pennsylvania Supreme Court

. impairs the integrity of the traditional trial process by

infringing a fundamental and essential power heretofore

vested in the trial court judge to protect litigants

against unfairness and injustice. Thus, the decision

operated to deprive Petitiorier of his property without

due process of law.

Conclusion.

CONCLUSION

Review of the decision below is necessary both to

protect the Petitioner and to insure the integrity of the

trial process by reaffirming the litigant’s right to a

review of the jury’s verdict by the trial judge. A writ

of certiorari should accordingly issue to review the

judgment and opinion of the Pennsylvania Supreme

Court.

Respectfully submitted,

- JOHN C. BANE, JR.

GILBERT J. HELWIG

J. TOMLINSON For

ROBERT W. HARTLAND

REED SMITH SHAW & McCLay

747 Union Trust Building

Pittsburgh, Pennsylvania 15230

Attorneys for Petitioner

Of counsel: a

DONALD S. MacLROD

WILLIAM F. SWANSON, JR.

April 24, 1972.

Meise

„

APPENDIX

IN THE COURT OF COMMON PLEAS »

Or ALLEGHENY CouNTy

Scan COMPANY, a Pennsylvania

Corporation, Plaintiff

* July Term

ROCKWELL-~STANDARD CORPORATION; 1960

a Pennsylvania -Corporation,

Defendant

8 J

Opinion.

(Filed August 4, 1969.)

SMITH, In., J.

Following a verdict in favor of the plaintiff in the

sum of 81, 200,000.28,“ the defendant filed a motion for

a new trial and a motion for judgment n. o. v.

The instant action was commenced on June 10,

1960 by the plaintiff filing a complaiut captioned “in

assumpsit.” The complaint contains four separate

counts. These counts are based upon the following:

1. The first count is for damages which the plain-

tiff alleges to have sustained as a result of the

defendant's breach of contract; and,

2. The second count is for damages which the

plaintiff alleged to have sustained as a result

*The verdict of the jury: was in two parts: parts: damages,

- $810,811.00; and, interest, $389,189.28.

Appendiæ Opinion.

of the breach of warranties by the defendant;

and,

3. The third count is for damages based on the

theory that the defendant has been unjustly

enriched at the expense of the plaintiff; and,

4. The fourth count is for damages which the

plaintiff sustained as the result of the defend-

ant deliberately making material representa-

tions which were false and which were relied

upon by the plaintiff and were the inducing

factor in its entering into the contract.

After hearing the evidence of the parties the Court

ruled that the plaintiff could not go to the jury on its

theories of liability as set forth in the first three counts

of the complaint. The propriety of the Court's ruling in

this regard has not been raised and is not now before

this Court en banc. However, the Trial Judge did sub-

mit the fourth theory of the plaintiff to the jury and it

is on this theory that the jury returned its verdict.

During the Korean War the plaintiff was engaged

in the manufacture of bombs and war materials for the

government and with the termination of this war effort

it decided that it would undertake a new type of manu-

' facturing geared to a peacetime economy. It was with

this object in mind that plaintiff entered into negotiation

with officers of the defendant in November, 1954.

As the result of a series of mergers the defendant

had as a part of its corporate structure what was known

as the Timken Silent Automatic (hereinafter TSA) divi-

sion. This division manufactured and sold through retail

outlets heating and cooling equipment primarily for resi-

4 o

dential use. In the field of oil fired furnaces the TSA

product was considered to be the “Cadillac” of the in-

dustry. In the field of the gas fired furnace TSA was

already in the market and was attempting to expand in

order to cope with and adjust to the change in the in-

dustry that was developing in the -1950’s. This change

was from the traditional oil fired furnace (either the

oil fired furnace or the oil converted furnace) to the gas

fired furnace and came about with the expansion of the

natural gas line facilities into the suburban and rural

areas of our country. To paraphrase an expression, gas

was in and oil was out!

The negotiations between the plaintiff and the de-

fendant which commenced in November, 1954 had as its

ultimate objective the sale by Rockwell and the pur-

chase by Scaife of TSA. These negotiations lasted from

their inception until they culminated in a formalized

contract on March 31, 1955. The negotiations were not

carried on as between strangers but as friends who have

done business together over the years in a satisfactory

manner. The executive heads of Scaife and Rockwell

were friends who had known each other over the years:

in fact Mr. Scaife’s wife was a member of the same fam.

ily Who Mr. Rockwell testified put hiin in business many

years previously. This position of friendship also ex-

tended down into the executive ranks of the two carpora-

tions. From the past dealings of the corporations, from

the personal and business relationships of their chief

executives and officers there was not the “arms-length-

dealing” that one would expect to find among individuals

or corporations that did not have this relationship. The

atmosphere of the “market place” was not present and,

therefore, neither was the usual warning sign which

— —k

A —

with clarity and effectiveness screams out, caveat

emptor.

The negotiations between Scaife and Rockwell

started out slowly and with a mutual idea of exchanging

ideas and probing for facts that were essential to a

proper and educated determination. This was particu-

larly true here because Scaife had no experience or

knowledge in the field of manufacturing and selling of

furnaces. while Rockwell had accumulated several dec-

ades of experience in this field. After some preliminary

meetings Scaife sent to Rockwell a list of questions

which Scaife thought of importance in the negotiations.

These questions and Rockwell’s answers are incorpor-

ated herein as Appendix A to this opinion.

The most important single consideration in the mind

of Scaife during the whole course of the negotiations,

and as it turns out also in the mind of Rockwell, was te

quality of the furnace produced and its marketability.

Particular emphasis was devoted to the quality and mar-

ketability of the gas fired furnace because, as both par-

ties agreed, the gas fired furnace was starting to domi- |

nate the residential heating business.

between the parties, various officers of Scaife discussed

the nature of the TSA furnaces with Rockwell officials,

they visited the plants of TSA, they examined a survey

made for Rockwell called the McKinsey Report, they had

an independent analysis firm by the name of Midwest

Research Institute visit the plants of Rockwell and sub-

mit to it a report dealing with the advisability of pur-

chasing TSA.

Appendix—Opinion.

As the result of these discussions, a consideration

of the reports not only of its own analyst but the Mc-

Kinsey Report submitted to it by Rockwell, and the

_ limited and restricted inspection of the plants of Rock-

well, the management of Scaife came to the conclusion

that the TSA division of Rockwell produced a quality

product that would be readily marketable and, therefore,

they decided to enter into the agreement of March 31,

1955 wherein Scaife agreed to purchase TSA for three

million eight hundred thousand ( 83, 800,000.00) dollars.“

What Scaife didn’t know at the time that it en-

tered into the contract of March 31, 1955 was the true

nature of the quality of the gas fired furnace. The

furnace that was the only hope for expansion and

growth in the heating industry, indeed, the only hope

to remain competitive in this industry, was seriously

defective. The heart of the gas fired furnace is the heat

exchanger. The heat exchanger is the object which has

as its ultimate purpose the exchange of heat brought

about as the result of the combustion of gas within the

chamber to heat in the air which flows around about it

on the outside and which ultimately flows through the

air conduits to warm the home. The TSA heat exchanger

was defective in two particulars: first, it made an exces-

sive amount of noise; and, second and more seriously, it

cracked. For a Timken Silent Automatic furnace to

make noise is one thing but for it to crack is another.

Cracking not only impedes and lessens its utility as a

heat exchanger but is dangerous to the user in that it.

permits carbon monoxide to escape from the combustion

The actual sum was slightly higher allowing for in-

ventory, etc., adjustments.

mn i

Appendix—Opinion.

chamber and permeate the air which circulates in the

home. With a heart so defective the gas fired furnace

was not functional and, therefore, not marketable.

Prior to and during the course of these negotiations

Scaife was never informed nor did it know the true na-

ture and extent of this defect and the impact that it al-

ready had or would have on the marketability of the

gas fired furnace. This information was not told the

Scaife negotiators nor was it such that they could de-

termine this from the limited opportunity that they had

to investigate. On the contrary, Rockwell was fully

aware of the defective heart of its gas fired furnace. It

possessed this knowledge for some time prior to the

negotiations which commenced in November, 1954 and

during the period of the negotiations which lasted until

March 31, 1955 (the date on which the contract was ex-

ecuted). Moreover, it was informed that the diagnosis

was serious and that the prognosis was anything but

encouraging. Although possessed of this knowledge not

one of the officers of Rockwell saw fit to impart it to

Scaife.

The only hint of trouble with the furnace that

Scaife had prior to the execution of the contract was a

casual remark made to one of its officers by an employee

of Rockwell that they had been having trouble with the

heat exchanger. The nature of the trouble or the impact

that it was having or would have upon the merchanta-

bility of the furnace was not mentioned. However, to

make sure that this was not a serious problem one of

the executive officers of Scaife met with one from Rock-

well at the latter’s “penthouse” and was assured that

this was only one of those problems that one encounters

A ppendix—Opinion.

in the manufacturing business and as such would be

worked out.

