Aladdin Construction Company, Inc. v. John Hancock Mutual Life Insurance Co. ( 2004 )

IN THE SUPREME COURT OF MISSISSIPPI
NO. 2004-CA-00090-SCT
ALADDIN CONSTRUCTION COMPANY, INC.,
BRIGHTWAY SERVICES, INC., JONES SIGN
COMPANY, INC. AND ROBERT JOE HILL d/b/a
J-N-H CONSTRUCTION
v.
JOHN HANCOCK LIFE INSURANCE COMPANY
DATE OF JUDGMENT: 01/28/2004
TRIAL JUDGE: HON. JAYE A. BRADLEY
COURT FROM WHICH APPEALED: JACKSON COUNTY CHANCERY COURT
ATTORNEYS FOR APPELLANTS: JOSEPH Q. WHITE, JR.
JOHN G. McDONNELL
HENRY P. PATE
ATTORNEY FOR APPELLEE: RICK ANDREW LA TRACE
NATURE OF THE CASE: CIVIL - CONTRACT
DISPOSITION: REVERSED AND REMANDED - 10/27/2005
MOTION FOR REHEARING FILED:
MANDATE ISSUED:
EN BANC.
RANDOLPH, JUSTICE, FOR THE COURT:
¶1. In July of 1999, John Hancock Mutual Life Insurance Company (“John Hancock”),
owner of Singing River Mall, entered into a contract with McMo, Inc. (“McMo”) to provide
project management services, in addition to design and construction documentation services,
for a renovation of the mall. The contract provided that McMo’s role in the later stages shall
be construction leader, acting in the interests of John Hancock and directing the contractors
(the “Fabricator/Suppliers”). Thereafter, McMo entered into separate agreements with Aladdin
Construction Company, Brightway Services Inc., Jones Sign Company, and J-N-H Construction
(“Plaintiffs”), as contractors, whereas McMo is identified as the “construction manager,”
retained by “Owner” John Hancock. John Hancock routed all payments due the Plaintiffs
through McMo, up to the full contract price. However, McMo failed to pay either all or part
of what was owed to each Plaintiff. McMo subsequently filed for bankruptcy. Plaintiffs now
seek payment from John Hancock first arguing inter alia that McMo acted as an agent of John
Hancock, so as to bind John Hancock under agency law. John Hancock argues that McMo was
not its agent, but rather a general contractor and Plaintiffs, should be considered
subcontractors who, by failing to timely utilize Miss. Code Ann. § 85-7-181 (1999) (the “stop
notice” statute), are estopped from recovery against John Hancock.
FACTS
¶2. On July 30, 1999, John Hancock entered into a Mall Renovation Agreement with
McMo providing that McMo would engage in “design, construction documentation and project
management consulting services” at Singing River Mall. Specifically, McMo contractually
agreed to solicit and analyze bid proposals,1 make recommendations to John Hancock
therefrom,2 negotiate construction agreements with Fabricator/Suppliers [Plaintiffs] for John
1
“Solicit, Receive and Analyze Implementation Bids. We will solicit and receive bid
proposals from the pre-qualified firms. After our initial analysis for responsiveness, we
will forward copies of all bid proposals received to [John Hancock] together with our
comments.”
2
“Recommend Fabricator/Suppliers. ... [W]e will make our Fabricator/Supplier(s)
recommendation to [John Hancock].”
2
Hancock,3 route payments from John Hancock to Fabricator/Suppliers,4 and oversee the
supervision, control, and selection of third-party services.5 Throughout, McMo was to act in
the interests of John Hancock.6 The John Hancock-McMo contract specifically stated that,
“[n]either McMo nor its employees are employees of [John Hancock] for any purpose
whatsoever, but are Independent Contractors. McMo and its employees shall have sole control
over the manner and means of their performance under this agreement.” However, the
designation of McMo as not an employee, but rather an independent contractor, does not
foreclose the inquiry of whether McMo was also an agent vel non. A party can be both an
3
“Negotiate Construction Agreement(s). We will negotiate with the
Fabricator/Suppliers mutually selected by [John Hancock] and McMo for the execution of
agreements between the Fabricator/Suppliers and [John Hancock]. We will use an
agreement [John Hancock] has approved.”
