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02/18/94 MIDWEST SOFTWARE v. WILLIE WASHER

February 18, 1994

MIDWEST SOFTWARE, LTD., AN ILLINOIS CORPORATION, PLAINTIFF-COUNTERDEFENDANT/APPELLANT
v.
WILLIE WASHER MANUFACTURING COMPANY, DEFENDANT-COUNTERPLAINTIFF/APPELLEE.



Appeal from the Circuit Court of Cook County. Honorable Marvin H. Ruttenberg, Presiding.

Rehearing Denied April 11, 1994. Released for Publication April 19, 1994.

Giannis, Egan, Rakowski

The opinion of the court was delivered by: Giannis

JUSTICE GIANNIS delivered the opinion of the court:

Plaintiff, Midwest Software, Ltd. (Midwest), filed a complaint against defendant, Willie Washer Manufacturing Company (Willie Washer), alleging breach of an oral contract. Midwest claimed it had not been paid $9,696.55 for computer consulting and programming services rendered to Willie Washer. In its answer, Willie Washer admitted that it contracted Midwest to provide computer services, but denied that Midwest had performed. Willie Washer also filed a counterclaim which affirmatively alleged that the software provided by Midwest pursuant to the contract did not "perform the functions which the parties agreed it would be capable of performing" and that this software "was written in a computer language other than that agreed to between the parties." In addition, Willie Washer claimed that Midwest breached an independent oral contract to purchase one of its computers. Willie Washer claimed that Midwest's breach of these agreements resulted in $200,000 in damages.

A bench trial was held on three days but over a five month period on February 25, June 11 and July 29, 1991. The trial court thereafter awarded $4,500 to Midwest on its complaint and $88,000 to Willie Washer on its counterclaim. Midwest now challenges both the amount of damages awarded to it on its complaint and the judgment entered against it on Willie Washer's counterclaim.

Midwest raises three issues on appeal. First, Midwest claims that the trial court erred in awarding only 50% of the work billed to Willie Washer on certain invoices. These invoices covered a period between October 16, 1989, and January 16, 1990. Second, Midwest claims that the trial court erred in finding that it breached a promise to perform a "straight conversion" of programs from Willie Washer's first computer to its new computer system. Finally, Midwest claims that the trial court did not properly compute damages.

THE TRIAL

Because the parties disagree substantially as to what was proven at trial, we make a detailed recitation of the trial proceedings.

Joseph Gulino testified first for Midwest. He stated that he was employed by Midwest as their director of operations and had held the position for eight years. He stated that Midwest's business was to provide software services to its customers on a time and materialbasis and that Midwest did not repair electronic components. He indicated that Midwest programs computer systems, maintains computer system software and trains users.

Gulino indicated that he began dealing with Willie Washer in 1984 after being given work from Bob Comyn, Midwest's president. In 1985, Gulino started working with Willie Washer's office manager, Robert Urlakis. According to Gulino, Urlakis would give Midwest a wide range of work to perform. Gulino stated that he would also receive work from Bill Neumann, Willie Washer's president, and another Willie Washer manager, Bill Fortney. He also indicated that he would sometimes receive work from Willie Washer through Bill Neumann, Jr., Jean Gates, and Mike Neumann.

Gulino testified that Willie Washer was using a CADO brand computer when he began working on the Willie Washer account. He indicated that the CADO computer had not been sold to Willie Washer by Midwest. Toward the end of 1988, Willie Washer purchased a Sun Microsystems (SUN) computer.

Gulino stated that one of the projects assigned to him by Bill Neumann was the job of putting Willie Washer's original programs that had been written in the CADOL programming language onto the new SUN computer. He indicated that Midwest had not recommended the SUN computer to Willie Washer, nor did Midwest give Willie Washer an opinion as to the ability of the SUN computer to handle Midwest's business. He stated that a man named Dean Marr from the SUN computer company recommended the SUN machine to Willie Washer.

Gulino testified as to how Midwest made the transfer from the CADO computer to the SUN computer. He stated that the "source code," which he described as the actual programs the programmer can write, was physically moved to the SUN computer and then run through a translator product which had been purchased from a third party vendor named Softran (SOFTRAN). He stated that this product, called "C-TRAN," would take the existing CADOL source code and convert it to the C programming language. He said that the C source code generated by the C-TRAN product was then "compiled" for use on the SUN computer.

Gulino said that Midwest had given Willie Washer an estimate of the cost of converting their programs from the CADO machine to the SUN machine. He stated that this estimate was $23,000 and that this figure was not a fixed bid, but rather, a time and material estimate. He testified that this estimate did not include work which Willie Washer requested in addition to the conversion.

Gulino indicated that there were no problems with the conversionitself, but that there were problems with the speed of the SUN equipment. He stated that there was also a problem with the terminals and that they would seem at times to "freeze up." He said that the cause of this problem was determined to be how the cables connecting the terminals were wired. He testified that the wiring of the terminals had been done by Willie Washer employees and that the manuals used by these employees were provided by SUN.

