L.B. Foster Co. v. America Piles, Inc.
| Decision Date | 26 February 1998 |
| Docket Number | Docket No. 97-7256 |
| Citation | 138 F.3d 81 |
| Parties | L.B. FOSTER COMPANY, Plaintiff-Appellee, v. AMERICA PILES, INC., Defendant, Grace Industries, Inc., Defendant-Appellant, Michael J. Amoruso, Esq., Appellant. |
| Court | U.S. Court of Appeals — Second Circuit |
Judah D. Greenblatt, New York City (McDonough Marcus Cohn & Tretter, New York City, on the brief), for Plaintiff-Appellee.
Vincent A. DeIorio, Purchase, NY, for Appellants.
Before: KEARSE and CABRANES, Circuit Judges, and CHIN, District Judge. *
Defendant Grace Industries, Inc. ("Grace"), appeals from a judgment entered in the United States District Court for the Eastern District of New York pursuant to Fed.R.Civ.P. 54(b), John Gleeson, Judge, awarding plaintiff L.B. Foster Company ("Foster") $179,593.65, plus interest, against Grace and defendant America Piles, Inc. ("API" or "America Piles"). The district court granted summary judgment to Foster on its contract claims against both defendants with respect to its lease of certain equipment. On appeal, Grace contends principally that it was not a lessee of the equipment but only a limited guarantor who had fulfilled its guarantee obligation, and that the ambiguous nature of the document embodying its guarantee precluded the granting of summary judgment against it. Michael J. Amoruso, Esq., an associate of the firm representing Grace, appeals from so much of the judgment as imposed sanctions against him personally for opposing entry of the Rule 54(b) certification. For the reasons that follow, we reverse the order imposing sanctions against Amoruso; and we vacate the judgment against Grace and remand for further proceedings.
Some of the facts are not in dispute. In 1991, Foster was a provider of construction equipment. Grace was a general contractor for certain road construction at John F. Kennedy Airport (the "JFK Project"). API, whose business included the installation of piles used as foundations, was, in early 1991, a dormant corporation with no officers; James Coppola was its sole shareholder. In the summer of 1991, API and Grace considered entering into a joint venture; in pursuit of that goal, two officers of Grace became, for a time, officers of API, and API's corporate address was changed to that of Grace.
In the fall of 1991, Foster provided a vibratory hammer and other equipment for the JFK Project, pursuant to agreements with API and Grace. The parties agree that there were two written agreements material to this appeal, and that one of them was signed by Grace. The meaning of the agreement signed by Grace, however, is in dispute.
In October 1991, two documents, on Foster forms entitled "EQUIPMENT RENTAL AGREEMENT," were signed. Insofar as is relevant to this appeal, the contents of the two documents were identical. Both listed Foster delivered the equipment to API on October 8, 1991. The equipment was used on the JFK Project until February 1992. Foster sent rent invoices to API at the address of API and Grace. Grace paid the bills until April 1992; thereafter, API did not return the equipment to Foster, and neither API nor Grace paid further rent. The equipment was not returned until Foster obtained a court order requiring its return.
the equipment in question, specified the weekly and monthly rent to be paid, and stated that the "EQUIPMENT IS TO BE USED ONLY AT THE FOLLOWING JOB LOCATION: J.F.K. Airport." Both identified the "LESSEE" as API. The first agreement was signed on October 7, 1991, by "Project Manager" Coppola, API's sole shareholder ("October 7 agreement"). The second agreement was signed on October 23, 1991, by "Project Manager" Walter R. Sokolich ("October 23 agreement"). Sokolich was an employee of Grace. Neither the October 7 agreement nor the October 23 agreement, however, mentioned Grace
Foster commenced the present action in November 1992, asserting two causes of action against API, and one against Grace. The claim against Grace was stated as follows:
21. On October 23, 1991, GRACE executed an Equipment Rental Agreement in the same form as the Foster/America Piles October 7, 1991 Equipment Rental Agreement and by doing so, GRACE guaranteed to FOSTER the payment by AMERICA PILES of the sums due FOSTER under the Foster/America Piles Rental Agreement....
22. On September 9, 1992 GRACE wrote to FOSTER confirming that the Foster/Grace Equipment Rental Agreement dated October 23, 1991 was intended to be a guarantee by GRACE of all of the obligations of AMERICA PILE [sic ] owed to FOSTER under the Foster/America Pile [sic ] Rental Agreement dated October 7, 1991....
