Matter of Fordson Engineering Corp.
| Decision Date | 08 December 1982 |
| Docket Number | Adv. No. 81-1955.,Bankruptcy No. 80-07070-W |
| Citation | 25 BR 506 |
| Parties | In the Matter of FORDSON ENGINEERING CORPORATION, a Michigan corporation, Debtor, Fred DERY, Trustee of Debtor, Plaintiff, v. GENERAL MOTORS CORPORATION (General Motors Assembly Division, New Plant & Facilities, Orion Township) a Michigan corporation; Brian & Gregory Contracting Company, a Michigan corporation, et al., Defendants. |
| Court | U.S. Bankruptcy Court — Eastern District of Michigan |
Cyril Abramson, Troy, Mich., for Fred Dery.
Thomas M. Reid, Birmingham, Mich., for Brian & Gregory Contracting Co.
Claiming a breach of contract, a complaint was filed in this Court by Fordson Engineering Corporation (Fordson) for recovery of damages from Brian & Gregory Contracting Company (B & G) in the amount of approximately $76,850.00.
On January 11, 1981, Fordson filed for relief under Chapter 11. On or about February 15, 1981, Fordson entered into two contracts with B & G wherein Fordson was to supply labor and materials for structural steel and support slabs on the General Motors Assembly Division (GMAD) Lake Orion project. GMAD is the owner of the project, Barton-Malow Company (Barton-Malow) is the construction manager, B & G is the prime contractor, and Fordson was the subcontractor of B & G. On August 31, 1981, Fordson terminated its contracts with B & G.
On September 18, 1981, Fordson filed a statement of account and mechanics' lien. On December 18, 1981, Fordson filed a complaint against GMAD, Barton-Malow, B & G and numerous sub-contractors seeking damages in the amount of $125,000.00 plus costs, interest and attorney fees. Fordson further requested that, in the event of a default, the Court find it to have a lien on the land and buildings at issue superior to that of the other defendants.
Claims as to defendants other than B & G have either been resolved or held in abeyance and are not the subject of the present action.1 As to B & G, several findings were made by the Court during the course of litigation. First, on February 12, 1982, the Court issued a memorandum opinion and order finding that Fordson had substantially complied with the Michigan Mechanics' Lien Act, MCLA 570.1 et seq.2 Second, on May 18, 1982, the Court issued an order allowing B & G to amend its affirmative defenses and denying Fordson's motion to dismiss and/or for summary judgment. Fordson's motion denied B & G had any right of setoff.
The testimony presented at trial, as well as the findings of fact and conclusions of law filed by the parties, places Fordson's claim for recovery into three categories: (1) amounts due under contract P240, (2) amounts due under contract P246, and (3) amounts billed as extras to those two contracts. Fordson computes the funds owed to it for labor and materials supplied to B & G essentially as follows:
Base Contract - $93,222.00 - P240 - Job # 5-81
95% Complete $88,560.90
Change Order # 1 1,881.00
__________
Total $90,441.90
Paid to Date 79,401.00
__________
Amount Due: $11,040.90
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Base Contract - $264,520.00 - P246 - Job # 6-81
95% Complete $251,294.00
Paid to Date 220,075.00
___________
Amount Due: $31,219.00
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Extras $ 72,988.51
Paid to Date 22,619.00
___________
Amount Due $50,369.51
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P240 $11,040.90
P246 31,219.00
Extras 50,369.51 $92,629.41
__________
Equipment in Field $13,689.39
___________
TOTAL DUE: $106,318.803
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Fordson admitted termination of the contract prior to completion.
Defendant B & G argues that as to contract P240, and contract P246, Fordson has been fully paid; that the amount claimed as owing by Fordson represents retainer held to completion of the contracts plus a sum representing a portion of the contracts not completed as of September 1, 1981. As to the amounts billed as extras to the two contracts, B & G asserts that: (1) extras are introduced by emergency field orders and bulletins; (2) extras so introduced are only paid by issuance of a change order; (3) as of September 1, 1981, no change orders had been issued, the first change order being issued on October 30, 1981; (4) change orders totaling $50,915.48 were approved subsequent to October 30, 1981. However, B & G asserts, since the earliest change order is dated October 30 and Fordson terminated the contract as of August 31, no moneys were owed.
