Travelers Cas. & Sur. Co. of Am. v. Cummins Mid-S., LLC

• Decision Date: 15 April 2015
• Docket Number: No. CV–14–592,CV–14–592
• Citation: 460 S.W.3d 308,2015 Ark. App. 229
• Parties: Travelers Casualty & Surety Company of America, and Boyd Corley Construction, LLC d/b/a Tycor Construction, LLC a/k/a Tycor Industries, LLC, Appellants, v. Cummins Mid–South, LLC, Appellee.
• Court: Arkansas Court of Appeals

2015 Ark. App. 229

460 S.W.3d 308

Travelers Casualty & Surety Company of America, and Boyd Corley Construction, LLC d/b/a Tycor Construction, LLC a/k/a Tycor Industries, LLC, Appellants

v.Cummins Mid–South, LLC, Appellee.

No. CV–14–592

Court of Appeals of Arkansas, DIVISION I.

Opinion Delivered April 15, 2015

Rehearing Denied May 20, 2015

Newland & Associates, PLLC, by: Joel Hoover and Breanna Trombley, Little Rock, for appellants.

Raymond Harrill, Little Rock and Robert Tschiemer, Mayflower, for appellee.

Opinion

BART F. VIRDEN, Judge

Travelers Casualty and Surety Company of America (Travelers) and Tycor Industries LLC (Tycor) appeal the circuit court's order for Tycor to pay Cummins Mid–South LLC (Cummins) $59,115.14 plus costs, interest, and attorney's fees on the grounds that (1) the language of the lien release was ambiguous, (2) Cummins did not waive its right to recover on the bond, and (3) Tycor was unjustly enriched. This appeal follows.

On appeal, Tycor asserts that the terms of the release were unambiguous, and that Cummins waived its right to payment under the bond by signing the release. Additionally, Tycor asserts that Cummins is not entitled to recover under the doctrine of unjust enrichment because the existence of a contract bars such recovery. We agree, and we reverse the circuit court's order.

I. Facts

Tycor, a general contractor, bonded by Travelers, subcontracted with ARC Electrical (ARC) for installation and electrical work on the Armed Forces Reserve Center project (project). ARC purchased a generator from Cummins. ARC began to have problems performing, and Tycor fired ARC before the job was completed. On August 3, 2011, John Virden¹ of Tycor contacted Nick Grandison, a project manager at Cummins, to ascertain if any money was owed for supplies relating to the project. Initially, Grandison told Virden that Cummins was paid in full. However, on September 20, 2011, Cummins contacted Tycor and explained that it had made a mistake and their records showed that Tycor actually owed $59,115.14 for the generator. It was undisputed that Tycor had assumed the liabilities of ARC regarding this job. Tycor took no action. In November 2011, Tycor received written notice that a $2,748.16 bill from a September 2, 2011 service call on the generator had gone into collection. The invoice showed the date of the service call, the parts and labor charges, plus various charges related to the repair of the part. On December 1, 2011, Tycor paid the bill with a check dated December 1, 2011, and wrote “Paid in Full–RE: Armed Forces Res. Ctr.” Tycor prepared the release, which was dated December 13, 2011. It was entitled “SUBCONTRACTOR/MATERIALMAN UNCONDITIONAL WAIVER AND RELEASE UPON FINAL PAYMENT,” and was signed by Cummins's chief financial officer, Mark Whitehead. It contained the statement “covers the full and final payment of the contract amount for labor, services and equipment, or material furnished on the job of Armed Forces Reserve Center.” Whitehead testified he handled unpaid accounts as a part of his job, regularly signing lien waivers and that he signed the release drafted by Tycor. He explained that he did not contact Tycor to discuss the release. Whitehead testified that he knew what a final lien waiver was, and he knew that if he signed it, Cummins was not going to get paid any more on that project. He testified that he did not check to see if any money was owed by Tycor on the job.

Three more times in January 2012, the generator required repair, which Cummins provided. The total bill for the three service calls was $6,794.64, which Tycor paid. However, for these repairs, Cummins prepared its own lien release, specifically noting that the generator itself had not been paid for. On March 28, 2012, Cummins submitted a notice of subcontractors claim against the contractor's bond for the amount of the generator, transfer switch, and start-up materials. Travelers denied the claim based on the execution of the lien release. On July 2, 2012, Cummins filed a complaint against Tycor and Travelers, asking for payment for the generator, interest, and attorney's fees. Tycor filed a motion to dismiss with its answer, which the circuit court denied.

