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SHERKATE SAHAMI KHASS RAPOL v. HENRY R. JAHN & SON

February 4, 1982

SHERKATE SAHAMI KHASS RAPOL (RAPOL CONSTRUCTION CO.), Plaintiff,
v.
HENRY R. JAHN & SON, INC., Defendant; HENRY R. JAHN & SON, INC., Defendant and Third-Party Plaintiff, v. LUFKIN INDUSTRIES, INC., Third-Party Defendant



The opinion of the court was delivered by: COOPER

Introduction

Plaintiff Rapol Construction Corp. (Rapol), an Iranian corporation, brings this action against defendant Henry R. Jahn & Son, Inc. (Jahn), a New York corporation, under the New York Uniform Commercial Code and common law fraud provisions. *fn1" The gravamen of the complaint is that Jahn failed to ship the goods which Rapol ordered. For its part, Jahn denied any wrongdoing and impleaded the manufacturer of the goods, Lufkin Industries, Inc. (Lufkin), a Texas corporation, on the ground that Lufkin "will be liable" to Jahn if the jury found Jahn liable in the main action. At the close of plaintiff's case, we directed judgment in defendant's favor and dismissed the complaint and third-party complaint as a matter of law.

 The Facts

 For approximately thirty (30) years, Rapol has been in the business of constructing irrigation projects, roads and buildings in Iran. *fn2" Its president and general manager is Hassan Mortezai-Faird (Mortezai-Faird) at all times relevant to this action principally engaged in the financial and administrative aspects of the Rapol enterprise. He also held approximately 30% to 40% of its stock. *fn3" Another principal Rapol shareholder and a corporate director involved herein is Iraj Safapour (Safapour) a civil engineer primarily responsible for the technical function of Rapol's construction business. *fn4"

 In 1973 or 1974 Rapol placed a bid on a construction project in Iran called the "Gotvand Irrigation Project" (project). In July, 1974 it was awarded one of the contracts for the project and another in December, 1974. *fn5"

 The projects on which Rapol successfully bid involved substantial work. One contract, affecting an area of approximately 18,000 acres, called for the construction of bridges, roads and canals fitted with such features as electrically operated gates and automatic water level control equipment. Safapour testified that the related contract involved the same type of work, but called for canals of different size and included the construction of 130 houses for laborers. When construction of the projects was actually underway, Safapour was responsible for overseeing the work of 1000 laborers and the operation of $ 10,000,000 worth of equipment. *fn6"

 In preparing for construction work, Rapol had to purchase equipment. Along with canal digging machinery, concrete mixers and other pieces of equipment, Safapour and Mortezai-Faird decided upon dump trailers (in addition to those already available) *fn7" for the large amount of gravel and sand which had to be transported.

 About January, 1975 Rapol requested and received information and brochures concerning the needed construction equipment from Amir Entezman (Entezman) of Iran Planing, an Iranian construction equipment broker and agent. *fn8" Iran Planing had acted as agent for Rapol on prior occasions. Safapour and Entezman had known each other since 1966. *fn9" Among the brochures received was one of the Lufkin model TD-27 dump trailer. *fn10"

 Safapour testified that in 1975 he was familiar with dump trailers but had not personally worked with the type of trailer described in the Lufkin brochure. *fn11" He further testified that the TD-27 dump trailer differed from the dump trailers Rapol owned or operated: In the TD-27 model the box, containing material for transportation, and the chassis were one piece which rose together when the attached unit unloaded its cargo. When operating the dump trailers which Rapol had in 1975, the chassis would remain parallel to the ground and only the box rose (by means of a hydraulic lift) when the cargo was unloaded. *fn12"

 Safapour undertook to determine the advantages, if any, of this unique feature in the TD-27 one piece dump trailer. As a result, Safapour decided to purchase trailers with the same mechanisms and operating features present in the Lufkin TD-27 dump trailers. *fn13" He testified that the TD-27 one piece type dump trailer had more strength and stability than the dump trailers Rapol formerly operated. *fn14"

 Early in 1975 Safapour went to California to see certain construction machinery in operation and visited a factory turning out construction equipment. During this visit he met a Mr. White, a representative of Jahn in Los Angeles, and inspected a construction operation which used equipment Rapol was interested in. *fn15"

