Otis Elevator Company v. Fulcrum Construction Company, LLC, No. 2005AP1704 (Wis. App. 7/25/2006)

• Decision Date: 25 July 2006
• Docket Number: No. 2005AP1704.,2005AP1704.
• Parties: Otis Elevator Company, Plaintiff-Appellant, v. Fulcrum Construction Company, LLC, Defendant-Respondent.
• Court: Court of Appeals of Wisconsin

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Otis Elevator Company, Plaintiff-Appellant, v. Fulcrum Construction Company, LLC, Defendant-Respondent.

Court of Appeals of Wisconsin, District I.

No. 2005AP1704.

Opinion Filed: July 25, 2006.

APPEAL from an order of the circuit court for Milwaukee County: MICHAEL GUOLEE, Judge. Reversed and cause remanded for further proceedings consistent with this opinion.

Before Fine, Curley and Kessler, JJ.

¶1 KESSLER, J

Otis Elevator Company, the successor of Northwestern Elevator Company (collectively, "Northwestern"), appeals from an order dismissing its claim for approximately $17,500 for elevator components that it custom ordered for Fulcrum Construction Company, LLC ("Fulcrum"), which ultimately were not used because the construction project was cancelled. The trial court concluded that Northwestern was not entitled to payment because it failed to submit shop drawings to the construction project's architect prior to ordering the elevator components, which the trial court concluded was required by the subcontract between Fulcrum and Northwestern.

¶2 It is undisputed that shop drawings were not submitted before the elevator components were ordered. However, Northwestern argues: (1) submission of the shop drawings was not a condition precedent to Fulcrum's performance under the subcontract; and (2) there are genuine issues of material fact as to whether Fulcrum waived strict compliance with the shop drawings provision.

¶3 We conclude that the subcontract and the general contract, parts of which purportedly applied to the subcontract, were ambiguous as to when Northwestern was to provide shop drawings, i.e., whether it was required to provide shop drawings before the elevator components were ordered, or only prior to seeking permits and installing the elevator, or at some other time. Based on this ambiguity, we conclude that extrinsic evidence may be properly considered to clarify the parties' intent. Examination of this evidence reveals that there are genuine issues of material fact that require resolution by a fact finder. Therefore, we reverse the order and remand for further proceedings. We do not consider Fulcrum's argument that Northwestern's pre-contract conduct waived strict compliance with the shop drawings provision.¹

BACKGROUND

¶4 On December 8, 1999, Fulcrum executed a contract (the "General Contract") with Capitol Medical Development LLC to be the prime contractor for the construction of a medical building. Several weeks prior to executing the General Contract, Fulcrum contacted Northwestern, a company it had worked with previously, to discuss having Northwestern serve as a subcontractor to install a hydraulic passenger elevator in the building. The discussions were fruitful and, on November 23, 1999, Northwestern wrote to Fulcrum thanking Fulcrum "for the contract award to perform the elevator installation." Northwestern's letter stated that the elevator components would have to be ordered sixteen weeks prior to installation, which at that time was scheduled to begin on May 1, 2000.² Northwestern's letter also asked Fulcrum to complete an enclosed "Elevator Ordering Information" form, and to identify any changes in elevator drawings dated September 17, 1999, that had been provided to Northwestern.

¶5 On December 16, 1999, by fax, Northwestern reminded Fulcrum that it needed a completed Elevator Ordering Information form. Fulcrum replied by saying the information had been passed on to the architect and advised that the start date for the project had been moved to January 3, 2000. The Elevator Ordering Information form was completed and signed on December 21, 1999, by Douglas Moore, an agent of the architect.

¶6 On January 25, 2000, Fulcrum and Northwestern entered into a written subcontract agreement (the "Subcontract"). The Subcontract provided that Northwestern was bound by the provisions of the General Contract insofar as they were applicable to the Subcontract; this Subcontract provision was similar to the General Contract's requirement that any subcontractors performing work on the project were, to the extent of work to be done by the subcontractor, to assume all of Fulcrum's obligations and responsibilities under the General Contract. The contract language at issue in this case involved specific sections of the General Contract. Section 3.12.7 of the General Contract provided: "The Contractor shall perform no portion of the Work for which the Contract Documents require submittal and review of Shop Drawings, Product Data, Samples or similar submittals until the respective submittal has been approved by the Architect." Section 1.1.3 defined "Work" as "the construction and services required by the Contract Documents, whether completed or partially completed, and includes all other labor, materials, equipment and services provided or to be provided by the Contractor to fulfill the Contractor's obligations. The Work may constitute the whole or a part of the Project."

