Opinion ID: 1957495
Heading Depth: 2
Heading Rank: 1

Heading: Is McMo a general contractor or an agent of John Hancock?

Text: ¶ 10. With respect to general principles of agency, the line between an agent and an independent contractor is not really a line but a `twilight zone,' with the answer inevitably revolving around the idea of control. Kight v. Sheppard Bldg. Supply, Inc., 537 So.2d 1355, 1359 (Miss. 1989) (citing Fruchter, 522 So.2d at 199). According to this Court: an agent is one who stands in the shoes of his principal; he is his principal's alter ego.... An agent is one who acts for or in the place of another by authority from him; one who undertakes to transact some business or manage some affairs for another by [his] authority ... The most characteristic feature of an agent's employment is that he is employed primarily to bring about business relations between his principal and third persons.... First Jackson Secs. Corp. v. B.F. Goodrich Co., 253 Miss. 519, 532, 176 So.2d 272, 278 (1965) (quoting 2 C.J.S. Agency § 1c, at 1024 (1936)). See also Restatement (Third) of Agency § 1.01 (Tentative Draft No. 2, 2001) (the key to the concept of agency is that the agent acts on the principal's behalf and is subject to the principal's control). ¶ 11. While John Hancock alleges that McMo was a general contractor, Plaintiffs maintain that McMo, as construction manager, was an agent of John Hancock. This Court has defined a general contractor as the party to a building contract who is charged with the total construction and who enters into sub-contracts for such work as electrical, plumbing and the like. Associated Dealers, 589 So.2d at 1247-48 (quoting Black's Law Dictionary 349 & 621 (5th ed.1983)). The term construction manager has not yet been defined in Mississippi. Other courts have defined the term, however, finding that [a] general contractor and a construction manager are separate and distinct titles with different responsibilities and different relationships to the parties to a construction project. R & A Constr. Corp. v. Queens Boulevard Extended Care Facility Corp., 290 A.D.2d 548, 549, 736 N.Y.S.2d 423 (N.Y.App.Div. 2002). See also Baum v. Ciminelli-Cowper Co., 300 A.D.2d 1028, 1029, 755 N.Y.S.2d 138, 139-40 (N.Y.App.Div.2002) (the existence of a distinction between general contractor and construction manager is a question of fact for trial on the merits). While [t]here is no single, widely accepted definition of construction management, Sagamore Group, Inc. v. Comm'r of Transp., 29 Conn.App. 292, 614 A.2d 1255, 1259 (1992), the Plaintiffs cite the distinction drawn between a general contractor and a construction manager by the Rhode Island Supreme Court in Brogno v. W & J Associates, Ltd., 698 A.2d 191, 194 (R.I.1997). The Brogno Court found that the [construction manager] acts as a mere agent for a project's owner and ... engages `trade contractors' in his principal's name to perform most or all of the actual work. Id. (quoting Bethlehem Rebar Indus., Inc. v. Fid. & Deposit Co., 582 A.2d 442 (R.I.1990)). See also Sagamore Group, 614 A.2d at 1259 (Today ... [a construction manager] is more commonly a group, a company, or a partnership with two paramount characteristics: construction know-how and management ability.). On the other hand, a general contractor is in the chain of liability and ... hires `subcontractors' in his own name to perform work. Brogno, 698 A.2d at 194 (quoting Bethlehem Rebar, 582 A.2d at 442). The Brogno Court also added that the mere self-serving label of [construction manager] or general contractor will not in and of itself determine a party's legal status. Id. ¶ 12. Plaintiffs' argument essentially operates as follows: Plaintiffs were designated as Contractor[s] in both the McMo-John Hancock contract and in their respective agreements with McMo; McMo was referred to as a construction manager in each Plaintiff's agreement with McMo; and McMo inspected and approved Plaintiffs work product, then approved Plaintiffs demands for payment by John Hancock who, by contract, was to route payments to Plaintiffs through McMo. Therefore, the argument flows, McMo was acting not as a general contractor, but rather as an agent of John Hancock. Such an agency relationship, Plaintiffs argue, deductively creates a direct contractual relationship between Plaintiffs and John Hancock, making the stop-notice limitations of § 85-7-181 inapplicable. Since agency is a question of material fact, see Engle Acoustic & Tile, Inc. v. Grenfell, 223 So.2d 613, 617 (Miss.1969), it is unsuited to resolution by motion for summary judgment. See Murphree, 707 So.2d at 529. ¶ 13. John Hancock responds by arguing that the use of the term construction manager does not automatically create an agency relationship. Brogno, 698 A.2d at 194 (quoting Bethlehem Rebar, 582 A.2d at 442). See also Kight, 537 So.2d at 1359 (what parties to a contract actually do provides the best evidence of what the contract required them to do). John Hancock argues that McMo fits the Associated Dealers definition of a general contractor because it had total responsibility and control over renovations at the mall and entered into the contracts with Plaintiffs to supply labor and material for those renovations. Not only was McMo expressly referred to as an independent contractor in the McMo-John Hancock contract, but the nature of their performance reflected that intent. The contracts between McMo and Plaintiffs were executed with McMo, with no signature line provided for John Hancock; none of the contracts stated that McMo was acting as John Hancock's agent; and none of the Plaintiffs were privy to the contract between McMo and John Hancock. Moreover, McMo had total control over the manner and means of performance under its contract with John Hancock. As a result, John Hancock alleges that Plaintiffs are simply attempting to create a disputed issue of material fact where none actually exists (i.e. the entire construction manager question is a strawman). In essence, John Hancock argues that Plaintiffs failed to assert their statutory rights as subcontractors under § 85-7-181 and are now seeking to hold John Hancock responsible for the Plaintiffs' own mistake. ¶ 14. [W]hether an agency has in fact been created is to be determined by the relations of the parties as they exist under their agreements or acts, with the question being ultimately one of intention.  