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Zimmer & Francescon, Inc. v. Rice Lake Contracting Corp.

Court of Appeals of Iowa

May 3, 2017

ZIMMER & FRANCESCON, INC., Plaintiff-Appellee,

         Appeal from the Iowa District Court for Linn County, Sean W. McPartland, Judge.

         General contractor Rice Lake appeals the district court's ruling in favor of its equipment supplier following a bench trial on the parties' breach-of-contract claims. AFFIRMED.

          Jeffrey A. Stone of Simmons Perrine Moyer Bergmann P.L.C., Cedar Rapids, and Nathan R. Sellers of Fabyanske, Westra, Hart & Thomson, P.A., Minneapolis, Minnesota, for appellant.

          Daniel P. Kresowik of Stanley, Lande & Hunter, P.C., Davenport, for appellee.

          Heard by Vaitheswaran, P.J., and Tabor and Mullins, JJ.

          TABOR, Judge.

         Rice Lake Contracting Corporation appeals the district court's ruling that Rice Lake's supplier, Zimmer & Francescon, Inc. (Z&F), met its contractual obligation to deliver four new motors for intermediate lift pumps as part of a major project undertaken by the City of Cedar Rapids following the 2008 flood.[1] Rice Lake contends the rejection of Z&F's motors by the city and its design engineer, HDR, is binding not only on Rice Lake under its prime contract with the city but also on Z&F under its separate supply contract with Rice Lake. During oral arguments, Rice Lake claimed the district court erred in substituting its judgment for HDR's decision that Z&F's motors did not meet the project's "design intent." According to Rice Lake, the court was not authorized to analyze the terms of its supply contract with Z&F given HDR's discretion to reject Z&F's motors unless HDR acted fraudulently in doing so.

         Because we agree with the district court that Z&F met its obligation to Rice Lake to "furnish as submitted" under Rice Lake's instructions regarding these motors, we affirm.

         I. Background Facts and Proceedings

         Construction Project. Flooding in 2008 damaged equipment at the Cedar Rapids Water Pollution Control Facility (the facility). The city hired HDR as the design engineer for its seven-year permanent improvement plan for the facility. Permanent repairs package 3 (the project) was a final phase in the city's plan. Michael Butterfield served as HDR's principal engineer and project manager. Butterfield stamped and sealed engineering documents prepared under his supervision, indicating the documents were "prepared accurately and appropriately for the design conditions." Butterfield provided his seal of approval on the project's plans and specifications.

         The city has general conditions for all of its construction projects. These general conditions are "a variant of the engineering contract documents" and are included in the city's contract with its general contractors. Butterfield explained the city "has a much better working knowledge" of the general conditions but HDR knows the documents "very well."

         Z&F, an Iowa company with nine employees, is a manufacturer's representative and distributor of equipment for waste water treatment plants. Andrew Larson, an experienced salesperson, prepared proposals and secured subsequent orders. Larson's May 2012 memorandum told all potential contractors for the project that Z&F intended to submit a proposal to supply equipment, including the motors at issue.

         Before Larson submitted Z&F's quotation or proposal, he reviewed HDR's plans and specifications, which set out very specific requirements for the motors. Butterfield explained the specifications, through the use of tasks and key notes, set out the "key design parameters" of the motors-horsepower, volts, rpm, and phases.[2] Larson agreed, stating the specifications "identify the parameters [Z&F needed] to compare to the pump requirements" and "taken together, are necessary for Z&F to make the proper selection of a motor in its quotation." Larson understood the plans and specifications' intent was for Z&F's motors to be compatible with the pumps.

         Z&F did not have amperage requirements for its motors when providing its quotation, even though HDR had specified amperage for other equipment.[3]Neither did the bid documents tell Z&F to "replace in kind" or to "replace with compatible motor, " which, similarly, HDR specified for other equipment. Larson understood the plans and specifications for the new motors "weren't asking us to duplicate" the existing motors, and he created Z&F's quotation based on HDR's plans and specifications.

         On May 30, 2012, Larson submitted Z&F's quotation to all contractors, bidding to supply more than $1 million in equipment, including the motors. Z&F's scope of work was limited to "furnishing" the equipment. The parties agree Z&F is a "supplier, " one who furnishes "materials or equipment to be incorporated in the Work by Contractor or any Subcontractor."

