FILED 1 ZUIg NOV —LI MI) 8 2 SUPERIOR COURT 3 OF GUAM
IN THE SUPERIOR COURT OF GUAM 5
6 K1NDEN CORPORATION, 7 Plaintiff, 8 Civil Case No. CVOO4O-16 9 vs. 10 GUAM HEALTHCARE DEVELOPMENT, INC. DBA GUAM REGIONAL MEDICAL 12 CITY, DCK PACIFIC GUAM, LLC. DCK DECISION AND ORDER WORLDWIDE, LLC AND DOES I-Ill, 13
14 Defendants.
17 INTRODUCTION 18 This matter is before the Honorable Judge Michael J. Bordallo. Plaintiff Kinden 19 Corporation (hereinafter “Kinden”) is represented by Attorney Louie I. Yanza. Defendant Guam 20 Regional Medical City (hereinafter “GRMC”) is represented by Attorney Vanessa L. Williams. 21 On September 13, 2018, GRMC filed a Motion for Summary Judgement (hereinafter “Motion”) 22 on Kinden’s foreclosure of mechanic’s lien, unjust enrichment, and quantum meruit claims. 23
24 Kinden filed an opposition on May 21, 2019. GRMC filed a reply on June 4, 2019. After having
25 received and reviewed the papers, arguments, and the file herein, the Court holds that GRMC’s
26 Motion for Summary Judgment is GRANTED in PART and DENTED in PART.
Page lofl7 . . BACKGROUND 2 This matter arises out of Kinden’s Verified Complaint and Demand for Jury Trial
(hereinafter “Complaint”) filed on January 19, 2016. Multiple trial dates were set in this matter
and then continued for various reasons, including attempts at mediation. The parties engaged in 5 mediation from January 2018-April 2018, but such efforts broke down and the parties continued 6 to move toward trial. On September 7, 2018, the Court granted leave for GRMC to file a Motion 7 for Summary Judgment, despite GRMC missing the deadline for filing dispositive motions. At a 8 hearing on September 4, 2018, the Court told Kinden it would have three weeks to file an 9 opposition to any motion for summary judgment. GRMC filed its Motion on September 13, 10 2018. Three weeks passed, and Kinden did not file an opposition. Four days later, on October 8,
12 2018, the Court took GRMC’s Motion under advisement.
13 After having reviewed GRMC’s Motion in a light most favorable to Kinden, coupled
14 with the fact that Kinden did not file an opposition, the Court granted GRMC’s Motion on
15 December 20, 2018. On January 2, 2019, Kinden filed a Motion to Reconsider the Court’s 16 Decision and Order, arguing the Court never set a deadline for Kinden to file an opposition, and 17 if the Court believes that it did set a deadline, the manner in which the Court set the opposition 18 deadline was unclear and confusing. On April 30, 2019, the Court granted Kinden’s Motion for 19 Reconsideration and allowed Kinden to file an opposition to the Motion for Summary Judgment. 20 Kinden filed an opposition on May 21, 2019. On June 4, 2019, GRMC filed a Reply Brief. The 21 Court took the issue of Summary Judgement under advisement on August 12, 2019. 22
23 FACTS
24 • GRMC initiated a new hospital construction project (hereinafter “Project”), selecting
25 DCK Pacific Guam LLC and DCK Worldwide LLC (collectively and hereinafter
26 “DCK”) to serve as the general contractor of the Project. Compl. p. 2.
Page 2 of 17 1 2. Kinden entered into a subcontract with DCK on or about September 10, 2012, to provide
2 labor and materials for the Project. Compi. p. 3.
3. In the summer of 2014, the Project was delayed for a variety of reasons, including major
cracks in the structure of the building following a seismic event in September 2014. 5 Deci. of Keith L. Farrell ¶9[ 3-4. 6 4. To compound things, DCK failed to pay its subcontractors, and many subcontractors 7 walked off the Project in December 2014. IdJ 4. 8 5. It was not until March 28, 2015, months later, that a solution was found and remediation 9 work could begin. It took another three months for DCK to complete remediation in 10
11 June2Ol5.Id.
12 6. Kinden alleges that as a result of these delays, it incurred extended overhead expenses.
