GHURA v. Rex Int'l

Opinion

Fl LED SUPER!OH COUhT OF GUAM 1

2 2023 M!tY -4 PM 2: 31 3 CLER~( OF COURT

4 IN THE SUPERIOR COURT OF Gls,;!\1, _ _~--"----- 5 GUAM HOUSING AND URBAN Civil Case No. CV0844-20 6 RENEWAL AUTHORITY; & DEPARTMENT OF PUBLIC HEALTH 7 AND SOCIAL SERVICES, 8 DECISION AND ORDER Plaintiffs, GRANTING DEFENDANT'S 9 MOTION FOR PARTIAL SUMMARY v. JUDGMENT RE: STATUTE OF 10 LIMITATIONS 11 REX INTERNATIONAL, INC.; & FIRST NET INSURANCE COMPANY; 12 & DOES 1-30, Defendants. 13

14 INTRODUCTION

15 This matter came before the Honorable Alberto C. Lamorena, III on February 6, 2023 for

16 hearing on Defendant First Net Insurance Company's ("First Net's") Motion for Partial Summary

17 Judgment Re: Statute of Limitations ("Motion"). Attorney Thomas M. Tarpley Jr. represents First

18 Net. Attorney Philip Torres represents Rex International, Inc. ("Rex International") but was not

19 present. Assistant Attorney General Yusuke Haffeman-Udagawa represents Guam Housing and

20 Urban Renewal Authority and the Department of Public Health and Social Services (collectively the

21 "Plaintiffs"). Having duly considered the parties' briefs, oral arguments, and the applicable law, the

22 Court now issues the following Decision and Order and GRANTS First Net's Motion.

23 BACKGROUND

24 On November 20, 2013, the Plaintiffs and Rex International entered into a contract in which

25 Rex International was to construct a Guam Environmental Public Health Laboratory, for use

26 investigating mosquito disease outbreaks (the "Mosquito Lab Facility"). See Complaint at 4 (Nov.

27 13, 2020).

Decision and Order Granting Defendant's Motion for Partial Summary Judgment Re: Statute·ofLimitations CV0844-20, Guam Housing and Urban Renewal Authority, et. al. v. Rex International, Inc. et. al. Page 1 of8 1 First Net issued a Performance and Payment Bond, subjecting First Netto a penal amount of

2 $2,178,200 should Rex International fail to perform the contract. See Declaration of Counsel in

3 Support of Motion (Ex. A) (May 18, 2022). First Net's obligations under the Performance and

4 Payment Bond lasted until Rex International "perform and complete all work required for" the

5 contract. Id. This includes delivery of said fully completed work "without further cost, expense or

6 charge to the" Plaintiffs, "free and hannless from all suits or actions ... which may be brought for or

7 on account of... the neglect of... Rex International." Id.

8 Construction of the Mosquito Lab Facility began in 2014 and ended in early 2016. See

9 Declaration of Counsel in Support of Motion (Ex. B) (May 18, 2022). On March 10, 2016, a ribbon-

10 cutting ceremony was held. Id. On March 29, 2016, an Occupancy Permit was issued by the

11 Department of Public Works, indicating that construction had finished and that the facility complied

12 with Guam's various codes and regulations concerning building structure and use. See Declaration

13 of Counsel in Support of Motion (Ex. E) (May 18, 2022).

14 However, Plaintiffs refused to accept the Mosquito Lab Facility, asserting that it failed to meet

15 several requirements specified in the contract. See Complaint at 6-8 (Nov. 13, 2020). Plaintiffs spent

16 the next two years working alongside Rex International to identify and cure the alleged defects, but

17 to no avail. Id. at 6-7. Plaintiffs refused to occupy the building for much of that time, and only began

18 occupation on June 2, 2017, conditional that said occupancy was not acceptance of the facility. See

19 Declaration of Counsel in Support of Motion (Ex. B) (May 18, 2022).

20 Plaintiffs informed First Net of Rex International 's alleged nonperformance in February, 20 ~ 8.

21 See Declaration of Counsel in Support of Motion (Ex. C) (May 18, 2022). On March 29, 2018,

22 Plaintiffs issued a Notice of Default of the Contract to Rex International, giving them a deadline to

23 cure by April 27, 2018. See Complaint at 7 (Nov. 13, 2020). Rex International did not cure the 24 problems, and Plaintiffs eventually terminated the contract on May 3, 2018. Id. at 7.

25 On November 13, 2020, the Plaintiffs brought suit against Rex International for breach of

26 contract. Id. at 1. The Plaintiffs also filed suit against First Net concerning First Net's failure to pay

27 out the Performance and Payment Bond. Id. at 12-14. Plaintiffs claimed $2,178,200 in damages

28 against First Net, the full penal amount under the Performance and Payment Bond. Id. at 14.

