Case Name: CHATLOS SYSTEMS, INC., a New Jersey Corporation v. NATIONAL CASH REGISTER CORPORATION. Appeal of NCR CORPORATION
Court: United States Court of Appeals for the Third Circuit
Jurisdiction: United States
Decision Date: 1982-01-15
Citations: 670 F.2d 1304
Docket Number: No. 81-1715
Parties: CHATLOS SYSTEMS, INC., a New Jersey Corporation v. NATIONAL CASH REGISTER CORPORATION. Appeal of NCR CORPORATION.
Judges: 
Reporter: Federal Reporter 2d Series
Volume: 670
Pages: 1304–1316

Head Matter:
CHATLOS SYSTEMS, INC., a New Jersey Corporation v. NATIONAL CASH REGISTER CORPORATION. Appeal of NCR CORPORATION.
No. 81-1715.
United States Court of Appeals, Third Circuit.
Argued Dec. 2, 1981.
Decided Jan. 15, 1982.
Rehearing Denied Feb. 11, 1982.
Certiorari Dismissed June 9, 1982.
See 102 S.Ct. 2918.
Richard V. Jones (argued), Stryker, Tams & Dill, Newark, N.J., for appellee; Paul M. Colwell, Newark, N.J., on brief.
Marc S. Friedman (argued), Kalb, Friedman & Siegelbaum, Newark, N.J., for appellant.
Before ALDISERT, ROSENN and WEIS, Circuit Judges.

Opinion:
OPINION OF THE COURT
PER CURIAM.
This appeal from a district court's award of damages for breach of warranty in a diversity case tried under New Jersey law presents two questions: whether the district court's computation of damages under N.J.Stat.Ann. § 12A:2 — 714(2) was clearly erroneous, and whether the district court abused its discretion in supplementing the damage award with pre-judgment interest. We answer both questions in the negative and, therefore, we will affirm.
Plaintiff-appellee Chatios Systems, Inc., initiated this action in the Superior Court of New Jersey, alleging, inter alia, breach of warranty regarding an NCR 399/656 computer system it had acquired from defendant National Cash Register Corp. The case was removed under 28 U.S.C. § 1441(a) to the United States District Court for the District of New Jersey. Following a non-jury trial, the district court determined that defendant was liable for breach of warranty and awarded $57,152.76 damages for breach of warranty and consequential damages in the amount of $63,558.16. Chatlos Systems, Inc. v. National Cash Register Corp., 479 F.Supp. 738 (D.N.J.1979), aff'd in part, remanded in part, 635 F.2d 1081 (3d Cir. 1980). Defendant appealed and this court affirmed the district court's findings of liability, set aside the award of consequential damages, and remanded for a recalculation of damages for breach of warranty. Chatlos Systems, Inc. v. National Cash Register Corp., 635 F.2d 1081 (3d Cir. 1980). On remand, applying the "benefit of the bargain" formula of N.J.Stat.Ann. § 12A:2-714(2) (Uniform Commercial Code § 2-714(2)), the district court determined the damages to be $201,826.50, to which it added an award of pre-judgment interest. Defendant now appeals from these damage determinations, contending that the district court erred in failing to recognize the $46,- 020 contract price of the delivered NCR computer system as the fair market value of the goods as warranted, and that the award of damages is without support in the evidence presented. Appellant also contests the award of pre-judgment interest.
Waiving the opportunity to submit additional evidence as to value on the remand which we directed, appellant chose to rely on the record of the original trial and submitted no expert testimony on the market value of a computer which would have performed the functions NCR had warranted. Notwithstanding our previous holding that contract price was not necessarily the same as market value, 635 F.2d at 1088, appellant faults the district judge for rejecting its contention that the contract price for the NCR 399/656 was the only competent record evidence of the value of the system as warranted. The district court relied instead on the testimony of plaintiff-appel-lee's expert, Dick Brandon, who, without estimating the value of an NCR model 399/656, presented his estimate of the value of a computer system that would perform all of the functions that the NCR 399/656 had been warranted to perform. Brandon did not limit his estimate to equipment of any one manufacturer; he testified regarding manufacturers who could have made systems that would perform the functions that appellant had warranted the NCR 399/656 could perform. He acknowledged that the systems about which he testified were not in the same price range as the NCR 399/656. Appellant likens this testimony to substituting a Rolls Royce for a Ford, and concludes that the district court's recomputed damage award was therefore clearly contrary to the evidence of fair market value — which in NCR's view is the contract price itself.
