Superior Silica Sands, LLC v. Herman Grant Company, Inc.

COURT OF APPEALS
DECISION NOTICE
DATED AND FILED This opinion is subject to further editing. If
published, the official version will appear in
the bound volume of the Official Reports.
July 28, 2020
A party may file with the Supreme Court a
Sheila T. Reiff petition to review an adverse decision by the
Clerk of Court of Appeals Court of Appeals. See WIS. STAT. § 808.10 and
RULE 809.62.

Appeal No. 2018AP2437 Cir. Ct. No. 2016CV192

STATE OF WISCONSIN IN COURT OF APPEALS
DISTRICT III

SUPERIOR SILICA SANDS, LLC, INDIAN HARBOR INSURANCE
COMPANY AND CERTAIN UNDERWRITERS AT LLOYD’S,

PLAINTIFFS-APPELLANTS,

V.

HERMAN GRANT COMPANY, INC., COLUMBIA NATIONAL INSURANCE
COMPANY AND THE CINCINNATI INSURANCE COMPANY,

DEFENDANTS-THIRD-PARTY
PLAINTIFFS-RESPONDENTS,

V.

MARKET & JOHNSON, INC., THE PHOENIX INSURANCE COMPANY,
JEFFERIES V. ALSTON JR. D/B/A ALSTON EQUIPMENT COMPANY,
DEF INSURANCE COMPANY, ALSTON ENVIRONMENTAL COMPANY, INC.
D/B/A ALSTON EQUIPMENT COMPANY, GHI INSURANCE COMPANY,
LAMSTEX MATERIAL HANDLING, LLC AND JKL INSURANCE COMPANY,

THIRD-PARTY DEFENDANTS,
No. 2018AP2437

STATE FARM FIRE AND CASUALTY COMPANY,

INTERVENOR.

APPEAL from a judgment of the circuit court for Barron County:
JAMES C. BABLER, Judge. Affirmed.

Before Stark, P.J., Hruz and Seidl, JJ.

Per curiam opinions may not be cited in any court of this state as precedent

or authority, except for the limited purposes specified in WIS. STAT. RULE 809.23(3).

¶1 PER CURIAM. Superior Silica Sands (Superior) contracted with
Market & Johnson (M&J) to construct a dry sand processing plant in Barron,
Wisconsin (the Barron Plant). The parties’ contract contained a limited remedy
provision, which limited the damages Superior could recover from M&J and its
subcontractors. M&J, in turn, contracted with Herman Grant Company, Inc.,
(Herman Grant) to build a sand dryer for the Barron Plant.

¶2 Superior deemed the sand dryer to be deficient in several respects, and
it ultimately commenced this lawsuit against Herman Grant and its insurers. The
circuit court granted Herman Grant’s motion for a declaratory judgment and entered
an order stating that, by virtue of the limited remedy provision, Superior was barred
from “recovering damages for lost profits, repair costs, and loss adjustment and
professional fees.” Superior then voluntarily dismissed its contract and tort claims
against Herman Grant.

¶3 Superior now appeals, arguing the circuit court erroneously exercised
its discretion by granting Herman Grant’s declaratory judgment motion.

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Herman Grant disagrees, and it also argues, in the alternative, that Superior’s
argument is moot because Superior voluntarily dismissed its contract and tort claims
after the court granted Herman Grant’s declaratory judgment motion. We reject
Herman Grant’s mootness argument. We agree with Herman Grant, however, that
the court properly granted its declaratory judgment motion. We therefore affirm.1

BACKGROUND

¶4 Superior is in the business of mining sand that is used in the hydraulic
fracturing process (i.e., “fracking”) to extract underground natural gas. In 2012,
Superior entered into a “Design/Build Contract” with M&J for construction of the
Barron Plant.

¶5 The Design/Build Contract contained a number of provisions that are
relevant to the issues raised in this appeal. For instance, the Design/Build Contract
provided that M&J could “subcontract portions of the Work to any Person without
further approval by Owner.”2 The Design/Build Contract further provided that M&J
was “solely responsible for the Work” and had “complete and sole responsibility”
for its agents and subcontractors.

