Court Opinion

ID: 2696579
Source: CourtListenerOpinion
Date Created: 2014-08-04 15:41:07.984537+00
Date Added: 2024-06-11T12:13:19.190512
License: Public Domain

[Cite as Huntington Natl. Bank v. Findlay Machine & Tool, Inc., 2012-Ohio-748.]

                      IN THE COURT OF APPEALS OF OHIO
                          THIRD APPELLATE DISTRICT
                              HANCOCK COUNTY

HUNTINGTON NATIONAL BANK,

        PLAINTIFF-APPELLEE/
        CROSS-APPELLANT,                                          CASE NO. 5-11-27

        v.

FINDLAY MACHINE & TOOL, INC.,

        DEFENDANT-APPELLANT/                                      OPINION
        CROSS-APPELLEE.

                Appeal from Hancock County Common Pleas Court
                          Trial Court No. 2006 CV 460

      Judgment Affirmed in Part, Reversed in Part and Cause Remanded

                          Date of Decision: February 27, 2012

APPEARANCES:

        Ralph D. Russo for Appellant/Cross-Appellee

        Thomas A. Yoder for Appellee/Cross-Appellant
Case No. 5-11-27

SHAW, P.J.

        {¶1} Defendant-appellant/cross-appellee, Findlay Machine & Tool, Inc.

(“FMT”), appeals the May 5, 2011 judgment of the Common Pleas Court of

Hancock County, Ohio, overruling its objections to the magistrate’s decision,

adopting the magistrate’s decision, ordering FMT to pay $63,990.00 with interest

from the date of judgment to the plaintiff-appellee/cross-appellant, Automated

Handling & Metalfab, Inc. (“AHM”), granting judgment in favor of AHM on

FMT’s counterclaim, and overruling FMT’s motion for a new trial. AHM cross-

appeals this same judgment, wherein the trial court overruled its motion for

prejudgment interest.1

        {¶2} The facts relevant to this appeal are as follows.                              AHM is a

manufacturer of conveyor systems.                  FMT is a designer and manufacturer of

cleaning systems for industrial parts. In the summer of 2005, FMT was the

successful bidder to design and manufacturer three separate industrial parts

cleaning systems for Caterpillar, Inc., in Joliet, Illinois, at a cost of approximately

$2,000,000.00.         In October of 2005, William Owsley, who was the project

manager for this contract with Caterpillar, met with Jeffrey Miller, the owner of

AHM, and requested that AHM submit a proposal to design and manufacture two

1
  On September 14, 2011, this Court granted the motion of Huntington National Bank to be substituted as
the plaintiff-appellee/cross-appellant because AHM ceased to exist after the filing of this appeal and
Huntington National Bank now has the right to receive payment of any amounts owed to AHM from FMT.
However, for ease of discussion, we will continue to refer to the plaintiff-appellee/cross-appellant as AHM.

                                                    -2-
Case No. 5-11-27

of the conveyor systems needed in two of these cleaning systems, the Lance

washer (“the Lance”) and the Rod and Housing washer (“the R&H”). AHM was

not involved in any way with the third cleaning system that FMT was building for

Caterpillar.

        {¶3} Owsley informed Miller that FMT’s original plan for the Lance

washer system called for a less expensive walking beam conveyor to transport the

parts through the cleaning system. However, FMT later determined a walking

beam conveyor was not a feasible conveyor for the type of washer system

Caterpillar needed.         Consequently, FMT realized that it had underbid the

Caterpillar contract and was going to lose money on the project.2 Owsley also

informed Miller that AHM would probably lose money if it built the conveyor for

the Lance system but that FMT would also pay AHM to build the conveyor system

for the R&H and that AHM would profit on the R&H system.

        {¶4} During this initial meeting between Owsley and Miller, Owsley

showed him “concept drawings” of the Lance and R&H washing systems to give

him an idea of the plans FMT had for these two washing systems and the types of

conveyor systems FMT wanted to use in these washers. On October 5, 2005,

AHM submitted a quote for labor, material, and engineering of the two conveyor

2
  Catepillar was FMT’s biggest customer, responsible for nearly half of all of FMT’s business. Thus,
although FMT stood to lose money on this particular project with Caterpillar, it was concerned with
maintaining its continuous business relationship with Caterpillar.

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Case No. 5-11-27

systems, with the Lance conveyor priced at $90,000.00 and the R&H conveyor

priced at $96,000.00.

       {¶5} For the Lance conveyor, the quote noted that the conveyor would be

designed to handle dedicated pallets 20” wide and 120” long with a conveyable

flat surface on the bottom of the pallets, that the product weight including the

pallets was 5,000 pounds, that pop-up stops would be utilized, that pallets would

be supplied by FMT, and that the quoted cost included set up and the test run of

individual pieces as necessary. For the R&H conveyor, the quote noted that caster

wheels would be utilized to handle 30” wide and 80” long conveyable flat bottom

pallets that had a product weight, including pallet, of 5,000 pounds, that a cylinder

“dog” system would be used to move the pallets, that FMT was to verify the

layout and pallet flow locations, that AHM would work with FMT engineering to

verify the designs met FMT customer specifications, and that the cost included set

up and the test run of individual pieces as necessary.

