Norco Equip. Co. v. Simtrex, Inc.Norco Equip. Co. v. Simtrex, Inc.
NORCO EQUIPMENT COMPANY, PLAINTIFF-APPELLEE vs. SIMTREX, INC., DEFENDANT-APPELLANT
JUDGMENT: REVERSED AND REMANDED
Civil Appeal from the Cuyahoga County Court of Common Pleas Case No. CV-518421
RELEASED: October 22, 2009
JOURNALIZED:
Richard E. Hackerd
2000 Standard Building
1370 Ontario Street
Cleveland, OH 44113
ATTORNEY FOR APPELLEE
Brent L. English
Law Offices of Brent L. English
M.K. Ferguson Plaza, Suite 470
1500 West Third Street
Cleveland, OH 44113-1422
N.B. This entry is an announcement of the court‘s decision. See
{¶ 1} Plaintiff-appellee, Norco Equipment Company, located in Ohio, distributes industrial air compressors manufactured by CompAir. Defendant-appellant, Simtrex, Inc., located in Pennsylvania, exports equipment to companies in the Middle East.
{¶ 2} In 2006, Norco filed suit against Simtrex, claiming breach of contract and unjust enrichment related to Norco‘s sale of an air compressor and other equipment to Simtrex, for which Simtrex had not paid. Simtrex answered and asserted counterclaims for breach of contract, breach of Uniform Commercial Code (“UCC“) warranties, and fraud. Simtrex also asserted a third-party complaint for fraud, conversion, and theft (this count was subsequently dismissed) against Norco‘s president, Eric Niedermeyer. The essence of Simtrex‘s claims was that Norco, through Niedermeyer, had represented that the air compressor it sold to Simtrex was new, when, in fact, it was used.
{¶ 3} At the close of all the evidence at trial, the trial judge granted Norco and Niedermeyer‘s motion for a directed verdict. The court entered judgment in favor of Norco in the amount of $162,355, the contract price for the air compressor and equipment, and dismissed Simtrex‘s claims against Norco and Niedermeyer. The trial court subsequently granted Norco‘s motion for prejudgment interest for the period September 3, 2003 to August 29, 2008
Trial Testimony
{¶ 4} Norco called three witnesses at trial: Niedermeyer, William Steele, vice-president of sales and marketing at CompAir USA, and Shaji P. Simon, Simtrex‘s owner (on cross-examination).
{¶ 5} Niedermeyer testified that Simon called him in late June or early July of 2003 and inquired about procuring an oil-free, diesel-powered, portable air compressor capable of producing 425 cubic meters of air per minute. Niedermeyer contacted CompAir USA in Sidney, Ohio, and was told that CompAir USA‘s engineers had built such a “prototype” compressor in 2001 for testing purposes to determine if the compressor could be manufactured in volume. The Model No. C425OFC compressor, with Serial No. 3607X11, had been extensively tested by CompAir USA‘s engineers and had 400 engineering test hours on it.
{¶ 6} Niedermeyer testified that he told Simon about the 400 test hours on the compressor and that the machine had never been rented or used other than for the test hours. Niedermeyer denied any knowledge of Defendant‘s Exhibit G, a document produced by Norco during discovery that purportedly
{¶ 7} Niedermeyer testified that he inspected the compressor at the CompAir USA facility in June 2003, and there was nothing about the machine that “caused him concern.” He admitted that he saw rust on the exhaust manifold, but asserted that the rust was the normal result of moisture condensing on the cast iron as the machine cooled down. Niedermeyer admitted that he did not tell Simon about the rust and did not tell him that the compressor had been built in 2001. Niedermeyer testified that pictures of the compressor taken in June or July 2003 indicated there were no dents, rust, or other imperfections on it.