1
In the alternative, Herman Grant argues the circuit court’s ultimate dismissal of
Superior’s contract and tort claims should be affirmed because Herman Grant was entitled to
summary judgment on those claims, for various reasons. We need not address this argument, as
we affirm the circuit court’s judgment on other grounds. See Turner v. Taylor, 2003 WI App 256,
¶1 n.1, 268 Wis. 2d 628, 673 N.W.2d 716 (court of appeals need not address all issues raised by
the parties if one is dispositive).
2
The Design/Build Contract defined the term “Work” to mean “the work and services
required in connection with the engineering, design, procurement, dismantling, transportation,
storage, refurbishment, construction, upgrade, installation, interconnection, commissioning,
start-up, testing, permitting, training for operation, supervision, and project management of the
Work” described in the contract, including any equipment and machinery “required for and related
to the foregoing.” The term “Owner” was defined to mean Superior.

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¶6 The Design/Build Contract also contained a warranty provision, by
which M&J warranted that the work would be “performed in accordance with the
terms and conditions of this Contract” and would be “free from defects in design
and workmanship.” The warranty provision further stated that, for a period of one
year following the substantial completion of the work, M&J would re-perform any
defective work and would repair or replace any defective equipment or materials,
as long as Superior “deliver[ed] notice of an alleged deficiency or defect within a
reasonable time after actual discovery thereof.” Such notice was required to be in
writing and to be delivered in one of four specified ways. The warranty provision
in the Design/Build Contract also stated that M&J would “cause all Subcontractor
warranties to be assignable to [Superior] upon the expiration of the Warranty
Period.”

¶7 The Design/Build Contract also contained a limitation of remedies
provision, which stated the remedies set forth in the contract were “the sole and
exclusive remedies of the Parties to this Contract for the liabilities of such Parties
arising out of or in connection with the Work or this Contract, notwithstanding any
remedy otherwise available at law or in equity.” The limitation of remedies
provision further stated that neither M&J nor any subcontractor would be “liable for
indirect, special, incidental, consequential or exemplary damages, including but not
limited to, the loss of profits or revenue.”

¶8 M&J subcontracted with Herman Grant to design and build a sand
dryer that was to be incorporated into the Barron Plant.3 In a Purchase Order
Agreement dated June 1, 2012, Herman Grant agreed to perform its work “in

3
It is undisputed that Herman Grant qualifies as a subcontractor under the Design/Build
Contract’s definition of that term.

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accordance with the Prime Contract between [M&J] and [Superior] and all Plans,
Drawings and Specifications including General and Special Conditions and
Addenda.” It is undisputed that no direct contract exists between Herman Grant and
Superior. It is further undisputed that the Purchase Order Agreement contains no
warranties and that Herman Grant did not elsewhere provide any warranty regarding
its work to either M&J or Superior.

¶9 Work on the Barron Plant was substantially completed in
January 2013. The parties agree that Superior began having problems with the sand
dryer almost immediately thereafter, but they disagree about the cause of the
problems. Superior contends that the sand dryer was defective in multiple ways and
failed to meet the performance requirements set forth in the Design/Build Contract.
Herman Grant, in turn, asserts that Superior operated the sand dryer in ways that
were contrary to the dryer’s specifications.

¶10 Superior contends that it provided Herman Grant with notice of the
problems with the sand dryer long before the one-year warranty period set forth in
the Design/Build Contract expired in January 2014. In response, however, Herman
Grant asserts there is “no evidence [Superior] ever provided M&J with the written
‘Notice’ required by the Design/Build Contract to start a warranty claim.”

¶11 Superior ultimately paid to have some parts of the sand dryer repaired
or replaced. Then, in December 2014, M&J paid Industrial Kiln & Dryer Group to
perform further repairs to the sand dryer at no cost to Superior. Industrial Kiln
performed those repairs from December 11 through December 15, 2014, and the
Barron Plant was completely shut down during that time. Superior contends that it
suffered at least $4,001,813.97 in damages as a result of the defective sand dryer

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and Herman Grant’s refusal to repair it, including: $3,651,246.52 in lost profits;
$284,055 in repair costs; and $66,512.45 in “loss adjustment and professional fees.”

