COURT OF APPEALS OF OHIO, EIGHTH DISTRICT COUNTY OF CUYAHOGA NO. 61347 S-PRODUCTS, B.V. : : : Plaintiff-Appellee : JOURNAL ENTRY : v. : AND : NORAL, INC. : OPINION : : Defendant-Appellant : DATE OF ANNOUNCEMENT OF DECISION: NOVEMBER 19, 1992 CHARACTER OF PROCEEDING: CIVIL APPEAL FROM THE COMMON PLEAS COURT CASE NO. CP-175967 JUDGMENT: AFFIRMED. DATE OF JOURNALIZATION: APPEARANCES: For Plaintiff-Appellee: MICHAEL A. THOMAS HUFFMAN AND THOMAS Atrium Office Plaza 668 Euclid Ave., Suite 100A Cleveland, OH 44114 For Defendant-Appellant: MICHAEL H. DIAMONT JAMES J. BARTOLOZZI KAHN, KLEINMAN, YANOWITZ & ARNSON, CO., L.P.A. The Tower at Erieview, #2600 Cleveland, OH 44114 -2- SPELLACY, J.: Defendant-appellant Noral, Inc. ("appellant") appeals from the trial court's judgment rendered in favor of plaintiff- appellee S-Products, B.V. ("appellee") in the amount of $44,989.60. The facts giving rise to the instant appeal are as follows: Appellee is a corporation organized by Gerard Bokhoven in the Netherlands. Appellee manufactures several products, including panel indicators, mineral insulated cables and certain temperature devices. The product at issue in the instant case was appellee's pocket digital thermometer, also known as pyrometers. The pocket digital thermometer provides laboratory accuracy for rugged plant and field environments in industrial and commercial applications. The thermometer was designed to resist shock and to provide a high quality, cost-effective instrument to read various temperatures in degrees Fahrenheit and Celsius. Appellant is a corporation organized in the State of Ohio with offices in Cleveland, Ohio. Appellant was formed by Dr. Dezso Ladanyi for the purpose of manufacturing temperature sensing probes of various types, including thermocouples, thermostor probes and resistance temperature detectors. Appellant also sells different types of temperature products such as indicators, recorders, controllers, infrared detectors and a wide spectrum of technical products. -3- In the spring and early summer of 1985, Gerard Bokhoven and Dr. Ladanyi commenced discussions about the possibility of appellant purchasing various products manufactured by appellee. The discussions ultimately focused on the purchase of appellee's hand-held thermometers. Prior to any signing of a contract, extensive negotiations took place concerning the quality of the thermometers, the purchase price, the delivery schedule and what may accompany the thermometers. In a letter dated July 3, 1985, Gerard Bokhoven informed Dr. Ladanyi that appellee would send appellant a prototype of the hand-held thermometer for a tryout and approval. Gerard Bokhoven stated that appellant had four weeks after the delivery of the prototype to inform appellee about its decision to purchase the product. Appellant received the prototype in August, 1985 and tested it rigorously. Appellant found the prototype to be satisfactory in every aspect. In fact, appellant found it to be a very good product and was very pleased with its performance and appearance. After further negotiations, appellee presented to appellant a proposal, dated September 18, 1985. In a letter dated October 1 11, 1985, appellant accepted the proposal. Thus, the parties entered into a contract for the sale and purchase of 2,000 hand- 1 Two agreed upon changes were made to the September 18, 1985 proposal concerning an import license and the guarantee period. -4- held thermometers. Appellant provided appellee with an advance payment of $20,000 when it entered into the contract. Appellant's Dr. Ladanyi claimed that the delay in accepting appellee's proposal of September 18, 1985 resulted from their discovery that Quantem Corporation, from New Jersey, was advertising the sale of what appeared to be identical hand-held thermometers. Appellant believed that it was going to be the exclusive seller of the hand-held thermometers, thus, it contacted appellee about Quantem Corporation. Apparently, appellee reassured appellant that Quantem Corporation would no longer be selling the identical product. Upon this reassurance, appellant entered into the contract. The contract between the parties set forth the rights of the respective parties and provided for the purchase price and the delivery schedules. Specifically, the contract provided for the currency rate between the U.S. dollar and the Dutch guilder. It was agreed that the exchange rate at the time of the contract was "one U.S. dollar for 3,40 Dutch guilders." The contract also set forth a description of the hand-held thermometers, including the range of the device in degrees Fahrenheit and Celsius. One particular paragraph of the contract provided that "any claims are to be submitted by Telex within seven business days after arrival of the products." In December, 1985, Dr. Ladanyi