United States ex rel. Foothills Services, Inc. v. Philadelphia Indemnity Insurance Company

• Court: District Court, D. Nevada
• Decided: March 24, 2022
• Docket: 2:19-cv-02016
• Status: Unknown

Opinion

1 2 3 4 UNITED STATES DISTRICT COURT 5 DISTRICT OF NEVADA 6 * * *

7 UNITED STATES ex rel. FOOTHILLS Case No. 2:19-cv-002016-KJD-DJA ENERGY SERVICES, INC., 8 ORDER Plaintiff, 9 v. 10 PHILADELPHIA INDEMNITY INSURANCE 11 COMPANY, et al.,

12 Defendants.

13 Presently before the Court is Defendant Philadelphia Indemnity Insurance Company’s 14 Motion for Summary Judgment (#40). Plaintiff filed a response in opposition (#44) to which 15 Defendant replied (#45). Also before the Court is Defendant Sayers Construction, LLC’s Motion 16 for Summary Judgment (#41). Plaintiff filed a response in opposition (#44) to which Defendant 17 Sayers replied (#46). 18 I. Procedural Background 19 Defendant Sayers Construction, LLC (“Sayers”) was the prime contractor on the Hoover 20 Mead Transmission Line Jumper Reinforcement Project (“Hoover Mead Project”) and, in 21 accordance with the Miller Act, furnished a payment bond (“Payment Bond”) from Philadelphia 22 Indemnity Insurance Company (“Philadelphia”) to secure payment to subcontractors and 23 suppliers. In its role as prime contractor, Sayers entered into a subcontract agreement (“Hoover 24 Mead Subcontract”) with Foothills for performance of certain work in exchange for payment by 25 Sayers. At the time Foothills and Sayers signed the Hoover Mead Subcontract, they entered 26 into Change Order No. 1 in the amount of $320,055.00, which accounted for the costs of 27 materials on the Hoover Mead Project that Foothills had not included in its estimate. Foothills 28 indicated that it could not undertake the work on the Hoover Mead Project without executing 1 Change Order No. 1. At the request and direction of Sayers, payment for Change Order No. 1 2 was to come from the Keswick-Airport and Airport-Cottonwood 230-KV Transmission Lines 3 Reconductoring Project (“Keswick Project”), which was another project on which Sayers had 4 engaged Foothills. 5 Plaintiff alleges that together, Change Order No. 1 and the Hoover Mead Subcontract 6 represent the parties’ complete agreement as to the Hoover Mead Project. Despite Foothills’ 7 performance of all obligations on the Hoover Mead Project, Sayers has refused to pay Foothills 8 the amount promised under Change Order No. 1. Foothills initiated this action to enforce its right 9 to receive payment under Change Order No. 1. Specifically, Foothills has asserted a claim for 10 breach of contract and, in the alternative, unjust enrichment against Sayers. In addition, Foothills 11 has asserted a claim on the Payment Bond against both Sayers and Foothills. 12 Defendant Sayers has now moved for summary judgment on each of Foothills’ three 13 claims against it, and Philadelphia has moved for summary judgment on Foothills’ claim on the 14 Payment Bond. 15 II. Facts 16 On March 22, 2017, Sayers entered into Contract No. DE-WA0003607 (“Keswick Prime 17 Contract”) under which it agreed to work as the prime contractor on the Keswick Project. On 18 March 29, 2017, Foothills and Sayers entered into a subcontract for the performance of certain 19 work on the project (“Keswick Subcontract”). 20 Separately, Sayers solicited Foothills as a subcontractor on the Hoover Mead Project. The 21 specifications required use of a helicopter and crew for the completion of the work on the 22 Hoover Mead Project, and Foothills contacted Source Helicopters (“Source”) for pricing. Source 23 provided Foothills with an estimate based on its understanding of the scope of work, and 24 Foothills incorporated this pricing into its proposal to Sayers. Ultimately, Sayers was awarded 25 the Hoover Mead Project with a bid that incorporated Foothills’ bid. On April 27, 2017, Sayers 26 entered into Contract No. DE-WA0003716 with WAPA for the Hoover Mead Project (“Hoover 27 Mead Prime Contract”). 28 Prior to Foothills’ execution of the Hoover Mead Subcontract, Foothills and Source 1 determined that they had mistakenly failed to include the entirety of their scope in the pricing 2 that Foothills had provided to Sayers. The omitted work related to installation of wire braids, as 3 the pricing contemplated single braids, not the required double braids. Instead of agreeing to a 4 subcontract that did not provide payment for the entirety of the contemplated work, Foothills 5 informed Sayers of these circumstances and that it would need to modify the pricing before it 6 would execute the Hoover Mead Subcontract, and Sayers and Foothills began negotiating a 7 change order. 