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08/07/97 LANE ENTERPRISES INC. VS L.B. FOSTER

August 7, 1997

LANE ENTERPRISES, INC. VS L.B. FOSTER COMPANY, APPELLANT; L. B. FOSTER COMPANY, APPELLANT VS LANE ENTERPRISES, INC.


Appeal from the Order dated November 20, 1996 in the Court of Common Pleas of Bedford County, Civil Case No. 163 of 1994. Before HOWSARE, J.

Appeal from the Order dated November 20, 1996 in the Court of Common Pleas of Bedford County, Civil No. 867 for 1993. Before HOWSARE, J.

Before: Cirillo, P.j.e., And Johnson And Ford Elliott, JJ. Opinion BY Cirillo, P.j.e. Ford Elliott, J., files a Dissenting Statement.

The opinion of the court was delivered by: Cirillo

OPINION BY CIRILLO, P.J.E.

Filed August 7, 1997

L. B. Foster Company (Foster) appeals from the order entered in the Court of Common Pleas of Bedford County. *fn1 We reverse.

This appeal arises out of litigation concerning an agreement between Foster, a manufacturer of steel bridge components and Lane Enterprises, Inc. (Lane), a company specializing in the coating of steel materials. In the spring of 1992, Foster agreed to sell Hammond Construction, Inc. (Hammond) various bridge components for use in the construction of a bridge in Summit County, Ohio. This agreement (the Hammond Agreement) specified that Foster was to supply the bridge components in two separate stages. The Hammond Agreement also stated that the bridge components were to be coated in accordance with the Ohio Department of Transportation (ODOT) specifications. *fn2 Because Foster was not equipped to coat the bridge components that it manufactured, it sought an outside contractor, Lane, to perform the coating process. On September 23, 1992, Foster and Lane orally agreed that Lane would clean and coat the bridge components. The agreement was confirmed by Foster's purchase order which specified that all cleaning and coating performed by Lane was to be in compliance with ODOT standard specifications for construction and materials and that Lane was not to ship any coated components without prior approval from an ODOT inspector (The Lane Agreement). In addition, reflecting Foster's delivery obligations pursuant to the Hammond Agreement, the Lane Agreement provided that Lane clean and coat the bridge components in two separate stages, the first stage to be delivered in October of 1992 (Stage I) and the second stage in June of 1993 (Stage II). pursuant to the Lane Agreement, Foster shipped Stage I of the uncoated bridge components to Lane's facility in Carlisle, Pennsylvania for processing. Lane then commenced the cleaning and coating process for the Stage I components. During cleaning, however, some steel residue (shot) as well as other surface contaminants remained on the steel and became trapped under the coating. *fn3 ODOT Inspectors visited Lane and examined the coated components. Although the ODOT inspectors were not fully satisfied with the amount of contamination trapped under the epoxy coating, they permitted shipment pending removal and re-application of the coating.

On January 5, 1993, Lane's quality assurance manager, Gary Hinkelman, wrote a letter to Foster detailing the problems that Lane faced while coating the Stage I components. Hinkelman explained Lane's inability to remove all of the contaminants and inquired as to whether Foster desired Lane to coat the Stage II components or retain Midwest Coating to complete Stage II. On January 27, 1993, a meeting was held at the bridge construction site. ODOT engineer David Nist conducted an inspection of the delivered stage I components. Nist performed a contamination test by chipping a piece of the epoxy coating which revealed backside contamination. Additionally, Nist's inspection revealed that the epoxy coating on the trimbars, components attached to the sides of the bridge floor, was readily removable. Nist then informed Lane that the coating procedure did not adhere to the Steel Structure Painting Council's surface preparation standard ten (SSPC SP-10) which was required for ODOT's approval. Nist, therefore, rejected the coated components.

A second on-site meeting was convened on February 5, 1993 to discuss how to rectify the situation. Representatives from Lane, Foster, and Hammond were all present. Lane representatives noted that pursuant to SSPC SP-10, ten to twenty percent backside contamination of an epoxy chip was acceptable. Via teleconference, ODOT vehemently disagreed, stressing that SSPC SP-10 allowed zero percent backside contamination. Lane representatives then informed those present that if SSPC SP-10 required zero percent contamination, Lane would be unable to meet those requirements.

