Mitsui & Co. v. Puerto Rico Water Resources Auth.
| Decision Date | 10 November 1981 |
| Docket Number | Civ. No. 76-1393(PG). |
| Citation | 528 F. Supp. 768 |
| Parties | MITSUI & CO. (U.S.A.), INC., Plaintiff, v. PUERTO RICO WATER RESOURCES AUTHORITY, Defendant. |
| Court | U.S. District Court — District of Puerto Rico |
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Fiddler, González & Rodríguez, San Juan, P. R., Ronald A. Cohan, Los Angeles, Cal., Rafael Rodríguez-Lebrón, San Juan, P. R., Kenneth Bowlin, San Antonio, Tex., Debevoise & Plimpton, New York City, for plaintiff.
Luis A. Lugo, Jr., San Juan, P. R., Kenneth M. Cushman, Philadelphia, Pa., Alberto Picó, San Juan, P. R., Donald B. Lewis, Philadelphia, Pa., for defendant.
On November 3, 1976, MITSUI & CO. (U.S.A.), INC., (Mitsui USA) filed suit against the Puerto Rico Water Resources Authority (PRWRA),1 a public corporation of the Commonwealth of Puerto Rico, to recover damages arising out of construction of a fossil fuel power plant (the Aguirre Project), located in Aguirre, Puerto Rico. The complaint alleges that Mitsui USA and PRWRA entered into a contract (the Prime Contract) whereby Mitsui USA agreed to build the plant for PRWRA; that PRWRA breached various contractual and other duties in both a fraudulent and negligent manner; and, that Mitsui USA is entitled to recover damages on theories of breach of contract and warranty, breach of duties of good faith and fair dealing, fraud, deceit, misrepresentation, quantum meruit and unjust enrichment.2
All, or most, of the construction work was subcontracted to Taihei Dengyo Kaisha Ltd. (TDK). TDK, in turn, issued a subcontract to Taihei Caribe, Inc., (TCI) its wholly owned subsidiary, which performed much of the actual construction work. Any damage award will belong to TDK.3
PRWRA moved for a separate trial on the issue whether Mitsui USA is the "proper plaintiff" and argued that Mitsui USA is not because it seeks to recover for damages suffered by TDK even though it has no liability to compensate TDK for such damages.4 On August 7, 1978, it was ordered that a separate trial be held on the issue of the "role Mitsui USA played in the construction of the Aguirre Project and its standing to bring this suit".5
Mitsui USA then filed a motion, and PRWRA filed a cross-motion, for summary judgment on all separate trial issues. Both parties assert that each of them are entitled to summary judgment as a matter of law based on uncontroverted facts. After studying the extensive evidentiary record, we agree that the essential facts are undisputed and that all conflicting evidence relates solely to immaterial issues.6
After lengthy briefs were filed, extensive oral argument was held on April 15, 1980, pursuant to request of the parties. At the hearing, PRWRA requested leave to file a further brief in support of its position that Blair, supra, is inconsistent with the law of Puerto Rico, and, therefore, it should not be applied so as to permit Mitsui USA to maintain this action as the so-called "proper plaintiff". We granted both parties 10 days to file briefs on this question after which we had expected the motions for summary judgment to be ready for submission. This was not the case, and, all through 1980 and 1981, both parties have continued to supplement their written arguments.7
We are now ready to rule. But, before doing so, we will set forth a general statement of facts. This will be followed by a discussion of the arguments advanced by the parties including references to additional specific facts as may be necessary.
In late 1969, Mitsui USA became interested in submitting a bid for construction of the Aguirre Project. After some investigation and discussion, the two Mitsuis agreed that Mitsui Ltd would invite TDK to assist in preparing the bid and to participate in negotiations with PRWRA on the condition that if the bid were successful, TDK would receive a subcontract for the construction work. Mitsui Ltd, acting for itself and Mitsui USA, invited TDK to participate on that basis, and TDK accepted.
Thereafter, various meetings were held between representatives of PRWRA, Mitsui USA, Mitsui Ltd, and TDK. PRWRA knew, or had reason to know, the corporate affiliation of representatives of Mitsui Ltd. PRWRA also was aware that Mitsui USA was not itself in the construction business and had not previously acted as a prime contractor or general contractor; that Mitsui Ltd had had extensive experience as a prime contractor in large construction projects including power plants. It was also told that Mitsui Ltd intended to work with, and assist, Mitsui USA on the Aguirre Project.