8 Ultimately, Sayers agreed to issue a change order increasing compensation to Foothills 9 by $320,055.00, but Sayers insisted on running the change order through the Keswick Project 10 even though it plainly involved the work on the Hoover Mead Project. Sayers directed this 11 structure of Change Order No. 1 to avoid having to account for a loss on the Hoover Mead 12 Project. 13 After negotiations, the parties agreed to terms on the written change order and moved 14 forward with executing the Hoover Mead Subcontract and Change Order No 1. On May 4, 2017, 15 Foothills and Sayers entered into the Hoover Mead Subcontract, under which Foothills agreed to 16 provide materials, labor, and other services to carry out the Hoover Mead project for payment in 17 the amount of $710,945. Sayers and Foothills also agreed that the Hoover Mead Subcontract 18 would be governed by Texas law. 19 At the same time Foothills and Sayers signed the Hoover Mead Subcontract, they entered 20 into Change Order No. 1, which provided “financial relief” to Foothills to account for the full 21 cost of its work on the Hoover Mead Project. Change Order No. 1 also specifically provides that 22 it “is only executable along with the contract for the [Hoover Mead] Project.” 23 On May 25, 2017, Sayers obtained the Payment Bond, which was executed in accordance 24 with the Hoover Mead Prime Contract. It names Sayers as the principal and Philadelphia as the 25 surety and lists the penal sum amount of $853,134. Under the terms of the Payment Bond, 26 Philadelphia consented to authorized modifications of the bonded contract and waived notice of 27 modifications. Moreover, the Payment Bond does not obligate Sayers to provide notification of 28 changes to Philadelphia for work on the Hoover Mead Project. 1 Foothills fully performed under both the Keswick and the Hoover Mead Subcontracts, 2 and it finished work on the Hoover Mead Project in or around January 2019. Sayers has no 3 claims against Foothills or complaints related to its performance. Sayers has refused to pay 4 Foothills the additional $320,055 it promised to Foothills under Change Order No. 1 for the 5 completion of the Hoover Mead Project. 6 III. Standard for Motion for Summary Judgment 7 Summary judgment is appropriate when the pleadings, discovery responses, and 8 affidavits “show there is no genuine issue as to any material fact and that the movant is entitled 9 to judgment as a matter of law.” Celotex Corp. v. Catrett, 477 U.S. 317, 330 (1986) (citing Fed. 10 R. Civ. P. 56(c)). For summary judgment purposes, the court views all facts and draws all 11 inferences in the light most favorable to the nonmoving party. Kaiser Cement Corp. v. Fishbach 12 & Moore, Inc., 793 F.2d 1100, 1103 (9th Cir. 1986). 13 The moving party bears the initial burden of showing that there are no genuine issues of 14 material fact for trial. It can do this by: (1) presenting evidence to negate an essential element of 15 the nonmoving party's case; or (2) demonstrating the nonmoving party failed to make a showing 16 sufficient to establish an element essential to that party's case on which that party will bear the 17 burden of proof at trial. See Celotex, 477 U.S. at 323–325. 18 If the moving party satisfies its initial burden, the burden shifts to the opposing party to 19 establish that a genuine dispute exists as to a material fact. See Matsushita Elec. Indus. Co. v. 20 Zenith Radio Corp., 475 U.S. 574, 586 (1986). To establish the existence of a genuine dispute of 21 material fact, it is sufficient that “the claimed factual dispute be shown to require a jury or judge 22 to resolve the parties’ differing versions of the truth at trial.” T. W. Elec. Serv., Inc. v. Pac. Elec. 23 Contractors Ass’n, 809 F.2d 626, 630 (9th Cir. 1987) (quotation marks and citation omitted). But 24 the nonmoving party “must do more than simply show that there is some metaphysical doubt as 25 to the material facts.” Bank of Am. v. Orr, 285 F.3d 764, 783 (9th Cir. 2002) (internal citations 26 omitted). It “must produce specific evidence, through affidavits or admissible discovery material, 27 to show” a sufficient evidentiary basis on which a reasonable fact finder could find in its favor. 28 Bhan v. NME Hosps., Inc., 929 F.2d 1404, 1409 (9th Cir. 1991); Anderson v. Liberty Lobby, 1 Inc., 477 U.S. 242, 248–249 (1986). 2 IV. Analysis 3 Determining the intent of the Hoover Mead Subcontract and Change Order #1 are 4 essential to resolving the issues in this case. Under Texas law, a contract exists if the following 5 elements are satisfied: (i) an offer; (ii) an acceptance in strict compliance with the terms of the 6 offer; (iii) a meeting of the minds; (iv) each party’s consent to the terms; and (v) execution and 7 delivery of the contract with the intent that it be mutual and binding. Rice v. Metropolitan Life 8 Ins. Co., 324, S.W.3d 660, 670 (Tex. App. 2010) (citing Hubbard v. Shankle, 138 S.W.3d 747, 9 487 (Tex. App. 2004)). The Court finds that questions of fact prevent it from granting summary 10 judgment. 