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Mobilpref SpA v. Coastal Construction Of South Florida, Inc.

United States District Court, S.D. Florida

March 1, 2017

MOBILPREF, SpA., Plaintiff,
v.
COASTAL CONSTRUCTION OF SOUTH FLORIDA, INC. d/b/a COASTAL CONDOMINIUMS, a Florida corporation, and ITAL KITCHEN INTERNATIONAL, INC. a/k/a CAPITOL HOLDING, a Florida Corporation. Defendants. COASTAL CONSTRUCTION OF SOUTH FLORIDA, INC. d/b/a COASTAL CONDOMINIUMS, Counter-Plaintiff,
v.
MOBILPREF, SpA., Counter-Defendant.

          FINDINGS OF FACT AND CONCLUSIONS OF LAW; FINAL JUDGMENT ON ALL CLAIMS

          EDWIN G. TORRES JUDGE

         This case came before the Court for non-jury trial on October 26-29, 2015, and January 13, 2016. The parties later filed proposed findings of fact and conclusions of law for the Court's consideration. The Court's review of the greater weight of the evidence in the case requires the entry of Judgment for Plaintiff in Part and for Counter-claimant in Part. This Court's Findings of Fact and Conclusions of Law follow, as well as the Court's resulting Final Judgment.

         I. FINDINGS OF FACT[1]

         A. Procedural History

         Mobilpref, SpA. (“Mobilpref”) commenced this action on January 7, 2014, in a two-count complaint seeking damages for breach of contract and account stated. [D.E. 4]. Mobilpref seeks 240, 443.43 euros, approximately $336, 620.80 based on the exchange rate it claims was in effect at the time of the project, for the manufacture and sale of kitchen, closet and related materials it delivered without complete payment. The complaint sought contractual damages from Ital Kitchen International, Inc., a/k/a Capitol Holding (“Ital”) and Coastal Construction of South Florida, Inc. d/b/a Coastal Condominiums (“Coastal”). The materials were purchased by Coastal for installation in the St. Regis hotel project in Bal Harbour, Florida (“the Project”).

         On January 29, 2014, Coastal filed its initial answer and affirmative defenses. [D.E. 10]. On May 16, 2014, Coastal filed an amended answer, affirmative defenses and counterclaim. In its answer, Coastal admits it did not pay Mobilpref the full contract price but alleges that Mobilpref breached the Parties' agreements by improperly shipping goods, delivering non-conforming goods, and failing to deliver all the goods that were ordered. Coastal demands judgment in its favor on Mobilpref's complaint.

         As for its counterclaim, Coastal admits it has no financial loss arising from Mobilpref's alleged breaches; rather, the counterclaim seeks damages for Mobilpref's breach of contract, fraud, fraud in the inducement, negligent misrepresentation, and unjust enrichment, all under the auspices of an assignment received from its surety (Liberty Mutual). Coastal demands damages of $1, 151, 385.91. [D.E. 23].

         Mobilpref dismissed Ital from the case on May 18, 2015, [D.E. 55]. After discovery and motion practice, the complaint and counterclaim went to trial before the Court (as the parties had contractually waived their respective rights to a jury trial). This case came up for non-jury trial before the Court on October 26-29, 2015, and concluded on January 13, 2016. After an opportunity to review the transcript of the trial, the parties submitted their proposed findings of fact and conclusions of law for the Court's consideration. As the Court found that neither party's proposed findings could be adopted without material modification, the Court prepared its own findings after thoroughly reviewing the available transcript and the documents submitted in evidence.

         B. The Project

         This case arose from the construction of the St. Regis Hotel in Bal Harbour, Florida. St. Regis was a high-end luxury hotel and condominium project for Starwood, a hotel and resort conglomerate (“Starwood” or “owner”). Coastal was selected by Starwood to serve as general contractor for the construction of a multi-million dollar hotel and residential complex across from the Bal Harbour Shops.

         Bill Ford was a vice-president of Coastal and designated as Coastal's corporate project executive in charge of the Project. Ford had overall responsibility for all aspects of the Project. Ford was Coastal's primary contact with Starwood as well as with Coastal's many subcontractors on the Project. Coastal had between 60-80 subcontractors on site at any given stage of the Project.

