Allgood Electric Co. v. Martin K. Eby Construction Co.

Citations: 85 F.3d 1547; 1996 U.S. App. LEXIS 15252; 1996 WL 309331Docket: 95-8572

Court: Court of Appeals for the Eleventh Circuit; June 25, 1996; Federal Appellate Court

Original Court Document: View Document

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A construction contract dispute arose between Allgood Electric Company (Allgood), an electrical subcontractor, and Martin K. Eby Construction Company, Inc. (Eby), the primary contractor, along with Eby's sureties, Federal Insurance Company (FIC) and Fidelity Deposit Company of Maryland (FDCM). Allgood initiated legal action in the Superior Court of Dooly County, Georgia, on March 12, 1993, after alleging that Eby's mismanagement led to delays and increased expenses during the construction of the Dooly Correctional Institution. The defendants removed the case to federal court, citing diversity jurisdiction.

On April 13, 1994, the district court granted partial summary judgment for the defendants, but Allgood's subsequent appeal was dismissed for lack of jurisdiction since the order did not resolve all issues and was not certified for immediate review. Following the district court's issuance of a Rule 54(b) judgment, Allgood appealed again. The appellate court reversed the summary judgment and remanded for further proceedings. 

Eby argued that Allgood had waived its claims through documents submitted during construction, including twenty-four applications for payment and a completion certificate, which contained waivers of lien rights. These documents were signed by Allgood's executives and specified the work completed and claims being waived, except for retained payments for contract-related work. The completion certificate confirmed that Allgood had completed its work and released any claims against Eby related to the project.

The document certifies the completion of work under subcontract number S28328-21804, specifically for Division 16 Electrical material and installation, and requests the release of retainage amounting to $138,949.06. The subcontractor affirms that all required work has been performed per contract terms, all payments to materialmen and laborers have been satisfied, and there are no outstanding claims, except as noted. It also states there are no unsatisfied claims for damages due to injuries arising from the contract's performance. The certificate is meant for final payment and acknowledges that acceptance releases the owner from any further claims under the contract, while affirming that such payments do not alter the owner's rights. Signature spaces are provided for representatives of Allgood, Eby, and the architect, with signatures from Allgood's President and Eby's Operations Manager, but not from the architect. A letter from Allgood's secretary references the signed release of retained funds. Eby argues that the language in the payment applications waives Allgood's claims for further payment, except for future work, and contends that Allgood's claims, aside from retainage, are barred by the completion certificate. In contrast, Allgood argues that the waiver language pertains only to lien rights, not to future payments owed by Eby, and maintains that its delay claims only emerged after subcontract completion. Allgood also claims the waiver provision is ambiguous and should be interpreted against Eby, asserting the completion certificate cannot bar delay claims since its work was not truly complete when signed.

Allgood submitted affidavits and correspondence to support its claims regarding amendments to a subcontract and additional work required due to "condemnation corrections" and "Change Order Proposals." Payment applications included requests for compensation for work completed through October 23, 1992. Eby relied on deposition testimony from Allgood's President, Alday, who stated she did not recall signing a completion certificate and would not have done so had she known Allgood's work was unfinished. Allgood noted that Eby failed to process the completion certificate properly, lacking necessary signatures for final payment, which was never made.

Eby later filed a second motion for summary judgment, arguing that Allgood's delay claims were barred due to untimely notice as required by the contracts. Eby claimed some additional costs were due to architect decisions and not actionable since Allgood did not protest these. Allgood countered that it met notice requirements and that delays could only be claimed post-project completion date. The district court considered Eby's first motion and noted that Eby made further payments after Alday signed the completion certificate, which acknowledged Allgood's outstanding retainage demand. The court granted Eby summary judgment on delay claims but denied it on the retainage claim, rendering Eby's second motion moot.