Nowhere during the course of the negotiations be-

tween Scaife and Rockwell did Rockwell tell Scaife the

true facts dealing with the defective heat exchanger.

Rockwell failed to inform Scaife: .

1. That for a considerable period of time prior

to the commencement of negotiations the top executive

officers knew that the heat exchangers were defective:

2. That the defects in the heat exchangers were so

serious that the TSA officials and engineers were unable

to find a solution even after many, many months of re-

search and testing; cat

3. That one of the chief executive officers consid-

ered the problem of such magnitude that he ordered the

creation of a Heating Committee to study and consider

what should be done under the circumstances;

4. That the management of TSA recommended to

and the chief executive officers of Rockwell agreed that

a reserve be set up of $26,000.00 per month to permit the

writing-off the heat exchangers;

5. That the recommendation of the management

of TSA *h thousands of the heat exchangers be writ-

ten off 2t e end of the year 1954 was set aside without

any reason; ö 2 5

6. That numerous complaints were received from

customers dealing with the defective heat exchangers;

and,

7. That Rockwell could no longer compete in the

changing heating industry because of the defective heat

exchanger which is the heart of a gas fired furnace.

PPTP 8 pe tae

0 eA ETIO Ihe

jor her 20,

Appendix—Opinion.

Following à trial which lasted from October 31,

1966 to December 2, 1966 the Court submitted the case

to the jury on the fourth count of the plaintiff's com-

plaint which, as we have indicated, was one of fraud and

deceit in the inception of the contract. In his charge to

the jury the Trial Judge instructed them, inter alia, as

follows:

“Now, this is important. When you consider the

case you consider, Members of the Jury, that the

plaintiff has the burden of proving his case beyond

a reasonable doubt. This burden rests with the

plaintiff throughout the case. They have the bur-

den of convincing you. Because of the nature of the

‘testimony, and because of the issue which I am go-

ing to submit to you, the evidence must be clear, it

must be precise, and it must be indubitable. I am

going to discuss that with you more fully, but at

this point, Members of the Jury, let me say this to

you: When you consider the burden of proof, re-

member that the plaintiff, when he alleges fraud,

must establish it by clear and convincing evidence.

The fraud must be proved by more than a mere pre-

ponderance of the testimony. Nothing short of evi-

dence that is precise, clear, and indubitable can be

allowed to overturn a written instrument. The rule

on fraud cases, that evidence must be clear, precise

and indubitable, means that the witnesses must be

credible, must distinctly remember the facts to

which they testify, must narrate details exactly,

and that evidence must be of such weight as to

make out facts alleged beyond a reasonable doubt

and thereby enabling the Jury to come to a clear

conviction without hesitancy of the clear and pre-

cise facts in issue.”

Appendix—O pinion.

“Now, this case, Members of the Jury, is based

upon an allegation of what we call in law a fraud or

deceit. In other words, the plaintiff is alleging that

the defendant did not disclose that of which it had

knowledge and which it should have disclosed after

an inquiry was made, and that it misrepresented the

true facts as they then existed and as they were

known to the defendant. This is what you are going

to have to determine: From the facts as you find

them, was there a misrepresentation fraudulently

made which was the inducing factor for the plain-

tiff to enter into the contract and which the plain-

tiff justifiably relied upon, and which the defend-

ant knew were false, and then which was the direct

and proximate result of the injuries which the

plaintiff alleges to have suffered?

Now, this is the crux of it. I am going to in-

struct you more fully on that, Members of the Jury.

One who fraudulently makes a misrepresentation of

fact for the purpose of inducing another to act in

reliance thereon in a business transaction is liable

to the other for the harm caused by his justifiable

reliance upon the misrepresentation.

There are various elements of what we call

fraudulent misrepresentation. I will discuss those

with you. First, there must be a misrepresentation.

Now, this could be a positive misrepresentation

where the person misrepresents an existing fact

knowing it to be false or where he fails to fully dis-

close something when he is asked to disclose some-

thing. There will be another element that I will

discuss with you a little bit later dealing with

failure to fully disclose certain circumstances, but

OTP ey |

ved 4

“oe En hy

rites es)

10a

Appendix—Opinion.

at this point I want to say it could be that they don’t

fully disclose that which they were inquired about

or asked of and where they come out and make a

statement which was false and they knew it to be

false regarding an existing fact.

Now, there must be a fraudulent utterance, and

you may find that, Members of the Jury, if you find

that from the statements made there was an intent

to deceive. A misrepresentation is fraudulently

made if the maker knows of its falsity when utter-

ing, stating otherwise. A misrepresentation in a

business transaction is fraudulent if the maker

knows or believes the matter to be otherwise than

as represented.

Now, you must also have another element,

Members of the Jury, and that is there must be an

intention by the maker—in other words, by the

party who makes the statement—that the recipient

—in other words, the person who received it—will

thereby be induced to act. Now, when you come to

consider this, you might consider that an intention

on the part of the defendant that the plaintiff be

induced by the misrepresentation to act, or refrain

from acting in respect to the subject matter, is an

important element of this case.

In other words, was the statement made so the

plaintiff would do something? In other words,

would he enter into the contract based upon his re-

lying upon the statement? Now, of course, there

may be other factors involved in inducing him to

enter into the contract, but if this was a factor this

would: be sufficient under the law.

lla

Appendix—Opinion.

Then you have the element, Members of the

Jury, that the recipient—in other words, the plain-

tiff in this case—must have justifiably-relied upon

the misrepresentation. This is another important

element, and I think that you can determine the

relationship of the parties, if that existed, the re-

lationship between the officers, if such was the

case, and if you find that the defendant, because of

its position as the owner of this division, had pe-

culiar knowledge of the facts relative to the divi-

sion, and if you find that the plaintiff was not on

the same footing, so to speak, as to have the facts

for its investigation and for its evaluation, then you

may find, along with the other facts in the case,

that the plaintiff justifiably relied upon the state-

ments made by the defendant, if such be the case.

The defendant, as the holder and prospective

seller, was naturally the proper source of informa-

tion, and even an independent injury would not

likely have produced more than an added confir-

mation of the defendant’s disclosure, whether it be

full or not full, but this, Members of the Jury, let

me hasten to add, is for your determination and

not mine. ,

Then you come down to the last element of the

offense: that the plaintiff’s reliance upon the de-

fendant’s statement must be the proximate cause of

the damage claim. In other words, there must be a ?

direct causal connection between the statements

which were made and the damages which the plain-

tiff complains of. These are the necessary elements

of the case, and you are going to have to determine

them and weigh them.”

* * *

12a

Appendix—Opinion.

“Now, when you consider the question, con-

sider all the testimony, Members of the Jury, and

weigh carefully the theory of the plaintiff, keep-

ing in mind its burden as I have instructed you, and

determine was there a misrepresentation by the

defendant of a material fact upon which the plain-

tiff relied, and based upon this reliance had entered

into the contract of March the 31, 1955. and which

was the direct cause of the injuries which are al-

leged to have been sustained. If you find this to be

‘the case, then the plaintiff is entitled to a verdict.

and I so instructed you.”

* * *

Now, I am going to affirm certain points that

counsel for the parties have submitted to the Court.

I am going to affirm. Point 3 of plaintiff’s. Fraud

consists of anything calculated to deceive whether

by single act or combination, or by suppression of

truth, or a suggestion of what is false, whether it

be direct falsehood or by innuendo, by speech or

silence, word of mouth, or look or gesture. It is any

artifice by which a person is deceived to his disad-

vantage.’

5: ‘The deliberate non-disclosure of a ma-

terial fact amounts to culpable misrepresentation

no less than does an intentional affirmation of a

material falsity.’ .

6: ‘A misrepresentation in a business trans-

action is fraudulent if the maker knows or believes

the matter to be otherwise than as represented.’

The deceived party is not required to prove

that the false representations were the sole induce-

; 13a

Appendix—Opinion.

ment for his entering into the transaction. It is suf-

ficient if the misrepresentation was a material fac-

tor in inducing him to enter into the transaction.’

In connection with these principles, all of them

that I have discussed with you, even if the parties

did not stand in a confidential relationship, which

would have required the defendant to disclose all

‘material facts which it knew, nevertheless, whether

plaintiff’s officers directly asked the defendant of-

ficers about the nature of the heat exchanger prob-

lem, plaintiff was entitled to a complete and truth-

ful answer.