4
“Manage Construction Funds and Pay Applications. We will receive, process and
approve all applications for payment submitted by Fabricator/Suppliers. We will submit a
summarized package to [John Hancock] on a monthly basis containing all approved pay
applications and necessary paperwork for check preparation by [John Hancock]. [John
Hancock] will route all payments through McMo.” (emphasis added).
5
Including two provisions which distinctly distinguish between the
Fabricator/Suppliers [Plaintiff-Appellants] and subcontractors. Those provisions are:
“Obtain and Monitor Certificates of Insurance. We will, on behalf of the
Client, set up systems to monitor the Fabricator/Suppliers (and their
subcontractors) compliance with the Client’s insurance requirements for the
project.” (emphasis added).
“Obtain and Verify Lien Waivers. We will set up systems for, and monitor,
the Fabricator/Suppliers’ submissions of lien waivers, including those of
subcontractors of any tier with lien rights.”
6
The Project Profile section of the John Hancock-McMo contract states,
“[s]imilarly, in the latter phases our role shall be construction leader, acting in the
interests of [John Hancock] ... .” (emphasis added).
3
independent contractor and an agent as the two roles are not mutually exclusive.7 The
“Recommend Fabricator/Supplier(s)” provision, the “Negotiate Construction Agreement(s)”
provision, and the “Manage Construction Funds and Pay Applications” provision of the John
Hancock-McMo contract are clearly atypical of the role of a general contractor.
Unquestionably, McMo was subject to John Hancock’s control as to its conduct. Moreover,
the John Hancock-McMo contract submitted that apart from life-safety issues, “[John
Hancock] shall not communicate directly with the Fabricator/Suppliers, and shall refer all
inquiries from any of them to McMo.” None of the Plaintiff-Appellants were signatories to
the Mall Renovation Agreement between John Hancock and McMo.
¶3. McMo then contracted with each Plaintiff to perform renovation work on Singing River
Mall. Each Plaintiff entered into a separate contract with McMo. These contracts specifically
refer to each Plaintiff as “Contractor,”8 John Hancock as “Owner,” and McMo as “Construction
Manager.” Each contract also defined “construction manager” as “McMo Incorporated,
retained by agreement with Owner to provide construction management services.” The
7
The Comment to the Restatement (Second) of Agency § 2 (1958) states:
An agent who is not a servant is, therefore, an independent contractor when
he contracts to act on account of the principal. ... Although an agent who
contracts to act and who is not a servant is therefore an independent
contractor, not all independent contractors are agents. Thus, one who
contracts for a stipulated price to build a house for another who reserves no
direction over the conduct of the work is an independent contractor; but he is
not an agent since he is not a fiduciary, has no power to make the one
employing him a party to a transaction, and is subject to no control as to his
conduct.
8
Not “Subcontractor.” Furthermore, Plaintiff Jones Sign signed a Contractor’s
Affidavit, not a Subcontractor’s Affidavit.
4
payment clause specifically provided for the Plaintiffs “to submit to Construction Manager its
monthly application for payment promptly on the date established by Construction Manager,
so as to enable Construction Manager to forward the application to Owner for payment.”
Essentially, the contract called for all services to be performed under the oversight, and to the
satisfaction, of both McMo and John Hancock.9 Despite the required approval of both McMo
and John Hancock, Plaintiffs were contractually required to direct all dealings to McMo.10
This requirement was particularly significant given the contractual presence of a “pay-when-
9
Article 9.13 states: “Construction Manager shall have the right to require, at any or
all progress meetings, whether called by Owner, Construction Manager or others, the
presence of Contractor, or a representative of Contractor authorized to act on its behalf.”
Article 3.1 states: “All services required hereunder shall be performed to the
reasonable satisfaction of Construction Manager and Owner ... Contractor shall perform
hereunder at the direction of the Construction Manager.”
10
Article 9.18 states: “Contractor understands and agrees that it shall not deal
directly with representatives of Owner, but shall handle all matters connected with this
Agreement, the Work, or the furnishing of labor or materials or payment therefore,
exclusively through Construction Manager unless otherwise directed in writing by
Construction Manager.”