Additionally, B & G alleges it is undisputed that Fordson breached its contract by refusing to complete it; therefore, it is entitled to offset all consequential damages of the breach subsequent to August 31. The total amount of offset as proposed by B & G is $120,951.12. This figure includes payroll costs to complete; material costs to complete; the costs incurred in discharging Fordson's mechanics' lien; costs incurred in discharging the claim of W.S. Molnar Company, a supplier of Fordson; and attorney fees. With regard to the setoff amount, B & G contends that Fordson's extras, allowed and paid to defendant subsequent to August 31, 1981, are in the amount of $50,915.48 and that B & G has or will receive retainer for Fordson's completed work, previously withheld by GMAD and Barton-Malow, in the amount of $31,377.30. B & G seeks to setoff from these amounts. B & G further proposes that the Court find that Fordson is indebted to it in the remaining amount of $38,658.34 and allow it to file its unsecured claim against the estate in that amount.
Prior to resolving this matter in terms of specific dollar amounts, certain legal issues must be addressed.
Paragraph two of B & G's first answer, filed on January 13, 1982, provided that at the time of termination of the contract, Fordson was owed $15,802.00 under contract P240, $30,047.21 under contract P246, and $75,427.28 for extras. On July 6, 1982, B & G, with the permission of the Court, amended its answer to provide that the amounts previously listed as owed under contracts P240 and P246 were in fact the value of work remaining to be done to complete the contracts.
Fordson asserts that statements contained in B & G's first answer filed on January 13, 1982 constitute judicial admissions. The Court disagrees.
Judicial admissions are formal admissions in the pleadings which have the effect of withdrawing a fact from issue and dispensing wholly with the need for proof of the fact. Polk v. Missouri-Kansas-Texas Railway Company, 341 Mo. 1213, 111 S.W.2d 138 (1937); Sebree v. Rosen, 393 S.W.2d 590 (1965); see generally, McCormick's on Evidence, ¶ 262 (2d ed. 1972). If pleadings are effective pleadings in the case, they have the standing of judicial admissions. However, if a pleading is amended, withdrawn or superseded by a substitute pleading, it ceases to be usable as a conclusive judicial admission, but is admissible in evidence as an evidentiary admission. Raulie v. U.S., 400 F.2d 487, 526 (10th Cir.1968). An evidentiary admission is not conclusive, but rather is subject to contradiction or explanation. Cooper v. Brown, 126 F.2d 874 (3d Cir.1942).
Additionally, Rule 715 of the Rules of Bankruptcy Procedure provides, with exceptions not relevant herein, that Rule 15 of the Federal Rules of Civil Procedure applies in adversary proceedings. Rule 15(a) provides for liberal amendment of pleadings at the discretion of the trial court. In Re Hunt, 3 B.R. 92 (E.D.Pa.1980); In Re Peckinpaugh, 14 B.R. 692 (N.D.Ohio 1981).
In the present case, B & G was allowed to file its amended answer by leave of the Court. Therefore, any statements made in B & G's first answer are evidentiary admissions and as such are subject to explanation or contradiction.4
It is undisputed that Fordson terminated the contracts at issue on August 31, 1981. Fordson asserts that the contracts were terminated due to the failure of B & G to pay invoices for "extras". It is the position of B & G that all invoices were paid in accordance with the contracts of the parties, and that any unpaid portions were due to extras which had not been approved by the construction manager.
Both parties rely on the testimony of Richard Wozniak, comptroller of Barton-Malow Company. Mr. Wozniak testified as to the four-tiered payment cycle for extras. Of substantial import, he further testified that payment as to extras could, and often did, take many months.
Ronald Mascot, executive vice president of Fordson, testified that although Fordson had not been paid for extras from April of 1981 forward they did not challenge the delay in payment until August of 1981. He further testified that when immediate payment was refused he ceased operating and, on August 31, 1981, sent a telegram to B & G terminating the contracts.
Delay in making payment where the amount of work done is disputed or is being negotiated is not on that basis alone a breach of contract. Rather, breach occurs where a contractor unilaterally, as here, leaves a job site without completing its contractual duties. In Re Northup-Johnson, Inc., 15 B.R. 767 (D.Md.1981). And damages in the form of completion costs may be assessed against a party breaching a contract. See, Northup-Johnson, supra; In Re Raber Industries, Inc....
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