Decision and Order Granting Defendant's Motion for Partial Summary Judgment Re: Statute of Limitations CV0844-20, Guam Housing and Urban Renewal Authority, et. al. v. Rex International, Inc. et. al. Page 2 of8 1 On May 18, 2022, First Net filed their Motion for Partial Summary Judgment Re: Statute of

2 Limitations. Seeking to dismiss Plaintiffs' claims against them, First Net asserts the claims are barred

3 by the statute of limitations, which they believe started running on March 29, 2016, the date the

4 Occupancy Permit was issued. See Motion at 5-7 (May 18, 2022).

5 On June 16, 2022, Plaintiffs filed their Opposition to Motion ("Opposition"). Plaintiffs claim

6 the statute of limitations began to run on March 29, 2018, when Plaintiffs issued a Notice of Default

7 on the Contract to Rex International. See Opposition at 3 (Jun. 16, 2022). Alternatively, if the Court

8 finds the statute of limitations started running in March 2016, Plaintiffs believe First Net should be

9 equitably estopped from bringing their Motion because First Net persuaded them to forego bringing

10 suit in a timely manner. Id. at 17-19.

11 On June 27, 2022, First Net filed their Reply to Plaintiffs' Opposition ("Reply"). First Net

12 reiterated that their surety liability accrued on March 29, 2016 because that was when Rex

13 International delivered the completed Mosquito Lab Facility to the Plaintiffs in a defective condition

14 that Plaintiffs knew about, which First Net guaranteed against in the Performance and Payment Bond.

15 See Reply at 3-5 (Jun. 27, 2022). First Net also denies ever inducing Plaintiffs into not filing suit.

16 Id. at 5-6.

17 The Court held a hearing on February 6, 2023. After hearing the arguments of the parties-, the

18 Court took the matter under advisement.

19 DISCUSSION

20 I. Preliminary Rules:

21 a. Standard for Summary Judgment:

22 Summary judgment is appropriate if the pleadings, depositions, answers to

23 interrogatories, and admissions on file, together with the affidavits, if any, show that

24 there is no genuine issue as to any material fact and that the moving party is entitled to

25 a judgment as a matter oflaw." See Hawaiian Rock Products Corp. v. Ocean Housing,

26 Inc., 2016 Guam 4 ,r 26 (quoting Guam R. Civ. P. 56(c)) (internal quotations omitted).

27 "Genuine issues" are factual disputes requiring resolution by a fact-finder. See Rayle

28 v. Hemlani, 2000 Guam 25 ,r 20. "Material facts" are those "relevant to an element of

Decision and Order Granting Defendant's Motion for Partial Summary Judgment Re: Statute of Limitations CV0844-20, Guam Housing and Urban Renewal Authority, et. al. v. Rex International, Inc. et. al. Page 3 of8 1 a claim or defense and whose existence might affect the outcome of the suit." Id. at ,r

2 20.

3 The court "must view the evidence and draw inferences in the light most

4 favorable to the non-movant." Id. at ,r 21 (internal citation omitted). "If the movant

5 can demonstrate there are no genuine issues of material fact, the non-movant cannot

6 merely rely on allegations contained in the complaint, but must produce at least some

7 significant probative evidence tending to support the complaint." Id. at ,r 21 (internal

8 citation omitted).

9 b. Statute of limitations is four (4) years.

10 "Any action upon any contract, obligation or liability founded upon an

11 instrument in writing" must commence within four (4) years from the accrual of said

12 cause of action. See 7 G.C.A. § 11303.

13 c. Statute of limitations against First Net started running upon Rex International's

14 breach.

15 An obligee's cause of action against their obligor's surety accrues at the same

16 time as the cause of action against the principal obligor. See 72 C.J.S. Principal and

17 Surety § 85. In other words, once a claim for breach of contract accrued against the

18 principal, both the principal (Rex International) and the surety (First Net) are

19 immediately liable.

20 II. Plaintiffs' claim against First Net accrued on March 29, 2016 because Plaintiffs

21 discovered the cause for a breach of the Performance and Payment Bond by that date.

22 The statute of limitations starts running once "a cause of action accrues." See 1000

23 Virginia Ltd. P'ship v. Vertecs Corp., 158 Wash.2d 566, 575 (2006). A "cause of action 24 accrues when the plaintiff discovers, or in the reasonable exercise of diligence should discover,

25 the elements of the cause of action." Id. at 575-576 (internal citations omitted). This discovery

26 standard prevents unjust situations where a plaintiff is initially unaware of harm sustained from

27 a wrongful act, and only discovers their cause of action after the statute of limitations has

28 otherwise passed. Id. at 575-576.

