Summary
noting that plaintiff's motion for partial summary judgment could be subject to denial due to its untimeliness
Summary of this case from Carter v. VNA, Inc.Opinion
Civil Action No. DKC 99-3195.
November 22, 2000
MEMORANDUM OPINION
In this dispute over payment, Plaintiff Capitol Indemnity Corporation (Capitol) has filed a motion for partial summary judgment against Defendant The Mountbatten Surety Company, Inc. (Mountbatten). Defendant has also filed a petition for leave to file surreply to Plaintiff's motion for partial summary judgment. The issues have been fully briefed, and no hearing is deemed necessary. Local Rule 105.6. For the following reasons, the court shall DENY Plaintiff's motion for partial summary judgment and DENY Defendant's petition for leave to file surreply.
Plaintiff filed its motion for summary judgment on May 31, 2000. This court's Scheduling Order stipulated that all pre-trial dispositive motions should have been filed by May 22, 2000. Both parties agree that this motion was filed past the deadline. Because the resolution of this motion would promote judicial economy and fairness to the parties by potentially reducing the issues for trial, this court is not going to deny this motion solely on its lack of timeliness.
Because the court is denying Plaintiff's motion for partial summary judgment, Defendant's petition for leave to file surreply is deemed unnecessary and denied.
I. Background
These two parties became involved after clients they serviced as sureties entered into a contract. On September 8, 1997, Coste Construction/ ANA General Contractors, J.V. ( Coste) subcontracted with MIC/CO, Inc. (MIC/CO) on a project to construct certain improvements at the Quince Orchard Library in Gaithersburg, Maryland. MIC/CO agreed to furnish labor and material for the project.
Mountbatten, as surety for Coste, issued the performance and payment bonds required by law for the entire project. Likewise, Capitol, as surety for MIC/CO, issued performance and payment bonds referencing the MIC/CO subcontract and bearing bond number C000720022, in favor of Coste, as obligee. Both Coste and MIC/CO encountered financial difficulties while working and became unable to complete the project. Mountbatten agreed to take over performance of Coste's contract with Montgomery County; Capitol agreed to complete the work required of MIC/CO by the Subcontract.
Soon thereafter, Mountbatten and Capitol entered into a written Takeover Agreement which set forth the terms upon which Capitol agreed to perform the work remaining under the MIC/CO Subcontract and upon which Mountbatten agreed to pay Capitol for such work.
The Takeover Agreement incorporates by reference the Subcontract and the aforementioned performance and payment bonds. The Subcontract sets forth that time is of the essence. (Defendant's Exhibit B, § 8). The date of completion agreed upon by the parties was March 1, 1999. (Defendant's Exhibit A, 7(a)). According to the agreement, Capitol would complete the work by and through John C. Grimberg and Company. Mountbatten agreed to make monthly payments upon the condition that A the work detailed in the payment requisition is completed according to its original specifications and approved by the owner of the project, Montgomery County. (Defendant's Exhibit A, § 6). Additionally, the Takeover Agreement provides that
Mountbatten reserves and does not waive its rights and/or defenses against Surety, Subcontractor and/or Completing Subcontractor, under the Subcontract and or Bonds, including but not limited to Mountbatten's claims for additional legal, design professional and delay costs resulting from Subcontractor's default, actual, or liquidated damages assessed by Montgomery County relating to delays caused by Subcontractor and/or Completing Subcontractor, after the extended Subcontract completion date of March 1, 1999 and it is understood that the amount to be paid to Surety under this Takeover Agreement may be reduced thereby.
Id. Under the terms of the contract, Mountbatten was to pay Capitol the balance of MIC/CO contract and the monthly payments could be reduced by default, actual, or liquidated damages.
There is no dispute between the parties that the project was not completed by March 1, 1999 and remains unfinished. The parties disagree on the amount of work remaining on the project, the amount of work completed on the project, the party responsible for the delay, and any potential damages assessed by Montgomery County. Mountbatten maintains that Capitol has delayed the project past agreed upon deadlines and as a result anticipates damages being assessed by Montgomery County. Mountbatten relies on correspondence between Louis Baldassarre, Project Manager, and Thomas Heger, Legal Counsel of Capitol, to assert that Capitol is responsible for the delay and will soon be required to pay damages. Mountbatten contends that Montgomery County offered to cap its liquidated damages claim at $75,000 if the Project had been completed by June 15, 2000. However, at this point in time there has been no assessment of liquidated damages made by Montgomery County against either party. Mountbatten also asserts that Capitol's completed work does not meet the agreed upon standards and the overall project is not completed.
Capitol disagrees with this assertion and instead contends that the responsibility for the delay is very much in dispute. For example, in a letter dated June 23, 1999, Heger responds to Baldassare's assertions by arguing that Mountbatten and other parties were responsible for the delay. See Defendant's Exhibit C, Heger's Letter, June 23, 1999. Furthermore, both parties acknowledge that liquidated damages have not yet been assessed by Montgomery County.