II. The Circuit Court's Order

On March 7, 2014, the circuit court entered an order finding that Cummins did not waive its bond claim on the grounds that the language of the first release was ambiguous and did not indicate it was payment for anything other than the service call. The circuit court found that the language was ambiguous, considering extrinsic evidence, and construed the terms of the lien release in favor of Cummins:

[T]here was nothing in the proof, circumstantial or otherwise, to indicate that Cummins knew that by accepting the check for $2,748.16 that it was releasing its right to be paid for the generator. The definition of waiver requires full knowledge of material facts and an action which is inconsistent with the right or intention to rely upon the right.

A waiver requires consideration.... There was nothing [in the lien release] to indicate that it [the check] was consideration for payment of the generator purchased by ARC.

The circuit court found that “Cummins provided the generator and was never paid for it” and hence, Tycor was unjustly enriched. Specifically, the circuit court found Tycor was unjustly enriched in the amount of $59,115.14 by its “retention of the generator at the work site ... for the project owner, and the failure of the bonding company to pay for it.”

The circuit court also found that Cummins could recover under the bond based on Tycor's unjust enrichment:

The purpose of the bond under A.C.A. section 18–44–501, et seq. was to provide for unforeseen eventualities. Tycor was obligated to provide the generator under the overall set of contracts, and for Tycor to not pay for it is a windfall benefit to Tycor[.]

The circuit court denied Tycor's defensive claims of detrimental reliance, estoppel, and payment on the ground that Tycor did not meet its burden to assert the defenses. In its final finding, the circuit court found that the bond should have covered the generator: “The purpose of the statute requiring a bond for public works projects is to provide for payment of subcontractors of materialmen in cases such as this.” The circuit court awarded Cummins $59,115.14 plus costs, 12% penalty, prejudgment and postjudgment interest, and attorney's fees.

III. The Lien Release

The release at issue in this appeal is a type of contract between the parties and is interpreted pursuant to the rules of contract interpretation. Wal–Mart Stores, Inc. v. Coughlin, 369 Ark. 365, 371, 255 S.W.3d 424, 429 (2007). The first rule of contract interpretation is to give to the language employed the meaning that the parties intended. Id. If the language of the policy is unambiguous, we will give effect to the plain language of the policy without resorting to the rules of construction. Elam v. First Unum Life Ins. Co., 346 Ark. 291, 297, 57 S.W.3d 165, 169 (2001). Whether ambiguity exists is ordinarily a question of law for courts to resolve. Machen v. Machen, 2011 Ark. App. 47, 380 S.W.3d 497. An issue involving a question of law is reviewed de novo. Travis Lumber Co. v. Deichman, 2009 Ark. 299, 319 S.W.3d 239. Language is ambiguous if there is doubt or uncertainty as to its meaning and it is fairly susceptible to more than one equally reasonable interpretation. Machen, supra. We must consider the sense and meaning of the words used by the parties as they are taken and understood in their plain and ordinary meaning. Id.

Our supreme court has set forth the function of the court when there is a question concerning the clarity of the terms of a contract:

[W]here there is a dispute as to the meaning of a contract term or provision, be it an insurance or other contract, the trial court must initially perform the role of gatekeeper, determining first whether the dispute may be resolved by looking solely to the contract or whether the parties rely on disputed extrinsic evidence to support their proposed interpretation. As Justice George Rose Smith explained, “[t]he construction and legal effect of written contracts are matters to be determined by the court, not by the jury, except when the meaning of the language depends upon disputed extrinsic evidence.” Thus, where the issue of ambiguity may be resolved by reviewing the language of the contract itself, it is the trial court's duty to make such a determination as a matter of law.

Elam, 346 Ark. at 297, 57 S.W.3d at 169–70 (internal citations omitted).

After careful examination of the lien release written by Tycor and signed by Cummins, we hold that the trial court erred in finding its language ambiguous, and we reverse.

We cannot say that the language of the lien release is ambiguous, looking only on the face of the document. The release is entitled at the top of the document: “SUBCONTRACTOR/MATERIALMAN UNCONDITIONAL WAIVER AND RELEASE UPON FINAL PAYMENT.” It contains the statements that the release “covers the full and final payment of the contract amount for labor, services and equipment, or material furnished on the job of Armed Forces Reserve Center.” The release clearly sets forth that the person who signs the document waives any bond right he or she may have: “[T]he undersigned hereby releases and waives any mechanics' lien, stop notice, or bond right he/she/it has on the said job.” The language is clear that Cummins releases any bond right it may have against Tycor concerning the Armed Forces Reserve Center job. There is no ambiguity, and therefore no call to look beyond the plain language of the contract.

We hold that the circuit court erred in finding the language of the release ambiguous, and on this point, we reverse.

IV. Waiver and Unilateral Mistake

Waiver is the voluntary abandonment or surrender by a capable person of a right known by him to exist, with the intent that he shall forever be deprived of its benefits,...