Opinion
No. 86-04808.
Decided April 14, 1988.
Michael Northrop, for plaintiff United States Steel Corporation.
Anthony J. Celebrezze, Jr., Attorney General, and Debra J. DeSanto, Assistant Attorney General, for defendant.
Ike Jenkins, pro se, for third-party defendant.
Plaintiff, United States Steel Corporation (herein "USS"), alleges that on or about February 27, 1985, USS sold and delivered to Jenkins Distributors, Inc. (herein "Jenkins") cyclone fencing for use by Jenkins, on what was defendant Ohio Department of Transportation's (herein "ODOT") outpost garage, Muskingum County project. USS alleges that prior to making the aforementioned delivery, ODOT and USS agreed, orally and in writing, for ODOT to direct payment for the cyclone fencing to USS. USS further alleges it relied on said agreement when it shipped the cyclone fencing to Jenkins. However, ODOT mailed its payment directly to Jenkins, and Jenkins refused to make payment to USS.
ODOT does not dispute that an agreement existed between itself and Jenkins for the purchase of cyclone fencing. However, ODOT argues it did not accept USS's proposal to have payment for the cyclone fencing directed to USS. Moreover, upon receipt of USS's request for joint payment, ODOT informed USS that ODOT's policy did not permit joint payment. ODOT instructed USS that payment could be directed "in care of United States Steel Corporation" if Jenkins made a notarized request and forwarded the same to ODOT's auditor, J.H. Ferguson.
On April 14, 1985, ODOT received an invoice in the amount of $11,684. Upon discovery that the procedure for a notarized request was not adhered to, a voucher was prepared and mailed to Jenkins. On June 3, 1985, USS contacted ODOT's chief of purchasing, John McCarthy, regarding payment. At this time, ODOT found a letter from Jenkins, requesting joint payment. This letter was not sent to the auditor, as required by ODOT; therefore, ODOT tendered payment to Jenkins.
Issues
1. Did a contractual relationship exist between USS and ODOT?
2. If so, did ODOT breach its duty under the terms of the contract?
3. If so, what was the extent of USS's damages?
4. Did USS fail to comply with Ohio's lien statute, R.C. 1311.26?
5. If so, was USS's failure to comply with R.C. 1311.26 a result of USS's detrimental reliance upon ODOT's representation?
6. If so, what was the extent of USS's damages?
Findings of Fact
Jenkins was let a land and building encumbrance on November 14, 1984, in the amount of $11,684. The purpose of this contract was for the installation of a fence at ODOT's outpost garage in Muskingum County, Ohio.
On February 27, 1985, Jenkins purchased cyclone fencing from USS to be used to complete the project. Prior to the purchase, E. A. Welsh, USS's credit manager, sent a letter to ODOT's chief of purchasing, John McCarthy, requesting that ODOT issue joint payment to Jenkins and USS. (Plaintiff's Exhibit A.) McCarthy forwarded the letter to ODOT's auditor's office.
In a letter dated November 29, 1984, ODOT's auditor, J.H. Ferguson, by Don Angle, disbursements auditor, informed USS that it was against ODOT's policy to issue joint checks. (Plaintiff's Exhibit B.) Ferguson further stated that he could, however, permit payment to Jenkins, and direct payment in care of USS. Additionally, Ferguson stated that he required a notarized written request from the state's vendor, authorizing such handling.
On December 4, 1984, Ike Jenkins, President of Jenkins Distributors, Inc., sent a letter to McCarthy, authorizing USS to send payment to Jenkins in care of USS's address. (Plaintiff's Exhibit C.) The December 4, 1984 letter was received by McCarthy, rather than Ferguson, as instructed by Ferguson.
On April 14, 1985, an invoice in the amount of $11,584 was received by ODOT's disbursement section. Thereafter ODOT conducted an audit, determined that the procedure outlined in the November 29, 1984 letter for a notarized request was not adhered to, and found an improperly certified affidavit and waiver of lien, stating all labor, material and equipment were paid for by Jenkins. On April 18, 1985, payment was made by ODOT to Jenkins. (Defendant's Exhibit 7.)
USS contacted McCarthy on June 3, 1985, requesting payment by ODOT. (Plaintiff's Exhibit E.) Subsequently, McCarthy discovered Jenkins's letter directing joint payment. However, this letter was not directed to ODOT's auditor, Ferguson. To date, USS has been unable to obtain payment for materials supplied to Jenkins.
Conclusions of Law
In order to determine whether USS can recover from ODOT, it is necessary to determine whether a contractual relationship existed between the parties. A contract is defined as "[a]n agreement upon sufficient consideration, between two or more persons to do or not to do a particular thing." Lawler v. Burt (1857), 7 Ohio St. 340, 349.
There is no dispute that a contract existed between USS and Jenkins. USS contracted with Jenkins to supply the latter party with cyclone fencing in order for Jenkins to complete its contract with ODOT. (Plaintiff's Exhibit D, invoice for purchase of cyclone fencing.) Thus, USS was Jenkins's subcontractor.
USS asserts the communications which took place between USS and ODOT from November 16, 1984 to June 3, 1985 constitute a valid contract. This argument is not well taken. The court finds that there was an offer by USS, ODOT's rejection and counteroffer, and USS's failure to properly communicate its acceptance of the counteroffer. In other words, USS merely attempted to assure it would be paid.
