Midwest Builder v. Lord and Essex

• Decision Date: 09 November 2007
• Docket Number: No. 1-06-1233.,1-06-1233.
• Citation: 383 Ill.App.3d 645,891 N.E.2d 1
• Parties: MIDWEST BUILDER DISTRIBUTING, INC., Plaintiff-Appellee, v. LORD AND ESSEX, INC., Defendant-Appellant.
• Court: United States Appellate Court of Illinois

891 N.E.2d 1

383 Ill.App.3d 645

MIDWEST BUILDER DISTRIBUTING, INC., Plaintiff-Appellee, v. LORD AND ESSEX, INC., Defendant-Appellant.

No. 1-06-1233.

Appellate Court of Illinois, First District, Sixth Division.

November 9, 2007.

Rehearing Denied July 30, 2008.

Marcy L. Gullett, Dranias, Harrington and Wilson, Chicago, for Appellant.

Peter Ordower, The Law Office of Peter Ordower, Chicago, for Appellee.

Justice JOSEPH GORDON delivered the opinion of the court:

Plaintiff-appellee Midwest Builder Distributing, Inc. (Midwest), a company providing cabinets and appliances for homebuilders, brought suit against Lord & Essex, Inc. (Lord & Essex), a homebuilder. Plaintiff sought payment for materials delivered at defendant's request to defendant's construction sites, pursuant to a credit information sheet signed by defendant's representative prior to the execution of a series of subcontractor agreements between the parties.¹ Defendant claimed that the credit information sheet was not a binding contract and that it had fulfilled all its obligations under the subcontractor agreements, which controlled. The case proceeded to a bench trial, and the trial court found in favor of plaintiff on its breach of contract claim. For the following reasons, we affirm and remand for the court below to determine additional amounts owed under the credit information sheet.

I. BACKGROUND

Midwest filed its original complaint on February 24, 2003, which was subsequently amended twice. The second amended verified complaint, which now frames the issues, alleged the following.

Lord & Essex is a corporation engaged in the business of building homes, while Midwest is a corporation that specializes in providing cabinets and appliances for homebuilders. Sometime in October 2000, Christopher Smith, then the contracts manager of Lord & Essex, signed a credit information sheet provided by Midwest. Midwest averred this was done in order to induce Midwest to sell goods to Lord & Essex on credit. The credit information sheet, which is attached to the complaint, elicits general information (such as company name and address), as well as specific credit-related information (credit references, bank references, and sales information); however, only the former section is completed, and the credit-related part of the sheet remains blank. Near the bottom of the sheet, in small but readable text, is printed the following:

"In the event MBD, Inc. retains an attorney to pursue collection of payment by suit or in bankruptcy or probate proceedings, seller may recover reasonable attorney fees and costs of court and interest at a rate of 1 1/2% per month from the date payment became due.

The information contained in this statement is provided for the purpose of obtaining, or maintaining credit with you on behalf of the undersigned, or persons, firms, or corporations in whose behalf the undersigned may either severally or jointly with others, execute a guaranty in your favor. Each undersigned understands that you are relying on the information provided herein (including the designation made as to ownership of property) in deciding to grant or continue credit."

Midwest's complaint further alleged that between October 2000 and January 2001, it executed various subcontractor agreements with Lord & Essex, whereby Midwest agreed to sell goods to Lord & Essex for use in five subdivisions where Lord & Essex was building homes. Copies of six of the eight agreements are attached to the complaint.

Three main provisions of the subcontractor agreements are relevant here. First, the contracts set out Lord & Essex's standard procedure for payment, known as the purchase order document system. The system works as follows: Lord & Essex sends out purchase orders and job release notices to each subcontractor, describing in detail the work to be performed for each house. Then, when a subcontractor delivers goods to a particular jobsite, a Lord & Essex representative signs both the purchase order and the contractor's job release notice as a way of indicating that the goods have been received and are of satisfactory quality. All the subcontractor agreements state that the aforementioned documents constitute "conclusive evidence" of the price of performance by Midwest. They also provide that Midwest "will accept payment based on the approved, signed Purchase Order System Document(s) as full and complete compensation for its work at the specified job site." Furthermore, in the last six contracts, Midwest's completion of the purchase order documents is made an express condition precedent to payment.

