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Glass Artistry Architectural Glass & Metal, LLC v. Western Surety Co.

January 27, 2010

GLASS ARTISTRY ARCHITECTURAL GLASS & METAL, LLC
v.
WESTERN SURETY COMPANY



The opinion of the court was delivered by: McLaughlin, J.

MEMORANDUM

This is a suit by a subcontractor against a surety to recover amounts due for material and labor provided for the construction of a building. The subcontractor, Glass Artistry Architectural Glass & Metal, LLC ("Glass Artistry"), has moved for summary judgment. The surety, Western Surety Company ("Western"), opposes summary judgment and argues that Glass Artistry is not entitled to the amounts it claims until the general contractor receives full payment from the building's owner. Western asserts that the building's owner has withheld full payment to the general contractor on the ground that work on the building, including work done by Glass Artistry, was defective. Western has filed a motion to stay the case pending the outcome of a dispute resolution process between the general contractor and the owner of the building.

For the reasons that follow, the Court will deny Glass Artistry's motion for summary judgment and grant Western's motion for a stay.

I. FACTUAL BACKGROUND

This suit concerns the construction of the West Whiteland Township Municipal Building. The owner of the building, West Whiteland Township ("West Whiteland"), contracted for the construction of the exterior of the building with Magnum, Inc. ("Magnum"), the general contractor. Magnum, in turn, entered into a subcontract with the plaintiff, Glass Artistry, to provide labor, material, and equipment to complete certain work on the project, principally glass and glazing for the building's doors and windows. As part of its contract with West Whiteland, Magnum was required to obtain performance and payment bonds, which would, among other things, guarantee payment to any subcontractors providing labor and materials to the project. Magnum obtained these bonds from the defendant Western. Compl. and Answ. ¶¶ 5-6.

A. The Terms of the Surety Bond

The surety bond at issue here states that Magnum and Western jointly and severally bind themselves to pay for labor, materials, and equipment furnished for the performance of the contract between Magnum and West Whiteland to build the township building. The bond states that the contract between Magnum and West Whiteland, including all contract documents and changes thereto, is incorporated into the bond by reference. Bond, Ex. A. to Pl. S.J. Br., Art. 1, Art. 15.2. The bond provides that the obligations owed to claimants under the bond are ended if Magnum "promptly makes payment, directly or indirectly, for all sums due." Bond Art. 3. A "claimant" is defined to include an individual or entity having a direct contract with Magnum to furnish labor, materials, or equipment for use in the performance of the contract. Bond Art. 15.1

The bond states that Western will have no obligation to any claimant until the claimant has given notice to Western of the amount of its claims. Once a claimant gives notice, the bond obligates Western to send the claimant an answer within 45 days, stating the amount that is undisputed and the basis for challenging any amounts that are disputed. The bond then obligates Western to pay any undisputed amounts. The bond also provides that any suit by a claimant under the bond must be commenced within one year of providing notice. Art. 4, 6, 11.

B. Glass Artistry's Evidence Concerning an Oral Contract Between It and Magnum

The subcontract between Magnum and Glass Artistry was entered into in May or June 2006. The parties disagree as to the specifics of this contract. Glass Artistry has submitted the affidavit of its president, Jerome Martucci, who states that Glass Artistry entered into an oral contract with Magnum to perform work on the building and that the total approved scope of work under this contract was $934,743. Martucci avers that Glass Artistry completed all its work on the project but has received only $756,477 from Magnum, leaving an unpaid amount of $178,266. Martucci states that Glass Artistry never received any notice from Magnum stating that West Whiteland was withholding money from Magnum because of defective work by Glass Artistry. Martucci Aff., Ex. B to Pl. S.J. Br., at ¶¶ 2-8.

Glass Artistry has also proffered an application and certificate for payment submitted by it to West Whiteland for work done through April 31 [sic], 2008. Ex. C to Pl. S.J. Br. This application states that Glass Artistry's "Original Contract Sum" was $880,000, but that this was increased by change orders to a "Contract Sum to Date" of $934,743. The application states that 10% of this amount or $93,474.30 is to be withheld as retainage,*fn1 leaving $841,269.70 as the total earned and payable to Glass Artistry. The application requests payment of $84,832.70, which combined with the amounts already requested, would equal the $841,269.70 total that the application states is earned and payable to Glass Artistry. The application contains the certification of the project's architect that the work in the application has been completed and that its quality is in accordance with the contract documents and that Glass Artistry is entitled to payment.