         Coastal's scope of work included custom-made kitchens and closets for residential condominium units having sale prices exceeding $1, 000, 000. Starwood requested that Coastal obtain a bid from Italkitchen International, Inc. (“Ital”), along with several other cabinet subcontractors, for the cabinet supply and installation that would utilize high-end Italian-made materials. The subcontract required the manufacture, delivery, fabrication and installation of cabinets and closets for the residences. DX 2.

         For that purpose, Coastal selected Ital for the project. On October 22, 2008, Coastal entered into a written subcontract with Ital for $13, 625, 000 to provide and install the custom kitchens and closets. DX 2.

         Liberty Mutual Insurance Company (“Liberty Mutual”) provided payment and performance bonds for Ital on the Project as required by the subcontract. Liberty Mutual assured Ital's performance of the work and payment of its subcontractors and suppliers. DX 19.

         The initial subcontract included cabinets for 268 units. T.II-277:22-25. This subcontract included kitchenware that which Starwood planned to provide with the units. But, due to the deterioration of the real estate market, Starwood decided not to finish 50 units. Coastal also removed the kitchenware from the subcontract, thereby reducing the number of units to 218 and the subcontract price to $9, 414, 061.79. DX 3. Ultimately, through other revisions, there were 216 units which were to receive kitchens and closets under the Ital subcontract. T.II-290:1-4.

         C. Mobilpref Contract & Commencement of Work

         To satisfy its obligations to Coastal, Ital contacted an Italian company, Mobilpref, to manufacture and deliver the kitchen and closet component parts to Miami, Florida. Ital and Mobilpref had worked together on other projects before. This arrangement contemplated that, after delivery, Ital was obligated to affix the necessary hardware, assemble the component parts, and install the completed assembled cabinets in each unit in the Project. The price of the original order for the goods purchased and ordered by Ital was 1, 787, 797.89 Euros. DX 26.

         Under its contract Mobilpref agreed to receive the orders and technical drawings from Ital and produce the goods in accordance with those drawings and orders. Mobilpref was also required to prepare the goods for shipment to Miami. Ital (and later Coastal) made all arrangements for shipment and paid directly for all shipping and delivery to the Ital warehouse in Miami, Florida. T.I-9:1-10.

         Mobilpref's proformas and invoices set forth the terms of purchase and include an “Ex Works” clause. PX 21, 26. The “Ex Works” clause means that the producer, MobilPref, is responsible for the manufacture of the goods. All shipping, assembly, installation and related matters are the responsibility of the customer (here, Ital and later Coastal). T.I-15-16.

         Coastal planned for Ital to begin receiving Mobilpref's materials in the fall of 2010, as required by the Project's overall schedule. The cabinets came with various options to be chosen by the ultimate unit purchaser or Starwood. There were seven selections of hardwoods, including exotics, for the kitchens and the closets. If the units were not sold by a certain date, Starwood would make the selections for the unsold units in order to maintain the schedule. The plan contemplated that the cabinets would be installed as the work moved up in the building, in a sequential fashion.

         Specifically, the luxury-priced kitchens and closets were made up of a great number of parts and components, with the complexity multiplied by the number of unit owner selections in the kitchens and the closets. With 216 units, 7 possible kitchen veneer selections in two finish selections (matte and high gloss), and 7 closet selections in two finishes, the permutations and combinations for that many units were extensive. The unit purchasers were to be given an option of seven (7) different species of exotic woods to choose from, in either a gloss or matte finish. Thus, there were fourteen (14) possible combinations available to the purchasers.

         Further, different parts of the closets were made of different types of materials as well. The higher end “showy” part of the kitchen and closets that were visible, i.e., doors, panels, etc., had to be veneer-faced, medium density fiberboard (an engineered wood product) with the veneer finish as specified by the unit purchaser. All of the different component parts had to be coordinated for every kitchen and closet component to match.

         The “boxes” for the kitchens and closets were all to be made of melamine, i.e., an engineered wood product. This is a generic material but comes in different finishes that had to be coordinated with the unit selections. The boxes formed the backbone of the cabinets to which the veneered products were applied to give the impression of a solid wood cabinet. However, some of the melamine materials had to have veneer applied to maintain the illusion of a solid wood product.

