Court Opinion

ID: 3133701
Source: CourtListenerOpinion
Date Created: 2015-10-21 20:09:06.005532+00
Date Added: 2024-06-11T10:35:22.778795
License: Public Domain

J. A25038/15

NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37

LOMBARD METALS CORPORATION                  :     IN THE SUPERIOR COURT OF
                                            :          PENNSYLVANIA
                          Appellee          :
                    v.                      :
                                            :
AMG RESOURCES CORPORATION,                  :
                                            :
                          Appellant         :     No. 822 EDA 2015

                Appeal from the Judgment Entered March 9, 2015
              In the Court of Common Pleas of Philadelphia County
              Civil Division No(s).: January Term, 2013 No. 000994

BEFORE: DONOHUE, MUNDY, and FITZGERALD,* JJ.

MEMORANDUM BY FITZGERALD, J.:                      FILED OCTOBER 21, 2015

        Appellant, AMG Resources Corporation, appeals from the judgment

entered in the Philadelphia County Court of Common Pleas in favor of

Appellee, Lombard Metals Corporation, in the sum of $95,165.01 plus 6%

interest from July 31, 2012, to the date of judgment ($14,219.36), for a

total of $109,384.37. We affirm.

        The trial court stated the factual and procedural history of this case as

follows:

              [Appellee] commenced the current action against
           [Appellant] on January 11, 2013, seeking damages
           resulting from an alleged breach of contract. [Appellant]
           had purchased steel from a metal strapping company, RG
           Steel, LLC (or RG Steel Sparrow Point, LLC), and then
           resold the material to [Appellee].       After [Appellee]

*
    Former Justice specially assigned to the Superior Court.
J.A25038/15

         purchased the metal, it was transported to a public
         warehouse during the period April 18, 2012 through
         approximately May 3, 2012. On June 22, 2012, [Appellee]
         was informed from a potential buyer that there were tags
         on the outside of the steel stating that “this material has
         holes.” That same day, [Appellee] emailed [Appellant’s]
         representative, Bob Reineke, about the tags and the
         possibility of non-conformity.    The material was then
         unwound and inspected on July 6, 2012, whereupon it was
         discovered that it contained defects. Upon learning of the
         defects, [Appellee] immediately notified [Appellant.]

            It is undisputed that [Appellant] unknowingly sold
         [Appellee] material that was non-conforming.

Trial Ct. Op., 1/26/15, at 1-2 (footnotes omitted).

      Appellant and Appellee stipulated, inter alia, to the following facts:1

         11. [Appellee] paid [Appellant]          the   total   sum   of
         $166,566.40 for the Material, in full.

                                  *    *    *

         19. On July 26, 2012, Bob Reineke of [Appellant]
         contacted RG Steel’s representative, Chuck McDaniel, by
         email to advise Mr. McDaniel of the problem with the
         Material.

         20. In his email of July 26, 2012, Mr. Reineke, stated that
         “the material was tagged by Samuels Strapping as having
         holes. I bought (and sold) this material based on the fact
         that it had surface scratches, similar to the ones on a
         picture you sent me. . . . As these coils have already been
         slit to narrow widths, this defect renders this material to
         only be usable as scrap.”

         21. Also in the email of July 26, 2012, Mr. Reineke, on
         behalf of [Appellant], proposed that [Appellant] would “buy
         all the material for scrap at .08lb where it lays in Toledo,”

1
 We note that the trial court incorporated the joint stipulation of facts in its
opinion. Trial Ct. Op. at 2 n.2.

                                      -2-
J.A25038/15

       and absorb freight and processing charges in settlement of
       the matter with RG Steel.

       22. In an email to Bob Reinke dated July 31, 2012, Mr.
       McDaniel [ ] stated “After review, it is agreed that the
       1035 claim material purchased by [Appellant] was
       misrepresented by RG Steel.      The material received
       contained numerous holes and was not usable, or able to
       be processed in any reasonable manner.”

       23. In that same email of July 31, 2012, Mr. McDaniel
       stated RG Steel’s agreement to accept [Appellant’s]
       proposal to reduce the price of the Materials to reflect their
       scrap value.

