Dixon Ticonderoga Co. v. Winburn Tile Mfg. Co.

DIXON TICONDEROGA COMPANY v. WINBURN TILE
MANUFACTURING COMPANY

95-812                                             ___ S.W.2d ___

                    Supreme Court of Arkansas
                Opinion delivered April 29, 1996


1.   Damages -- award of punitive damages proper under
     circumstances -- no error found. -- Upon a review of the
     record, there was strong evidence to support the theory that
     appellant not only knew that it had misrepresented its product
     to appellee, but also that it continued selling and shipping
     an increased number of the defective product at a higher price
     than the original in reckless disregard of the consequences,
     that being so, malice could have been inferred, thereby
     entitling appellee to the AMI 2217 instruction and its request
     for punitive damages; the jury had strong, substantial
     evidence from which it could reasonably find that appellant
     continued and financially benefited from its deceitful conduct
     and, at the least, should have known that its conduct would
     cause damage to appellee.

2.   Evidence -- denial of motion for new trial -- factors on
     review. -- On review, the test for whether the trial court's
     denial of a motion for a new trial was erroneous is whether
     the jury verdict was supported by substantial evidence, giving
     the verdict the benefit of all reasonable inferences
     permissible under the proof; in determining on appeal whether
     the evidence is substantial, the court need only consider the
     evidence on behalf of the appellee and that part of the
     evidence that is most favorable to appellee.  

3.   Witnesses -- expert witness's opinion constitutes substantial
     evidence -- expert's opinion must have reasonable basis. -- 
     A properly qualified expert's opinion constitutes substantial
     evidence, unless it is shown that the expert's opinion is
     without reasonable basis.

4.   Damages -- compensatory damages properly awarded -- jury had
     the right to believe expert's testimony. -- Appellant's
     assertion that compensatory damages awarded by the jury were
     erroneous was without merit where the jury considered the
     testimony of a duly qualified economist who had reviewed
     appellee's calculation of losses and found that, for practical
     purposes, appellee received no value from new formula saggers
     and that they were unacceptable and not suitable for use by
     appellee; in addition, the trial court, without objection,
     gave an instruction on fixing the amount of compensatory
     damages; considering the foregoing testimony, the supreme
     court concluded that the jury had substantial evidence before
     it; the weight and value to be given expert witnesses lies
     within the exclusive province of the jury; it also is the
     jury's prerogative either to believe or disbelieve any
     witness.  


     Appeal from Pulaski Circuit Court; John B. Plegge, Judge;
affirmed.
     Allen Law Firm, by:  H. William Allen, for appellant.
     Williams & Anderson, by: Leon Holmes, Katharine R. Cloud and
John E. Tull, for appellee.

     Tom Glaze, Justice.*ADVREP6*






DIXON TICONDEROGA COMPANY,
                    APPELLANT,

V.

WINBURN TILE MANUFACTURING
COMPANY,
                    APPELLEE.



