Ranger Const. Co. v. Dixie Floor Co., Inc.

• Decision Date: 21 April 1977
• Docket Number: Civ. A. No. 76-618.
• Citation: 433 F. Supp. 442
• Parties: RANGER CONSTRUCTION COMPANY, Plaintiff, v. DIXIE FLOOR COMPANY, INC., Defendant.
• Court: U.S. District Court — District of South Carolina

433 F. Supp. 442

RANGER CONSTRUCTION COMPANY, Plaintiff, v. DIXIE FLOOR COMPANY, INC., Defendant.

Civ. A. No. 76-618.

United States District Court, D. South Carolina.

April 21, 1977.

Pope D. Johnson, III, Thomas E. McCutchen, Whaley, McCutchen & Blanton, Columbia, S. C., for plaintiff.

Glenn Bowers, Nexsen, Pruet, Jacobs & Pollard, Columbia, S. C., for defendant.

ORDER ON PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT

HEMPHILL, District Judge.

This action arises from a contract between the parties under which the defendant was to furnish all materials and labor for the installation of resilient flooring in the Clinical Science Building at the Medical University of South Carolina at Charleston. The complaint alleges that defendant refused to perform the work specified in the contract for the agreed price of $52,601.00 and that as a result, the plaintiff was required to enter into a second contract to have the flooring installed at a substantially higher cost.¹ The plaintiff is seeking judgment against defendant for the additional amount which it alleges it was required to pay to have the contract performed, $22,268.00.

The defendant, in its answer, admitted that there was a contract between the parties, that the copy of the contract attached to the complaint was a true and correct copy, and that it had refused to perform its work under the subcontract. However, the defendant argues that its actions were justified in that the plaintiff had wrongfully withheld payment for work which the defendant had performed under a separate and distinct contract on a job in North Carolina.

The defendant alleges that shortly before it entered into the contract in issue, it had entered into another similar contract with the plaintiff which was completed in Hickory, North Carolina, on May 7, 1974. Thereafter the plaintiff, without apparent justification, refused to make payment as due under the contract, and, in order to collect the same, the defendant was forced to bring an action against the plaintiff in the United States District Court for the District of North Carolina and reduce its claim to judgment. Defendant finally received payment under this prior contract on June 7, 1976.

In April 1975, the plaintiff requested that the defendant begin work under the present contract. The defendant contends that as a result of the plaintiff's refusal to pay under the North Carolina contract, the defendant had substantial doubt as to both the plaintiff's ability and willingness to pay it for any performance it might render on the South Carolina contract. Accordingly, the defendant requested that the plaintiff provide it with assurance of performance and alleges that the plaintiff failed to do so in a satisfactory manner.

It is the defendant's position that the plaintiff's breach of the North Carolina contract constituted "reasonable grounds for insecurity" under § 2-609 of the Uniform Commercial Code (§ 10.2-609 of the S.C. Code Ann.) Section 10.2-609 of the S.C. Code reads:

Right to adequate assurance of performance.

(1) A contract for sale imposes an obligation on each party that the other's expectation of receiving due performance will not be impaired. When reasonable grounds for insecurity arise with respect to the performance of either party the other may in writing demand adequate assurance of due performance and until he receives such assurance may if commercially reasonable suspend any performance for which he has not already received the agreed return.

(2) Between merchants the reasonableness of grounds for insecurity and the adequacy of any assurance offered shall be determined according to commercial standards.

(3) Acceptance of any improper delivery or payment does not prejudice the aggrieved party's right to demand adequate assurance of future performance.

(4) After receipt of a justified demand failure to provide within a reasonable time not exceeding thirty days such assurance of due performance as is adequate under the circumstances of the particular case is a repudiation of the contract.

The defendant urges that summary judgment is inappropriate in this case because under § 10.2-609 the question of whether or not the plaintiff's breach of the former contract was "reasonable grounds for insecurity" under this section constitutes a question of fact which should be reserved for the jury. The plaintiff contends that Article II of the Uniform Commercial Code is not applicable to the transaction which is the subject of the present lawsuit.

Article II of the Uniform Commercial Code is limited in its application to transactions in goods.² "Goods" are defined in § 10.2-105 of the S.C. Code to mean "all things (including specially manufactured goods) which are movable at the time of identification to the contract for sale other than the money in which the price is to be paid, investment securities and things in action". The disputed contract in this action required the defendant to furnish all labor and materials necessary for the installation of resilient flooring in the plaintiff's construction project. There is no doubt that these materials, which consisted of vinyl asbestos tile, sheet vinyl, vinyl baseboards, and cement, constituted goods under the definition provided in § 10.2-105 of South Carolina's version of the Uniform Commercial Code. However, this determination is not dispositive of the issue in this case because the delivery of goods under the contract between the plaintiff and defendant was accompanied by a delivery of services by defendant. "Mixed" contracts, or contracts which involve both goods and services, are not automatically included within the scope of Article II merely because they are partially involved with the exchange of goods.

The leading case on the UCC's applicability to contracts which involve both goods and services is Bonebrake v. Cox, 499 F.2d 951 (8th Cir. 1974). In Bonebrake, the contract involved a sale and installation of bowling alley equipment between a dealer in new and used equipment and the owners of a bowling alley which had been destroyed by fire. The court found that in determining whether a mixed contract for goods and services should be covered as a "sale of goods" under the UCC,

the test for inclusion or exclusion is not whether they are mixed, but, granting that they are mixed, whether their predominant factor, their thrust, their purpose, reasonably stated, is the rendition of service, with goods incidentally involved (e. g., contract with artist for painting) or is a transaction of sale, with labor incidentally involved (e. g., installation of a water heater in a bathroom.)

In Bonebrake, the plaintiff's decedent, a Mr. Simek, was engaged in the sale of new and used bowling equipment and employed a man to install the equipment incident to its sale to provide the necessary expertise for its installation. The facts of the case indicate that Mr. Simek was largely involved in the purchase and sale of bowling equipment and owned three storage facilities for such equipment within his native state of Nebraska. The Ninth Circuit characterized the contract as one for the replacement of equipment and therefore the sale of goods under the Commercial Code. It is important to note that Simek was primarily a seller of bowling equipment and apparently, from the facts of the case, installed them as a sideline and as a convenience to his customers. It is also noteworthy that the contractual language involved in Bonebrake was that of a contract of purchase and sale.

In the present case the "predominant factor, thrust, or purpose, reasonably stated" of the contract is one for the delivery of services accompanied by the acquisition and furnishing of the necessary materials. The contract involved in this lawsuit is a construction contract, not a contract for the purchase and sale of goods. It is interesting to note that throughout the contract the defendant, Dixie Floor Co., Inc., is not referred to as a materialman but rather as a subcontractor. It is apparent that the plaintiff was not contracting for the materials alone but rather was contracting for the performance of an entire segment of the prime contract. The defendant's responses to interrogatories indicated that the defendant was essentially a service corporation engaged in the installation and construction of flooring. Defendant's response to Interrogatory No. 1 reveals that 75% of their business involved the contracting and installation of flooring. The answer to Interrogatory No. 3 reveals that the defendant did not, at any time relevant to this action, operate as a supplier or maintain a supply house for flooring materials and supplies. The answer to Interrogatory No. 12 indicates that for this particular job the defendant planned to purchase the materials completely from an independent dealer. It is obvious from these facts that the defendant in this case is primarily a service-oriented business which...