Indiana & Michigan Elec. Co. v. Terre Haute Industries, Inc.

• Decision Date: 30 April 1987
• Docket Number: No. 1-882A245,1-882A245
• Citation: 507 N.E.2d 588
• Court: Indiana Appellate Court
• Parties: INDIANA & MICHIGAN ELECTRIC COMPANY and American Electric Power Service Corporation, Appellants, v. TERRE HAUTE INDUSTRIES, INC., and Insurance Company of North America, Appellees.

Page 588

507 N.E.2d 588

INDIANA & MICHIGAN ELECTRIC COMPANY and American Electric Power Service Corporation, Appellants, v. TERRE HAUTE INDUSTRIES, INC., and Insurance Company of North America, Appellees.

No. 1-882A245.

Court of Appeals of Indiana First District.

April 30, 1987.

Rehearing Denied June 12, 1987.

Thomas W. Yoder, C. Erik Chickedantz, Livingston, Dildine, Haynie & Yoder, Fort Wayne, James G. McDonald, Jr., Princeton, for appellants.

Charles R. Nixon, Robert J. Fair, Fair & Nixon, Princeton, Hansford C. Mann, Max E. Goodwin, Mann, Chaney, Johnson, Goodwin & Williams, James O. McDonald, Everett, Everett, McDonald & Ireland, Gus Sacopulos, Sacopulos, Johnson & Hahn, Terre Haute, for appellees.

NEAL, Judge.

STATEMENT OF THE CASE

Appellants, Indiana & Michigan Electric Company (I & M) and American Electric Power Service Corporation (AEPSC), defendants and counterclaimants in trial court, appeal an adverse judgment for actual and punitive damages for breach of contract, rendered by the Gibson Circuit Court without a jury, in favor of appellee Terre Haute Industries, Inc. (THI), plaintiff and counterdefendant in trial court. The trial court further entered judgment in favor of THI on I & M's counterclaim. The trial court previously had entered summary judgment in favor of Insurance Company of North America (ICNA), THI's surety upon its performance bond to I & M, which action is a part of this appeal.

We affirm in part and reverse in part.

STATEMENT OF THE FACTS

The material issues in this appeal are fact sensitive, requiring a detailed statement of facts for their resolution. The evidence most favorable to support the judgment is as follows. I & M, a corporation engaged in the generation and distribution of electric energy, is a wholly-owned subsidiary of American Electric Power (AEP), a holding company which controls numerous other electric utilities. AEPSC On or about March 4, 1977, I & M completed plans and specifications that divided the project into a number of separate contracts, of which the contract between I & M and THI was but one. The contract, which includes all bid documents, plans, specifications, and general conditions, required the contractor to furnish "all specified materials and all necessary supervision, labor, tools and equipment for the installation of electrostatic precipitators, miscellaneous platforms, elevator and stair tower and related work" at the Breed plant. Record, vol II at 377. I & M was required to furnish all material which would be fabricated by other contractors and suppliers. Essentially, it was a labor contract. Bid documents provided for completion of the contract in 21 months, or 441 working days, computed upon a five-day, forty-hour work week. The contract would be let by May 1, 1977, work would commence on May 16, 1977, and steel erection would commence by July 1, 1977. The contract, stating that time was of the essence, and providing for liquidated damage penalties, contained certain completion deadlines as follows:

likewise a wholly-owned subsidiary of AEP, planned and executed the project under discussion here as an agent for I & M, although the contracting party was I & M. The Indiana Air Pollution Control Board (APCB) is a public body authorized to regulate businesses, including utilities, with reference to air pollution. For a number of years prior to 1977, APCB had been exerting pressure upon I & M to install, in its Breed generating plant in Sullivan County, Indiana, an electrostatic precipitator, an apparatus calculated to control air pollution created by coal-fired generators. Eventually, APCB fixed certain deadlines for compliance. Throughout this opinion we will use, for brevity's sake, the designation "I & M," but such designation will include acts of AEPSC unless otherwise stated.

(1) Complete and available for complete checkout by September 17, 1978;

(2) Complete and ready for tie-in by November 16, 1978;

(3) Complete and available for operation with existing system within ten weeks after the start of the tie-in outage.

These completion deadlines were related to the APCB mandate.

