Opinion
No. 3-612 / 02-1415
Filed March 24, 2004
Appeal from the Iowa District Court for Dickinson County, Frank B. Nelson, Judge.
A plaintiff purchaser appeals from a district court verdict in its favor against a defendant retailer, asserting the district court erred in denying recovery on certain theories and in determining it had not proved lost profits damages. The defendant cross-appeals, contending the plaintiff failed to establish any claim, and that the defendant is entitled to damages in the amount still owing for the product it sold the plaintiff. AFFIRMED.
Richard Meyer of Fillenwarth Fillenwarth, Estherville, for appellant.
Scott Brennan and Heather Palmer of Davis, Brown, Koehn, Shors Roberts, P.C., for appellees.
Heard by Huitink, P.J., and Zimmer and Miller, J.J.
Creative Marble Concepts appeals from a judgment, following a bench trial, in which it was awarded damages against Industrial Composites for a breach of implied warranty of fitness for a particular purpose. It contends the district court erred in denying recovery on its breach of contract and breach of express warranty theories. It also contends the district court erred in determining it had not met its burden to prove lost profits damages. Industrial Composites cross appeals, asserting the implied warranty claim was not supported by substantial evidence, and that it was entitled to damages on its counterclaim. We remanded the matter to the district court for clarification of the court's ruling on the issue of lost profits damages. Having received the court's ruling on remand, we affirm the judgment of the district court.
Although the cross appeal is brought on behalf of both Industrial Composites and Glas-Craft, Inc., only the claims against Industrial Composites are at issue in this appeal.
Background Facts and Proceedings.
Creative Marble Concepts (Creative Marble) requires a gel coat sprayer in its manufacturing process for cultured marble. In late summer 1998, Creative Marble began experiencing porosity problems when using its old gel coat sprayer. Porosity, or open pores in the finished cultured marble product, results from the entrapment of small bubbles in the gel coat. In an effort to solve the porosity problem, Creative Marble purchased a new sprayer. The new sprayer worked for a time, but porosity problems soon reoccurred. The sprayer's manufacturer could not resolve the porosity problem and did not want to continue providing service from Indiana, so it refunded Creative Marble's money and took return of the sprayer.
Upon the recommendation of a representative from Ashland Chemical, the company that supplied the Neste gel coat used by Creative Marble, Creative Marble contacted Industrial Composites (IC) regarding purchase of a Glas-Craft, Inc. (Glas-Craft) gel coat sprayer. After discussions with IC representatives, Creative Marble agreed to purchase the sprayer. The only written evidence of the agreement between the parties is a one-page "Sales Order." The sprayer was accompanied by a written one-year limited warranty from Glas-Craft.
The Glas-Craft sprayer was installed by an IC representative in December 1998. Creative Marble paid one-half of the $6,700 purchase price at delivery, and two $500 payments thereafter. The $2,350 balance has been unpaid since March 1999, about the same time Creative Marble began experiencing porosity problems with the Glas-Craft sprayer.
Once it had been advised of the porosity problem, IC provided technical assistance over the phone, sent additional parts, and eventually sent two separate representatives to Creative Marble to try to fix the problem. The porosity problem was not resolved, however, and in June 1999 IC and Glas-Craft exchanged Creative Marble's sprayer for a nearly-new demonstration model. From that point forward Creative Marble no longer experienced porosity problems. However, in September 1999 the new Glas-Craft sprayer began to have problems with "fading" or irregular spraying of the catalyst that hardened the gel coat. IC and Glas-Craft declined to service or replace the new sprayer, and Creative Marble reverted to using an old "pressure pot."
Creative Marble sued Glas-Craft for breach of its written warranty for failing to repair or replace the second sprayer. It sued IC for breach of contract and express warranty for failure to provide both (1) a sprayer that would "rectify" Creative Marble's porosity problem and (2) service and support, as well as a breach of implied warranty of fitness for a particular purpose. Creative Marble sought lost profits, costs incurred for porosity-related cleanup, and the $4,350 it had already paid toward the sprayer. IC counterclaimed for amounts still owing from Creative Marble, which included the remaining $2,350 due for the sprayer, and $524.18 for kits and supplies it had provided to Creative Marble.
