Court Opinion

ID: 70328
Source: CourtListenerOpinion
Date Created: 2010-04-26 06:59:37+00
Date Added: 2024-06-11T09:39:06.571304
License: Public Domain

United States Court of Appeals,

                             Eleventh Circuit.

                                 No. 94-6700

                           Non-Argument Calendar.

 HUNTSVILLE HOSPITAL, a public health care authority, Plaintiff-
Appellee,

                                      v.

 MORTARA INSTRUMENT, Defendant-Third-Party Plaintiff-Appellant,

                                      v.

 Rusty DICKERSON, individually d/b/a Quality Rep Services, Third-
Party Defendant.

                                July 12, 1995.

Appeal from the United States District Court for the Northern
District of Alabama. (No. 93-L-2310-NE), Seybourn H. Lynne, Judge.

Before DUBINA and BARKETT, Circuit Judges, and MORGAN, Senior
Circuit Judge.

     PER CURIAM:

     The plaintiff-appellee, Health Care Authority of the City of

Huntsville d/b/a Huntsville Hospital (the hospital), filed this

action   in    the    Circuit    Court     of   Madison   County,    Alabama.

Subsequently,        the   defendant-appellant,       Mortara       Instrument

(Mortara), filed a notice of removal to the United States District

Court for the Northern District of Alabama, Northeastern Division,

on diversity grounds.       The district court, after hearing ore tenus

evidence, entered a Judgment and Memorandum Opinion in favor of the

hospital.     We affirm.

I. FACTUAL BACKGROUND

     In late 1991, the hospital began negotiating with Quality Rep

Services, a recognized agent and distributor for Mortara, for the
purchase of an electrocardiogram management system manufactured by

Mortara.     Michael Carter, the Director of Cardiology Services,

represented the hospital.       Rusty Dickerson, Quality Rep Services'

president, represented Mortara.

     The terms of the sale of the system were stated by two

documents:    Mortara Quotation MI-2027-1 and a June 1, 1992 letter

from Dickerson to Carter.        In the letter, Dickerson offered the

hospital a six-month "right of return" on the system.            He stated:

     this means that during the first six months after
     installation, should the hospital be dissatisfied with the
     system, you may return it, and all monies paid to Mortara
     Instruments will be returned to you.

The hospital agreed to purchase the system for $155,380.1           Mortara

completed the installation of the system at the hospital on August

14, 1992.

     After    installation,     the   hospital   experienced     continuous

problems with the system.       Carter testified that in late 1992 he

asked a Quality Rep Services salesperson how the hospital should

exercise its right of return if it chose to do so.             According to

Carter, the salesperson replied that if necessary he would "back a

truck up" and take the system away himself.

     On February 10, 1993, within the six-month return period,

Carter   notified   Dickerson    that   the   hospital   was   electing   to

"exercise [its] option to return all equipment and software for the

complete refund."     Carter added that the hospital would need 30

days to purchase a replacement system.            Five days later, Carl

Jeffries, the hospital's Director of Material Management, sent

     1
      The hospital received a $24,000 credit for trading in used
hardware and paid an additional $130,901.20 by check.
Mortara a fax asking that it "fully coordinate the return of the

check" in advance of picking up the system.            On the same day,

Jeffries sent Mortara a letter requesting a refund check "on the

day that you pick up the equipment."

      On March 29, 1993, Mortara's president sent Jeffries a letter

listing several considerations for the return of the system,

including a restocking fee and effective April 1, 1993, a $100-per-

day charge for the hospital's use of the system.        On May 10, 1993,

the hospital installed a replacement system.         On May 27, 1993 the

hospital's counsel informed Mortara that its system was available

for retrieval.     However, Mortara did not retrieve the system or

refund any portion of the purchase price.

      The district court concluded that under Ala.Code §§ 7-2-602

and 7-2-604 (1975), which are provisions governing sales, the

hospital was entitled to a refund of the system's purchase price.

The court did allow Mortara a $5900 setoff, representing $100 per

day for the hospital's use of the system from March 29 to May 27,

1993.

II. DISCUSSION

         Mortara, appealing the district court's decision, first

contends that its agreement with the hospital required the hospital

to   physically   return   the   system   from   Huntsville,    Alabama   to

Mortara's office in Milwaukee, Wisconsin by February 14, 1993 in

order for the hospital to be entitled to a refund.             As authority

for this contention, Mortara relies on a seventy-year-old Oklahoma

case regarding "sale or return" contracts under the common law of

sales.     However, the instant case is clearly governed by the
Uniform Commercial Code as adopted in Alabama. See Intercorp, Inc.

v. Pennzoil Co., 877 F.2d 1524, 1527 (11th Cir.1989).