       {¶6} A change in the height of the R&H conveyor system was later

requested, resulting in an additional charge of $3,756.00. After this change, the

price of the two conveyor systems totaled $189,756.00, which was to be paid in

increments: 30% due with the purchase order, 30% due with integration of the

conveyor into the washer system, 30% due with Caterpillar’s approval at FMT’s

facility, and the balance due after approval by Caterpillar at its Joliet facility.

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Case No. 5-11-27

      {¶7} On October 20, 2005, AHM sent some drawings to Owsley for his

review. Over the next few months, a number of drawings of the two systems were

prepared. In November of 2005, FMT approved the design of the Lance conveyor,

and AHM began fabricating the Lance conveyor. Although AHM requested that

pallets be provided to it by FMT in order to test the conveyor system, FMT did not

provide a pallet. According to Miller, AHM tested the Lance conveyor in sections

without using an FMT supplied pallet, and these sections each worked. However,

the conveyor system could not be tested as one complete unit because it first had

to be integrated into the Lance washer system, which was being designed and built

by FMT.

      {¶8} FMT transported this conveyor system in parts on January 6, January

13, and January 18, 2006 from AHM’s facility to FMT’s. This conveyor then had

to be integrated into FMT’s washer system by FMT. Fabricators from AHM were

sent to FMT to assist in the integration of the conveyor into the washer system.

During this time, FMT instructed the AHM fabricators to change the position of

the three motors on the conveyor, which also required that all the guards for the

sprockets be changed. In addition, the stops in the conveyor system had to be

hardened because they were being damaged when hit by a pallet. There were also

problems with some of the rollers because they were not level. According to

Miller and Owsley, the system also needed some “debugging,” which they

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Case No. 5-11-27

indicated was typical whenever one system is being integrated into another.

Miller testified that the Lance conveyor was functional and all changes/repairs

requested of AHM by FMT were completed by sometime in late March of 2006.

       {¶9} However, according to George Hay, FMT’s chief executive officer,

the conveying equipment was poorly constructed. Among the problems testified

to by Hay were that a number of rollers were not parallel to one another because

the holes made for them in the frame were not the same elevation, causing the

pallets to go askew, a number of slides, glides, and pop-up stops were in the wrong

locations, and the pop-ups stops were and remain inadequate because they are

scored every time a pallet hits them, causing the stops to jam.

       {¶10} Meanwhile, AHM was given permission by FMT to begin the

fabrication of the R&H conveyor system sometime in January of 2006.             In

February of 2006, Owsley approved the plans for the R&H conveyor that were

submitted to him by AHM’s engineer. Once again, FMT did not send any pallets

to use in the testing of this system. AHM delivered this conveyor to FMT in late

March of 2006.

       {¶11} This system also had some problems that had to be remedied.

Initially, FMT realized that the conveyor would not fit inside its washer, so AHM

had to re-engineer it. Also, some of the guide rails were not aligning properly and

AHM fabricators were sent to assist in fixing these problems. While integrating

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Case No. 5-11-27

the conveyor system into the washer, FMT found that some of the casters were

welded flat, causing them not to be level when a pallet came to them, that some of

the “dogs” would not go back sufficiently to pick up the next pallet, and that there

was not a guide to prevent a pallet from falling due to its weight.    Jeffrey Cable,

FMT’s project leader for the R&H system, testified that AHM fabricators assisted

FMT employees in assembling the R&H conveyor, but that most of the necessary

adjustments and repairs were made by FMT employees because FMT was under

time constraints to get the R&H washer delivered to Caterpillar and because FMT

did not permit AHM employees to use its major equipment.

        {¶12} At different points in time, both the Lance and R&H washers were

run at FMT’s facility for representatives of Caterpillar. These runs were done to

demonstrate to Caterpillar that the washer systems were capable of satisfactorily

cleaning out various particles found in Caterpillar’s parts. After the successful run

of the Lance system, it was sent to Caterpillar’s facility in Joliet in August of

2006.     Once the R&H system was successfully run for Caterpillar’s

representatives, it was also sent to Caterpillar’s Joliet facility in October of 2006.

However, both washer systems experienced operating difficulties after arriving at

Caterpillar, and FMT employees have made a number of trips to Joliet to attempt

to resolve the problems. The testimony from FMT’s employees was that the

                                         -7-
Case No. 5-11-27

operating difficulties stemmed from problems with each system’s conveyors,

which were not operating properly.

      {¶13} FMT made a number of payments to AHM, totaling $113,766.00,

between October 11, 2005 and May 3, 2006. However, FMT did not pay the

remaining amount owed of $75,990.00. When Miller contacted FMT about the

unpaid amount, he spoke with Andrew Rill, FMT’s controller. Rill informed

Miller that FMT had not paid the remaining balance to AHM because Caterpillar

had not yet paid its balance on its contract with FMT. Rill did not inform Miller

of any remaining problems with the conveyor systems nor did anyone at FMT

express any dissatisfaction with the conveyor systems to Miller. FMT never paid

AHM the remaining balance on the contract. In addition, Caterpillar did not

approve the Lance and R&H washer systems.