On February 8, 1993, ODOT sent a letter to Hammond formally rejecting the Stage I coated bridge components in their present condition. ODOT proposed, however, that if the unacceptable portions of the components underwent certain field repairs, ODOT would accept the components. Foster sent a letter to Lane advising that Foster would withhold payment until corrections were made. At this time, Foster still owed Lane $18,018.06 for Stage I. Lane agreed to assume the cost of the field repairs, which would be deducted from the $18,018.06 still owed to Lane. Hammond then subcontracted with Thomarios Painting to complete the field repairs at a cost of $10,935.84. After the repairs were completed, Lane requested the amount still owing on Stage I, $7,082.22.

ODOT eventually permitted Hammond to proceed with erection of the bridge, thus, presumably approving the repaired bridge components. *fn4 On June 15, 1993, Foster sent Lane a letter inquiring as to whether Lane intended to perform Stage II of the Lane Agreement. The letter also stated that outstanding monies due Lane for Stage I, $7,082.22, would not be released until Lane gave assurances concerning its commitment to Stage II of the Lane Agreement. Lane responded that it would not discuss Stage II until Foster remitted the monies owed under Stage I. Foster sent a second letter on July 2, 1993, repeating its request for assurance of performance by Lane. Lane again responded that it would not proceed in any way until Foster satisfied the full payment for Stage I of the Lane Agreement. On August 17, 1993, Foster, faced with the prospect of delay damages under the Hammond Agreement, hired Encor Coating Incorporated (Encor) to complete Stage II at a cost of $99,329.15, $42,055.00 more than it would have paid Lane to complete Stage II under the agreement.

Foster then initiated suit against Lane by filing a writ of summons in Bedford County. Lane also initiated suit, filing a complaint in Cumberland County. The cases were subsequently consolidated in Bedford County and a bench trial ensued. The trial court found in favor of Lane on its counterclaim in the amount of $7,082.22. This appeal followed. Foster presents the following issues for our consideration:

1. Whether the principles of section 2-609 of the Uniform Commercial Code apply to this case?

2. Whether a party has the right to request adequate assurances that a contract will be performed when the obligor 1) presents in writing a statement that the obligor is only capable of producing defective work and that the obligee might look to obligor's [sic] competitor for completion of the work; 2) makes statements that the contract cannot be completed under the guidelines / specifications imposed by the purchaser; and 3) when the work done by the obligor is rejected in total by the purchased at the job site?

3. Whether a party's good faith withholding of a small percentage of the overall contract price constitutes such a material breach as to excuse the other party from performing its contractual obligations?

As an initial matter, we must discern whether the present appeal is properly before this court. "Issues not raised in the lower court are waived and cannot be raised for the first time on appeal." Pa.R.A.P. 302. Our courts have consistently interpreted this rule to require litigants to both raise and preserve issues in the lower court to prevent waiver. See Yudacufski v. Department of Transportation, 499 Pa. 605, 454 A.2d 923 (1982); Randt v. Abex Corp., 448 Pa. Super. 224, 671 A.2d 228 (1996). In civil non-jury trials, litigants desiring to avoid waiver of issues on appeal generally must first file post-trial motions in the trial court. Pa.R.C.P. 227.1(b)(2) ("Grounds not specified [in post-trial motions] are deemed waived . . . "). See Fernandes v. Warminster Mun. Auth., 296 Pa. Super. 523, 442 A.2d 1174 (1982). The purpose of the waiver rule is to promote judicial economy by providing the trial court with an opportunity to review and reconsider its earlier rulings and correct its own error. Soderberg v. Weisel, 455 Pa. Super. 158, 687 A.2d 839 (1997). Our supreme court, in the seminal case of Dilliplaine v. Lehigh Valley Trust Co., 457 Pa. 255, 257, 322 A.2d 114, 116 (1974), explains how a failure to preserve issues could drain judicial resources:

The diligent and prepared trial lawyer - and his client - are penalized when an entire case is retried because an appellate court reverses on the basis of an error opposing counsel ...


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