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June 28, 1971

THERMICE CORPORATION, Defendant and Third-Party Plaintiff, v. F & M SCHAEFER BREWING COMPANY, Third-Party Defendant

Gasch, District Judge.

The opinion of the court was delivered by: GASCH

GASCH, District Judge.

 This matter came on for trial before the Court. Plaintiff, a Delaware corporation doing business in the District of Columbia as the Rock Creek Ginger Ale Company, sued defendant Thermice, a Pennsylvania corporation having its principal office in Philadelphia, Pennsylvania, and doing business in a substantial number of states, including the District of Columbia, for breach of contract, negligence, and breach of warranty, express and implied. Thereafter, defendant Thermice, as third-party plaintiff, filed a third-party action against the F & M Schaefer Brewing Company, a New York corporation, alleging breach of warranty, express and implied, contending that if Thermice is held responsible for damages to plaintiff, the third-party defendant would be liable to it in whole or in part.

 From the testimony adduced in open Court, exhibits received in evidence, and the admissions of defendant Thermice, the Court finds the following facts:

 Plaintiff, a manufacturer of soft drinks, has its principal place of business in the District of Columbia. For a number of years prior to the incident in question, plaintiff had purchased carbon dioxide from defendant Thermice, which product was delivered to plaintiff by defendant Thermice in its special tractor-trailer tank and more specifically, from such tank to a specially designed storage tank on plaintiff's premises, which storage tank is owned and serviced by defendant Thermice under a lease agreement with plaintiff.

 On or about July 31, 1969, defendant Thermice's driver, one Kenyon, delivered approximately 20,000 pounds of liquid carbon dioxide to the storage tank on plaintiff's premises heretofore mentioned. This quantity of carbon dioxide had been purchased by Thermice from the F & M Schaefer Brewing Company at its Baltimore, Maryland, plant.

 One of plaintiff's employees, one Carrick, whose job at this time was the supervision of bottling operations of plaintiff, having been unsuccessful in his efforts to locate the source of the odor in the bottling plant, checked the main storage tank which was owned, installed, maintained, and leased by Thermice to plaintiff and to which the carbon dioxide was delivered on the 31st of July, and ascertained upon opening the valve thereof that a strong rotten egg odor emanated from the tank. He brought this to the attention of plaintiff's officials who thereupon shut down bottling operations and transmitted to Thermice this information. On or about August 8, 1969, the Thermice truck driver Kenyon, who had made delivery of the tank of carbon dioxide in question, returned with his truck to plaintiff's plant, checked the valve in question, noted a smell which he described as bad, smelling pretty rank and similar to that of a dirty bar rag. Thereupon he pumped out the tank and delivered the contents thereof to an industrial user of the product, the Armstrong Cork Company. After the tank had been pumped out and blown down by Kenyon, another employee, one Craig, supervised the cleansing of the tank by Rock Creek's employees.

 To the extent possible, generally by the use of dates of bottling stamped on the cases, plaintiff sought to segregate those cases of its bottled products which had been manufactured with carbon dioxide coming from the shipment in question and to withhold them from distribution to its customers. The number of these cases was 20,302. Thereafter, three representatives of the defendant Thermice, Messrs. Poffell, Davis, and Phillippi, came to the plaintiff's plant, observed the segregated cases, were given the opportunity of taste and sniff testing whatever bottles they selected, and removing whatever samples they wished for further inspection by defendant Thermice. Mr. Phillippi noted an unusual odor in the bottles inspected by him which he described as smelling bad and as a kind of a beer odor. He sniffed approximately a dozen bottles. Following this inspection, Mr. Phillippi agreed that the segregated cases should not be distributed and sold and that his company should pay for the cost of destruction. Laboratory testing of several sample bottles of Rock Creek's product manufactured with the CO 2 in question revealed that it had a beer odor and contained sulphur compounds.