Capitol disputes this notion and argues that by and through Grimberg, the company has completed all the work remaining under the MIC/CO Subcontract that could be completed. Capitol contends that the work was done in a good and workmanlike manner and in compliance with the MIC/CO Subcontract documents and prevailing industry standards.
Although Capitol does not dispute that the project remains unfinished, the company contends that the completed work attributable to them is in compliance with both the Subcontract and industry standards.
Mountbatten, however, did submit seven payment applications to Montgomery County. See Plaintiff's Exhibit A-G, Applications and Certification for Payment. In each of these applications for payment, Mountbatten certified that the subcontractors' work was completely satisfactory and in accordance with the requirements of the contract documents. Id. Mountbatten further certified that each of its subcontractors had been paid for work previously invoiced. The certification states as follows:
The undersigned Contractor certifies that to the best of the Contractor's knowledge, information, and belief the Work covered by this Application for Payment has been completed in accordance with the Contract Documents, that all amounts have been paid by the Contractor for Work for which previous Certificates for Payment were issued and payments received from the owner, and that current payment shown herein is now due.
Id. The certifications were signed under oath by Baldassare.
These payment applications do not, however, specify the projects attributable to individual subcontractors. Additionally, based on his observations of the work completed as of the date on the payment application, the Project Architect certified that the work had been completed in accordance with the contract documents and that Mountbatten was entitled to payment of the amount certified. The Architect's certifications state as follows:
In accordance with the Contract documents, based on on-site observations and the data comprising the application, the Architect certifies to the Owner that to the best of the Architect's knowledge, information, and belief the Work has progressed as indicated, the quality of the Work is in accordance with the Contract Documents, and the Contractor is entitled to payment of the AMOUNT CERTIFIED.
Id.
According to Wayne Appenzellar, architect in the Capital Projects Management Section of the Montgomery County Department of Public Works and Transportation, Montgomery County issued the requested payments to Mountbatten. See Plaintiff's Exhibit 3, Affadavit of Wayne Appenzellar, 4. As of January 25, 2000, Payment Application 22 further verifies that Mountbatten had received payments equaling a total of $2,581,032.06 from Montgomery County. See Plaintiff's Exhibit G, Application and Certification For Payment. Both Appenzellar and Heger assert that although Capitol submitted invoices, no payments have been forthcoming from Mountbatten. In December of 1999, a lavatory shut-off valve burst causing some damage. Mountbatten has asserted two counterclaims against Capitol. These claims are: 1) tort damages for the burst valve and 2) legal, design professional, and delay damages for the incomplete contract. Appenzellar testified that the County does not plan to assess any damages against Mountbatten based on the burst valve because the subsequent damage was minimal. (Plaintiff Exhibit 3, Appenzellar Deposition, 5). Again, the damages have yet, to be assessed by the County.
II. Summary Judgment Standard
A motion for summary judgment will be granted only if there exists no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). In other words, if there clearly exist factual issues "that properly can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party, then summary judgment is inappropriate. Anderson, 477 U.S. at 250; see also Pulliam Inv. Co. v. Cameo Properties, 810 F.2d 1282, 1286 (4th Cir. 1987); Morrison v. Nissan Motor Co., 601 F.2d 139, 141 (4th Cir. 1979); Stevens v. Howard D. Johnson Co., 181 F.2d 390, 394 (4th Cir. 1950). The moving party bears the burden of showing that there is no genuine issue of material fact. Fed.R.Civ.P. 56(c); Pulliam, 810 F.2d at 1286 (citing Charbonnages de France v. Smith, 597 F.2d 406, 414 (4th Cir. 1979)).
When ruling on a motion for summary judgment, the court must draw all reasonable inferences in favor of and construe the facts in the light most favorable to the non-moving party. Tinsley v. First Union Nat'l Bank, 155 F.3d 435, 437 (4th Cir. 1998). A party who bears the burden of proof on a particular claim must factually support each element of his or her claim. A [A] complete failure of proof concerning an essential element . . . necessarily renders all other facts immaterial." Celotex, 477 U.S. at 323.
III. Analysis
There are two issues before this court: 1) Mountbatten's withholding of payment to Capitol and 2) the amount of damages owed to Capitol.
A. Type of Indemnity
Mountbatten refuses to pay Capitol, asserting that the work stipulated to in the contract is incomplete and that Capitol has agreed to indemnify Mountbatten against delay damages assessed by Montgomery County. In Maryland, there is a difference between indemnity against loss and indemnity against liability. An indemnity against loss is where A the indemnitee cannot recover until he has made payment or otherwise suffered an actual loss or damage against which the covenant runs. Roebuck v. Steuart, 76 Md. App. 298, 308, 544 A.2d 808, 812 (1988) (internal quotation marks and citations omitted). By contrast, an indemnity against liability is where A an action may be brought and recovery had as soon as the liability is legally imposed, as when the judgment is entered, even though at that point no actual loss has been sustained. Levin v. Friedman, 271 Md. 438, 443-444, 317 A.2d 831, 834 (1974).