visited appellee's plant in the Netherlands. Dr. Ladanyi observed appellee's operations, including the manufacturing of the hand-held thermometers. Dr. -5- Ladanyi later claimed that he was not completely satisfied with what he observed, but he "chose to give Bokhoven the benefit of the doubt." The first delivery of 200 units of the hand-held 2 thermometers arrived in April, 1986. Once appellant received the 200 units, tests were immediately conducted to see if they conformed with the accuracy specifications provided for in the contract. The hand-held thermometers, as delivered, differed from the prototype sent to appellant in August, 1985. The display figure on the delivered units was 3/8 inch high, while the prototype's display figure was l/2 inch high. Further, the internal make-up of the delivered units was not identical to that of the prototype. Dr. Ladanyi claimed that upon a review of the internal make-up of the delivered units, he learned that the circuitry was completely different from the prototype's circuitry. Dr. Ladanyi also discovered that the direction of the switch from Fahrenheit to Celsius was reversed from that on the prototype. Despite the variations, it appeared that the delivered units basically functioned the same as the prototype. In a Telex dated April 21, 1986, appellant did not actually complain about the variations of the delivered hand-held thermometers. With regard to the change in height of the display 2 The initial delivery was supposed to be in December, 1985. However, negotiations over labels to be attached to the units and the sale of the hand-held thermometers by other American companies delayed the delivery. -6- figure, appellant merely asked, "Why did you make this change without getting our approval first." There was no complaint about the differences of either the circuitry or the Fahrenheit and Celsius switch. Appellant seemed only concerned with the labelling of the units. Gerard Bokhaven sent a Telex to appellant on April 23, 1986 regarding the differences between the delivered hand-held thermo- meters and the prototype. Gerard Bokhaven basically said that Dr. Ladanyi had approved the differences during his visit to appellee's plant in December, 1985. Appellee continued to ship the hand-held thermometers to appellant for the next couple of months. Then, in a Telex dated June 9, 1986, appellant voiced some complaints about the delivered units. Appellant stated in the Telex that "a large number of units received from you are seriously outside of the accuracy tolerances; therefore do not ship any more instruments 3 until this problem, as well as others, have been corrected ...." Appellee responded, likewise, in a Telex that it was "very surprised to hear that a large number of the units are out of accuracy." Appellee claimed that appellant was the first to complain about the accuracy, thus, it requested to hear more on the subject. Appellee requested appellant to provide figures as they related to accuracy. 3 By the time appellee received the Telex of June 9, 1986, another shipment had been sent. -7- Dr. Ladanyi claimed that appellant was receiving all sorts of complaints about the accuracy of the units not meeting the specifications. Therefore, appellant conducted extensive tests on the delivered hand-held thermometers. In a letter dated August 4, 1986, appellant sent to appellee the results of said tests. Appellant informed appellee that it tested several of the delivered units, and then it compared the results with tests performed on a Keithley model, a Quantem model, and the prototype provided by appellee. Appellant concluded that the delivered hand-held thermometers had the lowest accuracy. Appellant speculated that the delivered units did not have a new design, and that the prototype was of the latest design. Appellee responded to appellant's test results in a Telex dated August 22, 1986. Appellee admitted that the delivered hand-held thermometers differed from the prototype. However, appellee asserted that it made appropriate changes to suit appellant's needs. Appellee claimed that it showed Dr. Ladanyi the changes when he was at its plant in the Netherlands in December, 1985. With regard to the accuracy issue, appellee believed that appellant's calibration equipment was not working properly, since its own tests of the units revealed that they were "O.K." Appellee informed appellant that an outside company confirmed the accuracy of its calibration machines that tested the units. -8- Appellee recommended that to solve the situation, appellant should send one of its hand-held thermometers to the Netherlands. Appellee would then test the product itself to determine the accuracy. Appellant never sent appellee one of its hand-held thermometers for testing. Instead, appellant had an independent