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UNITED STATES EX REL. ROBERT DEFILIPPIS CRANE SERV

July 15, 1993

UNITED STATES OF AMERICA, for the use and benefit of ROBERT DeFILIPPIS CRANE SERVICE, INC., Plaintiff,
v.
WILLIAM L. CROW CONSTRUCTION COMPANY, CROW CONSTRUCTION COMPANY and/or CROW CONSTRUCTION CO., INC. and THE AETNA CASUALTY & SURETY COMPANY, Defendants.


NICKERSON


The opinion of the court was delivered by: EUGENE H. NICKERSON

NICKERSON, District Judge:

 Use plaintiff, Robert DeFilippis Crane Service, Inc. ("plaintiff"), brought this action under the Miller Act, 40 U.S.C. ยงยง 270a-e, against defendants William L. Crow Construction Company ("Crow"), the prime contractor at two construction projects at the United States Naval Station, Staten Island, New York, and The Aetna Casualty & Surety Company ("Aetna"). Aetna is the surety on payment bonds for the benefit of persons supplying labor and materials to subcontractors at the two projects.

 Plaintiff seeks payment of $ 279,500.41 under the bonds, saying that it has not been paid for equipment it rented to the Double-R Construction Corporation ("Double-R") (now bankrupt), a subcontractor performing work on the projects between March 1988 and June 1989.

 Plaintiff moves and defendants cross-move for summary judgment.

 I.

 The disputed and undisputed facts necessary to understand these motions are as follows.

 A.

 Crow was the prime contractor on two projects, known familiarly as "SIMA" and "Utilities," at the Staten Island naval station. Aetna provided separate payment bonds for each project. Double-R was a subcontractor. Plaintiff, having no contractual relations with Crow, provided equipment to Double-R for use at the projects.

 1. The relationship between Double-R and plaintiff

 The nature of the agreement between Double-R and plaintiff for the rental of equipment is in dispute. Plaintiff says that it "rented" the equipment to Double-R between March 23, 1988 and June 23, 1989 under a verbal agreement and periodically sent invoices to Double-R totalling $ 279,500.41.

 For nearly a year and a half Double-R made no payment to plaintiff for this allegedly rented equipment. Robert DeFilippis, the sole proprietor of plaintiff, says Robert Sisto, the principal of Double-R, assured him that Crow owed a large retainage to Double-R and that Double-R would pay plaintiff when Double-R was paid. DeFilippis also says he was not worried because he was assured of payment under the Miller Act bond if Double-R defaulted.

 Defendants question whether plaintiff "rented" the equipment to Double-R. They point out that after Double-R filed for protection under the bankruptcy laws on May 22, 1989, the bankruptcy trustee found no invoices or written requests for payment from plaintiff. But the trustee did find invoices from almost every other purported creditor. After Double-R petitioned under Chapter 11, plaintiff claimed it was owed $ 1.62 million for equipment rentals.

 Defendants suggest that DeFilippis was Sisto's silent partner in Double-R, providing equipment in exchange for equity, and that once Double-R filed for bankruptcy protection, DeFilippis recharacterized the transaction as equipment rental.

 Defendants say, for example, that on at least one occasion Sisto represented to an other subcontractor, in front of DeFilippis, that Sisto and DeFilippis were the two "R"'s of "Double-R." Plaintiff urges the court to treat evidence of this as hearsay. But such testimony would be significant because DeFilippis did not contradict Sisto. Defendants also provide evidence tending to show that Plaintiff's bookkeeper reported that DeFilippis was the Vice President of Double-R.

 DeFilippis concedes that (1) on several occasions he used his personal credit to enable Double-R to obtain surety bonds on projects for which plaintiff would provide heavy equipment; (2) he allowed Double-R to incur a $ 1.62 million debt for "rental" of plaintiff's equipment without once making a written request for payment; and (3) he loaned Sisto money when Sisto became sick and fell into arrears on his mortgage after Double-R's bankruptcy.

 DeFilippis contends that he had only a personal and business relationship with Sisto but no direct or indirect interest in Double-R.

 2. Representations by Double-R and DeFilippis to Crow

 During the term of the SIMA and Utilities subcontracts Double-R submitted to Crow six monthly requisition forms listing, under oath, the names of all suppliers and amounts due. At no time did Double-R suggest that plaintiff had rented equipment or was owed any funds.

 On May 25, 1989, three days after Double-R filed its bankruptcy petition, a meeting was held at Crow's offices to determine whether Double-R could function sufficiently to complete various subcontracts. The meeting was attended by:

 
Bernard Monahan (vice president of Crow)
 
Edwin Efros, Esq. (counsel for Crow)
 
James P. Pagano (bankruptcy attorney for Double-R)
 
Ben Lewis, Esq. (corporate counsel for Double-R)
 
Robert Sisto (principal of Double-R)
 
Bill Kiecka (employee of Double-R)
 
Robert DeFilippis

 Efros describes the meeting as follows. Sisto and DeFilippis arrived together. One of them signed both names on the attendance sheet. The two took turns assuring others present that Double-R could complete the work with some financial help from Crow on current billings. DeFilippis, by his conduct and statements, gave the impression that he was a partner or financial backer of Double-R. One of the pressing subjects of discussion was the extent of Double-R's existing obligations to subcontractors and suppliers. A number of these obligations were discussed, but at no time did DeFilippis reveal or suggest that Double-R owed plaintiff a large sum, indeed more than $ 250,000, for equipment provided for the projects. DeFilippis and Sisto promised personally to provide $ 50,000 in cash to pay then-due obligations. In reliance on these representations Crow agreed to advance $ 400,000 to Double-R for current expenses.

 DeFilippis provides a somewhat different account of the meeting. He says that he did not hold himself out as representing Double-R, never offered to provide $ 50,000 for then-due obligations, and attended solely to learn whether Crow would make a payment to Double-R, enabling it to pay plaintiff for rent owed. He does not deny that Crow sought to determine the extent of Double-R's obligations on these projects and that he sat silent while Double-R's obligations, but not the debt owed plaintiff, were discussed. He asserts that had he been directly asked how much he was owed by Double-R, he would have answered truthfully and that, in the absence of a direct inquiry, he was free to remain silent while Sisto misrepresented Double-R's financial position.

 3. Events after the May 25, 1989 meeting

 After the meeting, Crow advanced $ 400,000 to a special Double-R account. Plaintiff says it continued to provide equipment to Double-R during June 1989 for use on both the SIMA and Utilities projects. Defendants dispute this. On June 23, 1989 Sisto was hospitalized for a "psychotic depressive" disorder; Double-R withdrew from the project; and DeFilippis thereafter acted as spokesperson for the company.

 Crow contracted with Tacoma Construction Company, headed by a former senior supervisor of Double-R and partly owned by DeFilippis, to complete the work originally subcontracted to Double-R. Defendants have not been able to ...


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