11 A contract may be created prior to the execution of a formal document and the intent of 12 the parties to make a binding agreement is the ultimate issue. See Victoria Air Conditioning, Inc. 13 v. Lebco Constructors, Inc., 752 S.W.2d 625, 627 (Tex. App. 1988) (citing Scott v. Ingle Bros. 14 Pacific, Inc., 489 S.W.2d 554, 555–56 (Tex.1972); Hemenway Co. v. Sequoia Pacific 15 Realco, 590 S.W.2d 545, 548 (Tex.Civ.App.—San Antonio 1979, writ ref'd n.r.e.)). This 16 principle applies equally in the construction industry. Victoria, 752 S.W.2d at 627. In Texas, 17 “[t]he general rule is that separate instruments or contracts executed at the same time, for the 18 same purpose, and in the course of the same transaction are to be considered as one instrument, 19 and are to be read and construed together.” Jones v. Kelley, 614 S.W.2d 95, 98 (Tex. 1981); Bd. 20 of Ins. Comm’rs v. Great Southern Life Ins. Co., 239 S.W.2d 803, 809 (Tex. 1951). In Great 21 Southern, for example, the Supreme Court of Texas held that an insurance policy, trust 22 agreement, and a contract between Great Southern and the Bankers Associated must be 23 construed together because “they were a necessary part of the same transaction.” 239 S.W.2d at 24 809. The Texas Supreme Court instructs that construing contracts together gives “effect to the 25 intention of the parties” and should be applied with regard to the “realities of the situation.” 26 Miles v. Martin, 321 S.W.2d 62, 65 (Tex. 1959). 27 Here, the question is whether Hoover Mead Subcontract and Change Order #1 are part of 28 the same agreement. There is evidence to support that contention and evidence that they are two 1 separate contracts. The Hoover Mead subcontract contains a merger clause but Change Order #1 2 stated that it was “only executable along with the contract for WAPA Hoover mead [sic] Jumper 3 Clamp Reinforcement Project.” To further complicate matters, the Change Order states the 4 project as “Keswick-Airport Cottonwood 230-Kv Transmission Reconnecting[.]” The parties’ 5 intent to form a binding contract and the existence of a binding contract have not been 6 established as a matter of law but are fact issues to be determined by a fact finder. Id. at 628 7 (citing Simmons & Simmons Construction Co. v. Rea, 286 S.W.2d 415, 417–18 (Tex. 1956)). 8 Accordingly, Defendants’ motions for summary judgment are denied because questions of fact 9 regarding the construction of the alleged contract require a trial on the merits. 10 Further, even if the Court were to find the contracts were separate, whether Change Order 11 #1 is a valid contract requires resolution by a jury. Consideration is a fundamental element of 12 every valid contract. Fed. Sign v. Tex. S. Univ., 951 S.W.2d 401, 408 (Tex.1997). Consideration 13 is a present exchange bargained for in return for a promise and consists of benefits and 14 detriments to the contracting parties. Roark v. Stallworth Oil & Gas, Inc., 813 S.W.2d 492, 496 15 (Tex.1991). The detriments must induce the parties to make the promises, and the promises must 16 induce the parties to incur the detriments. Id. Lack of consideration occurs when the contract, at 17 its inception, does not impose obligations on both parties. See Michol O'Connor, O'CONNOR'S 18 TEXAS CAUSES OF ACTION 86 (2009). The contract lacking consideration lacks mutuality of 19 obligation and is unenforceable. Fed. Sign, 951 S.W.2d at 409. Lack of consideration is an 20 affirmative defense. Doncaster v. Hernaiz, 161 S.W.3d 594, 603 (Tex.App.-San Antonio 2005, 21 no pet.). The existence of a written contract, however, presumes consideration for its 22 execution. Id. Therefore, the party alleging lack of consideration has the burden of proof to rebut 23 this presumption. Id. Therefore, the Court denies Sayers’ motion for summary judgment on lack 24 of consideration. See Audubon Indem. Co. v. Custom Site-Prep, Inc., 358 S.W.3d 309, 321 25 (Tex.App.-Houston 2011) (questions of fact regarding lack of consideration prevented summary 26 judgment and required trial); Roark, 813 S.W.2d at 496 (questions of fact regarding 27 consideration required trial on the merits). 28 \V.Conclusion 2 Accordingly, IT IS HEREBY ORDERED that Defendant Philadelphia Indemnity Insurance Company’s Motion for Summary Judgment (#40) is DENIED; 4 IT IS FURTHER ORDERED that Defendant Sayers Construction, LLC’s Motion for 5 | Summary Judgment (#41) is DENIED. 6 | Dated this 24th day of March, 2022. 7 | CN 8 Kent J. Dawson 9 United States District Judge 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

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