Hayes Const. Co. v. Silverthorn

Annotate this Case

343 Mich. 421 (1955)

72 N.W.2d 190

HAYES CONSTRUCTION COMPANY v. SILVERTHORN.

Docket No. 9, Calendar No. 46,490.

Supreme Court of Michigan.

Decided October 3, 1955.

Dykema, Jones & Wheat (Thomas L. Munson and Allan Neef, of counsel), for plaintiff.

Thomas Roumell, for defendant Waters Company.

Wurzer, Higgins & Starrs (John R. Starrs, of counsel), for defendant Buhl Sons Company.

*423 SMITH, J.

This case involves charges of fraud and breach of contract. It arises out of the defective performance of a number of Coleman furnaces.

The plaintiff is the Hayes Construction Company, a Michigan corporation. The moving party therein, the sole stockholder, is Milton Ratner. "Actually I am Hayes Construction Company." Accordingly, when we hereafter speak of what Ratner said or what Ratner knew or what Ratner did, it may be understood that his corporate creature, plaintiff herein, spoke the same words, possessed the same knowledge, and undertook the same actions. Ratner is a builder of long experience. He started in the business in 1916 and has since remained in it. During that time he has constructed thousands of houses and, at the time of the trial, had just completed "building a portion of the Jeffries and Douglas housing projects for the city for about $4,200,000."

Ratner (Hayes Construction Company) was the general contractor for block 1 of Lake Shore Village, a group of 121 separate apartments, contained in 13 separate buildings. Each apartment was to have a separate furnace. When it became known in business circles that such an order would soon be forthcoming, Ratner was approached by many persons who attempted to interest him in their products. Among such persons was Arthur L. Johnson, Jr., at that time department manager for defendant Buhl Sons Company's heating division. Mr. Johnson extolled the virtues of the Coleman furnace. "I told him that the Coleman furnace would do the job for him." As proof thereof, Johnson pointed to a similar project, the Goddard project, where he himself lived, which employed Coleman furnaces, and, in fact, he invited Ratner to visit the project to see how the furnaces worked. The invitation was declined, but the information thus conveyed was utilized. Ratner did in fact telephone the owner of the *424 Goddard project and learned from him of the successful performance of the Coleman furnace. He obtained, in addition, the name of the contractor who installed the furnaces, with whom he also talked. Again he received a favorable report, particularly as to maintenance costs. Despite the magnitude of the expenditure (approximately $50,000 for the furnaces) he did not discuss the contemplated installation with his architect. What, then, influenced him to decide on the Coleman product? As Ratner explains: "That the maintenance was nil, and that they were a reasonable priced furnace, and they did the job I wanted." When Johnson came back he was informed of Ratner's inquiries and his decision. "I find out that those furnaces are satisfactory and if you can put those same furnaces in my unit to my satisfaction, I will be happy about it, and you will get the rest of the job after these 121 units." Johnson replied: "We can do it." The project went forward.

Defendant Buhl Sons Company, however, did not sell directly to the consumer. It sold to dealers and heating contractors, one of whom was defendant Waters Company. This company suggested that it could furnish a better furnace than the Coleman, but Ratner insisted that that was the make he wanted and he asked for their bid, exclusive of service, on the Coleman model 90-A, this model number having been supplied by Johnson. Waters' bid was low and they got the job. Work began in September of 1948.

Trouble with the furnaces was experienced from the outset. We will not burden the record with technical descriptions of the difficulties encountered. They were manifold, numerous, and, apparently, baffling. Ratner consulted with Waters and with Buhl. Waters said that they had received the furnace as a packaged unit, had started it running with *425 the equipment that was on it and they pointed out that their contract did not cover the servicing of the equipment. Buhl's representatives investigated the situation but denied responsibility. It did not, in fact, maintain a service department for Coleman products, although its mechanics at times assisted the factory representatives. The Coleman company itself, however, which had warranted the furnaces, having been notified both by Buhl and Ratner of the difficulties being encountered, sent men to Detroit to work on the problem. They spent approximately 6 weeks in Detroit, and made various changes, but the performance of the furnaces remained unsatisfactory. It was the opinion of Coleman's sales manager of the heating equipment division that the difficulties at the Lake Shore Village, "the principal problem that was out there was the matter of correcting the draft. And the draft problem was created by the incinerator." (The same chimney served the furnace in one apartment and the incinerator in the adjoining apartment.) As far as the difference between model 90 and model 90-A was concerned, he said, there was very little. The burners were essentially the same and the draft characteristics exactly the same. They were what is known in the trade as low-draft furnaces.

