W.W. Williams Midwest, Inc. v. Lien Waver

Filing 65

OPINION ; signed by Judge Robert Holmes Bell (Judge Robert Holmes Bell, kcb)

UNITED STATES DISTRICT COURT F O R THE WESTERN DISTRICT OF MICHIGAN S O U T H E R N DIVISION

W .W . WILLIAMS MIDWEST, INC., P lain tiff /C o u n ter -D e f e n d a n t, F ile No. 1:08-CV-410 v. H O N . ROBERT HOLMES BELL L IE N WAVER, her engines, tackle, and gear, D e f e n d a n t/C o u n te r- P l a in tif f . / OPINION T h i s breach of contract action against a vessel is before the Court on the defendant v e ss e l's motion for summary judgment. For the reasons that follow the motion will be d e n ie d . I. P la in tif f W.W. Williams Midwest, Inc. ("Williams"), is an Ohio corporation with an o f f ic e and place of business in Kent County, Michigan. re p a irin g marine engines. Defendant Lien Waver (the "Vessel") is a 43 foot vessel owned by the Fickle Miss C o rp o ra tio n , a Delaware corporation, since 1996, and used by the Schwendener family. (D k t . No. 18, Counter-Compl. ¶ 2; Schwendener Dep. 35.) Michael S. Schwendener Williams's business includes

(" S c h w e n d e n e r" ) is the Vessel's managing agent and has a right of possession in the Vessel. (C o u n ter-C o m p l. ¶ 3.) In August 2004 Schwendener contacted Plaintiff regarding repairs to the Vessel's e n g in e s based on Schwendener's understanding that the Vessel's 692 Detroit Diesel engine h a d a cooling design deficiency and defective top rings that wore out prematurely, his o b s e r v a t io n that the engines were emitting black smoke and using oil, and his observation th a t the Vessel had experienced a slight loss of power and a drop in engine rpm. (S ch w en d e n er Dep. 47-48, 80.) Plaintiff submitted a quote for rebuilding the engines, which included the following c o m m e n ts: This quote is for rebuilding both port and starboard engines on the Lein [sic] W a v e r. This includes teardown, clean up and repair as follows: This includes re b u ild in g of Heads, repairing injectors as needed. Replacement of cylinder k its , remove and reseal blower to the block. Coolant update. This will be co m p leted by our Frankfort facility. The engine will be painted before d e liv e ry to site. This does not include replacement of turbo chargers . . . . (E x . 2,1 8/24/04 Quote.) Michael Schwendener added the following language to the quote: " 1 ) All parts to be retained. 2) Work to be completed by Sept. 13th." (Id.; Schwendener D e p . 52.) Schwendener signed the quote and paid $10,000.00 as a down payment.

(S ch w en d e n er Dep. 59-60.)

In this opinion, references to exhibits 1-13 are to the exhibits attached to Defendant's m o tio n for summary judgment (Dkt. No. 49), and references to exhibits A-Q are to the e x h ib its attached to Plaintiff's response in opposition (Dkt. No. 52). 2

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T h e majority of the work on the Vessel's engines was performed by mechanic Don W in te rs at Williams's Frankfort facility. Williams completed the work on September 29, 2 0 0 4 , and sent Schwendener an Invoice for $38,816.24, minus the $10,000 down payment, f o r a total balance due of $28,816.24. (Ex. 4, 9/24/04 Invoice.) Schwendener was able to u s e the Vessel as of October 1, 2004. (Talbot Dep. 33.) On October 6, 15, and 18, S c h w e n d e n er contacted Winters to report that coolant was being discharged into the bilge. (E x . 5, Schwendener's Notes.) In October, Dale Hendershot, another Williams mechanic, investigated Schwendener's c o m p lain ts and determined that the radiator cap was faulty. He advised that Williams would r e p l a c e both radiator caps when the fuel pump was replaced. (Ex. K, 10/21/04 Repair O r d e r.) In November, Williams acknowledged that the cylinder head that it had installed e ith e r had a defective injector tube or the people who rebuilt the head had installed it im p ro p e rly. (Talbot Dep. 52.) Williams agreed to repair the engines before the boat was lau n c h e d in the spring: Customer reported that the starbord engine was pushing coolant out overflow. T h e re is an oil leak on starbord engine at the turbo. There is a shifting lag in th e port engine. Both port and starbord engines have oil and coolant leaking c a u sin g staining of paint. Testing for compression in coolant will be tested w h e n boat is launched. Boat is stored for the winter and will be under w a rra n ty when boat is launched. Warranty will commence upon launch of b o at in spring (estimated date is May 15, 2005.) (Ex. L, 11/1/5/04 Invoice.)

