Case Name: Del CRYER v. M & M MANUFACTURING COMPANY, INC.
Court: Louisiana Supreme Court
Jurisdiction: Louisiana
Decision Date: 1972-10-04
Citations: 273 So. 2d 818
Docket Number: No. 51807
Parties: Del CRYER v. M & M MANUFACTURING COMPANY, INC.
Judges: HAMLIN, J., dissents in part with written reasons.
Reporter: Southern Reporter, Second Series
Volume: 273
Pages: 818–831

Head Matter:
Del CRYER v. M & M MANUFACTURING COMPANY, INC.
No. 51807.
Supreme Court of Louisiana.
Oct. 4, 1972.
On Rehearing Feb. 19, 1973.
Tucker, Martin, Holder, Jeter & Jackson, T. Haller Jackson, Jr., Shreveport, for defendant-applicant.
Gamm, Greenberg & Kaplan, Jack H. Kaplan, Shreveport, for plaintiff-respondent.

Opinion:
SANDERS, Justice.
This case raises the question of whether a sale of manufacturing rights to a multipurpose heater should be rescinded upon the demand of the purchaser, because of a deficiency in the performance of the manufactured heater. The Court of Appeal upheld the sale. 253 So.2d 69. We affirm.
The facts are largely undisputed. Del Cryer, a Shreveport oil operator, acquired from the inventor the manufacturing rights to the "JET-Glo Multi Purpose Heater," described in a pending patent application. He also acquired a small stock of parts and dies for the heater at a judicial sale. Subsequently, he retained the Greene Research Engineering Company, operated by George J. Greene, Jr., a mechanical engineer, to improve and test the heater for orchard heating purposes. After making improvements and testing, the Greene Research Engineering Company made a written report to Cryer that the maximum burning rate of the heater, using kerosene as fuel, was 275,000 BTUs per hour, suitable for use by outdoor laborers, for preventing fruit and vegetables from freezing, and for protecting newly poured concrete. The report stated that the tests extended over two 24-hour periods.
After receiving the report, Cryer contacted Thayer T. May, president of M & M Manufacturing Company, Inc., concerning the manufacture of the heater. On July 3, 196S, Cryer delivered the model heater and the Greene report to May, suggesting that he satisfy himself about the performance of the heater and determine whether or not he desired to acquire the manufacturing rights. May demonstrated the heater to numerous fruit and vegetable growers to determine its marketability.
On August 17, 1965, by written contract, M & M Manufacturing Company, Inc., purchased the manufacturing rights to the heater from Cryer. M & M paid Cryer $12,500 in cash and agreed to pay him a royalty of $1.25 for each unit manufactured. In the sale, M & M obligated itself to manufacture a minimum of 5000 units in the first year. The sale contained no express warranty as to the capacity of the heater or its suitability for orchard heating.
M & M manufactured an initial group of some fifty heaters. In testing the fuel system on one of these units, M & M discovered that the heater accumulated soot so badly that in three to five hours it failed to produce sufficient heat to protect vegetation. Ultimately, the heater would go out completely.
M & M then made extensive efforts to correct the soot problem, but failed. Although possessing some utility, the heater fell short of the long-burning feature needed for a superior orchard heater. Thus, considering it unmarketable, M & M abandoned its plan to manufacture the heaters.
At the end of the initial contract year, Cryer brought the present suit for royalties and attorney's fees due him under the contract. M & M reconvened, seeking rescission of the sale on the grounds of error, failure of cause, and redhibitory vice.
After trial on the merits, the district judge found that the heater was unsuitable for orchard heating and so imperfect that it must be supposed that a buyer would not have purchased it had he known of the de- feet. He denied redhibition, however, because M & M could not return the parts and dies delivered in the sale. Under Louisiana Civil Code Article 2543, he reduced the purchase price $6,250.00, the amount of the first year's royalty. On appeal, the Court of Appeal denied the reconventional demand for rescission of the sale and granted judgment in favor of the plaintiff against M & M Manufacturing Company in the sum of $6,250.00, the royalty on the guaranteed minimum of 5000 heaters for the first year, with legal interest from judicial demand until paid, and all costs. It rejected plaintiff's demand for attorney's fees. 253 So.2d 69. On application of M & M Manufacturing Company, Inc., wc granted certiorari to review the judgment of the Court of Appeal denying rescission of the sale. 259 La. 1053, 254 So.2d 463 (1971).