5
paid” provision.11 Finally, the contract expressly required John Hancock to be named as one
of the insureds under applicable insurance policies.12
¶4. According to Tina Dubose, General Manager for the Singing River Mall, upon receipt
of the Plaintiffs’ pay applications, McMo would forward an invoice directly to John Hancock
and John Hancock would then review and approve the invoice for payment. Thereafter, John
Hancock would forward the McMo invoice to Dubose with instructions to draft a check drawn
on John Hancock’s Singing River Mall operating account, payable only to McMo.13
¶5. John Hancock forwarded to McMo all monies which were due to the Plaintiffs, and
monies due for McMo’s separate fees.14 Instead of making payments to Plaintiffs from the
payments received from John Hancock, McMo used the funds for other purposes. McMo
11
Article 5.5 states: “Notwithstanding any other provision of this Agreement,
Construction Manager shall be under no obligation to make payment to the Contractor
under any provision hereof except to the extent that Construction Manager has received
funds from Owner, payment by Owner being a condition precedent to payment of the
Contractor.” (emphasis added). As Article 9.18 required all dealings to be directed toward
McMo, then Plaintiffs were necessarily reliant upon McMo’s statements regarding
payment by John Hancock. Since McMo was only to pay Plaintiffs upon receipt of
payment from John Hancock under Article 5.5, the combination of Article 9.18 and Article
5.5 prohibited the Plaintiffs’ utilization of the stop-notice provisions of Miss. Code. Ann. §
85-7-181.
12
This provision, among others, establishes rights and benefits retained by John
Hancock under the contract, despite its absence as a signatory to the contract.
13
Not routed through McMo as stated in the John Hancock-McMo contract.
14
“The last payment by John Hancock made to McMo, Inc., for Vendor Funds Escrow
and [separate] fees [due] to McMo, Inc., for the Singing River Mall project was by check
No. 002994 dated July 12, 2000, in the amount of $149,400.00, drawn upon the Singing
River Mall Operating Account ... . In addition, McMo was paid $5,094.68 by check No.
003071 dated August 3, 2000 drawn upon the Singing River Mall Operating Account for
reimbursable expenses.”
6
failed to pay Plaintiffs, falsely insisting that it was waiting on payment from John Hancock, and
became insolvent soon after. With McMo insolvent, Plaintiffs sought recovery from John
Hancock arguing that McMo was an agent of John Hancock.15 Separate actions were filed in
both the Circuit Court of Jackson County and the Chancery Court of Jackson County. The
circuit court case was transferred to chancery court, and all cases were then consolidated.
¶6. The Jackson County Chancery Court concluded that there were no genuine issues of
material fact and granted John Hancock’s motion for summary judgment. The chancellor found
that McMo was acting as a general contractor under this Court’s definition found in Associated
Dealers Supply, Inc. v. Mississippi Roofing Supply, Inc., 589 So. 2d 1245, 1247-48 (Miss.
1991). In essence, the chancellor determined that McMo had total control over the manner
and means of performance under the contract, that no Plaintiffs had direct contact with John
Hancock, and that John Hancock paid McMo prior to proper notice of non-payment or the
filing of a mechanic’s lien by any Plaintiff. Furthermore, the chancellor held that there was
no agency relationship, explicit or implicit, between McMo and John Hancock.
ANALYSIS
¶7. In seeking a reversal and remand to the chancery court for a trial on the merits, the
Plaintiffs raises numerous issues on appeal. It appears that the relief sought is controlled by
two overriding, dispositive issues: (1) Was McMo a general contractor or an agent of John
15
Plaintiffs also alleged that John Hancock had been put on notice by Dubose that
certain contractors had not yet been paid. Specifically, Plaintiffs alleged that “[o]n July 28,
2000, McMo received the final payment. Sometime later, McMo told John Hancock that
McMo would not pay the Fabricator/Suppliers. No later than July 21, 2000, John Hancock
had known that any balance due to McMo was insufficient to pay known contractors’
claims.”
7
Hancock? If an agent of John Hancock, then McMo’s actions bind John Hancock regardless
of Plaintiffs failure to file a timely stop-payment notice under § 85-7-181. If a general
contractor, Plaintiffs are arguably mere subcontractors, and § 85-7-181 controls. Assuming
such, Plaintiffs failure to file a timely stop-payment notice would preclude recovery against
John Hancock. (2) Were Plaintiffs required to be in privity with John Hancock in order to
establish contractual obligations between the parties? If the answer is yes, then the absence
of privity between Plaintiffs and John Hancock in the John Hancock-McMo contract and the
lack of privity between John Hancock and Plaintiffs in the agreements between McMo and
Plaintiffs, renders the Plaintiffs contractual obligation argument null. If the answer is no,
however, then Plaintiffs may establish that John Hancock had an obligation to pay them under
a third-party beneficiary theory.
