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Royce Chemical Co. v. Sharples Corp.

December 6, 1960


Author: Hincks

Before HINCKS, WATERMAN and MOORE, Circuit Judges.

HINCKS, Circuit Judge.

This is a diversity case in which the plaintiff-appellee, a New Jersey corporation, to whom we shall refer as the Buyer, is a manufacturer of sodium hydrosulfite, a chemical used principally in the textile industry to make vat dyes soluble. Defendant-appellant, to whom we shall refer as the Seller, is a Delaware corporation which manufactures centrifugal equipment, including the "Super-D-Hydrator" which is used for crystal separation in the production of chemicals.

The first step in the Buyer's process of manufacturing sodium hydrosulfite is the combination of zinc dust with sulfur dioxide to make zinc hydrosulfite. To this is added soda ash or caustic soda and the resulting mixture is put through filter presses to filter off the zinc. The resulting "liquor" is then pumped into a "salting out tank," where salt is added and crystals of sodium hydrosulfite are precipitated out of solution. When formed, these crystals are suspended in the liquor; the mixture of liquor and crystals is called "slurry."

The next step, viz., the separation of the crystals from the slurry, is the one with which we are principally concerned. Before the events which culminated in this litigation, the Buyer separated the crystals by the traditional filter crock, or Nutsche, process. In this process, the slurry is put in a filter crock and is pulled by a vacuum through the filter, which, like a tea strainer, allows the liquor to pass but retains the crystals.

An alternative to the Nutsche process, now being used, apparently successfully, in the manufacture of sodium hydrosulfite by the DuPont Company, is the separation of crystals from liquor by centrifugal force. This is done by introducing the slurry into the revolving basket of a centrifugal machine. The outer wall of such a basket is perforated and as it revolves centrifugal force causes the liquor to pass through the holes, leaving the crystals behind in a cake on the outer wall. A knife is then applied to the cake as the basket revolves and the crystals are then unloaded.

Beginning in 1947, various discussions took place between the Buyer and the Seller, with a view towards the purchase by the Buyer of a centrifugal machine. Through 1951, the Seller, principally through its agent Costigan, a law-trained engineer, conducted a vigorous campaign to interest the Buyer in its machine. Various statements made by the Seller in the course of this campaign will be alluded to later in this opinion as they become relevant to our discussion. On January 17, 1951, Costigan wrote to the Buyer as follows:

"It was a pleasure to talk with you again and learn of your renewed interest in the production of sodium hydrosulfite. Since our several discussions with you a few years ago, we have had more very successful experience with this production and can vouch for the suitability of the Sharples C-20 Vaportite Super-D-Hydrator on this job."

Accompanying this letter was a "proposal" quoting prices for the two available sizes of the Super-D-Hydrator. There was a place on this "proposal" form for an acceptance, which the Buyer did not execute; even acceptance of the "proposal" would not, by its terms, create a contract until approved by one of the Seller's high-ranking officers, an act never performed. On January 26, 1951, the Buyer sent its "purchase order" for a C-27 centrifugal machine, which the Seller acknowledged on January 30, 1951.

The machine which the Seller accordingly delivered and the Buyer paid for, did not work satisfactorily, presumably because the crystals formed in the salting out tank, although varying in size, were too fine to withstand the force involved in separation by the Super-D-Hydrator, resulting in an excessive amount of crystal breakage. After various attempts to make adjustments which would render the machine usable, in which the Seller participated, the Buyer, through counsel, wrote to the Seller:

"we * * * rescind the sale and ask that you take immediate steps to reimburse us for the cost of the machine, plus our costs of the installation, which are substantial, and take the machine back."

The Seller refused.

Eventually the Buyer brought this action, seeking damages for breaches of express and implied warranties and for misrepresentations. The court below, sitting without a jury, found liability under all three theories, going beyond the complaint in finding that the alleged misrepresentations amounted to "fraud," and awarded to the Buyer damages of $32,749.05, plus interest. The Seller appeals.

Under Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 61 S. Ct. 1020, 85 L. Ed. 1477, we are obliged to apply the conflict of laws principles of New York, the state in which the district court sat. We agree with that court that under New York's conflicts rules, Auten v. Auten, 308 N.Y. 155, 124 N.E.2d 99, 50 A.L.R.2d 246, the law of New Jersey is applicable here.

1. Liability

Since we agree with the court below that the Seller is liable because of breach of an express warranty, we deem it unnecessary to review the lower court's treatment of the implied-warranty and misrepresentation claims and expressly refrain from discussion thereof.*fn1

New Jersey Statutes § 46:30-18 (corresponding to Uniform Sales Act § 12) provides:

"Any affirmation of fact or any promise by the seller relating to the goods is an express warranty if the natural tendency of such affirmation or promise is to induce the buyer to purchase the goods, and if the buyer purchases the goods relying thereon."

The district court found an express warranty in a bulletin which states that among the conditions which the Super-D-Hydrator can handle is that which exists when "because of evaporator operation the size of the crystals may vary from comparatively fine mesh to relatively large crystals from load to load or in the same load." The Seller has convinced us of the error of this finding: this statement could not have been relied upon nor would its natural tendency be to induce a sale since the Buyer knew that there was no "evaporator operation" in its process.

But the principal express warranty found by the court below was the statement in Costigan's letter of January 17, 1951, which "vouched" for the suitability of the Super-D-Hydrator "on this job."*fn2 We have no doubt that the natural tendency of this statement, which is quoted above, is to induce a sale. And we agree with the district court that this statement was an affirmation of fact - that the machine was suitable for the Buyer's use - and not a mere statement of opinion. If the Buyer "relied" on it, therefore, it is an actionable express warranty under the New Jersey statute. The court below specifically found that the proof established reliance. And that finding we may reverse only if it is "clearly erroneous," Fed.Rules Civ.Proc. 52(a), 28 U.S.C.A., which it is not.

The Seller bases its argument that Costigan's statement was not a warranty on the theory that "this production" refers to the use of the Super-D-Hydrator at DuPont, where the "very successful experience" had taken place, and that "this job" likewise refers to DuPont. In context, this is untenable; it is quite clear that "this production" refers back generally to the "production of sodium hydrosulfite" and that when the Seller said "we * * * can vouch for the suitability of [our machine] on this job" it meant on the Buyer's job. It seems ...

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