G. R. Sponaugle & Sons, Inc. v. McKnight Const. Co.

Decision Date28 February 1973
Citation304 A.2d 339
CourtDelaware Superior Court
PartiesG. R. SPONAUGLE & SONS, INC., a Pennsylvania corporation, Plaintiff, v. McKNIGHT CONSTRUCTION CO., a Pennsylvania corporation, et al., Defendants.

Jack Jacobs, of Young, Conaway, Stargatt & Taylor, Wilmington, for plaintiff.

Richard J. Abrams, of Richards, Layton & Finger, Wilmington, for defendants.

OPINION ON MOTION FOR SUMMARY JUDGMENT BY DEFENDANT

TAYLOR, Judge.

Plaintiff, a subcontractor, filed an action for mechanic's lien against a shopping center building owned by the defendant Betty Gay of Delaware, Inc. (Betty Gay) and for judgment against defendant McKnight Construction Company (contractor), the general contractor, which is currently in receivership. A third defendant, Gaylords National Corp., has been voluntarily dismissed as a party. The amount claimed is $228,345.13, of which $115,709.10 is asserted to be due under the contract between plaintiff and contractor, and $112,636.03 is asserted to be due for 'extra work outside of the contract.' Betty Gay has moved for summary judgment on a variety of grounds which will be hereinafter discussed.

I CAPACITY TO SUE

The first issue raised by Betty Gay is whether plaintiff, a Pennsylvania corporation, was entitled to proceed with this mechanic's lien action since plaintiff had not complied with 8 Del.C. § 371 at the time of the filing of this action. Preliminary to this consideration is the question of whether this issue has properly been raised by the pleadings. 8 Del.C. § 383(a) provides that a foreign corporation which is required to comply with 8 Del.C. § 371 and which has done business in Delaware without such compliance 'shall not maintain any action or special proceeding in this State unless and until such corporation has been authorized to do business in this State and has paid to the State all fees . . .'.

The failure of a foreign corporation to qualify is a matter of defense to be raised in the pleadings. Standard Sewing-Mach. Co. v. Frame, Del.Super., 2 Pennewill 430, 48 A. 188 (1900). The Delaware Supreme Court held in Model Heating Co. v. Magarity, Del.Supr., 2 Boyce 459, 81 A. 394 (1911), that a contract made by a foreign corporation while doing business in this State without qualifying to do business is not invalid in this State and that the capacity of the corporation to enforce the contract can be raised only by plea in abatement. 1 Woolley on Delaware Practice, p. 337, § 468 states: 'the only way in which a defendant can except to the capacity of the plaintiff to sue, as for . . . non-compliance with corporation laws, is by a plea in abatement.' Here, the issue is whether the plaintiff corporation had the capacity to sue at the time it filed this action.

Rule 9(a) of the Civil Rules of this Court provides: 'When a party desires to raise an issue as to the legal existence of any party or the capacity of any party to sue or be sued . . ., he shall do so by specific negative averment, . . ., which negative averment shall include such supporting particulars as are peculiarly within the pleader's knowledge.' An objection to capacity is characterized as 'a matter of abatement'. Barrack v. Van Dusen, 3 Cir., 309 F.2d 953 (1963). As such, it falls within the class of 'threshold defenses' and such issues must be raised and disposed of at the outset of the suit. 5 Federal Practice and Procedure, Wright and Miller, p. 397, § 1295; Martin v. American Employers Ins. Co., 1 Cir., 439 F.2d 1035 (1971). The issue of whether a corporation has status to litigate is a question of capacity, and must be timely raised. Trounstine v. Bauer, Pogue & Co., 2 Cir., 144 F.2d 379 (1944).

The answer filed by Betty Gay, after responding to the specific allegations of the complaint, contained affirmative defenses (1) failure to state a claim for which relief may be granted, (2) that the claim was not timely filed, (3) that the labor and materials were not furnished on the credit of the structure, and (4) that defendant is not liable for in personam judgment. On the same date of filing of the answer, Betty Gay filed a counterclaim against plaintiff for any amount which a subcontractor under plaintiff which had filed a separate mechanic's lien action against Betty Gay might obtain against Betty Gay. Thereafter, Betty Gay and plaintiff proceeded with extensive discovery as to the merits of this case. Subsequently, the answer of Betty Gay was amended to add affirmative defenses that (1) plaintiff by the subcontract waived and released its rights to file a mechanic's lien, (2) plaintiff acknowledged receipt of payment and satisfaction of the claim, (3) subsequent to filing of the action plaintiff waived, released and surrendered its lien on claim, and (4) plaintiff is barred by promissory and equitable estoppel. From an examination of the pleadings, it appears that the issue of the capacity of plaintiff to file the mechanic's lien action was not raised in a pleading and was first raised in defendant's initial brief on its motion for summary judgment.