Although Creative Marble also claimed IC breached an implied warranty to provide service and support, this claim was not ruled on by the district court, and Creative Marble did not bring this omission to the district court's attention in a post-trial motion. To the extent Creative Marble is attempting to raise this issue on appeal, error has not been preserved. See Meier v. Senecaut, 641 N.W.2d 532, 537 (Iowa 2002).
The district court ruled that Creative Marble had failed to prove its breach of contract and breach of express warranty claims, but that it had established IC's breach of an implied warranty of fitness for a particular purpose. The court awarded Creative Marble the money it had paid toward the sprayer and the porosity-related clean-up expenses, set off against the $524.18 Creative Marble still owed IC. The court did not award Creative Marble lost profits damages. Upon remand the court clarified that while it concluded Creative Marble had proved it had lost profit, there was no reasonable basis in the evidence presented from which an amount of lost profits could be ascertained. The court described the evidence concerning an amount of lost profits damages as "completely speculative and without factual basis." IC's counterclaim was dismissed.
Creative Marble appeals the court's conclusion that it failed to establish a breach of contract or express warranty by IC, or the amount of its lost profits damages. IC cross appeals, contending there was not substantial evidence it breached an implied warranty of fitness for a particular purpose, and that it should have been awarded the $2,350 due on the sprayer.
Scope and Standard of Review.
The district court's ruling is reviewed for the correction of errors at law. Iowa R. Civ. P. 6.4. The court's findings of fact are binding if supported by substantial evidence. Id. at r. 6.14(6)( a). The evidence is viewed in the light most favorable to upholding the court's judgment, and the court's findings are liberally construed to uphold, rather than defeat, its decision. Claus v. Whyle, 526 N.W.2d 519, 523 (Iowa 1994).
Implied Warranty of Fitness for a Particular Purpose.
To establish the existence of an implied warranty of fitness for a particular purpose, Creative Marble was required to show that IC had reason to know of the particular purpose for which Creative Marble purchased the sprayer, that Creative Marble relied on IC's skill and judgment to furnish a suitable sprayer, and IC had reason to know of Creative Marble's reliance. See Iowa Code § 554.2315 (1999); Bergquist v. Mackay Engines, Inc., 538 N.W.2d 655, 658 (Iowa Ct.App. 1995). Upon review of the record, substantial evidence supports the existence of such a warranty.
Evidence was presented, through the testimony of Paul and Marcy Savage, the owners of Creative Marble, as well as the testimony of IC sales representative Steven Payne and IC technician Tim Smith, that IC was informed of the following: Creative Marble's history of porosity problems, that Creative Marble was seeking a sprayer that could spray the Neste gel coat it used and do so without porosity, that Creative Marble would not purchase the Glas-Craft sprayer unless it could spray the Neste gel coat without porosity problems, and that Creative Marble was looking to IC for a recommendation as to whether the Glas-Craft sprayer would be such a machine. The Savages asserted Creative Marble would not have purchased the Glas-Craft sprayer without assurances the machine would spray, without porosity, the Neste gel coat, and Tim Smith testified that IC recommended to Creative Marble that the Glas-Craft sprayer was fit to spray the Neste gel coat.
The foregoing testimony is substantial evidence from which the district court could find an implied warranty that the Glas-Craft sprayer was fit to spray the Neste gel coat and to do without porosity or other problems. IC contends that, even if such a warranty existed, there is not substantial evidence in the record to show it breached the warranty. IC argues the evidence establishes the Glas-Craft sprayer was in fact fit to spray the gel coat used by Creative Marble, and that any porosity problems were due, not to the sprayer, but to the environment or operator error.
Evidence was presented that a number of things can be responsible for porosity, including the temperature of the gel coat and mold, dust, whether the gel coat has been adequately mixed, and operator technique. However, there was no affirmative evidence that any action of a Creative Marble employee or any aspect of Creative Marble's production environment actually led to the porosity problem. It is true the original Glas-Craft sprayer did not initially have porosity problems, and IC did present evidence that the original sprayer was free from any mechanical defect. However, there was also evidence that, in the same shop environment and with the same operators, Creative Marble did not experience porosity with either the replacement Glas-Craft sprayer or their own pressure pot.
