## Facts

- Pic-Air, Inc. manufactured faucet handles for T & S Brass & Bronze Works, Inc. under purchase orders.
- To make the handles, Pic-Air took possession of T & S’s tooling and kept it at its facility while producing parts.
- In February 1983, T & S ordered a large quantity of handles to be delivered in four installments.
- After receiving the third installment, T & S notified Pic-Air that a large portion of the handles were scratched.
- T & S demanded that Pic-Air return T & S’s tooling.
- Pic-Air representatives inspected the handles at T & S’s facility.
- During the inspection, T & S offered either (a) to sort the handles at Pic-Air’s expense or (b) to allow Pic-Air’s employees to do the sorting; either way, the sorting costs would be borne by Pic-Air.
- Pic-Air responded that the scratches did not justify rejection of the goods and stated it was not authorizing T & S to sort the handles.
- Pic-Air asked T & S to return the handles that T & S considered defective, but Pic-Air did not concede that any handles were defective and did not offer to cover sorting costs.
- T & S declined to return the handles on those terms.
- Pic-Air later proposed that it would decide which handles were defective and would replace only those it deemed defective.
- The disputed handles were not returned to Pic-Air, and Pic-Air did not return T & S’s tooling.
- T & S sued Pic-Air for conversion of the tooling, and Pic-Air counterclaimed for the contract price of the unpaid shipped installments and for the fourth installment that was never shipped.
- After a bench trial before a magistrate judge (by consent), the court found for T & S on conversion and found for Pic-Air on the unpaid contract price for shipped goods, subject to offsets for defects and sorting costs.

## Issues

1. Under the UCC, did T & S’s failure to return the allegedly defective handles amount to acceptance and waiver of defects that barred damages or an offset against the contract price?
2. Did the trial court properly allow T & S an offset for the value of defective handles and sorting costs while still holding T & S liable for the price of conforming goods shipped?
3. Did Pic-Air’s refusal to return T & S’s tooling after demand support liability for conversion?

## Decision

- The Fourth Circuit affirmed the magistrate judge’s judgment.
- The court rejected Pic-Air’s argument that T & S waived defects or accepted the goods in a way that eliminated UCC remedies merely because T & S did not return the scratched handles.
- The court upheld the award of the contract price to Pic-Air for the shipped installments, while allowing T & S an offset for damages caused by nonconforming goods, including sorting costs.
- The court left intact the judgment for T & S on its conversion claim based on Pic-Air’s continued retention of T & S’s tooling after demand.

## Legal Principles

- A party in possession of another’s personal property (including as a bailee) may be liable for conversion when it wrongfully exercises dominion over the property, including by refusing to return it upon the owner’s demand.
- Under UCC sales principles, a buyer may accept goods and still recover damages for nonconformity; acceptance does not, by itself, eliminate the buyer’s right to a monetary remedy after proper notice of breach.
- The UCC does not impose a general “return the goods or lose the remedy” rule for damage claims; returning goods is associated with rejection or revocation, while damages may be sought even when the buyer retains the goods.
- A buyer who owes the contract price for goods received may assert an offset for proven losses caused by nonconforming goods, including reasonable costs incurred to identify and separate defective units.
- Pre-UCC waiver/acceptance concepts that treat non-return as automatic waiver do not control where the UCC governs and the buyer timely complains of nonconformity.

## Conclusion

The Fourth Circuit affirmed a bench judgment arising from a faucet-handle supply dispute, holding that Pic-Air’s refusal to return customer-owned tooling supported conversion liability and that, under the UCC, T & S did not forfeit its right to damages or an offset for scratched handles and sorting expenses merely because it did not return the disputed goods while the parties disagreed about defect responsibility and costs.


T & S Brass & Bronze Works, Inc. v. Pic-Air, Inc., 790 F.2d 1098 (1986)