         Needless to say, this was a complex order. The full cabinet installation was estimated to take approximately eight (8) months, with an initial completion date in the summer of 2011. And this complex order was essential. The kitchen and closet cabinets had to be installed before Starwood could close on the condo units with the required certificates of occupancy.

         Coastal provided Ital with its initial unit wood selections by June 2010, anticipating that Ital would then commence the manufacturing and delivery process. For that purpose, Ital received a deposit of $3, 000, 000 under its subcontract with Coastal. T.II-293-2:6.

         D. Ital's Failure to Perform Leads to Delayed Production

         By September 2010, Coastal was expecting to see initial cabinets and materials arriving at the Project site. Ford had anticipated the typical lead time on such an order was 90 days from material selection to arrival of first materials. T.II-297:23-25, 298:1-2. That did not happen, however. Coastal raised its concerns with Ital, who assured Coastal that its work was proceeding as planned. In truth, however, Ital at that point in time was encountering financial hardships that were interfering with Ital's work on this Project. Ital was thus not making the required payments to Mobilpref to begin manufacture and delivery of the cabinets.

         For its part Starwood also grew concerned that Ital was not performing. Its project executive suggested a visit to Italy to meet directly with representatives of Ital and Ital's supplier (which Coastal later learned to be Mobilpref). A visit to Ancona, Italy - where Mobilpref was based - was planned for September 2010 at which time Coastal could verify the manufacture of the cabinet materials. Starwood wanted to verify that Ital had secured the veneer raw product for fabrication of the materials selected. Ford was thus tasked to go to Italy to meet with Ital's supplier - Mobilpref - to see the progress being made toward the delivery of the cabinet components he had been told were being manufactured there.

         That first visit to Ancona, Italy took place that September. In attendance for Coastal were Dan Whiteman (Coastal's president), who testified, Donald Whiteman, an assistant superintendent on the Project, and Ford. Starwood's project manager, Fordsman, attended as the owner's representative. Ital's principal, Ted Planton, also made the trip. This delegation met with Giancarlo Pierdicca, Mobilpref's owner, and Gerry Talozzi, who testified at trial as Mobilpref's corporate representative. Talozzi played a central role. Talozzi testified that he represented several Italian companies, including Mobilpref, under what he described as an “agency” relationship where he would promote a company's business and try to sell their materials outside of Italy. At the time of the Project, Talozzi had worked with Mobilpref on about 15 other projects. T.I- 7:21-24. As he was the primary Mobilpref representative who spoke English, Talozzi was the sole point of contact for Coastal and acted as Mobilpref's agent in its work on the project.

         Again, the purpose of the meeting was to confirm that Mobilpref had the capacity and the commitment to produce the cabinets for Ital and the Project. The attendees learned that Mobilpref was a “melamine” shop and only had the equipment to manufacture the “boxes” portion of the kitchens and closets, not the high-end veneered parts (the panels, doors and other visible component parts). Mobilpref subcontracted out the veneered wooden panels and door components of the kitchens and closets to GFL, another Italian cabinet company based near Ancona.

         Thus, the component parts of the kitchens and closets to be shipped to the Project were going to be the combination of the materials manufactured at Mobilpref's factory, GFL's factory and, later on, two other veneer shops at different locations, which were then to be shipped separately in shipping containers to Ital in Miami. Mobilpref represented that it had the systems in place to coordinate all of these material sources and parts and components so that the materials arrived in such a way that they could be assembled either in the Project or at Ital's warehouse.

         Talozzi touted, in particular, Mobilpref's use of a flat-packing process to make it easier to assemble the component parts once they arrived at the project. Talozzi explained how the packaging would be set up by unit for the kitchens, by unit for the closets, and they would be sent in “flat packs, ” which would be identified on each package what they were for.

         Coastal and Starwood's representatives were disappointed, however, that they did not see evidence of manufacturing of St. Regis components while they toured the Mobilpref factory. They were expecting to see fabricated panels, fabricated doors, or some type of finishing work in process, but they saw none of that.

