Eleventh Circuit reverses grant of summary judgment in favor of contractor on basis of releases executed by subcontractor.

Allgood Electric Co. v. Martin K. Eby Constr. Co.,
85 F.3d 1547, 1996 U.S. App. LEXIS 15252 (11th Cir. June 25, 1996)

Under Georgia law, subcontractor’s release of all claims against property on which project was located did not operate to release claims against contractor, nor was contractor entitled to benefit of release in which contractor was not mentioned by name.

Plaintiff Allgood Electric Company (“Allgood”) was the electrical subcontractor on a prison project for the Georgia Building Authority (“GBA”). Defendant Martin K. Eby Construction Company, Inc. (“Eby”) was the general contractor. Allgood sought to recover increased costs allegedly caused by Eby’s failure to coordinate various aspects of the project. Allgood also claimed entitlement to retainage.

In defense, Eby moved for summary judgment, asserting that certain provisions in a completion certificate signed by Allgood, as well as provisions in twenty-four applications for payment signed by Allgood, operated as a release of Allgood’s asserted claims. Eby also claimed that Allgood’s claims had been waived by virtue of Allgood’s failure to comply with certain contractual notice requirements.

The district court agreed that Allgood had released all of its claims and granted summary judgment in favor of Eby. Because it found that the claims had been released, the court did not reach Eby’s contentions regarding notice. Allgood appealled this decision to the Eleventh Circuit.

On appeal, the court first addressed the lower court’s finding that the completion certificate executed by Allgood operated as a release of Allgood’s claims against Eby. The court noted that under Georgia law, a release is only effective as to parties identified in the release by proper name or such other description as leaves no doubt as to the identity of the party released. Since the completion certificate only released claims against the “Owner” of the property, and did not mention Eby by name, the Eleventh Circuit held that the district court had erred in finding that it operated to release claims against Eby.

The court next addressed Eby’s claim that certain language in the payment applications barred Allgood’s claims. Again relying on Georgia precedent, the court found that Allgood’s relinquishment of “all claim or rights of lien . . . upon the premises” only released lien claims against the property; it did not release causes of action against Eby under the subcontract.

However, the court found that Allgood’s claims might be barred by a provision in the payment applications which read as follows:

I hereby certify that the work performed and the materials supplied to date, as shown on the above, represent the actual value of accomplishment under the terms of the contract (and all authorized changes thereto) between the undersigned and Martin K. Eby Construction Co., Inc., relating to the above referenced project.

The court held that by this provision, “Allgood seems to have certified that the amount billed represented the actual value of its performance for the periods of time indicated . . . . This would seem to bar recovery for any additional costs allegedly incurred during the course of construction for the periods of time represented by the invoices.”

The court remanded for the district court to consider the effect of this provision. It also ordered the lower court to address Eby’s contention that Allgood’s claims were barred by the notice provisions of the prime and subcontracts. Finally, the court ordered the lower court to examine Allgood’s claim that it had complied with the notice provisions by sending letters to Eby complaining of delays, or, in the alternative, that it was unable to calculate the amount of its demand until after the completion of construction, and thus was excused from providing notice prior to that time.

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