Plaintiff contends defendant’s officers, par-

ticularly Mr. Queenan, elected to answer the ques-

tion, and you have heard testimony as to what his

answer was. If you find that such answer was. not

completely candid and frank, but was a half-truth

or other type of evasive answer, which threw the

plaintiff off guard, it constituted an act of fraudu-

lent concealment. This principle also applies to the

answers given to the 26 questions submitted by

plaintiff to the defendant; particularly to the first

one, and that question was: Why is this division

for sale? Realizing that this type of business is far

removed from the types of business of other divi-

sions of this company, nevertheless it is difficult

to understand why this division would be for sale

if it is a money-maker and the prospects are encour-

aging for the future. ;

Defendant’s reply was answered quite fully by

Mr. Enos: ‘Radically different from our auto parts

business and we don’t feel we can devote the atten-

Appendix — Opinion.

tion it warranta“ When I just mentioned principle,

I meant principle of law. I will instruct you when

Members of the Jury, I will instruct you that

there are certain circumstances where a party must

not be silent upon a material fact within his know!.

edge, although he stands in no relationship of trust

reposed in him or to state all the facts that such

confidence demands.

Now, in the case we have before us there is no

confidential relationship existing between Rockwell

and Scaife, but if you were to find, Members of the

Jury, that Scaife reposed in Rockwell a specific

confidence, based upon their superior knowledge of

the business and industry, and this imposing of this

. faith was known to Rockwell, then they would have ;

& duty to make an honest disclosure or a full dis-

closure of those facts of which it had knowledge

Of course, if they didn’t want to, then they

should take some affirmative action to destroy this

faith that the plaintiff would be reposing in them.”

In considering the defendant's motion for judgment

. we have reviewed the record and considered it in

the light most favorable to the plaintiff, the verdict

winner, and have given it the benefit of every reasonable

inference of fact arising from the record and have re.

solved any conflict of the evidence in its favor: Gilling-

ham v. Patz, 429 Pa. 308, (1968); Hay ». B & O Railroad

Co., 415 Pa. 190, (1964); Berkeihiser » DiBartolomeo,

413 Pa. 158, (1964): Zilka v. Sanctis ( onstruction, Inc.

409 Pa. 396 (1962) ; and Bohner v. Fasern Express Inc.

405 Pa. 463 (1961). In passing upon the defendant's

16a

a Appendix Opinion.

motion for new trial we have reviewed the record to see

whether the verdiet is justified by the evidence pre-

sented whether or not there were any prejudicial errors

necessitating the granting of a new trial, and whether

the verdict was such that it was against the evidence as

to shock our judicial conscience.

I. Liability.

A. Asa matter of law did the plaintiff sustain

its burden of proof?

In the case of Gerfin v. Colonial Smelting & Refin-

ing Co., Inc., 374 Pa. 66 (1953), cited to us by the de-

fendant, the Pennsylvania Supreme Court stated at page

68 that:

“Whether the evidence is true is a question of fact

which justifies ite submission to the jury .

always a question of law . 3

Bank v. Harvey, Bxrz., 340 Pa. 223, 231. 16 A. 2d

409. “How stands the record?” .

The Supreme Court went further, at page 72. and ex-

panded on what is the requisite standard of proof in

fraud cases. Their opinion states as follows:

“What is meant by the statement that the evi-

dence must be clear, precise and indubitable? It

means that the witnesses must be ‘credible, .. dis-

tinetly remember the facts to which they testify,

and narrate the details exactly.’ (Leonard v. Cole-

man, 273 Pa. 62, 69, 116 A. 550, 552; Miller’s Estate,

279 Pa. 30, 38, 123 A. 646, 649); that the evidence

‘is not only found to be credible, but of such weight

and directness as to make out the facts alleged be-

17a

Appendix—Opinion.

yond a reasonable doubt.’ (Vogel, Administrator, v.

Taub, 316 Pa. 41, 43, 173 A. 270, 271; Doneyho v.

Scottdale Connecting R. R. Co., 330 Pa. 207, 209, 199

A. 162, 164) ; that ‘the witnesses must be found to

be credible, that the facts to which they testify are

distinctly remembered and the details thereof nar-

rated exactly and in due order; and that their testi-

mony is so clear, direct, weighty and convincing as

to enable the jury to come to a clear conviction,

without hesitancy, of the truth of the precise facts

in issue.’ ( Broida v. Travelers Insurance Co., 316 Pa.

444, 448, 175 A. 492, 494; Foley, Executor v. Wasser-

man, 319 Pa. 420, 424, 179 A. 595, 597; Aliquippa

National Bank v. Harvey, Executriz, 340 Pa. 223, |

232, 16 A. 2d 409, 414: Tate v. Metropolitan Life In-

surance Co., 149 Pa. Superior Ct. 558, 562,27 A. 24

283, 285). Cf. also Berardini v. Kay, 326 Pa. 481, '

192 A. 882.” ; :

The defendant also cites in support of its conten-

tion the case of Laughlin v. McConnel, 201 Pa. Super. :

180, (1963) wherein the Pennsylvania Superior Court 4

stated at page 183 that: )

“Fraud must be established by clear and satis-

factory evidence, as it is never presumed. Davis v.

Carbon County, 362 Pa. 322, 85 A. 2d 862; Pusic v. |

Salak, 261 Pa. 512, 104 A. 751. A party who relies :

on fraud to establish a claim has the burden of prov-

ing by cles and convincing evidence the facts upon

which the alleged fraud is based. Bayout v. Bayout,

373 Pa. 549, 96 A. 2d 876. Fraud must be proved by

more than a mere preponderance of evidence. Noth-

ing short of evidence precise, clear, and indubitable

18a

A li Opin

can be allowed to overturn a written instrument.

McCreary v. Edwards, 113 Pa. Superior Ct. 151, 172

A. 166.

This rule in fraud cases that evidence must be

clear, precise, and indubitable, means that witnesses

must be credible, must distinctly remember the facts

to which they testify, must narrate details exactly,

and that evidence must be of such weight as to make

out facts alleged beyond a reasonable doubt, thereby

enabling the jury to come to a clear conviction, with-

out hesitancy, of the truth of the precise facts in

issue. Gerfin v. Colonial Smelting d Refining Com-

pany, Inc., 374 Pa. 66, 97 A. 2d 71. The oral testi-

mony of one witness which is uncorroborated and

unsupported by any other evidence, and which is

diametrically opposed by the testimony of another

witness, cannot be considered evidence of such

weight as to make out a case beyond a reasonable

doubt.”

With defendant’s contention that these cases stand

for the appropriate principles of Pennsylvania law we

agree. In fact the Trial Judge followed them in his

charge to the jury, supra.

The defendant does not question that the jury acted

improperly in its finding but states that “as a matter of

law” the plaintiff failed to meet its burden of proof.

With this argument of the defendant we cannot agree!

We find that the record amply supports the jury’s ver-

diet on the question of liability and that there was more

than ample evidence to justify the Trial Judges’ sub-

mission of this issue to the jury for their determination.

In reaching this conclusion we have kept in mind that

19a

_ lic—Opini

fraud is never presumed but, rather, must be proved by

clear, precise and indybitable evidence testified to by

credible witnesses and that it must Possess such weight

and directness as to make out the fact alleged beyond

à reasonable doubt.

The Pennsylvania Law Encyclopedia, Fraud, Sec-

tion 2, summarizes the Pennsylvania law dealing with

the necessary elements of fraud as follows:

“The essential elements of actionable fraud consist

of, (1) a misrepresentation, (2) a fraudulent utter-

ance thereof, (3) an intention by the maker that

Viewing the facts of the instant case in light of law

#s set forth in the Neuman case, supra, we must neces.

sarily arrive at the conclusion that, as a matter of law,

the case was one for the jury’s consideration.

(a) A misrepresentation ?

4 2

20a oe

Appendix—Opinion.

sion was a healthy body that was functioning well in the

heating and cooling field and that it had a bright future

particularly in the gas fired field. Great projections were

made by defendant of the marketability of TSA’s prod-

ucts. But such was not the truth. TSA was in a precari-

ous position because of the defect in the heart of the gas

fired furnace, the very type of furnace that was becom-

ing the predominate factor in the heating industry. Al-

though this information was known to the defendant —

as we pointed out it had every reason to be and was con-

cerned — it did not make this information known to the

plaintiff but in fact concealed it.

Plaintiff was instructed when it was making an ex-

amination of the defendant’s plant and talking with

their employees not to let it be known that they were

contemplating purchasing the business nor ask any

questions that would show the full extent of their in-

terest. Moreover, the plaintiff was not permitted to go

to the defendant’s retail sellers and inquire as to the

merchantability of the defendant’s product. Plaintiff’s

examination of the TSA division was greatly limited and

restricted by the defendant. The area within which they

were permitted to inspect was so narrowly limited that

as to the merchantability and marketability of the TSA

product the plaintiff had to rely on the picture as pre-

sented by the defendant. This picture did not accurately

represent the true nature of what the parties were bar-

gaining for.