Decision and Order Granting Defendant's Motion for Partial Summary Judgment Re: Statute of Limitations CV0844-20, Guam Housing and Urban Renewal Authority, et. al. v. Rex International, Inc. et. al. Page 4 of8 1 "The liability for. .. any consequent breach of contract, is determined after ... the

2 construction project has been completed." See Carl E. Woodward, L.L. C. v. Acceptance Idem.

3 Ins. Co., 743 F.3d 91, 101 (5 1h Cir. 2014). Construction projects are completed at "the point

4 in time when" the plaintiff "received the completed building." Id. at 101. Liability cannot

5 arise out of "ongoing" construction projects because (1) builders "might correct the problem

6 before completing the project", and (2) this would impose obligations on owners to monitor

7 construction sites.at all times for any minor defect that might trigger the statute of limitations.

8 Id. at 101.

9 Here, all facts indicate that the Mosquito Lab Facility was fully constructed and

10 delivered to the Plaintiffs by March 29, 2016. It was on that date that an Occupancy Permit

11 was issued by the Department of Public Works, indicating that construction was "finished".

12 See Declaration of Counsel in Support of Motion (Ex. E) (May 18, 2022). The Plaintiffs'

13 words and actions also suggest that construction had finished by March 29, 2016. The

14 Plaintiffs hosted a ribbon-cutting ceremony just weeks prior, celebrating the building's

15 inauguration. See Declaration of Counsel in Support of Motion (Ex. B) (May 18, 2022). The

16 Plaintiffs even admit several times that "the construction of' the Mosquito Lab Facility "was

17 completed.in early 2016". See Declaration of Counsel in Support of Motion (Ex. B) (May 18,

18 2022); See also Declaration of Counsel in Support of Plaintiffs' Opposition to FirstNet's

19 Motion for Partial Summary Judgment Re: Damages (Ex. B) (Jun. 15, 2022). The Mosquito

20 Lab Facility was also delivered on that date, as the Plaintiffs were immediately all.owed to

21 occupy the building from that point forward. See Declaration of Counsel in Support of Motion

22 (Ex. E) (May 18., 2022).

23 While Rex International continued to perform subsequent work on the Mosquito Lab

24 Facility in the following months and years, such work functioned to remedy the complained

25 of defects rather than complete the initial construction or delivery of the building itself. For

26 purposes of the Performance and Payment Bond, Rex International substantially completed,

27 constructed, and delivered the Mosquito Lab Facility to the Plaintiffs by March 29, 2016.

Decision and Order Granting Defendant's Motion for Partial Summary Judgment Re: Statute of Limitations CV0844-20, Guam Housing and Urban Renewal Authority, et. al. v. Rex International, Inc. et. al. Page 5 of8 1 Furthermore, all facts indicate that the Plaintiffs discovered the notable facts

2 underlying the elements of their claim against First Net by March 29, 2016. By the Plaintiffs'

3 own admission, "on the day of the (March 10, 2016 ribbon-cutting) celebration, it was noted

4 that parts of the building, particularly the training room, were not being adequately cooled."

5 See Declaration of Counsel in Support ofMotion (Ex. B) (May 18, 2022); See also Declaration

6 of Counsel in Support of Plaintiffs' Opposition to FirstNet's Motion for Partial Summary

7 Judgment Re: Damages (Ex. B) (Jun. 15, 2022). Plaintiffs further admit their knowledge of

8 several other serious defects indicating a breach before November 13, 2016 (four years prior

9 to filing suit). For example, James Gillan, the Director of the Department of Public Health

10 and Social Services, divulged their knowledge of several defects indicating a breach in a

11 communication dated September 2016. See Declaration of Counsel in Support of Plaintiffs'

12 Opposition to FirstNet's Motion for Partial Summary Judgment Re: Damages (Ex. I) (Jun. 15,

13 2022). These defects include, among others, "the absence of required visual and audible

14 alarms", "improperly based'' BSC cabinets, and doors improperly containing "child-lock type

15 features". Id.

16 First Net has conclusively proven that the Mosquito Lab Facility was constructed and

17 delivered to the Plaintiffs by March 29, 2016. On that date, the Plaintiffs discovered the

18 elements of their claim against First Net, because they were aware that the completed Mosquito

19 Lab Facility did not comply with the contract's specifications. Therefore, the statute of_

20 limitations began to run on March 29, 2016.

21 III. Plaintiffs' filing was not within the statute of limitations because it was more than four

22 years after their claim accrued.

