Opinion
Civil Action 99-3040, Section "T"(5)
June 2, 2000
This cause came for hearing on Wednesday, March 1, 2000, upon the motion of plaintiff; Commercial Capital Holding Corporation ("Commercial Capital"), for Summary Judgment against the defendants, Team Ace Joint Venture, Team Contracting, Inc., and American Construction and Energy, Inc. (collectively referred to as "Team Ace"). Oral argument was waived by the parties and the Court took the matter under submission on the briefs only. The Court, having studied the legal memoranda filed by the parties, the evidence submitted, as well as the applicable law and jurisprudence, is fully advised in the premises and ready to rule.
ORDER AND REASONS
I. BACKGROUND:
Team Ace entered into a contract with the Housing Authority of New Orleans ("HANO") for construction work at several housing developments in New Orleans. Team Ace, as general contractor, then entered into three subcontracting agreements with SIMS Enterprises, Inc. ("SIMS") to perform various obligations in the Team Ace prime contract with HANG. SIMS in turn entered into a "factoring agreement" with the plaintiff; Commercial Capital, wherein SIMS assigned certain receivables from its Team Ace Subcontract Agreements to Commercial Capital in return for money paid to SIMS.
Before Commercial Capital would advance funds to SIMS, Commercial Capital would present Team Ace with a copy of SIMS' payment request in order to ascertain whether or not Team Ace would approve the requests, or whether or not it had any claims of setoff or defenses. Team Ace would then execute the "Invoice Acknowledgment Agreement" wherein Team Ace would acknowledge that the invoice presented would be paid and specifically waived any right of setoff; defense, counterclaim, or recoupments against SIMS in connection with that invoice. Commercial Capital also required SIMS sign the "Invoice Acknowledgment Agreement" acknowledging that payment of the invoice must be made to Commercial Capital. This was done and invoices paid by Team Ace to Commercial Capital until May 14, 1999, when Team Ace refused payment based upon failure of SIMS to comply with conditions of its contract with Team Ace. As a result, Commercial Capital filed this suit on October 6, 1999, contending that Team Ace owed $1,000,207.76 to date, all of which represented the face amount of invoices approved by Team Ace and accompanied by an "Invoice Acknowledgment Agreement".
Following the filing of the above captioned matter, Team Ace filed suit in the Circuit Court for Baltimore City, Maryland, on October 8, 1999, seeking a declaratory judgment relating to the rights and liabilities of the parties with respect to the Subcontract Agreements and the Commercial Capital assignment. Specifically, Team Ace alleges that it is not obligated to make payments to SIMS under the Subcontract Agreements until it has received satisfactory certificates and releases. As a result, Team Ace filed a Motion to Dismiss, or in the alternative, to Stay All Proceedings in this suit. The motion was denied by this Court in December 1999. In response, Team Ace filed an Answer and Counterclaim. Commercial Capital has now filed this Motion for Summary Judgment.
II. ARGUMENTS OF THE RESPECTIVE PARTIES:
A. Commercial Capital's Arguments in Support of Summary Judgment:
First, plaintiff argues that the Invoice Acknowledgment Agreements entered into by Team Ace, SIMS, and Commercial Capital are enforceable contracts. As such, the Court is bound to give legal effect to all agreements according to the true intent of the parties. The Invoice Acknowledgment Agreement sets forth:
[Team Ace] tenders this irrevocable acknowledgment solely to Commercial Capital Holding Corporation that the invoices approved by [Team Ace] are acceptable and that the invoices will be paid to Commercial Capital Holding Corporation without any setoff, defense, counterclaim or recoupment.
As such, the contract should be enforced as written.