Not to be considered as an isolated factor but one

of great importance is the response of the defendant to

plaintiff’s inquiry about cracking or defects in the heat

exchanger the day before the contract was signed. One

7 21a

Appendix—Opinion.

of the plaintiff’s executives heard from one of its em-

ployees that the TSA heat exchanger was defective and

he went to the executive head of the defendant and in-

quired about it. Defendant stated that the problem was

not serious, that it was one that is encountered in the

manufacturing business and that it could be worked out.

The true significance ‘of the trouble was not told to

plaintiff. Defendant did not state that the trouble with

the heat exchanger was one of long standing, that it

existed for about one year and that defendant was un-

able to find a solution to it, that it was so serious that

defendant in the early part of 1954 had set up a Heating

Committee with the idea in mind that a concerted effort

be made by the TSA division to correct it, that it was

recommended that a large amount of the heat ex-

changers be scrapped and that, among other things, a

reserve was established to write off the heat exchangers.

There was sufficient evidence for the Court, as a

matter of law, to submit to the jury and to justify the

jury’s finding that there was a false misrepresentation.

(b) A fraudulent utterance thereof.

The-defendant as we have Stated and restated in

ths opinion painted a false picture of its TSA division

to the plaintiff. This painting was done vividly for all

of plaintiff’s executive officers and personnel to see.

It was clearly done willfully because the executive offi-

cers of defendant who painted it did so with full knowl-

edge of the true facts as they existed. This is more than

adequately demonstrated by the minutes of the defend-

ant's Heating Committee and the letters of its executive

officers even without reference to their own oral testi-

mony.

err

SOR WEY westerners

* mne OR EE EON MRRBRNERET «oR om on

22a N

N Appendiq Opinion.

That the misrepresentations were uttered cannot

be denied for the contrary has been clearly and precisely

proven. Nor can it be denied that they were fraudulent

since they were willful.

(e) Intention by the defendant that the 23

would be induced to act.

Almost at the inception of the negotiations between

the plaintiff and the defendant in November of 1954, the

plaintiff asked the defendant a series of questions to

which the defendant responded (See Appendix A here-

to). The questions were submitted by the plaintiff for

the avowed purpose of giving it information on which

to make an evaluation as to the advisability of pur-

chasing the TSA division. The answers were given with

the intention on the part of the defendant of inducing

the plaintiff to act. From this beginning down to the

ultimate consummation of the negotiations in the con-

tract of March 31, 1955, the defendant continued to

fraudulently utter misrepresentations to induce the

plaintiff to act. Other circumstances from which this in-

tention may have been gleaned were: the sterile inspec-

tion of the TSA division plants, the restriction of inter-

rogation of retailers, the transmittal to plaintiff of the

McKinsey Report which failed to point up the defects in

the heat exchangers, the failure to readily state the true

nature of the marketability of the furnaces, and many

others, while at the same time painting the false picture

of hope and prosperity. It was reasonable to assume that

the representations of the defendant were uttered for

one purpose and one purpose only and that was to induce

the plaintiff to execute, as it did, the contract of March

31, 1955. ;

23a

Appendix—Opinion.

(d) Justifiable reliance by the plaintiff on the

representation of the defendant. f a

Here, it was evident from the totality of circum-

stances that in arriving at the decision to enter into the

contract of March 31, 1955 the plaintiff relied upon the

picture of the TSA division as painted by the defendant.

The plaintiff's secretary-treasurer, John Stuart, one of

the signatories to the contract, ‘stated that had he

known of the true facts that he would not have executed

the contract nor would the plaintiff have been a party

to it.

Moreover, because of their satisfactory, previous

dealings together, the close friendly business relation-

ship between the executive officers of the two companies:

and the personal friendship between Mr. Scaife and Mr.

Rockwell, the plaintiff was justified in its reliance upon

‘the defendant’s misrepresentations. ö

(e) Damage to the plaintiff as the proximate re-

sult.

The record shows that as the direct and proximate

result of the plaintiff's justifiable reliance on the de-

fendant's mis representations that were fraudulently ut-

tered with the intention to induce the plaintiff to act, the

plaintiff was damaged. The question of damages is more

fully discussed infra. 5

—

It is our opinion that the evidence in this case amply

supports the contention of Scaife that it was damaged

as a matter of fraud practiced on it by Rockwell as de-

fined by the Pennsylvania Supreme Court in the case of 2

Neuman v. Corn Exchange Natl. Bank and Trust Co.,

cited supra. .

the

Appendix—Opinion.

B. Did the Court err in charging the jury that

they could consider that Rockwell had a duty

of full disclosure of facts which they had

knowledge and which were relevant to the ne-

gotiations? ö

In the case of Zahn v. McMillin, 179 Pa. 146 (1897)

Pennsylvania Supreme Court stated at page 153

that:

“If he had been a member of the first associa-

tion, and had untruthfully represented a material

fact to his associates to induce them to part with

their interests, that would haye been conclusive

against him, because of the legal presumption of a

confidential relation; but if there was not presump-

tively a confidential relation, still, was there one

in fact, or such relation as warranted them in re-

lying on the truthfulness of his statements? The

principle controlling such cases, and deducible from

all the authorities, is well stated by Perry on Trusts,

vol. 1, p. 179:

‘There are cases where a party must not be

silent upon a material fact within his knowledge,

although he stands in no relation of trust and confi-

dence . . . If a party knows that another is relying

upon his judgment and knowledge in contracting

with him, although no confidential relation exists, -

and he does not state material facts within his

knowledge, the contract will be avoided; for know-

ingly to permit another to act as though the action

was confidential, and yet not state material facts,

is fraudulent. It is said that a party in such circum-

stances is bound to destroy the confidence reposed

25a

Appendi Opinion.

in him, or to state all the facts that such confidence

demands.“ 5

In the instant case the facts as produced at trial justi-

fied the submission to the jury of this issue. The record

shows by clear, precise and indubitable evidence that

the defendant Rockwell had knowledge of the defect in

the heat exchanger and its serious consequences for a

long time prior to and during the cotirrse of the negotia-

tions. The evidence to support this finding comes not

only from the plaintiff’s witnesses but from the defend-

ant’s. It is not only confirmed by this oral testimony but

finds support in the written committee reports of the

defendant’s Heating Committee as well as correspon-

dence between defendant’s executive officers and em-

Ployees of TSA. Moreover, the record shows that the

Plaintiff was relying upon Rockwell’s superior knowl-

edge in the heating field but also on its experience with

and knowledge of the particular heaters which were the

subject of negotiation. In light of the record in this case

the Trial Judge’s charge on this point is more than

warranted. The charge being + proper expression of

the law under the facts it cannot be considered as error.

C. Did the Court err in submitting the case to the

jury on the theory of fraud and deceit?

As we initially noted the plaintiff captioned its

complaint as one “in assumpsit.” Indeed its first three

counts were based upon the contract of March 31, 1955

and justified their having been “in assumpsit,” however,

the fourth count, the only one submitted to the jury,

was clearly one that should be dubbed “in trespass.”

Defendant contends that we erred when we permitted a

joinder of the assumpsit and trespass causes in the

Same complaint. If this were the case we would agree .

enen

War . NN

;

5 2

Defendant cites to us the case of Cunningham v.

Joseph Horne Co., 406 Pa. 1 (1961), for the principle

that assumpsit and trespass cannot be joined in the

same complaint as alternative remedies and that sepa-

rate suits must be filed. We do not feel that the principle

of this case has been violated inasmuch as the complaint

as ultimately considered by the Court and the jury

only contained one count.

“Amendment is freely allowed.

“No limit is imposed on the time when the

amendment may be made, it has been allowed even

after the trial (Goodrich-Amram, Procedural

Rules Service, 1, pages 223, 224 and 225.)

Being of the opinion that the record amply sustains

and justifies d verdict for Scaife on the issue of liability

Il The Damages.

Concluding as we have that the defendant's mo-

tions for a new trial and judgment n. o. v. are without

In the Trial Judge's charge to the jury, the jury was

instructed that in the event the plaintiff was entitled to

4 verdict on the question of liability that they should

compensate the plaintiff for all the legal damages which

it sustained as the direct and proximate cause of the

defendant's fraudulent misrepresentations. The Court

instructed the jury that it should consider: {1) the

A ppendiz—Opinion.

penses reasonably incurred in an effort to mitigate any

damages which it had sustained; and, (3) interest un-

der certain circumstances. As we previously noted the

jury returned a verdict of damages generally of $810,-

811.00 and a separate amount of $389,189.29 for interest.

It is the contention of the defendant that this verdict

should be set aside and a new trial granted.

A. The question of damages generally:

(1) Out-of-pocket loss

29a

A ppendix—Opinion.

owner of TSA and in all other respects the business

would continue to operate.