company conduct tests on some of the hand-held thermometers. Appellant informed appellee in a Telex dated September 16, 1986 that there were no problems with its calibration methods or equipment. Therefore, appellant instructed appellee "not to send any more instruments until this problem is resolved." By this time, 800 units had been delivered to appellant and paid for. Appellee offered to send one of its representatives to appellant's business in the United States. However, appellant neither permitted appellee to inspect the allegedly defective units nor sent appellee any of the units to the Netherlands. The parties continued to correspond and accuse each other of erroneous results and conclusions. Appellee claimed that appellant desired to cancel the contract as a result of its financial problems and the drop in value of the U.S. dollar. Appellant's Dr. Ladanyi admitted that appellant went into a serious financial bind. However, he blamed it on the cost of the 800 delivered units and the problems with selling them in the United States. Dr. Ladanyi claimed that they had problems in selling the hand-held units, because they were not accurate and several of them had faulty switches. -9- The parties continued to communicate with each other for a long period of time. In August, 1988, a new delivery schedule was set-up after the parties apparently solved their differences. However, the delivery schedule never materialized. Appellant continued to insist that appellee was not in compliance with the contract specifications. In a letter dated November 22, 1988, Dr. Ladanyi informed appellee's attorneys that appellant was willing to accept further shipments of the hand-held thermometers, only if they were exactly like the original prototype. Dr. Ladanyi demanded that the display dimensions must be l/2 inch high; that the PC band conform to the original prototype; and the accuracy of the instruments must conform to the contract specifications. Ultimately, the parties could not come to terms. On September 11, 1989, appellee filed a complaint in the Cuyahoga County Court of Common Pleas against appellant. Appellee alleged that appellant refused to accept any further shipments as to the remaining manufactured l,200 hand-held thermometers, and, thus, this amounted to a breach of contract. Appellee further asserted in its complaint that it had been and continued to be ready, willing and able to perform and discharge its obligations pursuant to the contract. However, it had been frustrated in doing so by virtue of appellant's ongoing breach and repudiation. Appellee sought $90,000 in damages. On November 9, 1989, appellant filed an answer and counterclaim. In its answer, appellant basically denied that it -10- breached the contract. Appellant alleged in its counterclaim that appellee breached the contract when it delivered 800 units that failed to meet the contract specifications and also did not conform with the prototype. Appellant further alleged that appellee breached its express and implied warranties with respect to all goods delivered. Appellant requested judgment in the amount of $144,269. On December 13, 1990, a bench trial commenced. On January 29, 1991, the trial court issued a memorandum to counsel. In its memorandum to counsel, the trial court found that appellee substantially complied with the contract and appellant was not warranted in failing to go through with it. Thus, the trial court concluded that appellant breached the contract. Accordingly, the trial court found in favor of appellee on its complaint and also found that appellant was not entitled to recover on its counterclaim. In calculating the damages, the trial court initially found that appellee was entitled to the amount due on the 1,200 undelivered units, at the time of the breach of the contract on 4 September 30, 1986. Said amount was $79,571.50. However, the trial court then found that appellant was entitled to a credit of 5 $48,000 for appellee's failure to resell the units elsewhere. 4 The trial court determined that 1,200 undelivered units at the exchange rate of 2.2845 was 181,680 guilders, or $79,571.50. 