¶12 Superior and its insurers—Indian Harbor Insurance Company and
Certain Underwriters at Lloyd’s—ultimately filed the instant lawsuit against
Herman Grant and its insurers—Columbia National Insurance Company and The
Cincinnati Insurance Company.4 Superior asserted claims against Herman Grant
for breach of contract, breach of the implied warranties of merchantability and
fitness for a particular purpose, negligence, and unjust enrichment. Herman Grant
subsequently asserted third-party claims against M&J (and others) for contribution
and indemnification.

¶13 On July 26, 2017, Herman Grant moved for a declaratory judgment,
seeking a declaration that the Design/Build Contract barred Superior from
recovering damages for lost profits, repair costs, and loss adjustment and
professional fees from Herman Grant. Herman Grant’s motion merely sought a
declaration as to whether Superior could recover the above categories of damages.
It did not ask the circuit court to dismiss any of Superior’s claims.

¶14 In response, Superior asked the circuit court to treat Herman Grant’s
motion as a motion for summary judgment because Herman Grant’s “requested
relief would operate as a dismissal of [Superior’s] claims.” Superior also argued
that the court should deny Herman Grant’s motion. It asserted that WIS. STAT.
ch. 402—part of the Uniform Commercial Code (UCC)—indisputably applied to

4
Indian Harbor and Lloyd’s had paid for some of Superior’s losses and therefore asserted
subrogated interests in Superior’s claims against Herman Grant. Superior asserted claims against
Columbia and Cincinnati under the direct action statute, WIS. STAT. § 632.24 (2017-18).

All references to the Wisconsin Statutes are to the 2017-18 version unless otherwise noted.

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the Purchase Order Agreement between Herman Grant and M&J, and that Superior
was a third-party beneficiary of that agreement. As such, Superior argued ch. 402
also applied to the Design/Build Contract. Superior then contended that the limited
remedy set forth in the Design/Build Contract failed of its essential purpose and was
therefore unenforceable under WIS. STAT. § 402.719(2).

¶15 On November 3, 2017, the circuit court entered a written decision
granting Herman Grant’s declaratory judgment motion. The court concluded WIS.
STAT. ch. 402 did not apply to the Design/Build Contract between Superior and
M&J. The court also assumed without deciding that Superior was “a third-party
beneficiary of Herman Grant’s purchase order agreement with [M&J] and,
therefore, [had] ‘contractual privity’ to assert claims against Herman Grant.”
Regardless, the court concluded that the waiver of consequential damages in the
Design/Build Contract precluded Superior from obtaining any consequential
damages from Herman Grant, and that the remedies set forth in the Design/Build
Contract were the “sole and exclusive remedies” available to Superior.

¶16 Superior moved for reconsideration of the circuit court’s November 3
decision, arguing “[t]he existence of the consequential damage waiver in the
design/build contract does not answer the legal question put before the Court.”
Superior explained:

[B]ecause the Purchase Order is governed by the UCC (even
if the design/build contract is not), and because [Superior] is
asserting direct claims as a third-party beneficiary of the
Purchase Order, [Superior] is entitled to the protections and
remedies provided under the UCC for breach of contract
claims. This includes WIS. STAT. § 402.719, which
invalidates a limited remedy provision when it “fail[s] of its
essential purpose.” The fact-intensive analysis of
determining whether the limitations of liability as applied to
Herman Grant failed of its essential purpose was not
undertaken by this Court, nor could it have been

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accomplished since Herman Grant[’]s motion papers did not
even include a statement of (allegedly) undisputed facts.

¶17 On March 16, 2018, the circuit court issued both a written decision
denying Superior’s reconsideration motion and an order granting Herman Grant’s
declaratory judgment motion. The court reasoned that WIS. STAT. § 402.719 “does
allow contractual modification or limitation of remedies” and thus “does not
preclude the limitations in the design/build contract.” The court further reasoned
there was “no evidence” supporting Superior’s contention that the limited remedy
in the Design/Build Contract failed of its essential purpose under § 402.719(2). The
court explained:

[T]he design/build contract granted [Superior] a one-year
warranty period to take action against the general contractor
[M&J] and [Superior] did not do so. This Court specifically
asked [Superior] why no action was taken and the response
was “that’s not legally relevant.” [Superior] never showed
any evidence as to why [it] could not have complied with the
warranty requirements of the design/build contract or why it
was impossible for [Superior] to bring [its] suit regarding
warranties within the time scheduled in the design/build
contract.