In the Takeover Agreement, Capitol agreed that Mountbatten could reduce its payments by the amount of actual or liquidated damages assessed by Montgomery County. Mountbatten uses the agreement as a basis to assert that common law indemnity principles do not apply in this case because there is a contractual agreement among the parties with respect to Mountbatten's rights regarding indemnification and reduction of damages from payment.
The court disagrees. Although the agreement sets forth clear terms and responsibilities when actual damages have been assessed, the contract is silent when it comes to unliquidated damages. This is a situation of an indemnity of loss or damage. Capitol has agreed that Mountbatten's payments may be reduced by either actual or liquidated damages. There is no express indemnity clause within the Takeover Agreement concerning unliquidated damages. Capitol did not make an express promise to indemnify and save Mountbatten harmless or agree to place Mountbatten in funds necessary to finance the completion of the Project and to secure Mountbatten against unliquidated losses that may occur in the future.
Defendant relies on cases where there is an express indemnity clause. See Fidelity Deposit Co. of Md., 722 F.2d 1160, 1163 (4th Cir. 1983); American Motorists Insurance Co. v. United Furnace Co. Inc., 876 F.2d 293, 295 (2nd Cir. 1989); E.L. White, Inc., v. City of Huntington Beach, 21 Cal.3d 497, 507, 579 P.2d 505, 515 (1978). Even an express indemnity clause is often limited to its own terms. For example, in E.L. White, Inc., 21 Cal.3d at 497, the court says A [w]ithin the limitations of the language used an express indemnity clause may have preemptive effect displacing implied rights. Thus, the parties are limited to the terms that they bargained and agreed upon. In the case at hand, the parties are limited to the language of the Takeover Agreement which governs actual and liquidated rather than anticipated damages.
Additionally, Mountbatten has made no payments on behalf of Capitol and cannot specify the amount of the future assessment of damages.
Furthermore, Mountbatten asserts that it should not have to make a payment to Capitol because final approval by Montgomery County has not been garnered because the project remains unfinished. Capitol, however, is not asking to be paid in full, but rather to be paid the amount that Mountbatten has received from Montgomery County on its behalf. Capitol is seeking the progress payments or monthly requisitions that Mountbatten promised to pay under the terms of the Takeover Agreement.
Additionally, Capitol relies on seven payment applications, that Mountbatten submitted to Montgomery County for the work completed by Capitol and Grimberg, to prove that its work is not only in compliance with the Subcontract but has resulted in Mountbatten receiving payment. See Plaintiff's Exhibits A-G. Thus, Mountbatten's assertion that Capitol's work is shoddy and not compliant with industry standards does not conform with the payment applications for which Mountbatten submitted, signed, and received payment.
Mountbatten should not be able simultaneously to certify to Montgomery County that the subcontractors have been paid while withholding the same funds from the subcontractors in anticipation of an assessment of damages.
B. Amount Owed to Capitol
The court finds that Mountbatten must pay Capitol the amount owed to it. It is not disputed that as of January 25, 2000, Montgomery County had paid a total of $2,581,032.06 to Mountbatten. Additionally, Mountbatten requested and received a payment of $21,124.85 as documented in Payment Application Number 22 shortly thereafter. In order to receive these funds, Mountbatten certified that work done by all of its Subcontractors, including Capitol, had been satisfactorily completed.
However, the Payment Applications relied on by Plaintiff do not detail the work done by individual subcontractors. Thus, it is difficult for the court to assess the work attributable to Capitol versus another subcontractor. Additionally, Capitol's damages calculations are based on the amount Mountbatten allegedly claims is outstanding rather than on the amount of work Capitol completed. Moreover, the two parties dispute the amount of work Capitol remains obliged to complete. Thus, even though Capitol asserts that the $137,857.50 sought is for progress payments, the record provided does not conclusively specify the work Capitol completed equaling this amount. On this record, the court must deny Plaintiff's motion for partial summary judgment.
IV. Conclusion
For the previously discussed reasons, the court shall DENY Plaintiff's motion for partial summary judgment and DENY Defendant's petition for leave to file a surreply.
A separate Order will be entered.
ORDER
In accordance with the accompanying Memorandum Opinion, IT IS this ___ day of November, 2000, by the United States District Court for the District of Maryland, ORDERED that:
1. Plaintiff's motion for partial summary judgment BE, and the same hereby IS, DENIED;
2. Defendant's petition for leave to file surreply BE, and the same hereby IS, DENIED;
3. A telephone scheduling conference will be held December 11, at 9:00 a.m. Counsel for Plaintiff is directed to arrange and initiate the call to counsel for Defendant and the court; and
4. The Clerk is directed to transmit a copy of this Order and the accompanying Memorandum Opinion to counsel for the parties and to Magistrate Judge Connelly.