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O n December 7, 2004, Schwendener sent Plaintiff a memorandum of thirteen open ite m s requiring corrective work.2 (Ex. 7, Schwendener Memo.) Plaintiff did not make any f o rm a l response to Schwendener's memorandum, but according to Winters and John Talbot, W illiam s's Grand Rapids Customer Support Manager, not all of the items on the list were c o v e re d by Williams's workmanship warranty. (Winters Dep. 83-85; Talbot Dep. 55, 83; Ex. 1 1 , Talbot-Winters FAXes.) Williams considered the repairs on the Vessel to be complete in May 2005 when they were able to pull off the cylinder head that was causing the

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The items noted by Schwendener are the following: 1) S tar b o a rd engine exhaust leak in coolant. 2) T re a t and flush carbon out of starboard engine. 3) P ro v id e new coolant. 4) R e p la c e carboned plastic expansion tank and tubing. 5) L o w fuel pressure alarms have sounded on both engines after a few h o u rs of continuous operation. 6) P a in t engines to specifications with Glacier white #8000 (PPG # 2 1 6 6 7 1 6 3 8 9 ) paint. 7) P o r t engine/transmission is slow to engage. A cable adjustment may be n e c e s s a r y. 8) P r o p e rly support and fasten all cables and wires, and provide proper c h a fe protection. 9) B o t h engines have several oil leaks (each side, front & rear). Note: Port engine is spraying an oil mist on the bilge floor near the front p u l l e y. 10) P r o v id e oil and coolant sample results. 11) R eta in all used parts to present to D.D. 12) Provide 6 month guarantee from acceptance of engines. 13) It appears the cockpit gel coat has been damaged from the black runner layed down last summer. When the exhaust manifold was removed, it w as placed on the runner.

(D ef .'s Ex. 7.)

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c o m p r e s s io n in the cooling system, replace the injector tubes, and work through some of the le a k issues. (Talbot Dep. 33-34.) Williams nevertheless continued to respond to many of th e items on Schwendener's list through October 2005. (Talbot Dep. 55, 57; Ex. M & N, W o rk Hours; Winters Dep. 92-99; Ex. Q, 10/5/05 Repair Order.) Williams sent Schwendener a revised Invoice on October 6, 2005. (Ex. O, 10/6/05 In v o ic e ). Williams attempted to recover payment from Schwendener after that date, but was u n ab le to make contact with him. (Ex. P, Williams' contact efforts.) In September 2007, Winters retired from Williams and Williams shut down its F ran k fo rt facility. The parts Winters had removed from Defendant were discarded. (Winters D ep . 32-33, 108-09.) In May 2008 Plaintiff filed this breach of contract action against Defendant pursuant to the Court's admiralty and maritime jurisdiction, seeking to recover the balance due on la b o r and materials furnished to the Vessel for the repair of its engines. Defendant filed a Counter-Complaint alleging that Plaintiff did not properly perform th e work contracted for, that Plaintiff's work failed to correct the complaint for which the V e ss e l was brought in for repairs, that Plaintiff applied improper and defective paint, and that a s a result, the Vessel and Schwendener have incurred significant expense and damages. (C o u n ter Compl. ¶¶ 9-13.)

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D e f e n d a n t has moved for summary judgment on Plaintiff's complaint based upon its a s s e rtio n that Plaintiff cannot maintain a breach of contract action against Defendant because P la in tif f first substantially and materially breached the underlying repair contract. II. U n d e r Rule 56(c) of the Federal Rules of Civil Procedure, summary judgment is p ro p e r if there is no genuine issue as to any material fact and the moving party is entitled to ju d g m e n t as a matter of law. In evaluating a motion for summary judgment the Court must lo o k beyond the pleadings and assess the proof to determine whether there is a genuine need f o r trial. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). If D e f e n d a n t carries its burden of showing there is an absence of evidence to support a claim th e n Plaintiff must demonstrate by affidavits, depositions, answers to interrogatories, and a d m is s io n s on file, that there is a genuine issue of material fact for trial. Celotex Corp. v. C a tre tt, 477 U.S. 317, 324-25 (1986). In considering a motion for summary judgment, the court must construe the evidence a n d draw all reasonable inferences in favor of the nonmoving party. Minges Creek, L.L.C. v . Royal Ins. Co. of Am., 442 F.3d 953, 955-56 (6th Cir. 2006) (citing Matsushita, 475 U.S. at 587). Nevertheless, the mere existence of a scintilla of evidence in support of Plaintiff's p o s itio n is not sufficient to create a genuine issue of material fact. Anderson v. Liberty L o b b y , Inc., 477 U.S. 242, 252 (1986). The proper inquiry is whether the evidence is such