 At the end of March, 1975 Safapour traveled to New York City and met White again and John Tashiro (Tashiro), Jahn's regional sales manager, *fn16" at the Jahn offices. Safapour testified that at this meeting the discussion included dump trailers Rapol intended to purchase, *fn17" price in particular. Safapour testified Tashiro quoted a price of $ 16,000 to $ 17,000 per unit for the TD-27 one piece dump trailer which he considered high. The discussion then turned to the feasibility of purchasing a unit without the box, the rationale being that such a unit would have less cubic volume and so save shipping costs. The boxes could then be constructed in Iran. *fn18"

 Safapour testified that he did not visit Jahn's offices again but thereafter spoke with Tashiro over the phone. Safapour returned to Iran, a satisfactory price quotation not obtained on the TD-27 dump trailer without the box. *fn19"

 Shortly after Safapour's return to Iran, Rapol received a price quotation from Jahn for trailers Safapour had discussed with Tashiro and White. *fn20" The price quotation, dated April 10, 1975, listed a unit price of $ 12,680 for a "LUFKIN MODEL TD-27 UNDERBODY FRAME..." (without the box). *fn21" After receiving this quotation, Rapol decided to purchase six (6) such Lufkin Model TD-27 underbody frames (without the box) and informed Entezman of Iran Planing of its decision. *fn22"

 Pursuant to Jahn's offer of April 10, 1975, Rapol was required to establish an irrevocable letter of credit for the total payment price of $ 76,080; Rapol proceeded to do so. *fn23" It established on May 17, 1975 a letter of credit with the Bank of Tehran in Jahn's favor; the letter of credit conditioned payment, which had to be stated in the invoice, on "6 Units Lufkin Model TD-27 Underbody frame., as per proforma invoice dated 10TH, April 1975...." *fn24" It also originally conditioned payment on shipment from the United States no later than July 15, 1975, but because of difficulties Lufkin encountered meeting that date, the letter of credit was amended to condition shipment no later than August 15, 1975. *fn25"

 Counsel stipulated at trial that Jahn's commercial invoice (exhibit 10) was presented to the Irving Trust Company and payment was made thereon. The date of this payment was not disclosed at trial. *fn26"

 The frames were shipped from the Port of Baltimore on July 17 or 18, 1975 aboard the El Tanio destined for Bandar Shahpour, Iran. The frames were shipped in two bundles of three frames each. Each bundle measured approximately 28 feet long, 8 feet wide, and 9 feet high and included crates containing miscellaneous equipment for the frames. *fn27"

 Rapol received a notice of the arrival of the frames in the port of Bandar Shahpour on or about September 8, 1975. Mortezai-Faird then forwarded this notice on September 10, 1975 to the Ostir Company, Rapol's agent for clearing the goods through customs. *fn28" In 1975, delays of thirty to forty days from the time goods arrived in Bandar Shahpour and cleared customs was not unusual. A permit clearing the frames from Iranian customs was issued on September 17, 1975. *fn29" The frames were placed in the custom's yard.

 Safapour testified that he next dealt with the frames in the beginning of October, 1975. The frames were to have been shipped directly to the Makbod factory, located in Teheran, where the boxes were to be constructed. However, as Safapour testified, there was a shortage of transportation facilities between Bandar Shahpour and Teheran and storage costs at the custom's yard were mounting. Therefore, the goods were shipped to an intermediate point, the Shustar camp (Shustar), a part of the Gotvand Irrigation project. *fn30" Shustar, located in Khouzestan province, was 200 miles from Bandar Shahpour; Teheran 700 miles from the port. Rapol used local transport to ship the goods by low bed trailer; the frames arrived at Shustar no earlier than October 10, 1975. *fn31"

 When the frames, still packed in two bundles of three frames each, arrived at Shustar they were placed in a storage yard. *fn32" Safapour testified on cross-examination as to the circumstances relating to the frames while they were at Shustar:

 
Q. There (was) nothing preventing you from going up and look at them was there?
 
A. No.
 
Q. There wasn't anything preventing any other Rapol employee from going up and look at them?
 
A. No.
 
Q. The trailers were in a yard of some kind at Shustar?
 
A. Yes.
 
Q. Was that with a fence around it?
 
A. Yes.
 
Q. The yard was entirely under the control of Rapol?
 
A. Yes.
 
Q. And Rapol personnel would have access to the trailer chassis any time they wanted to?
 
A. Yes.
 
Q. Were you able to get any view out of your office window of the trailer chassis or was it just in your car going back or forth?
 
A. From the window or even when I walked out I could see the storage yard. *fn33"
 
Safapour on cross-examination also admitted that he had the opportunity to inspect the frames at Shustar:
 
Q. When you were at Shustar, you said that you saw the trailers bundled up, two bundles of ...

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