¶8. “This Court does not sit to redetermine questions of fact.” In re City of Horn Lake,
630 So. 2d 10, 19 (Miss. 1993) (citing Johnson v. Black, 469 So. 2d 88, 90 (Miss. 1985)).
However, a de novo standard of review is applied to questions of law, see G.B. “Boots” Smith
Construction Corp. v. Cobb, 860 So. 2d 774, 777 (Miss. 2003), legal conclusions, see
Andrew Jackson Life Insurance Co. v. Williams, 566 So. 2d 1172, 1183-84 (Miss. 1990),
and jurisdictional questions, see McCain Builders, Inc. v. Rescue Rooter, LLC, 797 So. 2d
952, 954 (Miss. 2001).
¶9. Under Rule 56(c) of the Mississippi Rules of Civil Procedure, “judgment sought shall
be rendered forthwith if the pleadings, depositions, answers to interrogatories and admissions
on file, together with the affidavits, if any, show that there is no genuine issue as to any
material fact and that the moving party is entitled to judgment as a matter of law.” Miss. R. Civ.
8
P. 56(c). “This Court employs a de novo standard in reviewing a trial court’s grant of summary
judgment.” Noxubee County Sch. Dist. v. United Nat’l Ins. Co., 883 So. 2d 1159, 1163
(Miss. 2004) (citing O’Neal Steel, Inc. v. Millette, 797 So. 2d 869, 872 (Miss. 2001)). “In
conducting the de novo review, this Court looks at all evidentiary matters, including admissions
in pleadings, answers to interrogatories, depositions, and affidavits.” Id. (citing Lee v. Golden
Triangle Planning & Dev. Dist., Inc., 797 So. 2d 845, 847 (Miss. 2001)). “This evidence
must be viewed in the light most favorable to the party against whom the motion for summary
judgment has been made.” Id. (citing Hartford Cas. Ins. Co. v. Halliburton Co., 826 So. 2d
1206, 1209 (Miss. 2001)). “If any triable issues of fact exist, the lower court’s decision to
grant summary judgment will be reversed. Otherwise, the decision is affirmed.” Mabus v. St.
James Episcopal Church, 884 So. 2d 747, 756 (Miss. 2004). However, to constitute a triable
issue of fact, the genuine dispute must regard a material issue of fact. See Leffler v. Sharp,
891 So. 2d 152, 156 (Miss. 2004). In other words, “the non-moving party cannot just sit back
and remain silent, but ... must rebut by producing significant probative evidence showing that
there are indeed genuine issues of material fact.” Murphree v. Fed. Ins. Co., 707 So. 2d 523,
529 (Miss. 1997) (citing Fruchter v. Lynch Oil Co., 522 So. 2d 195, 198-99 (Miss. 1988)).
I. Is McMo a general contractor or an agent of John Hancock?
A.
¶10. With respect to general principles of agency, “the line between an agent and an
independent contractor is not really a line but a ‘twilight zone,’ with the answer inevitably
9
revolving around the idea of control.” Kight v. Sheppard Bldg. Supply, Inc., 537 So. 2d 1355,
1359 (Miss. 1989) (citing Fruchter, 522 So. 2d at 199). According to this Court:
an agent is one who stands in the shoes of his principal; he is his principal’s alter
ego ... . An agent is one who acts for or in the place of another by authority from
him; one who undertakes to transact some business or manage some affairs for
another by [his] authority ... The most characteristic feature of an agent’s
employment is that he is employed primarily to bring about business relations
between his principal and third persons ... .
First Jackson Secs. Corp. v. B.F. Goodrich Co., 253 Miss. 519, 532, 176 So. 2d 272, 278
(1965) (quoting 2 C.J.S. Agency § 1c, at 1024 (1936)). See also Restatement (Third) of
Agency § 1 (Tentative Draft No. 2, 2001) (the key to the concept of “agency” is that the agent
acts on the principal’s behalf and is subject to the principal’s control).