13 Compl. p. 3.
14 7. Kinden alleges that during the course of the construction, both GRMC and DCK
15 instructed Kinden to make change orders resulting in Kinden incurring further expenses. 16 Compl. p. 4. 17 Kinden alleges that the expenses related to extended overhead and change orders were 18 not included in Kinden’ s scope of work. Id. 19 9. On or about June 11, 2015, Kinden provided preliminary notice of a mechanic’s lien to 20 GRMC. Compl. p.5. 21 10. On June 25, 2015, DCK sent a “cease work” letter to all workers and subcontractors, 22 ordering them to immediately cease work, remove tools and equipment, and secure their 23
24 work areas until further notice. Decl. of Keith L. Farrell ¶ 10.
25 11. On October 19, 2015, Kinden recorded with the Department of Land Management a
26 claim of mechanic’s lien against the property of GRMC. Compi. Ex. 2.
Page 3 of 17 1 12. In the mechanic’s lien, Kinden claimed the amount of $2,841,309.88 as the reasonable
2 value of all labor, materials, services, and equipment on the Project. Id.
13. On January 19, 2016, Kinden brought a complaint for foreclosure of mechanic’s lien and
unjust enrichment against GRMC and breach of contract and unjust enrichment against 5 DCK. Compi. pp. 4-7. 6 14. In August 2016, GRMC determined that $1,900,999.03 of Kinden’s $2,841,309.88 7 mechanic’s lien was for Kinden’s Payment Applications, all amounts claimed under 8 retention, and a percentage of the Requests for Equitable Adjustments (hereinafter
“REA”), which GRMC did not dispute, and therefore settled by paying Kinden 10
11 $1,900,999.03. This left a remaining amount of $766,744.96, representing Kinden’s
12 remaining REA Claims, Standby Manpower Claims, and Payment Application #26 for
13 $170,836.00, all of which GRMC disputes. Deci. of Margaret A. Bengzon ¶ 8.
14 15. On September 28, 2016, Kinden reduced its lien amount to $337,188.60 and filed an
15 Amended Lien. Id. ¶9. 16 16. GRMC claims that upon its payment to Kinden of $1,900,999.03 in August 2016, it 17 satisfied its debt to Kinden and properly settled the mechanic’s lien. Kinden continues to 18 claim $170,836.00 against GRMC for services performed and billed in Payment 19 Application #26. Mot. For Summary Judgment pp. 13-14. 20 17. The parties mutually agreed to have the case mediated starting in January 2018, but by 21 April 2018, it became apparent that mediation efforts were failing and both parties 22 stayed arbitration pending this lawsuit. Opp. Mot. For Summary Judgment. p. 6. 23
24 ISSUES
25 1. Whether Kinden exhausted all available legal remedies.
26 2. Whether Kinden’s Mechanic’s lien is valid.
Page 4 of 17 1 3. Whether DCK was an agent of GRMC.
2 4. Whether Kinden may recover for labor and materials supplied to GRMC under the
doctrine of quantum meruit and unjust enrichment.
PRINCIPLES OF LAW 5 I. Motion for Summary Judgment 6 Summary judgment is regulated by Rule 56 of the Guam Rules of Civil Procedure. 7 Guam R. Civ. P. 56. Summary Judgment is appropriate if the pleadings, deposition, 8 interrogatories, and admissions on file together with the affidavits, if any, show that there is no 9 genuine issue as to any material fact and that the moving party is entitled to judgment as a 10 matter of law. Guam R. Civ. P. 56(c); Izuka Corp. v. Kawasho International, (Gttam), Inc., 1997 11 Guam 10 ¶ 7. In addition, 12
13 a party seeking summary judgment always bears the initial responsibility of informing the district court of the basis for its motion, and identifying those 14 portions of “the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any,” which it believes demonstrate the 15 absence of a genuine issue of material fact.
