MacCaferri Gabions, Inc. v. Dynateria Inc.

United States Court of Appeals,
Eleventh Circuit.
No. 94-5084.
MACCAFERRI GABIONS, INC., Plaintiff-Appellee, Cross-Appellant,
v.
DYNATERIA INC., Moore & Artis, Ltd., Inc., et al. Defendants,
Wilkinson & Jenkins Construction Co., Inc., Ohio Casualty
Insurance Company, Defendants-Appellants, Cross-Appellees,
Robert E. Rupert, Third-Party-Defendant.
Aug. 20, 1996.
Appeals from the United States District Court for the Southern
District of Florida. (No. 88-14152-CIV-KMM), K. Michael Moore,
Judge.
Before TJOFLAT, Chief Judge, and RONEY and PHILLIPS*, Senior
Circuit Judges.
PHILLIPS, Senior Circuit Judge:
Maccaferri Gabions, Inc. (Maccaferri), a materialman, sued
general contractor Wilkinson & Jenkins Construction Co., Inc. (W &
J) and its surety, The Ohio Casualty Insurance Co., for the balance
due on materials Maccaferri had supplied on a federal construction
project. The jury found for Maccaferri on three of its claims—one
based on the Miller Act, 40 U.S.C. §§ 270a-270d (1986), one on a
third-party beneficiary theory, and one on promissory estoppel—and
the district court then denied W & J and Ohio Casualty's motions
for judgment as a matter of law on each of these claims. W & J and
Ohio Casualty now appeal the denial of these motions, as well as
the district court's award of prejudgment interest on each of
*
Honorable J. Dickson Phillips, Jr., Senior U.S. Circuit
Judge for the Fourth Circuit, sitting by designation.
Maccaferri's successful claims. Maccaferri also cross-appeals,
seeking an increase in the interest award. We conclude that the
lower court erred in denying each of W & J's and Ohio Casualty's
appealed Rule 50(a) motions, and we therefore reverse and remand
with directions to enter judgment for W & J and Ohio Casualty on
all the claims.
I.
This dispute arises out of a shoreline erosion-control project
undertaken by the Army Corps of Engineers at Lake Okeechobee,
Florida. In 1986, W & J bid for and was awarded the general
contract for Section 5 of the project, which involved two large
areas on the lake's south shoreline as well as a small test
section. Ohio Casualty issued payment and performance bonds for
the project.
W & J sub-contracted with Maccaferri after it received the
general contract. Maccaferri manufactures gabions, which are
stone-filled wire mesh baskets used in erosion control and other
earth-retention projects. The general contract required W & J to
use gabions to complete a test section of the project, and it
installed Maccaferri's gabions in that section. Maccaferri was
paid in full for those materials; no claims arise out of that
transaction.
In early 1987, Maccaferri again approached W & J regarding the
remaining work on the project. Maccaferri suggested that W & J
subcontract some of that work to Moore & Artis (M & A), a
contractor with whom Maccaferri previously had dealt. Maccaferri
further offered to supply M & A with reduced-price gabions, which
it could use to complete the rest of the project. Maccaferri
claims that, at a meeting in Tampa attended by representatives of
all three parties, both W & J and M & A agreed to use its gabions
for all the remaining work; W & J denies ever making such a
promise.
Whatever happened, W & J did contract with M & A to do work on
the project. Section 3 of their subcontract required W & J to make
monthly progress payments to M & A, but specified that those
payments would not be due until five days after the Corps had paid
W & J for that month's work. M & A also delivered performance and
payment bonds to W & J; the sureties on those bonds were James
Sugg and Ruben Ham. Another contractor, Dynateria, Inc., who had
located these individual sureties, entered into separate contracts
by which it, in turn, agreed to indemnify them.
In April of 1987, M & A ordered $574,304.64 worth of gabions
from Maccaferri. Maccaferri agreed to supply the gabions,
intending to deliver them in installments. In anticipation of
performance, Maccaferri procured and stored the high-strength wire
needed to make the mesh baskets, and it further began
re-engineering its production line to produce the extra-large
gabions needed for the project.
Because of the large size of this order and because Maccaferri
was unsure of M & A's creditworthiness, Maccaferri approached W &
J and asked it to directly guarantee M & A's payments on the order.
W & J refused this request. But, to accommodate Maccaferri, W & J
and M & A did eventually modify their subcontract to "allow payment
by [W & J] for materials delivered to and provided on the Project
by Maccaferri ... by bank checks payable to [M & A's escrow agent]
Edward W. Bowen, Jr. and Maccaferri ... and to be distributed to
Maccaferri."
Reassured by this arrangement, Maccaferri delivered on June 2
what was supposed to be the first of several shipments of gabions,
for which it billed M & A $132,226.16. When M & A notified it of
this charge, W & J included a portion of this fee in its June
expense estimate, which it forwarded to the Corps. Although most
of the gabions had not yet been incorporated into the project so
that the Corps was not contractually bound to pay W & J for their
inclusion, the Corps, in its discretion, paid W & J $74,722 of the
total billed to M & A for the gabions. W & J, in turn, issued a
joint check for the same amount made out to Maccaferri and Bowen.