The contract contained provisions relieving the contractor from sanctions where delays were caused by strikes, lockouts, fire, unusual delays in transport, unavoidable casualty, and other similar causes beyond the control of the contractor. The contractor was required to absorb the first fifteen days of weather delays, but was excused from penalty for weather-related delays which exceeded that time. Nevertheless, the contractor was required to give written notice of claimed delays and resume work expeditiously.

Bid documents were circulated to THI in March 1977, and on April 18, 1977, THI submitted its bid to I & M for $7,033,733.00. That bid was not accepted by I & M by May 16, 1977, the commencement date, but I & M continued to study the bids. Of course, THI could not commence work prior to the award, but was required by the contract documents to commence work within one week after notice. In the meantime, I & M let a $26,000.00 service order, a contract of sorts, to THI, to commence on June 13 for the assembly of certain hoppers. By June 13, THI began pressing I & M to expedite the award, and the award was eventually granted to THI on July 1, 1977, forty-three working days after May 16, the stated commencement date. Nevertheless, though the completion dates were not changed, THI executed the contract on July 25. Significantly, THI made no objection to the completion dates at that time. On August 31, 1977, THI submitted a revised schedule, reflecting the late start, that would move the completion date back two or three months, but this revised schedule was not accepted by I & M. There is evidence that a custom exists in the industry which permits the shifting of the completion date to reflect a late award. By the end of September 1977, THI served notice on I & M that it would not be responsible for delay caused by the late award and the late start. Though I & M never In August 1977, THI was further delayed fifteen days in the performance of the contract by the failure of Bay-Con, the foundation contractor, to complete its work. By November and December 1977, I & M, complaining of THI's failure to maintain schedule, commenced making demands upon THI to mount an accelerated schedule. Further delay was caused by inclement weather; the severe and prolonged winter of 1977-78 was one of the worst on record. Temperatures tumbled to sub-zero readings and deep snow accumulated. Laborers refused to work on the high steel complex because of the temperatures, precipitation, and slickness of the girders. Because of union pressure, THI could not discipline its employees for their refusal to work in the inclement weather. Though other crafts persevered and remained on the job when THI did not, those crafts worked in more sheltered areas and were not as exposed to the biting cold. THI claims that under the contract it was not chargeable with delays totaling 70.1 days caused by the inclement weather.

really agreed to THI's position, it seemingly acquiesced.

As a result of a project agreement between I & M and certain unions, THI's contract required that it employ only union craftsmen. Though the project agreement prohibited work stoppages, walk-offs and slow-downs, petty jealousies causing delays did arise among the crafts. THI presented evidence that it lost 12.3 days as a result of such activities and claimed it was entitled to credit therefor.

THI presented evidence that the steel and material furnished by other I & M contractors and suppliers contained fabrication errors, such as tolerances that were changed from one-fourth inch to one-eighth inch, columns that were one-half inch too short, and bolt holes that would not align. THI was required to check and correct these errors, double handle the steel, and the like, which consumed time and expense. THI claims it lost 36.3 days because of these errors. It demanded reimbursement for such time and expense, but I & M refused to pay.

The bitterly disputed causes of these delays is the fundamental issue in this case. I & M claims that the cause of much, if not all, of the delays was the fault of THI alone. It argues that THI signed the contract with knowledge of the completion dates, without protesting the late award, and was bound by the contract. Its witnesses testified that there always exists a certain amount of misfabrication and other errors in any large job involving thousands of parts and hundreds of thousands of bolt holes. Reaming and fitting is to be expected. It claims that 36.3 days' delay claimed by THI is greatly exaggerated, as only four to six days would be sufficient to correct those matters. It charges that delay was caused by THI's not having a crane for six weeks. While not disputing labor problems, I & M claims that the causes of them were THI's failure to organize the work activity, failure to supervise the work, failure to provide adequate tools, on-site drunkenness by THI's management, and blatant acts of favoritism. Such incompetence caused low morale among the crafts and impeded productivity. I & M claims that weather delays were also greatly exaggerated because there were many days that men could have worked, but did not. I & M claims THI failed to plan and organize its work in order to provide ground assembly in sheltered areas and inside work on inclement days. I & M notes that other crafts worked in the same area after THI's personnel went home. It concludes that only twenty days' extension should be allowed for delay due to inclement weather. Finally, I & M claims that THI utilized insufficient scaffolding.

By the end of 1977, THI began to claim extensions of time for delays which allegedly occurred beyond its control. There is no dispute between the parties that by January 1978, the project was seriously behind schedule. However, THI claims that, at that time, it was forty...