Second, all of the contracts provide that Midwest cannot commence any suit against Lord & Essex more than 10 months after "the date the work under the Agreement is completed." There is no reciprocal provision limiting the power of Lord & Essex to sue. The contracts do not specifically define the time that Midwest's work is considered to be "completed." Midwest has an ongoing duty to perform warranty work for the 18-month period after installation of its goods, or the 12-month period after a house with its goods is sold; however, the last six contracts all contain a clause stating that completion "shall not be extended or tolled by repair, replacement, or warranty work."

Third, all of the contracts contain an integration clause that reads as follows: "This Agreement shall be construed as complete and fully integrated; that it supersedes all previous understandings, representations and agreements between the parties relating to the subject matter of this Agreement, all of the same being merged herein."

Pursuant to these subcontractor agreements, Midwest delivered goods to Lord & Essex, along with invoices describing the items and the agreed-upon prices. The invoices are attached to the complaint as well; each contains a note at the bottom reading, "Thank you for your order!!! There will be a 1.5% interest charge on any invoices past 30 days."

Midwest then alleged that Lord & Essex failed to pay for the goods that Midwest delivered, in breach of the provisions contained in both the credit information sheet and the subcontractor agreements. It therefore requested relief in the form of $58,608.88 in unpaid principal, plus 1.5% monthly interest, court costs, and attorney fees pursuant to the terms of the credit information sheet.

In its answer, Lord & Essex admitted that its agent Smith signed Midwest's credit information sheet, but it denied that the sheet was a binding contract between the parties. Lord & Essex further averred that, even if the credit information sheet were to be considered a contract, its terms would be superseded by the terms of the subcontractor agreements later signed by the parties; thus, the provisions for interest, attorney fees, and court costs would all be invalidated.

As to the subcontractor agreements themselves, while Lord & Essex agreed that they were signed by the parties, it claimed that Midwest did not live up to their terms, as set forth in its two affirmative defenses.² Its first defense was that Midwest's failure to follow the purchase order document system described in the subcontractor agreements barred any recovery by Midwest. It contended that because this failure constituted a material breach on the part of Midwest, Lord & Essex had no obligation to pay for any goods where the system was not strictly complied with. It also argued that Lord & Essex would be deprived of valuable, specifically bargained-for consideration if the system were not enforced as written in the contracts.

Second, Lord & Essex argued that Midwest's suit was untimely, since the contractual 10-month limit on suits had already passed by the time that Midwest initiated proceedings against Lord & Essex. Lord & Essex pointed out that in its complaint, Midwest did not allege that it performed any work unrelated to warranties or repairs after February 2002, nor did it provide any documentary evidence of such work; therefore, since the complaint was filed more than 10 months after February 2002, it was time-barred.

A bench trial commenced on March 3, 2006. The first witness called by Midwest was company president John Lomacz. No court reporter was present for the first day of trial; missing from the record is all of Lomacz's direct testimony, as well as the beginning of his cross-examination. As will be discussed below, there is no certified bystander's report of the first day's proceedings. After that first day, Lord & Essex hired a court reporter to cover the rest of the trial.

On the second day of trial, under cross-examination, Lomacz testified that as president of Midwest, he was familiar with the books and records of the company. He said that the last time that Midwest delivered product to Lord & Essex was in November or December of 2001. He also spoke briefly about the credit information sheet, saying that in his opinion, it was a binding contract. The remaining portions of his testimony largely concerned Midwest's computation of the amount that Lord & Essex owed, according to various accounting documents prepared by Midwest.

On redirect, Lomacz testified at length about the purchase order system. The system was supposed to work as follows: Lord & Essex would send a contractor's job release notice and a purchase order to Midwest in the mail. The contractor's job release notice would provide specifications about the work to be done. When Midwest delivered the requested products to the jobsite, Lord & Essex was supposed to sign off on the documents. He testified that Lord & Essex "dozens and dozens of times" took the position that without the signed papers, it had no obligation to pay Midwest. However, on multiple occasions, Lord & Essex failed to have on-site representatives available to sign the documents. As a result, there were "dozens" of times that Midwest delivered goods but never got signatures for their purchase orders or contractor's job release notices....