W & J mailed the check to Bowen, who endorsed and forwarded it to
Maccaferri.
Under the terms of its agreement with Maccaferri, M & A was
supposed to pay for any gabions delivered to the site within thirty
days of their delivery. Because it still had not received full
payment for its June 2 delivery by July 24, Maccaferri sent M & A
a collection letter requesting full payment of the balance due on
its account; it also sent a copy of that letter to W & J.
By mid-August it became apparent that M & A was in serious
trouble, and, after M & A failed to meet its August payroll, W & J
declared them to be in default and asked their surety, Dynateria,
to step-in and complete M & A's work. During the same month, W &
J prepared its July expense estimate, in which it included the
balance due on the delivered gabions. But the Corps representative
with whom W & J discussed this expense said that the Corps would
make no more payments for gabions that had not yet been
incorporated into the project until it received notice that
Maccaferri had been paid for them.
In October, Dynateria and W & J entered into a new subcontract
under which Dynateria would take over M & A's contractual
obligations. The W & J/Dynateria subcontract contained the
following language:
The Contractor [W & J] agrees to pay the Subcontractor
[Dynateria] for the performance of this Subcontract ...
subject to payments previously made to [M & A] for work under
its Subcontract, and further subject to reimbursement to
Contractor for labor costs advanced [M & A] ..., and payment
to Maccaferri Gabions, Inc. in the sum of $57,226.00 for
materials delivered and provided on the project for [M & A].
In January of 1988, Dynateria promised Maccaferri that it
would pay the remaining balance due and complete the project using
only gabions. Unfortunately, Dynateria did neither, and it
formally defaulted in October of 1988. W & J then completed the
project itself using rip-rap instead of gabions. Meanwhile,
Maccaferri was never paid the balance due on its June, 1987
shipment, nor were a large portion of those gabions ever
incorporated into the project. As a result, the Corps never paid
W & J for those stored gabions.1
Maccaferri began this suit in June of 1988. During the
following eight months, Maccaferri twice amended its complaint to
add various claims and defendants. By February of 1989, it had
1
In fact, the Corps eventually back-charged W & J for about
$33,000 of the $74,722 it had advanced in July of 1987, because
many of the gabions for which this advance had paid were never
used in the project.
included W & J, Ohio Casualty, Dynateria, M & A, and certain
individual sureties as defendants. Against all defendants,
Maccaferri alleged breach of contract, promissory estoppel,
negligence and gross negligence, conversion, and Miller Act
claims.2
In July of 1989, Maccaferri moved for a preliminary
injunction, asking that W & J be forbidden to complete the project
without using gabions. The preliminary injunction was denied.
After the injunction hearing, Maccaferri filed its third amended
complaint, and in the months that followed, the parties filed
numerous summary judgment motions. Eventually, Maccaferri, by
various means, obtained judgments against M & A, Dynateria, and
some individual sureties.
When the smoke had cleared, Maccaferri went to trial against
only W & J on the claims of breach of contract, promissory
estoppel, conversion, and the Miller Act claim—on which Ohio
Casualty also remained a defendant. The jury found for W & J on
the conversion and direct breach of contract claims, but found for
Maccaferri on its third-party beneficiary breach of contract,
promissory estoppel, and Miller Act claims, and awarded damages as
follows: $57,226.16 for the Miller Act claim; $57,226.16 for the
third-party beneficiary claim; and $45,800.00 for the promissory
estoppel claim.3 The district court also awarded simple
2
Maccaferri further alleged breach of suretyship contract
against the sureties.
3
Although the parties do not discuss this point, we assume
that the identical awards for the third-party beneficiary and
Miller Act claims were intended to cover the same loss—namely the
uncollected balance due on the June 2 delivery—and that
prejudgment interest of 5.49%, which, it concluded, began accruing
on July 2, 1987. Thus the district court awarded $48,878.98
interest on both the Miller Act and third-party beneficiary claims,
and $39,119.47 interest on the promissory estoppel claim.
These appeals followed, with W & J and Ohio Casualty
challenging the judgments against them4 and Maccaferri challenging
the district court's failure to award compound interest on those
judgments.
II.
W & J first argues that the district court erred in failing to
grant its motion for judgment as a matter of law and thereby
dismiss Maccaferri's Miller Act claim. Specifically, W & J
contends that because Maccaferri failed to provide it with
appropriate notice of its claim for payment within the Act's
ninety-day period, see 40 U.S.C. § 270b(a), the district court
should have directed judgment against Maccaferri on this claim. We
agree that W & J never was appropriately notified of Maccaferri's
claim; accordingly, we reverse.
In reviewing denials of motions for judgment as a matter of
law, we apply the same standard applied by the district court,
asking whether "the facts and inferences point so strongly and
overwhelmingly in favor of one party that a reasonable jury could
not arrive at a contrary verdict." Johns v. Jarrard, 927 F.2d 551,
Maccaferri could only have recovered this amount once.
4
Because Ohio Casualty's liability is entirely contingent on
W & J's, it makes no independent arguments. Thus our discussion
will deal only with W & J's arguments and the determinative
question of its liability.