¶11. While John Hancock alleges that McMo was a general contractor, Plaintiffs maintain
that McMo, as “construction manager,” was an agent of John Hancock. This Court has defined
a general contractor as “the party to a building contract who is charged with the total
construction and who enters into sub-contracts for such work as electrical, plumbing and the
like.” Associated Dealers, 589 So. 2d at 1247-48 (quoting Black’s Law Dictionary 349 &
621 (5th ed. 1983)). The term “construction manager” has not yet been defined in Mississippi.
Other courts have defined the term, however, finding that “[a] general contractor and a
construction manager are separate and distinct titles with different responsibilities and
different relationships to the parties to a construction project.” R&A Constr. Corp. v. Queens
Boulevard Extended Care Facility Corp., 290 A.D.2d 548, 549, 736 N.Y.S.2d 423 (N.Y. App.
Div. 2002). See also Baum v. Ciminelli-Cowper Co., 300 A.D.2d 1028, 1029, 755 N.Y.S.2d
138, 139-40 (N.Y. App. Div. 2002) (the existence of a distinction between “general
10
contractor” and “construction manager” is a question of fact for trial on the merits). While
“[t]here is no single, widely accepted definition of construction management,” Sagamore
Group, Inc. v. Comm’r of Transp., 614 A.2d 1255, 1259 (Conn. Ct. App. 1992), the Plaintiffs
cite the distinction drawn between a general contractor and a construction manager by the
Rhode Island Supreme Court in Brogno v. W&J Associates, Ltd., 698 A.2d 191, 194 (R.I.
1997). The Brogno Court found that “the [construction manager] acts as a mere agent for a
project’s owner and ... engages ‘trade contractors’ in his principal’s name to perform most or
all of the actual work.” Id. (quoting Bethlehem Rebar Indus., Inc. v. Fid. & Deposit Co., 582
A.2d 442 (R.I. 1990)). See also Sagamore Group, 614 A.2d at 1259 (“Today ... [a
construction manager] is more commonly a group, a company, or a partnership with two
paramount characteristics: construction know-how and management ability.”). On the other
hand, a general contractor “is in the chain of liability and ... hires ‘subcontractors’ in his own
name to perform work.” Brogno, 698 A.2d at 194 (quoting Bethlehem Rebar, 582 A.2d at
442). The Brogno Court also added that “the mere self-serving label of [construction manager]
or general contractor will not in and of itself determine a party’s legal status.” Id.
¶12. Plaintiffs’ argument essentially operates as follows: Plaintiffs were designated as
“Contractor[s]” in both the McMo-John Hancock contract and in their respective agreements
with McMo; McMo was referred to as a “construction manager” in each Plaintiff’s agreement
with McMo; and McMo inspected and approved Plaintiffs work product, then approved
Plaintiffs demands for payment by John Hancock who, by contract, was to route payments to
Plaintiffs through McMo. Therefore, the argument flows, McMo was acting not as a general
11
contractor, but rather as an agent of John Hancock. Such an agency relationship, Plaintiffs
argue, deductively creates a direct contractual relationship between Plaintiffs and John
Hancock, making the stop-notice limitations of § 85-7-181 inapplicable. Since agency is a
question of material fact, see Engle Acoustic & Tile, Inc. v. Grenfell, 223 So. 2d 613, 617
(Miss. 1969), it is unsuited to resolution by motion for summary judgment. See Murphree,