PRWRA was told that TDK would be the subcontractor responsible for all, or substantially all, of the construction on the Aguirre Project if Mitsui USA were the successful bidder. PRWRA reviewed the extensive power plant construction experience and other qualifications of TDK and approved it as a subcontractor. PRWRA also approved the qualifications of Mitsui USA to bid.
On May 19, 1970, Mitsui USA submitted its bid which was primarily based on cost estimates prepared by TDK. The bid identified TDK as the principal proposed subcontractor for the construction work and included a construction schedule which showed on its face that it had been prepared by TDK, a lengthy list of projects which TDK had built, and a brochure describing TDK's power plant experience. Also included in the bid package were Mitsui Ltd's 1969 Annual Report and Financial Statement and a brochure describing the relationship between Mitsui USA and Mitsui Ltd.
Mitsui USA was the low bidder. PRWRA's Committee of Awards referred to both "Mitsui & Co. (USA)" and "Mitsui & Co." in its recommendation, described the latter as "an internationally well known contracting firm which is ... very capable of performing this type of construction", and concluded that the award should be made to Mitsui USA. On June 29, 1970, PRWRA and Mitsui USA executed a contract which provided that all documents submitted with the bid became a part thereof.
The parties have agreed, for purposes of these motions, that Mitsui USA and Mitsui Ltd executed an agreement dated July 10, 1970, (the "USA-Ltd Agreement"). In substance, the agreement provides that, as between the two Mitsuis, Mitsui Ltd would "perform all the works required for the completion of the Contracted Work at Aguirre ... in accordance with the provisions in the Prime Contract", except for certain services to be rendered by Mitsui USA at its own expense. Mitsui USA agreed to pay the entire contract price ($29,945,000) to Mitsui Ltd as it received payment from PRWRA. Mitsui Ltd also agreed to pay Mitsui USA a "commission" for the services which it was to perform.
The USA-Ltd Agreement did not purport to assign, or otherwise extinguish, any of Mitsui USA's rights against, or obligations to, PRWRA. It expressly stated that it is to be effective "only between" the two Mitsuis; that all performance due PRWRA is to be rendered "under the name of Mitsui NY"; that only Mitsui USA will have the right and the obligation to collect payments from PRWRA; and, that the various provisions of the agreement are to be effective only "to the extent that this contract will not contravene or conflict with Article 22 of the Prime Contract". It was also agreed that Mitsui Ltd would indemnify Mitsui USA against, and hold it harmless from, any loss arising from the Aguirre Project. PRWRA was not given a copy of the USA-Ltd Agreement or otherwise informed of the contractual arrangement between the Mitsuis. PRWRA never asked for such information.
Mitsui Ltd and TDK executed an agreement dated July 10, 1970, (the Ltd-TDK Agreement) whereby TDK assumed responsibility for performing substantially all of the construction work on the Aguirre Project. The Ltd-TDK Agreement implemented the agreement described above between the Mitsuis and TDK which provided that the latter would receive a subcontract if Mitsui USA became the successful bidder. It was also consistent with PRWRA's understanding that TDK would be a subcontractor having substantially all construction responsibility.
Construction started in August 1970. TDK and TCI executed a subcontract dated as of January 1, 1971. The actual construction work was performed by TDK and TCI with PRWRA's knowledge and approval.8
Mitsui Ltd rendered advice and counsel to, and assisted, Mitsui USA during construction. It supplied personnel who became employees and agents of Mitsui USA, assisted in the procurement of materials and equipment from Japan, and performed various other services in connection with the Aguirre Project. Representatives of Mitsui Ltd and PRWRA had many direct contacts with each other through correspondence and meetings. Numerous letters and other written communications which Mitsui USA sent to PRWRA showed copies going to Mitsui Ltd. On at least two occasions, PRWRA wrote Mitsui Ltd directly asking it to cause Mitsui USA to cure alleged defects of performance.
Mitsui USA performed the duties required of a prime contractor as set forth in the Prime Contract. These included supplying performance and payment bonds, insurance and financing. It also discharged its duty of supervision ("superintendence") under the Prime Contract, which required it to "keep on the work ___ a competent Superintendent", by appointing Mr. Yasuo Koike as "Project Superintendent". PRWRA knew Mr. Koike was President of TCI and affiliated with TDK. He had no employment or other affiliation with either of the Mitsuis before the Aguirre Project. He performed Mitsui USA's duty of supervision as its agent.
There were substantial cost overruns during the Aguirre Project. Mitsui USA handled the preparation and presentation of claims for cost overruns to PRWRA with the assistance and participation of representatives of Mitsui Ltd, TDK and TCI. Although these claims were made by Mitsui USA in its name, PRWRA knew that they were for extra payments due to,...
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