ENVIRONMENTAL ELEMENTS v. MAYER POLLOCK STEEL

• Decision Date: 21 January 1980
• Docket Number: Civ. No. T-77-1669.
• Citation: 497 F. Supp. 58
• Parties: ENVIRONMENTAL ELEMENTS CORPORATION v. MAYER POLLOCK STEEL CORPORATION.
• Court: U.S. District Court — District of Maryland

497 F. Supp. 58

ENVIRONMENTAL ELEMENTS CORPORATION v. MAYER POLLOCK STEEL CORPORATION.

Civ. No. T-77-1669.

United States District Court, D. Maryland.

January 21, 1980.

David F. Albright, Christopher R. West and Semmes, Bowen & Semmes, Baltimore, Md., for plaintiff.

William H. Holden, Jr., Donn Weinberg and Weinberg & Green, Baltimore, Md., for defendant.

THOMSEN, Senior District Judge.

This diversity action, tried before the court without a jury, arises out of a subcontract between Environmental Elements Corporation (plaintiff or EEC), a subsidiary of Koppers Company, and Mayer Pollock Steel Corporation (defendant or MP), in which defendant agreed to purchase the material for and to fabricate and paint four large bayline columns, to be installed by plaintiff in a structure known as a "precipitator" which plaintiff had contracted to erect and did erect for American Electric Power Company (AEP) in West Virginia. The columns contained 96 flange welds and 60 web welds. The welding was done by defendant at its plant in Pennsylvania; the columns were accepted there by plaintiff and were sent to the work site in West Virginia; however, after the columns were installed in the precipitator it was discovered that all or almost all of the 156 welds were defective, and that the welding would have to be redone in the precipitator, which was a costly operation. Plaintiff seeks to recover from defendant the cost of examining the welds and rewelding the defective welds.

Diversity jurisdiction exists and is not disputed. Plaintiff's principal office is in Maryland; defendant's plant is in Pennsylvania. Those states have enacted the Uniform Commercial Code (UCC), as has West Virginia.

Plaintiff alleged, in the first count of its complaint, that defendant breached the subcontract in question in several ways:

(1) that defendant's welders were not qualified for unlimited thickness welding, as required by the contract;

(2) that defendant failed to fabricate the bayline columns in accordance with the drawings;

(3) that defendant's welding was defective in workmanship;

(4) that defendant's welding failed to comply with the practices set forth by the American Welding Society in its Structural Welding Code (SWC), as required by the contract; and

(5) that defendant failed to comply with its responsibility to perform appropriate quality control.

Defendant denied those allegations, but before final argument on the law the court heard argument on the facts and found that plaintiff had proved all the alleged breaches set out above, except (1).¹ Defendant, therefore, has relied heavily upon its contentions:

(A) that plaintiff itself had responsibilities under SWC to exercise quality control over the welding, which plaintiff failed to do; and

(B) that plaintiff failed to give notice of breach to defendant within a reasonable time after it should have discovered such breach or breaches.

Defendant argues that the failures on plaintiff's part relieve defendant from any liability under the contract.

Plaintiff's second count alleged that on October 21, 1976, after the discovery that the welds would have to be repaired, defendant entered into an agreement providing that defendant would pay for the entire cost of rewelding defendant's welds on the four bayline columns, all of which had been installed in the precipitator at the job site in West Virginia; that pursuant to this agreement plaintiff performed the necessary rewelding of the welds, and billed defendant for the costs thereof, which defendant refused to pay.

Defendant denies that the agreement alleged in the second count was made. Defendant concedes, however, that after the defects were discovered and reported by plaintiff to defendant, but before the repair work was begun, defendant's vice-president (Raker) had discussed the matter with plaintiff's purchasing officer and other representatives of plaintiff in Baltimore, and had offered to participate, to an unspecified extent, in the costs of replacing the MP welds which required replacement, but defendant argues that no amount was ever agreed upon.

At the trial each side called witnesses and offered depositions and exhibits, some many pages in length.

At the conclusion of the evidence each side presented proposed findings of fact. In accordance with a practice of this court, each side marked its opponent's proposed findings: blue for those findings or portions thereof which are admitted, red for those which are disputed, and yellow for those which are conceded to be true but considered immaterial. After full argument on the facts the court wrote "found," "not found" or "found as modified" on each proposed finding, and filed with the clerk as part of the record in this case the proposed findings and the court's ruling on each. Thereafter, both sides filed briefs, and oral argument on the law as applied to the facts has been heard.