     According to Ala.Code § 7-2-601(a), if goods do not conform to

a contract, the buyer may reject them.            In the instant case, there

is no question that the system did not conform to the contract.

Indeed,    the    parties   have     stipulated    that    the   hospital     was

sufficiently dissatisfied to allow it to exercise its "right of

return."    Under    Ala.Code § 7-2-602(1), rejection is ineffective

unless the buyer seasonably notifies the seller.                 An action is

taken    "seasonably"    when   it   is   taken   within   the   time   agreed.

Ala.Code    §    7-1-204(3).    Here,     the   parties    set   the   time   for

rejection at six months.        Clearly, Carter notified Dickerson the

hospital was electing to exercise its option to return within six

months of the system's installation.2

     Mortara maintains that the contract required the hospital to

not just notify Mortara, but physically return the system within

six months.      This analysis is inconsistent with the Law of Sales in

Alabama.    Ala.Code § 7-2-602(2) states that when a buyer is in

possession of goods after rejection, he is under a duty to hold

them with reasonable care at the seller's disposition for a time

sufficient to permit the seller to remove them, but the buyer has

no further obligations with regard to goods rightfully rejected.

(emphasis added)      Ala.Code § 7-2-604 adds that if the seller gives

no instructions within a reasonable time after notification of

     2
      The district court apparently found that the parties agreed
to extend the six-month return period by ninety days. Because
Carter's notification was within the original six-month return
period, we need not review that finding.
rejection,3 the buyer may store, reship, or resell the rejected

goods.     According to the official comment these actions are at the

buyer's option.

          Therefore, we find that the hospital properly rejected the

electrocardiogram         management    system.      After    Carter     notified

Dickerson on February 10 that the hospital was electing to exercise

its   option       to   return,   the    hospital   was     under   no    further

obligations.       The U.C.C. as adopted in Alabama in no way requires

the hospital to physically return the system in order to be

entitled to a refund.4

          Moreover, the resolution of this case under the terms of the

U.C.C. is consistent with Carter's uncontroverted testimony that

the Quality Rep Services salesperson responded to Carter's request

regarding how to effectuate a return by promising that if necessary

he would "back a truck up" and take the system away himself.

Mortara challenges the district court's consideration of this

testimony as use of parol evidence to impeach or vary the terms of

a written agreement.        However, Ala.Code § 7-2-202(b) specifically

allows the terms of a written agreement to be explained "by

evidence of consistent additional terms unless the court finds the

writing to have been intended also as a complete and exclusive

statement     of    the   terms   of    the   agreement."     Here,      there   is

      3
      Mortara never instructed the hospital as to what carrier to
use or how to pack the system for return.
      4
      As the Supreme Court of Nebraska stated in Maas v. Scoboda,
188 Neb. 189, 195 N.W.2d 491 (1972), "the law regards parties as
being competent to contract as they see fit with respect to the
satisfactory character of equipment sold and the seller assumes
the hazard of rendering performance according to the terms of the
contract."
absolutely no indication that the district court found the parties'

written agreement to be a complete and exclusive statement of the

terms of their agreement.     Therefore, it was not error for the

court to consider Carter's testimony.

       Lastly, Mortara asserts that the district court erred in

calculating the $5900 setoff. The concept of setoff in sales cases

is based on Ala.Code § 7-2-602(2)(a), which provides that "after

rejection any exercise of ownership by the buyer with respect to

any commercial unit is wrongful as against the seller."          See Ex

parte Stem, 571 So. 2d 1112, 1115 (Ala.1990).         In calculating the

setoff, the district court found that after rejection, the hospital

used the electrocardiogram management system until May 27, 1993,

the day the hospital's counsel informed Mortara that its system was

available for retrieval. The court derived the $100-per-day charge

from the March 29, 1993 letter Mortara itself sent the hospital.

       We review the district court's determination of damages for

clear error.   Taylor Rental Corp. v. J.I. Case Co., 749 F.2d 1526,

1530 (11th Cir.1985). Mortara has presented no evidence to counter

testimony by Carter that after the hospital installed a replacement

system on May 10, 1993, the Mortara system was never used for any

purpose other than retrieving or editing tests that had already

been   performed.    Regarding   the   $100   fee,    that   amount   was

voluntarily set by Mortara.   At trial, the court noted that the fee

was described in document exhibits as a usage fee. Mortara offered

no evidence of rental fees charged by lessors of similar equipment.

Therefore, we cannot find the district court's setoff calculation

clearly erroneous.
III. CONCLUSION

     For the reasons stated herein we hold that the district court

properly decided the merits of this case in favor of the hospital

and, accordingly, AFFIRM the court's judgment.