Next, it is asserted that equitable estoppel and detrimental reliance preclude Team Ace from asserting any defenses against plaintiff. Commercial Capital is not and has never been in a position to determine whether or not SIMS complied with its subcontract with Team Ace. This is precisely why the Invoice Acknowledgment Agreements were required before Commercial Capital would advance any funds. As such, plaintiff relied, to its detriment, on the representations made by Team Ace in the invoice Acknowledgment Agreements. Therefore, Team Ace should be equitably estopped from asserting the numerous defenses set forth in its counterclaim, which relate to complaints on the part of SIMS. While Team Ace has a dispute with SIMS, it should not be allowed to dishonor the contract that it entered into with plaintiff.
Third, plaintiff contends Mr. Arnold and Mr. King had authority to sign the Invoice Acknowledgment Agreements. Both gentlemen held the title of "Regional Project Manager". Further, both were in charge of the Team Ace office located in the Energy Centre in Harahan, Louisiana. King and Arnold would regularly appear at the three construction sites in a supervisory capacity. On twenty-nine (29) occasions, Arnold or King would review the SIMS invoice, approve it by initialing it, and then forward it to the Team Ace office in Kansas City for payment to Commercial Capital. At no time was the authority of King or Arnold ever questioned by anyone in the main office and all amounts approved were paid. The authority to approve invoices appeared to be well within the scope of their responsibility and was acknowledged by Team Ace. At the very least, King and Arnold appeared to have authority to execute the Invoice Acknowledgment Agreements.
As the obligations of Team Ace to plaintiff are set forth in the Invoice Acknowledgment Agreements, whereby Team Ace agreed to pay, without defense, setoff, or recoupment, plaintiff is entitled to judgment for the full amount, assessed one-half to each of the joint venture partners.
B. Arguments of Team Ace in Opposition to Summary Judgment:
The defendants argue that issues of material fact exist precluding the entry of summary judgment. Defendants first point out that a plaintiffs motion for summary judgment is extremely rare and that Commercial Capital has failed to carry its burden of persuasion in establishing that Team Ace's defenses are non-material or unprovable. Furthermore, defendants suggest that this motion is premature as defendants have not had an opportunity to engage in discovery. At the very least, Team Ace contends that it is entitled to "adequate time" for discovery.
Next, it is submitted that the gentlemen who executed the Invoice Acknowledgment Agreements lacked the authority to do so. The affidavit of David J. Wenkel, Vice President and Chief Financial Officer of America Construction Energy, Inc., one of the Team Ace Joint Venture partners, sets forth that Team Ace pays close attention to jobs in which factoring agreements are present because of the implications attendant to a subcontractor needing high interest interim financing. Moreover, he stated that only corporate officers of Team Ace or its constituent partners can approve such a significant contract and then only after deliberation with its joint venture partners. It is argued that Commercial Capital was woefully negligent in blindly relying on King and Arnold's supposed authority. Once Team Ace learned of the Invoice Acknowledgment Agreements, it immediately informed the principle of Commercial Capital that these gentlemen did not have the authority to sign these agreements and that the Invoice Acknowledgment Agreements were not binding on Team Ace. The authority of these men is an intensely factual inquiry which warrants the denial of the Motion for Summary Judgment.
The fourth argument asserted by Team Ace is that numerous conditions precedent must be satisfied before payment to SIMS' assignee, Commercial Capital, is appropriate. HANG must pay Team Ace before Team Ace can pay Commercial Capital. Moreover, the invoices submitted are marked "Preliminary", which suggests that additional conditions must be met prior to entitlement to payment. As such, issues of fact exist regarding who wrote "preliminary" on these invoices and the meaning of that term. Additionally, other conditions precedent are pled as affirmative defenses in Team Ace's answer which merit discovery, such as the indemnity provision which may vitiate plaintiffs claim.
Finally, Team Ace contends that the Invoice Acknowledgment Agreements are ambiguous. The plaintiff has failed to show when payments are due as the Agreements are silent as to when Commercial Capital is entitled to the money. As such, the plaintiff has failed to prove a major element of its case. Accordingly, Team Ace contends that the motion should be denied.