707 So. 2d at 529.
¶13. John Hancock responds by arguing that the use of the term “construction manager” does
not automatically create an agency relationship. Brogno, 698 A.2d at 194 (quoting Bethlehem
Rebar, 582 A.2d at 442). See also Kight, 537 So. 2d at 1359 (what parties to a contract
actually do provides the best evidence of what the contract required them to do). John
Hancock argues that McMo fits the Associated Dealers definition of a general contractor
because it had total responsibility and control over renovations at the mall and entered into the
contracts with Plaintiffs to supply labor and material for those renovations. Not only was
McMo expressly referred to as an “independent contractor” in the McMo-John Hancock
contract, but the nature of their performance reflected that intent. The contracts between
McMo and Plaintiffs were executed with McMo, with no signature line provided for John
Hancock; none of the contracts stated that McMo was acting as John Hancock’s agent; and
none of the Plaintiffs were privy to the contract between McMo and John Hancock. Moreover,
McMo had total control over the manner and means of performance under its contract with
John Hancock. As a result, John Hancock alleges that Plaintiffs are simply attempting to
create a disputed issue of material fact where none actually exists (i.e. the entire “construction
manager” question is a strawman). In essence, John Hancock argues that Plaintiffs failed to
12
assert their statutory rights as subcontractors under § 85-7-181 and are now seeking to hold
John Hancock responsible for the Plaintiffs’ own mistake. ¶14. “[W]hether an
agency has in fact been created is to be determined by the relations of the parties as they exist
under their agreements or acts, with the question being ultimately one of intention.” Engle,
223 So. 2d at 617-18 (emphasis added). The burden of proof as to the existence of an agency
relationship rests with the party asserting it. See Booker ex rel. Certain Underwriters at
Lloyd’s of London v. Pettey, 770 So. 2d 39, 45 (Miss. 2000). Thus, the burden of proof here
lies with the Plaintiffs.
¶15. The agency arguments of both parties focus upon the existence of a general, overarching
agency relationship between John Hancock and McMo. In the John Hancock-McMo contract,
agency is in no way mentioned16 and the agreement attempts to expressly establish the
independent contractor status of McMo.17 However, “[o]ur law recognizes that a person may
be an independent contractor as to certain work and a mere agent as to other work for the same
employer.” Kight, 537 So. 2d at 1359 (citing Carroll v. E.G. Lauglin & Sons, 220 Miss. 535,
540, 71 So. 2d 461, 463 (1954); Mills v. Jones’ Estate, 213 Miss. 680, 684, 56 So. 2d 488,
490 (1952)). The heart of the dispute, the lack of payment receipt by Plaintiffs, without doubt
involves an agency relationship between John Hancock and McMo.18 The “Manage
16
Although the Project Profile section of the John Hancock-McMo contract states,
“[s]imilarly, in the latter phases our role shall be construction leader, acting in the
interests of [John Hancock] ... .” (emphasis added).
17
But see n.7.
18
An “agent” is “[o]ne who is authorized to act for or in place of another; a
representative.” Black’s Law Dictionary 68 (8th ed. 2004). McMo arguably fits within this
13
Construction Funds and Pay Applications” provision of the John Hancock-McMo agreement
provides, “[McMo] will receive, process and approve all applications for payment submitted
by the Fabricator/Suppliers. We will submit a summarized package to [John Hancock] on a
monthly basis containing all approved pay applications and necessary paperwork for check
preparation by [John Hancock]. [John Hancock] will route all payments through McMo.”
(emphasis added). Although John Hancock artfully argues that McMo had sole control over
the manner and means of its performance, there is evidence that John Hancock contractually
obligated itself and factually controlled the manner of payment to the Plaintiffs.
¶16. Under general principles of agency law, “[o]ne who acts through another is in law
himself the actor.” Fruchter, 522 So. 2d at 199 (citing Slaughter v. Holsomback, 166 Miss.
643, 659, 147 So. 318, 322 (1933)). As stated in John Hancock’s Complaint filed in the
Circuit Court of Hillsborough County, Florida, against McMo for conversion, “[t]he Vendor
Funds Escrow payments were specific identifiable deposits of money belonging to [John
Hancock] which it entrusted to McMo for the specific purpose of paying the subcontractors
or suppliers who had furnished the labor or materials to the Project, as requested in each Pay
Application McMo submitted to [John Hancock].” (emphasis added). The existence of escrow
funds, specifically the Vendor Funds Escrow payments involved here, inherently presumes that
general definition of “agent” with respect to the payment of Plaintiffs by John Hancock.
Moreover, McMo arguably also corresponds with the Black’s Law Dictionary definition of
a “special agent” (“[a]n agent employed to conduct a particular transaction or to perform a
specified act”), id. at 70, a “managing agent” (“[a] person with general power involving the
exercise of judgment and discretion, as opposed to an ordinary agent who acts under the
direction and control of the principal”), id., an “escrow agent” (“[t]he third-party
depositary of an escrow”), id. at 69, and/or a “general agent” (“[a]n agent authorized to
transact all the principal’s business of a particular kind or in a particular place”). Id.
