Jet Printing v. Deep South Wholesale Paper ( 2003 )

IN THE COURT OF APPEALS OF TENNESSEE
AT NASHVILLE
July 9, 2002 Session
JET PRINTING, LLC
V.
DEEP SOUTH WHOLESALE PAPER COMPANY, INC.
Appeal from the Chancery Court for Davidson County
No. 00-356-II Carol McCoy, Chancellor
No. M2001-02582-COA-R3-CV - Filed January 23, 2003
This is a breach of contract case. A bag manufacturer ordered printed polyethylene film from a
printing company, to be made into bags to sell to chicken packaging companies. The film was
treated on both sides. Consequently, the bag manufacturer was unable to properly seal the bags.
Later shipments of film that were not treated on both sides sealed properly. The bag manufacturer
refused to pay for the initial shipment of film that would not seal, so the seller printing company sued
for breach of contract. The trial court found for the bag manufacturer, holding that the seller
breached both an implied term of the contract and an implied warranty of fitness for a particular
purpose. On appeal, the seller printing company argues that the trial court erred in finding that the
film did not conform to the contract and that the seller breached the implied warranty of fitness for
a particular purpose, and that the trial court erred in excluding the testimony of the seller’s proffered
expert. We affirm, finding that the trial court did not err in finding that the seller breached an
implied warranty for a particular purpose, nor in excluding the testimony of the seller’s expert
witness.
Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court Affirmed
HOLLY KIRBY LILLARD, J., delivered the opinion of the court, in which W. FRANK CRAWFORD , P.J.,
W.S., and DAVID R. FARMER , J., joined.
Wayne L. Robbins, Jr. and Mary Taylor Gallagher, Nashville, Tennessee, for appellant, Jet Printing,
LLC.
James C. Edwards, Madison, Tennessee, for appellee, Deep South Wholesale Paper Company, Inc.
OPINION
Plaintiff/Appellant Jet Printing, LLC (“Jet Printing”) prints pre-manufactured polyethylene
film. Defendant/Appellee Deep South Wholesale Paper Company, Inc. (“Deep South”) makes the
polyethylene film into bags for resale. Deep South’s representative contacted Jet Printing to discuss
purchasing polyethylene film from Jet Printing. The parties discussed the potential order, in
telephone conversations, over the course of approximately one week. During these conversations,
Jet Printing was made aware that Deep South planned to use the film to manufacture bags to be sold
to a chicken packaging company. There was no discussion of chemical treatment of the film. At the
conclusion of these discussions, Deep South placed a verbal order for polyethylene film. The verbal
order was followed by a written purchase order the next day. Jet Printing sent Deep South film that
was “corona” treated1 on both sides. Because the film was treated on both sides, Deep South was
unable to satisfactorily seal the bags on its sealing machines. After Deep South complained to Jet
Printing, Jet Printing used the film that was treated on both sides and was able to seal the bags on
Jet Printing’s sealing machines. After Deep South’s complaint, however, subsequent orders of
polyethylene film shipped from Jet Printing to Deep South were “strip” treated, which removes a
portion of the “corona” treatment where the bag is to be sealed. This polyethylene film was also
treated with an additional chemical to increase elasticity in the film. The strip treated film was used
to make bags that sealed to Deep South’s satisfaction.
Deep South refused to pay Jet Printing for the polyethylene film that was “corona” treated
on both sides. In response, Jet Printing sued Deep South for breach of contract. Deep South’s
answer to the complaint argued, inter alia, that Jet Printing provided Deep South with non-
conforming goods that breached the implied warranty of merchantability and the implied warranty
of fitness for a particular purpose.
A bench trial was held on July 23, 2001. At the trial, testimony indicated that Deep South
initially contacted Jet Printing on the recommendation of a third party. The evidence showed that
Jet Printing knew that Deep South was ordering the printed polyethylene film in order to make
sealable bags for resale. The testimony also showed that, based on Deep South’s verbal order, Jet
Printing purchased the film from its supplier before receiving Deep South’s written purchase order.
Prior to shipment of the polyethylene film, neither of the parties discussed whether the film should
be chemically treated. Likewise, the written purchase order did not mention chemical treatment of
the film.