According to Gulino, the conversion of programs to the SUN machine began in the end of 1988 and was completed in March of 1989. Based upon his review of the invoices, Gulino testified that the total cost to Willie Washer for the conversion was $21,599. In response to the trial court's questioning, Gulino testified that Willie Washer continuously requested work from Midwest in addition to the conversion.

Gulino was questioned about the eight invoices not paid by Willie Washer which totaled $9,696.55. Based upon the invoices, Gulino could not say who specifically performed the work charged. Following the court's inquiry, he stated that it was possible that he himself had performed none of the work. He indicated that the programmers themselves provided the specific descriptions of the work used in the invoices. He testified that the invoice descriptions were not generally sufficient for him to describe what had been done, particularly in light of the passage of time. He testified that Midwest's records would indicate who performed the actual work billed to Willie Washer, but that this information was not contained on the invoices. He also said, however, that all of the work performed by Midwest would have been done by either himself, John Gugliotta or Jerry Callahan, with minor exceptions.

Gulino testified regarding each of the disputed invoices individually and stated, with regard to each, that the work billed was actually done. He stated that he knew this to be true because he either installed the programs and/or worked on the project with Gugliotta or Callahan. He testified that the first he had heard that the work he had performed was not done properly was when he read Willie Washer's counter-complaint.

On cross-examination, Gulino testified that C-TRAN was a product that allows the use of CADOL programs on a UNIX-based computer such as a SUN computer. He admitted that one of the things Willie Washer had hired Midwest to do was to "translate" from the CADOL language into the C language, but Gulino stated that this was part of the process employed by the conversion software. He stated that the Willie Washer computer did not run the CADOL programs after the installation of the C-TRAN product. He saidMidwest converted the CADOL programs using the C-TRAN program and that the output of the C-TRAN product was then "compiled" to produce "executable files." He stated that Willie Washer's computer ran the executable files which were derived from the C source code.

Gulino testified that he did not talk to anyone at Willie Washer about installing a second conversion program produced by SOFTRAN called "C-EXEC." He stated that "they didn't want to know exactly how things worked. They just wanted them to work." He also testified that "I never told them exactly how I was going to do something. All they wanted was results."

Gulino admitted that Willie Washer's employees complained about the speed of the SUN computer. He stated that he knew the problem was not the software, however, because he had people come from SOFTRAN to look at the system and that the software had run on AT&T machines, NCR machines and DIGITAL machines, all of which were UNIX-based computers like Willie Washer's SUN computer. He indicated that the problem was either the hardware or the UNIX operating system.

Gulino was asked about problems Willie Washer was having with its "smart terminals" and "dumb terminals." He indicated that one of the changes Willie Washer had made when moving to the SUN machine was to install several smart terminals to replace dumb terminals. He stated that he believed the slowness in Willie Washer's computer was caused by the installation of the smart terminals but that he was not an expert with regard to the hardware. He stated that he knew Willie Washer was going to buy the SUN computer but that he did not know what specific model number. He said that he went to SUN's offices to see their product line before Willie Washer bought its first SUN machine and indicated that SUN was a reputable company. The trial court asked whether Gulino agreed to translate CADOL to the C system. Gulino stated, "Yes, I said I could have it done." In response to another question from the court, Gulino acknowledged that Willie Washer understood Gulino would be able to make the CADOL programs "work" on the SUN computer.

On redirect Gulino was asked why he put the C-EXEC program on Willie Washer's computer when he had admitted that he had not received specific authorization to do it. He stated that C-EXEC was an upgrade to the C-TRAN product. He said that whenever he thought Willie Washer should have an upgrade for their computer he would do it and that was what he had done throughout his relationship with Willie Washer. He also stated that, while the programs ran slowly on the SUN computer, he knew the conversion was successful because the programs were actually working. He indicated that hedid not sell, install or consult with Willie Washer about the purchase of the smart terminals.

Bob Comyn, Midwest's president, testified next. Comyn said that Joseph Gulino's job involved preparing the invoices sent to Willie Washer by reviewing time entries made by computer programmers employed by Midwest and then checking off the appropriate items to be billed. He stated that employees of Midwest entered their time into a computer every day, although the employee who performed work for Willie Washer would not have his or her name appear on the final invoice. He also testified that the invoice descriptions were taken directly from the programmer's entries.

Comyn testified that he prepared a spread sheet containing estimated costs for Midwest to convert Willie Washer's original CADOL programs to the first SUN machine. He stated that the idea of moving Midwest's customers away from the CADO machines and onto UNIX-based systems was something he first suggested. Because both the CADO operating system and the CADOL computer language were proprietary in nature, many of Midwest's customers were "locked into CADO." He stated that Chicago had only a single source for CADO hardware maintenance. He said that UNIX was a generic operating system that was becoming the standard operating system for business. He felt that the opportunity to "port" or "translate" Willie Washer's existing programs to a UNIX system provided Willie Washer a way of getting "out from under the clutches" of the CADO distributor. He said that when he presented the various options to Bill Neumann at Willie Washer, converting seemed to be the easiest way out. He testified that Willie Washer's system was very customized and that converting would be much cheaper than rewriting the programs.