A motion for summary judgment should be decided on the pleadings, affidavits, product of discovery and other factual matters properly in the record. Phillips v. Delaware Power & Light Co., Del.Supr., 216 A.2d 281 (1966); Matas v. Green, Del.Super., 3 Storey 473, 171 A.2d 916 (1961); Van Dyke v. Pennsylvania R. Co., Del.Super., 7 Terry 529, 86 A.2d 346 (1952). Since this issue has not been raised as provided in Rule 9(a), it is not before the Court.

II WAIVER CLAUSE IN CONTRACT

Betty Gay next asserts that plaintiff has waived its right to a mechanic's lien by virtue of a provision in the subcontract. A reading of the provision indicates that by its terms plaintiff did waive its right to file a mechanic's lien at least as to matters covered by the contract. Plaintiff undertakes to avoid the effect of this clause by several arguments. First, plaintiff contends that the clause was 'boiler plate' having been inadvertently inserted by the contractor without having been intended to be a part of the subcontract. If so, it was one of twenty-three consecutive printed clauses in the subcontract which the parties signed, each page bearing the initials of one of the parties.

In support of this position plaintiff's principal officer states that he discussed the matter with the contractor and the contractor indicated a willingness to put in writing the fact that the clause was inserted by mistake. However, no such writing was ever produced. Nor does plaintiff contend that the agreement was modified, either orally or in writing, to delete the clause. 1 Plaintiff does not seek to show that the parties failed to enter into a contract or that this was 'a sham agreement' or a 'non-existent agreement'. Compare 71 A.L.R.2d 382; Smilow v. Dickerson, 357 Pa. 455, 54 A.2d 883 (1947). Furthermore, this is not a case where it is contended that the subcontract or even the clause is the product of fraud. There has been no action to reform the instrument. Cf. Gracelawn Memorial Park v. Eastern Memorial Consultants, Del.Ch., 280 A.2d 745 (1971). Plaintiff's effort to escape the effect of a clause of the contract on this ground in this action is barred by the parol evidence rule. Katz v. Exclusive Auto Plaintiff next contends that there was no consideration for the waiver clause in the subcontract. This contention proceeds from the premise that a contract may be segmented and each segment tested to determine whether consideration exists for the segment.

Leasing Co., Del.Super., 282 A.2d 866 (1971).

A waiver of such lien may be by separate agreement 2 or it may be incorporated with other undertakings into one agreement. 3 If it is by separate agreement, it must be supported by separate consideration. If it is incorporated as a part of a more comprehensive agreement, the consideration requirement runs to the agreement as a whole.

In this case the contract was a single document consisting of many clauses, and there is nothing to indicate that it was not intended to be a single contract. There were undertakings on the part of each party which in their totality constituted the consideration for the contract. Cf. Equitable Trust Co. v. Gallagher, Del.Supr. 34 Del.Ch. 76, 99 A.2d 490 (1953); 1 Corbin on Contracts, p. 611, § 142. No single clause of the contract should be tested separately to determine whether an item of consideration can be identified specially with that clause. ibid; Gottlieb v. Heyden Chemical Corp., Del.Supr. 33 Del.Ch. 82, 90 A.2d 660 (1952). Absence of motivation or desire to insert a clause should not be equated with absence of consideration for the contract. I find nothing which applies different requirements of consideration in the case of a waiver of mechanic's lien than in other contractual undertakings.

There remains the question of whether Betty Gay is entitled to assert this clause which is found only in the contract between the plaintiff and the general contractor. Betty Gay was not a party to it. A third party beneficiary may recover on a contract made for its benefit. Royal Indemnity Co. v. Alexander Industries, Inc., Del.Supr., 211 A.2d 919 (1965); Wilmington Housing Authority v. Fidelity & Deposit Co., Del.Supr., 4 Terry 381, 47 A.2d 524 (1946). The waiver provision of the subcontract refers to liens against the premises to which the subcontract relates. The clear inference from this language is that it is intended for the benefit not only of the contractor but of those having property interest in the premises. Accordingly, the Court holds that those having a property interest in the premises are entitled to claim the benefit of the waiver provision. 4

Finally, plaintiff contends that the waiver provision does not extend to 'extra work.'

The waiver provision of the contract waives the filing of a lien 'against the premises to which the subcontract relates' 'for any services performed or materials furnished by, to or for...

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