       Considering other costs that have been incurred in
       transporting material RG will accept the scrap
       retention price of $8.00CWT. Please reduce [sic]
       adjust open invoices to account for the difference in
       price.

       24. RG misrepresented the condition of the Material to
       [Appellant].

       25. RG Steel filed for bankruptcy protection on May 30,
       2012 in the United States Bankruptcy Court for the District
       of Delaware.

       26. On or about September 24, 2012, [Appellant] filed a
       proof of claim in RG Steel’s bankruptcy case for the
       difference in value between the Material as represented
       and as sold. [Appellant’s] proof of claim states, in part, as
       follows:

          On or about March 14, 2012, [Appellant]
          contracted with the Debtor to purchase 400 net
          tons of steel. . . . Pursuant to the contract, the
          material was required to be usable steel with
          some surface scratches (as opposed to scrap
          metal). The Debtor represented and warranted
          to [Appellant] that the steel was usable, and,
          relying upon such representation and warranty,
          [Appellant] re-sold such material to a third
          party. . . . Following receipt of the steel by

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J.A25038/15

               [Appellant’s] third-party customer, [Appellant]
               was notified that the steel was nonconforming
               and not usable as represented and warranted
               by the Debtor. Specifically, the steel was scrap
               rather than usable steel.        The difference
               between the purchase price for the material
               abased on the representation that it was usable
               steel and the market value of the steel as scrap
               was $96,640 (as acknowledged and agreed by
               the Debtor), and [Appellant’s] third party
               customer has asserted damages against
               [Appellant]    based    on    such    difference.
               Acknowledging that it had misrepresented the
               material,   the   Debtor    agreed    to    credit
               [Appellant] the amount of $96,640 against
               other open invoices as a result of the
               nonconforming goods. . . .

Joint Stipulation of Facts, 12/1/14, at ¶¶ 11, 19-26 (emphases in original).

         At the bench trial, John Ruttenberg, Appellee’s president testified that

the steel is “packaged in steel coils.     It looks like toilet paper with steel

bands around it, which is steel strapping to hold it together for slipping.

[sic]”    N.T., 12/2/14, at 17.   He did not inspect the steel “[b]ecause Bob

Reineke is a reputable supplier and we had good business relations together

and I trusted his description of the steel and accepted it.” Id. He testified

that if the seller is not as reputable as Bob Reineke, he would “send

somebody out to inspect the steel before we take possession.” Id. In order

to inspect a steel coil, “it would have to be put up on a machine, an uncoiler,

to unwrap the steel so the surfaces or whatever can be inspected as it rolls

off.”     Id. at 18.    Mr. Reineke agreed to compensate Appellee for the

difference between the price paid and the market price for steel sold at scrap

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J.A25038/15

value. Id. at 25. Mr. Ruttenberg estimated Appellee’s total damages to be

approximately $90,000. Id. at 28.

      Mr. Reineke testified that he buys and sells steel within the course and

scope of his employment with Appellant.        Id. at 52.   He has been in the

industry since 1976. Id. He sold the steel to Appellee as 1035 cold rolled

steel with surface scratches. Id. at 54. Mr. Reineke testified, inter alia, as

follows:

           Appellee’s Counsel: And you understood that [Appellee]
           relied on your description in deciding to purchase the steel,
           right?

           A: Yes.

           Q: That’s a reasonable way to do business, isn’t it?

           A: Yes.

           Q: And you knew that [Appellee] bought it on the strength
           of your reputation as an honorable person in the industry,
           right?

           A: Yes. I believe so.

           Q: And [Appellee] didn’t inspect the steel, did it─

           A: No.

           Q: ─before committing to buy it from you?

           A: Oh, I don’t think they could have.

           Q: Why not?

           A: Well, generally, many times, when you buy steel that’s
           in an independent location like this was, the owner or the
           original customer gets a little squirrelly [sic] about having

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J.A25038/15

       someone come into their plant to inspect the steel.      So
       generally that’s a difficult thing to accommodate.

                                 *        *       *

       The Court: Is it fair to say in your industry everybody
       pretty much knows everybody in this area, for example.

       The Witness: Yeah. When you’ve been around as long as
       John and myself, you pretty much know most of the
       players but not all, Your Honor.

