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MANDATO ASSOCIATES INC v. SEPULVEDA MASONRY

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Court of Appeals of Georgia.

MANDATO & ASSOCIATES, INC. v. SEPULVEDA MASONRY et al.

No. A10A0751.

Decided: April 06, 2010

W. Jason Pettus, Atlanta, Sean Lamar Gill, for Appellant. Neal C. Scott, William E. Turnipseed, Atlanta, Michael A. Penn, Alpharetta, Robert Alan Luskin, Glenn Eric Cooper, Norcross, Kevin Alan Spainhour, Mark Joseph Boyd, for Appellee.

In this negligent construction action, Builders Insurance Group in the name of its insured (a general contractor) appeals the partial summary judgment granted to four subcontractors of the general contractor, which subcontractors Builders1 had sued to recover the $325,000 it had paid in settlement of a prior claim brought against the general contractor. Builders had alleged that the four subcontractors (Sepulveda Masonry, K & K Installers, Inc., Steve Crain, and Jasper Lumber Company) had negligently performed their subcontracts in constructing a residence for a homeowner, with which homeowner Builders had settled a prior claim asserted against the general contractor for faulty construction. The trial court granted partial summary judgment against Builders and in favor of the four subcontractors,2 concluding that Builders had failed to obtain the written consent of its insured to the prior settlement, and that therefore, under OCGA § 33-7-12(a), Builders had no right of subrogation against the subcontractors. We agree and affirm.

Summary judgment is proper when there is no genuine issue of material fact and the movant is entitled to judgment as a matter of law. OCGA § 9-11-56(c). A de novo standard of review applies to an appeal from a grant of summary judgment, and we view the evidence, and all reasonable conclusions and inferences drawn from it, in the light most favorable to the nonmovant. Matjoulis v. Integon Gen. Ins. Corp.3

So viewed, the evidence shows that on October 31, 2003, the general contractor executed a contract to build a residence for a homeowner. The general contractor hired numerous subcontractors, including the four subcontractors here, to perform various portions of the work. Dissatisfied with the quality of the construction, the homeowner brought a claim against the general contractor, which claim was defended by Builders. The general contractor also asserted a counterclaim for monies remaining due on the construction of the home.

The homeowner, the general contractor, and Builders participated in a mediation of the matter, concluding in an offer by the homeowner to settle the case in exchange for $325,000 and a dismissal of the counterclaim. The homeowner gave Builders and the general contractor ten days to accept the offer. Builders and the general contractor acknowledged receipt of the offer by signing a document evidencing the offer. Twenty days later, the homeowner received a check from Builders for $325,000 and unilaterally executed a release of all claims against the general contractor and Builders. All claims in the suit were apparently dismissed.

Based on its subrogation rights contained in its insurance policy with the general contractor, Builders brought the present action in the name of the general contractor against the four subcontractors here,4 seeking to recover the $325,000. Each of these subcontractors moved for summary judgment under OCGA § 33-7-12(a), arguing that because Builders had failed to obtain the written consent of the general contractor to the $325,000 settlement, it had acted as an independent contractor and was not entitled to assert any subrogation rights under the insurance policy.5 Finding no written consent by the general contractor to Builders's settlement payment, the trial court granted partial summary judgment to the four subcontractors, allowing the claims to proceed only insofar as they concerned the general contractor's payment of its $1,000 deductible under the policy.6 In the name of its insured, Builders appeals.

The key to this appeal is the application of OCGA § 33-7-12(a), which provides in pertinent part:

Any provision in a liability policy of insurance which provides that the insurer shall have the right to compromise or settle claims of third persons against the insured without the consent of the insured shall be deemed to create, as between the insurer and the insured, the relationship of an independent contractor ․, unless the insured shall previously have consented in writing to relinquish his claim or cause of action․

Interpreting this statute, Carden v. Burckhalter7 held:

Under OCGA § 33-7-12(a), a provision which permits the insurer to compromise claims or defenses of the insured without his consent “shall be deemed to create ․ the relationship of an independent contractor.” The designation in OCGA § 33-7-12 of [the insurance company] as “independent contractor” establishes as a matter of law that its payment made without [the insured's] written consent was not made as his insurer under the policy of insurance.

