Camara v. Hill

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                                No. 90-197

David Camara                                 Supreme Court

     v.                                      On Appeal from
                                             Rutland Superior Court
Bedford W. Hill,
d/b/a B. W. Hill Systems                     February Term, 1991

Frank G. Mahady, J.

Edward L. Winpenny of DeBonis, Wright & Winpenny, P.C., Poultney, for

S. Scott Smith of Biederman & Rakow, P.C., Rutland, for defendant-appellee

PRESENT:  Allen, C.J., Gibson, Dooley, Morse and Johnson, JJ.

     JOHNSON, J.   Plaintiff sued defendant seeking recovery of amounts paid
to defendant for a computer system for plaintiff's slate business, conse-
quential damages, and attorney's fees.  Defendant counterclaimed for the
value of time spent developing software.  After a two-day bench trial,
judgment was entered for defendant on plaintiff's claim and for plaintiff on
the counterclaim; plaintiff appealed.  We affirm in part and reverse in
part and remand for further proceedings.
     Defendant submitted an initial proposal to plaintiff on July 27, 1988,
stating as follows:
           Dear Dave [Plaintiff],

               This is a breakdown of the computer system we have
          been discussing.  Most of the vendors that I have talked
          to have told me that shipping times are about one week.
          I'll have this stuff shipped to me and I'll burn it in,
          (test run it) and write the inventory control software
          before I move the system to your office.  If they're
          not as bad a bunch of liars as the slate people, I
          should have Gail [plaintiff's employee] driving you
          crazy with the thing, in about three weeks.

The letter then specified a CCDA 640 kilobyte memory computer for $1,971 and
an "I.coth [sic] Starwriter"  printer for $948.  Promised software included
a "BPI Accounting Package" for $450, a "dBase III plus database" for $649, a
WordPerfect word-processing program for $375, and an operating system
program for $139.  The proposal also included miscellaneous charges of $250,
for a grand total of $4,782.
     Plaintiff agreed to the proposal and paid $4,782 when defendant told
him that the equipment had been shipped.  In subsequently delivering system
components, defendant changed many of the specifications in the July 27,
1988 letter, and the ensuing lawsuit largely concerned whether or not
plaintiff had approved those changes.  The trial court found that plaintiff
approved a different computer with a somewhat smaller memory, since the one
recited in the July 27, 1988 letter was then in short supply.  Instead of a
42-megabyte hard drive, defendant supplied a 30-megabyte drive, which the
court found "was entirely adequate for the system." The court further found
that defendant supplied a printer "which was identical to the Starwriter
except for the nameplate on the machine."  Instead of the BPI accounting
program, defendant supplied a DAK brand substitute, because he concluded the
latter "would be more appropriate to the Plaintiff's needs." It is also
undisputed that defendant provided plaintiff with nonoriginal copies of the
database and word-processing programs described in the July 27, 1988 letter.
     Central to the suit were delays in both the shipment of additional
components and the completion of software customized for plaintiff's
business use.  On October 19, 1988, a computer was delivered to plaintiff,
at which time, according to defendant's testimony, the software was
"probably 25% complete."  On November 23, 1988, defendant installed the
accounting program, but the inventory software remained uncompleted, and as
far as the record indicates, was never completed.  The printer was delivered
on January 17, 1989, but the tractor feed, essential to plaintiff's payroll,
was delivered a year later.
     In February, 1989, plaintiff demanded return of the money paid to
defendant, but did not offer to return the equipment.  When asked why he did
not return the system, plaintiff testified:
          Q. Have you held onto the equipment?

          A. Why I really don't know.  I had gotten a thousand
          dollars into it and I have got a lot of time.  I
          guess that's why I held onto it.

