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Blesi-Evans Co. v. Western Mechanical Services

April 13, 2010

BLESI-EVANS COMPANY, PLAINTIFF,
v.
WESTERN MECHANICAL SERVICE, INC., DEFENDANT.



The opinion of the court was delivered by: Karen E. Schreier Chief Judge

ORDER DENYING MOTIONS FOR SUMMARY JUDGMENT

Plaintiff, Blesi-Evans Company (Blesi), brought this action to recover amounts due under a contract with defendant, Western Mechanical Services, Inc. (Western). Blesi moves for summary judgment on its breach of contract claim. Western has not responded to Blesi's motion, but moves for summary judgment on its defenses that Blesi breached the parties' contract and that Western is entitled to reduce Blesi's claim by the amount of the expenses Western incurred as a result of Blesi's breach. Blesi opposes Western's motion.

BACKGROUND

The facts, as relevant to the pending motions,*fn1 are as follows: in the spring of 2006, Western entered into a contract with the state of South Dakota to replace the boilers on the South Dakota School of Mines and Technology (SDSM&T) campus. Skyline Engineering, LLC, acted as an agent for the state of South Dakota on this job. Under this contract, Western agreed to pay $500 per day in liquidated damages if the project was not substantially completed by October 13, 2006. Docket 58-6 at 4, 7, 14.

In February and March of 2006, Western solicited bids from subcontractors, including Blesi, for the boiler project. On March 14, 2006, Blesi submitted a proposal to supply one Superior Boiler Works Model W7-5-2500-S15-WBCF-GA2 Mohican Warrior, 4-pass wetback, 500 HP, Scotch Marine, steam boiler, along with freight costs, start-up, and training for $125,500. Docket 61-1 at 1-3. On March 28, 2006, Mike Guyse, Senior Application Engineer at Blesi, sent a fax to Western saying, "I am checking up to see what is happening with the School of Mines boiler project. Do you have your order yet? . . . PS: Deliveries are now into July for orders released this week. I also need to get this boiler on order to avoid an upcoming price increase." Id. at 4.

On April 6, 2006, Western faxed a purchase order to Blesi ordering one "Superior Boiler Works Model W7-5-2500-S15-WBCF-GA2 Mohican Warrior, 4-pass wetback, 500 HP, Scotch Marine, steam boiler" with the notation, "[p]er quote attached dated March 14, 2006." Docket 58-5 at 17. Western listed the price as $125,500. Id. Western attached a copy of the bid submitted by Blesi on March 14, 2006, to the purchase order. Docket 58-5 at 18-20. Paul Jody Iseminger, president of Western, testified that Western accepted Blesi's proposal to sell the Superior boiler with the purchase order. Deposition of Paul Jody Iseminger (Iseminger Dep.), Docket 58-5 at 25-26.

Blesi ordered the boiler from the manufacturer, Superior Boiler Works, Inc. (Superior), on or about March 31, 2006, and requested that Superior release the boiler for production on April 6, 2006. Dockets 61-2 & 61-4. The owner and president of Blesi, Mark Evans, knew the boiler would be used to heat the SDSM&T campus. Deposition of Mark Evans (Evans Dep.), Docket 61-30 at 12.

The present dispute arises out of a delay in the production and delivery of the boiler. The parties dispute whether they agreed on a delivery date for the boiler. It is undisputed that neither Blesi's March 14, 2006, bid nor Western's purchase order contained an expected shipment or delivery date. Western's president testified that Blesi's proposal did not contain a proposed date of delivery and that Blesi had not confirmed a delivery date in writing at the time Western sent its purchase order. Iseminger Dep. at 26-27. Rick Gienapp, Western's project manager, testified that Western sent several of its subcontractors a contract form providing that the work must be completed by October 13, 2006. Deposition of Rick Gienapp (Gienapp Dep.), Docket 58-4 at 66; see also Docket 58-4 at 12 (contract between Western and Checker Electric, Inc.). Western did not send this subcontract form to Blesi. Gienapp Dep. at 67. An undated Superior document indicates that the boiler should be shipped to the SDSM&T campus the week of September 30, 2006. Docket 61-31 at 4.

After Blesi ordered the boiler from Superior, a series of emails, faxes, and letters regarding the shipment and delivery dates for the boiler began. Blesi contacted Superior on April 28, 2006, to get information on the delivery date of the boiler. Docket 61-5. Guyse testified that he checked with Superior to make sure there was a firm delivery date for the boiler on this day. Deposition of David Michael Guyse (Guyse Dep), Docket 61-29 at 8.