95-812

Opinion Delivered:  4-29-96

APPEAL FROM THE CIRCUIT COURT
OF PULASKI COUNTY, ARKANSAS,
NO. 91-5036; HONORABLE JOHN B.
PLEGGE, CIRCUIT JUDGE 



AFFIRMED




                  TOM GLAZE, Associate Justice

     Winburn Tile Manufacturing Company filed this lawsuit against
Dixon Ticonderoga Company, alleging negligence, breach of express
and implied warranty and deceit in the sale of products called
saggers.  A sagger is a type of open-top box used in the
manufacturing process of tile.  Specifically, newly pressed tile is
placed in saggers that are then stacked on small rail-type cars
that ride on a track through a kiln where extreme heat is applied
to glaze the tile.  Because saggers must endure shifts in
temperatures from around 2300 degrees to room temperature within a
twenty-four-hour period, their life span is limited.  
     At trial, Winburn Tile offered proof in its attempt to show
Dixon had intentionally misrepresented that its saggers were
manufactured with a PT-250 formula, when, in fact, another mix, PT-
250A, was being used.  Winburn Tile contended that Dixon's pattern
of fraudulent concealment injured Winburn in the sum of $99,682.45. 
The jury agreed, awarding compensatory damages in the full amount
requested.  The jury also awarded Winburn Tile punitive damages in
the same amount.  On appeal, Dixon claims the trial court erred in
(1) submitting punitive damages to the jury and (2) refusing to
grant a new trial due to an erroneous verdict for compensatory
damages.  
     In its first argument, Dixon grudgingly concedes that, given
this court's standard of review, Winburn Tile's evidence at trial
was sufficient to prove its allegations of deceit.  Nevertheless,
Dixon argues deceit, alone, is insufficient to justify the
imposition of punitive damages; it urges Winburn tile also had to
show Dixon knew its deceit or misrepresentation would cause injury
to Winburn. 
     Both parties agree that the correct law is set out in AMI3d
2217, which was given the jury.  That instruction reads as follows:
          In addition to compensatory damages for any actual
     loss that Winburn Tile may have sustained, it asks for
     punitive damages from the Dixon Company.  Punitive
     damages may be imposed to punish a wrong-doer and to
     deter others from similar conduct.  In order to recover
     punitive damages from the Dixon Company, Winburn Tile has
     the burden of proving either:
          First, that Dixon Ticonderoga knew or ought to have
     known, in light of the surrounding circumstances, that
     its conduct would naturally and probably result in damage
     and that it continued such conduct in reckless disregard
     of the consequences from which malice may be inferred; or
          Second, that Dixon Ticonderoga intentionally pursued
     a course of conduct for the purpose of causing damage;
          Or both.
          You are not required to assess punitive damages
     against the Dixon Company, but you may do so if justified
     by the evidence.  (Emphasis added.)
     In referring to the first prong of AMI 2217 above, Dixon
argues that, before punitive damages could be awarded, Winburn Tile
had the burden to show Dixon knew or should have known that its
deceit would cause Winburn injury, and Dixon continued its deceit
in reckless disregard of the consequences.  Dixon claims no
evidence of such malicious knowledge or conduct was shown on its
part.  In sum, Dixon admits it had originally sold and shipped
Winburn Tile saggers comprised of one mix, PT250, and later changed
that formula or mix to PT250A without informing Winburn Tile, but
Dixon argues no evidence was introduced showing it intended Winburn
any harm when making that change in formula.  To the contrary,
Dixon relates it offered evidence that it had some problems of
thermal shock with its original PT250 formula, and it was merely
trying to improve its product with the new PT250A mix.  In
reviewing the record, we believe there is strong evidence to
support the theory that Dixon not only knew it had misrepresented
its product to Winburn, but also it continued selling and shipping
that defective product in reckless disregard of the consequences. 
That being so, malice could have been inferred, thereby entitling
Winburn to the AMI 2217 and its request for punitive damages.  See
Stein v. Lukas, 308 Ark. 74, 823 S.W.2d 832 (1992); see also Allred
v. Demuth, 319 Ark. 62, 890 S.W.2d 578 (1994). 
     Winburn Tile had been using saggers purchased from two
companies, Ferro Corporation and Shenango Corporation, when Dixon
approached Winburn about buying its saggers, which were composed of
the PT250 formula.  Winburn began purchasing Dixon's product in
August 1987, and carefully monitored Dixon's first shipments to
determine the quality was equal to that of Ferro's and Shenango's
saggers.  Dixon's second shipment in October 1987, revealed serious
problems, but a replacement shipment was sent in January 1988, and
no further problems were detected -- at least not until 1989. 
Winburn, being satisfied with Dixon's saggers, used all saggers
from the three companies interchangeably.  
     Unknown to Winburn, Dixon developed a new sagger formula,
PT250A, and on September 29, 1988, its shipment to Dixon contained
saggers composed of this new formula.  Dixon did not disclose this
change, and, in fact, Dixon's invoices to Winburn continued to