23 As explained above, the statute of limitations for Plaintiffs' claim against First Net

24 started running on March 29, 2016. However, Plaintiffs did not bring suit against First Net

25 until November 13, 2020. See Complaint (Nov. 13, 2020). The Plaintiffs had four years to

26 investigate problems, work out disputes, and ultimately file their complaint. The Plaintiffs

27 failed to do so within the appropriate time, and are now barred by the statute oflimitations.

Decision and Order Granting Defendant's Motion for Partial Summary Judgment Re: Statute of Limitations CV0844-20, Guam Housing and Urban Renewal Authority, et. al. v. Rex International, Inc. et. al. Page 6 of8 1 IV. Equitable estoppel does not prevent First Net from asserting their statute of limitations

2 defense because First Net never induced the Plaintiffs into forbearance of their lawsuit.

3· Plaintiffs believe that First Net should be equitably estopped from asserting their

4 statute of limitations defense because First Net repeatedly assured Plaintiffs that the

5 Performance and Payment Bond would be honored, leading to their delayed filing. See

6 Opposition at 17-19 (Jun. 16, 2022).

7 Guam recognizes the use of equitable estoppel in the context of a statute of limitations

8 defense. Limtiaco v. Guam Fire Dept., 2007 Guam 10 ,i 57. The claimant must prove the

9 following elements in an equitable estoppel analysis:

10 (1) The party to be estopped must be apprised of the facts; (2) He must intend that his conduct will be acted upon, or in such a manner that 11 the party asserting the estoppel could reasonably believe that he intended his conduct to be acted upon; 12 (3) The party asserting the estoppel must be ignorant of the true state of the 13 facts; and (4) He must rely upon the conduct to his injury. 14 Id. at ,r 58. 15 16 Applying these elements to the present case, First Net was apprised of the fact that Rex

17 International defaulted on the contract on May 3, 2018 (five days after the default and 18 termination were effective). See Declaration of Counsel in Support of Plaintiffs' Opposition 19 to FirstNet's Motion for Partial Summary Judgment Re: Damages (Ex. F) (Jun. 15, 2022). 20 The second inquiry is whether Plaintiffs could have reasonably relied on First Net's 21 representations that First Net would remedy any outstanding issues in the Mosquito Lab 22 23 Facility, and were ignorant of the fact that such remedies would not subst~tialize. It is true

24 that First Net promised Plaintiffs that they would have Rex International remedy the HVAC 25 commissioning problem. See Declaration of Counsel in Support of Plaintiffs' Opposition to 26 FirstNet's Motion for Partial Summary Judgment Re: Damages (Ex. H) (Jun. 15, 2022). 27 However, on September 24, 2018, First Net clearly disputed any obligation to remedy other 28

Decision and Order Granting Defendant's Motion for Partial Summary Judgment Re: Statute of Limitations CV0844-20, Guam Housing and Urban Renewal Authority, et. al. v. Rex International, Inc. et. al. Page 7 of8 1 grievances such as the BSC cabinets and the fume hoods. Id. On January 24, 2019, First Net

2 further challenged both the scope of their obligations as well as whether they even fell within 3 the warranty period. Id. These disputes were not a one-off conversation, and a September 19, 4 2019 email highlights how this remained a talking point between the parties well over a year 5 after First Net was notified of Rex International's default. Id. 6

7 Therefore, it was not reasonable for Plaintiffs to rely on any perceived representations

8 that First Net would remedy all outstanding deficiencies in the Mosquito Lab Facility.

9 Plaintiffs had no reason to believe that First Net was ever going to remedy several key 10 deficiencies absent a court-ordered judgment. In fact, Plaintiffs were repeatedly notified that 11 First Net was not going to undertake such actions. Plaintiffs have failed to prove that First Net 12 induced them into forbearing the bringing of their lawsuit, and equitable estoppel does not 13

14 prevent First Net's statute oflimitations defense.

15 CONCLUSION 16 For the reasons stated above, the Court GRANTS First Net's Motion. The statute of

17 limitations for Plaintiffs' claim against First Net started running on March 29, 2016. Because the

18 Plaintiffs filed suit against First Net after the four-year statute of limitations expired, and were not 19 improperly induced by First Net to forgo bringing suit, their claim against First Net is now time-

20 barred. 21 ---.... ,. .~ '':...

22 IT IS SO ORDERED this May 4 ' ZOZ 3

26 HONORABLE AL!3~R'f-O C. LAMORENA, III Presiding Judge, Superior Court of Guam 27

Decision and Order Granting Defendant's Motion for Partial Summary Judgment Re: Statute of Limitations CV0844-20, Guam Housing and Urban Renewal Authority, et. al. v. Rex International, Inc. et. al. Page 8 of8