Nationwide Agribus. v. Structural Restoration Inc

• Decision Date: 13 April 2010
• Docket Number: No. 3:08-cv-47 RP-CFB.,3:08-cv-47 RP-CFB.
• Parties: NATIONWIDE AGRIBUSINESS, as subrogee of Tri Oak Foods, Plaintiff,v.STRUCTURAL RESTORATION, INC., Defendant.
• Court: U.S. District Court — Southern District of Iowa

705 F.Supp.2d 1070

NATIONWIDE AGRIBUSINESS, as subrogee of Tri Oak Foods, Plaintiff,v.STRUCTURAL RESTORATION, INC., Defendant.

No. 3:08-cv-47 RP-CFB.

United States District Court,

S.D. Iowa,

Davenport Division.

April 13, 2010.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Kevin J. Driscoll, Finley Alt Smith Scharnberg Craig Hilmes & Gaffney PC, Des Moines, IA, S. Ellyn Farley, James I. Tarman, Jr., Cozen Oconnor, Chicago, IL, for Plaintiff.

Mark D. Aljets, Nyemaster Goode West Hansell & O'Brien PC, Des Moines, IA, Moss & Barnett, P.A., Minneapolis, MN, for Defendant.

ORDER ON CROSS MOTIONS FOR SUMMARY JUDGMENT

ROBERT W. PRATT, Chief Judge.

Before the Court is Defendant Structural Restoration, Inc.'s (“SRI”) Motion for Summary Judgment (Clerk's No. 27) and Plaintiff Nationwide Agribusiness's (“Nationwide”) Motion for Partial Summary Judgment (Clerk's No. 31), both filed on November 13, 2009. Nationwide filed its Response to SRI's Motion for Summary Judgment on December 18, 2009. Clerk's No. 39. SRI also filed its Response to Nationwide's Motion for Partial Summary Judgment on December 18, 2009. Clerk's No. 37. Both parties filed their Replies on January 4, 2010. Clerk's Nos. 42, 43. The Court does not believe oral argument will materially aid it in resolving the present motions. The matters are fully submitted.

I. FACTUAL AND PROCEDURAL BACKGROUND

This controversy relates to the collapse of a grain silo owned by Tri Oak Foods, formerly known as Oakville Grain, (hereinafter “Tri Oak”) at Tri Oak's Oakville, Iowa facility (hereinafter “Oakville facility”) on October 26, 2006. Def.'s Facts ¶¶ 2, 22; Pl.'s Facts ¶ 2. Prior to the collapse, the Oakville facility had four grain storage silos that Tri Oak used to store grain for the purpose of feeding hogs. Def.'s Facts ¶ 2. The silo that eventually collapsed was the smallest of the four silos and was known as the “wet tank” because it was used to receive wet corn from farmers. Id.

Many of the facts surrounding the events relevant to the current dispute are unclear. The following, however, is undisputed. In March or April 1997, Tri Oak hired SRI to inspect one of the large concrete silos (hereinafter “Silo 1”), not the wet tank, at the Oakville facility and to provide a quote for restoration of Silo 1 Id. ¶ 5. On or about April 14, 1997, SRI and Tri Oak entered into a written contract to perform the inspection. Id. ¶ 6. SRI sent three employees to perform the inspection, which consisted of the following: (1) scaffolding was erected around the silo to inspect its interior and exterior surface; (2) a sound test was performed on all surfaces to locate and identify any delaminations; ¹ (3) the delaminations were marked for future reference in performing the necessary repairs; and (4) the strength of the concrete was tested with a destructive impact hammer. Id. ¶ 7. Tri Oak requested a less thorough, visual inspection of the exteriors of three other silos, including the wet tank, for noticeable cracks or spalls ² that would need repair. Id. ¶ 8. SRI provided a report to Tri Oak that outlined its findings and submitted a bid for the necessary repairs. Id. SRI's bid was not accepted, but Tri Oak did have Silo 1 repaired by someone else. Id.

The parties also agree that Charles Threet (“Threet”), an SRI employee, again visited the Oakville facility in 2003, but the facts surrounding that visit are much less clear. Pl.'s Facts ¶ 7. Steve Cummings (“Cummings”), the then-grain operations manager at the Oakville facility, testified that he does not recall the specifics of Threet's 2003 visit or receiving a subsequent letter from Threet. Def.'s Facts ¶¶ 4, 9, 10; Pl.'s Resp. to Def.'s Facts ¶¶ 9, 10; see also Def.'s App. at 68. Cummings only vaguely recalls that there were conversations in which Threet said that he would like to stop by to check the repair work on Silo 1 Id.

Threet's recollection of his 2003 interaction with Tri Oak differs slightly from Cummings' memories. Threet recalls that he received a phone call from Tri Oak about the safety conditions of Silo 1. Def.'s App. at 82-83. Though Threet is uncertain if Cummings made this initial call in 2003, he is certain that he spoke to Cummings before stopping by the Oakville facility to look at Tri Oak's silos. Id. Threet also recalls that in December 2003, when he was traveling near Tri Oak, he stopped and made a visual inspection of the four silos. Id. Threet remembers that he looked closely at Silo 1 and also walked around the other silos. Id. He looked for, but did not observe, any bulges or exposed rebar as he walked around the silos. Id. at 83, 88. Following his visit, Threet wrote the following letter to Tri Oak on SRI letterhead:

20 December, 2003

Tri Oak Foods

# 1 Russel St.

Oakville, IA 52646

ATTN: Steve Cummings

Ref: INSPECTION

SILOS: 1, 2, 3, AND 4

The above referenced silos were first inspected by Structural Restoration, Inc. during March 1997. The following conditions were observed:

MARCH 1997

1. In the surface concrete of silo number 1, 12,000 S.F. of delaminations were identified. Repairs were completed by others in accordance with specifications ACI 506 SHOTCRETE.