The Trial Judge charged the jury that one of the

elements of damages that they should consider was the

out-of-pocket damages that the plaintiff sustained. In

other words the difference between what the plaintiff

paid for the business and what it was worth. We feel

that this is the proper measure of damages and is in

accordance with the rule of the Pennsylvania Supreme

Court enunciated as far back as the case of Browning v.

Rodman, 268 Pa. 575 (1920), and as recently as in the

case of Tilghman v. Dollenberg, 418 Pa. 604 (1965).

In the Dollenberg case the Pennsylvania Supreme Court

speaking through Mr. Justice O’Brien stated the rule as

follows: | 7

“. .. the difference between the real value of the

property purchased at the time of the sale and what

was paid for it.. (418 Pa. 604, 610).

In the instant case the plaintiff purchased the TSA

business for $3,749,827.54 and the damages to the plain-

tiff would be the difference between that amount and

the actual value of the business as purchased by the

plaintiff.

At the outset it is important to note that the Trial

Judge did not allow nor should the jury have been per-

mitted to consider the question of loss of profits.

In determining the out-of-pocket damages of the

plaintiff it would be proper for the jury to treat TSA as

a going concern and to consider the following factors.

The value of the equipment in accordance with in-

ventory value as contrasted with its actual value. In this

case the plaintiff agreed that the inventory value of the

Te 9 ys cone

30a

A ppendix—Opinion.

equipment purchased (such as the heat exchangers)

would be used in order to arrive at the final purchase

price. Plaintiff contended and offered evidence to sub-

stantiate its contention that some of the equipment was

of no value (or at most scrap value). The difference be-

tween these two would be a proper factor to consider in

answering the main question.

Another factor that would be a proper consideration

in this regard is the effect that the defective heat ex-

changers and the consequential defective gas fired furn-.

aces would have on the goodwill not only of the gas fired

furnaces but of all the products of TSA.

The fact that there was a large number of com-

plaints about the noise that installed gas fired furnaces

were making is a proper factor to consider because, as

it has been shown, this is not only a factor that goes

generally to the goodwill of the business but to the

ability to maintain TSA retail outlets.

While it is true that a verdict cannot be the result

of speculation and conjecture it need not in a case such

as this be capable of ascertainment with mathematical

exactness. There are in this case as in many a trespass

case areas of damages which can be presented only in

general terms and where the final determination thereof

is properly a matter for the jury. Thus it is with the

question of the value of what did the plaintiff receive

for the $3,749,827.54 which it paid to the defendant?

(2) Mitigating Damages.

It is hornbook law that when a person has been

wrongfully damaged by the tortuous conduct of another

that he must act reasonably under the circumstances to

3la

4 1

mitigate the damages which naturally flow from such

conduct. This the plaintiff attempted to do. Once it be-

came aware of the significance of the defective heat ex-

changers to the new business which it purchased it pro-

ceeded to take steps to correct the defect and, thus, to

lessen the consequential damages that such defect

caused. Scaife’s conduct in this regard consisted, inter

alia, of retaining the services of Dr. Anthony, Doctor of

Science from the Mellon Institute, to conduct a scientific

study and evaluation of the problem, the scrapping of

unsafe exchangers, testing and retesting of different

structural designs and an in-the-field investigation of in-

stalled furnaces. The question of what was reasonable

to mitigate the plaintiff's damages was submitted to the

jury for their consideration. While this is not an element

of damages which is subject to determination with math-

ematical certainty it is one, which based upon the record

in this case, was properly submitted to the jury.

B. Interest.

As we have indicated the Trial Judge submitted to

the jury the question of whether or not the plaintiff

should be awarded interest on its claim on what we find

to be proper instructions and, inasmuch as defendant

does not argue that this was error, we will not discuss it.

C. The excessiveness of the verdict.

In an action for fraudulent misrepresentations dam-

ages do not have to be proven with certainty. It is suffi-

cient if there is presented proper evidence from which

the jury may reasonably find the amount of the plain-

titk's harm. In the instant case it is conceivable that

plaintiff suffered a legally compensable harm in excess

„

renne

32a °

Appendix—Opinion.

of the verdict but it has failed to produce competent evi-

dence to prove this. Based on the record which we have

before us we are of the opinion that the jury’s verdict is

excessive. We do not feel that an examination of the

record in a light most favorable to the plaintiff would

justify a verdict in plaintiff's favor for more than

$300,000.00 plus interest in the amount of $143,999.00.

Because we find the verdict to be excessive we are going

to order a new trial limited to the issue of damages un-

less the plaintiff within thirty (30) days of this opinion

and the accompanying order enters a remittitur damnum

with the Prothonotary of this County in the sum of

$756,001,28.

D. Admission of Evidence.

The defendant in its argument and in its brief con-

tended that the Court erred in admitting into evidence

the limited portions of Plaintiff’s Exhibits 64 and 69 and

permitting the jury to consider them in the course of

their deliberation on the question of damages. We have

considered the arguments presented by the defendant in

this particular and feel that ihey are without merit.

While we do not disagree with the principles contained

in the authorities cited to us by the defendant, we feel

that in light of the evidencé and the Court's ruling that

they are inapplicable.

It is the opinion of the Court en banc that the de-

fendant’s contentions in this particular are without

merit and the admission into evidence of the limited

portions of Plaintiff's Exhibits 64 and 69 were not preju-

dicial error necessitating the — of a new trial.

Appendix—Order.

ORDER OF COURT

AND Now, to-wit, this 4th day of August, 1969, in

accordance with the foregoing opinion it is hereby

ORDERED, ADJUDGED and DECREED as follows:

1. That the motion of the defendant, Rockwell-

Standard Corporation, for judgment n. o. v. is. hereby

DENIED; and, a

2. That the, motion of the defendant, Rockwell-

Standard Corporation, for a new trial n. o. v. is herby

DENIED insofar as it relates to the question of liability

of the defendant to the plaintiff in the within case; and,

3. That the defendant’s motion for a new trial inso-

far as it relates to the question of damages be and the

same is hereby GRANTED unless the plaintiff causes to be

entered on the record in the Office of the Prothonotary

of this County a remittitur damnum in the sum of

$756,001.28 within thirty (30) days from the date of

this order.

By THE Court:

R. H. S., IR.

Appendiz—Opinion.

1538]

IN THE SUPREME COURT OF PENNSYLVANIA

WESTERN DIstrRIcT

. SCAIFE COMPANY, a Pennsylvania

corporation, Appellant in No. 43 Nos. 41 and

V. 43 March

ROCKWELL-STANDARD CORPORATION, ‘ Term, 1970

| a Pennsylvania corporation,

Appellant in No. 41

Appeals from Order of August 4, 1969, and Order of

September 4, 1969, Amending Order of August 4, 1969,

of Court of Common Pleas of Allegheny County,

Civil Division, No. 3342, July Term, 1960.

. Opinion

JONES, J. Filed: December 20, 1971

Following a trial by jury, a verdict was rendered in

favor of Scaife Company (plaintiff below and appellant

in No. 43, March Term, 1970) and against Rockwell-

Standard Corporation (defendant below and appellant

in No. 41, March Term, 1970) in the amount of $1,200,-

000.28.1 While the court en banc denied Rockwell’s mo-

tions for judgment n.o.v. and for a new trial, a new trial

on the issue of damages was ordered ‘unless Scaife filed

a remittitur damnum in the amount of $756,001.28. Upon

Scaife’s failure to file this remittitur, the court below

interest of $389,189.28.

1. The jury awarded damages of $810,811.00, and

35a

ordered a new trial limited solely to the question of dam- :

ages and these cross appeals followed.

A narration of the factual background of these ap-

peals begins with Rockwell’s merger on October 30,

1953, with the Timkin-Detroit Axle Company and the

concomitant acquisition of the Timkin Silent Automatic 0

(hereinafter TSA) division as a part of Rockwell’s ö

corporate structure. Although the TSA product was :

long considered the best in the oil-fired furnace indus-

try, this type of business was far removed from Rock-

well’s chief concern, the manufacture of automotive

parts. Moreover, reflecting the improvement and ex-

pansion of natural gas line facilities in the United

States, the fuel. furnace industry was drastically chang-

ing from oil-fired furnaces to natural gas-fired furnaces.

Attempting to meet the challenge of its competitors, 2

TSA developed and marketed its own gas-fired furnace. ö

Besides this factual discussion, an explanation of

the mechanical operation of a gas-fired furnace is neces-

sary. The key component of a gas-fired furnace, simple

but indispensable, is the heat exchanger. However, the

_ TSA heat exchanger was defective in two respects: it

was noisy and it cracked. As best stated by the court

below, [fJor a Timkin Silent Automatic furnace to make

noise is one thing but for it to crack is another.” For

this reason the TSA gas-fired furnace was not func-

tional and, therefore, not marketable.

