Stevens Const. Corp. v. Carolina Corp.

• Decision Date: 07 May 1974
• Docket Number: Nos. 253,s. 253
• Parties: STEVENS CONSTRUCTION CORP., Appellant, v. CAROLINA CORP. et al., Respondents. STEVENS CONSTRUCTION CORP., Appellant, v. Arthur G. GRANDLICH et al., Respondents. STEVENS CONSTRUCTION CORP., Appellant, v. ELRUTH CORP. et al., Respondents. to 255.
• Court: Wisconsin Supreme Court

Page 291

217 N.W.2d 291

63 Wis.2d 342

STEVENS CONSTRUCTION CORP., Appellant, v. CAROLINA CORP. et al., Respondents.

STEVENS CONSTRUCTION CORP., Appellant, v. Arthur G. GRANDLICH et al., Respondents.

STEVENS CONSTRUCTION CORP., Appellant, v. ELRUTH CORP. et al., Respondents.

Nos. 253 to 255.

Supreme Court of Wisconsin.

May 7, 1974.

Cook & Franke, Milwaukee, for appellant; John J. Ottusch, Milwaukee, of counsel.

Axley, Brynelson, Herrick & Gehl, Madison, for respondents.

HANLEY, Justice.

The following issues are presented by this appeal:

1. Did the trial court err in concluding that Stevens has breached its contract in failing to furnish a properly designed prestressed concrete structure?

2. Did the owners of Normandy Apartments waive the construction defect by failing to object thereto?

3. Did the trial court err in finding that the repair contract between Stevens and the owners failed for want of consideration?

4. Is Stevens entitled to prejudgment interest?

5. Did the trial court err in concluding that Stevens had substantially performed the contract?

The defendants herein became involved in the construction of apartment dwellings in Dane County with the construction of the Carolina Apartments located in Madison's University Hill Farm area. The construction and operation of the Carolina Apartments proved so successful that in 1968 the defendants conceived the idea of constructing the Normandy Apartments.

The Carolina Apartments and the Normandy Apartments are located in the same general area on approximately 6.2 acres of land. The apartment projects are basically similar in design--each consisting of three buildings of similar construction. The apartment projects both consist of three story ordinary construction buildings with basements and underground parking. The general contractor for both the Carolina and Normandy Apartments was Stevens Construction Company.

Defendants contacted Frank Leach and retained him for the performance of limited architectural services. Mr. Leach was not involved in the construction of the Carolina Apartments.

The architectural services contracted for from Mr. Leach were limited solely to doing the architectural design, layout of the stall exits in the basement, do the working drawings and specifications, engineer the wooden structure and flooring and footings and make periodic inspections and act as project professional to channel all related architectural information promptly. The reason the owners contracted for such limited services was economic. Generally, the precast concrete manufacturers and other subcontractors such as heating or electrical to their own design and engineering and by so contracting with the general contractor or subcontractor that such design and engineering services would be performed by them and by excluding those services from the duties of the architect, the owners could avoid duplication of services. Such avoidance of duplicative services saved the owners in excess of $85,000.

At the time Leach was preparing the general architectural design, the defendants contacted Stevens Construction Company in an attempt to retain them as General Contractor. The reasons for contacting Stevens were because of the fact that Stevens had been general contractor for the Carolina Apartments and because of Stevens multiple capabilities.

Stevens Construction Company is a corporation engaged in general construction work. Stevens and Collins Engineers, Inc.--a corporation involved in structural engineering--are generally interrelated corporations and are principally owned by Mr. Gene Grotenhuis. Stevens and Collins operated 'as one' in numerous construction projects--Stevens performing the general contractor's duties and Collins the structural engineering duties. Employees of Collins Engineering, Inc. are often loaned to Stevens Construction Company--such as Mr. Donald Lucas, a structural and civil engineer who was on loan to Stevens during construction of the Normandy Apartments--during a project in which Stevens was the general contractor.

After Leach had provided the owners with a site plan and a basic idea of the project concept, the negotiations with Mr. Grotenhuis of Stevens intensified. During those negotiations, Mr. Mohs testified, Mr. Grotenhuis stated that the Normandy contract would be the same as the Carolina contract. On the Carolina project Stevens acted as general contractor and in addition performed the structural engineering for that project. Stevens was required to furnish the concrete system and its subcontractor was Spancrete, Inc. The structural engineering for the Carolina project was performed by Collins through Spancrete.