2. Minor cracks were visually observed in silos 2, 3, & 4. No delaminations were identified.

DECEMBER 2003

1. The repairs completed to silo number 1 show no identifiable failures and no new delaminations were noted.

2. I have compared notes and photographs of silos 2, 3, & 4 and surface conditions are believed unchanged.

Notes:

1. During our original inspection, the surface cracks did not penetrate the total wall thickness.

2. Surface cracks can be expected in grain storage systems. This condition is expected due to no movement joints being included in the silo design.

3. I find the silos acceptable for grain storage service.

4. I recommend a visual inspection being made every 3 to 5 years.

Sincerely,

STRUCTURAL RESTORATION INC.

Charles T. Threet

Estimator & Field Manager

copy:

Randy Pflum ³

Def.'s App. at 49-50 (hereinafter “December 20, 2003 Letter”).

Neither Cummings nor Randy Pflum (“Pflum”), Tri Oak's CEO, could identify why a copy of the December 20, 2003 Letter was sent to Pflum. Def.'s Facts ¶ 11. In addition, Pflum has no recollection of the December 20, 2003 Letter until it was shown to him by a Nationwide adjuster, Mark Whalen, after the collapse of the wet tank. Id.

The parties agree that SRI was not paid by Tri Oak for Threet's 2003 visit and the December 20, 2003 Letter. Id. ¶ 18. Threet recalls that his primary purpose in visiting the Oakville facility was to “look[ ] for work for the next year,” and he describes the December 20, 2003 Letter as a “sales tool.” Def.'s App. at 83-84.

Though neither Threet, Cummings, nor any other employee of SRI or Tri Oak recall the details of the interaction that lead to Threet's 2003 visit and December 20, 2003 Letter, the record contains a letter, dated November 11, 2003, that may provide some context for Threet's 2003 visit and the December 20, 2003 Letter. Def.'s App. at 59 (hereinafter “November 11, 2003 Letter”). The November 11, 2003 Letter is putatively from Nationwide, is addressed to Cummings, and conveys the results of a “loss control service” that identified one recommendation: “Critical: Have a Structural Engineer come and look at [Tri Oak's] four STAR silos and have him give a report on their structural soundness. We have had problems with collapse on these silos throughout the midwest [sic] and we want to make sure yours are structurally sound.” Def.'s Facts ¶¶ 12-14; Def.'s App. at 59. Below this recommendation is an area for Cummings' response. Def.'s App. at 59. In that area, the box indicating that “All conditions identified in the recommendations will be completed by (Date)” is checked, though there is a question mark on the line where the “Date” would have been indicated. Id. Next to the question mark, a hand written note states: “I have called a structural engineer[,] Chuck Threet[,] Structural Restoration[,] Mnpls, Mn (See card). He is sending an engineer to look at the silos and give us a Bid. Waiting on the Bid to see when project....” ⁴ Id. The November 11, 2003 Letter is signed by Cummings and dated November 11, 2003. Id. Attached to the November 11, 2003 Letter was Threet's SRI business card, listing his title as “Estimator.” Id. at 60.

The parties agree that SRI's December 20, 2003 Letter was forwarded to Nationwide by Tri Oak to satisfy Nationwide's requirement that Tri Oak hire an engineer to inspect the silos prior to Nationwide providing collapse coverage, though it is unclear who at Tri Oak handled this paperwork. Def.'s Facts ¶ 21. Nationwide then relied on the December 20, 2003 Letter when it renewed Tri Oak's insurance policy that provided collapse coverage for the silos. Id.; Pl.'s Facts ¶ 10.

The wet tank subsequently collapsed in October 2006. Pl.'s Facts ¶ 11. A post-collapse inspection of the wet tank commissioned by Nationwide concluded that: (1) “the cause of the failure was corrosion of hoop re-bars at the hoop welds”; (2) “this is a result of long term related deterioration of the re-bar”; and (3) “[s]ince the re-bar is embedded in the concrete, a visual inspection would probably not show the corrosion unless cracks were visible that showed the re-bar. It is understood that no such visible cracks were found.” Def.'s App. at 54.

Nationwide has made payments to Tri Oak for the damages sustained as a result of the collapse in the net amount of $1,026,330.01. Pl.'s Facts ¶¶ 11-13; Am. Compl. ¶ 21. Nationwide filed the present action against SRI, as a subrogee of Tri Oak, alleging claims of: (1) negligence; (2) breach of express oral and/or implied contract; and (3) breach of express, oral and/or implied warranties. Am. Compl. ¶¶ 23-42. Before the Court are the parties' cross motions for summary judgment: SRI seeks summary judgment in its favor on all three counts, and Nationwide requests partial summary judgment in its favor on the issue of liability as to all three...