      {¶14} On July 28, 2006, AHM filed a complaint for breach of contract

against FMT. FMT filed its answer to this complaint on October 1, 2006, and also

filed a counterclaim for breach of contract.        FMT filed a supplemental

counterclaim for breach of contract on April 25, 2007. The matter proceeded to a

bench trial before a magistrate on September 5 and 7, 2007.

      {¶15} On February 29, 2008, the magistrate issued her decision, finding

that FMT had breached its contract with AHM and that AHM had established that

it was owed $63,990.00 on this contract ($75,990.00 less $3,000.00 from the

                                       -8-
Case No. 5-11-27

change order on the R&H system and less $9,000.00 due upon approval from

Caterpillar). The magistrate also found that FMT failed to establish that AHM

violated the terms of the contract based on the delivery dates, had failed to

establish that AHM violated any express or implied warranties, had conducted

itself in relation to the conveyor systems in a manner that demonstrated it had

accepted the conveyors, and had failed to establish the basis for any damages.

Based on these findings, the magistrate recommended that the trial court grant

judgment in favor of AHM and award damages in the amount of $63,990.00 with

interest at the legal rate of 8% from the date of judgment and that judgment on the

counterclaim be granted in favor of AHM.

      {¶16} FMT filed objections to the magistrate’s decision on March 14, 2008.

After the transcript was filed, FMT filed supplemental and revised objections on

June 30, 2008, listing eight specific issues with the magistrate’s decision. AHM

filed its response to FMT’s objections and a motion for pre-judgment interest on

July 17, 2008. On July 9, 2009, FMT filed a motion for a new trial on the issue of

FMT’s damages, asserting that Caterpillar had now unequivocally rejected the

Lance and R&H washers, refused to pay the balance of its contract with FMT, and

would no longer discuss the matter with FMT.

      {¶17} On May 5, 2011, the trial court overruled all of FMT’s objections,

adopted the magistrate’s decision, granted judgment in favor of AHM on its claim

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Case No. 5-11-27

and awarded it $63,990.00 with interest at the legal rate from the date of judgment,

granted judgment in favor of AHM on FMT’s counterclaim, and overruled FMT’s

motion for a new trial.

       {¶18} This appeal followed, and FMT now asserts seven assignments of

error for our review.

                        FMT’S ASSIGNMENT OF ERROR I

       THE TRIAL COURT COMMITTED PREJUDICIAL ERROR
       BY OVERRULING FMT’S OBJECTIONS TO THE
       MAGISTRATE’S    DECISION,    ADOPTING   THE
       MAGISTRATE’S DECISION AND ENTERING FINAL
       JUDGMENT AGAINST FMT WITHOUT UNDERTAKING
       AN INDEPENDENT REVIEW AS TO THE OBJECTED
       MATTERS TO ASCERTAIN THAT THE MAGISTRATE
       PROPERLY DETERMINED THE FACTUAL ISSUES AND
       APPROPRIATELY APPLIED THE LAW.

                        FMT’S ASSIGNMENT OF ERROR II

       THE TRIAL COURT COMMITTED ERROR PREJUDICIAL
       TO FMT BY OVERRULING FMT’S OBJECTIONS B, C, AND
       F AND THEREBY ADOPTING THE FINDING OF THE
       MAGISTRATE THAT “FMT FAILED TO ESTABLISH THAT
       AHM VIOLATED EXPRESS OR IMPLIED WARRANTIES.”

                    FMT’S ASSIGNMENT OF ERROR III

       THE TRIAL COURT COMMITTED PREJUDICIAL ERROR
       IN OVERRULING FMT’S OBJECTION A THEREBY
       ADOPTING THE MAGISTRATE’S DECISION THAT AHM,
       DESPITE HAVING A DUTY TO TEST THE CONVEYOR
       SYSTEMS, WAS NOT PROVIDED NOTICE OF DEFECTS IN
       THE TWO CONVEYOR SYSTEMS WHICH PRECLUDED
       FMT FROM ITS REMEDIES OF BREACH OF WARRANTY.

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Case No. 5-11-27

                    FMT’S ASSIGNMENT OF ERROR IV

      THE TRIAL COURT COMMITTED PREJUDICIAL ERROR
      BY OVERRULING FMT’S OBJECTIONS D AND G AND
      CONSEQUENTLY ADOPTING THE MAGISTRATE’S
      DECISION THAT FMT’S ACCEPTANCE OF THE
      DELIVERY OF THE TWO CONVEYOR SYSTEMS AND
      FMT’S APPROVAL OF AHM’S DESIGN OF THE PLANS
      LEAVES FMT WITH NO LEGAL RECOURSE AGAINST
      AHM’S CLAIM FOR PAYMENT.

                    FMT’S ASSIGNMENT OF ERROR V

      THE TRIAL COURT COMMITTED PREJUDICIAL ERROR
      BY OVERRULING FMT’S OBJECTION H IN ITS
      ENTIRETY AND CONSEQUENTLY ADOPTING THE
      MAGISTRATE’S DECISION THAT FMT FAILED TO
      ESTABLISH ANY BASIS FOR ANY DAMAGES EITHER ON
      ITS COUNTERCLAIM OR AS A SET-OFF AGAINST THE
      JUDGMENT AWARDED TO AHM.

