Northern Petrochemical Co. v. Thorsen & Thorshov, Inc., s. 43178
| Decision Date | 10 August 1973 |
| Docket Number | 43231,43274,Nos. 43178,s. 43178 |
| Citation | 211 N.W.2d 159,297 Minn. 118 |
| Court | Minnesota Supreme Court |
| Parties | NORTHERN PETROCHEMICAL COMPANY, Respondent-Appellant, v. THORSEN & THORSHOV, INC., Respondent-Appellant, Watson Construction Company, Appellant-Respondent, City of Mankato, Respondent. THORSEN & THORSHOV, INC., Third-Party Plaintiff, Respondent-Appellant, v. WILLIAM J. SUTHERLAND ENGINEERS, INC., Third-Party Defendant and Fourth-PartyPlaintiff, Respondent, v. NORTHERN STATES POWER COMPANY, Fourth-Party Defendant, Respondent, Lundin Construction Company, Inc., Fourth-Party Defendant, Respondent. CITY OF MANKATO, Fifth-Party Plaintiff, Respondent, v. Ellsworth E. GRAHAM and Hoffman Brothers, Fifth-Party Defendants, Respondents. |
1. Although the preferred measure of damages in building construction cases is either the cost of reconstruction in accordance with the contract specifications or the difference in value between the building as contracted for and as actually constructed, under the facts of this case, where the reconstruction has not fully restored the building and the total damages awarded do not exceed either the cost of full reconstruction or the diminution in value without any reconstruction, plaintiff was entitled to both the costs necessary for a partial reconstruction and the diminution in value between the contracted-for building and the building actually delivered.
2. Loss of use is a proper subject of damages where the loss is a direct and proximate result of the injury and such damages are within the contemplation of the parties at the time of making the contract. Under the facts of this case, plaintiff was entitled to recover its full damages for loss of use, including both lost profits and excess operating costs for the period in which its promised occupancy was delayed.
3. Under the facts of this case, the trial court properly held a liquidated-damages clause for late delivery was not intended to cover the extraordinary delay caused by faulty design and construction.
4. By its contract, plaintiff waived recovery for damages concurrently caused by faulty construction and the action of ground water or other insured peril under a builders' risk insurance policy purchased by defendant contractor.
5. The evidence does not support the apportionment of damages among the various defendants ordered by the trial court.
6. Where damages are caused by negligent breaches of contract by independent parties, the burden of proof as to apportionment is on the defendant who seeks apportionment. Where such a case is tried to a jury, the court must initially determine whether the harm is capable of apportionment and the jury, under proper instructions, must decide the fact question of the actual apportionment of damages.
7. Where there is no evidence that the owner of the building had actual knowledge of the contractor's deviation from the contract specifications, and the construction contract specifically provided that the architect's supervision should not relieve the contractor of his contract obligations, defendant's claim of waiver against plaintiff was properly denied.
8. Since a new trial on the issue of apportionment of damages is required, any error in the admission of soil density tests under the business-records exception to the hearsay rule was harmless.
9. Where neither the total amount of damages nor the apportionment of damages was readily ascertainable before trial, prejudgment interest was properly denied.
Carlsen, Greiner & Law, Wellington H. Law, Minneapolis, Gislason, Alsop, Dosland & Hunter, and Donald F. Hunter, New Ulm, for Watson Const.
Blethen, Ogle, Gage & Krause, Arthur H. Ogle and Kelton Gage, Mankato, for No. Petrochemical Co.
Meagher, Geer, Markham, Anderson, Adamson, Flaskamp & Breenan, O. C. Adamson II, and Clyde F. Anderson, Minneapolis, for Thorsen & Thorshov, Inc.
Farrish, Zimmerman & Johnson and Miles B. Zimmerman, Mankato, for City of Mankato.
McLean, Peterson & Sullivan, Mankato, Johnson & Sands, Minneapolis, for NSP Co.
Rider, Bennett, Egan, Johnson & Arundel, Minneapolis, for Lundin Const. Co.
Erickson, Zierke, Kuderer & Utermarck, Fairmont, for Graham and Hoffman Bros.
Heard and considered en banc.