¶7 The General Contract also incorporated a Project Manual, which it defined in § 1.1.7 of the General Contract as a "volume assembled for the Work which may include the bidding requirements, sample forms, Conditions of the Contract and Specifications." The Project Manual included a four-page description of the hydraulic passenger elevators, including specifications for the elevator. Part of this description specified what was to be included in shop drawings, project data and other submittals. Shop drawings were defined in § 3.12.1 by the General Contract as: "drawings, diagrams, schedules and other data specially prepared for the Work by the Contractor or a Subcontractor, Sub-subcontractor manufacturer, supplier or distributor to illustrate some portion of the Work."

¶8 On February 3, 2000, Northwestern ordered the elevator components so that they would arrive in time to be installed beginning on June 6, 2000. Northwestern admits it had not submitted shop drawings to Fulcrum or the architect by the time it ordered the elevator components, although the architect had approved the Elevator Ordering Information form in December.³

¶9 On March 15, 2000, Fulcrum sent all subcontractors a notice indicating that the project was "on hold" due to a problem obtaining a building permit. The memo stated in relevant part:

This is to advise you that the ... project has been put on hold as of today due to inability to obtain a building permit from the City of Milwaukee. The Owner has been unable to obtain permission from the adjacent property owner to connect to an existing storm sewer located on the adjacent property.... The Owner anticipates resolving this matter at a future date, but [is] unable to predict when that may be.

The above information is as accurate as we have right now. Our contract with the Owner has NOT been terminated, and, at this time, we are not terminating any subcontracts issued. We will contact each of you when we have further information.

(Emphasis in original.)

¶10 On April 12, 2000, Northwestern submitted shop drawings in writing and told Fulcrum that Northwestern "must be in receipt of the approved elevator shop drawing before we can apply for permit [sic]...." The shop drawings were never approved or returned to Northwestern. On May 18, 2000, Northwestern sent an invoice to Fulcrum for $17,491.50 in elevator components it had ordered.⁴ Fulcrum refused to pay the invoice, noting in a written response that "Fulcrum has been strictly advised that no materials are ordered [sic] by NW Elevator/Otis until all shop drawings have been approved. I have no record of shop drawings being submitted for this job."

¶11 Ultimately, the medical building project was cancelled.⁵ Northwestern filed suit against Fulcrum to recover the cost of the elevator components that Northwestern had ordered for the project. Fulcrum denied any liability, asserting that Northwestern's work had not been authorized because Northwestern had failed to "prepare and submit to Fulcrum shop drawings for approval by Fulcrum and the project architects" prior to ordering the elevator components. Fulcrum noted that "such shop drawings were not submitted by [Northwestern] until after [Northwestern] was notified that the construction ... was not proceeding." Fulcrum argued that the elevator components were ordered without authorization, and that Fulcrum was therefore not obligated to pay for them.

¶12 Fulcrum moved for summary judgment, which the trial court granted. The trial court held that approval of the shop drawings by Fulcrum was a condition precedent to any payment under the Subcontract, and that Northwestern's failure to submit the shop drawings prior to ordering the elevator components removed Fulcrum's liability to pay for the elevator components.⁶ The trial court also concluded that it could not consider correspondence that occurred prior to the execution of the Subcontract because pre-contract conduct was irrelevant where the written contract superseded prior agreements, and because considering that correspondence would violate the parol evidence rule. This appeal followed.

LEGAL STANDARDS

¶13 When reviewing a summary judgment, an appellate court applies the same methodology as the trial court. Green Spring Farms v. Kersten, 136 Wis. 2d 304, 315, 401 N.W.2d 816 (1987). The methodology is well-established, see State Bank of LaCrosse v. Elsen, 128 Wis. 2d 508, 511-12, 383 N.W.2d 916 (Ct. App. 1986), and need not be repeated here. We will affirm the trial court's decision granting summary judgment if the record demonstrates that there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. WIS. STAT. § 802.08(2).

¶14 The established rules of contract interpretation apply here. The primary goal in contract interpretation is to give effect to the parties' intentions. Johnson Controls, Inc. v. Employers Ins. of Wausau, 2003 WI 108, ¶30, 264 Wis. 2d 60, 665 N.W.2d 257. We ascertain ...