C. Arguments of Commercial Capital in Response:
First, it is asserted that this case was filed more than five months ago and is not premature. Team Ace has had five months to conduct discovery but chose not to do so. Further, it has not presented any facts by affidavit which would support its opposition. Next, it is submitted that King and Arnold had authority to sign the Invoice Acknowledgment Agreements evidenced by Wenkel's admission that he knew that SIMS had a factoring agreement with plaintiff', a fact he learned from the Project Manager. Further, Team Ace complied with the Project Managers' request for progress payment checks to be issued to both SIMS and Commercial Capital. The approved amounts invoiced were the amounts paid to Commercial Capital. As such, the evidence clearly shows that Arnold and King had at least apparent authority to sign the Invoice Acknowledgment Agreements and Team Ace should be estopped from denying the validity of those agreements.
Next, Commercial Capital submits that avoidance of the "conditions precedent" is the precise reason why the Invoice Acknowledgment Agreements were required. The Invoice Acknowledgment Agreements are clear on their face specifically providing for payment "without setoff; defense, counterclaim or recoupment." The agreement provided that the payments would be made within ninety (90) days following approval of the invoice. Finally, the agreement clearly provides that once Team Ace pays Commercial Capital on an invoice, Team Ace has no further obligation to SIMS. If after payment to Commercial Capital SIMS sues Team Ace on that invoice, Commercial Capital agrees to defend Team Ace. As such, the indemnity provision does not "vitiate Commercial Capital's claim."
III. LAW AND ANALYSIS:
A. Law on Summary Judgment
Rule 56(c) of the Federal Rules of Civil Procedure provides that summary judgment should be granted "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). "The party moving for summary judgment bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of the record which it believes demonstrate the absence of a genuine issue of material fact." Stults v. Conoco, 76 F.3d 651 (5th Cir. 1996), (citing Skotak v. Tenneco Resins, Inc., 953 F.2d 909, 912-13 (5th Cir.) (quoting Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). When the moving party has carried its burden under Rule 56(c), its opponent must do more than simply show that there is some metaphysical doubt as to the material facts. The nonmoving party must come forward with "specific facts showing that there is a genuine issue for trial." Matsushita Elec. Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 588 (1986) (emphasis supplied);Tubacex, Inc. v. M/V Risan, 45 F.3d 951, 954 (5th Cir. 1995).
Thus, where the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no "genuine issue for trial." Matsushita Elec. Industrial Co., 475 U.S. at 588. Finally, the court notes that substantive law determines the materiality of facts and only "facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
B. Apparent Authority
In Louisiana, an agency relationship is created by express appointment under La.C.C. art. 2985 or by implied appointment arising from apparent authority. See Cross v. Cutter Biological, 676 So.2d 131, 147 (La.App. 4 Cir. 1996), writ denied, 685 So.2d 142 (La. 1997); see also Duplessis Cadillac, Inc. v. Creative Credit Servs., Inc., 564 So.2d 336, 338-39 (La.App. 1 Cir. 1990); Ehlinger Associates v. Louisiana Architects Association, 989 F. Supp. 775, 787 (E.D.La. 1998), affirmed 167 F.3d 537 (5th Cir. 1998). It is well settled in Louisiana that "[i]mplied or apparent agency exists if the principal has the right to control the conduct of the agent and the agent has the authority to bind the principal" Urbeso v. Bryan, 583 So.2d 114, 117 (La.App. 4 Cir. 1991). See Cross, 676 So.2d at 147; see also Craft v. Trahan, 351 So.2d 277, 281 (La.App. 3 Cir. 1977); see Ehlinger, 989 at 787.
As the Supreme Court of Louisiana stated:
Apparent authority is a judicially created concept of estoppel which operates in favor of a third party seeking to bind a principal for the unauthorized act of an apparent agent. . . .