5 $48,000 represented the value of the 1,200 units at $40 per unit. -11- Therefore, appellee was entitled to $31,571.50, plus interest at 10% per annum from September 30, 1986 to January 1, 1991. Accordingly, judgment was entered in favor of appellee in the amount of $44,989.60. Appellant filed a timely notice of appeal and subsequently raised the following assignments of error: I. THE TRIAL COURT ERRED IN CONCLUDING THAT DEFENDANT WAS OBLIGATED TO ACCEPT AN ADDITIONAL 1,200 UNITS WHEN THE UNITS ALREADY DELIVERED DID NOT COMPLY WITH THE PROTOTYPE OR THE CONTRACT. II. THE TRIAL COURT ERRED IN CONCLUDING THAT PLAINTIFF'S OFFER TO "REPAIR" DEFECTIVE UNITS AND TO SEND ITS EXPERT TO DEFENDANT'S UNITED STATES PLANT COMPLIED WITH THE REQUIREMENTS OF O.R.C. SEC. 1302.67 FOR "ADEQUATE ASSURANCE OF PERFORMANCE" WHERE THE PROBLEM WITH THE VAST MAJORITY OF THE THERMOMETERS WAS NOT THAT THEY WERE "BROKEN" BUT THAT THEY WERE OF A DIFFERENT DESIGN AND CONSTRUCTED OF COMPONENTS DIFFERENT FROM THOSE CONTAINED IN THE PROTOTYPE AND THEY DID NOT PERFORM WITHIN THE SPECIFIED TOLERANCES. III. EVEN IF THE TRIAL COURT CORRECTLY FOUND THAT NORAL BREACHED THE CONTRACT, THE TRIAL COURT ERRED IN DETERMINING THAT THE VALUE OF THE UNSOLD UNITS WAS $40.00 PER UNIT (FOR PURPOSES OF CALCULATING THE CREDIT TO WHICH DEFENDANT WAS ENTITLED UNDER O.R.C. SEC.1302.80(A)) WHEN PLAINTIFF'S OWN WITNESS TESTIFIED THAT THE REASONABLE VALUE WAS $130 PER UNIT WHICH IS CONSISTENT WITH NORAL'S TESTIMONY. IV. EVEN IF THE TRIAL COURT CORRECTLY CONCLUDED THAT NORAL BREACHED THE CONTRACT, PLAINTIFF FAILED TO PRODUCE ANY EVIDENCE OF LOST PROFITS, WHICH WAS THE ONLY MEASURE OF DAMAGES TO WHICH PLAINTIFF WOULD HAVE BEEN ENTITLED, AND THEREFORE THE TRIAL COURT ERRED IN GRANTING JUDGMENT TO PLAINTIFF. -12- V. THE TRIAL COURT ERRED IN GRANTING JUDGMENT TO PLAINTIFF WHERE PLAINTIFF FAILED TO MITIGATE ITS DAMAGES. VI. THE TRIAL COURT ERRED IN DENYING NORAL RECOVERY OF ITS LOST PROFITS AND INCIDENTAL AND CONSEQUENTIAL DAMAGES AS A RESULT OF S- PRODUCTS' BREACH OF ITS CONTRACT TO DELIVER THERMOMETERS WHICH COMPLIED WITH THE PROTOTYPE AND MET THE AGREED WRITTEN SPECIFICATIONS. In its first assignment of error, appellant contends that the trial court erred in concluding that it was obligated to accept the undelivered 1,200 units of the hand-held thermometers. Appellant initially argues that since the hand-held thermometers already delivered to the United States did not conform with the prototype, it was not required to accept the undelivered units. Appellant asserts that appellee breached an express warranty pursuant to R.C. 1302.26(A)(3), which provides as follows: (A) Express warranties by the seller are created as follows: *** (3) Any sample or model which is made part of the basis of the bargain creates an express warranty that the whole of the goods shall conform to the sample or model. R.C. 1302.26(A)(3) clearly provides that an express warranty is created if a sample or model of the goods is made a part of the basis of the bargain. The express warranty created is that the whole of the goods conforms to the sample or mode. See, Campbell v. Decorators Warehouse (Dec. 8, 1983), Cuyahoga App. No. 46850, unreported. -13- We find that appellee did make the prototype of the hand- held thermometer a part of the basis of the bargain. In the letter sent to Dr. Ladanyi by Gerard Bokhoven, Dr. Ladanyi was told that appellant had four weeks after delivery of the prototype to inform appellee about its decision to purchase the product. Appellant received the prototype and tested it rigorously. Upon finding the product satisfactory in every aspect, appellant began serious negotiations over the purchase of 2,000 units. Based upon the above facts, we conclude that an express warranty was created as a result of the prototype sent to appellant. The next issue is whether appellee breached the express warranty when it allegedly sent nonconforming units. Appellee claims there was no evidence that the delivered units would be identical or a mirror image of the prototype. In addition, appellee contends that despite the cosmetic modifications pertaining to the height of the display figure, the on-off switch and the component parts of the circuitry, the units conformed with appellant's advertising brochures. Finally, appellee asserts that Dr. Ladanyi approved and accepted the units when he visited its plant in the Netherlands. We initially find that the hand-held thermometers delivered by appellee to appellant did conform to the prototype. Admittedly, the delivered units did differ from the prototype but we find that the differences were minimal and of only a cosmetic nature. The evidence established that the delivered units -14- basically functioned the same as the prototype. Thus, we are unable to conclude that with regard to the prototype, appellee sent appellant nonconforming goods. We further find that Dr. Ladanyi, acting on behalf of appellant, effectively approved and accepted the minor changes to the prototype. Dr. Ladanyi visited appellee's plant in December, 1985 and observed appellee's operations and, specifically, the manufacture of the hand-held thermometers. There was also evidence presented that Dr. Ladanyi discussed the minor alterations with Gerard Bokhoven and approved the same. For the foregoing reasons, we conclude that appellee did not breach any express warranties. Appellant next argues that the trial court erred in failing to conclude that appellee breached the contract