557 (11th Cir.1991). In applying that standard we view all the
evidence in the light most favorable to Maccaferri as non-movant.
We conclude that under that standard, the evidence was
insufficient to establish that Maccaferri satisfied the Miller
Act's notice requirement. Under the Miller Act, materialmen on
government construction projects who have no direct contractual
relation with the general contractor must, in order to establish a
right of action against the general contractor's payment bond, give
the general contractor sufficient written notice of their claims
within ninety days of the last day on which they supplied material
for the project. § 270b(a).5
Although courts have been somewhat lenient about enforcing
the Act's requirements concerning the method by which such notice
is given, e.g. Fleisher Engineering & Construction Co. v. United
States ex rel. Hallenbeck, 311 U.S. 15, 18-19, 61 S.Ct. 81, 83, 85
L.Ed. 12 (1940) (notice sufficient though not sent, as Act
requires, via registered mail), they have interpreted more rigidly
the Act's requirements for the contents of that notice: "[I]t is
crucial that the notice state a claim directly against the general
contractor, that the claim be stated with some specificity of
5
In relevant part, § 270b provides:
[A]ny person having direct contractual relationship
with a subcontractor but no contractual relationship
... with the [general] contractor ... shall have a
right of action upon the [general contractor's] payment
bond upon giving written notice to said [general]
contractor within ninety days from the date on which
such person ... supplied the last of the material for
which such claim is made, stating with substantial
accuracy the amount claimed and the name of the party
to whom the material was furnished.
amount due, and that the claim specify the subcontractor allegedly
in arrears." United States ex rel. Jinks Lumber Co. v. Federal
Ins. Co., 452 F.2d 485, 488 (5th Cir.1971). Put another way,
[T]he written notice and accompanying oral statements must
inform the general contractor, expressly or impliedly, that
the supplier is looking to the general contractor for payment
so that "it plainly appears that the nature and state of the
indebtedness was brought home to the general contractor."
United States ex rel. Kinlau Sheet Metal Works v. Great Am. Ins.
Co., 537 F.2d 222, 223 (5th Cir.1976) (quoting Houston Fire & Cas.
Ins. Co. v. United States ex rel. Trane Co., 217 F.2d 727, 730 (5th
Cir.1954)). This strictness as to the contents of the notice is
driven by the purpose of the notice requirement itself, which is to
protect the general contractor by fixing a date beyond which,
absent notice, it will not be liable for the subcontractor's debts.
Id. at 223-24 n. 1.
Here, the parties do not dispute the underlying facts; but
they disagree as to whether Maccaferri's actions within the
statutory period constitute adequate notice under the Act. The
parties agree that Maccaferri last supplied gabions to M & A on
June 9, 1987. Accordingly, it had until September 7 to notify W &
J of its claim.
Maccaferri points to several occurrences during the statutory
period and claims that each one, and all of them by their combined
force, put W & J on notice of its claim. Maccaferri first argues
that its June 24 collection letter to M & A, a copy of which it
sent to W & J, satisfied the notice requirement. The letter was
addressed to M & A and was to the point:
Our idea of a good collection letter is that it should be
brief, friendly, and successful. This letter is brief,
friendly, and it's [sic] success depends on you. The amount
past due is $132,226.16. Thank you.
We conclude that sending a copy of this letter to W & J was
insufficient under § 270b(a) to inform W & J that Maccaferri was
asserting a claim directly against it. Kinlau is instructive on
this point. In that case, a supplier mailed the general contractor
monthly statements showing the amount the subcontractor owed it.
It also eventually mailed the general contractor a copy of a
collection letter it had sent to the subcontractor. The district
court held that neither the monthly statements nor the copied
collection letter constituted sufficient notice to the general
contractor under § 270b(a) and on appeal, the Fifth Circuit
specifically affirmed this determination. Kinlau, 537 F.2d at 224.
Here, as in Kinlau, a collection letter addressed to the
subcontractor, M & A, though copied to general contractor W & J,
did not notify W & J that Maccaferri was looking to it for payment
of M & A's debt. Accordingly, the copied collection letter was
legally insufficient to satisfy the Act's notice requirement. See
id.
Maccaferri next claims that the joint-check arrangement
between W & J and M & A also constituted sufficient statutory
notice to W & J. Specifically, Maccaferri claims that three
different aspects of this arrangement—separately and
together—satisfy the notice requirement. First, it suggests that
the existence of the agreement itself put W & J on notice that
Maccaferri would be looking to it for its payments. Second,
Maccaferri claims that W & J's and M & A's modification of their
subcontract to permit the joint checks put W & J on notice. Third,
Maccaferri suggests that actual payment via joint check constituted
notice.
These arguments are meritless. First, as several courts have
specifically held, a joint-check arrangement between a general
contractor and its subcontractor does not by nature constitute
Miller Act notice to the general that an unpaid materialman is
making a specific claim for payment. United States ex rel. San
Joaquin Blocklite v. Lloyd E. Tull, Inc., 770 F.2d 862, 865 n. 4
(9th Cir.1985); Bowden v. United States ex rel. Malloy, 239 F.2d
572, 577 (9th Cir.1956); United States ex rel. Brothers Builders
Supply v. Old World Artisans, 702 F.Supp. 1561, 1567 (N.D.Ga.1988);
United States ex rel. Fordham v. P.W. Parker, Inc., 504 F.Supp.