Deep South’s representative testified that, because he was not in the printing business, he did
not direct Jet Printing to treat or not treat the film. Rather, he relied on Jet Printing’s expertise to
know whether to treat, or strip treat, a particular portion of the polyethylene film. Jet Printing’s
representative stated that Jet Printing had been in business only two months when Deep South placed
its order. Jet Printing’s representative acknowledged, however, that it was Jet Printing’s
1
“Corona” treated polyethylene film is coated with a chemical agent that helps the printed material better adhere
to the film.
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responsibility to advise clients with regard to what they should order, and to determine how the order
should be filled. Jet Printing proffered the testimony of an expert witness, a salesperson, to testify
about inherent assumptions a salesperson in the pre-manufactured film industry would make when
reading a purchaser’s order. The trial court refused to admit this testimony, reasoning that the
interpretation of the written purchase order was a legal conclusion and that the trial court did not
need the assistance of an “expert” in reading purchase orders. The trial court permitted Jet Printing
to make an offer of proof on the expert’s testimony.
Later in the trial, Deep South proffered the testimony of an expert witness, Steven Leuman
(“Leuman”), who had over twenty years of experience in making polyethylene film bags. The trial
court permitted Leuman to testify. He testified that, after receiving the initial shipment of
polyethylene film from Jet Printing, he made multiple unsuccessful attempts to make the film seal
consistently. To rebut Leuman’s testimony, Jet Printing’s representative testified that Jet Printing
could properly seal the bags on its own sealing equipment. Moreover, Jet Printing’s representative
testified that Jet Printing sold a small portion of the allegedly defective polyethylene film to another
customer and had received no complaints about whether the film could be sealed.
At the conclusion of the testimony, the trial court issued oral findings of fact. At the outset
the trial judge stated that, because Jet Printing ordered the polyethylene film from its supplier prior
to receiving Deep South’s purchase order, the court would look at the understanding between Jet
Printing and Deep South before the written purchase order was sent. The trial court found that it was
apparent from the testimony, and was therefore implied in the parties’ agreement, that Jet Printing
knew that the film was for bags that would seal. The trial judge gave credence to Leuman’s
testimony, that he could not get the bags to seal properly, and specifically discredited the testimony
of Jet Printing’s representative that the bags sealed on Jet Printing’s machines. The trial court found
that because Leuman could not make the bags properly seal, Jet Printing failed to comply with the
implied warranty for a particular purpose. The trial court’s subsequent written order stated that Jet
Printing breached an implied term of the contract because the bags would not seal, and that Jet
Printing breached the implied warranty of fitness for a particular purpose as set forth in section 47-2-
315 of the Tennessee Code Annotated. Accordingly, the trial court ordered that Jet Printing’s breach
of contract claims against Deep South be dismissed, and assessed costs against Jet Printing. From
this order, Jet Printing now appeals.
On appeal, Jet Printing argues that the trial court erred in finding that Jet Printing breached
the implied warranty of fitness for a particular purpose because Jet Printing did not know that Deep
South was relying on it to determine the appropriate chemical treatment for the film, if any, Deep
South did not rely on Jet Printing’s skill or judgment to determine film treatment, and because the
goods were not defective and were fit for the particular purpose for which they were sold. Jet
Printing argues that the trial court should have confined itself to the four corners of the written
purchase order and should not have found any implied terms in the written purchase order, and
maintains that the goods properly conformed to the terms of the written purchase order. In the
alternative, Jet Printing asserts that, even if the trial court properly found an implied term in the
written purchase order that the bags would seal, Jet Printing did not breach that term. Finally, Jet
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Printing asserts that the trial court erroneously excluded the testimony of its expert witness because
the trial judge would have benefitted from the specialized knowledge of the expert, and that the trial
court erroneously permitted Deep South’s expert to testify regarding industry standards while not
allowing Jet Printing’s expert to testify as to the same standards.
In response, Deep South argues that the trial court did not err in finding an implied warranty
of fitness for a particular purpose because Jet Printing admitted that its customers should rely on it
to provide the correct product, and because Deep South relied on Jet Printing to provide the correct
product. Deep South also notes that the purchase order did not address the treatment of the film, and
therefore, the trial court was justified in looking at the surrounding circumstances, including previous
conversations between the parties, in making its finding that there was an implied term in the
contract that the film would make bags that would seal. As to the expert testimony, Deep South
argues that the trial court did not err in refusing to permit the testimony of Jet Printing’s expert
witness because Jet Printing’s witness was proffered as an expert in reading purchase orders, and the
trial court stated that it did not need assistance in reading purchase orders.
