Appeal from the United States District Court for the Southern District of Indiana, Indianapolis Division. Nos. IP 76-C-496 and IP 76-C-502 -- Cale J. Holder, Judge .
Before Pell and Wood, Circuit Judges, and Baker, District Judge.*fn*
This is an appeal from a judgment of the district court entered after a bench trial awarding Michael L. Booher and Lorraine Corp. (Booher) $1,171,216.16 in compensatory and punitive damages against Litton Business Systems, Inc. and Royal Business Machines, Inc. (Royal). The judgment further awarded Booher attorneys' fees of $156,800.00. It denied, for want of consideration, the recovery by Royal of a $596,921.33 indebtedness assessed against Booher earlier in the proceedings in a summary judgment. The judgment also granted Royal a set-off of $12,020.00 for an unpaid balance due on computer typewriters.
The case arose from commercial transactions extending over a period of 18 months between Royal and Booher in which Royal sold and Booher purchased 114 RBC I and 14 RBC II plain paper copying machines. In mid-August 1976, Booher filed suit against Royal in the Indiana courts claiming breach of warranties and fraud. On September 1, 1976, Royal sued Booher on his financing agreements in the district court and also removed the state litigation to the district court where the cases were consolidated.
The issues in the cases arise under Indiana common law and under the U.C.C. as adopted in Indiana, Ind.Code § 26-1-2-102 et seq. (1976). The contentions urged by Royal on appeal are that:
(1) substantial evidence does not support the findings that Royal made certain express warranties or that it breached any express warranty and, as a matter of law, no warranties were made; and
(2) substantial evidence does not support the findings that Royal breached the implied warranties of merchantability and fitness for a particular purpose; and
(3) substantial evidence does not support the finding that Booher made a timely revocation of acceptance of the goods sold; and
(4) substantial evidence does not support the findings upon which the awards of compensatory damages were made and that certain awards constituted a double recovery; and
(5) substantial evidence does not support the findings upon which the awards of punitive damages were made.
We reverse and remand for a new trial on the grounds set forth in this opinion.
We first address the question whether substantial evidence on the record supports the district court's findings that Royal made and breached express warranties to Booher. The trial judge found that Royal Business Machines made and breached the following express warranties:
(1) that the RBC Model I and II machines and their component parts were of high quality;
(2) that experience and testing had shown that frequency of repairs was very low on such machines and would remain so;
(3) that replacement parts were readily available;
(4) that the cost of maintenance for each RBC machine and cost of supplies was and would remain low, no more than 1/2 cent per copy;
(5) that the RBC machines had been extensively tested and were ready to be marketed;
(6) that experience and reasonable projections had shown that the purchase of the RBC machines by Mr. Booher and Lorraine Corporation and the leasing of the same to customers would return substantial profits to Booher and Lorraine;
(7) that the machines were safe and could not cause fires; and
(8) that service calls were and would be required for the RBC Model II machine on the average of every 7,000 to 9,000 copies, ...