1066, 1070 n. 3 (D.Md.1980).6 Accordingly, W & J's and M & A's
modification of their own subcontract to reflect the joint-check
agreement must also fail to supply the requisite notice.
Furthermore, the actual issuance of joint checks does not provide
any more notice than the joint-check arrangement itself. See
6
In United States ex rel. Light & Power Utilities Corp. v.
Liles Construction Co., 440 F.2d 474 (5th Cir.1971), the court
flirted with the joint-check question presented here in holding
that a joint-check arrangement does not create a direct contract
between the general and the materialman. This is significant,
because, under the Act, the existence of a direct contractual
relationship obviates any need for notice. Although Liles
certainly offers implicit support for the idea that a joint-check
arrangement does not constitute notice—otherwise, it would not
matter whether it created a direct contractual relationship or
not—it does not specifically address the notice requirement. See
also United States ex rel. State Electric Supply v. Hesselden
Constr. Co., 404 F.2d 774 (10th Cir.1968) (neither joint-check
arrangement itself nor the issuing of joint checks establishes
direct contract relationship between the general and the
materialman; no discussion of notice). Here, neither party
contends that the joint-check arrangement created a direct
contractual relationship between W & J and Maccaferri.
Bowden, 239 F.2d 572 (no notice despite issuance of joint checks).
Thus, no aspect of the joint-check arrangement provided W & J with
the required notice of Maccaferri's claim.
The final event that Maccaferri suggests could constitute
Miller Act notice is W & J's preparation of its monthly payment
estimate for July of 1987, in which it took account of the
delivered gabions. Maccaferri contends that W & J's preparation of
this estimate somehow suggests it had Miller Act notice of its
claims. We disagree, and conclude, as did the Eighth Circuit in
United States ex rel. American Radiator & Standard Sanitary Corp.
v. Northwestern Engineering Co., 122 F.2d 600, 603 (8th Cir.1941),
that a supplier's submission of invoices that ultimately were
incorporated into the general's payment estimate do not, without
more, constitute notice under § 270b(a). Because a general's mere
awareness of a materialman's outstanding charges against its
subcontractor does not automatically notify the general that the
materialman is looking to it for payment, we believe the Eighth
Circuit's position is sound. Accordingly, we conclude that W & J's
use of Maccaferri's invoices in compiling its payment estimate did
not somehow amount to notice of its claims under § 270b(a).
Finally, Maccaferri urges that the "confluence of
circumstances" present here—the collection letter, the joint check
arrangement and payment, and the payment estimate—all combine to at
least raise a jury question as to whether W & J received proper
notice. We disagree. What is missing here is exactly what §
270b(a) was meant to provide: a clear indication from the
materialman that it expects the general contractor to pay the
balance due on the subcontractor's debt. See Jinks Lumber, 452
F.2d at 488 (prescribing content of § 270b(a) notice).
Accordingly, we conclude that there is no evidence from which a
rational jury could have concluded that Maccaferri satisfied the
Miller Act's notice requirement, see Fed.R.Civ.P. 50(a). The
district court therefore erred in not granting W & J's motion for
judgment as a matter of law as to Maccaferri's Miller Act claim.
III.
W & J next argues that the district court erred in failing to
grant its Rule 50(a) motion as to Maccaferri's claim that it was a
third-party beneficiary of W & J's subcontracts with M & A and
Dynateria. Because we conclude that, as a matter of Florida law,
Maccaferri could not recover as a third-party beneficiary of either
contract, we agree with W & J and, accordingly, reverse as to that
claim.
As explained above, Maccaferri's third-party beneficiary
claims were based on two of W & J's subcontracts, those with M & A
and Dynateria. We will examine these separately.
A.
We look first at the W & J subcontract with M & A, which
requires that we consider both the original subcontract and the
joint-check agreement by which the parties partially modified the
original. Maccaferri argues that by virtue of the modification, W
& J assumed M & A's duty to pay Maccaferri directly for all
materials it delivered to the job site. But W & J argues that,
when read together, the two documents merely constitute a standard
joint-check agreement, whereby the parties allowed W & J to pay
that portion of M & A's charges attributable to Maccaferri's
gabions via a joint check made out to both Maccaferri and M & A's
escrow agent, Bowen.
We approach this question by looking first to basic rules of
contract construction. Under Florida law, as generally, where the
language of an agreement is unambiguous, the legal effect of that
language is a question of law and, as such, may be declared by the
court. Smith v. State Farm Mutual Automobile Ins. Co., 231 So.2d
193, 194 (Fla.1970); Orkin Exterm. Co. v. F.T.C., 849 F.2d 1354,
1360 (11th Cir.1988). But, where a contract is reasonably
susceptible to more than one interpretation, it is ambiguous and
its meaning is a question for the jury. Hoffman v. Terry, 397
So.2d 1184 (Fla.Dist.Ct.App.1981); Thunderbird Ltd. v. First Fed.