     The court found that while the computer was in plaintiff's possession,
the hard disk was reformatted and the system was used.  The trial court also
found that there were delays in the performance of defendant's undertakings,
but it attributed some of these delays to plaintiff's own lack of cooper-
ation, specifically his failure to make his accountant available to consult
with defendant to aid in designing an accounting system appropriate for
plaintiff's business.
     The court concluded that time was not of the essence in the performance
of the contract and that plaintiff "has received substantially the system
contemplated by the parties, and the Defendant has received the sum set
forth in [the July 27, 1988 letter], which he drafted."  The present appeal
     Plaintiff argues first that he rejected the entire system as
nonconforming goods, pursuant to the Uniform Commercial Code (UCC),
specifically 9A V.S.A. { 2-601(a).  Defendant responds that the UCC does not
apply to this transaction because "[t]he actual physical goods were
entirely secondary to Plaintiff."  But the trial court made no determination
that the agreement between the parties was predominantly one for services,
rather than goods, and the record strongly supports the opposite conclusion.
The prices set by defendant in the July 27, 1988 letter all related to
goods, not services.  See Triangle Underwriters, Inc. v. Honeywell, Inc.,
604 F.2d 737, 742 (2d Cir. 1979) (where essence of contract for computer
system involved sales, rather than services, the UCC applied);  Austin's of
Monroe, Inc. v. Brown, 474 So. 2d 1383, 1388 (La. App. 1985) (contract,
which had as its predominant objective the obligation to deliver an
operational computer system, was one for sale); cf. Liberty Financial
Management Corp. v. Beneficial Data Processing Corp., 670 S.W.2d 40, 49 (Mo.
App. 1984) (contract to put data on tapes for transfer to data processing
system was contract for services, not the sale of tapes).  While the
counterclaim asserted that there was at least a quasi-contract to compensate
defendant for programming services, there was little if any support for that
claim in the record, and the trial court, in any case, denied the
counterclaim.  In sum, the UCC applies to this transaction.
     Defendant argues that under the UCC there was no valid rejection or
revocation of acceptance by plaintiff, and we agree that the trial court's
findings and conclusions as to the hardware, though not articulated in UCC
terms, are consistent with defendant's position and are not clearly
erroneous.  Under 9A V.S.A. { 2-606(1)(a) acceptance of goods may occur when
the buyer "[a]fter a reasonable opportunity to inspect the goods signifies
to the seller that the goods are conforming or that he will take or retain
them in spite of their non-conformity . . . ."  The court found that
plaintiff agreed to the substitution of another computer for the one
described in the July 1988 letter and that the printer delivered was
identical to the one promised, though marketed with the name of another
company.  By agreeing to the substitution of a different computer for the
one promised, plaintiff waived his right to reject that component.  And
assuming, arguendo, that plaintiff could have rejected the printer delivered
as not conforming to the contract, he did not do so.  He demanded return of
his money about a month after the printer was delivered, but that demand
related to delays in putting a complete system on line, delays which the
trial court found were specifically attributable to plaintiff's conduct.
     Plaintiff argues that even if he accepted the system under the UCC, he
later revoked acceptance pursuant to 9A V.S.A. { 2-608.  A buyer may revoke
his or her acceptance of a non-conforming commercial unit if he or she has
accepted it either "on the reasonable assumption that its non-conformity
would be cured and it has not been seasonably cured," 9A V.S.A. { 2-
608(1)(a), or "without discovery of such non-conformity if his acceptance
was reasonably induced either by the difficulty of discovery before
acceptance or by the seller's assurances."  9A V.S.A. { 2-608(1)(b).  The
trial court concluded that plaintiff knew of the non-conformities in the
hardware at the time he accepted the system.  The findings do not reflect
discovery of any additional, post-delivery non-conformities, and the record
does not suggest that there were reasons for revoking acceptance uncovered
after plaintiff demanded the return of his money in February, 1989.  In any
case, plaintiff would have had to notify defendant that his acceptance was
revoked pursuant to { 2-608(2), and he did not do so.  See Desilets Granite
Co. v. Stone Equalizer Corp., 133 Vt. 372, 374, 340 A.2d 65, 67 (1975).
     Plaintiff next argues that he did not receive original copies of dBase
III or WordPerfect.  Uncontradicted testimony at trial confirms that
assertion, and it is not contradicted by defendant on appeal.  The trial
court made no findings on this issue, though the issue was clearly
presented in the complaint and at trial.  Under 9A V.S.A. { 2-312(1)(a)
defendant warranted that "the title conveyed shall be good, and its
transfer rightful."  As to the two nonoriginal programs supplied, this
warranty was violated, and to the extent of plaintiff's consequent loss he
did not receive "substantially the system contemplated by the parties."
     We must therefore reverse and remand for further proceedings to
determine the damages resulting from defendant's failure to supply the
promised programs and to fashion an appropriate remedy.  The decision is
affirmed in all other respects.
     Reversed and remanded for further proceedings and an amended order with
respect to the computer programs described in this opinion; otherwise
                                   FOR THE COURT:

                                   Associate Justice