{¶ 8} At Simon‘s request, Niedermeyer provided Simon with a specification sheet regarding a “C425OFC Oil-Free Diesel Air Compressor.” Niedermeyer admitted that the specification sheet did not reference the prototype compressor he intended to sell to Simtrex. After some negotiation about price, Niedermeyer quoted Simon $162,355 for the air compressor and accompanying filter, dryer, dessicants (salt tablets), and two air hoses. Simon then issued a purchase order for “1 COMPAIR #C425OFC, DIESEL, OILFREE COMPRESSOR SKID MOUNTED, WITH DRYER, FILTER & DESSICANTS TO SUPPLY INSTRUMENT AIR WITH ALL ACCESSORIES WITH 2 EA AIR HOSES 2” X 10M, 150#RF[.]”
{¶ 10} Niedermeyer testified that he knew prior to shipment that Simon was buying the compressor for resale to Mahatta Trading Company, a Kuwaiti importer that supplies equipment to engineering and construction companies in the Middle East. He denied knowing that Mahatta intended to sell the compressor to Kellogg Brown & Root (“KBR“).1 Simon told Niedermeyer that he would arrange for shipping the compressor and accompanying equipment from CompAir USA‘s facility in Sidney, Ohio to Kuwait; Niedermeyer then sent Simon drawings of the C425OFC air compressor, along with pictures
{¶ 11} Niedermeyer testified that Simon called him after the compressor arrived in Kuwait and told him that KBR wanted documentation and assurances from CompAir USA that the compressor had a full warranty and was not a used machine. Gavin Monn, CompAir USA‘s president, then faxed a letter to representatives of Mahatta in which he informed them that the machine had been built by CompAir USA‘s engineering department, any running time on the machine was due solely to engineering tests, and the compressor had never previously been rented or sold.
{¶ 12} According to Niedermeyer, Simon also told him that the machine had been damaged in transit and would not start. Niedermeyer stated that Steven Ryder, a representative from CompAir UK, subsequently went to Kuwait to “see if he could smooth things out.” Niedermeyer stated that he thought KBR eventually got the machine running, but Simon subsequently called and told him that KBR had rejected the compressor because it was used, rusted, and dented, and the Murphy controller on the compressor was “hanging down.”
{¶ 13} William Steele, vice-president of sales and marketing at CompAir USA, testified that the machine at issue was built as a prototype machine at
{¶ 14} Steele testified that after Niedermeyer, a close personal friend, contacted him about procuring a machine for Simtrex, Niedermeyer visited CompAir USA‘s facility and saw the prototype C425OFC air compressor. Steele said the machine was in good condition when he looked at it with Niedermeyer, although he saw some rust on it, so he told Niedermeyer that CompAir USA would clean the machine and “paint it over” before they sold it. Steele stated that he took pictures of the machine at Niedermeyer‘s request.
{¶ 15} Steele testified that CompAir USA sells only new equipment, and he did not consider the prototype air compressor to be used. Steele denied that the compressor had ever been rented or loaned to anyone prior to its sale to Simtrex. He stated that he could not identify Defendant‘s Exhibit G, although he agreed that CompAir USA‘s engineers would have kept records relating to any loan of the machine.
{¶ 16} Simon testified that he called several distributors who did not have the compressor in stock before he eventually called Norco, where he dealt
{¶ 17} Simon testified that he told Niedermeyer that he was going to export the machine to Kuwait for eventual use by KBR. He stated further that he “never” buys used equipment and that Niedermeyer told him the air compressor was “new equipment” that would meet his specifications. Simon stated that Niedermeyer did not tell him, before Simtrex issued its purchase order to Norco, that the compressor had 400 engineering hours on it, had been built in 2001, and had been loaned to another customer in 2002. According to Simon, Niedermeyer only told him about the 400 engineering test hours on the compressor when he called Niedermeyer after the machine had reached Kuwait and told him the various complaints about its condition. Simon stated that Niedermeyer then told him the machine was considered new, despite the 400 test hours. Simon denied telling Niedermeyer that the compressor had been damaged in transit.
