E.W. Audet & Sons, Inc. v. Fireman's Fund Ins. Co. of Newark, New Jersey

• Decision Date: 14 January 1994
• Docket Number: No. 92-580-A,92-580-A
• Citation: 635 A.2d 1181
• Parties: E.W. AUDET & SONS, INC., et al. v. FIREMEN'S FUND INSURANCE COMPANY OF NEWARK, NEW JERSEY. ppeal.
• Court: Rhode Island Supreme Court

Page 1181

635 A.2d 1181

E.W. AUDET & SONS, INC., et al. v. FIREMEN'S FUND INSURANCE COMPANY OF NEWARK, NEW JERSEY.

No. 92-580-Appeal.

Supreme Court of Rhode Island.

Jan. 14, 1994.

Mark Jay Hagopian, Visconti & Petrocelli, Providence, for plaintiffs.

Michael Sarli, Gidley, Sarli & Marusak, Providence, for defendant.

OPINION

MURRAY, Justice.

This matter came before the Supreme Court on an appeal by the plaintiffs, E.W. Audet & Sons, Inc. (Audet), and Providence Steel, Inc. (Steel), from the entry of summary judgment for the defendant, Firemen's Fund Insurance Company of Newark, New Jersey (Firemen's), in the Superior Court. The plaintiffs challenge the Superior Court's denial of their motion for summary judgment and the granting of the defendant's cross-motion for summary judgment. We affirm.

Because this case is before us subsequent to the entry of summary judgment, the transcript is brief and contains no testimony. Therefore, the following summary of the facts and travel of the case has been gleaned from the 1989 Arbitrators' Findings and Award and the parties' briefs.

In 1989 Audet and Steel filed this lawsuit against Firemen's, seeking payment for costs incurred as a result of delays in a construction project to expand the wastewater-treatment plant (project) in the city of Cranston (Cranston). The prime contractor on the project was Westcott Construction Corporation (Westcott). Westcott entered into subcontracts with Audet, Crouse Combustion Systems, Inc. (Crouse), and other subcontractors in which the subcontractors agreed to perform work on various aspects of the project. Westcott also purchased metals for the project from Steel. In accordance with the terms of its subcontract, Crouse obtained performance and payment bonds from Firemen's. Crouse, as principal, and Firemen's, as surety, were both obligated to Westcott with respect to the project. Neither Crouse nor Westcott is a party to this lawsuit.

In 1981, Cranston and Westcott entered into a construction contract for the project for more than $21 million. Westcott and Crouse subsequently executed a subcontract in which Crouse agreed "to furnish all labor, materials, equipment and all else" necessary to complete the section of the general contract relating to filter presses, sludge-materials handling equipment, and incineration equipment. Additionally, Westcott entered into a subcontract with Audet for the performance of electrical and lightning-protection work. Westcott also purchased steel and other metals for the project from Steel by purchase order.

Delays in the construction occurred. In accordance with the Public Works Arbitration Act, G.L.1956 (1990 Reenactment) chapter 16 of title 37, Westcott and its subcontractors (including Steel, which was a supplier rather than a subcontractor) brought claims in 1986 for additional compensation for costs incurred as a result of delays that Cranston had allegedly caused; Cranston also asserted counterclaims against Westcott. The three arbitrators conducted hearings and subsequently made findings of fact and an award. The arbitrators pointed out that because no contractual relationship existed between Cranston and the "subcontractors," the claims of the "subcontractors" had to be "passed through" and presented by the prime contractor. The arbitrators clarified that Westcott's claim included the claims of numerous "subcontractors," among them those of Audet and Steel. In the arbitrators' enumeration of the claims that were included in Westcott's claim, they listed Steel's claim but noted that Steel was involved in the project through purchase order rather than by subcontract.

In their decision, the arbitrators found "that although Westcott was responsible as general contractor [sic ] for delays in the prosecution of the work, the principal source of delays was that of its subcontractor, CROUSE." They also found that, although Cranston's actions accounted for some of the delays, Crouse was not entitled to compensation from Cranston for delays because most of Crouse's delays were self-generated.

With regard to the subcontractors' claims, the arbitrators noted that the subcontracts contained the following clause:

"Section 6. The Subcontractor agrees that he shall have no claim for money damages or additional compensation for delay no matter how caused, but for any delay or increase in the time required for performance of this subcontract not due to the fault of the Subcontractor, he shall be entitled only to such extension of time for performance of his work as shall be allowed to the Contractor or by the Contractor."