14
the party receiving escrow funds shall act as the escrow agent for proper disbursement, which
in the case sub judice, was payment to the Plaintiffs. McMo was unquestionably an escrow
agent for John Hancock here, as payments from the Vendor Funds Escrow account were
contractually to be routed through McMo for payment to the Fabricator/Supplier-Plaintiffs,
and John Hancock should be estopped from now seeking to presently disclaim such judicial
admission.
¶17. McMo was contractually referred to as a “construction manager” hired to perform
“design, construction documentation and project management consulting services” for John
Hancock. Indeed, the McMo statements to John Hancock are titled “Consulting Invoice(s)”
and the payments requested for Plaintiffs are separately listed from McMo’s service charges,
under “Service Description” as “Vendor Funds Escrow.”
¶18. A general contractor is “charged with the total construction,” Associated Dealers, 589
So. 2d at 1247, not mere “project management services.” A “manager” is “[a] person who
administers or supervises the affairs of a business, office, or other organization.” Black’s Law
Dictionary 979 (8th ed. 2004). This definition bears close resemblance to the definition of a
“special,” “managing,” or “general” agent.19 As a “construction manager,” McMo clearly fits
within such agency definitions. McMo was contractually required to recommend
Fabricator/Suppliers to John Hancock, to act as the conduit for routing payments to Plaintiffs,
and to act in the interests of John Hancock, all of which are genuine issues of contested
material facts regarding the existence of an agency relationship between John Hancock and
McMo.
19
See n.18.
15
¶19. Fundamentally, “an entity which acts as agent for an owner intending no profit from the
construction itself is not a contractor or master workman for the purposes of § 85-7-181.”
Associated Dealers, 589 So. 2d at 1249 (Lee, P.J., dissenting) (citing Graham v. Pugh, 417
So. 2d 536, 540 (Miss. 1982) (company is deemed an agent of owner as it was not to undertake
the work itself and was not to make any profit from the construction job itself)). Actual
construction was performed by the Plaintiffs. McMo sought no profit on the construction
performed by Plaintiffs, but rather acted as the conduit for transferring John Hancock’s
payments to Plaintiffs. The debt due the Plaintiffs was not extinguished by John Hancock’s
payments to McMo, only John Hancock’s debt to McMo was extinguished. McMo’s profit
was relegated to its own professional fees20 and potential cost savings realized in the
Construction Budget.21 If McMo’s role regarding the payment of Plaintiffs was not as a
contractor or master workman, but as an agent, then § 85-7-181 is altogether inapplicable.
B.
20
Consisting of design services in Phase 1, construction documentation services in
Phase 2, and project management services in Phase 3.
21
“Cost Savings Split. [John Hancock] and McMo will split evenly (50/50) any
savings realized in the Construction Budget for the construction of the Scope of Work
outline herein.”
16
¶20. Furthermore, McMo’s status as a general contractor is called into question by its failure
to obtain a contractor’s license in the state of Mississippi. Miss. Code Ann. § 31-3-15 states
that:
No contract for public or private projects shall be issued or awarded to
any contractor who did not have a current certificate of responsibility issued by
said board [the Mississippi Board of Public Contractors] at the time of the
submission of the bid, or a similar certificate issued by a similar board of
another state which recognizes certificates issued by said board. Any contract
issued or awarded in violation of this section shall be null and void.
Miss. Code Ann. § 31-3-15 (Rev. 2005). “[T]he certificate of responsibility serves to protect
owners from ‘incompetent, inexperienced, unlawful and fraudulent acts of contractors,’ by
making null and void any contracts for construction for which a certificate of responsibility
should have been issued.” Associated Dealers, 589 So. 2d at 1248 (citing Miss. Code Ann.
§§ 31-3-1, -2, & -15 (1972)).22 While Steven Mordue and Tom McCurdy of McMo both
claimed to have held a Florida specialty license for signs, no proof of licensing in Mississippi
was forthcoming. The record provides no insight into whether the Florida specialty license
was accompanied by a certificate of responsibility or whether such a certificate, if present,
would be recognized in Mississippi under § 31-3-15. Therefore, additional genuine issues of
material fact exist regarding the validity of McMo’s contracts with the Plaintiffs.
