Pacific Chromalox Division, Emerson Electric Co. v. Irey

787 P.2d 1319, 128 Utah Adv. Rep. 8, 1990 Utah App. LEXIS 20, 1990 WL 12872
CourtCourt of Appeals of Utah
DecidedFebruary 12, 1990
Docket880203-CA
StatusPublished
Cited by9 cases

This text of 787 P.2d 1319 (Pacific Chromalox Division, Emerson Electric Co. v. Irey) is published on Counsel Stack Legal Research, covering Court of Appeals of Utah primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Pacific Chromalox Division, Emerson Electric Co. v. Irey, 787 P.2d 1319, 128 Utah Adv. Rep. 8, 1990 Utah App. LEXIS 20, 1990 WL 12872 (Utah Ct. App. 1990).

Opinion

GARFF, Judge:

Appellant Pacific Chromalox Division, Emerson Electric Co. (Chromalox) brought an action against respondents Richard F. Irey (Irey) and Industrial Engineering and Manufacturing Corp. (I.E.M.) for breach of contract and breach of warranty. Respondents counterclaimed for breach of contract *1321 and unjust enrichment. After a jury trial, the jury ruled in favor of respondents. We affirm.

Chromalox, a subsidiary of Emerson Electric, is a manufacturer of industrial heating elements which it sells to companies that produce heating equipment for commercial applications. It does not sell heating elements to residential customers. Irey, as the president and owner of I.E.M., designs and builds one-of-a-kind automated machines. I.E.M.’s staff includes Irey’s wife, some machinists and assembly people, and some consulting engineers, including Joseph W. Lindsey.

During the summer of 1982, Chromalox’s manager of manufacturing engineering, Ned Blackett, in response to corporate cost-cutting targets, was interested in reducing the cost of Chromalox’s complicated, labor intensive process for producing heating coils. He did not know if it was possible to build a machine to automate this process, but was interested in the possible savings that might result if such a machine could be built. He first offered this “high risk” project to another company, which declined it. Blackett then heard about Irey’s work in automation engineering and offered the project to him.

Irey visited the Chromalox facility, located in Ogden, Utah, and observed the coil production process. On about August 10, 1982, he hand-carried a proposal for the machine to Chromalox and met with Black-ett. He told Blackett that he could build a machine to duplicate the process exactly. Blackett told Irey that he could not pay more than $75,000 for the machine because of corporate financial restrictions, but if the machine worked, Chromalox might be interested in a second machine for another plant, and that Chromalox had need of other types of automated machinery which Irey might be able to build.

On November 2, 1982, I.E.M., through Irey, agreed to manufacture the machine for Chromalox for $69,896 plus tax, with delivery to take place in fourteen to sixteen weeks. Irey arrived at this price by subtracting the requisite amount of sales tax from Chromalox’s $75,000 ceiling. He deliberately underbid the project, which he figured would cost about $120,000 to complete, because he felt, on the basis of Blackett’s representations that a second machine might be needed and that Chroma-lox was interested in additional automated machinery, that it was an investment in his future business. To meet the price ceiling, Irey and Blackett agreed to eliminate a washer orienter called for in the original specifications.

Blackett filed a purchase requisition for the machine on November 9, 1982. Specifications set forth in the purchase order included the following: The machine was to be capable of applying a stud on both ends of a heating coil, which could range in diameter from .06" to .115", at a minimum rate of 600 coils per hour. It was to accept coils made from twenty to thirty-two gauge wire, was to be designed and constructed for continuous service, and was to allow for convenient servicing and repairs. The purchase order specified a delivery date of February 1, 1983. I.E.M. was to test the machine at its facility prior to delivery. Chromalox was to pay I.E.M. fifty percent of the contract amount upon satisfactory completion of the machine, with the remainder due within thirty days.

I.E.M. did not begin production of the machine until after December 7, 1982, when Chromalox sent required documentation regarding some of the specifications. About this time, Blackett became aware that the previously eliminated washer orienting device might be necessary to duplicate the manufacturing process. He discussed the problem with Irey, who told him that it would not be any problem to put a little orienter mechanism on the machine. They did not discuss any price increase or extension of the delivery date for the machine.

On March 31, 1983, approximately sixteen weeks later, Irey delivered the uncompleted machine to Chromalox’s facility at Blackett’s request, because Blackett need *1322 ed to demonstrate it to “corporate people” from Emerson Electric. Irey indicated that it would take two to three weeks to complete the machine, but that it was to the point that he could complete it at Chroma-lox’s plant. Because of its uncompleted condition, Chromalox did not pay for the machine at this time.

However, by April 1983, the machine was still not producing heating coil assemblies, and had numerous problems. First, the parties finally determined that addition of the washer orienter was necessary. Second, the washer dispenser on the machine continually jammed. Although Chromalox suggests that this problem was the result of Irey’s poor design, Irey indicated that the washers supplied by Chromalox may have caused much of the problem: He stated that it is understood in the automation industry that you will get washers free from burrs, deformations, and dirt because an automated machine cannot handle nonidentical parts. Even though Chromalox’s specifications stated that the washers used for production by the machine would be flat and free from burrs, they were not. Instead, they were nonidentical in shape and were mixed with bits of rock left from Chromalox’s deburring operation. Consequently, Irey maintained that tjhe problems encountered with the washer dispenser were a result of the poor quality of the washers. Finally, Irey and Chromalox engineers determined that it would be necessary to add a previously uncontemplated coil centering device to the machine. In its initial specifications, Chromalox had represented that the coils used on the machine would be manufactured to within plus or minus one coil diameter in length. However, the coils provided by Chromalox did not conform to this standard. According to Irey, the coil centering device was a necessary modification to compensate for Chro-malox’s lack of quality control, but interfered with the operation of the rest of the machine.

During the ensuing year, Irey continued to work part time, together with Chroma-lox engineers, on the machine at the Chro-malox plant. He spent a considerable amount of time on two unsuccessful attempts to design and install the washer orienter while Chromalox engineers constantly changed the specifications for the machine.

Although the machine was not operational during this period, never producing more than ten or twelve coil assemblies at a time, Chromalox paid Irey the total contract amount for the machine by October 4, 1983 because Irey was facing extreme financial pressures. Blackett told Irey that if the machine worked, Chromalox would be willing to pay I.E.M. an additional $30,-000 for the design and engineering package as an attempt to compensate him for the additional engineering work.

On March 26, 1984, Blackett authorized the machine’s return to I.E.M.’s facility in Salt Lake City for the purpose of refining the washer feeder and finding a way to orient the washers. During the ensuing ninety days, Irey again redesigned the washer orienter. However, the machine developed additional problems related to the washer feeder and washer orienter.

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Bluebook (online)
787 P.2d 1319, 128 Utah Adv. Rep. 8, 1990 Utah App. LEXIS 20, 1990 WL 12872, Counsel Stack Legal Research, https://law.counselstack.com/opinion/pacific-chromalox-division-emerson-electric-co-v-irey-utahctapp-1990.