Bluegrass Center, LLC v. U.S. Intec, Inc.

Citation: 49 F. App'x 25Docket: No. 01-3313

Court: Court of Appeals for the Sixth Circuit; October 9, 2002; Federal Appellate Court

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U.S. Intec, Inc. appealed a judgment from a bench trial favoring Bluegrass Center, LLC, which sought damages for alleged faulty installation of an Intec roof. Bluegrass claimed negligence in installer training and breach of guarantee, but the judgment was based on promissory estoppel. Intec contested this judgment, arguing that promissory estoppel was not included in the original complaint, that Bluegrass failed to prove it, that the court improperly admitted parole evidence, and that the awarded damages were excessive. Additionally, Intec appealed the denial of a pre-trial summary judgment.

The case centered on Bluegrass's ownership of a shopping center in Maysville, Kentucky, where it sought bids to replace the roof, requiring a warranty for the new installation. Randy Jewell from Jewell Construction submitted a bid to install an Intec roof with a 12-year factory warranty. Bluegrass's managing partner, Bernard Hackman, expressed concerns about Jewell's lack of experience and certification, seeking assurances that Intec would support Jewell throughout the project. Intec salesperson Larry Villers reassured Hackman that he would oversee Jewell’s certification and installation, documenting these assurances in a letter stating that he would assist with the project and ensure a quality installation.

Intec later provided a "Certificate of Merit" certifying Jewell as an approved applicator, but did not present evidence of adherence to its usual certification procedures. Villers was not involved in the certification process and could not confirm whether Jewell's prior work was inspected. Hackman relied on Villers's letter and Jewell’s certification in selecting Jewell for the roofing contract.

Neal Hatcher testified that Jewell was selected for the roofing job because he was expected to perform correctly under supervision. Jewell lacked formal instruction prior to certification and installation. Villers was present initially to assist and instruct Jewell on proper installation techniques, including torching seams and screw spacing. Villers visited the site every two weeks for inspections and communicated with Jewell weekly. Jewell claimed to have followed Villers' oral instructions closely. Although Villers mentioned that a specifications manual was typically mailed to installers, no evidence confirmed that Jewell received it, and Villers could not recall giving it to him. 

The roof experienced leaks during and after installation, prompting Jewell to caulk gaps and suspect separated seams. Villers advised Jewell to retorch the membrane seals, which appeared to resolve some leaks. Following tenant complaints, Hackman consulted Jewell and Villers about the leaks. Villers indicated that the membrane might not adhere properly. Bluegrass withheld final payment until Intec confirmed the installation's integrity and the absence of leaks. After inspection, Craig Noble from Intec assured Hackman that the installation was satisfactory, leading Bluegrass to issue the final payment.

A written guarantee was signed by Jewell, Dever, and Noble, stating that Intec would repair or replace roofing materials for leaks resulting from specific causes, including workmanship issues. It specified that the guarantee's remedy was exclusive and that any leaks discovered within two years due to improper installation would be the sole responsibility of the roofing contractor, with no obligation placed on Intec to address those leaks.

The guarantee explicitly states that it replaces any other warranties or guarantees, including implied warranties of merchantability or fitness. It clarifies that inspections by Intec during and after the roofing application do not absolve the roofing contractor from the responsibility of proper installation and do not waive the terms of the guarantee. Furthermore, no Intec representative has the authority to assume additional liability beyond what is written in the guarantee. After issuing the guarantee, leaks appeared in the roof, leading to a dispute about responsibility. Intec's staff indicated that the leaks stemmed from issues with HVAC units and parapet walls, claiming these were the building owner's responsibility to repair. Bluegrass, the building owner, hired another contractor, Jenkins, to fix the leaks, but they persisted. Jenkins noted that improper spacing of screws and torn seams were to blame for the leaks, contrary to Intec's specifications for screw placement. Intec did not provide independent expert testimony to counter Jenkins’s claims, and the district court questioned the credibility of Intec’s employee, Voight. Bluegrass eventually filed a complaint against Intec for negligent instruction, negligent manufacture, and breach of guarantee, dropping the negligent manufacture claim before trial. The district court ruled in favor of Bluegrass based on promissory estoppel without addressing the other claims. Intec's request to amend the findings was denied, leading to the appeal. On appeal, the court reviews legal interpretations de novo but factual findings for clear error, deferring to the district court’s credibility assessments.

Intec contests the denial of its motion for summary judgment, noting that generally such denials are not subject to renewal after a trial on the merits. Intec claims that under Ohio procedural rules, promissory estoppel must be separately pleaded in breach of contract cases, but this is not applicable as the case falls under Federal Rules of Civil Procedure. Federal notice pleading requires that pleadings include either direct or inferential allegations of all material elements necessary for recovery under a viable legal theory. Intec asserts that the district court could not amend pleadings to include a promissory estoppel claim without a motion from the parties. However, Fed. R. Civ. P. 15(b) allows for amendments to conform pleadings to evidence when issues are tried with the express or implied consent of the parties. The district court based its decision on Fed. R. Civ. P. 54(c), which allows for relief to be granted even if not specifically sought in the pleadings, emphasizing that valid claims should be allowed regardless of counsel's oversight at the pleading stage, provided the opposing party is not prejudiced. Intec contends it did not consent to the inclusion of promissory estoppel and objected during closing arguments. However, Rule 54(c) does not necessitate consent as Rule 15(b) does, though courts still require that no prejudice is suffered by the opposing party. The record indicates that Intec had sufficient notice of the facts underlying Bluegrass's claim for relief, fulfilling the notice pleading requirement.