{¶ 18} Simon testified that he subsequently emailed Niedermeyer a report of an inspection of the compressor done jointly with either Mahatta or KBR representatives and a CompAir representative after the compressor reached Kuwait. The report noted 11 alleged deficiencies with the compressor, including 1) a bent panel door and broken control panel door lock;
{¶ 19} Simon testified that Niedermeyer did not respond to this email. On September 28, 2003, Simon sent a letter advising CompAir USA‘s president that KBR had rejected the compressor. Simon testified that after KBR and Mahatta rejected the compressor, Simtrex had to reimburse Mahatta for the cost of shipping the compressor to Kuwait and storing it until it was sold by Mahatta shortly prior to trial.
{¶ 20} At the close of the evidence, the trial judge granted Norco and Niedermeyer‘s motion for directed verdict. Simtrex raises four errors for our review.
Law and Argument
I. Directed Verdict
{¶ 21} Simtrex first argues that the trial court committed reversible error in granting Norco and Niedermeyer‘s motion for directed verdict.
A. Breach of Contract Claims
{¶ 23} “A contract is generally defined as a promise, or a set of promises, actionable upon breach. Essential elements of a contract include an offer, acceptance, contractual capacity, consideration (the bargained for legal benefit and/or detriment), a manifestation of mutual assent and legality of object and of consideration.” Minster Farmers Coop. Exchange Co., Inc. v. Meyer, 117 Ohio St.3d 459, 2008-Ohio-1259, ¶28.
{¶ 25} The trial judge granted Norco and Niedermeyer‘s motion for a directed verdict because, he opined, “no question whether it was new or used, secondhand or whatever, apparently ever came up. I mean there seems to be no question about that.” He stated further that “when there‘s only one [compressor] available, it doesn‘t make a difference whether it was new or used” and that, in any event, “[he did not] know how this jury is going to be able to determine whether in the minds of the parties a new compressor was the subject of their transaction.” None of these reasons was an appropriate basis upon which to grant a directed verdict.
{¶ 26} In particular, it is abundantly clear that the testimony adduced at trial squarely presented a disputed factual issue regarding what the parties contracted for, obviously an essential element of the contract. Niedermeyer testified that the contract was formed when Simon faxed the purchase order and that the intended item to be purchased was the prototype compressor that had 400 test hours on it. He claimed that he told Simon about the test hours.
{¶ 27} Furthermore, in considering a motion for a directed verdict, the trial court considers neither the weight of the evidence nor the credibility of the witnesses; its sole concern is whether the nonmoving party adduced evidence of substantial probative value in support of his or her claims. Jarupan v. Hanna, 10th Dist. No. 1069, 2007-Ohio-5081, ¶8. Here, the trial judge‘s observation that it “made no difference” whether the compressor was new or used because there was only one available was both wrong (it apparently matters greatly to both Norco and Simtrex) and a factual determination that should have been left to the jury.
{¶ 29} Because reasonable minds could have reached different conclusions regarding what the parties contracted for, the trial court erred in granting Norco‘s motion for directed verdict on its breach of contract and unjust enrichment claims against Simtrex, and on Simtrex‘s breach of contract claim against Norco.
{¶ 30} We are not persuaded by Norco‘s disingenuous argument that the equipment at issue was described by Simtrex in its purchase order, which did not specify that the equipment was to be new or that it could not have engineering test hours on it, and, therefore, the parole evidence rule bars Simtrex from proving any terms other than those contained in the purchase order.
{¶ 31} The parol evidence rule,
{¶ 32} The parol evidence rule is designed to protect the integrity of written agreements and thereby encourage parties to put all contractual terms in writing. Galmish v. Cicchini (2000), 90 Ohio St.3d 22, 27. The rule does not apply, however, absent an initial finding that the written agreement contains final terms or is the complete agreement of the parties. Id.; Seleman v. Ganley, Inc. (Mar. 22, 2001), 8th Dist. No. 78599, citing Camargo Cadillac Co. v. Garfield Enterprises, Inc. (1982), 3 Ohio App.3d 435, 439.