(Emphasis in original.) Based on this analysis, Carden reasoned that in the absence of such written consent, the insurance company “has no right of subrogation because it did not make a payment to [the claimant] as insurer or agent of the insured under [the] policy.” Id. Carden concluded: “OCGA § 33-7-12 was enacted to protect the insured and is in derogation of common law and must be strictly construed. Construing the statute strictly, a payment made by an ‘independent contractor’ is not made ‘under the policy.’ ” (Citation omitted.) Id. at 490(2)(c), 448 S.E.2d 251. Accordingly, because no written consent was obtained in Carden, we affirmed the trial court's decision to enter judgment against the insurance company on the insurance company's subrogation claim. See BBL-McCarthy, LLC v. Baldwin Paving Co.8 (absent insured's consent to insurance company's settlement payment, the insurance company, “as subrogee under [the] insurance policy, has no right to recover indemnification for its settlement payment to the ․ plaintiffs”).

There is no dispute here that Builders's policy with the general contractor permitted it to compromise and settle claims asserted against the general contractor without its consent. There is also no dispute that the basis for Builders's claims in this matter against the four subcontractors was its settlement payment of $325,000 to the homeowner. Thus, the only question is whether the written mediation offer or the written release could constitute evidence of the general contractor's written consent to Builders's settlement payment to the homeowner.

The construction of a contract is a question of law for the court based on the intent of the parties as set forth in the contract, which construction we review de novo. Deep Six, Inc. v. Abernathy.9 “The cardinal rule of construction is to ascertain the intention of the parties. If that intention is clear and it contravenes no rule of law and sufficient words are used to arrive at the intention, it shall be enforced irrespective of all technical or arbitrary rules of construction.” OCGA § 13-2-3. Thus, “when the terms of a written contract are clear and unambiguous, the court is to look to the contract alone to find the parties' intent.” (Punctuation omitted.) Owners Ins. Co. v. Smith Mechanical Contractors.10 Only if the contract is ambiguous in some respect do we apply the rules of contract construction to resolve the ambiguity. Avion Systems v. Thompson.11 “Parol evidence is not admissible to contradict or construe an unambiguous contract.” (Punctuation omitted.) Unifund Financial Corp. v. Donaghue.12

There are only two writings here which could arguably serve as the general contractor's written consent to Builders's $325,000 payment to the homeowner.13 The first was the settlement offer resulting from the mediation, in which the homeowner offered to settle the matter for $325,000, which offer was to remain open for 10 days. The general contractor acknowledged receipt of this offer by signing the offering document. By no means did this unambiguous document constitute the general contractor's written consent to Builders' paying money to the homeowner. Rather, it was merely an offer to be accepted by the general contractor and by Builders in the future, as reflected in the very language of the document. Indeed, the preprinted language that the general contractor was agreeing to the payment was struck through, and the parties handwrote in the language that this was nothing more than an “offer to settle this case,” and that “said offer shall remain open until 5:00 p.m. on December 7, 2007 [ten days later] at which time said offer to settle shall expire unless it has been accepted by Builders Insurance Company and [the general contractor.]”

The second document was the homeowner's general release of Builders and of the general contractor, which release the homeowner executed upon receipt of the $325,000 payment from Builders. But this document was executed by the homeowner and his attorney only; indeed, the document did not even provide any signature lines for the general contractor to indicate its consent to the payment. Accordingly, regardless of the language of the document, this document also cannot constitute evidence that the general contractor consented in writing to the settlement payment. The affidavit of the principal of general contractor, in which the principal testified that he orally consented to the payment, is to no avail, as OCGA § 33-7-12(a) and Carden, supra, 214 Ga.App. at 489(2)(b), 448 S.E.2d 251, specifically require that the consent be in writing.

For these reasons, the trial court did not err in granting partial summary judgment to the four subcontractors, which ruling allowed only the general contractor's claim for its $1,000 deductible payment to survive.

Judgment affirmed.

BLACKBURN, Presiding Judge.

BARNES and BERNES, JJ., concur.

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