period from March through December, 1978, Defendant Bedwell was paid approximately $ 535,000.00 for work performed by Plaintiff." Id. at para 13. However, the affidavit continues, Bedwell "without cause, persistently and repeatedly withheld progress payments due to Plaintiff for electrical work satisfactorily completed by it." Id. at para 14.
Defendants argue that plaintiff has not demonstrated that Bedwell paid plaintiff less than the percentage amount which had been approved by the Navy. This contention, however, conflicts with Shreves's statement that Bedwell unjustifiably withheld some of plaintiff's share of the $ 535,000 that the Navy paid to Bedwell, thereby breaching the contract.
If Shreves's figure is correct,
Bedwell did not conform to the payment schedule and thus materially breached the contract. Community Science Technology, supra. There is evidence in the record that the Navy only paid Bedwell $ 418,476.50 for work performed by plaintiff. Defendant's Answers and Objections to Plaintiff's First Set of Interrogatories, No. 38.
Such conflicting evidence emphasizes the existence of a controverted material fact. In light of this substantial controversy, granting defendants' motion for summary judgment would be inappropriate.
Article 10 of the subcontract provides in relevant part: "Subcontractor agrees that if Subcontractor ... becomes bankrupt or insolvent or goes into liquidation, either voluntarily or involuntarily, or ... makes a general assignment for the benefit of creditors or otherwise acknowledges insolvency" the contractor shall have the right to terminate the subcontract. The term "insolvency" is not otherwise defined in the subcontract.
Pennsylvania law defines insolvency in two ways: "In the bankruptcy sense, the test of insolvency is purely mathematical and results when the aggregate value of the debtor's property is less than his liabilities. Insolvency in the equity sense, on the other hand, is the inability to meet obligations as they mature." Larrimer v. Feeney, 411 Pa. 604, 607, 192 A.2d 351, 353 (1963) (citation omitted). See Mellon Bank, N.A. v. Aetna Business Credit, 619 F.2d 1001, 1008 (3d Cir. 1980). The litigants agree that at the time plaintiff filed its Petition for Reorganization it was insolvent in the equity sense only. However, plaintiff argues that the contracting parties limited the term, "insolvency," to its bankruptcy sense. Yet, the clause "if subcontractor ... becomes bankrupt or insolvent" (emphasis added) differentiates between "bankruptcy" and "insolvency)." This clearly demonstrates that insolvency is a criterion separate from bankruptcy for determining whether plaintiff has defaulted. Therefore "insolvency" must be read in its "equity sense."
Were I to agree with plaintiff, the additional words, "or insolvent," would be unnecessary surplusage. I will not torture the plain meaning of this subcontract to reach such an interpretation. "In a written contract the intent of parties is the writing itself and when the words are clear and unambiguous the intent is to be determined only from the express language of the agreement." Robert F. Felte, Inc. v. White, 451 Pa. 137, 143, 302 A.2d 347, 351 (1973) (citing cases).
I therefore hold that, assuming Bedwell did not breach the contract earlier, see pages 1327-1328 supra, plaintiff defaulted on December 1, 1978, pursuant to Article 10(e) of the subcontract, when it filed its Petition for Reorganization; moreover, since the petition states that plaintiff was "unable to pay its debts as they mature," see Motion of Defendants, Curtis T. Bedwell & Sons, Inc. and United States Fidelity and Guaranty Company, for Summary Judgment at Exhibit G, plaintiff also defaulted pursuant to Article 10(g), for by filing the petition it thereby "acknowledged" its insolvency.
This result is especially compelling in light of a contractor's extraordinary obligations under the Miller Act, for
any person having direct contractual relationship with a subcontractor but no contractual relationship express or implied with a contractor furnishing said payment bond shall have a right of action upon the said payment bond upon giving written notice to said contractor within ninety days from the date on which such person did or performed the last of the labor or furnished or supplied the last of the material for which such claim is made....
40 U.S.C. § 270b(a).
Therefore plaintiff's inability to pay its debts as they matured its insolvency in the equity sense precipitated the rights of its unpaid materialmen and suppliers to look to Bedwell and its surety, United States Fidelity and Guaranty Co., for payment. If Bedwell were unable to terminate the contract under such circumstances, it would be forced to sit idly by and watch its potential liability to plaintiff's suppliers increase without any way to protect itself short of breaching the subcontract.
Plaintiff contends further that even if insolvency is interpreted in its equity sense, there are genuine issues of material fact as to whether Bedwell waived any right it may have had to declare plaintiff in default. Plaintiff promptly informed Bedwell after it filed a Petition for Arrangement on December 1, 1978. However, plaintiff continued to work on the project, with Bedwell's approval, until December 27, 1978, when Bedwell sent its termination letter. Affidavit of Robert L. Shreves, para 24. The issue, then, is whether Bedwell impliedly waived
its contractual right when it allowed plaintiff to continue its performance on the project for twenty-seven days after it filed its Petition for Arrangement.
A waiver is the intentional relinquishment of a known right. Brown v. Pittsburgh, 409 Pa. 357, 360, 186 A.2d 399, 401 (1962) (citing cases). "The doctrine of implied waiver in Pennsylvania applies only to situations involving circumstances equivalent to an estoppel, and the person claiming the waiver to prevail must show that he was misled and prejudiced thereby." Id. at 361, 186 A.2d at 401 (emphasis in original) (citing cases). Moreover, the burden of showing such an implied waiver rests on plaintiff. Steinman v. LaCharty Hotels Co., 355 Pa. 444, 447, 50 A.2d 297, 298 (1947); Yellow Cab Co. of Philadelphia v. Carpol Realty Co., 221 Pa.Super. 132, 136, 289 A.2d 241, 243 (1972).
Plaintiff has not carried this burden. Its answer to the defendants' motion for summary judgment did not proffer any facts suggesting that it was misled to its detriment because of the twenty-seven day delay. The fact that plaintiff continued to work on the project until December 27, 1978 did not prejudice it because there is no evidence showing that during this intervening period it contracted to purchase additional material, supplies, or tools. Indeed, there is no evidence that it entered into contracts of any sort during this time for instance, with laborers or with sub-subcontractors.
There will inevitably be some delay between the time the contractor learns of the insolvency of its subcontractor and the time when the contractor informs the subcontractor that it has terminated the contract. Absent facts demonstrating that plaintiff was harmed by this delay, however, I conclude that Bedwell did not impliedly waive its contractual right to terminate the contract.
I shall deny defendants' motion for summary judgment. However, assuming Bedwell did not breach the subcontract, see pages 1327-1328 supra, I hold that Bedwell lawfully terminated its subcontract with plaintiff on December 27, 1978.
IV. Plaintiff's Cross-Motion for Summary Judgment
A. Preliminary Statement
Plaintiff argues that the terms of the subcontract preclude Bedwell from recovery.
Article 10 of the subcontract states in pertinent part:
Subcontractor agrees that if Subcontractor (defaults) ... contractor shall have the right, after 48 hours written notice to Subcontractor or to anyone representing Subcontractor in the performance of Work, to terminate this Subcontract in whole or in part, and Contractor may itself or through others provide any labor or materials necessary to complete the job and deduct the cost thereof from any money due, or thereafter to become due, to Subcontractor under this Subcontract. Contractor shall also have the right to enter on the premises, take possession of all materials, tools, and appliances thereon for the purpose of completing Work, and this Subcontract shall be construed as an assignment by Subcontractor to Contractor of said item. Subcontractor agrees to abide by Contractor's action and that such termination shall not be made the basis of any legal action to secure additional compensation or damages.