equipment for several months, at an aggregate cost of nearly $ 50,000.
Plaintiff would have a claim based on each cognizable agreement to rent individual items of equipment (if indeed plaintiff supplied the equipment as a "rental" and not under some other understanding, such as a business partner's contribution). Thus, plaintiff's notice of claims is timely only insofar as it is based on the individual agreements to rent those items of equipment -- the Case 580, Case 855, and 950B Loader -- last furnished or supplied on or after June 8, 1989.
D. Whether plaintiff may be equitably estopped
Defendants' contend, last, that plaintiff should be equitably estopped from presenting its entire claim.
The doctrine of equitable estoppel is designed "to ensure fairness in the relationship between parties." Konstantinidis v. Chen, 200 U.S. App. D.C. 69, 626 F.2d 933, 937 (D.C. Cir. 1980). It "'precludes a litigant from asserting a claim or defense that might otherwise be available to him against another party who has detrimentally altered his position in reliance on the former's misrepresentation or failure to disclose some material facts.'" United States for the use of Krupp Steel Prod., Inc. v. Aetna Ins. Co., 923 F.2d 1521, 1526 (11th Cir. 1991) (citation omitted) (Miller Act case).
Estoppel requires the presence of three elements: "(1) words, acts, conduct or acquiescence causing another to believe in the existence of a certain state of things; (2) wilfulness or negligence with regard to the acts, conduct or acquiescence; and (3) detrimental reliance by the other party upon the state of things so indicated." Id. Because the prime contractor must take reasonable steps to protect itself from a possible misapplication of funds, its detrimental reliance must be reasonable. Id.
Applying the doctrine to this setting, the court concludes that a supplier may not knowingly or intentionally take steps to conceal from the prime contractor the extent of a subcontractor's delinquent obligations, thereby induce the prime contractor to make a significant advance to allow the project to continue, then later demand payment on the concealed obligation. To the extent the prime contractor suffers a loss due to the deception, the supplier's claim should be reduced. See United States for the use and benefit of Gulfport Piping Co. v. Monaco and Sons, Inc., 336 F.2d 636, 639 (4th Cir. 1964) ("When the Miller Act claimant by his own agreement or representation induces the general contractor to make payment to another, he is estopped from subsequent assertion of his claim to the extent that it is duplicating.").
Defendants submit evidence showing that DeFilippis was very close to (if not a principal of) Double-R and that, from the outset, he failed to inform Crow of Double-R's increasing obligations to plaintiff. But the evidence, with all ambiguities resolved in favor of plaintiff, does not show that prior to May 25, 1989 DeFilippis misled (or knew that Double-R had misled) Crow with respect to these obligations.
DeFilippis's professed ignorance and innocence plainly ended by May 25, 1989. At a meeting on that date, by his words, actions, and omissions, DeFilippis led Crow to believe that Double-R did not owe plaintiff a substantial sum. DeFilippis's assertion that -- if directly asked how much Double-R owed plaintiff he would have answered truthfully -- is insufficient to rebut the sworn statement of Crow's counsel that Crow attempted fully to discover Double-R's obligations under the subcontracts and that DeFilippis said nothing about the debt owed to plaintiff.
In reasonable reliance on representations by Sisto and DeFilippis, Crow agreed to advance $ 400,000 for payment of current obligations. Crow credibly says it would not have advanced the $ 400,000 had it known of the large sum owed plaintiff. Had that obligation been revealed, Crow would have immediately recognized that plaintiff had been submitting fraudulent monthly requisitions. Crow hardly would have entrusted funds to a dishonest subcontractor.
The extent of the loss is not clear from the papers. Plaintiff may be correct that some of the $ 400,000 advance was used to pay creditors who, otherwise, would have had a claim on the Miller Act bond. Defendants report (and plaintiff does not dispute) that $ 168,655 of this $ 400,000 was transferred to an escrow account in National Westminster Bank and that the ultimate disposition is not known.
The court holds that, without regard to the issue of timely notice, plaintiff's claim of $ 279,500.41 should be reduced to the extent that defendants suffered a loss attributable to the $ 400,000 advance.
To the extent this issue requires the court to determine how Double-R disbursed the $ 400,000 advance, the court will consider argument that the burden of production on that question should be shifted to plaintiff, notwithstanding the usual rule that a party asserting an affirmative defense bears the burdens of production and proof. Such a partial shifting of the burden may be justified here because plaintiff appears to be in a strong position, given its intimate relationship with Double-R, to determine how Double-R spent the advance.
Plaintiff's summary judgment motion is denied.
Defendants' summary judgment motion is granted in part. Plaintiff may recover the lower of (1) claims based on individual rental agreements, if any, for specific items of equipment last furnished or supplied on or after June 8, 1989, or (2) plaintiff's total claim less the amount of defendants' injury attributable to Crow's decision to advance $ 400,000 to Double-R.
Dated: Brooklyn, New York
July 15, 1993
Eugene H. Nickerson, U.S.D.J.
© 1992-2004 VersusLaw Inc.