Kokomo Tube Co. v. Dayton Equipment Services Co.

• Decision Date: 18 August 1997
• Docket Number: No. 96-2993,96-2993
• Citation: 123 F.3d 616
• Parties: KOKOMO TUBE COMPANY, a unit of Ultra-Cast, Incorporated, Plaintiff-Appellant, v. DAYTON EQUIPMENT SERVICES COMPANY, Defendant-Appellee. DAYTON EQUIPMENT SERVICES COMPANY, Plaintiff-Appellee, v. TRIPLE S HOLDINGS, INCORPORATED, Defendant-Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 616

123 F.3d 616

KOKOMO TUBE COMPANY, a unit of Ultra-Cast, Incorporated, Plaintiff-Appellant, v. DAYTON EQUIPMENT SERVICES COMPANY, Defendant-Appellee.

DAYTON EQUIPMENT SERVICES COMPANY, Plaintiff-Appellee, v. TRIPLE S HOLDINGS, INCORPORATED, Defendant-Appellant.

No. 96-2993.

United States Court of Appeals Seventh Circuit.

Argued Feb. 27, 1997.

Decided Aug. 18, 1997.

Jeffrey D. Spilman, Detroit, MI, for Plaintiff-Appellant.

Robert J. Palmer (argued), E. Spencer Walton, Jr., May, Oberfell & Lorber, South Bend, IN, for Defendant-Appellant.

Timothy W. Woods (argued), Thomas F. Lewis, Jr., Jones, Obenchain, Ford, Pankow, Lewis & Woods, South Bend, IN, for Defendant-Appellee.

Before BAUER, WOOD, Jr., and ROVNER, Circuit Judges.

BAUER, Circuit Judge.

Claiming consequential damages stemming from a static cast line not being installed in time for its factory's open house, Kokomo Tube Company brought a breach of contract action against the contractor for the job, Dayton Equipment Services Company. Dayton was not paid all that it charged Kokomo Tube for the project, so it, in turn, filed a counterclaim alleging breach of contract by Kokomo Tube. Dayton had also recorded a mechanic's lien on the property where Kokomo Tube is located when it became clear that Kokomo Tube would not be paying the balance it owed. Dayton brought an action against Triple S, the owner of the property, to foreclose on the mechanic's lien. The district court consolidated the cases. On December 4, 1995, the court entered judgment for Dayton and against Kokomo Tube in the sum of $112,606.65, plus attorneys' fees in an amount to be determined later. The district court also concluded that the judgment constituted a first lien on the property where Kokomo Tube is located and that Dayton was entitled to have the lien foreclosed against Triple S so that the property could be sold in satisfaction of Dayton's judgment. Kokomo Tube and Triple S appeal, bringing with them a bevy of contentions. We disagree with all of them and affirm.

Background

In 1991, the Spilman family (Jeff, his father, and his uncle Gilbert) acquired the Kokomo Tube Company, a foundry located in Peru, Indiana. Kokomo Tube manufactures stainless steel centrifugally-cast tubing assemblies and static cast fittings. On January 16, 1992, Kokomo Tube representatives met with a Dayton representative to discuss Dayton's installation of a static cast line in the Kokomo Tube plant. Jeff and Gilbert Spilman, along with project consultant Gerry Scott, executive vice president Gene Huskins, maintenance manager Tim Gehle, and foundry manager Jim Aaron represented Kokomo Tube at the meeting. Craig Ellis represented Dayton.

The parties agreed that Dayton would acquire and install used equipment. Kokomo Tube already had some of the necessary parts, and Ellis stated that Dayton could get some other used equipment from Texas. Jeff Spilman stated that Kokomo Tube wanted the line installed in time for its open house on March 18, 1992. He also asked that Dayton hand over weekly invoices so that Kokomo Tube could track Dayton's progress and expenditures. Ellis said that he thought Dayton could complete the project by a week before the open house. When asked, the attendees' memories diverged over the cost of installing the line. Their recollections ranged from $40,000 to $100,000.

After the meeting, Ellis went back to Dayton's offices and composed an offer letter, dated January 22, 1992. The letter stated:

Pursuant to our meeting on January 16, 1992, concerning your Foundry No Bake Project, Dayton Equipment Services Company is pleased to provide the following proposal and scope of work to be performed as listed below.