II. Privity of Contract
22
But see Timberton Golf, L.P. v. McCumber Constr., Inc., 788 F. Supp. 919, 925
(S.D. Miss. 1992) (in spite of § 31-3-15, Florida contractor’s failure to obtain Mississippi
certificate of responsibility did not void an arbitration agreement contained within a
contract to develop a golf course).
17
¶21. John Hancock asserts that it was not privy to the contracts between McMo and
Plaintiffs and Plaintiffs were not privy to the John Hancock-McMo contract. However, privity
is not required to establish contractual obligations. A third party can enforce a contractual
provision made primarily for his benefit even if he was not a party to the contract. See Burns
v. Washington Sav., 251 Miss. 789, 171 So. 2d 322, 324 (1965). As to such third-party
beneficiaries,
the controlling principle of law ... is that one not a party to a contract can sue for
a breach thereof only when the condition which is alleged to have been broken
was placed in the contract for his direct benefit. A mere incidental beneficiary
acquires by virtue of the contractual obligation no right against the promisor or
the promisee.
Hartford Accident & Indem. Co. v. Hewes, 190 Miss. 225, 234, 199 So. 93, 95 (1940). See
also Yazoo & M.V.R.R. v. Sideboard, 161 Miss. 4, 133 So. 669, 671 (1931) (“(1) When the
terms of the contract are expressly broad enough to include the third party either by name [or]
as one of a specified class, and (2) the said third party was evidently within the intent of the
terms so used, the said third party will be within its benefits, if (3) the promisee had, in fact,
a substantial and articulate interest in the welfare of the said third party in respect to the
subject of the contract.”). In other words,
for the third person beneficiary to have a cause of action, the contracts between
the original parties must have been entered into for his benefit, or at least such
benefit must be the direct result of the performance within the contemplation
of the parties as shown by its terms. There must have been a legal obligation or
duty on the part of the promisee to such third person beneficiary. ... connect[ing]
the beneficiary with the contract.
18
Burns, 171 So. 2d at 325. In making this determination, the “primary purpose of [the]
provisions,” Chic Creations of Bonita Lakes Mall v. Doleac Elec. Co., 791 So. 2d 254, 259
(Miss. Ct. App. 2000), ought to be considered.
A.
¶22. The “Negotiate Construction Agreement(s)” provision expressly states that, “[McMo]
will negotiate with the Fabricator/Suppliers mutually selected by [John Hancock] and McMo
for the execution of agreements between the Fabricator/Suppliers and [John Hancock].”
(emphasis added). Plaintiffs are directly referenced under the terms of the “Negotiate
Construction Agreement(s)” provision as the “Fabricator/Suppliers.” Clearly, each Plaintiff
is a party whose performance was contemplated.
B.
¶23. Under the “Manage Construction Funds and Pay Applications” provision, John Hancock
assumed the obligation to pay Plaintiffs, albeit through McMo. John Hancock has admitted
as much, by its declaration in the Florida proceeding against McMo, supra. Therefore,
Plaintiffs’ status vel non as third-party beneficiaries of the John Hancock-McMo agreement
is a contested issue of material fact.
CONCLUSION
¶24. Only if McMo was a general contractor and Plaintiffs were subcontractors, would they
be required to utilize the protections afforded by § 85-7-181, and if they did not employ such
protection, the burden of this unfortunate loss would be borne by them. However, if they
establish the existence of an agency relationship between John Hancock and McMo, their
status as third-party beneficiaries of the John Hancock-McMo contract, McMo’s lack of
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general contractor status, or the invalidity of the McMo contract, then John Hancock’s
payments to McMo would not extinguish its debt to the Plaintiffs.
¶25. As Plaintiffs can arguably establish any of the aforementioned, this Court holds that the
chancellor erred in granting John Hancock’s motion for summary judgment. Viewing the
record in the light most favorable to Plaintiffs, triable issues of fact exist regarding all of these
issues. Therefore, the trial court’s judgment is reversed, and this case is remanded to the trial
court for a trial on the merits consistent with this opinion.
¶26. REVERSED AND REMANDED.
SMITH, C.J., WALLER AND COBB, P.JJ., EASLEY, CARLSON AND GRAVES,
JJ., CONCUR. DICKINSON, J., CONCURS IN PART AND DISSENTS IN PART
WITHOUT SEPARATE WRITTEN OPINION. DIAZ, J., NOT PARTICIPATING.
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