16 Celotex Corp. V. Catrett, 477 U.S. 317, 323 (1986) (citations omitted). 17 In rendering its decision on a motion for summary judgment, a court must draw 18 inferences and view the evidence in a light most favorable to the non-moving party. Bank °i 19 Guam v. flores, 2004 Guam 25. If, however, the movant can demonstrate that there are no 20 genuine issues of material fact, the non-movant cannot merely rely on allegations contained in 21 the pleading but must produce at least some significant probative evidence to support the 22 pleading. Ethi’ards i’. Pacific financicti Corporation, 2000 Guam 27 ¶ 7. Consequently, a 23 court’s “ultimate inquiry is to determine whether the ‘specific facts’ set by the nonmoving party, 24 coupled with undisputed background or contextual facts, are such that a rational or reasonable 25
26 jury might return a verdict in its favor based on that evidence.” Id.
Page 5 of 17 1 II. Mechanic’s Lien
2 Any corporation that provides labor, materials, equipment, or services that are used to
improve real property shall have a lien on such property for the payment of the value of such
labor, materials, equipment, or service. 7 G.C.A. § 33101. The corporation will have lien rights 5 whether the labor, materials, equipment, or services were performed or furnished at the request 6 of the property’s owner or any person acting with the owner’s authority. Id. 7 a. Preliminary Notice 8 Except when the lienholder is under direct contract with property owner, Guam law
requires that a lien claimant provide the property owner a written preliminary notice of the lien 10 within twenty (20) days after the claimant has first furnished labor and materials. 7 G.C.A. §
12 33 106(a).
13 If the claimant provides notice twenty (20) days after labor and materials were first
14 furnished, then the claimant will be entitled to record a lien only for labor and materials
15 furnished within twenty (20) days prior to the service of the notice, and any time thereafter. 7 16 G.C.A. § 33 106(b). 17 b. Delay Damages 18 As a matter of law, a mechanic’s lien shall be for the reasonable value of services, 19 equipment, or materials furnished or for the price agreed upon by the claimant and the person 20 with whom he or she contracted, whichever is less. 7. G.C.A. § 33102. 21 c. Pre-Judgment Interest 22 The standard for recovery of pre-judgment interest “is whether the defendant actually 23
24 knows the amount owed or from reasonably available information could the defendant have
25 computed that amount.” Guam Top Builders Inc. v. Tanota Partners, 2012 Guam 12 ¶ 6$. Pre
26 judgment interest is warranted “where the amount due ... is fixed by the terms of the contract or Page 6 of 17 . . 1 is readily ascertainable by reference to well-established market values.” Id. However, pre
2 judgment interest is not allowable “where there is a dispute between the parties concerning the
basis of computation of damages so that the amount of damages depends upon a judicial
determination based on conflicting evidence.” Id. 5 III. Quantum Mermt[Unjust Enrichment 6 Quantum merit it is an equitable remedy. Angino & Rovner v. Jeffrey R. Lessin & 7 Associates, 131 A.3d 502 (Pa. Super. 2016). Quantum meruit has been defined to include 8 recovery allowed where one party’s performance occurs in the absence of a contract. Los/i v.
Foster, 37 Wash.2d 220, 222 P.2d 824 (1950). “Quantitnz ineruit relief is founded upon the legal 10 fiction of an implied contract. This fiction cannot be maintained, however, when the rights of the
12 parties are described in a written contract.” Corn v. Greco, 694 So.2d 833, 934 (fla. 2nd DCA
13 1997).
14 The Supreme Court of Guam has held that in order for a quantum ineruit claim to be
15 valid it must satisfy three elements. Tanaguchi-Ruth & Associates v. MDI Gttam Coip., 2005 16 Guam 7 ¶ 27. The three elements are (1) the performance of services by the plaintiff, (2) the 17 receipt of the benefit of those services by the defendant, and (3) the unjustness of the defendant’s 18 retention of that benefit without compensating the plaintiff. Id. 19 Unjust enrichment is an equitable remedy, found where an individual receives a benefit 20 which would be unconscionable for him to retain. C/app v. Goffstown Sc/i. Dist., 159 N.H. 206, 21 A.2d 1021 (2009). “Unjust enrichment” occurs when one confers a benefit upon another 22 who accepts or acquiesces in that benefit, making it inequitable to retain that benefit without 23
24 paying. Dowling Family P’s/up v. Mid/cmd Farms, 2015 S.D. 50, $65 N.W.2d $54. “A person is
25 enriched if the person receives a benefit at anothers expense.” Tanaguchi-Ruth + Assocs, v.