by not meeting the accuracy specifications set forth in the contract. All reasonable presumptions consistent with the record will be indulged in favor of the validity of the judgment under review by an appellate court. Jaffrin v. DiEgidio (1949), 152 Ohio St. 2d 359. Deference will be given to the findings of the trier of fact, since it weighs the credibility of the witnesses and the weight of the evidence. Seasons Coal Co. v. City of Cleveland (1984), 10 Ohio St.3d 77. We find that the trial court, as the trier of fact, was entitled to accept appellee's evidence that demonstrated that the delivered units were within the specifications of the contract. Appellee's evidence showed that the units were in substantial -15- compliance with the contract and also complied with all American standards. We also find that appellant failed to permit appellee to inspect or repair the allegedly defective units. On numerous occasions, appellee requested that appellant send it some of the units in order that they could be tested in the Netherlands. Appellant failed to do so. Appellee also offered to send one of its representatives to appellant's offices in the United States to inspect and test the units. However, appellant did not permit this either. R.C. 1302.59 provides in relevant part as follows: In furtherance of the adjustment of any claim or dispute: (A) either party on reasonable notification to the other and for the purpose of ascertaining the facts and preserving evidence has the right to inspect, test, and sample the goods including such of them as may be in the possession or control of the other; .... We conclude that appellant failed to abide by the terms of R.C. 1302.59. Moreover, we find that appellant failed to comply with paragraph seven of the contract which provided: "Any claims to be submitted by Telex within seven business days after arrival of the products." Appellant received its first shipment of the hand-held thermometers in April, 1986. However, appellant did not raise any complaints about the accuracy of the units until June, 1986. -16- Clearly, according to the terms of the contract, appellant failed to timely raise its claim of inaccuracy. Accordingly, we conclude that appellee did not breach either an express warranty or the terms of the contract. Appellant's first assignment of error is without merit and is overruled. Appellant argues in its second assignment of error that the trial court erred in concluding that appellee complied with R.C. 1302.67. Specifically, appellant contends that appellee's offer to repair defective units and to send an expert to its plant in the United States did not amount to adequate assurances that appellee would supply units in accordance with the contract. Based upon our findings above, that appellee did not breach either any express warranties or the parties' contract, we find that appellee did not violate R.C. 1302.67. We determine that since appellee did deliver conforming goods, it did not have to provide adequate assurances of due performance. In addition, we find that when appellee was presented with appellant's complaints, appellee did provide appellant with a sense of reliance and security that its promised performance was forthcoming. See, American Bronze Corp. v. Streamway Products (1982), 8 Ohio App.3d 223. Appellee continuously offered to test and repair any allegedly defective units and also offered to send its expert to the United States for an inspection. Appellee did, in fact, provide appellant with adequate assurances of -17- performance. Appellant's second assignment of error is not well taken and is overruled. Appellant's third and fourth assignments of error will be addressed together, since they both pertain to the propriety of the trial court's award of damages. Appellant initially contends that the trial court, in calculating the credit due to appellant, erroneously determined that the value of the undelivered units was $40.00. Appellant asserts that the $40.00 value unequivocally conflicted with the value of $130.00 per unit provided by appellee's own expert. Appellant further argues that the trial court erred in awarding damages pursuant to R.C. Chapter 1302. When a buyer repudiates with respect to the purchase of goods, the seller may resell the goods and recover damages pursuant to R.C. 1302.80 or recover for damages for nonacceptance under R.C. 1302.82. See R.C. 1302.77(D),(E). If the seller elects to resell the goods, R.C. 1302.80(A) provides that he may recover the difference between the resale price and the contract price along with incidental damages. The resale must be made in good faith and in a commercially reasonable manner, and if it is at a private sale, the seller must give the buyer reasonable notification of his intention to resell. R.C. 1302.80(B),(C). In