Skyline Steel Corp. v. AJ Dupuis Co.

• Citation: 648 F. Supp. 360
• Decision Date: 19 November 1986
• Docket Number: Civ. No. 85-75073.
• Parties: SKYLINE STEEL CORPORATION, Plaintiff and Counter-Defendant, v. A.J. DUPUIS COMPANY, Defendant and Counter-Plaintiff.
• Court: U.S. District Court — Western District of Michigan

648 F. Supp. 360

SKYLINE STEEL CORPORATION, Plaintiff and Counter-Defendant, v. A.J. DUPUIS COMPANY, Defendant and Counter-Plaintiff.

Civ. No. 85-75073.

United States District Court, E.D. Michigan, S.D.

November 19, 1986.

COPYRIGHT MATERIAL OMITTED

Peter Swiecicki, Andrea Maya Windholz, Detroit, Mich., for plaintiff and counter-defendant.

Robert E. Butcher, Southgate, Mich., for defendant and counter-plaintiff.

MEMORANDUM OPINION AND ORDER

ANNA DIGGS TAYLOR, District Judge.

I. STATEMENT OF FACTS

This diversity action, which was tried before the Court without a jury, is to collect payments due under the terms of several contracts. Plaintiff Skyline Steel Corporation ("Skyline") is a New Jersey corporation with its principal place of business in East Rutherford, New Jersey. Skyline sells and leases steel and steel products to customers throughout the United States. Its sales agent for the Midwest region is William ("Bill") Horvath, Jr., a steel broker in Southgate, Michigan.

Defendant A.J. Dupuis Company ("Dupuis") is a Michigan corporation which is currently inactive. At all times prior to and immediately after consummation of the contracts presently in dispute, Dupuis was a contracting company with its principal place of business in Southgate, Michigan. Bruce Sells, Jr. was President of the A.J. Dupuis Company and John Perry was a company employee.

In 1984, Dupuis was selected as the subcontractor on a municipal project at the Lakewood Street Bridge at Harbor Island in Detroit, Michigan. D. Macro Cement was the general contractor on, and the City of Detroit was the owner of, this project. In mid-June 1984, John Perry telephoned Bill Horvath (as they were the respective agents of Dupuis and Skyline) inquiring about prices and availability of Skyline sheet piling for use in connection with the Harbor Island project. Subsequent telephone conversations between these two agents resulted in two oral contracts whereby Dupuis would purchase and lease sheet piling from Skyline. The terms of these contracts were conveyed to Skyline's credit office in New Jersey for invoicing purposes on June 21, 1984.

The relevant terms of the two oral contracts were as follows. According to Skyline, Dupuis agreed to purchase 34,550 pounds of steel sheet piling, at $0.26 per pound, for a total amount of $8,983.00. Payment terms were net 30 days. In addition, Dupuis agreed to lease 37,862 pounds of sheet piling for an initial month's rental fee of $3,123.45 and $340.74 per month thereafter or, in lieu of rental payments, a liquidated cost of $0.26 per pound. Payment terms were net upon Dupuis' receipt of monthly invoices, at the beginning of each monthly period.

Skyline alleges delivery of the sheet piling to Dupuis at the Harbor Island construction site on June 29, 1984. On that date, Dupuis was furnished with Skyline's Invoices number DI 29223 and K 35275 reflecting the sheet piling Dupuis had purchased and leased. Notwithstanding delivery, Dupuis did not pay any amounts towards the purchase price of $8,983.00 or the initial month's rental fee of $3,123.45. The only payment Skyline has received to date from Dupuis has been $681.48, representing two monthly payments on the leased piling. This suit is for the sums alleged to be due.

At some point after delivery of the steel, a credit manager at Skyline's main office in New Jersey notified sales representative Horvath that no payment had been received on the Dupuis account. Horvath made repeated unsuccessful demands for payment, via telephone conversations and meetings with John Perry and Bruce Sells. Dupuis told Horvath that Skyline would receive payment for its steel upon Dupuis' receipt of payment from either the City of Detroit, the general contractor, or the contractor's bondsman. By November 12, 1984, Dupuis had received more than $82,000.00 from D. Macro Cement, the general contractor, none of which has been applied towards Dupuis' overdue accounts with Skyline.

In addition to the Harbor Island project, Defendant Dupuis was also a subcontractor on the Third Street Sewer Outfall Project, on which the City of Detroit was the owner and the Barton-Malow Company was the general contractor. The leased sheet piling used in the former project was subsequently moved by Dupuis to the latter project without authorization from Skyline. Skyline notified the owner and general contractors of the Harbor Island and Third Street projects on March 13, 1985 and June 4, 1985, respectively, that it was claiming the benefit of the Michigan Public Works Bond Act, Public Act No. 213 of 1963, as amended, M.C.L.A. § 129.201 et seq., arising out of Skyline's delivery of sheet piling for use in both projects.