26 MDI Guam Corp., 2005 Guam 7 ¶ 29 (Guam Apr. 1, 2005).
Page 7 of 17 1 a. Exhaustion of Legal Remedies
2 As a general rule, and subject to equitable considerations, exhaustion of available,
adequate legal remedies is required as a prerequisite to a courts exercise of equitable
jurisdiction. In order for a party to seek an equitable remedy under the law, it must first dispose 5 of its legal remedies. Aurora Loan Services, LLC v. Lopa, 88 A.D.3d 929, 932 N.Y.S.2d 496 (2d 6 Dept 201 1); Bivens v. Scttt Lake City Corporation, 2017 UT 67, 416 P.3d 33$ (Utah 2017). A 7 failure to exhaust available legal remedies, while pursuing an indirect equitable claim, is 8 considered to render equitable jurisdiction both premature and improper.
Maloney v. Therm Alum Industries, Corp., 636 So. 2d 767 (Fla.4th DCA 1994). 10
11 Once it has been determined that there is a valid reason for applying the exhaustion
12 of remedies doctrine, the exceptions to the rule must be considered. If resort to the prescribed
13 administrative procedures would be futile or inadequate to prevent irreparable injury, or if blatant
14 violations of constitutional or statutory rights have already occurred, the exhaustion of
15 administrative remedies should not be reqLllred. Rhodes v. United States. 574 F.2d 1179 (5th Cir. 16 1978); Susqttehanna Valley Atiictnce v. Three Mile Island Nuclear Reactor, 619 F.2d 231 (3d Cii. 17 1980); Barnes v. Chatterton, 515 f.2d 916 at 920-21. 18 b. Agency 19 “Agency is a legal relationship between a principal and an agent. It is a fiduciary 20 relationship which results from manifestation of consent of one person to allow another to act on 21 his or her behalf and subject to his or her control, and consent by the other so to act. The agent is 22 a party who acts on behalf of the principal with the latter’s express, implied, or apparent 23
24 authority” Maurillo v. Park Slope U—Haul, 194 A.D.2d 142, 146, 606 N.Y.S.2d 243 [citations
25 omitted]; see G.K. Alan Assoc. Inc. v. Lazzari, 66 A.D.3d 830, 833, 887 N.Y.S.2d 233; Time
26 Warner City Cable v. Adeiphi Univ., 27 A.D.3d 551, 552, 813 N.Y.S.2d 114.
Page 8 of 17 . 1 “[A]n agency relationship may be express or de facto. A de facto agency may be proven
2 by the presence of three elements at the time of contracting: 1. ‘manifestation by the alleged
principal, either by words or conduct, that the alleged agent is employed as such by the
principal,’ 2. ‘the agents acceptance of the arrangement,’ and 3. ‘the parties understood that the 5 principal will control the undertaking.’ “Stripttng v. Jordan Prod. Co., 234 F.3d $63, $70 (5th 6 Cir. 2000) (quoting Forest Oil Corp. v. Tenneco, Inc., 626 F. Supp. 917, 921 (S.D. Miss. 1986)). 7 ANALYSIS 8 I. Mechanic’s Lien 9 The parties dispute the validity of the mechanic’s lien that Kinden 10 initially filed with the Department of Land Management on October 19, 2015. The initial lien
12 amount was for $2,841,309.88. After a payment in the amount of $1,900,999.03 by GRMC
13 towards the lien, Kinden filed an Amended Mechanic’s Lien for $337,188.60.