Redhibition is the avoidance of a sale because of a vice or defect in the thing sold. LSA-C.C. Art. 2520. It is based upon an implied-in-law warranty that the thing sold is free of hidden defects that render it useless or impair its use to such an extent that it must be supposed that the buyer would not have purchased it, had he known of the vice. LSA-C.C. Arts. 2475, 2476, 2520; 23 Tul. L.Rev. 120.
As correctly noted by the Court of Appeal, the contested contract is a sale of the right to manufacture and distribute a heater built according to a design protected by patent law. The thing sold was an incorporeal right. LSA-C.C. Art. 460; Messersmith v. Messersmith, 229 La. 495, 86 So.2d 169 (1956); Yiannopoulos, Louisiana Civil Law Treatise: Property § 13, pp. 33-34 (1967).
In the sale of an incorporeal right, the implied warranty includes existence of the right at the time of the transfer and peaceable possession of that right. LSA-C.C. Arts. 2501, 2646; Tomlinson v. Thurmon, 189 La. 959, 181 So. 458 (1938). It does not extend to a deficiency in a physical object to which the right may ultimately relate. The thing sold and warranted is the right, not the object. Ratcliff v. McIlhenny, 157 La. 708, 102 So. 878 (1925); 2 Planiol Civil Law Treatise (Translation by Louisiana State Law Institute) No. 1629, p. 904. See also Losecco v. Gregory, 108 La. 648, 32 So. 985 (1901); Succession of Mahoney, 167 La. 255, 119 So. 40 (1928); Benner v. Van Norden, 27 La.Ann. 473 (1875).
We conclude that redhibition is unavailable in the present case because of the absence of warranty extending to the performance of the manufactured heater.
M & M advances two additional reasons for rescinding the sale: error and failure of cause. Although the arguments are variously phrased, the pervasive issue is whether the sale should be rescinded because of error.
As to error, the Louisiana Civil Code provides:
Article 1823:
"Errors may exist as to all the circumstances and facts which relate to a contract, but it is not every error that will invalidate it. To have that effect, the error must be in some point, which was a principal cause for making the contract, and it may be either as to the motive for making the contract, to the person with whom it is made, or to the subj ect matter of the contract itself."
Article 1825:
"The error in the cause of a contract to have the effect of invalidating it, must be on the principal cause, when there are several; this principal cause is called the motive, and means that consideration without which the contract would not have been made."
Article 1826:
"No error in the motive can invalidate a contract, unless the other party was apprised that it was the principal cause of the agreement, or unless from the nature of the transaction it must be presumed that he knew it."
In these articles, cause is identified with motive. Litvinoff, Louisiana Civil Law Treatise: Obligations § 290, pp. 522-523 (1969); Smith, A Refresher Course in Cause, 12 La.L.Rev. 2, 15 (1952). Error in the determining motive, or principal cause, of a contract vitiates consent and invalidates the contract. Error as to a subsidiary motive has no effect upon the validity of the contract. Stack v. Irwin, 246 La. 777, 167 So.2d 363 (1964); Carpenter v. Skinner, 224 La. 848, 71 So.2d 133 (1954).
Some motives are readily discernible from the inherent nature of a sale. For example, an immediate end of the buyer is to acquire ownership of the thing sold. That motive characterizes the transaction. Other motives, not discernible from the inherent nature of the sale, rise to the status of principal cause only when the parties contract, on that basis. Although the parties need not make the motive an express condition of the contract, it must appear from all the circumstances that the existence of the sale has been subordinated to the reality of the motive. The special motive must have been a constitutive element of the accord of wills. The reality of the motive becomes a tacit condition of the contract. LSA-C.C. Arts. 1825, 1826, 1827; Aubry & Rau, Droit Civil Francais: Obligations (An English Translation by the Louisiana State Law Institute) § 343a, p. 313; 3 Toullier, Droit Civil Francais (6th ed.) Title 3, Art. 1, § 40-42, pp. 26-28; Litvinoff, Louisiana Civil Law Treatise: Obligations § 220, pp. 394-395 (1969); Smith, A Refresher Course in Cause, 12 La.L.Rev. 2, 10-11 (1952).