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th a t a reasonable jury could return a verdict for Plaintiff. Id.; see generally Street v. J.C. B r a d fo r d & Co., 886 F.2d 1472, 1476-80 (6th Cir. 1989). I I I. D e f en d a n t contends it is entitled to summary judgment on Plaintiff's breach of c o n tra c t action because Plaintiff has admitted that it had substantially and materially b re a c h e d the underlying contract repair before any alleged breaches by Defendant. Defendant's motion for summary judgment is based on application of the Michigan ru le that one who commits the first substantial breach of a contract cannot maintain an action a g a i n s t the other contracting party for failure to perform. Baith v. Knapp-Stiles, Inc., 156 N .W .2 d 575, 578-79 (Mich. 1968); see also Able Demolition v. Pontiac, 739 N.W.2d 696, 7 0 1 (Mich. Ct. App. 2007) ("[O]ne who first breaches a contract cannot maintain an action a g a in s t the other contracting party for his subsequent breach or failure to perform.") (quoting M ic h a e ls v. Amway Corp., 522 N.W.2d 703, 706 (Mich. Ct. App. 1994)). T h is rule only applies when the initial breach is "substantial." Michaels, 522 N.W.2d a t 707 (citing Baith, 156 N.W.2d at 579). For purposes of this rule a "substantial breach" is a breach that has effected "such a change in essential operative elements of the contract that f u rth e r performance by the other party is thereby rendered ineffective or impossible, such as th e causing of a complete failure of consideration or the prevention of further performance b y the other party." Baith, 156 N.W.2d at 579 (quoting McCarty v. Mercury Metalcraft Co., 1 2 7 N.W.2d 340, 343 (Mich. 1964) (citations omitted). "To determine whether a substantial

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b re a c h occurred, a trial court considers `whether the nonbreaching party obtained the benefit w h ic h he or she reasonably expected to receive.'" Able Demolition, 739 N.W.2d at 701 (q u o tin g Holtzlander v. Brownell, 453 N.W.2d 295, 298 (Mich. Ct. App. 1990)). The d e ter m in a tio n of which breaches are "substantial" is "inextricably tied to the particular facts o f the case." Chrysler Int'l Corp. v. Cherokee Exp. Co., 134 F.3d 738, 742 (6th Cir. 1998). D e f en d a n t contends that Plaintiff breached the contract in the following respects: (1) b y failing to make the repairs in a timely manner; (2) by failing to retain the parts; (3) by f a ilin g to correct oil and coolant leaks; (4) by failing to keep promises to correct the paint and g el coat issues; and (5) by failing to submit a final invoice or communicate that the repairs co n trac ted for were ever completed. Defendant contends that these failures, taken together, c o n stitu te a whole and complete failure to perform the underlying contract and relieves D e f e n d a n t of its obligation to pay under the contract. (Def.'s Br. re Mot. for Summ. J. 10.) 1 . Timeliness Defendant contends that Plaintiff breached the contract by failing to complete the w o rk in a timely manner. The quote provided that all work would be completed by S e p te m b e r 13. (Ex. 2, Quote.) The original work was not completed until September 29, 2 0 0 4 , and Defendant has admitted that the follow-up repairs were not completed until May 2 0 0 5 , at the earliest. The record reflects that Winters advised Schwendener on September 2 that he was ru n n in g about a week behind on the engine work. (Schwendener Dep. 73.) Schwendener

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testified that he told Winters that he had plans to use the boat in the middle of September. (Id . at 74.) There is no evidence, however, that Schwendener communicated any urgency th a t the September 13 deadline be met. In fact, Schwendener testified that he was

s ym p a th e tic to Winters' efforts to do the best work he could, and Schwendener did not want to sacrifice quality in exchange for time. (Schwendener Dep. 74.) The Vessel was available o n October 1, 2004, and Schwendener used the Vessel in October 2004, and in every season s in c e then. Based upon the evidence of record, the Court finds there is an issue of fact as to w h e th e r the failure to complete the repairs by September 13, 2004, constituted a substantial b re a c h of the contract. 2. Retention of Parts T h e parties' contract provided that all parts were to be retained. (Ex. 2, 8/24/04 Q u o te.) Don Winters testified that it was standard procedure to retain parts until a job is c o m p le te d , but that parts are rarely kept for more than thirty days. (Winters Dep. 32, 113.) W in te rs also testified that it was not normal business practice to deliver the parts to the c u s to m e r. (Id. at 32.) Williams kept the parts removed from Defendant's engine for a p p ro x im a tely four years. During those four years no one from the Schwendener family re q u e ste d the parts or came to pick them up. When Williams closed the Frankfort facility in the fall of 2007, the parts were discarded. (Winters Dep. 32.)