(Complaint pp 21, 22.) Grace denied these allegations and asserted a cross-claim against API for indemnification in the event that Grace were held liable to Foster. API, for its part, denied most of the allegations against it and asserted an indemnification cross-claim against Grace.
In June 1994, following discovery, Foster moved for summary judgment against API and Grace, contending that both were liable as primary obligors:
The Rental Agreements required AMERICA PILES and GRACE to pay FOSTER a monthly rent of $10,500 plus other charges for the Equipment from the date of its shipment to the date of its return.
(Foster Statement pursuant to Rule 3(g) of the Local Rules for the Eastern District of New York ("Rule 3(g)") p 3.) In support of its contention that Grace had unlimited, primary liability for the equipment rental, Foster submitted, inter alia, the affidavit of its regional credit manager stating that any characterization of Grace's role as that of guarantor must have been a "side deal" strictly between Grace and API, because prior to Sokolich's signing the October 23 agreement, "GRACE never advised FOSTER that their [sic ] execution of the Rental Agreement was intended to be merely a guarantee or that the guarantee was limited to when the Equipment was in use at the project." (Affidavit of Carol Koss dated May 6, 1994, p 18.) "Sokolich signed the Rental Agreement but never conveyed to FOSTER, at the time of execution of the Rental Agreement, that his signature was meant merely as a limited guarantee." (Id. p 15.) Foster also submitted various documents, including handwritten notes, apparently written by one of its employees, stating that "America Piles, Inc is Division of Grace Ind."
API opposed Foster's motion for summary judgment against API and cross-moved for summary judgment against Grace, contending that API had never entered into a rental agreement with Foster. Submitting an affidavit from Coppola, API argued, inter alia, that in June 1991 Grace had essentially taken over API in anticipation of the then-contemplated joint venture; that when Coppola signed the October 7 agreement, he was an employee of Grace; that in signing the contract, Coppola acted on behalf of Grace, not Grace, supporting its position with affidavits from its executive vice president and controller, opposed the summary judgment motions against it by Foster and API, asserting principally that there were disputed issues as to the extent of its undertaking to Foster. Grace asserted, inter alia, that Sokolich had signed the October 23 agreement at the request of Foster solely for the purpose of guaranteeing API's payment of the rent due under the October 7 agreement signed by Coppola, and solely for the period during which the equipment was to be used on the JFK Project. Grace asserted that Foster and Grace had discussed and agreed on those limitations. Grace pointed out that it had paid Foster the rent for the period during which the equipment was used on the JFK Project; its controller stated that Grace's payments to Foster for the two months beyond that period were inadvertent.
API; and that "Grace agreed to make all of the payments for the rental of the Equipment, as evidenced by the execution of the Grace Rental Agreement by Defendant Grace's Project Manager, Walter Sokolich on October 23, 1991." (API Rule 3(g) Statement p 11.)
Grace also asserted that Coppola had never been an employee of Grace; that API had been Grace's subcontractor on the JFK Project; that API had never been a subsidiary or division of Grace; that Grace had informed Foster that API was a subcontractor and had never represented that API was a Grace subsidiary or division; that neither Grace nor API had ever had an ownership interest in the other; and that Grace had made API's payroll payments (for which API reimbursed Grace) and temporarily shared its officers with API solely to accommodate API and to allow Grace to minimize the risk of liens that could impede Grace's receipt of payment for the JFK Project if API's employees were not paid.
The district court referred the summary judgment motions to Magistrate Judge Joan M. Azrack for report and recommendation. The magistrate judge recommended that all of the motions for summary judgment be denied. She found principally that there were factual issues to be tried as to the capacity in which Coppola signed the October 7 agreement and his power to bind API.
As to Foster's claim against Grace, the magistrate judge noted that Foster had equivocated as to Grace's role, alleging in the complaint that Grace was a guarantor, and contending in its summary judgment motion that Grace was a primary obligor, see Report and Recommendation dated February 28, 1995, at 19; thus, Foster asserted that Grace was liable as both "guarantor and lessee," id. at 7 (emphasis added). The magistrate judge stated that unless the complaint were amended, Foster's claim should be treated as one against Grace as guarantor; she concluded that since a guarantor cannot be liable unless the principal is liable for the underlying debt, and since she had found that there were issues to be tried as to the liability of API, Grace's liability...
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