In his article on Cause, supra, Dr. J. Denson Smith, an eminent civil law authority, states:
"Considering the nature of the contract, realization of the principal cause or motive is understood to be the basis upon which consent is given and it therefore becomes a tacit condition of the contract. This is because the final and principal motive for assuming an obligation must lie in the obvious end being sought, for example, obtaining ownership, or use, or services, or conferring a benefit. If this cause fails, the will is vitiated and the contract falls. At the same time, if the particular motive is not discernible by the nature of the contract it is subsidiary and does not rise to the status of a tacit condition because the other party is not chargeable with knowledge that the contract is conditioned on its realization. To be effective as a condition, the parties must contract on that basis. An example of this may be found in the rule that error as to the value of the thing purchased and sold does not vitiate consent. Although a buyer may not have bought if he had known the true value of the thing, it should be presumed that he is taking his chance — and the seller is in like position —unless the agreement is conditioned on value. All that the seller is required to know is that the buyer wants the thing being bought and sold, or supposedly so; why the buyer may want it, whether because of its supposed value or for any other reason is not the seller's concern if the parties do not contract on such basis. As the French writers put it, error will serve to invalidate consent only when it enters the contractual field. It does so tacitly if it relates to the principal cause, that is, the final and determining motive." [Footnotes omitted],
The treatise of Aubry & Rau, Droit Civil Francais, supra, sets forth the principle as follows:
". . . [T]he error relative to the occasional motives or to the circumstances which may have induced one or both of the parties to contract, is a cause of nullity only where, according to the common intention of the parties, the reality of these motifs constitutes a condition to which they intended to subordinate the formation or the performance of the agreement." [Footnote omitted].
Finally, Toullier in Droit Civil Francais, supra, § 42, p. 28, states:
"It is by the manner in which the act is expressed, by the nature of the contract, by the object of the promise, finally by the circumstances, that one may determine what the determining motive has been, and whether the consent given has been subordinated to or conditioned on the reality of this motive as an implicit condition."
In the present case, the transfer of ownership was effective. The buyer became the owner of the right to manufacture and distribute. The right conveyed is without defect. Hence, the immediate end that characterizes a sale generally was achieved.
M & M asserts, however, that its motive was to secure the manufacturing rights to a long-burning, high-output heater to sell to orchardists for freeze protection. It postulates that this motive was the principal cause of the contract, and the heater's failure to fulfill these requirements is an invalidating error. Finally, conceding the seller's good faith, it asserts that the error was induced by the seller's misrepresentation that the heater possessed the essential features to protect orchards from freezing.
Innocent misrepresentations may induce error when a purchaser justifiably relies upon them. When an error results from such non-fraudulent misrepresentations, the error invalidates the contract only if it bears upon the principal cause of the contract. LSA-C.C. Arts. 1823, 1825, 1845, 1847(2), 2529; Ganucheau v. Greff, La.App., 181 So.2d 854 (1966); Kardis v. Barrere, 17 La.App. 433, 136 So. 135 (1931); 12 La.L.Rev. 509.
Cryer was an oil operator, with no special competence in heat engineering. Both lower courts found that he was in good faith and made no misrepresentations to the buyer. We adopt this factual finding.
ít is true that he transmitted a copy of the engineering report to the buyer when he delivered the model heater for testing. Under the circumstances, however, the transmission of the report cannot be considered as a representation of the seller that the heater met all the performance requirements of a marketable orchard heater. On the contrary, the record reflects that the seller intended that the manufacturer itself test the heater and rely upon its own skill and judgment as to the heater's performance. He gave the company ample opportunity to conduct its investigation by supplying it with a working model more than a month before the sale. Apparently, the manufacturer's tests consisted only of burning the heater for short periods for demonstration purposes. Under no sound legal theory, however, is the inadequacy of these tests chargeable to the sell er. See Henderson v. United States Sheet & Window Glass Co., 168 La. 66, 121 So. 576 (1929); Rocchi v. Schwabacher & Hirsch, 33 La.App. 1364 (1881).