On May 1, 2006, Blesi sent a fax to Western saying, "I have some VERY bad news; delivery of your boiler has been pushed back to 9/23/06. . . . Therefore, if you need to cancel this order I will regrettably understand." Docket 61-6 (emphasis in original). Blesi had confirmed the September 23, 2006, delivery date with Superior. Guyse Dep. at 10. Also on May 1, 2006, Western sent a letter to Skyline informing Skyline that the shipment date of the boiler had been pushed out until "approximately September 23, 2006." Docket 58-6 at 16. Western explained that it had "contacted various boiler manufacturers and they are all experiencing delivery times of the same magnitude." Id. Western requested an extension of the completion date for the SDSM&T project and relief from the liquidated damages penalty of the contract, stating, "IF the boiler arrives around September 23rd as estimated, that only leaves us about 2 1/2 weeks to set the equipment, connect it and do the factory start up." Id.

On May 4, 2006, Skyline denied Western's requests for an extension and relief from the liquidated damages provision of the contract. Skyline stated, "the State expects a fully functional boiler to be installed and online at the physical plant by the scheduled completion date of October 13, 2006. . . . If reasonable assurance of an on time project delivery cannot be made, the State will pursue damages." Docket 61-7. That day, Western wrote a letter to Blesi informing Blesi that Skyline and the State Engineer were adamant that the project be completed by October 13, 2006. Western requested, p]lease contact the factory and see if there is anything we can do to expedite this. . . . [T]he State Engineer is asking for reassurance that we can complete this project on time. We need an immediate response from you on a locked in delivery date that we can forward to Skyline and the State Engineers office before they will allow us to start removal of the existing boiler.

Docket 61-8. Western also reminded Blesi that the $500 per day liquidated damages would add up quickly. Blesi, in turn, informed Superior that Western would face liquidated damages if the boiler was delivered after the scheduled delivery date. Evans Dep. at 38. Superior indicated that it firmly believed it would meet the scheduled delivery date and would try to improve on it. Docket 61-9. Western asserts that Blesi passed on Superior's statement to Western, but Blesi asserts that nothing in the record documents such a correspondence.

On May 5, 2006, Western informed Skyline that Western had been in contact with Blesi about the delivery date of the boiler. Western reported that boiler delivery dates had been extended from 16-20 weeks to 24 or more weeks. Western indicated that it had requested that Superior forward a definite delivery date to Western. Western also stated that "[p]roviding the factory can supply the boiler to us prior to September 23rd, as stated, we guarantee we will be able to have the equipment up and functioning by the October 13th completion date." Docket 58-4 at 10.

On May 15, 2006, Western faxed a letter to Skyline stating that Western would provide, furnish, and maintain a temporary boiler at its own cost if the temperatures required and the boiler did not arrive on schedule. Docket 61-11. Western asserts that Skyline demanded that Western agree to provide a temporary boiler if the boiler did not arrive on time. Blesi disputes that Skyline ever demanded that Western provide a temporary boiler.

On July 25, 2006, Blesi informed Western that "[s]hipment of your boiler for the School of Mines project is still 9/28/06" and indicated that Blesi hoped the date would be even earlier. Docket 61-11.

On September 14, 2006, Blesi corresponded with Superior about the boiler. Superior stated that it could not remember a guarantee date for shipment of the boiler and would get back to Blesi when its engineering department knew when it would begin the cutting phase for the boiler. Docket 61-12. On September 15, 2006, Blesi informed Western that the boiler was scheduled to be delivered on November 3, 2006. Blesi acknowledged, "[t]his is obviously not acceptable and Superior Boiler Works has been working the past several days to see what they can do to improve this delivery date." Docket 61-13. On September 18, 2006, apparently after discussions between Blesi and Western, Blesi informed Superior that Western was facing expenses of $6,000 per month to rent a temporary boiler, $3,000 in freight charges, and $3,000 to install the temporary boiler. Blesi indicated that these expenses were in lieu of the $500 per day fine Western would otherwise face. Docket 61-14.

On October 5, 2006, Skyline wrote a letter to Western stating that the contract for the SDSM&T project provided that the work would be substantially completed by October 13, 2006, and there would be liquidated damages in the amount of $500 per calendar day for delay in completion of the work. Skyline referred to Western's May 15, 2006, letter indicating that Western would furnish a temporary boiler if the boiler did not arrive on schedule and stated, "[t]his letter serves as formal notification that a temporary boiler, equal in size and burner efficiency to the project boiler shall be installed and maintained at your cost until the new boiler has been installed and is in operational condition." Docket 61-15. On October 10, 2006, Western notified Skyline that the temporary boiler would arrive on October 13, 2006, and would be operational, if needed, by October 24, 2006. Docket 61-17. The temporary boiler was delivered to the SDSM&T campus on October 14, 2006. Docket 64-1.

On October 18, 2006, Blesi informed Superior that Western had to rent a temporary boiler because of Superior's delays. Blesi requested that Superior write a letter explaining and apologizing for the delays. Docket 61-18. On October 20, 2006, Blesi again contacted Superior and stated that Blesi would not continue to lie and cover for Superior. Blesi asked how many other boiler orders came in after Blesi's but were constructed ...


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