                    FMT’S ASSIGNMENT OF ERROR VI

      THE TRIAL COURT COMMITTED PREJUDICIAL ERROR
      AND ABUSED ITS DISCRETION BY OVERRULING FMT’S
      MOTION FOR A NEW TRIAL BASED ON NEWLY
      DISCOVERED EVIDENCE.

                   FMT’S ASSIGNMENT OF ERROR VII

      THE TRIAL COURT’S JUDGMENT ADOPTING THE
      MAGISTRATE’S DECISION IS CONTRARY TO LAW AND
      AGAINST THE MANIFEST WEIGHT OF THE EVIDENCE
      AND JUDGMENT SHOULD HAVE BEEN ENTERED IN
      FAVOR OF FMT DISMISSING AHM’S COMPLAINT AND
      GRANTING FMT JUDGMENT ON ITS COUNTERCLAIM.

      {¶19} In addition, FMT filed a cross-appeal and now asserts one

assignment of error for our review.

                                      -11-
Case No. 5-11-27

                 AHM’S CROSS-ASSIGNMENT OF ERROR

       THE TRIAL COURT COMMITTED ERROR IN NOT
       GRANTING THE FORMER APPELLEE PRE-JUDGMENT
       INTEREST PURSUANT TO OHIO REVISED CODE 1343.03
       IN A BREACH OF CONTRACT CASE. THE COURT FOUND
       THAT THE DISPUTE INVOLVED A CONTRACT DISPUTE
       BETWEEN THE PARTIES AND FOUND LIABILITY ON
       THE PART OF THE APPELLANT TO THE FORMER
       APPELLEE IN THE AMOUNT OF $63,990 FOR BREACH OF
       THAT    CONTRACT,    BUT  FAILED    TO   AWARD
       PREJUDGMENT INTEREST ON THAT AMOUNT FROM
       APRIL OF 2006 WHICH WAS THE TIME OF THE BREACH.
       AS SET FORTH HEREIN, OHIO REVISED CODE 1343.03
       BESTOWS THE RIGHT OF AUTOMATIC PRE-JUDGMENT
       IN A BREACH OF CONTRACT CASE.

                        First Assignment of Error of FMT

       {¶20} In its first assignment of error, FMT asserts that the trial court erred

by overruling its objections to the magistrate’s decision because the judgment

entry does not contain any supporting evidence that the trial court conducted an

independent review of the magistrate’s decision.          More specifically, FMT

contends that although the trial court’s entry states that it conducted an

independent review of the magistrate’s decision, the entry does not reflect in any

other manner that the trial court conducted an independent review, i.e. the entry

does not mention what evidence or exhibits it relied upon, does not refer to

specific transcript pages or particular witnesses, and does not cite any case law or

the Revised Code chapter that addresses the substantive merits of the case. FMT

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Case No. 5-11-27

further requests that this Court conduct a de novo review of the magistrate’s

decision and objections.

       {¶21} Pursuant to Rule 53(D)(4)(d) of the Ohio Rules of Civil Procedure,

when objections are filed to a magistrate’s decision, the trial court must

independently review the objected matters to decide if the magistrate properly

determined the factual issues and appropriately applied the law.        Brandon v.

Brandon, 3d Dist. No. 10-08-13, 2009-Ohio-3818, ¶ 31; Davidson v. Davidson,

7th Dist. No. 07 BE 19, 2007-Ohio-6919, ¶ 9. Accordingly, the trial court is free

to adopt, reject, or modify the decision of the magistrate under its de novo review.

Goldfuss v. Traxler, 3d Dist. No. 16-08-12, 2008-Ohio-6186, ¶ 7, citing Stumpff v.

Harris, 2d Dist. No. 21407, 2006-Ohio-4796, ¶ 16; Civ.R. 53(D)(4)(b).

       {¶22} When examining whether a trial court has conducted the required

independent review of a magistrate’s decision, appellate courts “generally presume

regularity in the proceedings below, and, therefore, we generally presume that the

trial court conducted its independent analysis in reviewing the magistrate’s

decision.” Mahlerwein v. Mahlerwein, 160 Ohio App.3d 564, 2005-Ohio-1835,

828 N.E.2d 153, ¶ 47 (4th Dist.). Therefore, the party who asserts that the trial

court did not conduct such a review bears the burden of affirmatively

demonstrating the trial court’s failure to perform its duty. Id.; Figel v. Figel, 3d

Dist. No. 10-08-14, 2009-Ohio-1659, ¶ 10.

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Case No. 5-11-27

       {¶23} Furthermore, a trial court’s decision will not be reversed on appeal as

being against the manifest weight of the evidence as long as there is some

competent, credible evidence to support the decision.              Cichanowicz v.

Cichanowicz, 3d Dist. No. 3-08-04, 2008-Ohio-4779, ¶ 20, citing Duer v.

Moonshower, 3d Dist. No. 15-03-15, 2004-Ohio-4025, ¶ 15.

       {¶24} In its entry, the trial court quoted the exact language of Civ.R.

