STOTT v. JOHNSTON

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District Court of Appeal, First District, Division 1, California.

STOTT v. JOHNSTON.*

Civ. 14306.

Decided: June 26, 1950

Hill, Morgan & Farrer, Elliott H. Pentz, David A. Thomas, Los Angeles, for appellant. Frederick L. Hewitt, Edward E. Heavey, San Francisco, for respondent.

Plaintiff and respondent Reo D. Stott, a painting contractor, brought an action against Thomas Johnston, Pervo Johnston Company, Johnston Paint Company, Pervo Paint Company and Jack Hendricks (and three Does) to recover damages alleged to have resulted to plaintiff by reason of the use by him in his business of some paint alleged to have been sold to him by said defendants. By his complaint plaintiff sought to recover $5,468.15, the money paid for the paint; damages in the amount of $50,000 as the cost necessary to repaint the buildings on which the paint was used; and $40,000 damages for loss of business and customers. At the trial a nonsuit was granted as to Pervo Paint Company and Pervo Johnston Company, and dismissed by plaintiff as to Hendricks, and the action then continued with Johnston, doing business as Johnston Paint Company, as the only defendant. The trial court instructed the jury that ‘The only basis upon which damages can be awarded in this case is upon this claim of loss or damage to said good will.’ The jury returned a verdict awarding damages in the sum of $10,000, and this appeal is from the judgment entered in accordance with said verdict.

As grounds for a reversal of the judgment appellant makes two major contentions: (1) That respondent failed to establish liability against appellant; (2) that respondent failed to establish any legal damages. Before discussing these contentions we shall summarize briefly the factual situation as shown by the record. Some time in February, 1946, Hendricks introduced himself to Stott as a representative of the Pervo Company. They discussed paints and Stott told Hendricks that he was using ‘Rich paint.’ Hendricks told Stott, ‘We have got as good a paint, if not better.’ Stott testified as follows: ‘I asked him, I says, ‘In case of any paint going bad at any time, what is your company policy?’ He says, ‘We would reimburse you a hundred percent for labor and materials for any paint that goes bad.’ And I wanted an assurance and that was the assurance he give me.

‘Mr. Hewitt [attorney for plaintiff]:

‘Q. Did he say anything alse at that time about the paint, if anything went wrong with it? A. If anything went wrong with it, they would stand behind me one hundred percent.’ Stott purchased paint from Hendricks and during the following months painted about 56 residences and buildings with the Pervo ‘Fume Proof’ paint. Stott prepared and applied the paint as he was instructed by Hendricks. In June, 1946, Stott told Hendricks that the paint did not cover as well as it should. Hendricks examined one of the jobs which had been painted and said that the paint seemed to be lacking sufficient pigment. The company added more pigment to the paint and Stott continued to use it; also more pigment was added to the paint purchased by him after that time.

In about October, 1946, Stott began receiving complaints from customers whose buildings had been painted. He took Hendricks and Johnston to one of the buildings, and after examining the job Hendricks stated that there was ‘definitely something wrong with the paint.’ Johnston also said that there was ‘something wrong with it,’ and proceeded to explain to Stott and the owners of the building that it was not Stott's fault that the paint was peeling off the walls, but that he had received a bad batch of paint. Johnston told the owners (McGinnis) that his company would stand behind the job, and told Stott to do the job over, giving him instructions as to how and when it should be done.

Stott received complaints from his customers from the latter part of 1946 until April, 1947. Stott testified that he saw Hendricks in about March, 1947; told Hendricks that he was receiving many complaints from his customers because the paint was peeling off the jobs, and that Hendricks said, ‘I know the paint is no good, but I would appreciate it, Reo, if you wouldn't go telling it around town that our paint is no good, because it would hurt my sales terrible.’ About two weeks later, Hendricks told stott that Johnston had gone to Los Angeles to talk to the Pervo company people, and that they had told Johnston to have Stott do the jobs over again as the complaints came in. However, Stott was told to ‘get in touch’ with Hendricks or Johnston before redoing any job, so that Hendricks and Johnston could first ‘verify each and every job.’ Hendricks and Stott agreed that Johnston would pay him $3.50 an hour for the labor to clean and paint the jobs, and Stott would furnish the materials, equipment and men.

On about April 5, 1947, Stott returned to the Johnston Paint Company all the Pervo paint that he had in stock, about 276 gallons. At about the same time he told Hendricks that he had received complaints on about 20 jobs. Hendricks said that he did not know whether the company would make good for that many, and Stott would have to discuss the matter with Johnston.