On November 16, 1984, E.A. Welsh, USS's credit manager, sent a letter to ODOT seeking to accomplish a tri-party agreement. (Plaintiff's Exhibit A.) The purpose of the tri-party agreement was to have ODOT issue joint checks to Jenkins and USS. The court finds that this letter requesting joint payment constitutes an offer.
On November 29, 1984, J.H. Ferguson, ODOT's disbursements auditor, responded to USS's request. (Plaintiff's Exhibit B.) Ferguson's response stated, in relevant part, as follows:
"Department policy does not permit joint payment with our vendor. I can, however, make the warrants payable to our vendor Jenkins Distributors, Inc., and `direct' them in care of United States Steel Corporation at the USS address. I will require a notarized written request from our vendor, authorizing such handling." (Emphasis added.)
Clearly, Ferguson's November 29, 1984 letter is a rejection and counteroffer. The rejection is explicitly stated in the following terms: "Department policy does not permit joint payment with our vendor." (See Defendant's Exhibit 5, defendant's departmental policy.) Additionally, proposing a different contract constitutes a rejection of the offer. Steel v. Murphy (1918), 10 Ohio App. 150, syllabus. ODOT's correspondence contained a proposal for a different contract. The proposal language read, "I can, however, make the warrants payable to vendor Jenkins Distributors, Inc., and `direct' them in care of United States Steel Corporation at the USS address."
In addition, the above-quoted letter should be characterized as a counteroffer. A "counteroffer" or "counterproposal" is defined as a response to an offer which is conditional or introduces a new term. See Schiff v. Schiff (App. 1942), 36 Ohio Law Abs. 626, 45 N.E.2d 132. Ferguson's responsive correspondence outlined both a new term and a condition to acceptance. The new term was the possibility of issuing the warrant to Jenkins and directing payment to USS, rather than issuing a joint check. The manner in which Ferguson described to USS that USS could obtain direct payment ( i.e., requiring notarized written request from vendor) is deemed a condition to acceptance. Hence, the November 29, 1984 correspondence is a counteroffer.
USS argues that it accepted Ferguson's counteroffer. Both parties agree that USS attempted to comply with the condition in the counteroffer to mail a notarized written request from Jenkins, permitting direct payment to USS. (See Defendant's Exhibit 1.) However, USS failed to comply specifically with Ferguson's explicit instructions. Rather than send the notarized acceptance to Ferguson, USS mailed its attempted acceptance to McCarthy, ODOT's chief of purchasing. Consequently, Ferguson never received USS's acceptance of the counteroffer. Thus, a contract was not formed between USS and ODOT.
It should be noted that USS had an available method by which to require ODOT to withhold payment to Jenkins. R.C. 1311.26 provides as follows:
"Any subcontractor, materialman, laborer, or mechanic, who has performed labor or furnished material, fuel, or machinery, or who is performing labor or furnishing material, fuel, or machinery for the construction, alteration, removal, or repair of any property, appurtenance, or structure, described in sections 1311.02 and 1311.03 of the Revised Code, or for the construction, improvement, or repair of any turnpike, road improvement, sewer, street, or other public improvement, or public building provided for in a contract between the owner or any board, officer, or public authority and a principal contractor, and under a contract between such subcontractor, materialman, laborer, or mechanic and a principal contractor or subcontractor, at any time, not to exceed four months from the performance of the labor or the delivery of the machinery, fuel, or material, may file with the owner, board, officer, or the authorized clerk or agent thereof, a sworn and itemized statement of the amount and value of such labor performed, and material, fuel, or machinery furnished, stating when the last of such labor was performed and when the last of such material, fuel, or machinery was furnished, containing a description of any promissory notes that have been given by the principal contractor or subcontractor to the lien claimant on account of the labor, machinery, or material, or any part thereof, with all credits and setoffs thereon, and stating the post-office address of the claimant. Proof that such sworn and itemized statement was mailed by registered letter to the address of the owner, board, or officer, is prima-facie evidence of the filing thereof with the owner, board, or officer."
Because USS failed to file a lien pursuant to R.C. 1311.26, ODOT had no obligation to withhold money. ODOT has no obligation to pay USS, even though ODOT had notice of USS's potential claim. See State, ex rel. Star Supply, Div. of Star Industries, Inc., v. City of Greenfield (S.D. Ohio 1981), 528 F. Supp. 955.
USS argues that but for its reliance on ODOT's representations that USS would be paid, USS would have filed for a lien. This argument is without merit. Based upon the evidence submitted at trial, the court cannot find that ODOT made representations that payment would be issued directly to USS. Thus, USS's reliance was misplaced.
It is the determination of this court that USS has failed to prove by a preponderance of the evidence that a contractual relationship existed between USS and ODOT. Additionally, this court concludes that USS failed to comply with R.C. 1311.26; moreover, ODOT did nothing that resulted in USS's failure to file a lien. Accordingly, judgment is hereby rendered in favor of ODOT and against USS.
Judgment accordingly.
LOWELL B. HOWARD, J., retired, of the Athens County Court of Common Pleas, sitting by assignment.