Otis Elevator Co. v. W.G. Yates & Sons Constr. Co.

• Decision Date: 07 August 2013
• Docket Number: CV 12-J-1708-NE
• Court: U.S. District Court — Northern District of Alabama
• Parties: OTIS ELEVATOR COMPANY, Plaintiff, v. W.G. YATES & SONS CONSTRUCTION COMPANY, a/k/a Yates Construction, Defendant.

OTIS ELEVATOR COMPANY, Plaintiff,

v. W.G. YATES & SONS CONSTRUCTIONCOMPANY, a/k/a Yates Construction, Defendant.

CV 12-J-1708-NE

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ALABAMA NORTHEASTERN DIVISION

DONE: August 7, 2013

MEMORANDUM OPINION

Otis Elevator Company ("Otis") filed this action for breach of contract alleging that W. G. Yates & Sons Construction Company ("Yates") has failed to pay Otis the money owed Otis under the subcontract with Yates of December 7, 2010 (docs. 1, 7, 8 and 25). The court previously determined that if Otis complied with the contract, Yates' breach is remediable under the Alabama Prompt Pay Act, Ala. Code § 8-29-1, et seq., which provides for interest at 12% per annum plus attorney's fee. See Memorandum Opinion, April 3, 2013 (doc. 57).

Yates filed a counterclaim alleging that Otis breached the subcontract at issue by failing to install escalators with a step width of 40 inches and by failing to call to the attention of Yates that Otis was deviating from the Contract Documents by furnishing and installing escalators with a step width of 32 inches, resulting in damages to Yates for the costs to remedy said alleged breach (doc. 11).

The court conducted a bench trial on June 10-13, 2013, at which both parties were present and represented by their respective counsel.

FACTUAL BACKGROUND

The subcontract in question arose out of the baggage claim expansion project for Huntsville Madison County Airport Authority (the "Owner"). The architect for the project was Chapman Sisson Architects (the "Architect"). See Subcontract, p. 1, (submitted as Def.'s Exh. 9); OTIS Stipulated Facts #2.¹ Yates was the general contractor for the project. See OTIS Stipulated Facts #2. As part of the work, Yates was required to install four escalators, two interior and two exterior. See Trimmer Decl., ¶ 3 (submitted as Def.'s Exh. 41); OTIS Stipulated Facts #3. Yates solicited and received bids from three escalator suppliers, plaintiff Otis, and non-parties Thyssen Krupp and Schindler, for the supply and installation of the escalators. OTIS Stipulated Facts #6. All three were asked to bid according to the plans and specifications. Id. The plans and specifications were made available at a website for viewing or downloading. Decl. of Trey Steber, ¶ 2 (submitted as Def.'s Exh. 33).

Escalators generally have two dimensions for width, rated width ("nominal width") and step width (or "tread width"), being the width of the escalator stair treads. Rated width is approximately 8 inches wider than step width. Standard step widths are typically 24 inches, 32 inches, and 40 inches, and the corresponding rated widths are approximately 32 inches, 40 inches, and 48 inches, respectively.² See SteberDecl., ¶ 3. Nowhere in the project specifications is either a rated width or a step width specified. Id.; OTIS Stipulated Facts #4 & 5. One of the contract drawings, Drawing A180, did depict certain escalator drawings. See Yates Stipulated Facts #3. Detail C6 of Drawing A180 addressed the two interior escalators and Detail A1 of A180 addressed the two exterior escalators. Steber Decl., ¶ 4; Yates Stipulated Facts #5. Based on these plans and specifications, Otis and non-party Thyssen Krupp both proposed to supply and install escalators with a 32 inch step width. See Trimmer Decl., ¶10; OTIS Stipulated Facts #6 & 7. The only bidder who proposed installing escalators on the project with a step width of 40 inches was non-party Schindler, whose product was the undisclosed basis for the design.³ OTIS Stipulated Facts #8; Pl.'s Exh. 75 p. 13 (Pinkston depo).⁴ Yates chose Otis as the lowest bidder, but did not issue the subcontract in question until the Architect had approved Otis' shop drawings and product literature. Those drawings and product specification literature clearly show that Otis' proposal was for 32 inch step width escalators. OTIS Stipulated Facts # 7, 10, & 11; Pl.'s Exh. 75, p. 10-12 (Pinkston Depo); Shop Drawings (submitted as Def.'s Exh. 4 & 5). Yates also reviewed and approved Otis' submissions and shop drawings. OTIS Stipulated Facts # 7, 10, & 11; Pl.'s Exh. 75, p. 10-12 (Pinkston's depo); Shop Drawings (submitted as Def. Exh 4 & 5). At notime during the submittal and review process did either the Architect or Yates object to the specified step width of 32 inches, nor did either of them ever express that escalators built to such specifications would not comply with the project plans and specifications. Pl. Exh. 75 p. 11-12 (Pinkston depo.).

