Opinion
C.A. No. 07C-05-137 MMJ.
Submitted: March 31, 2008.
Decided: June 5, 2008.
UPON CROSS-MOTIONS FOR SUMMARY JUDGMENT.
Joanne Pileggi Pinckney, Esquire, Pinckney Harris, LLC, Wilmington, DE, Attorney for Plaintiff.
James R. Harker, Esquire, Cohen, Seglias, Pallas, Greenhall Furman, P.C., Wilmington, DE, Attorney for Defendant.
OPINION
FACTUAL AND PROCEDURAL CONTEXT
On May 11, 2007, Salah Pecci Leasing Co., Inc. ("S P") filed a Complaint against GBC Christina Landing, LLC ("GBG"); Berlin Steel Construction Company ("Berlin"); Structural Services, Inc. ("Structural"); J J Crane and Rigging, Inc. ("J J"); and Western Surety Company ("Western Surety"), alleging breach of contract, bad faith and unjust enrichment.
On November 22, 2005, GBC, the construction manager of the Christina Landing construction project (the "Project"), executed a written subcontract agreement with Berlin to perform construction work (the "Subcontract Agreement"). On December 1, 2005, in connection with the Subcontract Agreement, Berlin, as principal, and Western Surety, as surety, entered into a Labor and Material Payment Bond with GBC, as obligee, in the amount of $4,037,000.00 (the "Bond"). The Bond provides in pertinent part:
(1) A claimant is defined as one having a direct contract with the Principal or with a Subcontractor of the Principal for labor, material, or both, used or reasonably required for use in the performance of the contract. Labor and material being construed to include that part of . . . rental of equipment . . . directly applicable to the subcontract.
(2) The above-named Principal and Surety hereby jointly and severally agree with the Obligee that every claimant as herein defined, who has not been paid in full before the expiration of a period of ninety (90) days after the date on which the last of such claimant's work or labor was done or performed, or materials were furnished by such claimant, may sue on this bond for the use of such claimant, prosecute the suit to final judgment for such sum or sums as may be justly due claimant, and have execution thereon.
Berlin then contracted with Structural, who contracted with J J, to perform services in connection with the Subcontract Agreement. On April 25, 2006, J J leased a crane from S P at the monthly rate of $25,000.00, in addition to mobilization costs of $10,310.00 (the "Lease"). S P delivered the crane in early May 2006. J J, Structural and/or Berlin used the crane to perform work on the Project from May 15, 2006 through August 31, 2006.
The original Lease payment due was $100,082.00. In March 2007, Structural made a partial payment which reduced that amount to $63,582.00. S P claims that it performed all obligations under the Lease and that S P is still owed $63,582.00.
On January 18, 2008, S P moved for summary judgment. S P claims that under the Bond, Berlin and Western Surety are jointly and severally liable for payments due to S P. S P contends that any ambiguous contract language should be construed against the drafter; that S P is a proper claimant under the Bond; that there is no privity requirement for recovery; and that S P is an intended third-party beneficiary of the Bond.
In their cross-motion for summary judgment, Berlin and Western argue: that S P is not a proper claimant under the Bond; that S P's claims are barred by payment and a valid waiver and release; and that S P cannot recover on a theory of unjust enrichment.
SUMMARY JUDGMENT STANDARD
This Court will grant summary judgment only when no material issues of fact exist. The moving party bears the burden of establishing the non-existence of material issues of fact. Once the moving party meets its burden, the burden shifts to the non-moving party to establish the existence of material issues of fact. Where the moving party produces an affidavit or other evidence sufficient under Superior Court Civil Rule 56 in support of its motion and the burden shifts, then the non-moving party may not rest on its own pleadings, but must provide evidence showing a genuine issue of material fact for trial. If, after discovery, the non-moving party cannot make a sufficient showing of the existence of an essential element of the case, summary judgment must be granted.
Moore v. Sizemore, 405 A.2d 679, 680 (Del. 1979).
Id. at 681.
Super. Ct. Civ. R. 56(e); Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986).
Burkhart v. Davies, 602 A.2d 56, 59 (Del. 1991), cert. denied, 504 U.S. 912 (1992); Celotex Corp., 477 U.S. at 322-23.
A court deciding a summary judgment motion must identify disputed factual issues whose resolution is necessary to decide the case, but the court must not decide those issues. The Court must evaluate the facts in the light most favorable to the non-moving party. Summary judgment will not be granted under circumstances where the record reasonably indicates that a material fact is in dispute or if it seems desirable to inquire more thoroughly into the facts in order to clarify the application of law to the circumstances.
Merrill v. Crothall-American, Inc., 606 A.2d 96, 99 (Del. 1992).
Id.
Ebersole v. Lowengrub, 180 A.2d 467, 468-69 (Del. 1962).
ANALYSIS
At the conclusion of oral argument, the parties agreed that resolution of one legal issue will determine the cross-motions for summary judgment. This issue is one of first impression in Delaware.Specifically, the Court must consider the following language in the Bond: "A claimant is defined as one having a direct contract with the Principal or with a Subcontractor of the Principal. . . ." The question is whether the undefined term "Subcontractor" includes all subcontractors who provided services or materials on the Project; or whether "Subcontractor" is limited to those entities who entered into subcontract agreements directly with Berlin, the principal. If "Subcontractor" encompasses all subcontractors, S P is a "claimant" and Western is liable to pay S P pursuant to the Bond for any amounts still outstanding. If "Subcontractor" is limited to direct subcontractors, such as Structural, S P cannot recover under the Bond.
The Court finds Knecht, Inc., v. United Pacific Ins. Co., to be instructive on the issue of a sub-subcontractor's right to recover on a bond against a principal or surety. In Knecht, a sub-subcontractor, who was owed money from a subcontractor, sought payment on a bond against the surety. In language substantively parallel to the instant case, the bond in Knecht defined a claimant as "a person with a direct contract with the principal on the bond . . . or with a subcontractor of the principal, for labor and material used or reasonably required for performance of the contract."
860 F.2d 74 (3d Cir. 1988).
Id. at 76.
In affirming the United States District Court, the Third Circuit Court of Appeals found that nothing in the contract "released or extinguished the rights of a sub-subcontractor such as Knecht under the bond." In addition, the court noted that the contractor "could have provided in its agreement with [the subcontractor] that any sub-subcontractor waive any right on the bond against either the principal or surety."
Id. at 79.
Id.
The Court finds S P is a claimant under the Bond. Where a surety for a contractor in a construction contract guarantees payment of the contractor's obligation to pay for labor and materials, those parties providing labor and materials are third-party beneficiaries of the surety contract. In the absence of a specific disclaimer of liability in the surety agreement, the surety's assumption of the contractor's responsibility to pay for material and labor extends to sub-subcontractors.
See Royal Indemnity Co. v. Alexander Industries, Inc., 211 A.2d 919, 921 (Del. 1965).