National Steel Corp. v. L. G. Wasson Coal Mining Corp. (338 F.2d 565, 1964)

SWYGERT, Circuit Judge.

This diversity action was brought by plaintiff National Steel Corporation for the recovery of $41,215.50 representing the balance owed by defendant L. G. Was-son Coal Mining Corporation, located at Boonville, Indiana, under a contract for the sale of 8,200 tons of sheet steel piling, to be fabricated according to government specifications and used by Wasson in the construction of a cofferdam at the Barkley Dam project on the Cumberland River in the State of Kentucky. Wasson was building the dam under a contract with the United States Corps of Engineers.

' A counterclaim was filed by Wasson against National Steel in which recovery of consequential damages was sought in the amount of $41,210.35, for a breach of implied warranty of merchantability and fitness. It asserted that the steel in question was defective, thus permitting one cell of the cofferdam to rip open and collapse, resulting in the alleged damages.

The case was tried before the district court without a jury. Judgment was rendered upon special findings and conclusions of law in the amount of $210.35 in favor of Wasson, the difference between the amount which the court found was owing to National Steel and the amount of consequential damages for which the district judge held National Steel liable to Wasson. There is no dispute in this appeal regarding the amount owing to plaintiff on its complaint. The sole issue concerns the allowance of consequential damages to defendant.

The determinative questions are twofold: first, whether a disclaimer of liability by plaintiff was a part of the contract and, second, if it was, whether it absolved plaintiff of liability for latent defects in the steel sold defendant. Both parties are in agreement that the law of Kentucky is controlling in the disposition