         The city hired Rice Lake, a Minnesota company, to be the general contractor for the project. On July 16, 2012, Paul Kujak, the project manager for Rice Lake, accepted Z&F's May 30 quotation by issuing a purchase order to Z&F. The parties agree the purchase order created a contract[4] for Z&F to supply the motors. Rice Lake planned to work with its electrical subcontractor to install the motors after delivery. Rice Lake's purchase order stated:

         (IMAGE OMITTED)

         Larson then contacted Fairbanks, the pump manufacturer, to help coordinate Z&F's ultimate purchase through Fairbanks from U.S. Motors. The next month, August 2012, Larson went to the facility to gather additional information for the shop drawings, which are "submittals or technical data." The shop drawings would be drafted by U.S. Motors and transmitted through Z&F to Rice Lake for the general contractor's approval.[5] Larson took a picture of the nameplate on the existing motors, which provided technical data, including the amperage of the damaged motors.

         Z&F submitted its first set of shop drawings to Rice Lake, and these drawings set out amperage for its proposed motors. Rice Lake reviewed and approved the shop drawings without changes and forwarded them to HDR with Rice Lake's transmittal letter.[6] After its review, HDR rejected the first set of drawings on September 26, 2012, instructing Rice Lake to tell Z&F to revise and resubmit the drawings in line with HDR's six detailed comments. HDR's comments did not call out amperage for the four motors and did not comment on the amperage Z&F specified.

         The "engineer review" section of the city's general conditions states the engineer's "review and approval" of shop drawings "will be only to determine if the items covered by the submittals will, after installation or incorporation in the Work, conform" to the contract "and be compatible with the design concept of the completed Project as a functioning whole." The engineer's approval does not encompass the "means, methods, techniques, sequences, or procedures of construction (except where [such] is specifically and expressly" called for in the contract). Additionally, the engineer's approval "shall not relieve" the contractor from its "responsibility for any variation from" the contract requirements unless the contractor has called the engineer's attention in writing "to each such variation" at the time the contractor submits shop drawings. Butterfield testified Rice Lake did not approach HDR with a change order for Z&F's motors.

         The "resubmittal procedures" in the city's general conditions state the contractor "shall make corrections required by" the engineer to the shop drawings and "shall return" them for another review by the engineer. The contractor "shall" in writing "direct specific attention" to any "revisions other than" the engineer's prior corrections on a previous submittal.

         On November 9, 2012, Larson responded to Kujak about HDR's comments concerning motor speed, cooling capacity, thermostats, rotation, and bearings, and on November 30, Z&F submitted its second set of shop drawings to Rice Lake. Kujak approved Z&F's second set of shop drawings the same day, stamping Rice Lake had "satisfied Contractor's Obligations" as "to Contractor's review and approval as stipulated under General Conditions." The general conditions state Rice Lake is solely responsible for coordinating the work of its subcontractors and suppliers and Rice Lake's obligations "shall include data which is 'complete with respect to quantitates, dimensions, specified performance and design criteria, materials, and similar data." (Emphasis added.) Butterfield explained Rice Lake "had an obligation to verify all of those things under the specifications, " and "the shop drawing does not relieve the contractor of meeting the intent of the contract documents." (Emphasis added.)

         After giving its approval, Rice Lake forwarded the second set of shop drawings to HDR for its review. On December 5, 2012, HDR sent a directive to Rice Lake telling Kujak to instruct Z&F to "furnish as submitted." HDR's comments on Z&F's second submittal included comments on other equipment Z&F was supplying, but HDR did not make any comments about the four motors.

         When Butterfield approves shop drawings, he looks for "general conformance with the design and intent with the specs and drawings" and his approval states either "furnish as submitted, furnish as noted, or revise and resubmit." But according to Butterfield, HDR's instruction to Rice Lake to "furnish as submitted" is not "the equivalent of [a] get-out-of jail card if the contractor does not follow the plans and specs." (Emphasis added.) Larson testified Z&F relies on the engineer stamping as verification "the engineer has validated the plans in conformance with our specifications." According to Rice Lake, shop drawings are another way to document communications and can supplement the contract documents. After Z&F was told to "furnish as submitted, " it instructed U.S. Motors to manufacture the motors.

         On April 1, 2013, Kujak retired and Mark Hinsz became the project manager for Rice Lake. Later in April, Z&F delivered the motors to the project site and invoiced Rice Lake. Rice Lake was not ready to install the four motors at the time of delivery but would work with its electrical contractor to install the motors. Z&F was not responsible for installation.

         Amperage and ...

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