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Zig Zag Spring Co. v. Comfort Spring Corp.

decided: January 9, 1953.


Author: Mclaughlin

Before McLAUGHLIN, KALODNER and STALEY, Circuit Judges.

McLAUGHLIN, Circuit Judge.

In this replevin suit plaintiff obtained a judgment against defendants which included punitive damages and defendants appeal.

The amended complaint alleged that prior to May 24, 1948, plaintiff was the owner of two spring manufacturing machines valued at $15,000 each; that from early in April, 1948, to about June 8th of that year plaintiff was negotiating with the defendant Maryland corporation for the sale of three such machines to the latter concern; that during that period, for the purpose of demonstrating the operation of the machines to the defendants, plaintiff delivered three machines, including the two above mentioned, to the defendant New York corporation at its Jersey City, New Jersey, plant; that title to the machines was to remain in plaintiff unless and until a contract of sale was executed and in the event to such agreement was entered into "* * * defendants would return said machines to plaintiff."

Continuing, the complaint states that one of the machines was returned to the plaintiff; that on or about June 8, 1948, the negotiations with the Maryland company for the sale of the remaining two were terminated without a contract being consummated; that plaintiff is entitled to immediate possession of the machines; that demands for same have been made upon the defendants; that the defendants refused to deliver them and wrongfully detain them. Possession of the machines and damages for their unlawful detention were demanded.

The second count specifically alleges that, after the demands for possession had been made, the Maryland defendant, through its control of the New York defendant, had the latter ship the machines to it in Baltimore "* * * for the purpose of delaying, harassing and obstructing the court action * * *" which the letters from plaintiff's attorney demanding return of the machines indicated would be brought. In the alternative plaintiff also sued for the purchase price of the machines and for their reasonable value. The original complaint had demanded special damages arising out of loss of a sale by plaintiff of the two machines held by defendants. That claim was withdrawn through a stipulation between the parties entered into prior to the filing of the amended complaint.Suit was started on June 29, 1948. Initially the New York corporation was the sole defendant. Later, by leave of the court, the Maryland company was joined as a defendant in the amended complaint. The action is in the federal court by reason of diversity of citizenship.

The trial of the case commenced March 12, 1952. Plaintiff's attorney, in his opening to the jury, charged malice on the part of the defendants in the taking and detention of the machines. Speaking of that assertion the defense attorney stated to the court that "* * * the special damage request has been taken out of this case by the plaintiff itself; there shouldn't be any opening on that phase at all." Plaintiff's attorney explained that the stipulation had merely eliminated special damages from the loss of the sale of the machines to a third party and that the reference in the opening had been to what was actually punitive damages. The court asked counsel for the plaintiff if he still relied "* * * upon the wilfulness of the alleged misappropriation * * *." Counsel replied, "That's right." The court said, "It doesn't make it special, it makes it punitive." Counsel for the plaintiff agreed and continued with and completed his opening without further comment from the defense. After the conclusion of the trial, the court by order allowed the formal amendment of the complaint that it might conform to the evidence. The amendment consisted in adding to the appropriate paragraphs of the first two counts the words "and maliciously", so that the particular phrase as amended read "wrongfully and maliciously detains them."

Appellants contend that order was error because it allowed "* * * a claim for punitive damages which is neither set forth in the original complaint nor supported by the evidence * * *."

The record fails to uphold that argument. Though punitive damages were not expressly claimed the complaint presented an adequate foundation for proof of malicious misappropriation by the defendants. From the introductory paragraph of the opening on behalf of the plaintiff that element was stressed. It was plaintiff's basic trial theory. Counsel for the defense did comment, as has been stated, on what was said for the plaintiff regarding alleged malicious conduct of the defendants and in the defense opening the jury was told that the suit was a simple contract action with no punitive damages involved. Defense counsel also took exception to the trial court's charge as to punitive damages.*fn1 But there was no objection made to plaintiff trying its case on its theory of punitive damages. In paticular, no surprise was pleaded, nor was there any request for a continuance. As counsel for appellant stated at the oral argument on this appeal, the defense knew all the evidence and there was no surprise as to that. It would seem that the situation really resolved itself into a difference of opinion as to what the evidence revealed, the defense thought at the trial being, as it is now, that it did not justify punitive damages. The defense conception of the transaction was and is that an entire contract for three machines had been entered into with the plaintiff and that as part of that arrangement there was to be a protective personal guarantee to the defendants by the Ross brothers (who controlled plaintiff corporation) against patent infringement suits. That contract, argues the defense, justified the removal of the two machines to Maryland; justified their retention for four years without any payment whatsoever to the plaintiff, though during that time, as might be inferred from the evidence, they made a profit of $55,000 from their use of the machines.

The order of the trial court allowing malicious detention to be formally added to the complaint was proper. The facts and conclusions in the complaint, plaintiff's opening and its whole trial course thereafter, all unobjected to by the defense, were directed to the obtainment of punitive damages because of the malicious misappropriation of its property by the defendants. The order was directly authorized by Rule 15(b) of the Federal Rules of Civil Procedure, 28 U.S.C. That rule is captioned "Amendments to Conform to the Evidence". The last sentence of Paragraph (b) reads: "The court may grant a continuance to enable the objecting party to meet such evidence." Here, such continuance was not necessary or requested because, as conceded, the defense was not surprised by the evidence - their point was and is that it did not constitute a proper ground for exemplary damages.

It is undisputed, as alleged in the complaint, that the machines were delivered to the New Jersey plant of the New York corporate defendant. According to the plaintiff, they were delivered for demonstration purposes.If no contract was entered into they were to be returned to the plaintiff. While neither party expressly states that New Jersey law governs the punitive damage test to be applied in this matter, they both rely on the leading New Jersey case on the subject.*fn2 That decision is Dreimuller v. Rogow, Sup.Ct.1919, 93 N.J.L. 1, 107 A. 144, which also a replevin suit The defense there argued, and a similar contention is urged in the present case, that plaintiff's recovery should have been limited to the value of the goods taken and the damages sustained by their detention. The Supreme Court of New Jersey, in upholding the trial court's submission to the jury of the question of punitive damages and a verdict thereon, said at page 3 of 93 N.J.L., at page 145 of 107A. "The right to award exemplary damages primarily rests upon the single ground - wrongful motive; and, when the personal intent to injure is shown, the penalty may be inflicted."

Appellants' next point is that the refusal to charge certain of their requests was error. Defense request #4 on behalf of the New York company and #5 for the Maryland defendant would have removed plaintiff's claim for punitive damages from consideration by the jury. These were properly denied by the trial court for the reasons already indicated.

The Maryland defendant's request #8 read as follows:

"If you find from all of the evidence and circumstances in this case that plaintiff corporation and the Maryland corporation entered into a binding agreement on June 2, 1948, under which the plaintiff corporation agreed to sell and the Maryland corporation agreed to buy three Zig Zag machines for the sum of $45,000, I charge you that that binding agreement constitutes an entire contract and that, therefore, the plaintiff corporation has no right to ...

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