Glass Artistry has also proffered a similar application and certificate of payment by Magnum to West Whiteland for the period through May 30, 2008.*fn2 Ex. D to Pl. S.J. Br. Like the Glass Artistry application, Magnum's application requests a payment which, combined with the amounts already requested by Magnum, would equal the total contract amount, less 10% retainage. The schedule attached to this certification shows work on doors and windows which would have been within Glass Artistry's scope of work. The application contains the certification of the architect that all of the work in the application has been performed, that its quality is in accordance with the contract standards, and that the application should be paid. Glass Artistry has also proffered a payment voucher showing that the amount requested in this application was paid by West Whiteland to Magnum. Ex. D to Pl. S.J. Br.

C. Western's Evidence Concerning a Written Contract Between Glass Artistry and Magnum

Western disputes that the subcontract between Magnum and Glass Artistry was an oral contract. It attaches to its opposition to summary judgment a written subcontract between Magnum and Glass Artistry for the work on the West Whiteland Municipal Building dated June 24, 2006. Subcontract, Ex. 1.A. to Def. S.J. Opp. The subcontract was never signed by Glass Artistry, but Western contends that it nonetheless became binding. Western has submitted the affidavit of Magnum's project manager, Raymond Rongione, who states that, in July 2006, he provided Glass Artistry with a copy of the proposed subcontract, along with a schedule of prices, a computer disk of prevailing wage rates, the architectural drawings for the project, and a copy of the contract between Magnum and West Whiteland. Rongione states that Glass Artistry started work on the building in February 2007 and at no time prior or after that time did it reject any terms of the proposed subcontract or return the subcontract to Magnum as unacceptable. Rongione Aff., Ex. 1 to Def. S.J. Opp., at ¶¶ 2-7.

The written subcontract states that Magnum agrees to pay Glass Artistry $880,000 for performance of its work, "subject to additions and deductions for changes as may be agreed upon" in writing. It provides that partial payments will be made for work completed, approved, and paid for by the owner and that 10% "retainage will be withheld from each payment and for 90 days after final acceptance by the Owner." The subcontract makes payment to Magnum from West Whiteland a "condition precedent" to Magnum's obligation to Glass Artistry. Subcontract Art. 4.

Under the subcontract, Magnum's payments to Glass Artistry are to be made upon West Whiteland's payment of Magnum's contractors certificates "so that at all times [Glass Artistry's] total payments shall be as large in proportion to the value of the work done by [Glass Artistry] as the total amount certified to [Magnum] is to the value of the work done by [Magnum]." Magnum also agrees in the subcontract to pay Glass Artistry "on demand" for "work or materials as far as executed and fixed in place, less the retained percentage, at the time the certificate should issue." Subcontract Art. 5(f), 5(h).

The written subcontract expressly incorporates the general construction contract between West Whiteland and Magnum, including any supplements, addenda, and architectural drawings. It also provides that both Magnum and Glass Artistry agree to be bound by the terms of the West Whiteland/Magnum contract "as far as applicable to this subcontract" and that Glass Artistry agrees to assume toward Magnum all of the responsibilities that Magnum assumes to West Whiteland under the terms of the general contract. Glass Artistry also agrees to "indemnify and hold harmless" Magnum from claims and damages, including attorneys' fees, to the extent caused by Glass Artistry's negligence. Subcontract Art. 1, 5(a), 5(d)(1).

The subcontract does not contain an arbitration clause, but it allows Glass Artistry, in certain situations, to "be present and to submit evidence" in arbitration that may take place under the contract between Magnum and West Whiteland. The subcontract also states that Magnum and Glass Artistry agree that "[i]n the matter of arbitration their rights and obligations and all procedure[s] shall be analogous to those set forth in this contract." Subcontract Art. 5(j), 5(k).

D. Western's Evidence Concerning Notice to Glass Artistry of Potential Claims by West Whiteland

As mentioned above, the affidavit of Glass Artistry's president, Jerome Martucci, states that Glass Artistry never received any notice from Magnum that West Whiteland was withholding money from Magnum because of Glass Artistry's defective work. Western disputes this and attaches to its opposition copies of notices sent to Glass Artistry from Magnum complaining of defective work.

Faxed letters sent to Glass Artistry from Magnum project manager Raymond Rongione on January 22, February 1, February 12, February 19, and March 6, 2008, all complain that Glass Artistry has not satisfactorily completed its work, noting inadequate manpower and incomplete or defective work. The February 12 and 19 and March 6 notices all warn that Glass Artistry will be responsible "for ...


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