(Footnote omitted.) The court’s order declared that Superior was “barred from
recovering damages for lost profits, repair costs, and loss adjustment and
professional fees against Herman Grant” and its insurers.

¶18 After the circuit court granted Herman Grant’s declaratory judgment
motion, Columbia—one of Herman Grant’s insurers—filed a motion for declaratory
and/or summary judgment. Columbia argued, in part, that its policies did not
provide coverage for Superior’s claims against Herman Grant. Columbia also
argued, however, that Superior’s claims should be dismissed because Superior
“cannot recover any of its claimed damages [from] Herman Grant.” Specifically,
Columbia argued that: (1) Superior could not prevail on its contractual claims

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because, based on the court’s prior declaratory judgment ruling, Superior had “no
recoverable damages” with respect to those claims; (2) because Superior had
“affirmed the Design/Build Contract and pursued contract damages,” it was barred
from “pursu[ing] an equitable claim like … unjust enrichment”; and (3) Superior’s
negligence claim was barred by the economic loss doctrine. Herman Grant and its
other insurer—Cincinnati—subsequently joined that portion of Columbia’s motion
seeking dismissal of Superior’s claims.

¶19 Superior did not file a response to Columbia’s motion for declaratory
and/or summary judgment. Instead, on July 18, 2018—before the circuit court ruled
on Columbia’s motion—Superior filed a notice of voluntary dismissal regarding its
unjust enrichment claim. The notice stated it was “for the purpose of perfecting
[Superior’s] appeal of the Court’s November 3, 2017 Decision, the Court’s
March 16, 2018 Order Granting Motion for Declaratory Judgment, and the Court’s
March 16, 2018 Decision which held, as a matter of law, that [Superior] could not
recover any of [its] claimed damages” on its contract and tort claims.

¶20 On the same day, Superior also filed a “Notice of Motion and Motion
for Entry of Final Judgment,” which “move[d] the Court for entry of a final order
or judgment” in favor of Herman Grant and its insurers on Superior’s contract and
tort claims “for purposes of appeal under WIS. STAT. § 808.03(1).” In its
accompanying brief, Superior explained:

This Court has ruled that there are no damages recoverable
on any of the remaining causes of action being pursued by
Plaintiffs. Accordingly, since absent any recoverable
damages those causes of action are no longer valid, final
judgment should be entered in favor of Defendants
Herman Grant Company, Inc., The Cincinnati Insurance
Company and Columbia National Insurance Company … on
[Superior’s contract and tort claims]. The Court’s prior
Orders which held as a matter of law that [Superior has] no
recoverable damages would thereby become immediately

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appealable as a matter of right pursuant to WIS. STAT.
§ 808.03(1).

(Footnotes omitted.)

¶21 In response, Herman Grant did not oppose the entry of a final
judgment dismissing all of Superior’s claims with prejudice; however, it questioned
whether Superior was seeking voluntary dismissal under WIS. STAT. § 805.04(2) or
summary judgment under WIS. STAT. § 802.08. If the latter, Herman Grant stated
it “would like the Court’s Order, the court record, or both to reflect that
Herman Grant … would be entitled to judgment dismissing [Superior’s] claims as
a matter of law for reasons other than the November 3, 2017, Decision and the
arguments advanced by [Superior’s] ‘Motion for Entry of Final Judgment.’”
Herman Grant then set forth various alternative reasons why it believed it was
entitled to summary judgment on each of Superior’s claims.

¶22 At a hearing on August 31, 2018, the circuit court concluded Superior
was seeking voluntary dismissal under WIS. STAT. § 805.04(2), rather than summary
judgment. The parties debated whether Superior should have to reimburse
Herman Grant’s attorney fees and costs as a condition of dismissal, and the court
ultimately found it unnecessary to predicate dismissal upon the payment of those
fees. The court then granted Superior’s motion for the entry of a final judgment,
and on November 13, 2018, it entered a final judgment dismissing Superior’s
contract and tort claims with prejudice.