14 The amended lien consists of amounts for labor and materials as well as delay damages
15 and pre-judgment interest associated with: (1) the main contract, (2) CUP building, and (3) 16 extended overhead and manpower standby. Out of the $337,188.60.00, $1,729.63 is for labor 17 and materials and the remaining $335,458.96 is for delay damages and pre-judgment interest. 18 a. Preliminary Notice Requirement 19 GRMC alleges that the lien is invalid because it lists items that are outside the statutory 20 recovery period. Kinden gave preliminary notice to GRMC on or about June 11, 2015. As such, 21 GRMC argues that after applying the “20-day rule” of 7 G.C.A §33106(b) to the preliminary 22 notice date, Kinden may not recover for any labor and materials furnished to GRMC before 23
24 May 23, 2015. GRMC argues that the $1,729.63 in labor and materials were furnished to
25 GRMC before May 23, 2015.
Page 9 of 17 1 Kinden claims that its mechanic’s lien is valid. Kinden concedes the date of preliminary
2 notice; however, it argues that the preliminary notice requirement does not apply to this case
because GRMC had actual knowledge of Kinden’s work on the Project.
To support this argument, Kinden cites Kim . J.f. Enterprises, 42 Cal.App. 4th 849 5 (1996). In interpreting California’s mechanics lien statute, which is nearly identical to Guam’s, 6 the Kim court stated that preliminary notice was not required because the contractors were under 7 “direct contract with the owners.” Id. Both parties in this case agree that Kinden was not under 8 direct contract with GRMC; however, the court in Kim ruled that according to the California
statute, a presumption may be made that would deem two parties to be “under direct contract.” 10 The Kim court stated:
12 The rationale for excepting those under direct contract with the owner from serving a preliminary notice is that ‘the owner is generally apprised of potential 13 lien claims by those with whom he deals directly, whereas it is difficult for him to learn of potential liens by those not under direct contract. [Citation.]” Truestone, 14 Inc. v. Simi West Industrial Park 1], 163 CalApp.3d 715 at p. 722, 209 CaLRptr. 757.) 15
16 Section 3129 states that every work of improvement constructed, labor performed or materials furnished “with the knowledge of the owner” shall be held to have 17 been constructed, performed, or furnished at the instance of the owner and hence 18 “under direct contract with the owner” within Section 3097. Truestone, Inc. v. Simi West Industrial Park II, 163 Cal.App.3d at p. 722, 209 Cal.Rptr. 757. Under 19 those circLimstances even though the contract for a work of improvement is with a lessee, and not the owner, no preliminary notice is required because of the 20 owner’s knowledge. (Ibid.)
21 1dat856.
22 Kinden’s argument lies in the fact that because GRMC requested and was aware that 23 Kinden was performing work to improve the Project, a presumption can be made that GRMC 24 and Kinden were “under direct contract”; therefore, the lack of a timely preliminary notice 25 cannot be used as a means to invalidate the lien. 26
Page 10 of 17 1 The preliminary notice requirement and whether it applies has a significant impact on
2 the value of the lien. The Court is aware that GRMC and Kinden did not enter into an express
contract with each other. However, the Court is also aware that under certain circumstances, the
nature of the interactions between two parties may reasonably suggest otherwise. Therefore, the 5 Court finds that as to the preliminary notice requirement under 7 G.C.A §33106(b), a triable 6 issue does exist as to whether the degree of GRMC’s awareness of Kinden’s actions on the 7 Project is sufficient enough to deem GRMC and Kinden “under direct contract.” 8 For this reason, the Court holds that Kinden’s alleged failure to file a timely mechanic’s 9 lien does not constitute grounds for summary judgment on Kinden’s mechanic’s lien claim. 10
11 b. Delay Damages GRMC argues that the lien is invalid because it contains amounts that reflect delay 12
13 damages. Kinden argues that the delay damages incurred by Kinden were anticipated by the
14 contract in Section $ and GRMC therefore has not paid Kinden the agreed upon price.