Bluegrass asserted a claim of promissory estoppel while framing its argument under the theory of 'negligent training.' To establish promissory estoppel under Ohio law, the plaintiff must prove: 1) a clear and unambiguous promise; 2) reasonable and foreseeable reliance on that promise; 3) actual injury resulting from that reliance. Bluegrass's complaint indicated that Intec was responsible for providing technical expertise on installation procedures, which was allegedly compromised by negligence due to improper instructions. Bluegrass cited statements from Mr. Villers, who assured Bernard Hackman of his presence during the initial installation days and regular follow-ups to ensure correct installation. Additionally, Villers implied that if Jewell Construction was selected as the contractor, he would ensure proper installation through guidance. Bluegrass contended reliance on these assurances when awarding the contract to Jewell Construction, which was certified by Intec as a qualified installer. The final pretrial order outlined claims against Intec for negligence in both providing technical expertise and certifying Jewell Construction. Bluegrass maintained that Intec was aware of its allegations regarding the promise of training, the reliance on that promise, the foreseeability of the reliance, and the resulting injury from improper installation. Evidence presented at trial by Bluegrass also supported the elements of promissory estoppel, of which Intec was fully cognizant.

The claim's core lies in its factual elements, and misidentifying a legal theory does not invalidate it. Intec contended it would have produced more evidence regarding the certification and Villers letter if aware they were in dispute. However, the final pretrial order flagged the certification as crucial to Bluegrass’s claim, and Intec had already presented evidence on this process and its implications. The Villers letter was also anticipated, having been referenced in opposition to the summary judgment motion as a key assurance for the roofing contract with Jewell. Intec questioned Villers about the letter at trial, demonstrating awareness and the opportunity to address these issues. Intec's claim of prejudice regarding the testimony of Dever, who signed the guarantee, is unfounded as evidence about Bluegrass’s actions leading to the guarantee was already presented by another partner. Thus, the district court could appropriately assess Bluegrass's entitlement to relief under the theory of promissory estoppel. 

On the evidentiary front, Intec sought to exclude parol evidence concerning pre-guarantee representations, arguing the district court improperly admitted it to alter the guarantee's terms. The parol evidence rule states that an oral agreement cannot supersede a signed document on the same subject with differing terms. Additionally, promissory estoppel does not apply to oral statements that precede a written contract covering the same subject. The court upheld that Intec’s promise to train Jewell was not part of the guarantee's subject matter, which dealt with responsibilities for installation issues, separate from the training promise that influenced Bluegrass’s contractor selection. Once training was completed, the guarantee governed the responsibilities related to installation errors.

Intec contends that the salesman’s statements about training violate the express terms of the guarantee, which disclaims any warranties not explicitly written in the document. Although the guarantee excludes other guarantees and warranties, it lacks an integration clause that would establish it as the sole agreement between the parties, thus allowing for the admission of parole evidence to support a supplemental promise not conflicting with the guarantee. The guarantee's disclaimers pertain to installation issues but do not address a prior promise to train Jewell in installation techniques. The district court correctly admitted evidence regarding the training promise.

Intec challenges Bluegrass's claim of promissory estoppel, asserting that Bluegrass did not demonstrate a clear promise or reasonable reliance on it. Intec argues that no specific language in Villers's letter supports the alleged training promise. However, the determination of promissory estoppel hinges on witness credibility. The district court found sufficient evidence supporting that Intec promised to train Jewell in proper roof installation. Testimonies from Bluegrass partners indicated that Villers assured them he would provide guidance throughout the installation. Although Villers’s letter did not explicitly promise training, its language and supporting testimonies substantiate the district court's conclusion regarding the promise.

Intec also argues that Bluegrass's reliance on the promise was unreasonable due to Jewell's inexperience and the limited training time provided. Nonetheless, Bluegrass’s awareness of Jewell’s inexperience actually lends credibility to their reliance on Intec’s commitment to provide instruction, reinforcing the logical expectation that a manufacturer would train a contractor on its product installation. The district court's ruling aligns with this reasoning.

Jewell testified that his former employer received guidance from Villers on installing Intec roofs, a duty Villers acknowledged as part of his role at Intec. Villers emphasized Intec's vested interest in ensuring proper roof installation to maintain customer satisfaction. This testimony supported the district court's conclusion that Bluegrass reasonably relied on Intec's promise to instruct Jewell in the installation process. Intec contended that it fulfilled its promise by certifying Jewell; however, the court found this certification insufficient since Jewell lacked the necessary knowledge for correct installation. Villers’ commitment included not only assisting with certification but also being present to instruct Jewell, which was crucial for assuring Bluegrass of a quality installation.

On appeal, Intec did not dispute the finding that Villers provided incorrect installation instructions, leading to a faulty roof. Intec's argument that Villers' presence at the installation’s start fulfilled the promise ignored the purpose of his assurance—proper instruction. The district court established that Bluegrass suffered damages due to reliance on Intec's unfulfilled promises. The court awarded reliance damages, justified by the cost of repairing the deficient roof work, as supported by relevant case law.

Intec challenged the damages awarded, arguing insufficient evidence of all roof sections leaking post-installation. However, Bluegrass's expert witness testified that the entire roof required replacement to prevent future leaks, and Intec failed to present counter-evidence. The district court's acceptance of this testimony was deemed appropriate, with its findings on future leaks not contrary to the evidence.

The court affirmed the judgment, noting Intec's loss of records related to Jewell’s certification and appropriately granting judgment based on quasi-contract or unjust enrichment principles, even amid a breach of contract claim. The court also factored in Bluegrass's prior expenses for replacing certain roof sections in its damage calculations.