¶23 Superior subsequently filed a notice of appeal from the circuit court’s
November 13, 2018 judgment. In its notice of appeal, Superior asserted the court’s
“November [3], 2017 and March 16, 2018 Decisions and the Court’s March 16,
2018 Order” held that Superior was barred from recovering the only damages it

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sought from Herman Grant on its contract and tort claims. Superior further
contended that, after the court entered its final judgment dismissing those claims
with prejudice on November 13, 2018, the court’s prior orders regarding damages
“became appealable under WIS. STAT. [RULE] 809.10(4).”

¶24 Herman Grant moved for summary disposition of Superior’s appeal,
arguing that Superior had forfeited the right to challenge the circuit court’s
declaratory judgment rulings on appeal by voluntarily dismissing its unjust
enrichment claim and then moving for the entry of a final judgment on its contract
and tort claims. We denied Herman Grant’s motion. We explained, “[T]he focus
in these situations should be on whether, by its terms, a stipulated judgment turned
a nonfinal, nonappealable judgment into a final, appealable judgment without truly
bringing finality to the action.” We continued, “Here, the circuit court’s decision
on consequential damages, whether it was labeled as a declaratory judgment or
partial summary judgment, was in effect dispositive of the contract and tort claims.
Once [Superior] had voluntarily dismissed its remaining equitable claim, there was
nothing left to litigate in the circuit court.”

DISCUSSION

I. Mootness

¶25 Before considering the merits of Superior’s appellate arguments, we
first address Herman Grant’s assertion that the issues raised in this appeal are moot.
Herman Grant argues that Superior’s appellate arguments focus on the circuit
court’s nonfinal order granting Herman Grant’s declaratory judgment motion.
Herman Grant contends Superior does not “seek any review or reversal of the Final
Judgment dismissing six of [its] seven claims with prejudice in November 2018, nor
[does it] seek relief from [its] voluntary dismissal of the seventh claim in July 2018.”

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(Record citations omitted.) Because Superior’s “claims of error are limited to the
non-final Declaratory Judgment entered in March 2018,” and because that judgment
“only impacted claims [Superior] later dismissed with prejudice,” Herman Grant
asserts Superior’s arguments that the court erred by granting the declaratory
judgment are moot, and any error by the court in doing so was harmless.

¶26 Appellate courts generally decline to address moot issues. PRN
Assocs. LLC v. DOA, 2009 WI 53, ¶29, 317 Wis. 2d 656, 766 N.W.2d 559. “An
issue is moot when its resolution will have no practical effect on the underlying
controversy.” Id., ¶25. In addition, an appellate court will not reverse a judgment
based on a harmless error—that is, an error that did not “affect[] the substantial
rights of the party seeking to reverse or set aside the judgment.” WIS. STAT.
§ 805.18(2).

¶27 We conclude Superior’s appellate arguments are not moot, and the
voluntary dismissal of Superior’s remaining claims did not render harmless any
error the circuit court may have committed in granting Herman Grant’s declaratory
judgment motion. As we noted in our prior order denying Herman Grant’s motion
for summary disposition of this appeal, the circuit court’s order granting the
declaratory judgment motion was, in effect, “dispositive of [Superior’s] contract and
tort claims,” as it barred Superior from recovering any of its claimed damages.
Nonetheless, the order granting the declaratory judgment motion was not a final
order, as it did not dismiss any of Superior’s contract and tort claims and did not
have any effect on Superior’s unjust enrichment claim. Consequently, Superior
could not appeal the declaratory judgment order as of right. See WIS. STAT.
§ 808.03(1).

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¶28 After the circuit court granted Herman Grant’s declaratory judgment
motion, Superior voluntarily dismissed its unjust enrichment claim. Then, for the
express purpose of expediting its ability to seek review of the court’s declaratory
judgment decision, Superior asked the court to enter a final judgment in favor of
Herman Grant on its remaining contract and tort claims.5 The court granted that
motion, recognizing that there “wasn’t much left of the case” after its ruling on
Herman Grant’s declaratory judgment motion.

¶29 On these facts, Herman Grant cannot show that our resolution of the
issues raised in Superior’s appeal “will have no practical effect on the underlying
controversy.” See PRN Assocs., 317 Wis. 2d 656, ¶25. If we were to reverse the
circuit court’s final judgment dismissing Superior’s contract and tort claims on the
ground that the court erred by granting Herman Grant’s declaratory judgment
motion, we would remand for further proceedings on those claims. Thus, our
decision would have a “practical effect” on the outcome of this case. See id. In
addition, any error that the circuit court made in granting the declaratory judgment
motion affected Superior’s “substantial rights,” as the declaratory judgment
prohibited Superior from recovering any of its claimed damages on its contract and
tort claims, thus essentially disposing of those claims. See WIS. STAT. § 805.18(2).