Comyn testified that he was excited about the prospect of programming in C for Willie Washer and that Midwest was doing a lot of work for Motorola in the C language at the time. He stated that when Willie Washer decided to convert its programs, there were more C programmers employed by Midwest than CADOL programmers. He was particularly happy with Willie Washer's choice of converting the CADOL to C "on the box."

Comyn described the process of converting Willie Washer's programs in substantially the same terms as Gulino. Comyn stated that the first step in the conversion process was to run the CADOL source code through the C-TRAN product which produced C source code. The second step was to take the C source code generated by C-TRAN and "compile" it into "object code." He stated that the final step was to "link the object code" with program libraries in orderto create executable programs which the SUN computer could run.

Testimony indicated that the compiled object code was not something the programmers could work with and that modifications to the programs after the conversion had to be done by using either the original CADOL or the translated C source code. While the conversion process enabled the CADOL programs to ultimately run on the UNIX operating system, Comyn indicated that the C source code produced by the C-TRAN product was very hard to work with because it had been translated rather than originally written in C by a programmer. He stated that Midwest decided it would be best not to try to work with the translated source code when changes needed to be made to the programs, but instead, to work with the archived CADOL source code. He indicated that this would give Willie Washer "the most bang for their buck." He stated that the modified CADOL code could then be reprocessed through the C-TRAN product and then again compiled.

Comyn testified that the process of modifying Willie Washer's programs took longer than it had taken when changes were necessary prior to the conversion. He stated that he was involved with the decision to stop using the C-TRAN product and to use instead the C-EXEC program. He indicated the C-EXEC program made the compiling process significantly shorter. Projects that had taken three or four hours could be completed in half an hour according to Comyn. He said that this would ultimately save the client money. He stated that when the C-EXEC program was added to Willie Washer's machine Midwest did not remove the C-TRAN product. He testified that if Willie Washer wanted to use the C-TRAN product to modify its programs they still had that option, although he did not believe that using the C-TRAN product was in Willie Washer's interest.

On cross-examination, Comyn indicated that he did not tell Willie Washer that Midwest was installing the C-EXEC product. Comyn stated that he did not ever discuss technical decisions with Willie Washer. He admitted that one of the things he had told Bill Neumann before the conversion was that it was better to get off the CADOL language and into the C language. He also stated that Willie Washer's programs after the conversion were not being modified in C, although he indicated that if Willie Washer wanted to make changes in C they could easily do so by using the C-TRAN product. He said that it would be "a bad choice to put them back to C, but we could put them back to C in nothing flat. The product still exists on the box."

After a brief redirect by Midwest's counsel, Midwest rested its case.

Willie Washer's president, William Neumann, testified first for Willie Washer. He stated that he purchased Willie Washer's CADO computer ten years earlier and had used the machine to do the company's payroll, pricing, inventory, accounting, invoicing and to store customer files. He indicated that Willie Washer began doing business with Midwest approximately a year later. He said that the programs used by the company were either standard programs that had been modified by Midwest or programs that had been written by Midwest. Willie Washer was introduced to Midwest through the salesman who sold Willie Washer the CADO machine.

Neumann testified that he did not recognize most of the charges on the unpaid invoices and that he did not himself authorize the work. He admitted, however, that other people at Willie Washer may have authorized the work and stated that he really did not understand most of the charges.

Neumann testified that there came a time when Willie Washer was running out of room on its CADO computer. He stated that CADOL was an "off" language and that Willie Washer wanted to be "in the main stream of things." He said that he had lunch several times in the summer of 1988 before Willie Washer purchased the SUN computer with Dean Marr from the SUN company, and with Bob Comyn and Joe Gulino. He stated that Willie Washer depended on its computer and that he wanted to discuss the SUN machine with them. He said that dealing with Midwest was like "going to the doctor. You had such trust in these people." He said that he relied upon them "100 percent" for all of Willie Washer's computer problems. Neumann stated that he talked to Comyn and Gulino regarding the new computer and that he was concerned about the switch because of Willie Washer's complete reliance on the CADO machine.

Neumann also testified regarding a trip the four men took to SUN's computer showroom to see the machine in operation. Neumann said that Gulino and Comyn wanted to see the machine and that they approved the machine after several lunch meetings.

Neumann testified regarding the written estimate given to him by Midwest prior to the conversion. He indicated that he attended a meeting at which Joe Gulino was present. He stated that Gulino presented him various options for Willie Washer's programs and that he decided on the $23,000 straight conversion. He indicated he believed Midwest was going to convert all of the CADO programs into C and that Willie Washer would continue to run their programs just like they did with the CADO programs, but that they would be in a different language. Neumann stated that he did not really look at the document presented at the meeting, however. He stated, "I really didn'tknow what it was all about. All I looked at was the bottom figure of $23,000 and they said that was the best way to go. This was on their ...


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