53(D)(4)(d) in regards to ruling on objections to a magistrate’s decision.       The

court also noted that it could adopt, reject, or modify the magistrate’s decision, in

whole or in part, because it was to conduct a de novo review of any determination

of fact or law made by the magistrate as it had the ultimate authority and

responsibility over the magistrate’s findings and rulings. The trial court further

noted that it was responsible for substituting its judgment for that of the

magistrate’s whenever the magistrate improperly determined the factual issues

and/or inappropriately applied the law.

       {¶25} Additionally, the trial court’s entry detailed who testified, their

respective roles in the matter, and the number of exhibits submitted by both

parties. The court then stated that it reviewed the objections, the magistrate’s

decision, and the transcript filed in this case, including that it reviewed the

testimony of each witness (each of which the court named) and the exhibits that

were admitted into evidence.

                                          -14-
Case No. 5-11-27

       {¶26} After detailing what it had considered, the trial court stated that upon

its independent review it found that the magistrate properly determined the factual

issues and appropriately applied the law. Thus, the trial court elected to adopt the

magistrate’s decision in toto and overruled the objections filed by FMT.

       {¶27} While the trial court’s judgment entry did not specifically quote

witnesses or otherwise cite to the substantive law upon which it relied, there is

nothing in the record to indicate that the trial court did not independently review

the objected matters. Furthermore, FMT has failed to affirmatively demonstrate

that the trial court did not perform its duty to conduct an independent review.

Accordingly, FMT’s first assignment of error is overruled.

                           FMT’s Second, Third, Fourth,
                         and Seventh Assignments of Error

       {¶28} FMT’s second, third, fourth, and seventh assignments of error each

involve issues regarding the trial court’s findings as to which party breached the

contract and whether AHM breached any warranties it made, expressly or

impliedly, about the conveyor systems. More specifically, FMT maintains in its

second assignment of error that the trial court incorrectly found that AHM did not

breach any express warranties, that AHM did not breach the implied warranty of

fitness for a particular purpose, and that AHM did not breach the implied warranty

of merchantability. In its third assignment of error, FMT asserts that the trial court

incorrectly found that FMT was precluded from a remedy for a breach of any

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Case No. 5-11-27

types of warranties by AHM because FMT failed to provide notice to AHM of

defects in the two conveyor systems. FMT contends in its fourth assignment of

error that the trial court incorrectly found that FMT had no legal recourse against

AHM’s claim for payment because it accepted delivery of the conveyor systems

and approved the design plans submitted by AHM. Lastly, in FMT’s seventh

assignment of error it maintains that the trial court’s judgment was against the

manifest weight of the evidence. In support of this assignment of error, FMT

relies upon the assertions outlined in its second, third, and fourth assignments of

error.    Once again, FMT urges this Court to conduct its own review of the

evidence and rule accordingly.

         {¶29} Contrary to FMT’s request that this Court conduct a de novo review

of the evidence, an appellate court is not permitted to reverse a trial court’s

judgment when it is supported by competent, credible evidence going to all of the

essential elements of the case. C.E. Morris Co. v. Foley Constr. Co., 54 Ohio

St.2d 279, 376 N.E.2d 578 (1978). “Under this highly deferential standard of

review, a reviewing court does not decide whether it would have come to the same

conclusion as the trial court. Rather, we are required to uphold the judgment so

long as the record, as a whole, contains some evidence from which the trier of fact

could have reached its ultimate factual conclusions.”      Hooten Equip. Co. v.

Trimat, Inc., 4th Dist. No. 03CA16, 2004-Ohio-1128, ¶ 7. We are to defer to the

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Case No. 5-11-27

findings of the trier of fact because in a bench trial, the trial judge “is best able to

view the witnesses and observe their demeanor, gestures and voice inflections, and

to use these observations in weighing the credibility of the proffered testimony.”

Seasons Coal Co., Inc. v. Cleveland, 10 Ohio St.3d 77, 80, 461 N.E.2d 1273

(1984). Furthermore, a trial court’s decision involving R.C. 1302.01 et seq., that is

based on competent, credible evidence, will not be reversed on appeal. George v.

Fannin, 67 Ohio App.3d 703, 709, 588 N.E.2d 195 (12th Dist. 1990), citing

Konicki v. Salvaco, Inc., 16 Ohio App.3d 40, 42, 474 N.E.2d 347 (2d Dist. 1984).

       {¶30} Initially, we note that the parties do not dispute that the merits of this

case are governed by R.C. 1302.01 et seq., Ohio’s codification of the U.C.C. for

the sale of goods. Ohio’s adoption of the U.C.C. provides multiple remedies for

buyers of alleged nonconforming goods, including the purchase and installation of

custom-made goods. Varavvas v. Mullet Cabinets, Inc., 185 Ohio App.3d 321,

2009-Ohio-6962, 923 N.E.2d 1221, ¶ 45. Further, the parties do not dispute that

the trial court correctly found that $63,990.00 was the remaining purchase price on

the contract and that FMT had not paid this amount. Rather, these assignments of

error center around two questions:        (1) whether AHM failed to design and

fabricate two conveyor systems that performed as required, which would entitle

FMT to damages and if not, (2) whether FMT is precluded from recovering any

damages and must pay the remaining purchase price because it accepted and/or did

                                         -17-
Case No. 5-11-27

not effectively revoke its acceptance of the conveyors and did not notify AHM of

the breach within a reasonable time after discovering the breach. We find the

second question to be dispositive of these assignments of error.