The arbitrators also quoted the following provision, which was part of the "terms and conditions" of the subcontracts:

"18. The Contractor agrees to allow the Subcontractor to use the Contractor's name in procedures set up in the general contract or provided by law for the prosecution of any claims for additional compensation for any work done pursuant to the direction of the Architect or Owner. The Contractor further agrees on reasonable notice to include any claims of the Subcontractor in any action against the Owner. The Subcontractor agrees to be bound by the results of any arbitration, litigation or administrative proceedings in the same manner that the Contractor is bound by such results."

The arbitrators also cited the Severin doctrine. In Severin v. United States, 99 Ct.Cl. 435 (1943), cert. denied, 322 U.S. 733, 64 S.Ct. 1045, 88 L.Ed. 1567 (1944), the United States Court of Claims held that a prime construction contractor with the federal government could not recover from the government a subcontractor's damages for government-caused delays when the subcontractor had agreed not to hold the prime contractor liable for such delays. 99 Ct.Cl. at 440-44. One commentator has explained this doctrine as "requiring a prime contractor's liability to the subcontractor as a condition of recovery against the government in a representative suit * * *." See Henry R. Kates, Note, Facilitating Subcontractors' Claims Against the Government Through the Prime Contractor as the Real Party in Interest, 52 Geo.Wash.L.Rev. 146, 151 (1983).

The arbitrators noted that courts have interpreted the doctrine to "permit a prime to sue on behalf of [its] subcontractor only when the prime contractor has reimbursed its subcontractor for the latter's damages or remains liable for such reimbursement in the future." They concluded that the Severin doctrine applied and determined that "the exculpatory clause in the subcontracts is clear and sufficiently specific to bar such delay claims." Therefore, they concluded, Audet and the other "subcontractors" (other than Crouse and Steel) were barred from asserting delay claims and were not entitled to delay damages.

As for Steel's claims, the arbitrators determined that Steel was entitled to compensation for costs incurred as a result of delay. Because Steel had provided metals for the project under a purchase order, not a subcontract, Steel had not agreed to waive claims for delay damages as had Audet.

The arbitrators issued the following award: Crouse was to pay Westcott $384,800, and Westcott was to pay Cranston $314,000 and Steel $8,000; additionally, Cranston was to pay Westcott $117,600. Therefore, Westcott received a net amount of $180,400, Cranston received a net amount of $196,400, and Steel received a net amount of $8,000. The arbitrators issued their findings and award in April 1989.

In October 1989, Audet and Steel filed their complaint in this civil action against Firemen's as Crouse's surety. Audet, Steel, and Firemen's proceeded with discovery and other aspects of the lawsuit. In 1991, this court affirmed the judgment of the Superior Court confirming the 1989 arbitration award. See Westcott Construction Corp. v. City of Cranston, 586 A.2d 542, 542-43 (R.I.1991). In September 1992, the Superior Court motion justice granted Firemen's motion for summary judgment and denied Audet and Steel's motion for summary judgment. After a Superior Court justice had entered final judgment, Audet and Steel appealed to this court.

Audet and Steel base their challenge to the granting of Firemen's motion for summary judgment and the denial of their motion for summary judgment on two legal issues. They claim that the Superior Court justice erred in making the following rulings: (1) that the arbitration precluded Audet and Steel from asserting delay claims against Crouse's bond and (2) that Audet and Steel were not third-party beneficiaries of the contract between Westcott and Crouse and were not entitled to benefit from Crouse's bond.

When reviewing the granting or the denial of a motion for summary judgment, this court applies the same analysis that the motion justice applied. See Barratt v. Burlingham, 492 A.2d 1219, 1220 (R.I.1985). Rule 56(c) of the Superior Court Rules of Civil Procedure provides that, following a hearing on a motion for summary judgment, "[t]he judgment sought shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as [a] matter of law." Our review includes examining the pleadings and affidavits in a light most favorable to the party opposing the motion. Barratt, 492 A.2d at 1220. We shall uphold the Superior Court's order granting summary judgment "[o]nly when our review reveals no issues of material fact, and the moving party is entitled to judgment as a matter of law * * *." Id.

Our review of the record reveals no genuine issue of material fact. None of the parties argued in any of the summary-judgment documents or at the hearing on the motions for summary judgment that an issue of material fact existed. Additionally, the parties' statements of facts in their briefs do not reveal or identify disputes regarding issues of material...