Wiseman: CDA not entitled to $804,049 in damages

Superior Court Associate Judge David A. Wiseman has ruled that the Commonwealth Development Authority is not entitled to $804,049 in damages in connection with the lawsuit over the construction of Tinian High School.

Wiseman said he finds no evidence which was presented during trial which supports a finding that CDA, as third party beneficiary, suffered damages as a result of the breach of the Public School System-Guerrero Brothers Inc. agreement.

Wiseman discussed such finding in his order on Friday that granted PSS’ motion for judgment as a matter of law.

In 2001, Century Insurance Co. Ltd. (CIC) sued PSS for alleged breach of contract involving the Tinian High School construction project. The insurance company also named as co-defendant GBI, a contractor who was awarded $3.8 million with the project.

CIC alleged that PSS refused to pay the company that had assumed the completion of the school project.

PSS then filed a counter-claim against CIC, CDA, and GBI.

During the first phase of the jury trial in the case in Aug. 2008, GBI was found liable to CIC for $170,960 in damages.

In the second phase of the jury trial also last August, GBI and CDA claimed they suffered damages as a result of the breach of a 2001 settlement agreement between PSS and CIC.

The jury also concluded that CIC did not breach its contract to provide interim payments to GBI and did not unreasonably delay in providing performance and payment bonds to GBI. The jury also found that CDA was entitled $804,049 in damages from PSS as a result of PSS’ breach of the GBI-PSS agreement.

PSS then renewed its motion for judgment as a matter of law to overturn the jury’s decision to award CDA damages.

PSS, though counsel Karen Klaver, argued that surety law and subrogation control this matter. CIC, through counsel Steven Pixley, maintained that as the bonding company in the Tinian High School Project, subrogation and surety law dictate that their rights are superior to any claims by CDA.

CDA, through counsel Ben Salas, argued that CIC failed to perfect its security interest pursuant to the Uniform Commercial Code and therefore CIC’s interest is subordinate to CDA’s right as a lien creditor.

CDA was the lien holder and a guarantor of loans made from the Bank of Saipan to GBI.

In his decision issued Friday, Wiseman said a court may grant a renewed motion for judgment as a matter of law if there is no legally sufficient evidentiary basis for the verdict.

In this case, Wiseman said CDA had no direct claim to the remaining funds under the laws of surety and subrogation.

“After numerous extensions and increasing loans, GBI spectacularly failed to complete the Project. At which time, CIC, as the surety, was required to complete the Project. CIC satisfactorily did so and was certainly entitled to payment for the completion,” he said.

The judge said PSS reached an agreement, equal to the amount of remaining funds, which satisfied their debt to CIC as the party who finished the construction.

“The Phase 1 Funds were intended for construction of the Project and it is clear that CIC was entitled to those funds,” Wiseman said.

Wiseman said CIC’s failure to perfect its security interest is inconsequential.

CIC, the judge stressed, had a greater legal and equitable claim to the remaining funds than CDA.

He noted that the only plausible legal conclusion the jury could have reached in awarding CDA $804,049 was finding that CDA, as a third party beneficiary, was harmed by PSS’s breach of the PSS-GBI agreement.

Wiseman said PSS breach of contract had no impact on CDA’s damages on their ability to recover their losses from GBI.

“While CDA was no doubt harmed (in the form of accrued interest) by GBI’s failure to pay their owed monies to the Bank of Saipan, this harm is not a result of the breach of the PSS-GBI agreement,” he said.

Consequently, the judge said, CDA cannot now week to recover their losses from PSS.