Court Opinion

ID: 24919
Source: CourtListenerOpinion
Date Created: 2010-04-25 08:28:43+00
Date Added: 2024-06-11T15:04:40.462913
License: Public Domain

IN THE UNITED STATES COURT OF APPEALS

                         FOR THE FIFTH CIRCUIT

                         _____________________

                              No. 00-41233
                            SUMMARY CALENDAR
                         _____________________

DON KRUEGER CONSTRUCTION CO.,

                               Plaintiff-Counter Defendant-Appellee,

                                versus

ALLIANCE STEEL, INC.,

                               Defendant-Counter Claimant-Appellant.

_________________________________________________________________

      Appeal from the United States District Court for the
          Southern District of Texas, Victoria Division
                          No. V-98-CV-29
_________________________________________________________________
                          August 7, 2001

Before JOLLY, JONES, and BENAVIDES, Circuit Judges.

PER CURIAM*:

     Defendant    Alliance   Steel,       Inc.   (“Alliance”)   appeals   the

district court’s award of damages in this breach of contract case

involving Alliance’s agreement to supply a pre-engineered steel

building to Plaintiff Don Krueger Construction Company (“Krueger”).

Finding no error in the district court’s determination that Krueger

     *
      Pursuant to 5TH CIR. R. 47.5, the court has determined that
this opinion should not be published and is not precedent except
under the limited circumstances set forth in 5TH CIR. R. 47.5.4.

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reasonably mitigated its damages when it accepted a higher bid

after Alliance repudiated the contract, we AFFIRM.

                                   I

      In January 1998 Krueger, bidding for a contract to construct

an   elementary   school,   solicited   bids   from   subcontractors   to

construct and provide a steel building for use in construction of

the school.   Alliance submitted a bid of $459,603; the next lowest

bid, submitted by Ceco Builders, was $959,724.         Although Krueger

had never done business with Alliance, Krueger accepted its bid

because it was significantly lower than the other bids received.

      At Alliance’s request, Krueger sent a letter to Alliance

confirming that Alliance had been awarded the contract.            That

letter also stated that Alliance would be receiving a purchase

order for the building within two weeks that was to be signed and

returned to Krueger.    No objections to this letter were made by

Alliance.

      Soon after, Alliance sent a letter asking Krueger to sign

Alliance’s form contract to formalize the agreement in writing.

While industry custom provides that the general contractor supplies

the subcontractor with a purchase order containing the terms of the

agreement, Alliance apparently did not conduct business according

to this custom and preferred to utilize its own form contract.

Krueger examined Alliance’s form contract and discovered some

variances between provisions in that contract and the requirements

                                   2
of Krueger’s contract with the school district.1

     After a series of conversations and confrontations during

which Alliance refused to sign Krueger’s purchase order, Alliance

eventually repudiated the contract.2 Following the breach, Krueger

sought substitute bids for steel buildings in order for it to meet

the demands of its contract with the school district.     Although

Krueger received a bid from Mart, Inc. to supply the building for

$491,184, Krueger eventually accepted the bid of Mid-West Steel

Building Company for $742,264.   Krueger did not utilize Mart’s bid

because Mart was a vendor, not a manufacturer, and was planning to

buy a steel building from Alliance and supply it to Krueger.

Concerned about Alliance’s apparent refusal to accept the terms of

Krueger’s contract with the school district, Krueger did not accept

Mart’s bid.

     Alliance argued before the district court that Krueger failed

to mitigate its damages by accepting the higher bid.   The district

court ruled that Krueger properly mitigated its damages despite

accepting the higher bid because Mart’s reputation was unknown and

Mart was not going to manufacture the building itself, but rather

         1
       Specifically, Alliance provided warranties that were more
limited than those required by the school district, included
different choice of law provisions, and did not include liquidated
damages.
     2
      The formation of a contract between Krueger and Alliance is
undisputed, and Alliance does not appeal the district court’s
determination that Alliance repudiated the contract on March 6,
1998.

                                 3
use Alliance’s building.     The court found that, because Alliance

had already acknowledged its refusal to sign Krueger’s purchase

order without modifications,       Krueger acted reasonably when it

refused to accept that bid.

                                   II

     Alliance   appeals   only   the    district   court’s   finding   that

Krueger mitigated its damages.          Alliance bears the burden of

showing that Krueger’s mitigation efforts were insufficient.            See

Bank One, Texas, N.A. v. Taylor, 970 F.2d 16, 29 (5th Cir. 1992).

     When evaluating the propriety of cover following a breach of

contract, a court should determine “whether at the time and place

the buyer acted in good faith and in a reasonable manner, and it is

immaterial that hindsight may later prove that the method of cover

used was not the cheapest or most effective.”          Tex. Bus. & Com.

Code Ann. § 2.712, cmt. 2.        The district court has written a

thorough opinion in this case, and we agree with the district

court’s conclusion that Krueger acted reasonably in its decision to

reject Mart’s bid.   Krueger was unfamiliar with Mart’s reputation,

while Krueger had prior business dealings with Mid-West, whose bid

Krueger eventually accepted.     Most importantly, Mart was not even

planning to manufacture the building; instead, it intended to

purchase Alliance’s building, mark up the price, and re-sell it to

Krueger.   Knowing from prior dealings that Alliance had refused to

sign Krueger’s purchase order and had not agreed to some of the

                                   4
requirements of the general contract between Krueger and the school

district, Krueger made a reasonable choice to pass on Mart’s bid.

     Under these facts, Alliance has failed to satisfy its burden

of showing that Krueger’s mitigation efforts were deficient.   The

district court’s award of damages is therefore

                                                 A F F I R M E D .

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