Because this case was heard by a trial court sitting without a jury, we review the case de novo
upon the record with a presumption of correctness of the findings of fact by the trial court below,
unless the evidence preponderates against the decision of the trial court. See Tenn. R. App. P. 13(d);
Wright v. City of Knoxville, 898 S.W.2d 177, 181 (Tenn. 1995). Questions of law, however, are
reviewed de novo without a presumption of correctness. Burlew v. Burlew, 40 S.W.3d 465, 470
(Tenn. 2001) (citation omitted). The interpretation of a contract is a matter of law; thus, no
presumption of correctness accompanies the trial court’s interpretation of the contract. Leon
Williams Gen. Contractor v. Hyatt, No. E2001-00434-COA-R3-CV, 2002 Tenn. App. LEXIS 112,
at *5 (Tenn. Ct. App. Feb. 7, 2002) (citing NSA DBA Benefit Plan, Inc. v. Connecticut Gen. Life
Ins. Corp., 968 S.W.2d 791 (Tenn. Ct. App. 1997)). With regard to admissibility of expert
witnesses, we review the trial court’s decision under an abuse of discretion standard. State v. Reid,
No. M1999-00803-SC-DDT-DD, 2002 Tenn. LEXIS 550, at *127 (Tenn. Nov. 26, 2002) (citing
State v. Anderson, 880 S.W.2d 720, 728 (Tenn. Crim. App. 1994)). Absent an abuse of discretion,
the trial court’s determination will stand. Id. A trial court abuses its discretion when it reaches a
decision against logic that causes a harm to the complaining party or when the trial court applies an
incorrect legal standard. Eldridge v. Eldridge, 72 S.W.3d 82, 85 (Tenn. 2001) (citing State v.
Shirley, 6 S.W.3d 243, 247 (Tenn. 1999)). Regarding witness credibility, the Tennessee Supreme
court has stated:
Unlike appellate courts, trial courts are able to observe witnesses as they testify and
to assess their demeanor, which best situates trial judges to evaluate witness
credibility. Thus, trial courts are in the most favorable position to resolve factual
disputes hinging on credibility determinations. Accordingly, appellate courts will not
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re-evaluate a trial judge’s assessment of witness credibility absent clear and
convincing evidence to the contrary.
Wells v. Tenn. Bd. of Regents, 9 S.W.3d 779, 783 (Tenn. 1999) (citations omitted). Thus, the
credibility determinations of the trial court will be upheld on appeal unless there is clear and
convincing evidence to the contrary.
Jet Printing argues first that the trial court erred in finding, pursuant to section 47-2-315 of
the Tennessee Code Annotated, an implied warranty that Jet Printing would ship Deep South
polyethylene film that would seal to Deep South’s satisfaction on Deep South’s sealing machines.
The statute states:
Where the seller at the time of contracting has reason to know any particular purpose
for which the goods are required and that the buyer is relying on the seller’s skill or
judgment to select or furnish suitable goods, there is . . . an implied warranty that the
goods shall be fit for such purpose. . . .
Tenn. Code Ann. § 47-2-315 (2001). Thus, to establish an implied warranty of fitness for a
particular purpose, the buyer must prove that: (1) the seller knew that the buyer had a particular
purpose for which the goods were required; (2) the seller knew that the buyer was relying on the
seller’s skill or judgment to provide the buyer with goods fit for that particular purpose; and (3) the
buyer must have actually relied on the seller’s skill or judgment. See Kopper Glo Fuel, Inc. v.
Island Lake Coal Co., 436 F. Supp. 91, 95 (E.D. Tenn. 1977) (citing Sylvia Coal Co. v. Mercury
Coal & Coke Co., 156 S.E.2d 1, 16-17 (W. Va. 1967)). “Whether or not [an implied warranty of
fitness for a particular purpose] arises in any individual case is basically a question of fact to be
determined by the circumstances of the contracting. . . .” Tenn. Code Ann. § 47-2-315 cmt.1. Once
an implied warranty of fitness for a particular purpose has been established, the buyer must then
show that the goods were not fit for the purpose for which they were intended. Masters v. Rishton,
863 S.W.2d 702, 706 (Tenn. Ct. App. 1992) (citation omitted). In this case, Jet Printing asserts that
it did not know that Deep South was relying on Jet Printing to determine chemical treatment, if any,
for the polyethylene film, that Deep South in fact did not rely on Jet Printing’s skill or judgment
regarding those specifications, and finally, even if it did, that the polyethylene film supplied to Deep
South was not defective and was fit for the particular purpose for which it was sold.