15 Section 8 of the Kinden-DCK contract provides that:
16 [i]f the Subcontractor is delayed in the prosecution of its work due to the acts of the Owner and/or its agents, other independent contractors of the Owner, the 17 Contractor, or the Contractor’s other subcontractors and the Subcontractor suffers delay, acceleration, loss of efficiency, extended overhead, or any other type of 18 damages therefrom, the Contractor agrees to transmit to the Owners, subcontractors, or other entity any such claims submitted to it by the 19 Subcontractor. Likewise, if the Subcontractor has any other type of claim for 20 damages including, but not limited to, differing site conditions, change in scope of work, disruption, loss of efficiency, cumulative impact of change orders, payment 21 delay, or any other type of damages caused by the Owner, other independent contractors of the Owner, the Contract, the Contractor’s other subcontractors, or 22 any other such entity, the Contractor agrees to transmit to the Owner, other subcontractors, or other entity any such claims submitted to it by the 23 Subcontractor. Any claim submitted by Subcontractor shall be accompanied by sufficient detail and certification (if applicable) that validates the claim’s 24 legitimacy such that enables Contractor to reasonably transmit the claim to Owner or others. 25
Page 11 of 17 1 “The function of the mechanic’s lien is to secure repayment for services and materials actually 2 contributed to the site, not to recover for consequential damages.” Lambert v. Superior Court,
228 Cal. App.3d 383, 389. Based on Lambert, GRMC argues that Kinden’s delay damages are
not recoverable under the lien because they are consequential damages and not amounts that
6 reflect materials or services that were actually contributed to the Project.
7 Kinden claims that Lambert does not apply to the matter at hand, as the facts in Lambert
8 and the matter at hand are easily distinguishable. In Lambert, the contractor had been paid in full
by the owner; however, GRMC has not paid Kinden the contract price agreed upon by Kinden 10 and DCK. Kinden argues that unlike the contractor in Lambert, Kinden is not seeking anything 11 over the contract price. 12 The Court finds that whether a property owner has paid the full contract price is 13 immaterial to whether delay damages may be considered as part of the reasonable value of labor 14 and services that are incorporated into a mechanic’s lien. The Court holds that Guam’s mechanic 15 lien statute does not permit a lien for delay damages. Summary Judgment is therefore granted on 16 Kinden’s mechanics lien to the extent the claim seeks delay damages. 17
1$ c. Pre-Judgment Interest
19 GRMC argues that Kinden’s lien is also invalid because it contains impermissible pre
20 judgment interest amounts. GRMC claims that pre-judgement interest is recoverable under
21 allowable claims only when the claims are liquidated. Burnett v. Glas, 154 Cal. 249, 97 P. 423,
22 427 (1908); Macomber v. Bigelow, 126 Cal. 9, 58 P.312 (1809). “Liquidated damages” are those 23 which are certain by computation from the face of the contract, or which might be made certain 24 by reference to well-established market values plus computations. Lineman v. Schmtd, 32 Cal.2d 25
Page 12 of 17 1 204, 209. GRMC contends that because Kinden’s claims in this case are unhiquidated, pre
2 judgment interests on those claims are prohibited.
Kinden claims that the fact that the amount owed to Kinden under the lien is in dispute
does not render the claim unliquidated. Kinden further argues that the claim is unliquidated 5 because amongst other reasons, all the necessary figures are available to calculate the amount 6 due to Kinden and therefore its claim is not unliquidated. 7 The Court acknowledges that Kinden has stopped supplying GRIvIC with any materials or 8 labor in any way and all the services provided to GRMC by Kinden are all on the record. As
such, Kinden claims that all the necessary information to compute the amount owed, if any, to 10 Kinden has been brought to the attention of GRMC and all that is left is mere calculation.