We will first examine the charge of fraud against defendant Buhl. Ratner, it is asserted, was over his depth with salesman Johnson and was cozened into an improvident purchase by the arts and wiles of deceit. Thus he relied upon Johnson's false and fraudulent or reckless (Wettlaufer Manufacturing Corporation v. Detroit Bank, 324 Mich 684) assertions that the Coleman furnace would do the job, that its average final consumption was thus and so, and that its maintenance was nil. But Johnson's duplicity, it is asserted, did not stop here. For, it is said, he knew that the furnaces in the Goddard *426 project bore a certain model number (90), but he, with this knowledge, either knowingly or recklessly supplied Ratner with another model number 90-A. It is, says plaintiff, just as though he were shown and purchased a corner lot, only to have some other lot description placed in the deed. Smith v. Michigan Realty & Construction Co., 175 Mich 600.

So far as Johnson's assertions as to the merits of the Coleman furnace, that it would do the job, that it was miserly in its consumption of fuel, and the maintenance nil, we are here in the realm of what the common law has for years termed "puffing," a salesman's praise of his own property, involving matters of estimate or judgment upon which reasonable men may differ. Ordinarily these are not regarded as actionable, even though the vendee's joys of realization fall short of those of his anticipation. The reason for this lies in the realities of commercial intercourse. As Judge Learned Hand put it in Vulcan Metals Co. v. Simmons Manufacturing Co. (CCA), 248 F 853, 856:

"There are some kinds of talk which no sensible man takes seriously, and if he does he suffers from his credulity. If we were all scrupulously honest, it would not be so; but, as it is, neither party usually believes what the seller says about his own opinions, and each knows it. Such statements, like the claims of campaign managers before election, are rather designed to allay the suspicion which would attend their absence than to be understood as having any relation to objective truth."

See, also, Truman v. J.I. Case Threshing Machine Co., 169 Mich 153; Camden Fire Insurance Co. v. Peterman, 278 Mich 615, 619.

The relationship of the parties may, however, impose more stringent requirements. One party may have special knowledge and the other none and without the means of getting it. In this case the latter *427 cannot fairly and reasonably exercise his own judgment. The parties, therefore, do not stand on equal terms and the buyer has a right to rely upon the representations of excellence made by the seller.

In the case at bar, appellant urges upon us that we are in the above area of fraud, that Ratner "clearly was not on a par with Johnson, and this is particularly true where the Coleman furnaces were concerned." It is pointed out to us that Ratner knew very little about furnaces, nothing about Coleman farnaces, and that he had "never installed a furnace in his life." Nevertheless, we share the reluctance of the trial court in accepting Mr. Ratner as the gullible and trusting buyer pictured to us. His experience in building was substantial. In this part of the country heating plants are an integral part of habitable construction. Nor did he stand alone and unprotected. He had a professional adviser an architect. It is clear that he did not rely blindly, if at all, upon Buhl's representations. He prudently checked them, not only with another owner but with another heating contractor. Means of knowledge were open to him and the degree of their utilization was circumscribed in no respect by defendant Buhl or its agent, Johnson. As a matter of fact, the extent of Ratner's trust in Johnson, as described to us, challenges our credulity. He was told by Johnson, he says, that "the maximum fuel consumption would be 5-1/2 gallons per average heating day." This, it is asserted, was a representation, both false and material, known to be such, or recklessly made, and upon it Ratner relied, to his sorrow and his loss. But it would seem that upon even the most casual reflection such a statement, if made, would be totally devoid of persuasive meaning. Even if we define an "average" heating day in some reasonable manner (as to which the record is silent) the oil consumption on such a day would obviously depend upon the *428 needs of the individual household. Are there infants in the family? Old people? Is the housekeeper careful about keeping the apartment doors and windows closed? Johnson flatly asserts that it would be impossible to give an actual gallonage rate per day and that he did not do so.