reflect the saggers shipped contained the old PT250 formula.  
     In 1989, Winburn Tile learned the number of saggers it was
using had dramatically increased, and it set out to determine the
reason.  It was not until February 1990, that Winburn discovered
Dixon's saggers had laminations.  Laminations are defects caused by
air pockets in the product, and those defects make the product less
durable.  The other two companies' saggers showed no signs of
lamination.  
     When Winburn and Dixon could not resolve their differences,
this litigation ensued.  During discovery, Winburn learned for the
first time, from documents produced by Dixon, that Dixon had
changed its formula just prior to Dixon's September 1988 shipment. 
However, Dixon's invoices to Winburn continued erroneously to
reflect shipments of saggers manufactured with the original PT250
mix.
     Although Dixon contends it intended no injury to Winburn by
Dixon's misrepresentation of formulas, our review of the record
reflects ample evidence from which a jury could (and obviously did)
find otherwise.  In this connection, Dixon admitted that its policy
was to discuss with customers any material changes which would have
either a positive or negative impact on performance.  As previously
discussed, this was never done.  Dr. Robert Moore, a ceramic
engineer, testified there was more talc in the PT250A formula than
the PT250 mix, but the risk of putting high amounts of talc into
the sagger is that the sagger will weaken.  He said that in testing
for the softening temperatures for these products, samples
generally are sent to the customers.  Dixon knew very well that any
valid test given the new sagger formula must be performed at the
plant where it is to be used in order to evaluate how it works in
those particular conditions.  Nonetheless, it shipped the new
formula saggers without any suggestion that plant tests be
conducted.  Dixon's knowing failures to comply with its own
policies in these matters reflect a reckless disregard of
consequences.  The resulting problems should have been of little
surprise.  Besides the increase in the number of saggers Winburn
incurred after the PT250 formula was changed to PT250A, Winburn
paid a higher price per sagger, $3.25 to $4.00.  And while Dixon
discounts the advantages it derived from producing the PT250A,
testimony was presented that other financial benefits were derived
by Dixon from its change in formulas.  In sum, we believe the jury
had strong, substantial evidence from which it could reasonably
find Dixon continued and financially benefited from its deceitful
conduct, and at the least, should have known its conduct would
cause damage to Winburn.  
     In its second point for reversal, Dixon asserts the
compensatory damages awarded by the jury were erroneous, and the
trial court erred in denying Dixon a new trial for that reason.  On
review, the test in these circumstances is whether the jury verdict
is supported by substantial evidence, giving the verdict the
benefit of all reasonable inferences permissible under the proof. 
Williams v. Ingram, 320 Ark. 615, 899 S.W.2d 454 (1995).  In
determining on appeal whether the evidence is substantial, this
court need only consider the evidence on behalf of the appellee and
that part of the evidence that is most favorable to the appellee. 
Id.  
     Here, the damages awarded were for $99,682.45.  The portion of
that award which is specifically contested is $78,911.99, the total
amount Winburn paid for the 19,279 saggers shipped and paid for
after the August 1988 formula change.  Dixon complains that the
jury award erroneously assigned no value for any of the saggers it
had shipped.    
     We first point out the settled rule that a properly qualified
expert's opinion constitutes substantial evidence, unless it is
shown that the expert's opinion is without reasonable basis.  Ford
Motor Co. v. Massey, 313 Ark. 345, 855 S.W.2d 894 (1993).  To
support its claim for compensatory damages, Winburn duly qualified
Dr. Charles Venus as an economist who had reviewed Winburn Tile's
calculation of losses.  Venus testified that the actual use Winburn
had of the new formula saggers in manufacturing tile amounted to
one or two trips, although some saggers may have made it through
three or four times.  Even so, Venus stated, for practical
purposes, Winburn received no value from the saggers.  In addition,
we note that the trial court, without objection, gave an
instruction on fixing the amount of compensatory damages and that
instruction included the following element.  
          [T]he difference at the time and place of Winburn
     Tile's acceptance of the saggers between the value of the
     saggers as accepted and the value they would have had if
     they had been as warranted.
Winburn presented evidence that saggers are bought and sold by the
truckload, and the last thing they wanted was another load of
laminated or defective saggers.  Dr. Moore gave his view that the
PT250A saggers were unacceptable and were not suitable for use in
the Winburn manufacturing process.  The weight and value to be
given expert witnesses lies within the exclusive province of the
jury.  It also is the jury's prerogative either to believe or
disbelieve any witness.  Id.  Considering the foregoing testimony,
we conclude the jury had substantial evidence before it.
     For the reasons set out above, we affirm.