Memorandum of Decision Re: Repudiation of Contract

FOR THE NORTHERN DISTRICT OF CALIFORNIA In re JIM and ROSALIE STEPHENS,                                       No. 1-90-00412      Debtors. ___________________________/ KINGDOM FINISH CONTRACTORS, INC.,      Plaintiff,    v.                                                                              A.P. No. 1-90-0237 JIM and ROSALIE STEPHENS,      Defendants. ______________________________/
Memorandum of Decision
     Debtors and defendants Jim and Rosalie Stephens, doing business as Trinity Woodworks, are engaged in the business of manufacturing and installing cabinetry. In 1988, they entered into a contract with Webcor Builders, Inc., to manufacture, deliver and install several hundred cabinets to a luxury hi-rise condominium project in San Francisco for $500,000.00.      Webcor had originally told Stephens that there would be no problem with his workers installing the cabinets, even though they were not union members. However, union opposition surfaced immediately, and Webcor informed Stephens that he would have to subcontract the installation. Webcor recommended plaintiff Kingdom Finish Contractors, Inc.      After meeting with Stephens, Kingdom offered to do the installation for $26,000.00. Stephens questioned whether Kingdom could perform the work at this price, since his own estimators had arrived at a figure of $56,000.00 for installation, and that was using non-union workers. Kingdom reiterated that it would do the work for $26,000.00, and the parties signed a contract, prepared by Kingdom, fixing the price for installation at $26,000.00.      After the contract was signed, Kingdom hired two carpenters to do the actual work as its subcontractor for $20,000.00. When those carpenters appeared to start work, they immediately realized that they had made a mistake in agreeing to do the work for only $20,000.00. They had expected an ordinary sort of project, but soon discovered that the owner was expecting very high quality work and that the delivery schedule called for by the general contractor required something of a "piecemeal" installation; instead of being able to install all the cabinets in one unit and then move quickly to the adjoining unit, which would be most efficient and cost-effective for the installers, the plans called for certain types of cabinets to be installed at certain times, requiring the installers to return to many units to complete installation. Moreover, some of the cabinets had not been placed in the right units by Webcor employees, making the job even more difficult.      The disillusionment of the carpenters sent by Kingdom was matched by the disappointment of Webcor with them. Webcor had recommended Kingdom based on its good experience with one of Kingdom's foremen, and had expected him to supervise the job. When the carpenters got off to a very slow start, and then promptly ruined two cabinets by making mistakes which would have been correctable in ordinary projects but were unacceptable for luxury condominiums, Webcor insisted on their removal. Kingdom made an attempt to salvage the job by sending over its foreman, but it quickly became evident that the economics of the job would not permit him to actively supervise the whole job and nothing less was acceptable to Webcor. Webcor proceeded to have its own employees install the cabinets, deducting a total of about $110,000.00 from Stephens' contract. This reduction forced the debtors to file their Chapter 11 petition.      This action was originally filed in state court by Kingdom, alleging breach of contract by Stephens and seeking its lost profit; with removal of the case to bankruptcy court, it became an unsecured claim. The debtors have counterclaimed for the difference between the contract price ($26,000.00) and what Webcor ended up charging them for installation. This matter is a core proceeding pursuant to 28 U.S.C. sections 157(b)(2)(B) and (C).      The court finds no cause for Kingdom's repudiation of the contract based on the fact that not all cabinets had been delivered to the proper units. Its contract with Stephens recited that it was entitled to extra money for delays caused by Webcor; Stephens would have put up little fight to a reasonable adjustment, since Kingdom's bid was less than half of the estimated cost of installation.      Webcor's refusal to accept the work of the carpenters sent by Kingdom was justified. The contract required Kingdom to perform the work in a workmanlike manner according to standard practices. Once the carpenters saw that they had made a mistake in agreeing to do the job for $20,000.00, their attitude was less than workmanlike and their work was unacceptable for the type of project.      Kingdom asks the court to find an implied term in its contract with Stephens that cabinets would be delivered in such a way as to make the work of the installers as efficient as possible. The court sees no basis for implying such a term. Both parties were experienced in business, and the plans for the project were readily available. While delivery was not ideal from the installer's view, it was not so odd or unusual as to be unforeseeable by an experienced installer. Moreover, the contract specifically called for installation "as scheduled." The cabinets were delivered as scheduled. The problem is that Kingdom did not attempt to determine what that schedule was.      Based on the foregoing findings, the court concludes that Kingdom breached its contract with Stephens by failing to complete its contract to install the cabinets. The court rather liberally in favor of Kingdom assumes that it would have been entitled to an extra $4,000.00 for delays caused by stocking problems, so that the total of its contract would have been $30,000.00. The Stephens' damages are accordingly the difference between that amount and the amount they were charged by Webcor for installation.      There is some confusion in the record as to exactly how much Webcor charged for installation, as the $110,000.00 figure includes stocking the project, which was not part of the Kingdom contract. A Webcor official estimated that only about five percent of that total was for stocking, but there are other indications of a higher sum for stocking; Stephens' trial brief states the amount at $25,000.00. In fairness to Kingdom, the court will not adopt a higher figure than that urged by Stephens, and finds that the amount backcharged by Webcor on account of installation was 1$85,000.00.      1. Another contractor, Commercial Casework, was employed briefly and Stephens asserts its $4,160.00 bill as additional damages. However, the bill was sent to Webcor, not Stephens, and the court accordingly assumes that it was included in Webcor's backcharges. Accordingly, plaintiff shall take nothing by its complaint and defendants shall have judgment in their favor on their counterclaim in the amount of $55,000.00, plus costs of suit. Counsel for defendants shall submit an appropriate form of judgment, which shall properly reflect that the debtors are the defendants and counterclaimants, not their fictitious business name "Trinity Woodworks."      This memorandum constitutes the court's findings and conclusions pursuant to FRCP 52(a) and FRBP 7052.
Dated: September 5, 1991                                                                              _______________________                                                                                                                      Alan Jaroslovsky                                                                                                                      U.S. Bankruptcy