Sav. & Loan Ass'n, 908 F.2d 787, 790 (11th Cir.1990); Fabrica
Italiana Lavorazione Materie Organiche v. Kaiser Aluminum & Chem.
Corp., 684 F.2d 776, 780 (11th Cir.1982). The initial question
whether a contract is or is not ambiguous is itself one of law.
Orkin, 849 F.2d at 1360; see 10A Charles A. Wright et al., Federal
Practice & Procedure § 2730.1 at 279 (1983) (stating rule in
context of summary judgment). Here, we conclude that on the matter
at issue, the relevant documents are, as a matter of law,
unambiguous, hence should have been, and may now be interpreted as
a matter of law.
Section 3 of the original W & J/M & A subcontract defined
those parties' relationship with respect to W & J's payments on the
subcontract. It provided, inter alia, for W & J to make monthly
progress payments to M & A during the course of its performance.
But it expressly limited W & J's payment duties as follows:
Such [progress] payments shall not become due to [M & A] until
5 days after [W & J] receives payment for such work from the
Owner. If [W & J] receives payment from the Owner for less
than the full value of materials delivered to the site but not
yet incorporated into the work, the amount due to [M & A] on
account of such materials delivered to the site shall be
proportionately reduced.
Later, W & J and M & A partially modified this agreement "to allow
payment by [W & J] for materials delivered to and provided on the
Project by Maccaferri" by joint checks payable to Maccaferri and M
& A's escrow agent, Bowen. The joint-check modification
incorporated by reference the original subcontract; thus, we must
construe the two documents together, giving effect, where possible,
to all their provisions. See Guaranty Fin. Servs. v. Ryan, 928
F.2d 994, 999-1000 (11th Cir.1991) (" "An interpretation that gives
a reasonable meaning to all parts of the contract will be preferred
to one that leaves portions meaningless' ") (quoting United States
v. Johnson Controls, Inc., 713 F.2d 1541, 1555 (Fed.Cir.1983)).
In determining whether these documents, read together, are
ambiguous, we first ask whether they are "reasonably susceptible"
to Maccaferri's suggested reading—that by them W & J undertook an
independent obligation to pay it directly for materials it supplied
to M & A. We conclude that the documents cannot support such a
reading for several reasons. First, Maccaferri's reading conflicts
with other contract provisions that establish the parties' relative
duties. Under Section 11(c) of the main subcontract, M & A
expressly "obligates" itself "[t]o pay for all materials furnished
... under this subcontract." Similarly, Section 12 provides that
M & A
shall furnish to [W & J] releases of bond rights and lien
rights by persons who have furnished ... material ... in the
performance of this Subcontract, it being agreed that payment
of money otherwise due [M & A] need not be made by [W & J]
until such releases are furnished.
Thus the main subcontract clearly requires M & A, not W & J, to pay
materialmen such as Maccaferri, even allowing W & J to withhold
payment from M & A if it has not secured releases from those
materialmen. Thus reading the joint check agreement as Maccaferri
suggests would create a conflict between that agreement and these
sections of the contract; such a reading is strongly disfavored,
see Guaranty Financial, 928 F.2d at 1000 (" "nor should any
provision be construed as being in conflict with another unless no
other reasonable interpretation is possible' ") (quoting Johnson
Controls, 713 F.2d at 1555).
Maccaferri's reading would further alter W & J's obligations
under its subcontract with M & A by erasing, though only with
respect to Maccaferri, important limits on those obligations.
Specifically, under Section 3, which defines W & J's payment
obligations under the subcontract, W & J is only obligated to make
progress payments or final payments to M & A after it has itself
received the appropriate payment from the Corps. But Maccaferri's
suggested interpretation would read this limitation out of the
modified contract, at least with respect to itself, requiring W &
J to pay for it directly for materials whether or not the Corps
already has paid W & J for them.
Finally, although the parties could have used the joint-check
arrangement specifically to supersede conflicting provisions of the
subcontract, the text of the joint-check agreement contains no
language effecting such a change. Most critically, the joint-check
language itself is non-mandatory; it does not say, for example, "W
& J shall hereafter assume M & A's duty to pay all money owing to
Maccaferri for its deliveries to the project, all other provisions
of the Subcontract notwithstanding." It says rather that the
parties "agree to allow," not require, W & J to pay by joint check
for Maccaferri's charges. This is hardly language that signals a
thoroughgoing change in the parties' duties. Accordingly, we
conclude that these agreements do not support Maccaferri's
suggested reading. We further conclude that the only reasonable
reading of these documents, one which gives effect to all their
terms, is as follows: As W & J's duty to pay M & A accrued under
the subcontract—i.e., as it received the appropriate payments from
the government—it could pay for that portion of M & A's fee
attributable to Maccaferri's materials by joint check made out to
Maccaferri and Bowen.7
Having determined the meaning of the contract language in
question, we must now determine whether that language creates in
Maccaferri any presently-enforceable third-party rights against W
& J. We conclude that it does not.
7
We note that the parties acted on this agreement as it
applied to charges due in June of 1987. In that month W & J
presented to the government its payment estimate, which requested
payment for M & A's charges, $74,947.98 of which was attributable
to gabions Maccaferri had delivered to the site. The government
paid this request in full, and after receiving this payment, W &
J issued a check payable to Bowen and Maccaferri for this amount.