Stott testified that Johnston told him in August, 1947, that the company would stand behind the paint ‘one hundred per cent.’ In October, 1947, Stott called Johnston and told him that he then had about 40 complaints and wanted something done about it. Johnston told Stott that the company ‘can't stand for that,’ and declared, ‘I don't intent to maintain your jobs.’ On November 4, 1947, Johnston went with Stott to inspect the jobs. They looked at the first house and Johnston admitted that the paint was ‘definitely over-pigmented.’ Stott told him that he had painted a number of houses with that some paint and that they would all start peeling and his reputation would be ruined. Johnston told Stott that he would take care of the people that sued, and not to worry about the rest, as people forget very easily and Stott's reputation would not be hurt in any way. Stott threatened to sue Johnston. They proceeded to look at some more of Stott's jobs. At the next stop Johnston again agreed and stated to the owner that the paint was ‘a poor batch’ and that Stott was not liable. From then until the tour was completed, however, Johnston changed his attitude; upon their inspection of each job, he thereafter told Stott that the trouble lay in ‘surface condition’ and that the houses Stott was painting were so old that they were not worth painting and ‘should be burned down.’

Stott told Johnston that he wanted the jobs done over and $20,000 damages, and Johnston said, ‘We might give you $5,000 and pacify these people, but we sure wouldn't give you twenty.’ Stott then threatened to sue, and Johnston said, ‘Now, we don't have to go into that. We will call in the license inspector and if the license inspector says we are wrong, we will stand good for the jobs.’ Stott immediately agreed to this proposal. About two weeks later, Johnston told Stott over the telephone that the state license inspector had inspected several of the jobs and said that the trouble was ‘surface condition.’ Upon making inquiry, Stott discovered that Johnston had never contacted the state license board. Stott then asked the board to have the jobs checked. He telephoned Johnston after he had received the board's report, told Johnston that the report was that Stott was in no way responsible for the paint failures, and asked Johnston to make good on his promise. Johnston refused and told Stott to ‘go ahead and sue.’

Additional facts will be set forth as this opinion progresses.

Appellant first argues that the alleged statements of Hendricks and Johnston were not express warranties but only amounted to ‘puffing talk.’ In support of his argument he cites Steen v. Southern California Supply Co., 74 Cal.App. 265, 239 P. 1098, 1099. In that case, Steen bought caramel coloring matter from defendant. The defendant's salesman had previously told Steen that the coloring matter was ‘just as good or perhaps better than any,’ that ‘it would stand up with any coloring matter as far as quality was concerned’ and was ‘as good as anything * * * [Steen] had used.’ The court held that this was ‘puffing talk’ and not an express warranty. However, the opinion in the Steen case states that the so-called ‘puffing talk’ was made by the salesman a number of days before Steen went to defendant's store and purchased the coloring matter, and that at the time the purchase was actually made no words were said which constituted a warranty. In the instant case, the facts are much stronger and show that defendant's salesman not only gave assurances as to the high quality of the paint but promised that defendant would reimburse plaintiff ‘a hundred per cent for labor and materials for any paint that goes bad’ and that ‘If anything went wrong with it, they would stand behind me one hundred percent.’ Plaintiff testified that he wanted an assurance before changing from the paint he was using to defendant's paint, and that it was upon this assurance being given to him that he decided to try the Pervo paint.

Section 1732 of the Civil Code reads: ‘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. No affirmation of the value of the goods, nor any statement purporting to be a statement of the seller's opinion only shall be construed as a warranty.’ (Emphasis added.)

We are convinced that the statements of appellant and his salesman, Hendricks, constituted an express warranty. Indeed it would be difficult to find a clearer case of a buyer being induced to buy upon the representations of the seller as to quality.

Appellant next argues that the evidence failed to establish a breach of implied warranty of merchantability, and, although the evidence indicated that the paint sold to respondent was not of first quality, there was no evidence that the paint was not salable as goods of that general kind. In this connection, appellant argues that although the paint was perhaps not of first grade quality it could not be concluded from the evidence ‘that the paint was unsalable as such, or that it was worse than average or that it was unsuitable for all painting purposes, and thus Stott failed to predicate a breach of implied warranty of merchantability.’