The trial court below focused on the understanding of the parties prior to the issuance of the
written purchase order. It found that the discussions between the parties’ representatives did not
indicate whether the polyethylene film was to be treated; however, the testimony of the
representatives showed clearly that both parties understood that the bags, when assembled, would
seal to meet Deep South’s requirements. Indeed, at the trial, Jet Printing’s representative
acknowledged that he was aware that Deep South intended to convert the polyethylene film into bags
that would contain chicken parts to be sent to China. Clearly the evidence established that Jet
Printing had reason to know of Deep South’s intended use for the polyethylene film.
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The second element required to find an implied warranty of fitness for a particular purpose
is whether the buyer relied on the seller’s skill or judgment to supply goods fit for the buyer’s
purpose. See Tenn. Code Ann. § 47-2-315. The buyer need not show that the seller had actual
knowledge of the buyer’s reliance, only that the seller had “reason to realize . . . that the reliance
exists.” Tenn. Code Ann. § 47-2-315 cmt.1. In this case, the trial judge found that Deep South
requested polyethylene film that would seal. Neither party indicated how the polyethylene film was
to be treated; the trial court concluded that Jet Printing was expected to use its judgment to determine
which type of film would make a proper seal. Further, Jet Printing’s representative acknowledged
at trial that he believed that it was his responsibility to advise clients regarding what product they
should order, and that customers should rely on him to order the correct product for the customer’s
purposes. Moreover, the evidence at trial showed that the treatment of the film was not for Deep
South’s benefit, but rather for Jet Printing’s benefit, as the corona treatment helps the ink adhere to
the polyethylene film. Deep South’s representative testified that he did not specify which treatment,
if any, to use because he is not in the business of printing on polyethylene film. Clearly the evidence
was sufficient to support the trial court’s determination that Jet Printing had reason to know that
Deep South was relying on it to provide polyethylene film that would properly seal.
Jet Printing next argues that Deep South could not have actually relied on Jet Printing to
choose the correct product for Deep South because a buyer who is knowledgeable and capable of
choosing goods cannot rely on a seller’s skills to choose the correct product. Jet Printing cites
Kopper Glo Fuel, Inc. v. Island Lake Coal Co., 436 F. Supp. 91 (E.D. Tenn. 1977), in support of
this assertion. In Kopper Glo, the buyer purchased coal from a coal brokering business. After
having received shipments of coal, the purchaser refused to pay. The seller sued for the purchase
price, and the purchaser counterclaimed, arguing that the coal was of inferior quality and contending,
inter alia, that the seller breached an implied warranty of fitness for a particular purpose. The
District Court for the Eastern District of Tennessee, interpreting Tennessee law, noted that, in order
to establish an implied warranty for a particular purpose, the buyer must actually rely on the seller’s
skill or judgment. In Kopper Glo, the buyer had a degree in chemical engineering as well as a
medical degree, and was provided with laboratory results from chemical analyses of the coal product
in order to evaluate the quality of Kopper Glo’s coal reserves. Id. at 94. The buyer “personally
inspected Kopper Glo’s coal and was quite capable of making his own independent judgment of
whether Kopper Glo’s reserves would be of sufficient quality to meet Island Lake’s needs.” Id. at
95. Under these circumstances, the district court concluded that the buyer’s expertise and inspection
of the coal prior to purchase prevented the buyer from claiming that he relied on the seller’s skill or
knowledge in deciding to purchase the seller’s product. Therefore, no implied warranty was created.
See id. at 95.
In contrast, in the case at bar, Deep South did not have an opportunity to inspect the
polyethylene film prior to purchasing it. Moreover, in Kopper Glo, the seller was required only to
ship the best coal it had available. In this case, Jet Printing was to ship polyethylene film that would
seal to Deep South’s satisfaction. Deep South’s representative testified unequivocally that he relied
on Jet Printing to order the correct polyethylene film needed to properly produce the bags. In light
of this, the evidence supports the trial court’s factual finding on the last element, that Deep South
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in fact relied on Jet Printing’s skill and judgment in choosing the appropriate treatment for the
polyethylene film in order to meet Deep South’s needs. Therefore, we affirm the trial court’s finding
of an implied warranty for a particular purpose.