Bowen endorsed the check and forwarded it to Maccaferri. Thus,
as W & J's duty to pay M & A was activated by its own receipt of
funds from the government, W & J—as allowed by the joint-check
arrangement—paid a portion of those funds by joint check, the
proceeds of which ultimately were distributed to Maccaferri.
Under Florida law, a third party may enforce an agreement
between others only if it is an intended beneficiary, not an
incidental beneficiary, of that agreement. Metropolitan Life Ins.
Co. v. McCarson, 467 So.2d 277, 279 (Fla.1985). Furthermore, "[a]
party is an intended beneficiary only if the parties to the
contract clearly express, or the contract itself expresses, an
intent to primarily and directly benefit the third party." Caretta
Trucking, Inc. v. Cheoy Lee Shipyards, Ltd., 647 So.2d 1028, 1031
(Fla.Dist.Ct.App.1994). There can be no doubt that this agreement
did bestow some benefit on Maccaferri; by agreeing to allow
payments in the form of joint checks, the parties gave Maccaferri
greater assurance that it would actually receive whatever funds W
& J gave M & A to pay for Maccaferri's materials. Although it is
unclear whether this benefit was "primary" or "direct" enough under
Florida law to make Maccaferri a true third-party beneficiary of
this contract, we assume—only arguendo—that the agreement did
create a third-party beneficiary arrangement.
But as a third-party beneficiary of the W & J/M & A
subcontract, Maccaferri's rights against W & J not only sprang from
that agreement, but also were limited by its terms. To that
effect, Florida has announced the following rule: "It is clear
that a third-party beneficiary's right to enforce a contract cannot
"rise higher than the rights of the contracting party through whom
he claims.' " Maryland Casualty Co. v. Department of Gen. Servs.,
489 So.2d 54, 57 (Fla.Dist.Ct.App.1986) (quoting Crabtree v. Aetna
Casualty & Surety Co., 438 So.2d 102, 105 (Fla.Dist.Ct.App.1983));
see also 11 Fla.Jur.2d Contracts § 153, at 462 (1981) (stating this
general rule).
Based on this rule, W & J argued at trial and again on appeal
that Maccaferri could not, as a matter of law, recover against it
as a third party beneficiary. It points out that, as explained
above, M & A's right to receive progress payments for a period did
not accrue until after the government paid W & J the money due for
that period. Furthermore, the undisputed testimony at trial was
that, after paying W & J's June estimate, the government made no
more payments attributable to Maccaferri's gabions.8 In fact, the
government eventually back-charged W & J $33,000 for gabions
included in the June payment that never were incorporated into the
project. Thus, because the government never paid W & J for the
balance of the delivered gabions, W & J's duty to pay for
them—hence M & A's corresponding right to be paid for them—never
matured. As a result, Maccaferri's own right to look to W & J for
payment, which could be no greater than M & A's, see Maryland
8
When W & J prepared its July payment estimate, it
originally requested payment for the balance due Maccaferri.
According to the trial testimony of W & J's co-owner, William
Wilkinson, when W & J spoke with a Corps representative regarding
whether the Corps would pay for these gabions, which were on site
but had not been incorporated into the project, the
representative explained that the Corps would make no more
payments for such materials without first receiving proof that
Maccaferri already had been paid for them.
It appears that the Corps was concerned about releasing
any more funds for stored materials without being certain
that those materials would in fact be used in the project.
The Corps seems to have reasoned that if someone performing
the job had itself paid for the materials, it would be much
more likely to actually use them on the job. At any rate,
because neither M & A nor Dynateria ever paid Maccaferri for
these materials, Wilkinson explained, W & J never received a
payment notice that it could forward to the Corps. As a
result, the Corps never released funds to cover the gabions
that had been delivered, but not installed.
Casualty Co., 489 So.2d at 57, also never matured.
We agree with this analysis. Thus, to the extent that the W
& J/M & A subcontract, including the joint-check agreement, created
any third-party rights in Maccaferri, the limits those very
agreements placed on its rights prohibit Maccaferri from recovering
against W & J the unpaid balance due on the gabions it delivered.
B.
The other contract from which Maccaferri might have gained
third-party rights is the subcontract between W & J and Dynateria.
We conclude that this contract gave Maccaferri no rights against W
& J.
When M & A defaulted on its subcontract, W & J called on its
performance surety, Dynateria, to assume M & A's obligations. W &
J and Dynateria then entered into a written subcontract, under
which Dynateria essentially agreed to pick up where M & A left off.
W & J for its part promised to pay Dynateria for its work, but it
expressly conditioned its payment obligations as follows:
[W & J] agrees to pay [Dynateria] for the performance of this
Subcontract ... subject to payments previously made to [M & A]
for work under its Subcontract ..., and further subject to
reimbursement to [W & J] for labor costs advanced to [M & A]
in the sum of $13,150.00, and payment to Maccaferri Gabions,
Inc. in the sum of $57,226.00 for materials delivered to and
provided on the project for [M & A].