Although it is a matter of some dispute whether

Rockwell or Scaife initiated negotiations for the sale:

and purchasé of the TSA division, negotiations did com-

mence in the Fall of 1954. Reviewing the record, one

fact is abundantly clear: Rockwell was very much aware

of the defective condition of its heat exchanger and the

TERE OD e wenn U G0 Nee eee egg

PRO eee dee pn ae pft

36a

Appendix—Opinton.

effect of this defective component on the marketability

of its final product. Besides numerous complaints by

customers, Rockwell’s cognizance of this problem is

demonstrated, inter alia, by (1) its creation of a Heat-

ing Committee to scrutinize the situation; (2) its un-

availing, trial-and-error method of improvement; and

(3) Rockwell’s establishment of an accounting reserve

of $26,000.00 per month to permit the writing-off of the

heat exchangers. To capsulize the controversy, Scaife

allegedly knew none of these facts when the contract for

the sale of the TSA division was executed on March 31,

1955.

For a period of many months, no allegation of fraud

was pressed by Scaife and Scaife successfully developed

a new type of heat exchanger. However, claiming that

damage was already done, a complaint employing four

theories of recovery was filed by Scaife. After receiv-

ing the evidence, the trial judge ruled that Scaife could

go to the jury on only one of these theories: fraudulent

misrepresentation.2 At this point we deem it wise to

separate our discussion of these appeals.

No. 41, March Term, 1970

The primary issue of this appeal by Rockwell is

whether there is sufficient evidence of fraudulent mis-

representation to justify the jury’s verdict. Of course,

if the evidence does not establish Rockwell’s liability,

we need not reach the issue presented by Scaife’s appeal,

2. The three other theories were breach of con-

tract, breach of warranties and unjust enrichment. The

trial judge’s rejection of these theories was not assigned

as error before either the court en banc or this Court.

Hence we will not consider this point.

AP Rated fe a GREER

37a

A ppendix—Opinion.

No. 43, arch Term, 1970, concerning the amount of

damages. : |

Summarizing the essential elements of this cause

of action, Mr. Justice (later Chief Justice) Jones in

Neuman v. Corn Exchange Nat. Bank and Trust Co.,

356 Pa. 442, 450, 51 A. 2d 759, 763 (1947), stated, “there

must be (1) a misrepresentation, (2) a fradulent utter-

ance thereof, (3) an intention by the maker that the

recipient will thereby be induced to the act, (4) justi-

fiable reliance by the recipient upon the misrepresenta-

tion and (5) damage to the recipient as the proximate

result.“ Accord, Eden Roc Country Club v. Multhauser,

416 Pa. 61, 204 A. 2d 465 (1964) ; Savitz v. Weinstein,

395 Pa. 173, 149 A. 2d 110 (1959). Concerning the proof

of fraud, our cases have consistently enunciated a very

high standard. E.g., Yoo Hoo Bottling Co., Inc. v.

Leibowitz, 432 Pa. 117, 247 A. 2d 469 (1968) (“clear,

precise and convincing”); Gerfin v. Colonial Smelting .

and Refining Co., Inc., 374 Pa. 66, 97 A. 2d 71 (1953)

(“clear, precise and indubitable”) ; New York Life Ins.

Co. v. Brandwene, 316 Pa. 218, 172 Atl. 669 (1934) “clear

and satisfactory”). The question then becomes whether

Scaife's proof of every element met this exacting stand-

ard. ö

Combining the first and second criteria, we must

examine whether a fraudulent misrepresentation was

uttered. Initially, we not that a fraudulent misrepre-

sentation can take many forms: “ ‘fraud consists in any-

thing calculated to deceive, whether by single act or

combination, or by suppression of truth, or a.sugges-

tion of what is false, whether it be direct falsehood or

by innuendo, by speech or silence, word of mouth, of.

look or gesture. It is any artifice by which a person is

HOE f een —

SEs ati AEE igo erences ne N SERRE N Ne

38a

Appendix—Opinion.

deceived to his disadvantage’: [citation omitted].”

Reichert Estate, 356 Pa. 269, 274, 51 A. 2d 615, 617

(1947). Besides our previous recitation of the facts,

additional evidence in this regard, both documentary

and testimonial, are very pertinent.

First, during the negotiations, Scaife submitted

twenty-six questions to Rockwell concerning the TSA

division, including, inter alia: “why is this division for

sale” and “what reasons for declining sales volume and

faster decline of profits for recent years.” Despite Rock-

well’s awareness of the defective heat exchanger, no

mention was made of this factor. Second, Scaife was

not permitted to question TS’s engineers and retail deal-

ers during the negotiations. Third, testimony by various

Scaife executives, if believed, indicated that any hint of

trouble was excused by Rockwell officials as minor

problems encountered daily by manufacturers. In light

of the enormity of TSA’s problem, we cannot reject the

jury’s implicit finding that Rockwell either deliberately

evaded or actively concealed the true situation. -Overall,

2 share the opinion of the court en banc that, there

was sufficient evidence for the Court, as a matter of law

to submit to the jury and to justify the jury’s finding

that there was a false misrepresentation.”

The third element—an intention by the maker that

the recipient would thereby be induced to act—is easily

satisfied. The rosy picture painted by Rockwell during

the course of the negotiations, coupled with Rockwell’s

failure to disclose the malfunctioning of its heat ex-

changer, clearly supports the jury’s verdict.

Although neither party has specifically focused its

argument on the fourth criterion—justifiable reliance

—it is evident from the facts stressed by each side that

39a

Appendix—O pinion. .

the crux of the legal controversy concerns this issue.

Relying heavily on Emery v. Third Nat' Bank, 308 Pa.

504, 162 Atl. 281 (1932), Rockwell srincipalfy argues

that Scaife knew or should have known of the defective

heat exchanger and that any damage was essentially

self-inflicted. On the other hand, one major facet of

Scaife’s position, discussed by the court in its charge,

is that the long-standing business and personal relation-

ship between the executives of each corporation, while

not attaining the legalistic stature of a “confidential

relationship,” could justify a factual finding that Scaife

reposed a specific confidence in Rockwell which was

knowingly abused by Rockwell.

In Emery, this Court stated:

“A misrepresentation as to the subject of a

proposed sale will not support an action for deceit

if the subject be open to the buyer’s observation.

In Mahaffey v. Ferguson, 156 Pa. 156, 169, 27 A. 21,

this court quoted approvingly the statement of

Chancellor Kent, Commentaries, 2d volume 494-5,

that the law does not go to the romantic length of

giving indemnity against the consequences of in-

dolence and folly, or a careless indifference to the

ordinary and accessible means of information. The

same opinion quotes from Slaurhter v. Gerson, 13

Wallace 379, as follows: Where the means of knowl-

edge are at hand and equally available to both par-

ties, and the subject of purchase is alike open to

their inspection, if the purchaser does not avail

himself of these means and opportunities, he will

not be heard to say that he has been deceived by

the vendor’s misrepresentations.’ This court has

40a

Appendix—O pinion.

consistently adhered to these principles. (Citations

omitted].”

308 Pa. at 511-12, 162 Atl. at 283. Utilizing this concept,

Rockwell accentuates certain facts: (1) several market-

and engineering reports indicated TSA’s sluggish entry .

into the gas furnace market; (2) Scaife executives had,

at least, a glimmering of this problem; and (3) Dr.

Anthony, a metallurgical engineer employed by the

Mellon Institute, testified that it would be obvious from

an inspection of the heat exchanger testing room (a

Scaife official and Scaife’s chief engineer had toured

one of these rooms) that the heat exchanger was de-

fective. However, the evidence introduced by Scaife re-

pudiated each of these allegations. Owing to this ex-

tremely close, factual controversy occasioned by our

rigorous standard of review as well as the possibility

of a specific confidence reposed by Scaife in Rockwell,

we believe the trial judge did not err in allowing this

case to go to the jury and that the jury’s verdict is

sufficiently suported by the evidence.

On these facts, there is undisputed evidence of con-

tinuous, business transactions between the corporations.

Moreover, close, personal relationships existed between

the executives of both companies. Of course, Rockwell

contends that familiarity and personal relationships did

not influence this business transaction. Accordingly,

the trial judge, correctly employing this Court’s lan-

guage in Zahn v. McMillin, 179 Pa. 146, 153, 36 Atl. 188,

189-90 (1897), stated in his charge to the jury: “...

there are certain circumstances where a party must not

be silent upon a material fact within his knowledge, al-

though he stands in no relationship of trust and con-

41a

Appendic Opinion.

fidence. If a party knows that another is relying upon

his judgment and knowledge in contracting with him,

although no confidertial relationship exists — and I will

say that none existed in this case — and he does not

state material facts within his knowledge, the contract

will be avoided, for knowingly to permit another to act

as though the action were confidential and yet not state

material facts is fraudulent. It is said that a party, in

such circumstances, is bound to destroy the confidence

reposed in him or to state all the facts that such con-

fidence demands.” See, also, Restatement of Torts § 542

(1938). Thus, the jury could have concluded that Rock-

well knowingly abused Scaife’s confidence which would

further justify Scaife’s reliance.