While there was evidence from which a reasonable fact finder could conclude that IC did not breach the warranty, the question before this court is whether there was evidence a reasonable mind would accept as adequate to demonstrate that a breach did in fact occur. See Falczynski v. Amoco Oil Co., 533 N.W.2d 226, 230 (Iowa 1995). Viewing the record in the light most favorable to Creative Marble, "indulging in all legitimate inferences that may fairly and reasonably be deduced from the evidence," Pollmann v. Belle Plaine Livestock Auction, Inc., 567 N.W.2d 405, 409 (Iowa 1997), we conclude that standard has been met. Substantial evidence supports the district court's conclusion that IC breached an implied warranty of fitness for a particular purpose.
Breach of Contract and Express Warranty.
Creative Marble also raises a claim of district court error concerning its breach of contract claim against IC and another claim of district court error concerning its breach of express warranty claim against IC. However, Creative Marble agreed during oral argument that the measure of its damages was the same, whether damages were awarded solely for IC's breach of an implied warranty of fitness for a particular purpose, or were instead or in addition awarded on one or both of the other theories. Given the rather broad standard for buyer's damages under the implied warranty theory, we agree. See Iowa Code § 554.2714. Accordingly, as Creative Marble prevailed on its claim for breach of an implied warranty of fitness for a particular purpose, and as damages for lost profits, if proven, were available under that theory, any errors by the district court in its consideration of Creative Marble's breach of contract and breach of an express warranty claims were harmless. See Hollingsworth v. Schminkey, 553 N.W.2d 591, 595 (Iowa 1996) (noting legal error by district court requires reversal where it materially impacts the court's decision); Brant v. Bockholt, 532 N.W.2d 801, 803 (Iowa 1995) ("errors against a party are cured by a verdict in that party's favor unless the error was prejudicial with respect to the amount of recovery").
Damages.
Awarding damages is a matter within the district court's discretion, and an award will be upheld so long as the record contains a reasonable basis from which the award can be inferred. Hawkeye Motors, Inc. v. McDowell, 541 N.W.2d 914, 917 (Iowa Ct.App. 1995). Here, the amounts of damages awarded for the porosity-related clean-up expenses and the money paid for the ultimately non-functioning sprayer were supported by substantial evidence and were within the realm of damages that could be awarded by the court. See Iowa Code §§ 554.2714, .2715 (establishing measures of buyer's damages for seller's breach). We find no abuse of discretion in the award of these amounts.
The primary damages issue is the district court determination that Creative Marble failed to prove the amount of its lost profits. Where a party has established damages, but the amount of those damages is uncertain, the judge or jury may allow recovery where the record provides a reasonable basis from which the amount of damages can be approximated. Field v. Palmer, 592 N.W.2d 347, 353 (Iowa 1999). Even if it is difficult to ascertain the amount of damages with any precision or certainty, that alone is not a basis for denying recovery. Bangert v. Osceola County, 456 N.W.2d 183, 190 (Iowa 1990). Damages should not be denied so long as there is evidence that some damages were sustained. Palmer v. Albert, 310 N.W.2d 169, 174 (Iowa 1981). However, recovery should not be allowed where the damage estimate is overly speculative. See Jamison v. Knosby, 423 N.W.2d 2, 6 (Iowa 1988).
Here, the district court determined that the record did not contain a reasonable basis from which the amount of damages could be determined or inferred, as the evidence of amount was "completely speculative." Although "completely speculative" may be somewhat strong, we agree with the court's ultimate conclusion that the evidence was insufficient to allow an award of damages for lost profits. Creative Marble did lose customers during the time it was having problems with the Glas-Craft sprayer. It was also able to establish the amounts of its gross sales to various customers, as well as its overall revenue and costs, during the time it was experiencing sprayer problems. However, it did not reasonably demonstrate how the changes in its profits and revenues were tied to the loss of various customers. We find no error in the district court's determination that Creative Marble did not provide a reasonable basis from which an amount of lost profits could be approximated.
Costs on appeal are taxed three-fourths to Creative Marble and one-fourth to IC.