 On the basis of these facts, the Court finds for the plaintiff against the defendant Thermice. Thermice knew the nature of Rock Creek's business and that its product, carbon dioxide, was used by Rock Creek in the preparation of various soft drinks for human consumption. Being thoroughly aware of the importance of producing pure carbon dioxide used in the preparation of soft drinks expected to be used for human consumption, Thermice's expert witness, Mr. Martin Goldstein, testified to the elaborate quality controls maintained in Thermice's own plant. These quality controls, according to the testimony of Mr. Goldstein, were more extensive and impressive than those utilized by the third-party defendant Schaefer in purifying and testing the by-product, carbon dioxide, in its manufacture of beer. Nevertheless, in this instance, Thermice elected to purchase Schaefer's surplus carbon dioxide for $10 a ton and distribute it to customers using CO 2 in the preparation of soft drinks for human consumption. It is noted that when Schaefer had need of additional CO 2 for its production of canned beer it paid Thermice $35 a ton for this ingredient. Thermice was given the opportunity of inspecting the means and methods employed by Schaefer in its product purification, testing, and storage of carbon dioxide, but nevertheless, did not avail itself of this opportunity, except to receive from Schaefer a cannister containing approximately three pounds of carbon dioxide which it tested in its own laboratory. No test by sniffing or otherwise was utilized by Thermice between acceptance of this carbon dioxide at Schaefer's plant and delivery to plaintiff with respect to this shipment.

 Plaintiff's production cost for the 20,302 cases of its product manufactured with the impure CO 2, plus the cost of destroying them, is $41,841.55.

 Defendant Thermice while denying liability pleads in the alternative that plaintiff was under the obligation to mitigate its damages and to shut down its production as soon as the unusual odor was detected. The Court finds plaintiff's efforts to ascertain the cause of the odor were prompt as well as reasonably extensive and that as soon as it was learned that the cause of the odor was one of the ingredients of the manufacture of its soft drink product, i.e., CO 2, production was promptly stopped and defendant Thermice notified.

 Plaintiff is entitled to judgment in the amount of $41,841.55 against Thermice.

 A more difficult question is presented by the third-party complaint and the course of dealing between Thermice and Schaefer. Thermice was well aware of the use to which the carbon dioxide it delivered to Rock Creek would be put. Schaefer, on the other hand, knew only that Thermice was in the business of distributing carbon dioxide manufactured by its parent corporation, Publicker, to a large number of customers engaged in the many uses of this product.

 This course of dealing had its inception when Schaefer late in 1968 or early in 1969 decided to dispose of its surplus CO 2. The assignment was given to Mr. Agiato, Schaefer's senior buyer, who has the responsibility for sale of surplus by-products. Mr. Agiato got in touch with Schaefer CO 2 suppliers. Only Thermice expressed interest in purchasing this surplus CO 2. Early in 1969 Mr. Agiato met with Mr. Brocklehurst of Thermice. At that meeting they reached a general agreement for the purchase of CO 2 from Schaefer by Thermice. The terms agreed upon were price, availability, and the method of pick-up. While there was no direct representation by Schaefer as to the quality of its surplus CO 2, it is undisputed that Schaefer utilized its surplus CO 2 in connection with its beer brewing procedures, particularly in its beer canning operations, and representations were made that the amount of CO 2 available as surplus would depend upon Schaefer's own needs for utilizing this product in connection with its beer canning operations. Mr. Profido, engineer-manager of Schaefer's Baltimore Brewery, testified, that the standard CO 2 for its beer manufacturing processes was 99.9% purity but that 99.85% was acceptable. Rock Creek's acting plant manager testified that Rock Creek required CO 2 of at least 99.6% purity. While Mr. Agiato was not informed as to the ultimate use which Thermice expected to make of the CO 2 in question, he was aware that CO 2 is used in carbonated beverages.

 Following Mr. Goldstein's report to his company, Thermice and Schaefer entered into a course of dealings wherein Thermice's tank truck driver, Mr. Kenyon, at stated intervals went to Schaefer's Baltimore Brewery and obtained therefrom weekly tank loads of Schaefer's surplus CO 2. This course of dealing commenced in March of 1969 and continued through August 8, 1969. The amount of each pick-up ranged from about twenty thousand pounds to thirty-five thousand pounds. The total amount obtained by Thermice from Schaefer's Baltimore Brewery was 714,000 pounds.

 On August 8, 1969, Thermice was notified of the discovery of the foul smell which emanated from the tank of CO 2 manufactured by Schaefer and delivered by Thermice to Rock Creek. Thermice promptly sent its representatives to Rock Creek's plant and, as heretofore reported, got samples of the material in question, as well as randomly selected bottles of Rock Creek's product manufactured with the CO 2 in question.

 Shortly thereafter, Thermice notified Schaefer that there had been a problem with the CO 2 and that pick-ups of that ...

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