Having established each of the above elements of

this cause of action, there is no question of proximately

caused damages other than the extent thereof. On bal-

ance, we are of the opinion that Scaife introduced clear

and satisfactory evidence upon which the jury deter-

mined that Scaife was the victim of Rockwell’s fraud-

ulent misrepresentation.

Rockwell next argues that Scaife’s failure to com-

plain or give notice of any breach for a period of nine-

teen months after the corporate takeover constitutes

a waiver of any recovery.? “The affirmance of a con-

tract induced by fraud of the seller does not extinguish

the right of the purchaser, and it is not a waiver of the

fraud, nor does it bar the right of the purchaser to re-

cover damages for the fraud. [Citations omitted].”

Tilghman v. Dollenberg, 418 Pa. 604, 610, 213 A. 2d 324,

327 (1965). “Affirmance of the contract is not a waiver

of the fraud; nor does it bar the right to recover: it does

42a

Appendi - Opinion.

bar a subsequent recission.” Miller v. Central Trust &

Savings Co., 285 Pa. 472, 486, 132 Atl. 579, 584 (1926).

See, also, Emery v. Third Nat'l Bank, 314 Pa. 544, 171

Atl. 881 (1934). Accordingly, Scaife could affirm the

contract and yet maintain this action for fraud.

No. 43, March Term, 1970

As noted earlier, Scaife’s appeal questions the pro-

priety of the new trial ordered by the court en bane

limited to the issues of damages because of its conclu-

sion that the verdict was excessive and Scaife’s failure

to file the required remittitur. Stated differently, the

narrow issue presented is whether the combined award

of $1,200,000.28, damages plus interest, is excessive.

In this area of law we begin with the well-recog-

nized principle that the grant or refusal of a new trial

because of the excessiveness of the verdict is peculiarly

within the discretion of the trial court and ‘will not be

reversed unless an abuse of discretion or an error of law

has been committed. See, e.g., Murphy v. Taylor, 440 Pa.

186, 269 A. 2d 486 (1970); Connolly v. Philadelphia

Transp. Co., 420 Pa. 280, 216 A. 2d 60 (1966); Guzman

v. Bloom, 413 Pa. 576, 198 A. 2d 499 (1964). Recognizing

the difficult task encountered by an appellate court in

reviewing the record when a trial court merely assigns

3. Rockwell’s argument is primarily based on Sec-

tion 2-607(3) of the Uniform Commercial Code, Act of

April 6, 1953, P. L. 3, S 2-607 (3), 12A P. S. $2-607(3).

Since the jury’s verdict was based on fraudulent mis-

representation and not on any theory involving the Uni-

form Commercial Code, Section 2-607 (3) is inapplicable.

However, as hereinafter noted in our textual discussion,

a similar, common law concept exists.

43a

Appendix—O pinion. .

conclusory statements — interests of justice,” “shocks

the court’s conscience” and “substantial justice’ — we

have attempted to discharge this practice. See, Gilligan:

. Shaw, 441 Pa, 305, 272 A. 2d 462 (1971); Hilliard v.

Anderson, 440 Pa. 625, 271 A. 2d 227 (1970); Kralik v.

Cromwell, 435 Pa. 613, 258 A. 2d 654 (1969); Beal v.

Reading Co., 370 Pa. 45, 87 A. 2d 214 (1952) ; Bellettiere

v. Philadelphia, 367 Pa. 638, 81 A. 2d 857 (1951). In

Hilliard, the defendant was granted a new trial upon the

plaintiff’s failure to file a remittitur solely because “the

verdict was excessive and shocked the conscience of the

court.” Primarily concerned with the “shock the con-

science“ test, we noted, “[t]he court should state the

reasons for this conclusion in order that we may have

the opportunity of intelligently determining if an abuse

of discretion occurred.” 440 Pa. at 628, 271 A. 2d at 229.

We now add the “excessive verdict” conclusion to that

list of judicial statements requiring additional, support-

ing reasons. See Spangler v. Helm’s New York-Pitts-

burgh Motor Express, 396 Pa. 482, 153 A. 2d 490 (1959).

Relying on language in past decisions of this Court,

Rockwell contends that the sole measure of damages in

a case of this nature is the difference between the con-

sideration paid for the property and its true market

value, as of the date of the sale. See, Tilghman v. Dollen-

berg, 418 Pa. 604, 213 A. 2d 324 (1965) ; Neuman v. Corn

Exchange Nat. Bank and Trust Co., 356 Pa. 442, 51 A. 2d

759 (1947). See, also, Restatement of Torts § 549a

(1938). Accordingly, Rockwell contends that Scaife’s

proof of its operating cost which included expenses re-

quired to produce and market the TSA product inflated

the jury’s verdict, whereas these figures should not have

44a

Appendix—O pinion.

been presented to the jury.“ Since Scaife’s evidence

greatly exceeded the jury’s verdict, we believe the trial

judge abused his discretion in ordering a new trial after

Scaife failed to file the required remittitur. We realize,

however, that our conclusion begs the question whether

Scaife’s expenses and losses are includable in assessing

damages.5

Initially, we recognize the position taken by many

jurisdictions that losses and expenses incurred by the

defrauded party as a proximate result of the fraud

may be recovered. See, 37 C. J. S. Fraud & 141 (1943);

Restatement of Torts § 549 b (1938). Moreover, we

noted in Neuman that, [while formulated rules re-

lating to the appropriate measure of damages in varying

circumstances have to some extent become fixed, they

4. Perhaps this reasoning was accepted by the

trial judge; this, however, we cannot determine with

certainty since no explanation was given. Nor can we

make this determination from the jury’s verdict since

Scaife’s suggestion, prior to the court’s charge, that the

jury be instructed to itemize its verdict was rejected as

untimely by both Rockwell and the trial judge.

5. Rockwell also contends that the evidence pre-

sented by Scaife — prepared summaries of Scaife’s

voluminous business records — was inadmissible under

the rules of evidence. Although the documents were

available to Rockwell for several years prior to trial, no

attempt was made to inspect these records until trial.

Unfortunately, portions of this original mass of material

were destroyed. Owing to this partial destruction as well

as the sheer volume of these records, Scaife only intro-

duced summaries. We do not believe this was error. See,

IV Wigmore on Evidence § 1230 (3d ed. 1940). Even if

there was error, there was no reversible error since

Scaife’s supporting witnesses were extensively cross-

examined on these figures. 7

45a

A ppendix—O pinion.

are by no means immutable but bend to the exigencies .

of the particular case in order that just compensation

may be ascertained and awarded.” 356 Pa. at 457, 51 A.

2d at 766. Considering the demise of the oil-fired furnace

industry, the steps taken by Scaife and the expenses

thereby incurred to correct the defective heat exchanger

can be fully justified as sound business practice and

were proximately caused by Rockwell’s misrepresenta-

tion. Additionally, Scaife’s operating losses may not

be equated with the “benefit of the bargain” rule pro-

hibited in Neuman; whether all of these losses were

proximately caused by Rockwell’s fraud is, of course, a

question for the jury. In short, to apply the measure of

damages formula discussed in Tilghman to the sale

of a “defective” business would work a grave injustice. -

It is our opinion that the jury’s verdict is fully supported

by the evidence and should be reinstated.

Judgment, as modified, is affirmed. The record is

remanded with instructions to reinstate the jury’s ver-

dict. 7

Mr. Justice Cohen did not participate in the decision

of this case.

Mr. Justice Pomeroy did not participate in the con-

sideration or decision of this case.

Mr. Chief Justice Bell filed a dissenting Opinion.

46a ‘

: Appendix—Dissenting Opinion.

[538]

IN THE SUPREME COURT OF PENNSYLVANIA .

WESTERN DISTRICT

SCAIFE COMPANY, a Pennsylvania

corporation, Appellant in No. 43 Nos. 41 and

v. 43 March

ROCK WELI.- STANDARD CORPORATION, Term, 1970

a Pennsylvania corporation,

Appelant in No. 41 J

Appeals from Order of August 4, 1969, and Order of

September 4, 1969, Amending Order of August 4, 1969,

of Court of Common Pleas of Allegheny County,

Civil Division, No. 3342, July Term, 1960.

Dissenting Opinion

Bai, C. J. Filed: December 20, 1971

The lower Court granted a new trial to Rockwell-

Standard Corporation limited to the issue of damages

because the verdict was excessive. Our Court reverses

and reinstates the jury’s verdict because “the jury’s

verdict is fully supported by the evidence.” Further-

more, this Court for the first time in its history requires

the trial Judge (or lower Court) to state his (or its)

reasons why he (or it) believes the verdict was exces-

sive.