¶30 Under these circumstances, any error by the circuit court in granting
Herman Grant’s declaratory judgment motion was not harmless, and Superior’s
appeal challenging the court’s declaratory judgment ruling is not moot. We
therefore proceed to address the merits of Superior’s argument that the court erred

5
See WIS. STAT. RULE 809.10(4) (“An appeal from a final judgment or final order brings
before the court all prior nonfinal judgments, orders and rulings adverse to the appellant and
favorable to the respondent made in the action or proceeding not previously appealed and ruled
upon.”).

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by granting the declaratory judgment motion and holding that the limited remedy
provision of the Design/Build Contract barred Superior from recovering any of its
claimed damages on its contract and tort claims.

II. Declaratory judgment

¶31 Whether to grant or deny a declaratory judgment is committed to the
circuit court’s discretion, and we will not reverse unless the court erroneously
exercised its discretion.6 Olson v. Town of Cottage Grove, 2008 WI 51, ¶35, 309
Wis. 2d 365, 749 N.W.2d 211. Where the court’s decision to grant or deny a
declaratory judgment motion turns upon a question of law, however, we
independently review that legal question. Gulmire v. St. Paul Fire & Marine Ins.
Co., 2004 WI App 18, ¶10, 269 Wis. 2d 501, 674 N.W.2d 629 (2003).

¶32 Here, the circuit court’s decision on Herman Grant’s declaratory
judgment motion turned on its interpretation of both the Design/Build Contract
between M&J and Superior and the Purchase Order Agreement between M&J and
Herman Grant. The interpretation of a contract presents a question of law that we
review independently. Marx v. Morris, 2019 WI 34, ¶20, 386 Wis. 2d 122, 925
N.W.2d 112, reconsideration denied, 2019 WI 84, 388 Wis. 2d 652, 931 N.W.2d
538. When interpreting a contract, our aim is to determine and give effect to the
parties’ intentions, and we presume those intentions are expressed in the language
of the contract. Estate of Kriefall v. Sizzler USA Franchise, Inc., 2012 WI 70, ¶21,
342 Wis. 2d 29, 816 N.W.2d 853. “Where the language of a contract is

6
A court must be presented with a justiciable controversy before it may exercise its
jurisdiction over a declaratory judgment claim. Olson v. Town of Cottage Grove, 2008 WI 51,
¶28, 309 Wis. 2d 365, 749 N.W.2d 211. Our case law sets forth four factors that must be satisfied
for a declaratory judgment claim to be justiciable. Id., ¶29. It is undisputed that those factors are
satisfied in this case, and we therefore do not address them further.

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unambiguous and the parties’ intentions can be ascertained from the face of the
contract, we give effect to the language they employed.” Id.

¶33 “An award of damages for a breach of contract should compensate the
injured party for the losses that stem from the breach.” Champion Cos. of Wis. v.
Stafford Dev., LLC, 2011 WI App 8, ¶10, 331 Wis. 2d 208, 794 N.W.2d 916 (2010).
Such compensation includes direct damages, which can be measured in multiple
ways. For instance, an aggrieved buyer may be entitled to recover the cost to repair
a defective product, or, alternatively, to the difference between the value of the
product as promised and its value as actually delivered. See id., ¶12. In addition to
such direct damages, an aggrieved buyer may also be entitled to recover “incidental
and consequential damages for breach of contract.” Kramer v. Board of Educ. of
Sch. Dist. of Menomonie Area, 2001 WI App 244, ¶11, 248 Wis. 2d 333, 635
N.W.2d 857.

¶34 Notwithstanding the general availability of these damages, parties to
a contract may agree to limit the available remedies for a breach. “When a contract
specifies remedies available for breach of contract, the intention of the parties
generally governs.” Ash Park, LLC v. Alexander & Bishop, Ltd., 2010 WI 44, ¶37,
324 Wis. 2d 703, 783 N.W.2d 294. “Commercial parties, presumably of equal
bargaining power, are generally free to set terms of their own agreement, including
warranties, disclaimers, and limitation of remedies.” Daanen & Janssen, Inc. v.
Cedarapids, Inc., 216 Wis. 2d 395, 407, 573 N.W.2d 842 (1998).

