Opinion ID: 6932938
Heading Depth: 2
Heading Rank: 2

Heading: Welco v. APAC

Text: We would first note the limited scope of APAC’s appeal from the judgment entered by the district court in favor of Welco. APAC has not here challenged the district court’s determination that APAC breached its oral agreement to compensate Welco for the additional work which was necessitated by the defective plans. Rather, the only arguments presented by APAC in appealing the judgment entered in favor of Welco are the following: (1) that the district court erred in concluding that APAC also breached an implied warranty as to the sufficiency of the plans; (2) that the district court erred in calculating Weleo’s damages on its breach of contract claim; and (3) that the district court erred in awarding Welco prejudgment interest. APAC has in this appeal challenged several findings made by the district court. The standard of review as to this aspect of the appeal is whether the challenged finding is “clearly erroneous.” Friend v. Leidinger, 588 F.2d 61, 64 (4th Cir.1978). (a) Breach of Implied Warranty Under the law of South Carolina, 6 “if a party furnishes specifications and plans for a contractor to follow in a construction job, he thereby impliedly warrants their sufficiency for the purpose in view.” Hill v. Polar Pantries, 219 S.C. 263, 64 S.E.2d 885, 888 (1951); see also Hutson v. Cummins Carolinas, Inc., 280 S.C. 552, 314 S.E.2d 19 (App.1984). APAC’s primary argument in this appeal is that the district court erred in applying the rationale of Polar Pantries to the facts of this case. APAC contends that because it neither participated in the actual preparation of the plans nor held itself out as being specially qualified in the field, e.g., as an architect or an engineer, it cannot, as a matter of South Carolina law, be held to have impliedly warranted the adequacy of the plans. According to APAC, under the law of South Carolina only Sirrine, and perhaps the Towns, could be held liable for breach of implied warranty on the facts of this case. Although APAC has cited eases from other jurisdictions which provide some support for its position, see S & D Mechanical Contractors, Inc. v. Enting Water Conditioning Sys., Inc., 71 Ohio App.3d 228, 593 N.E.2d 354 (1991), no South Carolina authority suggests that a court of that State would agree with APAC’s position if confronted with the specific facts of this case. The language and rationale of Polar Pantries are clear and are not subject to the limitations suggested by APAC. That APAC may not have held itself out as an architect or as an engineer does not negate APAC’s implied warranty of the adequacy of the plans, particularly in light of-the uncontradicted testimony presented at the trial that APAC had represented to Welco that the plans were documents that Welco “could build by.” Other South Carolina authority besides Polar Pantries lends support to Welco’s claim that APAC breached an implied warranty as to the adequacy of the plans. In Robert E. Lee & Co. v. Commission of Public Works of Greenville, 250 S.C. 394, 158 S.E.2d 185 (1967), the South Carolina Supreme Court affirmed a jury verdict which had been rendered in favor of two contractors in their suit against the owner of the project seeking damages for, inter alia, breach of an implied warranty as to the adequacy of construction plans. The plaintiffs there had contracted with the defendant to install a pipeline on the defendant’s property. The defendant had furnished the plaintiffs with plans which purported to reveal certain information relating to the subsurface materials and conditions along the pipeline route. Following a second trial, the jury rendered a verdict in favor of plaintiffs on their breach of implied warranty claim. On appeal, the South Carolina Supreme Court affirmed and specifically upheld the trial judge’s instruction to the jury that “failing to record upon the plans the water and subsoil conditions actually encountered constitutes a breach by the defendant of its implied warranty.” Robert E. Lee, supra, 158 S.E.2d at 186. Nowhere in the Robert E. Lee opinion did the Supreme Court of South Carolina suggest or imply that only engineers who actually prepared allegedly defective plans can be held to have impliedly warranted the adequacy of those plans. On the contrary, Robert E. Lee, as well as Polar Pantries, supports the district court’s entry of judgment in favor of Welco on its claim against APAC for breach of implied warranty. Having provided Welco with plans which purported to reflect the actual ground profiles and elevations along the path of the project’s pipeline and having indicated to Welco that the latter could rely upon and “could build by” the plans, APAC cannot later disclaim any implied warranty on the ground that it did not actually prepare the plans. It is a well-recognized principle of warranty law that “if a material state of facts is warranted to exist and it turns out not to be the ease, the warrantor is liable even though he acted on misinformation or in good faith.” Magill v. Gulf & Western Indus., Inc., 736 F.2d 976, 979 (4th Cir.1984). In sum, the district court’s interpretation of South Carolina law on the implied warranty issue was an entirely reasonable prediction as to what the Supreme Court of South Carolina would do if presented with the facts of this case. See Caspary v. Louisiana Land & Exploration Co., 707 F.2d 785, 793 (4th Cir.1983). We will therefore not disturb the judgment of the South Carolina district judge, who was better situated than this Court to determine the nuances of local law. See Caspary, 707 F.2d at 788 n. 5 (“In determining state law in diversity cases where there is no clear precedent, courts of appeal are disposed to accord substantial deference to the opinion of a federal district judge because of his familiarity with the state law which must be applied.”). APAC has also argued that the district court’s finding that APAC “furnished” the Plans to Welco is