{¶ 33} Despite Norco‘s argument to the contrary, the trial court never made a finding that the purchase order represented the parties’ complete agreement (and did not conduct the analysis set forth in Carmargo Cadillac Co., supra, which requires an evidentiary hearing outside the presence of the jury before any parol evidence is admitted in which the court considers the facts and circumstances surrounding the making of the contract to determine if the contract is the parties’ final agreement and, hence, whether parol evidence is admissible). Accordingly, as the purchase order was silent regarding whether the compressor was to be new or could have test hours on it, a consistent additional term, the trial court correctly heard evidence of the parol agreement to explain or supplement the incomplete written terms.
{¶ 34} Furthermore, it is well settled that a court may hear parol evidence when, through fraud or mistake, the contract does not express the actual agreement or intention of the parties. Bartholomy v. Maeda (Aug. 6, 1992), 7th Dist. No. 91 C.A. 171, citing Neininger v. State (1893), 50 Ohio St. 394, 400. Here, the parol evidence regarding what Niedermeyer told Simon prior to Simtrex‘s purchase order related directly to Simtrex‘s fraud claim.
{¶ 35} Lastly, we note that Norco did not object to any parol evidence at trial and, in fact, itself introduced extrinsic evidence to explain the intent of the parties to the contract. Specifically, Niedermeyer testified that he told Simon prior to Simtrex‘s issuance of its purchase order that the air compressor had 400 test hours on it. Accordingly, Norco cannot now complain about parol evidence offered by Simtrex to explain the intent of the parties.
{¶ 36} We are also unpersuaded by Norco‘s argument that a directed verdict was proper because there was no evidence that Simtrex ever rejected the goods or properly revoked its acceptance of the compressor.
B. UCC Warranties
{¶ 37} The trial court likewise erred in granting Norco‘s motion for directed verdict regarding Simtrex‘s claims for breach of UCC warranties.
{¶ 38} Under
{¶ 39} Simtrex also claimed that Norco breached implied warranties of merchantability and fitness for a particular purpose.
{¶ 40} The trial court also erred in granting a directed verdict on Simtrex‘s claim of implied warranty of fitness for a particular purpose. Under
C. Fraud
{¶ 41} The elements of fraud are: 1) a representation, 2) which is material to the transaction at hand, 3) made falsely, with knowledge of its falsity, or with such utter disregard and recklessness as to whether it is true or false that knowledge may be inferred, 4) with the intent of misleading one into relying upon it, 5) justifiable reliance upon the representation, and 6) a resulting injury proximately caused by the reliance. Williams v. U.S. Bank Shaker Square, 8th Dist. No. 89760, 2008-Ohio-1414, ¶14, citing Williams v. Aetna Fin. Co., 83 Ohio St.3d 464, 475, 1998-Ohio-294.
{¶ 42} If the jury believed Simon, Simtrex established a factual question regarding these elements at trial. Simon testified that Niedermeyer told him
D. Conversion
{¶ 43} Simtrex also asserted a conversion claim against Niedermeyer. On appeal, Simtrex does not challenge the trial court‘s granting of directed verdict on this claim; hence, we do not consider whether the trial court‘s judgment on this claim was in error.
{¶ 45} In light of our resolution of Simtrex‘s first assignment of error, Simtrex‘s second, third, and fourth assignments are moot and we need not consider them. See
It is ordered that appellant recover from appellee costs herein taxed.
The court finds there were reasonable grounds for this appeal.
It is ordered that a special mandate be sent to said court to carry this judgment into execution.
A certified copy of this entry shall constitute the mandate pursuant to Rule 27 of the Rules of Appellate Procedure.
CHRISTINE T. McMONAGLE, JUDGE
SEAN C. GALLAGHER, P.J., and
FRANK D. CELEBREZZE, JR., J., CONCUR