Guam Housing and Urban Renewal Authority v Pacific Superior Enterprises Corporation [2001] GUSC 8; 2001 Guam 08 (23 April 2001)

IN THE SUPREME COURT OF GUAM

GUAM HOUSING and URBAN RENEWAL AUTHORITY,
a public body corporate and politic,
Plaintiff

vs.

PACIFIC SUPERIOR ENTERPRISES CORPORATION, and
Defendant-Appellant

MANU MELWANI,
Defendant-Appellee

OPINION

Filed: April 23, 2001

Cite as: 2001 Guam 08

Supreme Court Case No. CVA00-009
Superior Court Case No.CV0887-96

Appeal from the Superior Court of Guam
Argued and submitted on October 27, 2000
Hagåtña, Guam

Appearing for the Defendant-Appellant: Lawrence J. Teker, Esq. TEKER CIVILLE TORRES CALVO & TANG 330 Hernan Cortez Ave. Hagåtña, Guam 96910

Appearing for the Defendant-Appellee: Wilson Quinley, Esq. Law Offices of Wilson Quinley Ste. 500 I, GCIC Bldg. 414 W. Soledad Ave. Hagåtña, Guam 96910

BEFORE: PETER C. SIGUENZA, JR., Chief Justice (Acting),[1] JOHN A. MANGLONA, Designated Justice, and MITCHELL F. THOMPSON, Justice Pro Tempore

SIGUENZA, C. J.:

[1] This is an appeal of a judgment dismissing the Complaint in Interpleader filed by the Guam Housing and Urban Renewal Authority against Pacific Superior Enterprises Corporation and Manu Melwani. The Guam Housing and Urban Renewal Authority does not appeal the Final Judgment; however, Melwani seeks review of the lower court's dismissal. We find that the lower court erred in its conclusion that Melwani's disavowal of surety status precluded his recovery of the interpleaded funds. Therefore, we reverse the trial court's judgment and remand for further proceedings.

I. FACTUAL BACKGROUND

[2] Pacific Superior Enterprises Corporation (hereinafter, APSEC@), a local contractor, was the successful bidder on four contracts with the Guam Housing and Urban Renewal Authority (hereinafter, AGHURA@). The contracts involved the renovation and repair of several of GHURA's residential housing units. The approximate contract price for all four contracts was $1,517,804. As part of the bid process, PSEC was required to provide a performance or cash bond to guarantee the completion of the projects; however, the option of providing a cash escrow in the amount of 20% of the contract price was also offered. PSEC was unable to secure a performance bond from a surety company. Consequently, it entered into an agreement with Manu Melwani (hereinafter, AMelwani@) wherein the latter agreed to provide the sum of $303,564.80 (20% of the contract price) and in return he would receive $257,266.00 or 16.94% of the gross aggregate amount of the contracts (Melwani labels this as a Apremium@ for the service he provided). Both Melwani and PSEC claim to have directly deposited the cash bonds with GHURA.

[3] Each of the contracts entered into by PSEC and GHURA called for the completion of the projects on dates certain. The latest of these dates was September 9, 1994. However, by October 1994, none of the projects had been completed. GHURA had contacted Melwani and informed him that PSEC had abandoned the projects and was in default on the contracts. GHURA also informed Melwani that if he did not complete the projects then he would forfeit the cash bond advanced on behalf of PSEC.

[4] On or about, October 6, 1994, Melwani engaged the services of Pacific Tri-Star, Inc. (hereinafter, APacific Tri-Star@) to complete the contracts and allegedly expended the sum of $272,051.01 for materials, supplies, labor and equipment towards completion of the projects. Additionally, Melwani claims that $97,000.00 is still due and outstanding to various suppliers and laborers from the work performed by Pacific Tri-Star. Further, it appears that PSEC directed GHURA to make all payments on the subject contracts Ajointly in the name of Pacific Superior and its Surety which is namely Manu P. Melwani@. On March 14, 1995, PSEC rescinded its earlier authorization that payments be made jointly to itself and Pacific American Title. It further requested that future checks be made payable solely to PSEC.[2]

[5] On or about April 13, 1995, counsel for Melwani informed GHURA that Melwani was the surety, that because of PSEC's default Melwani, as surety, had to step in and take over all of the GHURA projects. Counsel further informed GHURA that the projects were now completed and requested that all of the bond money and the outstanding payments be released to Melwani.

[6] On June 14, 1996, GHURA filed a Complaint in Interpleader in the Superior Court of Guam. Named as defendants were PSEC and Melwani. The gravamen of the Complaint was that GHURA and PSEC had entered into contracts for the repair and renovation of certain housing units owned by GHURA. The subject contracts were fully performed and an aggregate amount of $411,978.15 represented the unpaid sums due on the contracts. GHURA alleged that it believed that Melwani provided cash bonding to PSEC on the subject contracts in lieu of surety bonding, and that both Melwani and PSEC claim all of the outstanding balances on the subject contracts. Consequently, GHURA claimed that it was unable to determine the validity of the conflicting claims and who should be paid. Additionally, GHURA disclaimed any interest in the outstanding balance. The Complaint prayed for the relief that the Defendants be interpleaded and that they litigate their respective rights to the outstanding balances, that GHURA be discharged from any and all liability on account of the claims, and that it be allowed to deposit the disputed amount into the court. The Complaint further prayed that the parties be enjoined from instituting any action against GHURA for the recovery of any amounts arising from the subject contracts.

[7] On July 1, 1996, Melwani answered the Complaint and claimed that he was entitled to the sum of $424,335.20 representing the amount expended to complete the projects by hiring other contractors, laborers and materials. He also filed a Cross-Claim against PSEC alleging that he had entered into a bonding agreement with PSEC for the subject contracts and that he was owed $257,266 as a premium for such services.

[8]