       {¶31} FMT does not dispute that it accepted the conveyors at issue.

However, FMT maintains that its acceptance of the conveyors does not preclude it

from recovering damages for any breach of express or implied warranties by

AHM. The Revised Code establishes the remedies available to a buyer, such as

FMT, after the goods have been accepted and the time for revocation of

acceptance has passed. The relevant section of the Revised Code states: “Where

the buyer has accepted goods and given notification as provided in division (C) of

section 1302.65 of the Revised Code, he may recover as damages for any non-

conformity of tender the loss resulting in the ordinary course of events from the

seller’s breach as determined in any manner which is reasonable.” (Emphasis

added.) R.C. 1302.88(A).

       {¶32} A buyer’s failure to notify the seller of the non-conformity in

accordance with R.C. 1302.65(C) operates to bar the buyer’s remedies under the

statute. Revised Code section 1302.65(C), in relevant part, states: “Where a tender

has been accepted: (1) the buyer must within a reasonable time after he discovers

or should have discovered any breach notify the seller of breach or be barred from

any remedy; * * *.”         The Ohio Supreme Court has stressed that “the

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‘determination of a reasonable time and the adequacy of notice to the seller are

ordinarily questions of fact.’” Chemtrol Adhesives, Inc. v. American Mfrs. Mut.

Ins. Co., 42 Ohio St.3d 40, 537 N.E.2d 624 (1989), qutoing Kabco Equip.

Specialists v. Budgetel, Inc., 2 Ohio App.3d 58, 61, 440 N.E.2d 611 (10th Dist.

1981); Allen Food Products, Inc. v. Block Bros., Inc.. 507 F.Supp. 392, 394

(S.D.Ohio 1980); Agway, Inc. v. Teitscheid, 144 Vt. 76, 80, 472 A.2d 1250, 1253

(1984).

      {¶33} In determining what constitutes adequate notice, the Ohio Supreme

Court has stated the following:

      R.C. 1302.65 is a codification of UCC 2-607. Official Comment 4
      to UCC 2-607 provides: “The content of the notification need
      merely be sufficient to let the seller know that the transaction is
      troublesome and must be watched. There is no reason to require
      that the notification which saves the buyer's rights under this
      section must include a clear statement of all the objections that
      will be relied on by the buyer, as under the section covering
      statements of defects upon rejection (Section 2-605 [R.C.
      1302.63] ). Nor is there reason for requiring the notification to be
      a claim for damages or of any threatened litigation or other
      resort to a remedy. The notification which saves the buyer’s rights
      under this Article [R.C. Chapter 1302] need only be such as
      informs the seller that the transaction is claimed to involve a
      breach, and thus opens the way for normal settlement through
      negotiation.”

      While the Official Comments to UCC 2-607 supply courts with
      interpretative assistance, we have recently noted that “[t]he
      Official Comment following R.C. 1302.65 [UCC 2-607] provides
      somewhat contradictory guidance as to how the notice
      requirement is to be construed.” Chemtrol Adhesives, Inc. v.
      American Mfrs. Mut. Ins. Co. (1989), 42 Ohio St. 3d 40, 52, 537

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      N.E.2d 624, 636. The debate as to whether a strict or liberal
      approach should be applied to UCC 2-607 persists. * * *

      This issue, however, has been decided by Chemtrol, supra,
      wherein we stated: “We reject the strict reading of R.C.
      1302.65(C)(1) [and UCC 2-607] * * * as we believe that notice
      may be sufficient under the statute despite the fact that the
      notice does not specifically allege a breach of the contract.
      Moreover, in our view, the statute was not meant to exclude the
      possibility that notice may be inferred. * * * Therefore, no
      specific form or words are required in the notice of breach of
      contract under R.C. 1302.65(C)(1).

(Emphasis added.) AFG, Inc. v. Great Lakes Heat Treating Co., 51 Ohio St.3d

177, 179-180, 555 N.E.2d 634 (1990).

      {¶34} FMT maintains that the trial court erred in finding that FMT did not

provide notice of the defects in the conveyor systems within a reasonable time.

Rather, it asserts that when it notified AHM of the various problems with both

conveyor systems, that this was sufficient notice of the breach to let AHM know

that the transaction was troublesome and must be watched. FMT also asserts that

AHM failed to test the conveyors as required, and if it had done this testing, it

would have had notice that its conveyor systems were defective.

      {¶35} We agree with FMT that the evidence before the trial court revealed

that AHM was on notice that the transaction was troublesome when FMT initially

informed AHM of a number of problems with both conveyor systems. However,

the evidence before the trial court also showed that each problem that was brought

to AHM’s attention by FMT was remedied. In fact, Miller testified that after April

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2006, he believed that AHM had taken care of every issue that FMT had with the

conveyors and that he believed that AHM had gone above and beyond what was

required of it to assist FMT in making its washer systems operational. He further

testified that after April of 2006, he was not informed of any more problems with

the conveyor systems and was told in May of 2006 that the reason his company

had not been paid the remaining balance on the contract was because FMT was

waiting to be paid by Caterpillar. He was never told that FMT was withholding

payment because of any problems with the conveyor system.