Because of the detailed findings, it is not necessary to set out the facts at length in this opinion. It should be noted that this is not a tort action for negligence, but is an action in contract based upon (I) the original subcontract between the parties hereto, and (II) the alleged agreement between plaintiff's representatives and Raker, defendant's vice president, at the meeting in Baltimore on October 21, 1976.

I

As stated above, in the third and fourth paragraphs of this opinion, the facts found by the court support nos. (2), (3), (4) and (5) of the allegations of breach of contract contained in plaintiff's first count.

(a)

The first defense advanced by defendant thereto is that "plaintiff failed to give notice of breach to defendant within a reasonable time after it plaintiff should have discovered such breach and is therefore barred from any remedy." This defense is based upon UCC § 2-607(3)(a). That subsection provides:

(3) Where a tender has been accepted

(a) The buyer must within a reasonable time after he discovers or should have discovered any breach notify the seller of breach or be barred from any remedy; ...

Section 1-204(2) states: "What is a reasonable time for taking any action depends on the nature, purpose and circumstances of such action."

Whether notice of breach has been given within a reasonable time is ordinarily a question of fact based upon all the surrounding circumstances. Lynx, Inc. v. Ordnance Products, Inc., 273 Md. 1, 327 A.2d 502 (1974); Smith v. Butler, 19 Md.App. 467, 311 A.2d 813 (1973).² Where the facts are undisputed and but one inference can be drawn therefrom as to the reasonableness of the notice, the question is one of law. Id.

The evidence shows that in mid-December 1975, after receiving an inspection release form from plaintiff, defendant shipped the bayline columns to plaintiff at the job site (the AEP plant then being constructed in West Virginia), where they were accepted by plaintiff. The work on the AEP plant had not then progressed to a point where the bayline columns were to be installed in the precipitator structure; such installation began in the early spring of 1976. In July 1976, for some reason not shown by the evidence in this case, plaintiff had ultrasonic testing performed at the job site on some welds made by subcontractors other than defendant, which revealed that some of the tested welds were defective in quality.

Plaintiff first learned of problems with defendant's welds in September 1976, and on September 30 informed defendant that AEP claimed that there were defects in defendant's welding work. The court finds and concludes that notice of the claimed defects was given within a reasonable time after plaintiff discovered the possibility of such defects.

Defendant argues, however, that plaintiff should have discovered the breach at or near the time of acceptance, and that the delay in notification was unreasonable and bars plaintiff's recovery under UCC § 2-607(3)(a). The evidence shows that Lerp, an employee of defendant, visually inspected the finished columns at defendant's plant before they were released for shipment to West Virginia. At that time only the external surfaces of the welds were visible, and they were covered by a layer of paint. The contract did not require plaintiff to engage in any testing (destructive or non-destructive) of the welds before or after acceptance. The witnesses for both sides agreed that, after a weld has been completed, it is impossible to tell through a visual inspection whether back-gouging³ required by the contract has been done. Defendant's failure adequately to perform the root back-gouging was the major cause of defects in its welds. Whether plaintiff herein "should have discovered" the defects in the welds at or around the time of acceptance (December 1975) turns on the question whether plaintiff had a legal duty to test for and discover any latent defects in the welds not discoverable by a visual inspection.⁴

Most of the cases cited by defendant on this point dealt with facts quite different from the facts of this case because either (a) the defects were patent, or (b) where latent, the plaintiffs had delayed notice to the defendants for an unreasonable period after they had discovered the defects. The closest case on the facts and law cited or found is Larrance Tank Corporation v. Burrough, 476 P.2d 346 (Okl.1970), which dealt with defective welding not observable by the naked eye. The welding was in a gasoline tank which had been buried under several feet of dirt and, like the welding defect in our case, was not quickly discoverable. Notice to the defendant therein was given by the plaintiff promptly after discovery, fifteen months after acceptance. The court relied on UCC § 1-204(2) (quoted above herein), and stated that the defect "was not one that was quickly discoverable," and that it could not say as a matter of law that plaintiff's remedy was barred by § 2-607(3) because of plaintiff's failure to discover the defect earlier.

In the case at bar the defects in the...