Statler Concrete & Supply Co. v. ADP Concrete Services, Inc. et al

Filing 37

OPINION; signed by Judge Robert Holmes Bell (Judge Robert Holmes Bell, kcb)

UNITED STATES DISTRICT COURT F O R THE WESTERN DISTRICT OF MICHIGAN S O U T H E R N DIVISION

U N IT E D STATES OF AMERICA for the use of STATLER CONCRETE & SUPPLY CO., a Michigan Corporation, P la in tif f , F ile No. 5:05-CV-147 v. H O N . ROBERT HOLMES BELL A D P CONCRETE SERVICES, INC., et al., D e f e n d a n ts . / OPINION In this action Plaintiff Statler Concrete Company ("Statler") seeks payment for m a te ria ls supplied on a federal construction project known as the Total Army School System P ro j e c t (the "Project"). Plaintiff seeks recovery from Defendant Travelers Casualty and S u re ty Company of America ("Travelers") pursuant to a payment bond issued by Travelers to J.O.A. Construction Co., Inc. ("JOA"), pursuant to the Miller Act, 40 U.S.C. § 3131. T h is matter is currently before the Court on Travelers' renewed motion for summary ju d gm e n t. (Dkt. No. 33, Travelers' Mot. for SJ.) JOA was the general contractor on the Project. JOA hired Dynamic Construction S e rvic e s , Inc. ("Dynamic") as a subcontractor to perform concrete work. Dynamic, in turn, h ire d ADP Concrete Services, Inc. ("ADP"). ADP then entered into a contract with Statler to supply materials for the Project. Prior to delivering materials, Statler, ADP and Dynamic

e n te re d into a joint check agreement, by which they agreed that all payments for the project w o u ld be payable by joint check to Statler and ADP. (Dkt. No. 33, Ex. A.) This Court held in its previous opinion that the joint check agreement between D yn a m ic and Statler was not sufficient to establish the type of direct contractual relationship n e c e ss a ry to support a claim on a Miller Act Payment Bond. (Dkt. No. 17, 2/28/06 Op. at 7 .) However, in light of Statler's evidence that Dynamic orally agreed to pay Statler for m a te rials supplied, and the fact that discovery had not yet been conducted, the Court d e te rm in e d that there was a genuine issue of fact as to whether Dynamic and Statler had a d irec t contractual relationship. (Id. at 8.) Travelers has now renewed its motion for summary judgment based upon its c o n te n tio n that there is no admissible evidence to support Plaintiff's assertion that there was a direct contractual relationship between Dynamic and Statler. Travelers contends that P la in tif f 's evidence that Dynamic orally promised to pay Statler, and not ADP, for the m aterials that Statler provided to the Project (Dkt. No. 14, Pl.'s Resp., Ex. 3, Statler Aff. ¶¶ 7 -8 ), directly conflicts with the language of the written joint check agreement and is in a d m is s ib le under the parol evidence rule. Under Michigan law "[p]arol evidence of c o n tra c t negotiations, or of prior or contemporaneous agreements that contradict or vary the w ritte n contract, is not admissible to vary the terms of a contract which is clear and u na m b igu ou s." UAW-GM Human Res. Ctr. v. KSL Recreation Corp., 579 N.W.2d 411, 414

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(M ich . App. 1998) (quoting Schmude Oil Co. v. Omar Operating Co., 458 N.W.2d 659, 663 (M ic h . App. 1990)). Plaintiff opposes Traveler's renewed motion for summary judgment. (Dkt. No. 34, P l.'s Br. in Opp.) Plaintiff contends that the parol evidence rule does not bar extrinsic e vid e n c e of the oral agreement because the written agreement was not a fully integrated a gre e m e n t, and because Dynamic continued to promise to pay Statler after the written a gre e m e n t was signed. 1. Integrated Agreement A prerequisite to the application of the parol evidence rule is a finding that the parties in te n d e d the written agreement to be a complete and integrated expression of their a gre e m e n t. NAG Enter., Inc. v. All State Indus., Inc., 285 N.W.2d 770, 771 (Mich. 1979). T h e parol evidence rule does not preclude admission of extrinsic evidence showing "that the p a rtie s did not `integrate' their agreement, or assent to it as the final embodiment of their u nd e rs ta n d i n g , or that the agreement was only `partially integrated' because essential e l e m e n ts were not reduced to writing." Id. at 772 (citations omitted). Extrinsic evidence is admissible on the threshold question of whether the written instrument is an "integrated" a gre e m e n t unless the agreement contains an explicit merger or integration clause. UAW-GM H u m a n Res. Ctr., 579 N.W.2d at 418.