On appeal, the key issue is whether the payment applications or completion certificate barred Allgood's delay claims. Allgood argues these documents only waived its lien rights and did not relinquish claims against Eby, which arose upon the completion of its work. Additionally, Allgood contends that the completion certificate only released claims against the project's owner, not Eby, as the latter was not mentioned. Allgood cites Lackey v. McDowell for this argument. The review standard for the appeal is de novo, with Georgia law governing the case due to federal jurisdiction based on diversity of citizenship.

The completion certificate's effect is analyzed in light of the Lackey case. While appellate courts typically do not entertain new arguments, they possess the discretion to address pure questions of law not previously presented. In Lackey, an emergency medical technician injured after responding to an accident settled with the third party's insurance via a general release, which broadly discharged claims related to the incident. However, when the technician sued the assisting party, the appellate court initially ruled in favor of the third party, interpreting the release to include any liable parties. The Supreme Court of Georgia reversed this decision, establishing that only parties explicitly named in a release are discharged, thus eliminating the need for intent inquiries regarding future releases.

The current analysis finds that the Lackey ruling applies to the completion certificate in question. The certificate, directed to the GSFIC, specifically released claims against the 'Owner' but did not name Eby or identify them as a released party. The term 'Owner' did not encompass Eby, and the fact that Allgood submitted the certificate to Eby did not change this conclusion. Consequently, the district court's summary judgment favoring Eby based on the completion certificate was erroneous.

Regarding the payment applications, Allgood asserts that these documents also did not release claims against Eby, as Eby was not identified as a released party in the relevant clause, which waived all claims or rights of lien without naming any parties involved in the construction project. This further supports Allgood's position that claims against Eby remain valid.

Allgood argues that the language in the payment applications pertains solely to its lien rights against the property, excluding delay claims against Eby under the subcontract. Conversely, Eby contends that the phrase "all claim or rights of lien" encompasses any claims Allgood may have against Eby. Both parties have not referenced any controlling Georgia authority directly applicable to the issue. The relevant Georgia case, J.L. Williams Co. Inc. v. West Concrete Co., demonstrated that similar language in a release only waived lien rights against the property owner and not against the general contractor. Therefore, the terminology in the payment applications is interpreted as releasing lien claims against the property but not claims under the subcontract with Eby, indicating that the district court improperly granted summary judgment to Eby based on this clause.

Additionally, another provision in the payment applications certifies that the billed amounts reflect the actual value of work performed under the contract with Eby. This certification likely prevents Allgood from recovering additional costs incurred during the specified periods. Although Allgood submitted about twenty-four payment requests, only twenty-two are in the record, with gaps in invoices for two specific months. Allgood claimed that the project was to be completed by September 23, 1991, but continued until March 1993, and it is unclear if Allgood worked beyond its last invoice date of October 23, 1992. Allgood maintains that it could not file delay claims until after the original completion date and could not assess additional costs until project completion. Eby asserts that Allgood's delay claims are subject to notice requirements from the prime contract, which Allgood allegedly failed to meet.

Eby argued that the contract required Allgood to notify them of delays and associated damages within fifteen days of each event, claiming the delays began at the project’s inception and that Allgood's notices were late and inadequate. In response, Allgood cited a subcontract provision stating that adjustments for delays caused by the Owner, Architect-Engineer, or other specified events require written approval to be valid. Allgood presented letters sent to Eby during construction, asserting these letters met notice requirements for increased costs due to delays. However, the district court did not explore whether these letters fulfilled the notice provisions or whether Allgood could determine the value of its claims before project completion, leaving these as unresolved factual disputes. The court also did not assess the implications of Allgood certifying that the amounts in its payment applications reflected the actual value of its work. The appellate court reversed the district court’s summary judgment favoring Eby on Allgood's delay claims and remanded the case for further examination of these issues. Additionally, Allgood raised a point regarding Eby potentially waiving any failure to meet notice requirements, which remains a disputed fact alongside Allgood's retainage claim.