Appellee did not order, nor was it promised, merely a specific NCR computer model, but an NCR computer system with specified capabilities. The correct measure of damages, under N.J.Stat.Ann. § 12A:2— 714(2), is the difference between the fair market value of the goods accepted and the value they would have had if they had been as warranted. Award of that sum is not confined to instances where there has been an increase in value between date of ordering and date of delivery. It may also include the benefit of a contract price which, for whatever reason quoted, was particularly favorable for the customer. Evidence of the contract price may be relevant to the issue of fair market value, but it is not controlling. Mulvaney v. Tri State Truck & Auto Body, Inc., 70 Wis.2d 760, 767, 235 N.W.2d 460, 465 (1975). Appellant limited its fair market value analysis to the contract price of the computer model it actually delivered. Appellee developed evidence of the worth of a computer with the capabilities promised by NCR, and the trial court properly credited the evidence.
Appellee was aided, moreover, by the testimony of Frank Hicks, NCR's programmer, who said that he told his company's officials that the "current software was not sufficient in order to deliver the program that the customer [Chatios] required. They would have to be rewritten or a different system would have to be given to the customer." Appendix to Brief for Appellee at 2.68. Hicks recommended that Chatios be given an NCR 8200 but was told, "that will not be done." Id. at 2.69. Gerald Greenstein, another NCR witness, admitted that the 8200 series was two levels above the 399 in sophistication and price. Id. at 14.30. This testimony supported Brandon's statement that the price of the hardware needed to perform Chatios' requirements would be in the $100,000 to $150,000 range.
Essentially, then, the trial judge was confronted with the conflicting value estimates submitted by the parties. Chatios' expert's estimates were corroborated to some extent by NCR's supporters. NCR, on the other hand, chose to rely on contract price. Credibility determinations had to be made by the district judge. Although we might have come to a different conclusion on the value of the equipment as warranted had we been sitting as trial judges, we are not free to make our own credibility and factual findings. We may reverse the district court only if its factual determinations were clearly erroneous. Krasnov v. Dinan, 465 F.2d 1298 (3d Cir. 1972).
Upon reviewing the evidence of record, therefore, we conclude that the computation of damages for breach of warranty was not clearly erroneous. We hold also that the district court acted within its discretion in awarding pre-judgment interest, Chatlos Systems, Inc. v. National Cash Register Corp., 635 F.2d at 1088.
The judgment of the district court will be affirmed.
. Section 12A:2-714(2) states:
The measure of damages for breach of warranty is the difference at the time and place of acceptance between the value of the goods accepted and the value they would have had if they had been as warranted, unless special circumstances show proximate damages of a different amount.
. The district court found the fair market value of the system as warranted to be $207,826.50; from this it subtracted its determination of the value of the goods delivered, $6,000.
. At oral argument, counsel for appellant responded to questions from the bench, as follows:
Judge Rosenn: Your position also is that you agree, number one, that the fair market value is the measure of damages here.
Counsel for Appellant: Yes, sir.
Judge Rosenn: The fair market value you say, in the absence of other evidence to the contrary that is relevant, is the contract price. That is the evidence of fair market value.
Counsel: That's right.
Judge Rosenn: Now seeing that had the expert or liad the plaintiff been able to establish testimony that there were other machines on the market that were similar to your machine—
Counsel: Yes.
Judge Rosenn: That the fair market value of those was $50,000, that would have been relevant evidence but it had to be the same machine — same type machine.
Counsel: Well, I would say that the measure of damages as indicated by the statute requires the same machine — "the goods" — in an operable position.
. We find the following analogy, rather than the Rolls Royce-Ford analogy submitted by appellant, to be on point:
Judge Weis: If you start thinking about a piece of equipment that is warranted to lift a thousand pounds and it will only lift 500 pounds, then the cost of something that will lift a thousand pounds gives you more of an idea and that may be—
Counsel for Appellee: That may be a better analogy, yes.
Judge Weis: Yes.
. The dissent essentially is based on disagreement with the estimates provided by Chatios' expert, Brandon. The record reveals that he was well qualified; the weight to be given his testimony is the responsibility of the factfinder, not an appellate court.