Court Opinion

ID: 4010508
Source: CourtListenerOpinion
Date Created: 2016-07-06 11:12:20.962098+00
Date Added: 2024-06-11T07:44:43.093437
License: Public Domain

The S. Morgan Smith Company in June, 1941, entered into a contract with the city of Kaukauna for construction and installation of a hydraulic turbine and a turbine governor in the municipally owned hydroelectric power plant.  The defendant Hartford Accident  Indemnity Company executed a performance bond obligating it to perform the contract in the event the Smith Company failed to do so.  The contract contained the following provisions:
                        "GUARANTEE AND INSURANCE.
"The manufacturer shall guarantee the design and, workmanship to be in accordance with the detailed specifications hereto attached and to specific specifications which the manufacturer submits in his proposal.  All work and material is to be of the best quality and first class in every particular. The manufacturer shall further agree to furnish parts at his own cost and expense and any portion of equipment which may be found to be defective, or which shall fail within one year after commencement of operation as a result of faulty design or defective material or workmanship."
The installation was completed on October 1, 1942.  In January of 1943, there was a breakdown in the mechanism resulting in considerable damage to it.  The cause of the breakdown is undetermined, but the claim is made that the damage was occasioned by failure of the design to conform. with the specifications in the contract. *Page 220 
The city immediately notified the Smith Company of the breakdown and sent certain broken parts to it for repair and replacement.  At the same time it ordered another company to inspect, dismantle, and repair certain other damaged equipment. The machinery was again placed in working order by the Smith Company, such repairs being completed in June of 1943.  Payment was made to the company by the city in the amount of its charges and there was no claim at that time of damage for breach of contract or that the company was required to do the work at its own expense.  The city, which had negotiated a contract with the plaintiff Lumbermens Mutual Casualty Company, insuring it against damage due to failure or breakdown of the machinery, presented a claim in the amount of $10,578.95 which the insurer paid.
On November 16, 1943, the plaintiff, as assignee of the city of Kaukauna, made claim against the Smith Company for the amount it had paid to the city.  This was ten months and two days after the city and the insurance company had knowledge of the breakdown.  The plaintiff was unable to obtain service on the Smith Company, a foreign corporation, but instituted this action against the defendant Indemnity Company on its performance bond.
The trial court granted the motion of the defendant Indemnity Company for a summary judgment dismissing the complaint, and denied the plaintiff's motion for a summary judgment for the amount in suit.  From a judgment entered on the order granting defendant's motion and from the order denying plaintiff's motion, plaintiff appeals.
The claim of the appellant is based upon the provision of the city's contract with the Smith Company to *Page 221 
which reference has been made.  It is argued that while the first two sentences of the "guarantee" are essentially warranties as to design and workmanship, the third sentence is strictly a guaranty "which among other things insures the city against the cost and expense of parts which fail, provided the failure occurs within one year as a result of faulty design."  It is said that under the contract the gates were required to be designed so that in case of breakage of the operating mechanism they would drift shut, and that the damage was caused by the failure of the gates to drift shut in accordance with the required design.
Considering the case from the standpoint of breach of warranties, it is clear that the facts do not show the plaintiff entitled to relief.  Sec. 121.49, Stats., requires that in order to charge a seller for breach of warranty the buyer must give notice of any such breach within a reasonable time after he knows or ought to know of it.  We have said that this section requires notice of a claim for damages as a condition precedent to a right of recovery.  Marsh Wood Products Co. v. Babcock Wilcox Co. (1932) 207 Wis. 209, 240 N.W. 392;Ace Engineering Co. v. West Bend Malting Co. (1943)244 Wis. 91, 11 N.W.2d 627.  The delay of ten months in giving notice of a claim for damages was, as a matter of law, an unreasonable length of time, particularly in view of the fact that it denied to the Smith Company an opportunity to thoroughly investigate the cause of the breakdown with a view to asserting any defense that may have existed.  Woodv. Heyer (1923), 179 Wis. 628, 191 N.W. 971.
It is unnecessary to determine whether there is a guaranty of performance.  If there is one, there can be no recovery. Upon the breakdown of the mechanism the city could have relied upon the alleged guaranty and demanded replacement of defective parts at the expense of the Smith Company.  But it did not do so.  It ordered some parts and services from the Smith Company and in the order requested prompt invoices. *Page 222 
Other parts and services were ordered from another company and the same request was made.  Upon completion of the work the invoices were paid without raising the question as to liability of the Smith Company under its contract.
It is contended that the payment was made under business compulsion because of the necessity of the repairs in furnishing service to the utility's patrons.  It is said that had there been a demand for performance of the guaranty, the Smith Company might have refused unless the city waived its claim, and under the urgency of the situation the city might have been forced to waive it in order to get the work done, since only the Smith Company was able to furnish and repair the defective equipment.  It is also said that if the city had refused to pay the bill after the repairs had been completed, subsequent requests for repair parts in an emergency might have been jeopardized.
It may well be, as the appellant contends, that the Smith Company would have demanded that the city waive its claim. But it should have been given that opportunity.  Had the matter been presented for the company's consideration and had it demanded waiver of the city's claim, the city could then have elected its course, but it made no effort to ascertain the company's position.  The company did not breach its guaranty of performance; it was given no opportunity to perform. It was not notified that it was expected to replace the machinery at its own expense.  The claim that if the city had refused to pay the bill after repairs had been completed, subsequent. requests for repair parts in an emergency would have been jeopardized, is not persuasive.  That consideration was of no more import at the time than it was ten months later when claim was made by the appellant insurer under a subrogation clause in its insurance contract with the city.  The city knew when it claimed under its contract that there was every likelihood the present claim would be asserted by the insurer.
We consider that under the circumstances there was a waiver of any right the city may have had to insist upon *Page 223 
performance of the claimed guaranty.  See cases collected in 6 Callaghan's Wis. Dig., Waiver, secs. 1, 4.
By the Court. — Judgment and order affirmed.