After Yates and the Architect approved Otis' shop drawings, the issuance of a signed subcontract ensued and Otis ordered and had delivered the 32 inch step width escalators. Trimmer Decl., ¶ 12. Yates constructed the wellways, or directed the construction by another subcontractor, that is the pits where the escalator motor and equipment are installed, for the escalators. OTIS Stipulated Facts #13. Yates constructed the wellways to accommodate 32 inch step width escalators. Trimmer Decl., ¶ 12. At no time during this process did Yates or the Architect raise any issue concerning the 32 inch step width escalators. Pl. Exh. 75, p. 11-12 (Pinkston depo.); Trimmer Decl., ¶ 12; OTIS Stipulated Facts # 18.

As the escalator work was nearly finished in March of 2012, the Owner objected to the 32 inch step width. OTIS Stipulated Facts # 18; Pl. Exh. 75 p. 16 (Pinkston depo.); Letter from the Owner of March 19, 2012, (submitted as Pl.'s Exh. 5). A meeting was held regarding this issue on March 26, 2012, with the Owner, the Architect, Yates and Otis representatives all in attendance. OTIS Stipulated Facts # 19. Following that meeting, on March 28, 2012, Yates drafted a letter to the Owner. Pl's Exh. 12 & 13. In that letter Yates stated, among other things,

CSA [the Architect] had the opportunity to reject the escalators during the submittal review process. Though not clearly identified in the Contract Documents, the OTIS shop drawings identify clear tread width and critical dimensions. [The Architect] reviewed the submittal and indicated that the shop drawings complied with the design intent. Based upon the information provided in the Contract Documents and compliance of shop drawings with the intent design the escalators comply with the Contract Requirements.

Pl's Exh. 13 (emphasis added). In that same letter, Yates pointed out that two of the three bidders read the contract documents to require escalators with 32 inch step width. Id.⁵

Subsequent to this letter, the Owner, disagreeing with Yates' position as stated in that letter, started threatening Yates with liquidated damages of $5,000 per day and tacitly threatened to never do business with Yates again. Yates Stipulated Facts # 19. At this point Yates changed its opinion as to whether or not the installed escalators were in conformance with the Contract Documents, concluding for the first time that they were not. In the end, the dispute between Yates and the Owner resulted in a Change Order (#75). See Letter from Yates to Otis dated May 7, 2012, (submitted as Def.'s Exh. 27). In agreeing to perform the work under Change Order 75, Yates did not reserve its rights against the owner. Otis, however, agreed to do the work underChange Order 75, but did so under reservation of rights. Yates has not paid Otis for any work done by Otis on the project since January 2012, even though Yates has been fully compensated for the work it performed, as well as what Otis performed, on the project. OTIS Stipulated Facts # 23 & 25.

Nowhere do the Contract Documents made available to Otis and the other bidders actually state the step width as 40 inches. Yates Stipulated Facts # 8; see also Drawing A180, Detail A1 and Detail C6.

I. The Contract is Ambiguous

At the center of this dispute is a question of contract interpretation. Under general Alabama rules of contract interpretation, the intent of the contracting parties is discerned from the whole of the contract. See Loerch v. National Bank of Commerce of Birmingham, 624 So. 2d 552, 553 (Ala. 1993). Where there is no indication that the terms of the contract are used in a special or technical sense, they will be given their ordinary, plain, and natural meaning. See Ex parte Dan Tucker Auto Sales, Inc., 718 So. 2d 33, 36 (Ala. 1998). If the court determines that the terms are unambiguous, then the court will presume that the parties intended what they stated and will enforce the contract as written. See id. at 36; Voyager Life Ins. Co. v. Whitson, 703 So. 2d 944, 948 (Ala. 1997). If the court determines that the terms are ambiguous, then the court must use established rules of contract construction to resolve the ambiguity. See Whitson, 703 So. 2d at 948. Under those established rules,where there is a choice between a valid construction and an invalid construction the court has a duty to accept the construction that will uphold, rather than destroy, the contract and that will give effect and meaning to all of its terms. See id. at 948-49; Sullivan, Long & Hagerty v. Southern Elec. Generating Co., 667 So. 2d 722, 725 (Ala. 1995). Additionally, "if there exists inconsistency between two clauses of a contract which cannot be reconciled, the inconsistency must be resolved in favor of the prior clause, unless an intention to thereafter qualify is plainly expressed." City of Fairhope v. Town of Daphne, 208 So. 2d 917, 924 (1968); see Whitson, 703 So. 2d at 949. Lastly, if all other rules of contract construction fail to resolve the ambiguity, then, under the rule of contra proferentem, any ambiguity must be construed against the drafter of the contract. See Lackey v. Central Bank of the South, 710 So. 2d 419, 422 (Ala. 1998).

The court must first determine whether the contract unambiguously calls for a 40 inch step width escalator. The parties stipulated that "[t]he Project specifications set forth certain performance requirements but had no dimensions for the escalators to be installed." OTIS Stipulated...