¶35 In this case, Superior’s contract and tort claims sought to recover three
categories of damages from Herman Grant: lost profits, the cost to repair the sand
dryer, and loss adjustment and professional fees. We agree with the circuit court

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that the Design/Build Contract expressly prohibits Superior from recovering each
of these categories of damages.

¶36 First, § 28.2 of the Design/Build Contract states that neither M&J nor
any subcontractor “shall … be liable for indirect, special, incidental, consequential
or exemplary damages, including but not limited to, the loss of profits or revenue.”
This provision unambiguously bars Superior from recovering lost profits from
Herman Grant—a proposition that Superior does not dispute on appeal.

¶37 Section 28.2 of the Design/Build Contract also bars Superior from
recovering its claimed loss adjustment and professional fees. Those damages are
for amounts that Superior’s insurers paid to Willis North America, Inc., a risk
management and risk services company. Herman Grant asserts—and Superior does
not dispute—that those payments qualify as incidental damages because they were
made in connection with Superior’s insurance claims, which, in turn, “resulted from
the contract/warranty breaches at issue.” As such, Superior does not dispute that
Section 28.2 of the Design/Build Contract unambiguously bars it from recovering
incidental damages from Herman Grant.

¶38 Section 28.2 of the Design/Build Contract does not bar Superior from
recovering the cost to repair the sand dryer. Nevertheless, other provisions of the
Design/Build Contract prevent Superior from recovering those damages from
Herman Grant.

¶39 Specifically, § 28.1, entitled “Remedies Exclusive,” expressly
provides that the remedies set forth in the Design/Build Contract are intended to be
the parties’ “sole and exclusive remedies ... for the liabilities of such Parties arising
out of or in connection with the Work or this Contract, notwithstanding any remedy
otherwise available at law or in equity.” The Design/Build Contract further provides

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that: (1) while M&J may subcontract portions of the work, it remains “solely
responsible for the Work” and has “complete and sole responsibility as principal”
for its subcontractors; (2) M&J warranted that the work would be “free from defects
in design and workmanship”; and (3) for a period of one year following the
substantial completion of the work, M&J would re-perform any defective work and
would repair or replace any defective equipment or materials. Although the
Design/Build Contract also states that M&J will assign all subcontractor warranties
to Superior after the expiration of the one-year warranty period, it is undisputed that
Herman Grant did not provide any warranty for the sand dryer to either Superior or
M&J.

¶40 The above provisions of the Design/Build Contract unambiguously
establish that M&J was solely responsible for the work on the Barron Plant and
warranted that such work would be free from defects, and that Superior’s sole
remedy for any defects in the Barron Plant was M&J’s promise to repair or replace
any defective work, equipment, or materials within one year of substantial
completion. Taken together, these provisions bar Superior from recovering any
repair costs from Herman Grant.

¶41 In an attempt to avoid this result, Superior argues that the limited
remedy set forth in the Design/Build Contract failed of its essential purpose, and the
contract’s limited remedy provision is therefore unenforceable. Superior relies on
the UCC—specifically, WIS. STAT. § 402.719(2), which states that “[w]here
circumstances cause an exclusive or limited remedy to fail of its essential purpose,
remedy may be had as provided in chs. 401 to 411.” This argument fails because
WIS. STAT. ch. 402 applies only to transactions in “goods,” meaning “all things
(including specially manufactured goods) which are movable at the time of
identification to the contract for sale.” WIS. STAT. §§ 402.102, 402.105(1)(c).

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There is no dispute that the subject of the Design/Build Contract—i.e., a fully
operational dry sand processing plant—is not a “movable” good. As such, ch. 402
does not apply to the Design/Build Contract, and Superior cannot rely on
§ 402.719(2) to argue that the limited remedy provision in that contract is
unenforceable.