      {¶36} As previously noted, the reason that the notification which saves the

buyer’s rights under R.C. Chapter 1302 need only be such as to inform the seller

that the transaction is claimed to involve a breach is so that the way for normal

settlement through negotiation is opened. Here, FMT notified AHM that the

conveyor systems had a number of problems. FMT then worked with AHM to

remedy these problems. By April of 2006, AHM believed that all the problems

had been remedied and that FMT was now satisfied with the conveyor systems.

Indeed, the project manager through April of 2006 for FMT, William Owsley,

who is the one who worked directly with AHM, testified that he was satisfied with

AHM’s work and cooperation in troubleshooting during the integration process.

Thus, AHM was not given notice that its transaction with FMT remained

problematic.

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       {¶37} Moreover, the evidence before the trial court revealed that FMT

chose to no longer communicate with AHM about the problems with the

conveyors. In fact, when Miller contacted FMT in May about the remaining

balance due, he was not told of any dissatisfaction with the conveyors but was

simply told that FMT was waiting on payment from Caterpillar. Additionally,

FMT sent the washer systems, including the conveyors made by AHM, to Joliet,

and took it upon itself to make numerous changes to the conveyors without

involving AHM or even informing AHM that problems remained. The trial court

found that these actions demonstrated FMT’s acceptance and ownership of the

conveyors, served to prevent AHM from being notified that problems persisted,

and that FMT made the decision to use these conveyors and to perform work on

the conveyors itself due to its own time constraints in its contract with Caterpillar.

       {¶38} As to FMT’s claims that AHM failed to test the conveyors as

required and that it would have been put on notice of the problems with the

conveyors if it had tested them, the contract for the conveyors stated, “[c]ost

includes set up and test run individual pieces as [n]ecessary.” Contrary to FMT’s

position, this language does not demonstrate that AHM had an affirmative duty to

test run the conveyor systems once completely integrated into the washer systems,

only that it would test the individual pieces of the conveyor systems as necessary.

Miller testified that the Lance system was tested in parts by AHM at its facility

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prior to being delivered to FMT but that no pallets were supplied to AHM for

either the Lance or R&H systems. The trial court found this testimony to be

credible. In addition, the trial court found, and the evidence supported that neither

conveyor could be fully tested, i.e. with a number of pallets weighing up to 5,000

lbs. in a continuous cycle through the washing stages, until they were integrated

into their respective washer systems. The contract did not require this type of

testing on the part of AHM. Therefore, FMT continued to have a duty to notify

AHM if it continued to experience problems with the conveyors, particularly after

AHM was led to believe by FMT that any problems with the conveyors had been

remedied.

       {¶39} In short, the trial court found that FMT failed to provide a timely and

adequate notice of continuing problems with the conveyor systems. In fact, the

trial court also noted that FMT stopped calculating interest due from AHM for

delaying the project in July of 2006 because it acknowledged that the conveyors

were at “functional capacity.” These findings are supported by some, competent

credible evidence, and they support the trial court’s determination that FMT, by its

own decisions and actions, failed to properly notify AHM of the non-conforming

nature of the conveyors or to otherwise act in compliance with R.C. Chapter 1302.

Accordingly, the trial court did not err in finding that FMT breached its contract

with AHM, that FMT was responsible for the remaining balance on the contract

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(less the amounts deducted without objection by AHM), and that FMT was not

entitled to damages and/or an off-set of the balance for breach of contract by

AHM.

       {¶40} For all of these reasons, FMT’s second, third, fourth, and seventh

assignments of error are each overruled.

                   FMT’s Fifth and Sixth Assignments of Error

       {¶41} Both FMT’s fifth and sixth assignments of error involve issues

relating to the damages it sustained based on AHM’s breach of contract. Given

our decision as to FMT’s second, third, fourth, and seventh assignments of error

that the trial court did not err in finding in favor of AHM and against FMT, the

fifth and sixth assignments of error of FMT are moot, and, accordingly, both are

overruled.

                           AHM’s Assignment of Error

       {¶42} In its sole assignment of error, AHM asserts that the trial court erred

in overruling its motion for pre-judgment interest that it filed on July 17, 2008.

AHM maintains that R.C. 1343.03(A) entitles it to prejudgment interest as a

matter of law. In response, FMT contends that the trial court correctly overruled

AHM’s motion for pre-judgment interest because AHM failed to file an objection

to the magistrate’s decision, which did not award pre-judgment interest to AHM.

       {¶43} The award of pre-judgment interest as to claims arising out of breach

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of contract is governed by R.C. 1343.03(A). Dwyer Elec., Inc. v. Confederated

Builders, Inc., 3d Dist. No. 3-98-18 (1998). In pertinent part, this section provides

that: “ * * * [w]hen money becomes due and payable upon any bond, bill, note, or

other instrument of writing, * * * for the payment of money arising out of * * * a

contract or other transaction, the creditor is entitled to interest * * *.” (Emphasis

added.) R.C. 1343.03(A).

