Amoco Oil Co. v. Capitol Indem. Corp.
| Decision Date | 28 January 1980 |
| Docket Number | No. 77-773,77-773 |
| Citation | 291 N.W.2d 883,95 Wis.2d 530 |
| Parties | AMOCO OIL COMPANY, a Maryland Corporation, Plaintiff-Appellant and Cross-Respondent, v. CAPITOL INDEMNITY CORPORATION, Defendant-Respondent and Cross-Appellant andCross-Respondent, Staley & Lawrenz, Inc., Defendant-Respondent, Black Rock Contracting Corporation and Craig D. Lawrenz, Defendants, John R. Madden, Defendant-Respondent and Cross-Appellant. |
| Court | Wisconsin Court of Appeals |
Ronald L. Wallenfang (argued) and W. Stuart Parsons and Quarles & Brady, Milwaukee, on brief, for plaintiff-appellant and cross-respondent Amoco Oil Co.
Bruce Gillman (argued) and Tomlinson, Gillman & Travers, S. C., Madison, on brief, for defendant-respondent Capitol Indem. Corp.
Thomas J. Basting (argued) and Brennan, Steil, Ryan, Basting & MacDougall, S. C., Janesville, on brief, for defendant-respondent and cross-appellant John R. Madden.
Before BABLITCH and DYKMAN, JJ., and SACHTJEN, Reserve Judge.
This is a contract action commenced by the plaintiff (Amoco) to recover the balance due it for 1,067.47 tons of hot asphalt delivered to the defendant-contractors for purposes of a state highway project. Only 693.4 tons were actually used on this project. The remaining asphalt was diverted to two other public projects and numerous private ones. The contract obligated Amoco to provide only up to 740 tons for the specified state highway project. The essence of this dispute is who is liable for payment of the asphalt delivered but not actually used for the project specified in the contract.
The defendants consist of the contractor who agreed to purchase the asphalt (Staley & Lawrenz, Inc.), its surety on the Wisconsin state highway project (Capitol Indemnity Corp.), a subcontractor on the Wisconsin project (Black Rock Contracting Corp.), and the subcontractor's individual officers (Craig Lawrenz and John Madden).
In June of 1975, Amoco and Staley & Lawrenz entered into an agreement under which Amoco agreed to supply up to 740 tons of asphalt to be used for the paving of Wisconsin State Highway 11 near Orfordville. The contract amount was based on an estimate made by a trained Amoco asphalt sales engineer of the quantity of asphalt needed for the project. The contract specified that the asphalt was to be used for project 1701-5-71, the Highway 11 paving job.
Staley & Lawrenz was awarded the bid for project 1701-5-71 in the spring of 1975. It had never before worked on an asphalt blacktopping project but one of its officers, Craig Lawrenz, had discussed forming a contracting corporation that did such work with John Madden prior to the submission of the bid. Lawrenz and Madden had not incorporated this separate corporation, to be known as Black Rock Contracting Corp. (Black Rock), at the time of the bid.
Staley & Lawrenz submitted the bid with the intent to sublet the entire project to Black Rock as soon as it was incorporated. On April 28, 1975, Madden and Lawrenz, as individuals, signed an indemnity agreement under which they assumed personal liability for any losses arising out of the Orfordville project on the part of Staley & Lawrenz.
After Black Rock was incorporated on May 14, 1975, Staley & Lawrenz learned that, under the terms of the state contract it could not subcontract the entire job as planned. Consequently it sublet two-thirds of the project to Black Rock and the R. T. Madden Company, Inc. Staley & Lawrenz agreed to assume liability for the remaining third, which consisted of the cost of purchasing the liquid asphalt for the job.
As required by sec. 289.14(1), Stats., which provides that a prime contractor must furnish a performance bond in order to obtain a public works contract, Staley & Lawrenz obtained such a bond in the amount of $178,848 from Capitol on May 3, 1975. The bond contract provided:
The condition of this obligation is such that if the said bounden principal shall in all things perform all the terms and conditions of the within and foregoing contract and applicable specifications, to be by such principal performed, and shall make all payments as therein required, then this obligation is void; otherwise it shall be and remain in full force and virtue.
Staley & Lawrenz hired Indianhead Truck Line Inc. (Indianhead) to haul the asphalt from the Amoco refinery in Whiting, Indiana, to a central batch plant then owned and operated by Black Rock near Orfordville. Forty-three truckloads of asphalt were delivered between July 29, 1975 and November 17, 1975. Each delivery was initiated by Charles Meyers, superintendent of the Black Rock plant. Meyers placed orders for the asphalt through Indianhead, which then made shipping arrangements with Amoco. All bills of lading for the shipments of asphalt specifically refer to the Orfordville Highway 11 project.