         They thus left the meeting in Italy still concerned that Ital and Mobilpref would not be able to deliver despite the subcontractors' assurances. They had reason to be concerned given that Mobilpref itself was relying on its own suppliers to deliver complete kitchen and cabinet components. And Coastal learned on that trip that Mobilpref's factory only produced the melamine boxes that, without the remaining components, would not satisfy Coastal's needs.

         By that point in time (September 2010), Coastal had already made deposits to Ital under the subcontract. Coastal had no intention of making any further payments to Ital until their product started arriving at Ital's local warehouse in Miami. By the time Coastal and Starwood returned to Miami, materials had still not been shipped.

         In October or November 2010, Platon from Ital claimed to Ford that the first container was on its way. Ford went to Ital's warehouse in Miami when Platon told him that a shipment for the Project had come in, but when Ford arrived he found only cabinet parts for another project. No St. Regis product was evident.

         Ford by this point was fully aware of Ital's failure to perform, which was consistent with Starwood's growing concern that Ital's financial condition was jeopardizing the project. After Ford confronted Ital about its failure to perform, Platon put Ford in touch with Talozzi, who told Ford that Mobilpref had not yet received its payment to begin shipping materials. T.III-359:9-15.

         For its part, Mobilpref insisted on payment of $1, 500, 000 before it would commence production of the materials for the Project. Talozzi claimed that a deposit payment of $200, 000 was still due and owing. At the same time, Mobilpref and Ital refused to disclose to Coastal the precise terms of their deal, i.e., the total value of the materials that Ital had ordered from Mobilpref and the exact list of the pieces to be supplied by Mobilpref. Ford was told, instead, that if Coastal paid the $1, 500, 000, Coastal would receive the ordered materials.

         By this point, both Coastal and Mobilpref were thus fully aware that Ital's financial problems was hampering its performance under the contract. Accordingly, Coastal put Ital's performance bond surety, Liberty Mutual, on notice of a possible claim based on the issues it was having with Ital. T.IV-589:12-20. Coastal's knowledge that Ital would likely breach its contract was not enough for it to cancel it and retain a replacement cabinet subcontractor. But this was not a viable option, as Ford explained, because shop drawing submittals, material selections, and measurements had already been prepared and would likely have to be redone. Ford decided that, as a result, Coastal would have to find some solution with Ital. That solution required Coastal to step in and deal directly with Mobilpref.

         E. The Tri-Party Agreement - December 20, 2010

         Ultimately, on December 20, 2010, Coastal, Ital and Mobilpref entered into a “Tri-Party Agreement” under which Coastal was to make the $1, 500, 000 in payments directly to Mobilpref in order to receive all of the kitchen and closet materials from Mobilpref (with a resulting credit against the balance of Ital's subcontract). PX 1; DX 4.

         Ford's intent was that, if Coastal fronted the $1, 500, 000 to Mobilpref for the kitchen and closet materials, Ital would at least be able to complete its own scope of work under the contract - receiving, sorting and assembling the delivered materials for installation at the St. Regis project. Based upon Ital's and Mobilpref's assurances, Ford hoped that all of the dates for the shipment and delivery of the materials per the Tri-Party Agreement were achievable.

         The Tri-Party Agreement provides that Coastal was to receive all of the materials (which at the time included 204 kitchens and 202 closets) for payment of $1, 500, 000 and that Mobilpref would look only to Ital for any balance remaining due for production of all the materials:

Whereas, Mobilpref has a separate Agreement with Ital to manufacture and delivery [sic] the cabinets to Ital for fabrication and installation, and Whereas, the Subcontract Agreement between Coastal and Ital provides for payment of materials only upon their delivery and storage in Miami, Florida, and
Whereas, Mobilpref and Ital have jointly requested that certain advance payments be made directly to Mobilpref for the above cabinets, and wish to keep the terms and details of their separate agreement confidential between their organizations, and
Whereas Mobilpref has agreed to remain open and in full production of the cabinets without any interruption of manufacturing during the Christmas and New Year Holiday Season, and
Whereas time is of the essence is assuring the timely completion of the Project, and Whereas Coastal, in exchange for the acceptance of this Agreement by Ital and Mobilpref is prepared to make certain advance payments provided certain conditions of manufacture and delivery are met, the following represents the terms of this Agreement:
1. Ital and Mobilpref agree that Coastal shall only be responsible to make payments to Mobilpref for the payments outlined below and that any further payments that may now be or become due to Mobilpref in excess of the following will be made solely by Ital, and Coastal shall have no responsibility now or in the future for any such payments.
2. Coastal agrees to make direct payments to Mobilpref by wire transfer in the following amounts, with a simultaneous acknowledgement by Ital that any such payment is an equal reduction in the balance of the Subcontract amount between Coastal and Ital, based upon confirmation of the fulfilment of the agreed upon manufacture and shipping dates of the components outlined herein . . . .