12 Although the amount owed to Kinden is in dispute, the Court holds that Kinden’s claims are not
13 unliquidated because all necessary amounts to calculate those claims have been provided to
14 GRMC. Therefore, the Court holds that Kinden’s claim for pre-judgment interest is not invalid
15 as a matter of law. 16 Quantum Meruit IUnjust Enrichment 17 In its complaint, Kinden seeks recovery from GRMC under the theories of quantum 18 meruit and unjust enrichment. “Quantum meruit” is an equitable remedy entitling a person who 19 has rendered services to recover payment for the reasonable value of those services. Hughes and 20 Coleman PLLC v. Chambers, 526 S.W.3d 70, 74. The theory of “unjust enrichment” is an 21 equitable doctrine that the benefited party equitably ought to either return or compensate for the 22 conferred benefits when there was no legal contract to pay. Bedsole v. Action Outdoor Advert. 23
24 JV, LLC, 325 Ga. App. 194,750 S.E.2d 445 (2013). GRMC argues that the theories of quantum
25 meruit and unjust enrichment do not apply because GRMC has not unjustly benefited in any way
26 due to the fact that they already paid for the labor and materials that Kinden has supplied.
Page 13 of 17 1 a. Exhaustion of Legal Remedies
2 As a preliminary matter, GRMC argues that Kinden cannot pursue the equitable claims o
qttanturn meruit and unjust enrichment unless it first exhausts all available legal remedies. To
support this argument, GRMC cites Rogers v. Whitson 22$ Cal.App.2d 662 (1964) and 5 Truestone, Inc. v. Simi West Industrial Park II 163 Cal.App.3d 715. Tn Rogers, a subcontractor 6 was hired by a general contractor to provide equipment for a construction project. After not 7 getting compensated by the general contractor for incurred costs for the construction project, the 8 subcontractor sought relief from the property owner. The California Court of Appeals held that
due to a lack of privity between the property owner and the subcontractor, the property owner is 10 not personally liable to the subcontractor. Furthermore, the California Court of Appeals held that
12 the property owner is not unjustly enriched because the subcontractor had alternative legal
13 remedies such as seeking recovery from the general contractor with whom he stood in
14 contractual privity.
15 In Trttestone, a subcontractor sought equitable relief from the property owner after the 16 general contractor failed to pay the subcontractor for materials that he delivered to the 17 construction project on the owner’s property. Citing Rogers, the California Court of Appeals 1$ held that if there is no contract between the subcontractor and the owner, the subcontractor may 19 not recover under an unjust enrichment theory against the owner. 20 In September 2012, Kinden and DCK entered into a written contract. GRMC argues that 21 Section 2, F, Paragraph 30(b)(i) of the contract clearly provides Kinden with an adequate legal 22 remedy which it has failed to exercise. 23
24 The Kinden-DCK subcontract provides:
25 If subcontractor shall claim that any such change, or any other action, omission, event, or condition, alters its scope of work or increases the cost or time of 26 performance of its work, it shall as an essential term of this Agreement, notify the
Page l4of 17 1 Contractor in writing within Ten (10) working days of the receipt of such order or such action, omission, event, or condition giving rise to the claim, or such claim 2 shall be barred.
Within Five (5) working days following the issuance of such notice, the Subcontractor must specifically identify the amount, provide a breakdown or 4 calculation of the amount, and the basis and justification for the claim with sufficient detail and precision for the Contractor to evaluate and determine the merits of the claim fdr presentation of such claim to the Owner or other 6 responsible parties. Subcontractor acknowledges and agrees that such notice is essential for the Contractor and its Surety (if applicable) to manage the work, 7 manage and report the financial status of the work, mitigate impact of changes, preserve the rights against the Owners and other Subcontractors, and to evaluate $ the exercise of its rights including but not limited to termination for convenience.
An equitable adjustment, if appropriate, in the Subcontract price shall be agreed upon in writing by the Parties, but Subcontractor shall not delay proceeding with 1 the Work as changed pending such agreement. If the parties are unable to agree 11 upon the amount of the addition to or the reduction from the subcontract price or time, the Subcontractor shall nevertheless proceed with the Work, and the 12 determination of such amount of the addition or reduction shall be determined in accordance with The written contract states that Kinden would provide labor and 13 materials for the Project.