¶42 Superior does not argue that WIS. STAT. ch. 402 directly applies to the
Design/Build Contract. Instead, Superior contends that ch. 402 applies to the
Purchase Order Agreement between M&J and Herman Grant. Superior
acknowledges that it is not a party to the Purchase Order Agreement, but it argues
it is a third-party beneficiary of that agreement. Superior further contends that the
limited remedy provision in the Design/Build Contract was “made part of the
Purchase Order [Agreement],” and ch. 402 therefore applies to the limited remedy
provision.

¶43 Assuming without deciding that WIS. STAT. ch. 402 applies to the
Purchase Order Agreement and that Superior is a third-party beneficiary of that
agreement, we nevertheless reject Superior’s assertion that the Purchase Order
Agreement incorporates the Design/Build Contract’s limited remedy provision. The
Purchase Order Agreement merely states that Herman Grant must perform its work
“in accordance with the Prime Contract [i.e., the Design/Build Contract] between
[M&J] and [Superior] and all Plans, Drawings and Specifications including General
and Special Conditions and Addenda.” Thus, while the Purchase Order Agreement
requires Herman Grant to perform its work according to the specifications in the
Design/Build Contract, it does not incorporate any other provisions of the
Design/Build Contract. We therefore reject Superior’s argument that ch. 402
applies to the Design/Build Contract by virtue of the Purchase Order Agreement.

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No. 2018AP2437

Because ch. 402 does not apply to the Design/Build Contract, Superior cannot argue
that the limited remedy provision is unenforceable under WIS. STAT. § 402.719(2).7

¶44 Finally, Superior argues that the circuit court erred by stating in its
written decision granting Herman Grant’s declaratory judgment motion that
Superior had not showed “any evidence as to why … it was impossible for
[Superior] to bring [its] suit regarding warranties within the time scheduled in the
design/build contract.” Superior argues the court’s statement was “clear error”

7
The circuit court concluded Superior did not establish that the limited remedy set forth
in the Design/Build Contract failed of its essential purpose because there was no evidence that
Superior had availed itself of that remedy during the one-year warranty period. On appeal, Superior
argues there is a factual dispute regarding that issue because it “presented considerable evidence
showing that it notified [M&J] and Herman Grant, both verbally and in writing, that the Sand Dryer
was not working properly during the one-year warranty period.”

None of the evidence cited by Superior shows that it provided written notice of any defects
in the sand dryer to M&J or Herman Grant in the manner required by the Design/Build Contract.
Nonetheless, Superior argues it “was not even required to provide notice during the one-year period
to preserve its rights,” as the full text of the notice provision states:

Contractor’s warranty obligations and liabilities are conditioned
on Owner’s delivering notice of an alleged deficiency or defect
within a reasonable time after actual discovery thereof by Owner;
provided, however, that Owner’s failure to give such notice
during such period shall not relieve Contractor of its warranty
obligations and liabilities except to the extent Contractor is
prejudiced by such failure.

(Emphasis added.)

In light of our conclusion that WIS. STAT. ch. 402 does not apply to the Design/Build
Contract, we need not address the parties’ arguments regarding whether Superior provided M&J
and Herman Grant with sufficient notice of the alleged defects in the sand dryer. In addition, we
choose not to do so because the parties did not raise any arguments in the circuit court regarding
whether either M&J or Herman Grant was prejudiced by Superior’s failure to provide the notice
specified in the Design/Build Contract. Moreover, the parties do not develop any arguments
regarding prejudice on appeal. We will not abandon our neutrality to develop such arguments for
the parties. See Industrial Risk Insurers v. American Eng’g Testing, Inc., 2009 WI App 62, ¶25,
318 Wis. 2d 148, 769 N.W.2d 82.

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No. 2018AP2437

because the Design/Build Contract “does not contain a contractual suit limitations
period, it only contains a warranty period.”

¶45 We agree the circuit court’s wording gives the impression that it
erroneously believed suit had to be commenced during the one-year warranty period
set forth in the Design/Build Contract. The interpretation of a contract, however, is
a question of law that we review independently. See Marx, 386 Wis. 2d 122, ¶20.
Our analysis, as set forth above, does not rely on any misperception that the
Design/Build Contract required Superior to file suit within a certain time. What
could be interpreted as the circuit court’s misstatement to that effect is therefore
immaterial.

By the Court.—Judgment affirmed.

This opinion will not be published. See WIS. STAT. RULE
809.23(1)(b)5.

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