         PX 1 at 1-2.

         The balance of Item 2 of the Tri-Party Agreement specified five total payments for a total of $1, 500, 000, with the final payment due after shipment of all materials by February 28, 2011. This condition was consistent with the overall scheduled completion date for the kitchens in July-August 2011 and the closets by September-October. T.III-375:20-25. Hence, all parties to the Tri-Party Agreement agreed that “time was of the essence.”

         While the Tri-Party Agreement expressly referenced the existence of an undisclosed balance that Ital would still owe Mobilpref, Coastal was not privy to that information. Only Ital and Mobilpref knew that amount. Ford never saw the original pro forma before Coastal entered into the Tri-Party Agreement. But Coastal entered into the Agreement anyway with the intent and expectation that Ital and Mobilpref would perform their obligations under the Agreement and Ital's subcontract. T.I-15-16.

         F. Problems and Delays in Early Installation

         With the Tri-Party Agreement in place, Coastal began making its first installment payments directly to Mobilpref, which in turn started shipping containers of materials from Italy in January 2011. T.III-376:15-25. But as the containers for the kitchens started to arrive at Ital's warehouse, they were not being timely assembled by Ital personnel. Under the Ital contract, Ital was responsible for assembling the offloaded materials and preparing them for installation at the project location. But that did not happen, in part due to the manner in which Mobilpref began sending the materials. Mobilpref did not ship closet-specific flat-packs as Coastal expected; instead, Mobilpref's initial shipments were organized by the type of component part, i.e., a series of end panels for multiple units and not by unit. But the underlying contract documents ultimately placed the responsibility of assembling the shipped materials at Ital's doorstep. Ital could not do so.

         The problems evident in the early part of 2011 led Coastal to begin taking over management of the Ital subcontract. Coastal began directing the operations at the Ital warehouse facility in Miami and on the Project's jobsite. Coastal installed its own staff at the warehouse and hired Tom Driscoll Installations, Inc. to manage Ital's entire scope of work. Coastal's in-house financial staff also took over all payments for Ital's vendors, suppliers, staff and overhead. Driscoll started working on the Project in approximately the second week of February 2011. T.IV- 681:20-22. Coastal could no longer afford to let Ital languish while the work on the project got delayed.

         But Ital's failure to properly assemble the units created even further delays, especially for the closet installations. Ital (and then Coastal) had to sort the materials at Ital's warehouse to locate the different component parts (which in many instances came on separate containers) to accumulate the product needed for a single unit. To compound matters, Talozzi admitted that the veneered doors were packaged separately from the other materials by Mobilpref's veneer shop subcontractor, GFL. And GFL did not flat-pack the doors in the way that Talozzi had claimed. Moreover, the parts were either poorly labeled or not labeled at all, which made it difficult to efficiently assemble the parts for installation of a closet in a unit.

         Upon arrival at the site, Driscoll familiarized himself with the current status by reviewing the status of the installations in the units at the Project. Driscoll testified that during the first two months he was on site (February and March 2011), the work focused on installation of the kitchen “boxes” in the units that would ultimately receive the veneer door panels and other necessary veneer component parts. Driscoll testified that in early February, he was trying to get the “kitchen program up and running” and the next step would be to start the closet program. T.IV-689:10-15. But the closet program was hindered because there was “simply not enough material there.” T.IV-689:1-4.

         G. Amendment 1 to Tri-Party Agreement - April 2011

         By mid-March 2011, Coastal had just made a large payment of $500, 000 to Mobilpref and had only one payment of $250, 000 remaining to Mobilpref under the Tri-Party Agreement. Yet, despite the shipment of materials that were received to date, the quantities did not add up because many more materials were necessary for completion, especially for the ...


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