1. Lay out and detail of the entire molding system and operation

2. The site requirements for air, water, water discharge and electrical service

3. Sand reclamation installation

4. Mixer, sand heater, silo installation

5. Mold line equipment installation

6. System interlock and debug

It is estimated that 1,816 man hours will be required to perform the above listed work. With a project crew of six men, this work could be completed within an eight working week time frame. As discussed, Dayton Equipment Services Company would provide four men and Kokomo Tube would provide two men. The cost of labor provided by Dayton Equipment Services would be $7,021.33 per week. This price includes labor cost, living expenses, travel and truck expenses. The crew provided by Dayton Equipment Services Company would be experienced in this type of installation and all efforts would be made to shorten the projected time frame. If Kokomo Tube would provide four men on this project, this would be a crew of eight men or four men for a two shift turn per day, [sic] It is estimated that this would allow for project completion in four weeks. This would equate a [sic] cost of $42,128.00 for Dayton Equipment Services' labor. Costs could be further reduced by performing as much fabrication work and machine repair as possible in our shop rather than on the job site. This would reduce travel and living expenses. Please note that the personnel provided by Kokomo Tube would have to be experienced to some degree in equipment installation, welding, pipe fitting or electrical runs. Most importantly they would need to be able to follow direction.

Work can be scheduled immediately on the reclaim system and mold line conveying system. Layout and detail of the system can be done concurrently. Delays in completion could be experienced by equipment delivery which could very likely make a March 11, 1992 start up unlikely. Dayton Equipment Services will aid and coordinate with Kokomo Tube to ensure the shortest possible project time frame.

It is understood that this proposal does not include any material. We will use whatever is available at your facility. We can use used beams, pipe, electrical apparatus, etc [sic] provided it is in good condition with no sacrifice to the quality of the installation. New material will be used where absolutely necessary. Such material can be provided by us. All material provided by us to Kokomo Tube will be charged at our cost plus 15% F.O.B. Dayton. Invoices of purchased material will be made available for your review.

Our terms for this project are progressive payments on a weekly basis, payable upon receipt of invoice. The invoice will be coupled with a job progression report signed off by your representative.

This proposal is good for sixty days.

I would like to thank all of you for your courtesy shown me during my visit to your facility and for allowing us to quote this work. We look forward to working with you. If you have any questions concerning this proposal do not hesitate to call.

After receiving the letter, Jeff Spilman called Ellis to remind him of how important it was that the project be completed by the date of the open house, March 18, 1992. On January 31, 1992, Kokomo Tube accepted Dayton's offer in its purchase order, which stated: "Time and materials as proposed. All material purchased to be approved in advance by Kokomo Tube Company."

Throughout January, Kokomo Tube had not decided whether the static cast line's conveyance system would be powered by gravity or electricity. Kokomo Tube did not decide to use electricity until the first week of February. Additional work was required in order to have the system run by electricity. As evidenced by a purchase order dated February 27, 1992, Kokomo Tube awarded the extra work to Dayton via a separate contract. Larry Trout, who worked for Dayton, took over the job of managing the project after Kokomo Tube's original consultant, Gerry Scott, left his job. Trout understood that Kokomo Tube was supposed to do the purchasing for the electrical project. Trout submitted a request to purchase controls to Tim Gehle, but by February 27, the controls had still not been ordered. On February 28, Trout and Jeff Spilman agreed that Trout should take over the ordering of equipment.

On February 28, Dayton ordered the electrical control cabinet for Kokomo Tube's conveyor line from a distributor known as Weaver. Weaver promised to deliver the cabinet by March 9. On March 6, Weaver reported that it could not ship the cabinet as promised because of a blizzard. After the blizzard subsided, Weaver still could not ship the cabinet on time because some of its parts were missing. Dayton did not seek out another distributor because it believed that the cost of securing another distributor would have been considerably higher than if it stuck with Weaver. On March 16, Weaver assured Trout that the cabinet was being shipped that night by overnight express. Weaver eventually shipped the cabinet by overnight express on March 17. The cabinet, however, was lost in transit. Dayton received the cabinet on March 25, after the date of Kokomo Tube's open house.

Shortly before the open house, Ellis informed Jeff Spilman that the line would not be in operation by March 18. Dayton assigned larger crews, but Spilman said that Kokomo Tube would not pay overtime. At the open house, Dayton "jerryrigged" the line so that it appeared to be operable to Kokomo Tube's guests. The display and performance did not quite live up to Kokomo Tube's expectations, but Kokomo Tube never claimed that it lost any business as a result.

The parties' relationship was never the same after the open house. Kokomo Tube was able to use some of the equipment in a limited capacity beginning around March 21, but disputes about overtime persisted. Dayton finally completed the line and left the plant on April 15. However, more than a few kinks had to be worked out. Dayton ultimately charged Kokomo Tube $235,887.93 for the project. Kokomo Tube paid $111,066.71, the amount which it believed it owed.

After Kokomo Tube repeatedly refused to pay the balance due, Dayton recorded a mechanic's lien on the property where Kokomo Tube is located on June 3, 1992. The mechanic's lien named...