For the doctrine of apparent authority to apply, the principal must first act to manifest the alleged agent's authority to an innocent third party. Second, the third party must rely reasonably on the manifested authority of the agent. . . . [T]he principal will be bound for the agent's actions if the principal has given the innocent third party a reasonable belief the agent had authority to act for the principal.Boulos v. Morrison, 503 So.2d 1, 3 (La. 1987) (citations omitted); see also Cross, 676 So.2d at 147 ("Apparent agency arises when the principal acts in such a manner as to give an innocent third party the reasonable belief that the agent has the authority to act for the principal."). Apparent agency is established "by the words and conduct of the parties and the circumstances of the case." Self v. Walker Oldsmobile Co., Inc., 614 So.2d 1371, 1375 (La.App. 3d Cir. 1993) See Urbeso, 583 So.2d at 117 (same). An agency relationship may be created even though there is no intention to do so. Cross, 676 So.2d at 147; Self, 614 So.2d at 1375;Urbeso, 583 So.2d at 117. However, "[a] third party seeking to benefit from the doctrine of apparent authority may not blindly rely upon the assertions of an agent. He has a duty to inquire into the nature and extent of the agent's power." Boulos, 503 So.2d at 3. Finally, the party seeking to bind the principal has the burden of establishing the existence of the agency relationship. Boulos, 503 So.2d at 3. The question of apparent authority thus turns on whether the principal has acted in a manner that manifests the alleged agent's authority and whether the third party reasonably relied on the agent's authority.
C. The Court's Analysis:
It is the finding of this Court that the evidence presented clearly shows that King and Arnold were vested with apparent authority. Both King and Arnold held the title of Project Manager and acted in a supervisory capacity over the contract work. On twenty-nine (29) occasions, invoices were submitted for their approval and then sent to Team Ace's headquarters in Kansas City, whereupon checks were issued in the amounts approved by the Project Manager and sent to Commercial Capital. As such, Team Ace gave Commercial Capital a reasonable belief that King and Arnold had authority to act on behalf of Team Ace. In reliance on representations made by the Project Managers, vested with apparent authority, that invoices would be paid, Commercial Capital advanced funds to SIMS.
The Invoice Acknowledgment Agreements clearly provide:
[Team Ace] tenders this irrevocable acknowledgment solely to Commercial Capital Holding Corporation that the Invoices approved by [Team Ace] are acceptable and that the Invoices will be paid to Commercial Capital Holding Corporation without any setoff, defense, counterclaim or recoupment.
The rights and remedies of [Team Ace] as it pertains to SIMS Enterprises International, Inc. of Louisiana are not abridged, amended or modified by this agreement, with the exception of the modification of [Team Ace's] right of setoff, defense, counterclaim or recoupment, referenced here and above, and only with regard to the Invoices, acknowledged herein.
The affidavit of Mark M. Byouk, Chief Financial Officer of Commercial Capital, establishes that he met with Team Ace Regional Project Manager, Rick Arnold, wherein Byouk advised Arnold that Commercial Capital had no construction expertise and was not in a position to supervise the construction or determine whether the work was being done properly, as such, before any funds would be advanced to SIMS, acknowledgment by Team Ace would be required. (Byouk affidavit p. 2). An Acknowledgment form was provided to Arnold who indicated that he would have to forward it to his superiors in Kansas City and discuss it with them. (Byouk affidavit pp. 2-3). Several days later, Arnold advised that his supervisor did not approve the form. Thereafter, Arnold was given another form which Arnold later advised was acceptable to his superiors. (Byouk affidavit p. 3). This information was not contradicted by Team Ace and further David Wenkel attested to the fact that he was informed by Rick Arnold, Team Ace's Project Manager, that SIMS had obtained financing from Commercial Capital and requested that any approved payments to SIMS also include Commercial Capital's name as payee. (Wenkel affidavit p. 2). Wenkel however contends that he was unaware of the Invoice Acknowledgment Agreements until August 30, 1999, when Commercial Capital inquired about the outstanding invoices. (Wenkel affidavit p. 2).