Defendant A.J. Dupuis Company does not dispute that it entered into two contracts to purchase and lease sheet piling from Skyline, that the piling was delivered to and accepted by Dupuis, and that it made two rental payments to Skyline totalling $681.48. However, in answering the complaint, Dupuis advances several general and affirmative defenses for nonpayment on its accounts. Dupuis generally alleges that it did not agree to the following contractual terms: the net 30 day payment for the purchased piling; the initial rental payment of $3,123.45 and the liquidated monthly cost of $0.26 per pound for the leased piling; and the monthly prejudgment interest charges of 1.5% and 1.0% on overdue balances. Dupuis affirmatively asserts, inter alia, that Skyline's statutory notice of its claims to the City of Detroit and the general contractors pursuant to the Michigan Public Works Bond Act constituted an election of remedies precluding recovery from Dupuis of payments due.

Dupuis has also filed a counterclaim against Skyline alleging failure to deliver the ordered sheet piling on the dates and at the times expressly promised by Skyline's representatives. Anticipating timely delivery, Dupuis had called in work crews who could not function until after delivery of the piling. Efforts to secure piling from other suppliers had been unsuccessful. As a result of the late deliveries, Dupuis allegedly incurred additional labor costs and other incidental expenses. Dupuis has requested the Court to offset these costs against any legitimate claim that Skyline may have against Dupuis.

For the reasons to be stated below, the Court will enter judgment for Plaintiff on its breach of contract claim. Judgment will also be entered for Plaintiff on Defendant's counterclaim.

II. CHOICE OF LAW

Before discussing the merits of this case, the Court must first determine the state law that controls the interpretation of the contracts at issue. The present diversity action was brought in the United States District Court for the Eastern District of Michigan. Since federal courts must follow the choice of law rules of the state in which they sit, Michigan choice of law rules will be applied in the instant case. Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941); Liberty Mut. Ins. Co. v. Vanderbush Sheet Metal Co., 512 F.Supp. 1159, 1166 (E.D.Mich. 1981). "Under Michigan law, interpretation of contract provisions are governed by the law of the state in which the contract was entered into." McLouth Steel Corp. v. Jewell Coal & Coke Co., 570 F.2d 594, 601 (6th Cir.1978). See also Wells v. 10-X Mfg. Co., 609 F.2d 248, 253 (6th Cir.1979). Although there is no evidence that the parties discussed choice of law, the contract undeniably was made and to be performed in the State of Michigan. Therefore, Michigan law will govern Plaintiff's contract claim.

III. THE CONTRACTS

The parties do not dispute that in 1984 John Perry, acting on behalf of Defendant Dupuis, telephoned Bill Horvath, Midwest Sales Representative for Skyline, and inquired about prices and availability of Skyline steel sheet piling. After several telephone conversations, two oral contracts were entered into whereby Dupuis agreed to purchase and lease sheet piling from Skyline. The terms of these contracts were embodied in confirmatory invoices.

Plaintiff's Exhibit 1 is Skyline Invoice number DI 29223 representing Dupuis' purchase of 34,550 pounds of steel sheet piling, at $0.26 per pound, for a total amount of $8,983.00. The order date was June 21, 1984 and the steel was shipped via common carrier on June 29, 1984. Payment terms were net 30 days with a past due interest charge of 1.5%.

Plaintiff's Exhibits 2 and 3 are Skyline Invoices number K 35275 and K 35278 representing Dupuis' lease of 37,862 pounds of piling for an initial month's rental fee of $3,123.45 and $340.74 per month thereafter or, in lieu of rental payments, a liquidated cost of $0.26 per pound. The order was dated June 29, 1984 and payment terms were net upon receipt of the invoice with a past due interest charge of 1.0%.

For the reasons outlined below, all of Dupuis' arguments are without merit. Dupuis' failure to pay any amount for the purchased sheet piling and the initial month's rental for the leased piling renders it liable for breach of contract.

A. THE UNIFORM COMMERCIAL CODE

The contracts at issue involve a "transaction in goods": the purchase and lease of steel. Skyline argues that because the underlying transaction involves goods, Article II of the Uniform Commercial Code ("U.C. C." or "Code"), Sales, as adopted in Michigan at M.C.L.A. § 440.2101 et seq., should govern interpretation of the contracts. Dupuis objects to application of the U.C.C. on the ground that Skyline's first references to the Code were at trial; the U.C.C. was never mentioned in any of Skyline's pleadings. Skyline denies an obligation to plead the U.C.C.

The Court is in accord with Skyline's position on both counts. Contrary to Dupuis' suggestion, there is no authority whatsoever for imposing upon a party the obligation to specifically plead the U.C.C. and this Court declines to fashion such a rule in the instant case. The purchase and lease of steel is a transaction...