The parties, of course, disagree as to the meaning of this
language. According to Maccaferri, the agreement anticipates that
W & J itself will pay M & A's debt to Maccaferri, and Dynateria
will thereafter reimburse W & J for that payment. W & J, on the
other hand, reads it as requiring Dynateria to discharge M & A's
unfulfilled duties, including its duty to reimburse W & J for money
previously advanced to M & A, and its duty to pay the balance due
on Maccaferri's account. Again, we find that the document is
unambiguous and will not reasonably support Maccaferri's proposed
reading. See Smith, 231 So.2d at 194. Thus, we may, and do,
declare its meaning as a matter of law. See id.; Orkin, 848 F.2d
at 1360. Again, we are mindful of the need to give effect to the
entire agreement and to avoid an interpretation that creates an
unnecessary conflict between its terms. See Guaranty Financial,
928 F.2d at 1000.
We read the agreement as expressly conditioning W & J's duty
to pay Dynateria on the latter's assumption of M & A's duties. To
that effect, it reduces the amount that will be due Dynateria by
amounts already paid to M & A and further conditions payment on
Dynateria's performance of two specific tasks: (1) reimbursement
of funds W & J advanced to M & A, and (2) payment of the balance
due to Maccaferri on its materials contract with M & A. Both of
these are actions that, had M & A not defaulted, would have been
due from it, but are now expected from its performance surety,
Dynateria.
The factual background from which the agreement arose, as
expressed by its own preface, confirms our understanding that
Dynateria was taking over M & A's duties, including its duty to pay
Maccaferri. The agreement recites the fact that M & A was
originally hired as the subcontractor, that it took out a
performance bond covering its work, that it defaulted on the
contract, and that Dynateria now wishes to subcontract with W & J
for performance under the same prime contract under which M & A
began its work. Furthermore, Section 11(c) of the new subcontract,
like the identical one in the W & J/M & A subcontract, specifically
requires Dynateria to "pay for all materials furnished ... under
this Subcontract"; such materials would, of course, include
Maccaferri's gabions.
Accordingly, it is clear under the plain language of the
subcontract that Dynateria, who was M & A's surety, intended to
take over M & A's duties under that subcontract; one of those
duties, as specified in the agreement, was to pay the balance due
Maccaferri. As a result the only promise in this agreement that
could have given rise to third-party rights in Maccaferri came not
from W & J, but from Dynateria. Thus, assuming it had such rights,
the only party against whom Maccaferri could enforce them is
Dynateria.
Maccaferri, of course, suggests a different reading of the
agreement. Maccaferri reads Section 3 of the agreement as
conditioning W & J's payment duties on Dynateria's reimbursement of
W & J for (1) costs W & J has advanced to M & A—which is consistent
with our own reading—and (2) W & J's own payment to Maccaferri for
the delivered materials. Thus, Maccaferri's reading suggests that
W & J has itself assumed M & A's duty to pay Maccaferri, and will
not pay Dynateria until it reimburses W & J for those materials
payments. Such a reading, while not grammatically impossible,
risks invalidating the agreement as a whole and conflicts with the
other contract provisions mentioned above.
First, Maccaferri's reading would possibly invalidate the
contract by rendering W & J's payment promise illusory. Reading
the language as making W & J's payment duties "subject to
[Dynateria's] reimbursement for" W & J's future payment of
Maccaferri's fees would make W & J's own payment of Maccaferri a
condition precedent to its duty to pay Dynateria. Put differently,
if W & J never paid Maccaferri—which it had no independent legal
obligation to do—then Dynateria could never reimburse W & J for
that payment, thus never triggering W & J's duty to pay Dynateria
for its work. Such a "promise" by W & J, to pay Dynateria under
conditions it alone controls, would be illusory and would not
constitute consideration for Dynateria's counter-promise to
perform. See Pan-Am Tobacco Corp. v. Department of Corrections,
471 So.2d 4, 5 (Fla.1984) (contract is illusory and unenforceable
"[w]here one party retains for itself the option of fulfilling or
declining to fulfill its obligations under the contract");
Restatement (Second) of Contracts §§ 77, 2 cmt. e (promise
conditioned on non-mandatory performance of promisor himself is not
consideration).
In other words, such an interpretation would destroy the
mutuality of obligation under the contract. Under Florida law, as
generally, a contract clause should not be interpreted in such a
way as to destroy mutuality of obligation and, thereby, invalidate
the contract. See American Medical Int'l v. Scheller, 462 So.2d 1,
8 (Fla.Dist.Ct.App.1984) (refusing to adopt interpretation of
contract that would render it void for lack of mutuality). If
instead, the language is read—as we conclude it must be—as
requiring Dynateria itself to pay Maccaferri in order to trigger W
& J's payment duty, then W & J cannot control the occurrence of a
condition precedent to accrual of its payment duty, thus making the
parties' promises mutual and non-illusory.
We also note that finding in this subcontract an undertaking
by W & J itself to pay Maccaferri would be inconsistent with the
duties of the parties specified elsewhere in the contract. As
mentioned above, Section 11(c) of the subcontract requires
Dynateria, not W & J, to pay all materialmen; furthermore, Section
12 requires Dynateria to deliver its work to W & J "free from all
claims, encumbrances, or liens," including those from materialmen.