The manufacturer was aware that the heater was newly developed. The purchase of manufacturing rights to it was speculative in some degree. One who expresses an unqualified will to purchase such rights should be bound accordingly unless the seller knows or should know that the purchaser's will is conditional. No basis for this knowledge appears in the record. Rather, it appears that, following the manufacturer's investigation and exercise of judgment, the seller reasonably contemplated an unconditional transaction. We find nothing in the contract or the circumstances under which it was formed to raise the manufacturer's expectations for the heater to the contractual level of principal cause.
In its well-written brief, the defendant relies upon several decisions of this Court dealing with error in contracts, including Stack v. Irwin, 246 La. 777, 167 So.2d 363 (1964); Carpenter v. Skinner, 224 La. 848, 71 So.2d 133 (1954); Overby v. Beach, 220 La. 77, 55 So.2d 873 (1951); and Pan American Production Co. v. Robichaux, 200 La. 666, 8 So.2d 635 (1942). We find these cases to be factually and legally inapposite.
We conclude, as did the Court of Appeal, that the sale is valid and that plaintiff's demand should be sustained.
For the reasons assigned, the judgment of the Court of Appeal is affirmed at defendant's costs.
HAMLIN, J., dissents in part with written reasons.
SUMMERS, J., dissents.
TATE, J., dissents in part and assigns written reasons.
. The report recited: "Tests were performed on two identical, standard production heaters and extended over two 24-hour periods. All tests were performed in an unsheltered area with no provisions made for wind shielding. A standard recommended kerosene fuel (higher heating value of 19,900 Btu/lb.) was used for all tests."
. "Q. And you and Mr. May subsequently negotiated verbally and worked out the signed contract which was previously introduced in evidence, is that correct?
"A. Well, he told me he was very much interested in something, some product, and I told him to take the heater and take the engineer's report and if he found that it was something that he was interested in why I would be happy to make a deal with him and told him the conditions of the deal that I would accept, so he takes the heater and the engineer's report, and then I didn't have any other personal contact with Mr. May then for a couple of weeks."
"Q. Did you give Mr. May ample opportunity to run any tests that he may liave desired prior to the time of the execution of the contract on August 17th, 1965?
"A. Yes, sir. Mr. May had the heater about 30 days prior to the time that we made — that we closed the deal.
"Q. Did you conceal from him any knowledge that you had with reference to the operational effect of the heater?
"A. No, sir, nothing — I didn't conceal anything because I told Mr. May my oecu-pation was an independent oil operator and that I wasn't an engineer but I did have an engineer's report on the heater and he could take it and do anything that he wanted to do with it, satisfy himself, and then if he thought that it was something he was interested in why I would be very happy to get with him- and close the deal."
.The sale, captioned "Sale of Manufacturing Rights," conveyed the manufacturing and distributing rights with "legal warranties," that is, with such warranties as are imposed by law. It also conveyed the stock of parts and dies.
. The condition has also been described as "unvocalized" (8 Tul.L.Rev. 194), "undeveloped" (13 Tul.L.Rev. 363), and "implied" (Litvinoff, Louisiana Civil Law Treatise: Obligations § 212, p. 378 at f. n. 21 (1969).
."C'est par la mani&re dont l'acte est concu, par la nature du contrat, par l'objet de la promesse, enfin 'par les cir-constances, qu'on peut juger quel a été le motif determinant de celui qui consent, et si son consentement était subordonné á la réalité de ce motif comme it une condition implicite."
. In contrast, when error is induced by fraud, it need relate only to a "material part of the contract." LSA-C.C. Art. 1847(2); 12 La.L.Rev. 509; 33 Tul.L. Rev. 270.
. On original hearing, the Court of Appeal stated: "In this case there was no misrepresentation present." This finding remained undisturbed on rehearing.