Arnold began approving the invoices and later King did the same when he took over as Project Manager. On seventy-one (71) occasions, Invoice Acknowledgment Agreements were signed by the Team Ace's Project Manager, a representative of SIMS, and Commercial Capital, thus forming binding agreements between the parties. The wording of the Invoice Acknowledgment Agreement is very clear and the result does not lead to absurd consequences. The first twenty-nine (29) of the invoices and Acknowledgment Agreements were honored by Team Ace and payment was forwarded to Commercial Capital. However, Team Ace refused payment on the final forty-two (42) invoices which had been approved by the Project Managers.
Commercial Capital advanced over a million dollars to SIMS based upon the representations made by Team Ace. It is the finding of this Court that the reliance was justified as the first twenty-nine (29) invoices submitted and approved by the Project Manager were paid without question. As such, Team Ace is equitably estopped from avoiding the agreements it entered into with the plaintiff.
In response to the arguments made by defendant, this contract is in no way ambiguous and clearly provides that upon acceptance the plaintiff is entitled to payment without any setoff, recoupment, defense or counterclaim as to that particular invoice. Further, while defendant argues that it has not had adequate time for discovery, defendant has failed to contradict any of the evidence submitted by the plaintiff in support of its claims. As this is a situation where plaintiff is moving for summary judgment, Team Ace is in the unusual position of having control over the information and documentation which would support any defense it may have; thereby limiting the need for extensive discovery. In this light, there has been no indication that what has been represented by the plaintiff is incorrect. Defense exhibits include the Subcontract Agreement between SIMS and Team Ace, a copy of the Complaint filed in the Maryland Court, a memoranda filed in the Maryland suit regarding personal jurisdiction, the Maryland Federal Court's order remanding the Maryland suit to Maryland State Court, the declaration of David Wenkel, and finally, SIMS' Statement of Claim or Privilege. This is simply not sufficient to create genuine issues of fact in this matter. Any claim Team Ace has that SIMS did not properly perform the job as contracted is a dispute between it and SIMS, the validity of any such claims are for another court to decide on some future day. The Invoice Acknowlcdgment Agreements at issue in this motion entitle Commercial Capital to the invoice amounts approved by the Project Managers.
The Court further notes that it is well-aware of the fact that Team Ace has filed a Counterclaim alleging that Commercial Capital tortiously interfered with the Subcontract Agreements between Team Ace and SIMS by directing SIMS' work under the Subcontract Agreements, instructing SIMS to submit invoices for work not performed, colluding with SIMS to the detriment of Team Ace and ultimately causing Team Act to place SIMS in default of the Subcontract Agreement. Team Ace contends that its affirmative defenses to the main demand and the proof for the Counterclaim are inseparable from and intertwined with the claim for relief in the main demand, in addition to asserting that granting summary judgment would be severely prejudicial to the Counterclaim. However, both sides concede that the granting of Commercial Capital's Motion for Summary Judgment would not affect the pendency of the Counterclaim.
As such, it is the opinion of this Court that based upon the reasons stated above, Team Ace is bound to pay Commercial Capital those amounts reflected in the signed Invoice Acknowledgment Agreements. The granting of the summary judgment on this issue does not prejudice the ability of Team Ace to demonstrate and recover damages alleged in the counterclaim for interference with contract and/or collusion.
Finally, the Order dated April 27, 2000 by the Circuit Court for Baltimore City entering a default judgment against SIMS in no way affects this Court's ruling. That Court stated that Team Ace was "under no duty to pay to defendant SIMS Enterprises International, Inc. any funds until such time as all conditions and requirements set forth in the subcontract for payment are met . . ." The Order of this Court is that Team Ace acknowledged the invoices submitted and that Commercial Capital, not SIMS, was entitled to payment of said funds without defense, setoff, counterclaim, or recoupment.
Accordingly,
IT IS ORDERED that the Motion for Summary Judgment filed on behalf of the plaintiff; Commercial Capital Holding Corporation, is hereby GRANTED.