Thus because the contract otherwise requires Dynateria to pay all
materialmen, it would be strange for W & J itself to undertake such
a duty to one of Dynateria's primary materialmen, especially in the
rather indirect way Maccaferri argues it did.
Accordingly, we conclude that the only legally supportable
reading of Section 3 of the subcontract, in light of the entire
agreement, is that it obligated Dynateria, not W & J, to pay the
balance due Maccaferri under its materials contract with M & A.
Thus Maccaferri could not, as a possible third-party beneficiary of
Dynateria's promise, enforce that promise against W & J.
Because Maccaferri also cannot recover against W & J as an
intended beneficiary of the W & J/M & A subcontract, we conclude
that it was error to deny W & J's motion for judgment as a matter
of law on Maccaferri's third-party beneficiary claims.
IV.
W & J next claims that the district court erred in failing to
grant its Rule 50(a) motion with respect to Maccaferri's promissory
estoppel claim. Specifically, it contends that, because Maccaferri
introduced no evidence that W & J ever promised to complete the
Lake Okeechobee project using only gabions, Maccaferri cannot now
claim that it relied on such a non-existent promise in incurring
costs necessary to produce a large number of gabions for the
project. We agree with W & J that Maccaferri presented no evidence
of such a promise by W & J itself, hence conclude that the district
court erred in denying W & J's motion for judgment as a matter of
law on that claim.
Florida has adopted the familiar formulation of the
promissory estoppel rule stated in Section 90(1) of the Restatement
(Second) of Contracts:
A promise which the promisor should reasonably expect to
induce action or forbearance on the part of the promisee or a
third person and which does induce such action or forbearance
is binding if injustice can be avoided only by enforcing the
promise.
See W.R. Grace & Co. v. Geodata Servs., Inc., 547 So.2d 919, 924
(Fla.1989) (quoting § 90(1)). It is axiomatic that a plaintiff
cannot recover for reasonable, detrimental reliance on a promise
without proving that the defendant made the promise. See id.
(denying promissory estoppel claim for failure to sufficiently
prove existence of promise).
We have examined each item in the record to which Maccaferri
points as evidence of a promise by W & J to complete the entire
project using gabions and find no sufficient proof of any such
promise. First, Maccaferri claims that W & J made its promise to
use only gabions during preliminary contract negotiations between
it, W & J, and M & A. On this point, the testimonies of two
participants at these negotiations—William Wilkinson and George
Ragazzo, Maccaferri's special projects manager—were presented at
trial. Wilkinson admitted that the parties did negotiate regarding
the project and that M & A eventually quoted him a price for its
work. But Wilkinson never mentioned making any promise to
Maccaferri that the project would be completed with gabions only.
Interestingly, although Maccaferri's counsel examined Wilkinson
twice during the trial, he never questioned Wilkinson regarding
specific discussions at this meeting. Thus Wilkinson's testimony
does not disclose any promise on which Maccaferri could base its
estoppel claim.
Likewise, Ragazzo's testimony—which was read to the jury from
the transcript of an earlier proceeding—mentions no promises made
by W & J to Maccaferri. Although Ragazzo did testify that
"someone" promised him that the project would be completed entirely
with gabions, the only someone named in that portion of his
testimony is Dynateria. In the absence of proof that Dynateria was
somehow acting as W & J's agent when it made this statement, this
promise could not be found made by W & J itself. Thus Ragazzo's
testimony is no help to Maccaferri on this point.
Maccaferri further claims that a number of documents prove
that W & J promised to use its gabions for the entire project.9
9
The documents include: (1) the W & J/M & A subcontract,
which mentions gabions as one material that M & A could use in
its work; (2) M & A's purchase order for $574,304.64 worth of
gabions; (3) Maccaferri's letter informing W & J of the
specifications of the gabions it was supplying; (4) W & J's
certification to the Corps of Engineers that Maccaferri had
delivered $132,226.15 worth of gabions to the site; (5) the W &
J/M & A joint-check agreement; (6) Dynateria's letter to
Maccaferri promising to use the gabions to complete its work on
the project.
Although these documents reveal many things—that M & A contracted
with Maccaferri, that Maccaferri delivered gabions to the site,
that W & J knew the gabions had been delivered, etc.—they are
devoid of any reference to a promise by W & J on which Maccaferri
could have relied in amassing the materials needed to produce all
the gabions.
Because Maccaferri presented no evidence that W & J itself
ever promised to use only gabions in constructing the Lake
Okeechobee project, the district court erred in denying W & J's
motion for judgment as a matter of law on Maccaferri's promissory
estoppel claim.
V.
In view of our holdings that all of Maccaferri's claims should
have been dismissed as a matter of law, the parties' several claims
respecting the appropriate interest on the judgment now to be
vacated are moot.
VI.
For the reasons discussed above, we REVERSE the district
court's orders denying W & J's and Ohio Casualty's Rule 50(a)
motions and REMAND with directions to enter judgment in favor of W
& J and Ohio Casualty dismissing all of Maccaferri's claims.
SO ORDERED.