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G iv e n the lapse of time, the normal business practices, the lack of communication, and th e size of the parts, the Court concludes that there is an issue of fact for trial as to whether th e failure to retain the parts constituted a substantial breach of the contract. 3 . Completion of Repairs Defendant contends that Williams failed to complete the repairs contracted for. In su p p o rt of this contention Defendant contends that Williams has admitted that it failed to p ro p e rly complete its initial repairs, and that Williams presented contradictory testimony and n o written documentation regarding its follow-up repairs. Schwendener has testified that the V esse l continues to have coolant and oil leaks, it is burning more oil, there is grit on the port e n g in e dipstick, and the maximum rpm has dropped. (Schwendener Dep. 118, 120-21, 124, 1 2 6 - 2 8 .) In response, Williams has presented evidence that Schwendener and his family have c o n tin u e d to operate the Vessel in their typical fashion, operating the engines between forty a n d seventy hours each summer, including some extended trips (Schwendener Dep. at 111, 1 1 4 -15 ); they have not had any additional mechanical work performed on Defendant's e n g in e s (id. at 116-17); they typically do not operate the Vessel above 2000 rpm (id. at 128); a n d Schwendener has agreed that the coolant and oil leaks are cosmetic and can be cleaned u p with a towel (id. at 121, 126-27). Williams contends that inasmuch as Defendant is o p e ra tin g the Vessel in a normal fashion, the problems Defendant complains about cannot b e deemed a substantial breach of the contract. Williams has also presented testimony from

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W in te rs that the work contracted for was properly performed, that many of the continuing p ro b le m s are not attributable to Williams, and that there is no reason why Plaintiff should not b e paid. (Winters Dep. at 82, 111.) The Court concludes that there are numerous issues of fact concerning what repairs w e re performed, the extent of the remaining problems, and the cause of the remaining p ro b le m s that preclude the Court from determining, as a matter of law, whether Plaintiff s u b s ta n tia lly breached the contract. 4. Paint and Gel Coat D e f en d a n t contends that Williams applied the wrong type and color of paint, applied i t in an unworkmanlike manner, and caused cracking of the gel coat in the cockpit. (S ch w en d e n er Dep. 120, 124.) Winters testified that he received the paint specifications from Schwendener and gave them to the auto parts store that mixed the paint. (Winters Dep. 86-87.) When Winters in v e s tig a t e d Schwendener's complaint about the paint on October 5, 2005, it was Winters' o b s e rv a tio n that "the paint on the underside of the I beams is same as engine and the paint they put on the back is whiter." (Ex. Q, 10/5/05 Repair Order; Winters Dep. 110.) Winters d o e s not know when the I-beams were painted, but he testified that the difference in the paint o n the I-beams was not related to any work that Williams had performed. (Winters Dep. 1 1 1 .)

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T h e evidence presented reveals that there are issues of fact for trial concerning P la in tif f 's responsibility for selecting the paint used on the engine, and for painting the areas th a t allegedly do not match. There are also issues of fact concerning the damage to the gel coat. Schwendener a d v is e d Talbot that Winters damaged the gel coat during the repairs, but Winters does not b e l ie v e he caused that damage. (Talbot Dep. 86.) The Court has insufficient evidence on th e nature of the gel coat issue to determine whether Plaintiff is responsible for the cracking o r whether the cracking constitutes a substantial breach of the contract. 5. Communications D e f e n d a n t contends that Plaintiff failed to submit a final invoice and failed to c o m m u n ic a te that the repairs contracted for were ever completed. T h e record reveals that there were some unresolved issues between the parties, in c lu d in g which items on Schwendener's list of corrective actions Williams would not be ta k in g responsibility for, and Talbot's representations that he would fix the paint issue, in s p e c t the Vessel himself, and look into the abnormal oil samples. (Talbot Dep. 78-79, 858 6 ; Schwendener Dep. 99; Ex. 13, Schwendener's 11/1/05 notes.) However, Plaintiff did issue an invoice on October 6, 2005, after addressing many of the items on Schwendener's lis t, and Plaintiff has presented evidence that sometime after Talbot's November 1, 2005 c o n v e rs a tio n with Schwendener, Williams attempted, but was unable, to contact S c h w e n d e n er either by telephone or by mail. (Talbot Dep. 79; Ex. P.) The nature and extent

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a n d the cause of the communications issues are questions of fact for trial. IV. U p o n review of the parties' briefing and construing the evidence in the light most f a v o ra b le to Plaintiff, the Court concludes that even when the various alleged breaches id e n tif ie d by Defendant are considered together as a whole, there are issues of fact for trial a s to whether there has been such a complete failure of consideration that Plaintiff should be p ro h ib ited from maintaining this action against Defendant for payment under the contract. A c c o rd in g ly, Defendant's motion for summary judgment will be denied. An order consistent with this opinion will be entered.

Dated: June 18, 2009

/s/ Robert Holmes Bell ROBERT HOLMES BELL UNITED STATES DISTRICT JUDGE

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