Action for damages arising out of the faulty construction and subsequent reconstruction of an industrial building. This is a consolidation of three appeals from a judgment awarding plaintiff, Northern Petrochemical Company (Northern Petro), the owner of the building, damages from the general contractor, Watson Construction Company (Watson), and the primary architect, Thorsen & Thorshov, Inc. (T & T), and awarding T & T idemnity against the structural engineer, William J. Sutherland Engineers, Inc. (Sutherland). Watson's main issue on appeal is the apportionment of damages between it, T & T, and Sutherland, but it also challenges the total damages awarded Northern Petro, certain evidentiary rulings, and the court's instructions to the jury. Northern Petro appeals from the denial of prejudgment interest and the denial of recovery for damages concurrently caused by water. T & T frankly admits its appeal was taken solely to protect its procedural status should a new trial be granted on Watson's appeal and urges this court to affirm on all issues. We grant Watson a new trial on the single issue of apportionment of damages and affirm as to all other issues.
This was an extremely long and complicated action which was tried to a jury despite a multiplicity of parties, issues, and legal theories. 1 We have tried to limit our discussion of the facts and issues since we find no issue has significant precedential value and, essentially, what is required is a consideration of all issues upon an indepth, careful review of the record.
In 1966, Northern Petro contracted with T & T for architectural services in the construction of a new headquarters, which would serve as its office, warehouse, and manufacturing plant. Since T & T did not do structural engineering, it contracted with Sutherland to provide the structural design of the building. In late 1967, Northern Petro contracted with Watson to act as general contractor for the building at a set price of $689,000.
Because of the particular needs of Northern Petro's production processes, the building required a specialized configuration to allow efficient operations. Northern Petro was engaged in the extrusion of plastic film for industrial uses. This film is extruded by drawing tiny pellets of resin through tall, tower-like structures and then cutting the plastic into sheets or tubing. Since the extruders are in excess of 40 feet tall and the finished product is released at the top of the extruder, the manufacturing, or 'C,' section was designed as a two-story structure with large holes in The site selected for the building was readily adaptable to the split-level construction desired. The land was relatively level from the west end of the building for about 200 feet. At this point, at approximately the middle of the warehouse section, it dropped sharply about 20 feet. At approximately the west end of the manufacturing section, the contour leveled out and continued level to the east. A cross-section of the building looked like this:
the upper floor to accommodate the extruder. The warehouse, or 'B,' section was built on the same level as the upper floor of the manufacturing section in order to facilitate handling of the bulky final product. The office, or 'A,' section was on the same level as the warehouse section.
Construction of the building, which began in the fall of 1967, progressed rapidly. In April 1968, when the building was virtually completed, it became clear that there were major structural flaws in the building. Large cracks were developing in the walls and floor of the manufacturing and warehouse sections; the lower half of the wall between the warehouse and manufacturing sections (hereafter the BC wall) and the steel columns in the manufacturing sections were out of plumb and seriously bowed to the east.
At this point, a consulting engineer was hired to find the cause of the problems and suggest remedial action. Steel cables had been installed to reinforce the building, but the deterioration continued. It became apparent that the building was moving toward the east in fits and starts. This movement was halted only when large wood shorings were used to brace the building.
It was eventually determined that the cause of the eastward movement was the inability of the BC wall to withstand the horizontal pressures of the earthfill against the west or warehouse side. The wall was being pushed to the east and transmitting this movement through the rest of the building. If no remedial measures had been taken, the building would ultimately have collapsed. In an unusual effort to mitigate damages, Watson, T & T, and Northern Petro agreed to cooperate in the reconstruction of the building. Watson and T & T agreed to perform necessary construction and architectural services, for which Northern Petro would pay T & T its regular fee for additional services and pay Watson on a cost-plus basis. The parties specifically agreed that these services would be without prejudice to the ultimate determination of liability.
Until actual reconstruction began, it was believed that the sole reason for the building's failure was a structural defect in the support for the BC wall. The consulting engineer found that the structural design of the building provided seriously inadequate lateral support for the BC wall. Even if every other facet of the construction In order to alleviate the pressures on the BC wall, the first step in reconstruction was to remove the floor and underlying fill from the eastern third of the warehouse section. As the floor was being taken up, however,...
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