                                 *        *       *

       Appellee’s Counsel: During your many years in this
       business─ as a result of your many years in this business,
       did you tell John Ruttenberg on June 22nd or on July 6th
       or on any date you’re being unreasonable?

       A: No.

                                 *        *       *

       Q: You never told [Appellee] at any point prior to this
       litigation, which wasn’t filed until January of 2013, that
       they waited too long, did you?

       A: No. I don’t believe I told them that. I told them that I
       would try to accommodate them.

                           *         *        *

       Q: That wasn’t my question. [Appellee] made claim to you
       and you made immediate claim to RG, right?

       A: That’s correct. Yes.

       Q: And RG never told you that you were late, did they?

       A: No.

       Q: They never told [sic] that you waited an unreasonable
       period of time to make claim, did they?

                                         -6-
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           A: No.

Id. at 54-56, 60, 72-73.

        The trial court found in favor of Appellee for breach of contract and

awarded damages.       Appellant filed a motion for post trial relief, which the

court denied on February 18, 2015.        Judgment was entered on March 9,

2015.     This timely appeal followed.    Appellant was not ordered to file a

Pa.R.A.P. 1925(b) statement of errors complained of on appeal.         The trial

court filed an opinion incorporating its January 26, 2015 order and opinion.

        Appellant raises the following issues for our review:

           1. Whether the trial court erred as a matter of law by
           failing to cite and apply commercial standards to
           [Appellee], a merchant buyer, for the time to revoke, as
           the Uniform Commercial Code (“U.C.C.”) requires?

           2. Whether the trial court erred as a matter of law by
           failing to apply commercial standards to [Appellee], a
           merchant buyer, for the time to revoke where there is
           undisputed evidence that [Appellee] (1) failed to inspect
           the material in a timely manner; and (2) failed to revoke
           acceptance of the material within the time it should have
           discovered the nonconformity?

Appellant’s Brief at 2.

        Appellant argues the trial court erred in failing to “cite and apply

commercial standards to [Appellee’s] behavior . . . .” Id. at 17. Appellant

avers that the trial court’s failure to apply commercial standards “comes in

three parts.” Id. “First, the trial court never stated that it must evaluate

[Appellee’s] behavior according to commercial standards of merchant

buyers, as the U.C.C. requires.” Id. “Second, the trial court demonstrated

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in its conclusion of law that it did not apply commercial standards to

[Appellee], a merchant buyer.”     Id.   “Third . . . the trial court ignored

undisputed evidence that [Appellee] did nothing for months according to

commercial standards of merchant buyers.” Id. at 19. Appellant contends

“the trial court erred as a matter of law by not citing and applying

commercial standards to the time a merchant buyer has to revoke, as

required by 13 Pa.C.S.A. §§ 2608(b), 2607(c)(1), 2607, official cmt. no. 4.”

Id.

      We address Appellant’s issues together because they are interrelated.

Our review is governed by the following principles: “Instantly, the trial was

before a judge without a jury and, accordingly, our scope of review is limited

to a determination whether the court’s finding that appellee rejected [the

goods after delivery] within a reasonable time is supported by competent

evidence.”    Yates v. Clifford Motors, Inc., 423 A.2d 1262, 1268 (Pa.

Super. 1980). “Under Pennsylvania law, what is a reasonable time after

tender or delivery for rejection or revocation of defective goods is generally

deemed a question of fact to be resolved by the fact finder, and no express

outside time limit is set.” Smith v. Penbridge Assocs., Inc., 655 A.2d
1015, 1020 (Pa. Super. 1995) (emphases added) (citing Ford Motor Credit

Co. v. Caiazzo, 564 A.2d 931 (Pa. Super. 1989) (citations omitted)).

      The Uniform Commercial Code, in pertinent part, provides as follows:

         (c) Notice    of   breach.─Where     a   tender   has   been
         accepted:

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J.A25038/15

           (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[.]

13 Pa.C.S. § 2607(c)(1) (emphases added).

        The time of notification is to be determined by applying
        commercial standards to a merchant buyer.                 “A
        reasonable time” for notification from a retail
        consumer is to be judged by different standards so that in
        his case it will be extended, for the rule of requiring
        notification is designed to defeat commercial bad faith, not
        to deprive a good faith consumer of his remedy.