14 Section 2, F, Paragraph 30(b)(i).
15 In response, Kinden argues that Rogers and Truestone are inapt because they do not 16 address whether a construction manager is an agent of the owner. Kinden relies on Aladdin 17 Construction Co. v. John Hancock Life Insurance, 914 So.2d 169 (Miss. 2005) to argue that the 18 lack of pnvlty between a property owner and subcontractor does not bar the subcontractor from 19 seeking relief against the owner. Furthermore, Kinden argues that if the circumstances are such 20 that an agency relationship existed between the owner and contractor, the subcontractor may 21 hold the owner responsible for the acts of the contractor. 22 In accordance with the subcontract between DCK and Kinden, Kinden was to submit 23
24 invoices to DCK who would then review and approve the invoices before forwarding them to
25 GRMC for payment. GRMC would then release a check to DCK who then would draw a check
26 to Kinden. This system naturally made all payments received by Kinden for work done on the
Page 15 of 17 e 1 Project dependent upon DCK. Kinden argues that this payment system strongly implied a
2 principal-agent relationship between GRMC and DCK in which DCK was the disbursing agent
for GRMC. To support this argument, Kinden has referenced the construction management
agreement between GRMC and DCK. The contract states: 5 “...[T]he Construction Manager shall be the Owner’s agent to the extent 6 specifically provided in this Agreement, shall exercise its skill and judgement in furnishing construction administrative and management services, and shall 7 perform its services in an economical and timely manner.”
8 Construction Managing Agreement § 2.1.
Kinden agrees that GRMC paid DCK the $170,188.60 that was appropriated for 10 Kinden’s payment Application #26. However, Kinden never received payment from DCK.
Kinden asserts that a principal is liable even for the fraudulent acts of its agent when those acts 12 are within the scope of his authority. See Grigsby v. Hagler, 25 Cal.App. 2d 714, 715 (1938). 13 Kinden also states that the determining factor in ascertaining whether an agent’s acts falls 14 “within the scope of the agency” is not whether the principal authorized, benefited, or fulfilled 15 the job responsibilities, but whether the risk of such an act is “typical of or broadly incidental” 16 to the principal’s enterprise. Unrtth-Haxton v. Regents of University of California, 162 17 Cal.App.4th 343, 368 (2008). As such, Kinden argues GRMC and DCK were in an agency
19 relationship, and Kinden can hold GRMC responsible for DCK’s negligence in not paying
20 Kinden the $170,188.60 which was appropriated for and owed to Kinden.
21 It is undisputed that Kinden and DCK have agreed to stay arbitration. However, there is
22 still Section 2, F, Paragraph 30(b)(i) of the contract that GRMC argues is legally adequate to 23 resolve Kinden’s disputes in this matter. The Court has reviewed Section 2, F, Paragraph 24 30(b)(i) of the contract between Kinden and DCK. The Court holds that Section 2, F, Paragraph 25 30(b)(i) includes language that is clear enough to provide Kinden with a legal remedy for the 26
Page 16 of 17 1 compensation Kinden seeks. Furthermore, Kinden never disputes the legal adequacy of any of
2 the contract provisions of the subcontract nor have they made any arguments or presented any
evidence to show that DCK is insolvent to the extent that it cannot meet any of its contractual
obligations. 5 Lastly, Court has reviewed Kinden’s argument that GRMC may be held liable for the acts 6 of DCK under an agency relationship. Although the Court holds that the facts may be present 7 that such a relationship exists, the Court finds that the agency issue in Aladdin only gave rise to a 8 contractual claim but not an equitable claim. As both quantum meruit and unjust enrichment are
equitable claims, they cannot be pursued unless Kinden can demonstrate that it has exhausted its 10 contractual remedies. As such, the Court grants summary judgment on Kinden’s quantum meruit
12 and unjust enrichment claims.
‘3 CONCLUSION
14 Based on the foregoing, GRMC’s Motion for Summary Judgment is GRANTED in
15 PART and DENIED in PART. 16
17 “1 SO ORDERED, this day of J” V 2019,
HON RABLE MICHAEL J. BORDALLO 22 Judge, Superior Court of Guam 23 P”tCL.
at placed in the 24 .
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