Section 1735 of the Civil Code provides: ‘Subject to the provisions of this act and of any statute in that behalf, there is no implied warranty or condition as to the quality or fitness for any particular purpose of goods supplied under a contract to sell or a sale, except as follows: (1) Where the buyer, expressly or by implication, makes known to the seller the particular purpose for which the goods are required, and it appears that the buyer relies on the seller's skill or judgment (whether he be the grower or manufacturer or not), there is an implied warranty that the goods shall be reasonably fit for such purpose. (2) Where the goods are bought by description from a seller who deals in goods of that description (whether he be the grower or manufacturer or not), there is an implied warranty that the goods shall be of merchantable quality.’

As to subdivision (1) there is ample evidence that Stott relied on Hendricks' knowledge of the paint and upon the latter's judgment before he purchased the paint, and particularly so after the first purchase. There is also ample and substantial evidence to support the conclusion that Hendricks knew exactly the purpose for which the paint was being purchased. In June, 1946, at Stott's suggestion, Hendricks examined some CAA shacks which Stott had painted, and Hendricks agreed that the paint did not cover the way it should. In August, 1946, Hendricks watched Stott paint the outside of Stott's own building; Hendricks even told Stott exactly how to apply the paint. A reading of the transcript leaves absolutely no doubt in one's mind about Hendricks' knowledge of the purpose for which the paint was bought.

In support of his argument that the evidence failed to establish a breach of implied warranty of merchantability as provided by subdivision (2) of said section 1735, appellant relies solely upon the case of Kenney v. Grogan, 17 Cal.App. 527, 120 P. 433. That case held that olives were not unmerchantable when they were capable of being used to make olive oil, even though the olive oil was of an inferior quality, when the oil could be sold at $1 a gallon (good quality olive oil sold at $1.75). The court said that the olives were not useless and unsalable, and as ‘There was nothing in the contract of purchase to show that any special grade or quality was expected to be furnished’, 17 Cal.App. p. 533, 120 P. at page 436, the olives could not be held unmerchantable.

In the instant case, not only did the evidence show that the paint peeled off the houses within a short period of time after being applied, thereby making it a question of fact for the jury as to whether the paint was merchantable and usable or not, but there also were many admissions by Johnston and Hendricks that the paint was defective and useless for the purpose for which it was sold. Not only did Johnston (usually through Hendricks) admit that the paint was defective, but Johnston offered to, and did in fact, take back the stock of paint unused and gave Stott credit for it.

We are convinced that there was ample evidence upon which a finding of a breach of implied warranty could be based.

Appellant next contends that the complaint failed to allege that Stott (a) informed the seller as to the particular purpose for which the paint was intended to be used, and (b) relied upon the seller's skill or judgment, and that, therefore, Stott cannot recover for breach of an implied warranty under section 1735(1) of the Civil Code.

This contention deserves scant attention. In the first place, we believe the complaint shows that appellant was well aware of the purpose for which the paint was to be used and also that respondent relied upon the representations made. Secondly, no demurrer, either special or general, was filed, and the point does not appear to have been raised during the trial. As was said in Drullinger v. Erskine, 71 Cal.App.2d 492, at page 499, 163 P.2d 48, at page 52: ‘It is apparent that if the defendants had suggested those defects of pleading, in the course of the trial, the plaintiff, upon application therefor, would have been granted leave to amend the complaint. Article VI, Section 4 1/212, of the Constitution, provides that: ‘No judgment shall be set aside, * * * in any case, on the ground * * * of the improper admission or rejection of evidence, or for any error as to any matter of pleading, * * * unless * * * the court shall be of the opinion that the error complained of has resulted in a miscarriage of justice.’' See, also, Wiltsee v. Utley, 79 Cal.App.2d 71, 179 P.2d 13; Gerstner v. Scheuer, 91 Cal.App.2d 123, 204 P.2d 937.

The final and most serious contention of appellant is that the evidence as to damages is insufficient to support the judgment.

In his complaint plaintiff asked for the following damages: (1) $5,468.15—representing $6,185, the amount he paid for the paint less a credit of $716.85 for the return of paint to the defendant, which amount was credited to him; (2) 50,000—as the cost necessary to repaint the buildings be had painted with defendant's paint, and (3) $40,000—for the loss of business and customers.

On the trial, at the conclusion of plaintiff's case there was a discussion between the court and counsel in chambers outside of the presence of the jury. The court stated that in its opinion there was no basis for recovery under prayer 1, and counsel for plaintiff apparently agreed. A discussion then was had concerning prayer 2, and the court stated that in its opinion Stott was not legally liable to his customers to repaint the houses. The court stated that under the contract Stott had made with his customers he was bound only to do his work in a workmanlike manner, and if the court gave instructions allowing recovery under this part of the prayer it might amount to reversible error. Counsel for plaintiff did not agree with the court's view as to this, but apparently did not press the point further. The court then stated that it intended to submit to the jury only the issue of loss of or damage to good will, and the jury was so instructed.