In the alternative, Jet Printing argues that, even if there was an implied warranty of fitness
for a particular purpose, the trial court erred in finding that the warranty was breached. Jet Printing
relies on the testimony of its representative that Jet Printing was able to successfully seal bags on its
machines using the corona-treated film initially shipped to Deep South, and that a portion of the
corona-treated film was sold by Jet Printing to another purchaser, with no complaint.
In order to establish a breach of the implied warranty of fitness for a particular purpose, Deep
South was required to prove that the polyethylene film was either defective or not fit for the
particular purpose for which it was sold. See Masters v. Rishton, 863 S.W.2d 702, 706 (Tenn. Ct.
App. 1992) (citation omitted). At the trial, Deep South’s expert witness, Leuman, with over twenty
years’ experience using polyethylene film to make bags, testified that he made numerous attempts
to seal bags using film from Jet Printing’s initial shipment, to no avail. The trial court expressly
credited Leuman’s testimony. In contrast, the trial court specifically discredited the testimony of Jet
Printing’s representative, noting that if anyone could have made the bags seal properly, it would have
been Leuman. Absent clear and convincing evidence to the contrary, credibility determinations made
by the trial court will be upheld on appeal. See Wells v. Tenn. Bd. of Regents, 9 S.W.3d at 783.
Considering all of these circumstances, and giving appropriate deference to the trial court’s
determinations of credibility, the trial court’s finding that the implied warranty for a particular
purpose was breached is affirmed.
Jet Printing argues that the trial court abused its discretion in excluding the testimony of Jet
Printing’s proffered expert, Buzz Payne (“Payne”). Jet Printing equates Payne’s testimony to the
testimony of Deep South’s expert, Leuman, and argues that the trial court erred in permitting
Leuman to testify with regard to the industry standards of strip treating polyethylene film while
refusing to permit Payne to testify regarding the same industry standards. Jet Printing notes that
Payne was prepared to testify that the industry standard is that customers who want strip treating on
their polyethylene film must specify that treatment, and that a contract for polyethylene film would
not have strip treatment as an implied term.
As noted above, the trial court’s inclusion or exclusion of the testimony of an expert witness
is reviewed under an abuse of discretion standard. Section 702 of the Tennessee Rules of Evidence
states:
If scientific, technical, or other specialized knowledge will substantially assist the
trier of fact to understand the evidence or to determine a fact in issue, a witness
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qualified as an expert by knowledge, skill, experience, training, or education may
testify in the form of an opinion or otherwise.
Tenn. R. Evid. § 702. Thus, the testimony of a witness with specialized knowledge may be
permitted if the specialized knowledge will substantially assist the court in understanding the
evidence or a fact in issue. Moreover, “the subject under examination must be one that requires that
the court and jury have the aid of knowledge or experience such as men not specially skilled do not
have, and such therefore as cannot be obtained from ordinary witnesses.” State v. Shuck, 953
S.W.2d 662, 668 (Tenn. 1997) (quoting Casone v. State, 246 S.W.2d 22, 26 (Tenn. 1952)). In this
case, Jet Printing proffered Payne, a salesperson, as an expert in reading purchase orders. The trial
court determined that it did not need assistance in reading or understanding purchase orders, stating:
. . . experts are to be of assistance to [t]he [c]ourt, and reading purchase orders[,] that
basically is going to be a legal conclusion that I will draw from whatever facts are
tendered to me. I don’t think that there is such a thing [as] an expert in reading
purchase orders. If this was very, very complicated, if there was something that was
beyond the keen of [t]he [c]ourt to understand, then experts certainly are of
assistance.
In contrast, Leuman’s experience was in converting polyethylene film into bags. He testified to the
industry standards as to the types of polyethylene film that will make a proper seal, asserting that it
was generally known in the industry that film treated on both sides will not properly seal. The trial
court found his testimony to be of substantial assistance. Under these circumstances, we find that
the trial court did not abuse its discretion in refusing to admit into evidence the testimony of Jet
Printing’s proffered expert.
The above determinations pretermit any other issues raised on appeal.
The decision of the trial court is affirmed. Costs are taxed to appellant, Jet Printing, LLC,
and its surety, for which execution may issue, if necessary.
___________________________________
HOLLY KIRBY LILLARD, JUDGE
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