Undisputed records of Staley & Lawrenz show that of the 1,067.47 tons of asphalt delivered, the Orfordville project consumed only 693.4 tons. A public works project in South Beloit, Illinois, used 192 tons of the asphalt while 51.86 tons were used on a Village of Albany public works job and the remaining 130.21 tons were dispersed among various private jobs. 1 The South Beloit public works project was also bonded by Capitol pursuant to Ill.Rev.Stats. ch. 29, sec. 15.
Amoco claims that it first learned of the discrepancy between the amount it delivered and the amount actually used in the Orfordville project in a January 15, 1976 letter from Capitol. 2 Prior to that time, Amoco kept track of the amount of asphalt shipped to each customer during the preceding week by means of a weekly "lifting" report. This report did not, however, list the estimated requirements for each job for which asphalt was supplied. Consequently, there was no way of determining from these reports whether a given customer's orders were exceeding its predetermined needs.
Lawrence Kennard, Amoco's asphalt sales engineer for Wisconsin at the time the contract was made, was transferred and replaced by Donald G. Collins in early September, 1975. Kennard testified that he never personally spoke with Lawrenz about any overrun of asphalt; that the normal deviation between estimated and actual asphalt usage was between zero and ten percent if there were no construction change orders; that he did not know why he neither noticed nor questioned any excess shipment of asphalt which would have indicated a diversion; and that the normal Amoco practice was to have a specific sales agreement for a specific state highway project.
Collins testified that he first noticed Staley & Lawrenz from an Amoco credit report which showed that the contracting firm was behind in its payments. As of August 31, 1975, it owed $50,507 to Amoco. Collins said that Kennard never told him of any potential diversion problem with Staley & Lawrenz before he left. Collins attempted to contact Lawrenz about the overdue bill in late September, 1975, but was unsuccessful. Staley & Lawrenz paid Amoco $27,551.21 on September 3, 1975, but Amoco's credit report for September showed that it still owed $45,006 to Amoco.
Amoco claims that it first learned of the use of its asphalt in the South Beloit project in April, 1976, when it received a letter from a Beloit engineering firm informing it of the performance bond executed by Capitol for the South Beloit project. It promptly made a claim against Capitol, under both the Orfordville and South Beloit job bonds for all the asphalt provided for both the Orfordville and South Beloit projects.
Capitol refused this claim but did not attempt to negotiate a settlement with Amoco in March, 1976, for the principal sum due for the asphalt used on the Orfordville project under the Orfordville bond. The settlement offer was rejected.
Amoco brought a collection action on December 7, 1976, to recover the price for all asphalt furnished to Staley & Lawrenz. It named Capitol, Staley & Lawrenz, Black Rock, Craig D. Lawrenz, John R. Madden and Charles H. Meyers as defendants. Meyers, who placed the asphalt orders on behalf of Black Rock, was later dismissed by consent of the parties as a defendant. Capitol cross-complained against Lawrenz and Madden on the basis of the April 28, 1975 indemnity agreement they entered into to save Staley & Lawrenz harmless from any loss arising out of the Orfordville project. Capitol sought to recover, under a subrogation theory, any judgment it would have to pay Amoco for the balance due for the asphalt used in the Orfordville project.
A trial to the court was held in the Rock County Court on October 3, 1977. On February 27, 1978, the trial court entered a written decision determining that Amoco could recover a judgment against Capitol only for the unpaid price of the asphalt actually used on the Orfordville project in the amount of $22,928.21, together with interest and costs in the amount of $2,408.99; that Amoco could not recover from Capitol for any of the asphalt diverted to other work, including the South Beloit project; and that Capitol could recover from Madden for the amount of its loss to Amoco under the April 28, 1975 indemnity agreement signed by Lawrenz and Madden. The trial court dismissed Amoco's cause of action against Madden and Black Rock.
Amoco appeals from that portion of the judgment entered on April 11, 1978, which refused its recovery against Capitol for the price of the asphalt diverted from the Orfordville project. Capitol cross-appeals from the award of prejudgment interest on the amount awarded for the nondiverted asphalt. Madden appeals from that part of the judgment granting Capitol's cross-claim.
Each party's appeal raises several distinct issues. We will first discuss those issues peculiar to the Amoco appeal and then subsequently address those of Capitol and Madden.
The trial court held that materials furnished by a...
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