We all agree with the well-recognized principle that

the grant or refusal of a new trial because of the exces-

siveness of the verdict is peculiarly within the discre-

—

3 . 47a

Appendix—Dissenting Opinion.

tion of the trial Court, and will not be reversed unless

there is an abuse of discretion or an error of law which

controlled the outcome of the case. Connolly v. Phila.

Trans. Co., 420 Pa. 280, 216 A. 2d 60; Guzman v. Bloom,

413 Pa. 576, 198 A. 2d 499; Chambers v. Montgomery,

411 Pa. 339, 192 A. 2d 355.

For many years I have advocated and urged trial

Courts to state their reasons for granting or denying a

new trial. However, I believe that where a new trial is

granted by the trial Judge or lower Court because of.an

excessive verdict, this should not be mandatory. If a

trial Court gives the reasons which induced it to make

the Order it did, this would undoubtedly enable an ap-

pellate Court to more intelligently analyze and better

judge the lower Court’s decision. However, in many

cases this would likely expose the trial Judge to personal

hostility, because oftentimes he would have to state, as

the reason for his Order, that he did not believe the

plaintiff or the defendant or one or more of the wit-

nesses, or that such-and-such witness seemed to be con-

fused, or that he (or they) was inexperienced or not

convincing. While this would, I repeat, greatly aid an

appellate Court, we must remember when we come to

consider the question of an abuse of discretion that a

trial Judge sees and ‘hears the witnesses and, therefore,

is in a far better position than an appellate Court to

form a fair and just opinion on the point of excessive-

ness of the verdict.

Even more important, the Majority’s reversal of

the lower Court’s Order in this case, “because the jury’s

verdict was fully supported by the evidence,” does not

fall within the well-established legal principle which

the Majority itself reiterates, i.e., that the grant or

48a

Appendix—Dissenting Opinion.

refusal of a new trial... is peculiarly within the dis-

cretion of the trial court

I would therefore affirm the Order of the lower

Court which granted a new trial limited solely to the

question of damages.

49a

Appendix — Petition for Reargument.

IN THE SUPREME COURT OF PENNSYLVANIA

WESTERN DISTRICT

SCAIFE COMPANY, a Pennsylvania

corporation,

Respondent Nos. 41 and 43

V. March Term,

ROCKWELL-STANDARD CORPORATION, 1970

a Pennsylvania corporation,

Petitioner. 7

Appeals from the Order of the Court of Common Pleas

Civil Division of Allegheny County, Pennsylvania,

at No. 3342, July Term, 1960.

PETITION FOR REARGUMENT

Filed December 30, 1971

To the Honorable Justices of said Court:

Rockwell-Standard Corporation, petitioner, by its

attorneys, John C. Bane, Jr., Gilbert J. Helwig, J. Tom-

linson Fort and Reed Smith Shaw & McClay, hereby re-

spectfully requests this Honorable Court to grant it a

rehearing for the following reasons:

1. Petitioner was appellant at No. 41 March Term,

1970, and Scaife Company, respondent, was appellant at

No. 43 March Term, 1970.

2. These appeals were argued on December 1, 1970,

and on December 20, 1971 this Court (per Jones, J.)

filed its opinion affirming, as ~odified, the judgment

of the court below and remanding the record with in-

50a .

Appendix — Petition for Reargument.

structions to reinstate the jury’s verdict. Chief Justice

Bell filed a dissenting opinion. Mr. Justice Cohen did

not participate in the decision of the case. Mr. Justice

Pomeroy did not participate either in the consideration

or the decision of this case. A copy of the two filed

opinions is attached hereto as Exhibit A.

3. In its opinion a majority of this Court held that

there was sufficient evidence of fraudulent misrepre-

sentation before the jury to justify its verdict in favor

of respondent and that, as to damages, the jury’s ver-

dict in the amount of $1,200,000.28, damages plus in-

terest, was supported by the evidence.

. 4. Petitioner’s sole argument is directed towards

the action of this Court in holding that the court below

abused its discretion in finding that the jury verdict

of $1,200,000.28 was excessive and ordering the grant of

a new trial limited solely to damages after respondent

failed to file a remittitur in the amount of $756,001.28.

5. The majority opinion acknowledges the well-

recognized principle that the grant of a new trial be-

cause of excessiveness of the verdict is peculiarly with-

in the discretion of the trial court and will not be re-

versed unless an error of law has been committed or

that discretion has been abused. This Court has held

countless times that the trial judge, who hears and sees

the witnesses and receives the physical evidence, is in a

far better position than an appellate court, reading a

cold record, to evaluate the demeanor and credibility of

the witnessess and the weight to be given particular

items of evidence.

i 51a

Appendix — Petition for Reargument.

6. The majority recognizes “the difficult task en-

countered by an appellate court in reviewing the record

when a trial court merely assigns conclusory state-

ments interests of justice,’ ‘shocks the court’s con-

science’ and ‘substantial justice.“ The court further

States that it has attempted to discourage this practice

on the grounds that an appellate court does not have the

“opportunity of intelligently determining if an abuse of

discretion occurred” unless the lower court gives its

reasons for a conclusory statement. Hilliard v. Ander-

son, 440 Pa. 625, 271 A.2d 227 (1970). The majority adds

“the “excessive verdict’ conclusion to that list of judicial

statements requiring additional, supporting reasons.”

(Opinion, p. 10).

7. In granting the new trial, the court below

stated, without supporting reasons, its conclusion that

the jury’s verdict had been excessive.

8. Despite this Court’s sound and clearly enun-

ciated policy, the majority has found, without the bene-

fit of the supporting reasons of the lower court, that

such court abused its discretion in finding that the

jury verdict was excessive.

9. This action by the majority penalizes petitioner

because of the lower court's failure to follow the Su-

preme Court’s policy that conclusory statements of a

lower court require supporting reasons.

10. This action severely prejudices petitioner’s

rights and amounts to a denial of property without due

process of law. When this Court has before it only the

cold record and has not had the benefit of actually

52a

Appendix — Petition for Reargument.

hearing and seeing the witnesses testify, it must be

considered violative of the Due Process Clause for this

Court to reverse the order of the court below without

knowing the reasons for that court’s action.

11. Remanding the record so that the court be-

low can properly perform its obligations is consistent

with the proper exercise of this Court’s administrative

powers. ö

12. On numerous occasions this Court has held

that it is required to remand the record to the lower

court for a statement of reasons when the lower court

has acted without giving a rationale for such action.

Mallory’s Estate, 295 Pa. 406 (1929); Rankin v. Rankin,

224 Pa. 514 (1909) ; 9 Standard Pennsylvania Practice,

Ch. 40 §154. Federal appellate courts, including the

United States Supreme Court, have followed the policy

of remanding the case to the trial court, if there has

been an inadequate explanation of the trial court’s rul-

ing. Commissioner v. Duberstein, 363 U.S. 278 (1960);

5A Moore’s, Federal Practice £52.06 (2), p. 2718.

13. If the court below has reasonable grounds for

its order (and it must be so assumed), this court under

its own policy, must affirm that order. In a case in which

the facts are disputed and credibiliy is an issue, this

Court can not in the interests of justice assume that the

lower court could not set forth any reason for its ac-

tion which would not constitute an abuse of discretion.

WHEREFORE, petitioner respectfully requests that

this Court grant reargument limited to the question

whether the Due Process clause and proper administra-

Appendix — Petition for Reurgument.

tion of the court system require that the record be

remanded so that the court below can specify its rea-

sons for finding the verdict excessive.

Respectfully submitted,

JOHN C. BANE, JR.

GILBERT J. HELWIG

J. TOMLINSON FORT

REED SMITH SHAW & MCCLay

Attorneys for Rockwell-Standard

Corporation

Of Counsel:

Donald S. MacLeod

William F. Swanson, Jr.

Appendix—Order.

IN THE

SUPREME COURT OF PENNSYLVANIA

WESTERN DISTRICT

No. 41, 43 March Term, 1970

SCAIFE COMPANY, )

a Pennsylvania Corporation No. 3342

v. a July Term,

ROCKWELL-STANDARD CORPORATION, 1960

a Pennsylvania Corp.,

Appellant

Appeal from the Order of August 4, 1969 of the Court of

Common Pleas, Civil Division of the

of the County of Allegheny

Certified from the Record

December 30, 1971 Petition for Reargument, filed.

Order

“January 26, 1972

Petition denied.

Per Curiam”

IN TESTIMONY WHEREOF, I have hereunto set my

hand and the seal of said Court at Pittsburgh, Pa. this

20th day of April, 1972.

HELEN D. STEELE

Deputy Prothonotary

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.