clearly erroneous. There is no merit to this contention. There is ample evidence in the record to support the district judge’s finding of fact in this respect. Accordingly, we find no error in the district court’s determination that APAC breached an implied warranty concerning the adequacy of the plans. (b) Welco’s Damages APAC next contends that the district court erred in calculating Welco’s damages on its breach of contract claim. In his June 7, 1993 Order, the district judge expressly found that “[a'Jlthough APAC and Welco agreed that the latter would receive additional compensation, there was no agreement as to the amount of compensation Welco would receive for the extra work.” The district judge then quoted from and relied upon decisions of the South Carolina Supreme Court which hold that when an express contract is silent as to price, the law will invoke the standard of reasonableness and permit recovery of the “fair value” of the additional work performed. Gantt v. Morgan, 199 S.C. 138, 18 S.E.2d 672 (1942); Braswell v. Heart of Spartanburg Motel, 251 S.C. 14, 159 S.E.2d 848 (1968). As a general rule, “fair value” or quantum meruit damages are not appropriate when suit is brought on an express contract which contains a specific method for calculating the amount of compensation to be paid for additional work. However, contrary to APAC’s contentions, the subcontract between APAC and Welco did not contain a mechanism for calculating the amount of compensation to be paid for additional work. Examination of the relevant language of the subcontract indicates that it does not describe a precise method for computing Welco’s damages. Rather, the subcontract provided that the amount of compensation for additional work “shall be negotiated ” by the parties using one or more, or a combination of the following methods: (1) previously approved bid prices; (2) an agreed lump sum; or (3) actual costs plus an agreed fixed fee not greater than 15% of actual costs. The subcontract thus envisioned that compensation for additional work would be determined only on a negotiated or agreeable basis. Finding that there was no express agreement between the parties concerning the amount of compensation to be paid for the additional work, the district court determined damages on the basis of the figures negotiated between the parties. There is accordingly no merit to APAC’s argument that the district judge erred in refusing or neglecting to calculate damages as provided for in the contract. This is not a case in which the parties had agreed upon a specific formula or equation for the calculation of the missing price of an express contract. Indeed, in light of the contract’s specific requirement that ■ additional compensation be negotiated between the parties, we conclude that the district judge acted reasonably in adopting as the fair value of the additional work performed by Welco the amount of the claim calculated by Welco and verified and adopted by APAC. Accordingly, we find no error in the district judge’s calculation of the amount of damages to be awarded to Welco on its breach of contract claim. (c) Prejudgment Interest There remains the issue whether Welco is entitled to an award of prejudgment interest. As a general rule, prejudgment interest is not appropriate when a plaintiff seeks to recover unliquidated damages. APAC contends that the recent decision of the South Carolina Supreme Court in Babb v. Rothrock, 426 S.E.2d 789 (S.C.1993), demonstrates that the district judge misapplied the law of South Carolina in awarding Welco prejudgment interest. In Babb, the South Carolina Supreme Court stated as follows: The law allows prejudgment interest on obligations to pay money from the time when, either by agreement of the parties or operation of law, the payment is demanda-ble, if the sum due is certain or capable of being reduced to certainty. The fact that the sum is disputed does not render the claim unliquidated for the purposes of an award of prejudgment interest. The proper test for determining whether prejudgment interest may be awarded is whether or not the measure of recovery, not necessarily the amount of damages, is fixed by conditions existing at the time the claim arose. 47 C.J.S. Interest & Usury § 49 at 124-25 (1982). 426 S.E.2d at 791 (other cits, omitted) (emphasis added). APAC’s reliance on Babb is misplaced. Indeed, if anything, that ease demonstrates that the award of prejudgment interest here was not error. At least as of March 12,1986, APAC was on notice of Welco’s claim for additional compensation and even participated in and verified the calculation of the amount of that claim. APAC’s argument would be more convincing if, within some reasonable period of time after receiving Welco’s letter of March 12, 1986 demanding payment of $505,775, APAC had objected to or protested the amount of the claim. Instead, APAC adopted the figure advanced by Welco as a fair and accurate calculation of the value of the additional work performed by Welco. APAC even made a request to the Towns for an equitable adjustment to the prime contract in that very same amount. Whether or not, as now argued by APAC, it submitted the request for an equitable adjustment to the Towns for its own benefit and compensation rather than for that of Welco, APAC was on and after Welco’s letter of March 12,1986 fully aware of both Welco’s demand for additional compensation and of the nature and precise amount of that demand. By submitting the same figure to the Towns, APAC adopted the amount claimed as reasonable compensation for the additional work. Under the circumstances here, APAC’s obligation to compensate Welco for the additional work was, at least as of March 12, 1986, sufficiently liquidated and undisputed to support an award of prejudgment interest from that date, even if APAC subsequently decided to dispute its liability for that amount. 7 Accordingly, we conclude that the district judge did not err in awarding Welco prejudgment interest.