       {¶44} “The language of R.C. 1343.03(A) is neither permissive nor

ambiguous. In a breach of contract case between private parties where liability is

established, the trial court does not have discretion in awarding prejudgment

interest.” Butterfield v. Moyer, 3d Dist. No. 8-04-04, 2004-Ohio-5891, ¶ 14.

“Specifically, in cases like this one where a party has been granted judgment on an

underlying contract claim, that party is entitled to prejudgment interest as a matter

of law.” W & W Roofing & Siding, Inc. v. H.P. Group, L.L.C., 3d Dist. No. 5-01-

11, 2001-Ohio-2248, citing Dwyer Elec., supra.

       {¶45} The Supreme Court of Ohio has held that “in determining whether to

award prejudgment interest pursuant to R.C. 1343.03(A), ‘ * * *, a court need only

ask one question: Has the aggrieved party been fully compensated?’” Dwyer

Elec., supra; quoting Royal Elec. Constr. Corp. v. Ohio State Univ., 73 Ohio St.3d

110, 116, 652 N.E.2d 687 (1995). In order to be fully compensated, or made

whole, an aggrieved party should be compensated for the lapse of time between

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accrual of the claim and judgment. Id. at 117. This is the role and purpose of pre-

judgment interest. Accordingly, the only issue for resolution by a trial court in

claims made pursuant to R.C 1343.03(A) is how much interest is due the

aggrieved party. Id. In order to determine this, the trial court must make a factual

determination as to “when interest commences to run, i.e., when the claim

becomes ‘due and payable,’ and to determine what legal rate of interest should be

applied.” (Emphasis in original.) Id. at 115. Thus, while the right to pre-

judgment interest in a contract claim is a matter of law, the amount awarded is

based on the court's factual determination of an accrual date and interest rate.

       {¶46} In the case sub judice, AHM’s claim for pre-judgment interest was

based upon a contract. Thus, the trial court was required to award pre-judgment

interest. The only question for the trial court was what date the pre-judgment

interest began to accrue. Nevertheless, the trial court found that AHM failed to

object to the magistrate’s decision, which did not include an award of pre-

judgment interest. Thus, the trial court overruled AHM’s motion for pre-judgment

interest.

       {¶47} Civil Rule 53(D)(3)(b)(iv) provides that if a party fails to file a

timely objection to the magistrate’s decision, “[e]xcept for a claim of plain error, a

party shall not assign as error on appeal the court’s adoption of any factual finding

or legal conclusion, whether or not specifically designated as a finding of fact or

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conclusion of law under Civ.R. 53(D)(3)(a)(ii), unless the party has objected to

that finding or conclusion as required by Civ.R. 53(D)(3)(b).”

       {¶48} The Ohio Supreme Court has discussed the application of the plain

error doctrine in civil cases, finding that, “[i]n appeals of civil cases, the plain

error doctrine is not favored and may be applied only in the extremely rare case

involving exceptional circumstances where error, to which no objection was made

at the trial court, seriously affects the basic fairness, integrity, or public reputation

of the judicial process, thereby challenging the legitimacy of the underlying

judicial process itself.” Goldfuss v. Davidson, 79 Ohio St.3d 116, syllabus, 679

N.E.2d 1099 (1997).

       {¶49} “A ‘plain error’ is obvious and prejudicial although neither objected

to nor affirmatively waived which, if permitted, would have a material adverse

affect on the character and public confidence in judicial proceedings.” Schade v.

Carnegie Body Co., 70 Ohio St.2d 207, 209, 436 N.E.2d 1001. While conceding

that pre-judgment interest in this case was mandatory, FMT maintains that the

failure of the trial court to award pre-judgment interest because AHM did not file

an to the magistrate’s decision on this issue does not rise to the level of plain error.

       {¶50} However, the Rules of Civil Procedure specifically state that in the

absence of an objection, a trial court may adopt a magistrate’s decision “unless it

determines that there is an error of law or other defect on [its] face.” Civ.R

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53(E)(4)(a). Review under the plain error standard is limited on appeal to review

of “the trial court's adoption for failure to correct an obvious error of law or other

such defect in the decision.” Timbercreek Village Apts. v. Myles, 2d Dist. No.

17422 (1999), citing Divens v. Divens, 2d Dist. No. 97 CA 0112. (1998).

       {¶51} Although AHM filed a motion for pre-judgment interest, thereby

bringing the issue to the trial court’s attention, the trial court adopted the

magistrate’s decision and overruled AHM’s motion. The magistrate’s decision

and recommendations clearly omitted an award of pre-judgment interest, a defect

that was obvious on its face.      Pursuant to Royal Elec., supra, and the plain

language of     R.C. 1343.03(A), AHM has not been fully compensated and is

entitled to prejudgment interest. Thus, AHM’s assignment of error is sustained,

and we remand the matter to the trial court to determine the amount of pre-

judgment interest owed, i.e. to determine the “due and payable” date and the legal

rate of interest.

                                                        Judgment Affirmed in Part,
                                                             Reversed in Part and
                                                                 Cause Remanded

WILLAMOWSKI and ROGERS, J.J., concur.

/jlr

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