13 Pa.C.S. § 2607, cmt. 4. (emphasis added).

        (b) Time and notice of revocation.─Revocation of
        acceptance must occur within a reasonable time after the
        buyer discovers or should have discovered the ground for
        it and before any substantial change in condition of the
        goods which is not caused by their own defects. It is not
        effective until the buyer notifies the seller of it.

13 Pa.C.S. § 2608(b) (emphases added).

     This Court in Moscatiello v. Pittsburgh Contractors Equip. Co.,

595 A.2d 1198 (Pa. Super. 1991) opined:

        [A] buyer must revoke acceptance of goods within a
        reasonable time after he “discovers or should have
        discovered the ground for it.” 13 Pa.C.S.A. § 2608.
        Comment 4 to section 2608 is instructive as to what
        constitutes “reasonable” time.

                 Since this remedy [revocation of acceptance]
           will be generally resorted to only after attempts at
           adjustment have failed, the reasonable time period
           should extend in most cases beyond the time in
           which notification of breach must be given, beyond
           the time for discovery of nonconformity after
           acceptance and beyond the time for rejection after
           tender.

                                   -9-
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Id. at 1204-05.

      In the case sub judice, the trial court opined:2

             The evidence illustrates that the parties had a positive
         business relationship, and [Appellee] relied on the nature
         of this relationship when agreeing to purchase the material
         from [Appellant]. [Appellant] purchased the material from
         RG Resources, which was described as “1035 cold rolled
         with surface scratches,” and then proceeded to sell the
         material in “as described condition” to [Appellee]. When
         [Appellee] purchased the material from [Appellant], the
         president of [Appellee], John Ruttenberg, testified that
         Reineke, “is a reputable supplier and we had good
         business relations together and I trusted his description of
         the steel and accepted it.” Moreover, Reineke was aware
         that [Appellee] was relying on his description and was
         acting based upon [Appellant’s] honorable reputation.
         Until [Appellee] was directly alerted to the presence of
         tags on the material indicating it contained holes,
         [Appellee] had no reason to suspect that the material was
         different than what [Appellant] had promised. . . .

             The reasonableness of [Appellee’s] notice of breach is
         further supported by [Appellant’s] response to the
         situation.    When [Appellant] received notice of the
         deformity on June 22, 2012, [Appellant] did not question
         [Appellee’s] timing or inform [Appellee] that its conduct
         was unreasonable. In fact, after learning of the situation,
         [Appellant] made a similar claim to RG Steel about the
         misrepresentation of the quality of the steel. Just as
         [Appellant] did not raise an issue as to the reasonableness
         of [Appellee’s] notice, RG Steel did not challenge
         [Appellant’s] claim as being untimely. . . .

            Because a court is to evaluate reasonableness based
         upon the circumstances at hand, this court grants
         substantial weight to the parties’ relationship, [Appellee’s]

2
  We note that Appellant’s claims that the trial court failed to cite and apply
the Uniform Commercial Code is belied by the record. See Trial Ct. Op. at
2-3.

                                     - 10 -
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         reliance on [Appellant’s] description, and the parties
         having not even broached the topic of the reasonableness
         of the notice until the commencement of litigation. . . .
         [Appellee] acted reasonably in notifying [Appellant] of the
         breach and is entitled to damages.

Trial Ct. Op. at 3-4 (citations omitted). We agree no relief is due.

      Instantly, the trial court found that Appellee notified Appellant of the

breach within a reasonable time. See 13 Pa.C.S. § 2607(c)(1). There is no

express time limit for buyer’s notification of the breach. See 13 Pa.C.S. §

2608(b); Smith, 655 A.2d at 1020; Moscatiello, 595 A.2d at 1204-05.

Instantly, after our thorough review of the record we find the trial court’s

finding that Appellee acted reasonably in notifying Appellant of the breach

and its entitlement to damages is supported by competent evidence.       See

Yates, 423 A.2d at 1268.

      Judgment affirmed.

Judgment Entered.

Joseph D. Seletyn, Esq.
Prothonotary

Date: 10/21/2015

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