The parties continued to work closely together concerning design and economics of the project. One specific aspect of that design--the prestressed concrete structure which was to support the project in general--was originally to be let to Spancrete for a system similar to that incorporated in the Carolina project. The 'Spancrete' system was called for in the first architectural plans. Since Spancrete had a more expensive system than Concrete Research, the owners were induced to accept the latter. Stevens contacted Concrete Research, gave them the architect's plans and informed them to submit a design proposal for consideration. All parties knew that design responsibility for such a system rested in the end with the subcontractor because of the limited services exacted for the owner's architect.

Concrete Research, Inc. had a registered structural engineer on its staff named Mr. Ellenbeck. He examined the architect's plans and designed the prestressed concrete beams, columns and planks necessary to support the area between the arms of the U-shaped Building C of the Normandy project which had been dug out and was to be used for tenant parking. In so designing the prestressed concrete structure and preparing the shop drawings and structural calculations, Mr. Ellenbeck made a drastic mistake. Ellenbeck designed the beams of the prestressed concrete system to hold 120 pounds per square foot less than that called for. Since there is a 70% safety factor built into such calculations, however, the mistake was not readily observable, even after construction. These shop drawings were then given to the owners who accepted them and the architect who incorporated them in the plans. Mr. Grotenhuis of Stevens informed the owners that Concrete Research's plan would be structurally right in terms of design.

Construction was begun in the fall of 1968. Stevens had orally agreed to act as general contractor and the principal subcontractors had been selected. However, because of several contractual details that were yet to be worked out, work was started without a written contract. In May or June, 1969 the contract was finally completed and signed by the parties. The contract was, however, backdated to November 1, 1968 to approximate the date construction had commenced.

After the prestressed concrete substructure was designed and installed, the owners decided to modify the original concept by placing larger planters on the patio deck which the structure supported. At this time, the subcontractor had completed his work and was no longer present. The new planters were incorporated into the drawings and installed without structural testing. The result was a cracking of the beams above the columns. While the original structure was sorely tested because of the miscalculation of Concrete Research, the structure remained erect. However, when the plans were changed and new planters installed, the actual load on the system was 456 pounds per square foot. Since the original mistaken design could withstand only 290 pounds per square foot (170 pound design plus 70%--120 pounds--safety factor), the beams cracked and yielded.

The design error of Concrete Research, Inc., Stevens' subcontractor, was for the first time discovered. Previous to the addition of the larger planters, the error was latent and could not be discovered except by a person of design engineering competence. Since the owners' architect lacked design experience, the defect was undiscoverable. Upon discovery, the owners demanded that Stevens, Concrete Research and Leach remedy the situation without cost in that the construction contract called for the correction of such defects by the contractor. The contractor and subcontractor refused.

Initially the owners agreed to allow Stevens and Concrete Research to correct the defect and so contracted via a cost plus agreement. The owners became dissatisfied with Stevens and Concrete Research's repair work and ordered them to cease. The repair work done by Stevens to this time was reasonably valued at $3,136.51. A Madison structural engineer was retained, Mr. Thomas O'Sheridan, and repairs were made. These repairs were reasonably valued by the trial court at $21,518.63. In addition, the trial court found the reduced utility and economic value of the basement and building was $3,000. This amount was based on reduced space for parking facilities.

Stevens Responsibility for 'Design'

The trial court found in the present action that the plaintiff, Stevens Construction Company, had contracted to furnish and install a properly designed prestressed concrete system sufficient to support the weight which the architectural plans and specifications showed would be placed thereon when the building was complete. The trial court based this finding that Stevens had contracted to furnish and install a properly designed prestressed concrete system on

'. . . the contracts, the circumstances surrounding their execution, the specifications of the architect (Precast Concrete) and the practical construction placed thereon by the parties, . . .'

This, Stevens contends, was error.

Initially, it is undisputed that Stevens Construction Company and its subcontractor, Concrete Research, Inc. did design the prestressed concrete system incorporated in...