Appellant argues first there can be no recovery for loss of good will in the instant case, but we entertain no doubt but that under the authorities and our codes damages may be recovered for loss of good will, if such damages are shown by the evidence. It requires no stretch of the imagination to believe that the sale of defective paint to a successful painting contractor, which results in his painting 50 or more houses and buildings with the paint and it begins to peel off in six months or less, can virtually ruin his reputation as a painting contractor in that particular community.

We believe that we need go no further than to quote from section 1789 of the Civil Code, as follows: ‘(6) The measure of damages for breach of warranty is the loss directly and naturally resulting in the ordinary course of events from the breach of warranty. (7) In the case of breach of warranty of quality, such loss, in the absence of special circumstances showing proximate damage of a greater amount, is the difference between the value of the goods at the time of delivery to the buyer and the value they would have had if they had answered to the warranty.’

The record shows that plaintiff was using the ‘Rich’ paint and was satisfied with it; that defendant's salesman told him defendant's paint was the best money could buy, that it was as good or better than the paint plaintiff was using, and that they would stand behind him 100 per cent if anything went wrong with it. The record also shows that defendant's paint was admittedly defective, as has already been set forth. Under such circumstances, we are convinced that plaintiff and respondent is entitled to recover for loss of good will.

However, damages for loss of good will must be established by satisfactory evidence, and in the instant case plaintiff failed to introduce sufficient evidence to support the verdict and judgment.

Plaintiff's accountant testified that the following figures accurately represented his income and profits for 1946–1948:

On cross-examination, Stott testified that he suffered business losses in 1947 and 1948 because of trouble or differences he was having with the unions.

The difficulty in this connection is in finding, with any degree of certainty, the losses to Stott's business caused by loss of good will. Certainly the above figures reveal no loss, and the failure to develop increased business may be attributed to the union trouble or to many other factors. Stott testified that during 1946 and up to March 1, 1947, he spent over $3,000 in advertising, and in 1947 he spent approximately $5,000 for advertising. Perhaps the jury may be regarded as having determined that because of the paint failure this money was completely wasted ($8,000, that is, assuming there is no overlap between the $5,000 and the $3,000 above-mentioned) and that, in addition, plaintiff suffered a $2,000 falling off in gross income due to the defective paint. It would seem that plaintiff must in some manner show the damages resulting from loss of good will even though it may not be possible to show it with the same particularity as is possible in other types of damage. Plaintiff should have introduced some evidence as to the general volume of painting performed in the territory in which he operated and also some evidence tending to show that his volume of business in the years following the use of defendant's paint would have been much larger than it was but for the damage to his reputation as a painting contractor caused by using defendant's paint. The difficulty with plaintiff's proof is that it does not connect up the various elements of damage and is in such form that it does not show clearly that damage to good will actually resulted. The net profit appears to be greater in 1948 than in 1946.

We feel, therefore, that notwithstanding the fact that plaintiff's good will may have been substantially damaged, we must reverse the judgment because of the unsatisfactory state of the record as to proof of damages. This will require a retrial.

In view of such retrial, something should be said about the items of damage other than the claimed loss of good will. It is quite clear that the trial court was in error in holding, as a matter of law, that plaintiff could not recover for the amount paid for the paint, less the credit allowed for the paint returned, as set forth in prayer 1. This is clearly a ‘loss directly and naturally resulting in the ordinary course of events from the breach of warranty’ within the meaning of section 1789 of the Civil Code. It also is too clear to require extended comment that under prayer 2, if plaintiff can prove that he did in fact repaint all or some of the buildings painted with defendant's paint, without cost to the customers or at less than plaintiff's cost, he may recover for all losses suffered as a result thereof. Of course, plaintiff cannot recover if, in fact, he did not or does not repaint such buildings, because in such event he has not suffered this item of loss.

It may be that the three items of damage in some respects overlap. Of course, plaintiff cannot recover for the same item, in whole or in part, more than once. Any such possible duplication may be taken care of by proper instructions to the jury.

Inasmuch as we are of the opinion the cause must be retried, it is our view that, in the interest of justice, all of the issues should be retried in the light of what has been said in this opinion. Before such retrial plaintiff should be permitted to make such amendments to his complaint as he may be advised.

The judgment is reversed, and a retrial on all issues is ordered.

SCHOTTKY, Justice pro tme.

PETERS, P. J., and BRAY, J., concur.

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