the instant case, the trial court stated in its memorandum to counsel that the resale of the undelivered units was not done in a commercially reasonable manner and there was no -18- evidence of the required notification. Therefore, we find that the trial court's award of damages was not based upon R.C. 1302.80. If the seller elects to recover damages for repudiation, the measure of damages is the difference between the market price at the time and place for tender and the unpaid contract price together with incidental damages. R.C. 1302.82(A). If this measure is inadequate, the measure of damages is the profit which the seller would have made from full performance by the buyer together with incidental damages. R.C. 1302.82(B). In a breach of contract case, the non-breaching party is entitled to the remedy of placing him in the position where he was before the contract was made; that is, to return him to the status quo. Yurchak v. Jack Boiman Constr. Co. (1981), 3 Ohio App.3d 15. We find that in order to return appellee to the status quo, after appellant wrongfully refused to accept shipment of the 1,200 undelivered units, the trial court properly calculated damages according to R.C. 1302.82(A). The trial court correctly awarded damages by determining the difference in the market price and the unpaid contract price. The issue now is whether the trial court assigned the proper value as to the market price of the undelivered units. The trial court in the instant case determined that based upon all the evidence, the value of the undelivered units was $40.00 per unit. The trial court simply weighed all the evidence and arrived at that value. Clearly, the trial court is in a far -19- superior position to evaluate the evidence as the trier of fact. See, Ostendorf-Morris Co. v. Slyman (1982), 6 Ohio App.3d 46. We are unable to conclude that the trial court erred in finding the value of the undelivered units to be $40.00 per unit. We conclude that the trial court did not err in its award of damages. Appellant's third and fourth assignments of error are not well taken and are overruled. Appellant argues in its fifth assignment of error that appellee did not act diligently to mitigate damages. The doctrine of avoidable consequences, i.e. mitigation of damages, is intended to prevent an inclusion in the damage award of such damages that could have been avoided by reasonable affirmative action by the injured party without substantial risk to such party. F. Enterprises, Inc. v. Kentucky Fried Chicken Corp. (1976), 47 Ohio St.2d 154. The doctrine of avoidable consequences requires only reasonable practical care and diligence, not extraordinary measures, to avoid excessive damages. Provident Bank v. Barnhart (1982), 3 Ohio App.3d 316. The evidence in this case showed that appellee and appellant continued negotiations to resolve their differences. Appellee held onto the undelivered units until appellant could agree to accept them. Appellee ultimately sold the units only after the differences were not resolved with appellant. We find that appellee did use reasonable care and diligence to mitigate damages. -20- Appellant's fifth assignment of error is not well taken and is overruled. In its sixth assignment of error, appellant basically claims that the trial court erred in not finding that appellee breached the contract, by failing to deliver 2,000 hand-held thermometers that complied with the prototype and met the contract specifica- tions. Based upon our ruling with regard to appellant's first assignment of error, we conclude that appellee did deliver conforming hand-held thermometers to appellant. We further conclude that appellant breached the parties' contract when it refused to accept shipment of the remaining 1,200 units. Accordingly, we conclude that the trial court properly awarded damages in the amount of $44,989.60 to appellee. Appellant's sixth assignment of error is without merit and is overruled. Trial court judgment is affirmed. -21- It is ordered that appellee recover of appellant its costs herein taxed. The court finds there were reasonable grounds for this appeal. It is ordered that a special mandate issue out of this court directing the Common Pleas Court to carry this judgment into execution. A certified copy of this entry shall constitute the mandate pursuant to Rule 27 of the Rules of Appellate Procedure. KRUPANSKY, J., CONCURS; AND DAVID T. MATIA, C.J., DISSENTS. LEO M. SPELLACY JUDGE N.B. This entry is made pursuant to the third sentence of Rule 22(D), Ohio Rules of Appellate Procedure. This is an announcement of decision (see Rule 26). Ten (10) days from the date hereof this document will be stamped to indicate journalization, at which time it will become the judgment and order of the court and time period for review will begin to run. .