The matter of the allegedly misrepresented model number stands on a different footing, assuming (which is far from proved) that engineering and design differences in the 2 models would account for a satisfactory performance by the one and no performance by the other. Here is a statement of positive fact, not opinion. We are out of the realm of trader's talk. But the evidence with respect thereto is conflicting. Johnson asserts that at the very outset in their first meeting, he discussed with Ratner the difference between model 90 and model 90-A, stating that the former was being successfully used in the Goddard project, but that it was being discontinued and that an improved model, the 90-A, would be used in the contemplated project. Ratner, on the other hand, asserts that it was not until a year and a half after the installations were made that he became aware that 2 different models were made, the 90 and the 90-A. The trial court's finding, on this point, goes to the heart of this phase of the controversy, the conclusion being that Johnson did not represent to Ratner that the latter was getting model 90 furnaces. We cannot agree with appellant that the trial court's conclusion should not be allowed to stand. We deem it pertinent to observe, in this respect, that in a case tried to the court without a jury, we do not disturb the judgment of the court unless it is against the preponderance of the evidence. Jones v. Eastern Michigan Motorbuses, 287 Mich 619. Such judicial restraint is peculiarly appropriate to a fraud case. The trier of the facts in such a matter has an inestimable advantage over the *429 appellate tribunal. The hesitant word and the averted glance stand on a parity, on the printed page before us, with the positive assertion and the forthright expression. Not so in the mind and conscience of the nisi prius judge. He makes his appraisal of truth or falsity upon an evaluation of all the elements visible and audible, and while cases may occur in which his disregard for the clear preponderance is manifest even in these chambers, this case is not one of them. Much expert testimony was taken as to the cause or causes of the difficulties experienced. The experts do not agree. The trial court's conclusion was expressed in the following language:

"Mr. Johnson and Mr. Marx testified that the real reason that there was difficulty with these particular units in this particular housing project was because of the high draft of the chimneys in the various units, which condition was aggravated and made still higher when the incinerator units, which were placed on the same flues, went into operation, and especially when the incinerator doors were left open. The evidence reveals that these chimneys in this project were large ones with an incinerator connected with each chimney, and with the incinerator in operation the chimney temperature was raised and the draft correspondingly increased. Both of these furnaces, whether model No 90 or model No 90-A, were known in the trade as low-draft furnaces."

Even plaintiff's expert, Mr. Jordan, conceded that joining the furnace exhaust to a flue which was also connected with an incinerator would "interfere with the draft," although as to the extent and effect of such interference he differed vigorously with defendant Buhl's witnesses. With respect to the trial court's conclusion, quoted above, appellant asserts that "the finding by the trial court that the chimney *430 draft was responsible for the defective operation of the Coleman model 90-A furnaces installed in Lake Shore Village was contrary to the preponderance of the evidence." We cannot agree. In our opinion the trial court was amply justified in its finding by the evidence adduced and it is not contrary to the preponderance thereof.

It remains to consider the charges made against Waters, the heating contractors who installed the furnaces. The case against Waters rests upon the foundation that, under its contract with plaintiff, prepared by plaintiff on standard printed forms, it "is the guarantor not only of the installation of the furnaces, but also of the furnaces themselves." Waters denies liability, asserting not only plaintiff's failure to give certain allegedly required notices (of defects and claims) but also that it "merely did what plaintiff requested," that is, installed the furnace model prescribed by plaintiff and, hence, should not be held liable for its malfunctioning. The question of whether or not one prescribing a certain machine thereby assumes the sole responsibility and risk for its operation, notwithstanding its guaranty by the furnisher thereof, we do not reach. The cause of the difficulties experienced, as noted above, was defective chimney draft. This was precisely the area in which Waters had relieved itself of responsibility. "Owner," Waters had added to the printed provisions of the subcontract, "is to be responsible for chimney draft." Responsible, it is reasonable to conclude, not only for the draft itself but for consequences flowing therefrom or from lack or abundance thereof. In view of the provision, we cannot saddle Waters with the cost of the debacle and the partnership should, we agree with the trial court, recover the amount unpaid on its contract, with interest.

*431 We find no merit in the remaining contentions of appellant. The judgment of the lower court is affirmed. Costs to appellees.

CARR, C.J., and BUTZEL, SHARPE, REID, DETHMERS, and KELLY, JJ., concurred with SMITH, J.

BOYLES, J., concurred in the result.