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T h e joint check agreement does not contain an explicit merger or integration clause. A c c o rd in gly, extrinsic evidence is admissible on the threshold question of whether the in s trum e n t is an integrated agreement. P la in tif f contends that Holly Statler's first affidavit is sufficient to create a genuine iss u e of material fact on the issue of whether the joint check agreement is fully integrated b e c a us e it contains evidence of an oral promise to pay that is not found in the joint check a gre e m e n t. Plaintiff's argument is not persuasive. The joint check agreement provides that "all p a ym e n t s" on the Project will be made with a "joint check" payable to Statler and ADP. H o lly Statler states in her affidavit that prior to supplying materials for the Project she was give n a joint check agreement which provided that Dynamic would pay by joint check p ayab le to Statler and ADP and that she was also told orally by Dynamic that Dynamic w o u ld pay Statler and not ADP for the materials that Statler provided to the Project. (Holly S ta tle r Aff. ¶¶ 7-8.) Plaintiff is attempting to use Holly Statler's affidavit not to supplement o r add terms to the joint check agreement, but to introduce oral promises that were allegedly m a d e contemporaneously with the joint check agreement that directly contradict the joint c h e c k agreement. This is the very kind of information the parol evidence rule is designed to exclude. "The practical justification for the [parol evidence] rule lies in the stability that it gives to written contracts; for otherwise either party might avoid his obligation by te stif yin g that a contemporaneous oral agreement released him from the duties that he had

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s im u lta n e o u sly assumed in writing." Hamade v. Sunoco Inc. (R & M), 721 N.W.2d 233, 2 47 (Mich. App. 2006) (quoting 4 Williston, Contracts, § 631). The Court concludes that th e extrinsic evidence presented is not sufficient to create an issue of fact as to whether the jo in t check agreement was an integrated agreement. 2. Promises Made After the Written Agreement P la in tiff contends, in the alternative, that even if the joint check agreement was fully in te gra te d , the joint check agreement was modified by Dynamic's subsequent promises to p a y Statler directly. In support of this assertion Plaintiff has presented a supplemental a f f id a vit from Holly Statler. According to Holly Statler, in all of her conversations with J O A and Dynamic it was her "understanding that Dynamic would be paying Statler for its m a te ria ls either directly or by joint check." (H. Statler Suppl. Aff. ¶ 2.) She also states that in February 3, 2005, Dynamic assured her that it would pay Statler directly for the remaining m o n ie s owed Statler for materials supplied to the Project. (H. Statler Suppl. Aff. ¶ 4.) The parol evidence rule precludes evidence of "contract negotiations, or of prior or c o n te m p o r a n e o u s agreements that contradict or vary the written contract." UAW-GM H u m a n Res. Ctr., 579 N.W.2d at 414 (quoting Schmude Oil Co., 458 N.W.2d at 663) (e m p h a s is added). The parol evidence rule does not bar the introduction of subsequent a gre e m e n ts which may operate as a modification or waiver of the parties' signed agreement. R a s c h v. Nat'l Steel Corp., 177 N.W.2d 428, 429-30 (Mich. App. 1970).

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T h e evidence Statler has submitted is not sufficient to create an issue of fact as to w h e th e r the joint check agreement was modified by subsequent agreements. With respect to the time period that Statler was supplying ADP with materials, Statler has not presented e vid e n c e that Dynamic made any specific agreement to modify the joint check agreement. S he has merely indicated that based upon conversations with JOA and Dynamic it was her " u n d e rs ta n d in g" that Dynamic would pay Statler for its materials, and that such payment w o u ld be made "either directly or by joint check." Statler's ambiguous understanding of the s o urc e and the terms of the alleged modification is not sufficient to create an issue of fact a s to modification. The evidence is undisputed that Dynamic made all payments on the P ro je c t to ADP and Statler with joint checks. (Dkt. No. 34, Pl.'s Br. in Opp. 2.) Moreover, S ta tle r has not presented evidence that Dynamic ever paid Statler directly, or that it took any o th e r action that was inconsistent with its obligations under the joint check agreement. It was not until after Dynamic terminated its contract with ADP in October 2004 that S ta tle r contends that Dynamic specifically advised that it would pay Statler directly. (H. S ta tl e r Supp. Aff. ¶¶ 3-4.) It is undisputed that Statler contracted with ADP to supply m a te ria ls and that it was ADP's obligation to pay for those materials. Any promise by D yn a m ic to pay for those materials would have been a promise to pay the debts of another. T h e Michigan Statute of Frauds requires such an agreement to be in writing: In the following cases an agreement, contract, or promise is void unless that a gre e m e n t, contract, or promise, or a note or memorandum of the agreement, c o n tra c t, or promise is in writing and signed with an authorized signature by th e party to be charged with the agreement, contract, or promise:
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.... (b ) A special promise to answer for the debt, default, or misdoings of another p e rs o n . M ic h . Comp. Laws § 566.132(1) . Plaintiff has presented no evidence of any writing signed b y Dynamic relating to a promise to pay ADP's debts that would satisfy the Michigan S ta tu te of Frauds. Plaintiff's evidence of an oral promise by Dynamic to pay ADP's debts w o u ld accordingly be unenforceable under Michigan law. The Court concludes that Plaintiff has not come forward with evidence of a direct c o n tra c t between ADP and Dynamic sufficient to support a claim on a Miller Act Payment B o n d . The Court will accordingly grant Travelers' renewed motion for summary judgment a n d enter judgment in its favor. Although Plaintiff may not be entitled to relief under the M ille r Act Payment Bond, Plaintiff is not without a remedy. Plaintiff has obtained a default ju d gm e n t against ADP and Plaintiff has chosen not to pursue any claims against Dynamic in this action. An order and partial judgment consistent with this opinion will be entered.

D A TED :

September 25, 2008

/s/ Robert Holmes Bell ROBERT HOLMES BELL U N IT E D STATES DISTRICT JUDGE

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