Engle, 223 So.2d at 617-18 (emphasis added). The burden of proof as to the existence of an agency relationship rests with the party asserting it. See Booker ex rel. Certain Underwriters at Lloyd's of London v. Pettey, 770 So.2d 39, 45 (Miss.2000). Thus, the burden of proof here lies with the Plaintiffs. ¶ 15. The agency arguments of both parties focus upon the existence of a general, overarching agency relationship between John Hancock and McMo. In the John Hancock-McMo contract, agency is in no way mentioned [16] and the agreement attempts to expressly establish the independent contractor status of McMo. [17] However, [o]ur law recognizes that a person may be an independent contractor as to certain work and a mere agent as to other work for the same employer. Kight, 537 So.2d at 1359 (citing Carroll v. E.G. Lauglin & Sons, 220 Miss. 535, 540, 71 So.2d 461, 463 (1954); Mills v. Jones' Estate, 213 Miss. 680, 684, 56 So.2d 488, 490 (1952)). The heart of the dispute, the lack of payment receipt by Plaintiffs, without doubt involves an agency relationship between John Hancock and McMo. [18] The Manage Construction Funds and Pay Applications provision of the John Hancock-McMo agreement provides, [McMo] will receive, process and approve all applications for payment submitted by the Fabricator/Suppliers. We will submit a summarized package to [John Hancock] on a monthly basis containing all approved pay applications and necessary paperwork for check preparation by [John Hancock]. [John Hancock] will route all payments through McMo.  (emphasis added). Although John Hancock artfully argues that McMo had sole control over the manner and means of its performance, there is evidence that John Hancock contractually obligated itself and factually controlled the manner of payment to the Plaintiffs. ¶ 16. Under general principles of agency law, [o]ne who acts through another is in law himself the actor. Fruchter, 522 So.2d at 199 (citing Slaughter v. Holsomback, 166 Miss. 643, 659, 147 So. 318, 322 (1933)). As stated in John Hancock's Complaint filed in the Circuit Court of Hillsborough County, Florida, against McMo for conversion, [t]he Vendor Funds Escrow payments were specific identifiable deposits of money belonging to [John Hancock] which it entrusted to McMo for the specific purpose of paying the subcontractors or suppliers who had furnished the labor or materials to the Project, as requested in each Pay Application McMo submitted to [John Hancock]. (emphasis added). The existence of escrow funds, specifically the Vendor Funds Escrow payments involved here, inherently presumes that the party receiving escrow funds shall act as the escrow agent for proper disbursement, which in the case sub judice, was payment to the Plaintiffs. McMo was unquestionably an escrow agent for John Hancock here, as payments from the Vendor Funds Escrow account were contractually to be routed through McMo for payment to the Fabricator/Supplier-Plaintiffs, and John Hancock should be estopped from now seeking to presently disclaim such judicial admission. ¶ 17. McMo was contractually referred to as a construction manager hired to perform design, construction documentation and project management consulting services for John Hancock. Indeed, the McMo statements to John Hancock are titled Consulting Invoice(s) and the payments requested for Plaintiffs are separately listed from McMo's service charges, under Service Description as Vendor Funds Escrow. ¶ 18. A general contractor is charged with the total construction, Associated Dealers, 589 So.2d at 1247, not mere project management services. A manager is [a] person who administers or supervises the affairs of a business, office, or other organization. Black's Law Dictionary 979 (8th ed.2004). This definition bears close resemblance to the definition of a special, managing, or general agent. [19] As a construction manager, McMo clearly fits within such agency definitions. McMo was contractually required to recommend Fabricator/Suppliers to John Hancock, to act as the conduit for routing payments to Plaintiffs, and to act in the interests of John Hancock, all of which are genuine issues of contested material facts regarding the existence of an agency relationship between John Hancock and McMo. ¶ 19. Fundamentally, an entity which acts as agent for an owner intending no profit from the construction itself is not a contractor or master workman for the purposes of § 85-7-181. Associated Dealers, 589 So.2d at 1249 (Lee, P.J., dissenting) (citing Graham v. Pugh, 417 So.2d 536, 540 (Miss.1982) (company is deemed an agent of owner as it was not to undertake the work itself and was not to make any profit from the construction job itself)). Actual construction was performed by the Plaintiffs. McMo sought no profit on the construction performed by Plaintiffs, but rather acted as the conduit for transferring John Hancock's payments to Plaintiffs. The debt due the Plaintiffs was not extinguished by John Hancock's payments to McMo, only John Hancock's debt to McMo was extinguished. McMo's profit was relegated to its own professional fees [20] and potential cost savings realized in the Construction Budget. [21] If McMo's role regarding the payment of Plaintiffs was not as a contractor or master workman, but as an agent, then § 85-7-181 is altogether inapplicable.
¶ 20. Furthermore, McMo's status as a general contractor is called into question by its failure to obtain a contractor's license in the state of Mississippi. Miss. Code Ann. § 31-3-15 states that: No contract for public or private projects shall be issued or awarded to any contractor who did not have a current certificate of responsibility issued by said board [the Mississippi Board of Public Contractors] at the time of the submission of the bid, or a similar certificate issued by a similar board of another state which recognizes certificates issued by said board. Any contract issued or awarded in violation of this section shall be null and void. Miss.Code Ann. § 31-3-15 (Rev.2005). [T]he certificate of responsibility serves to protect owners from `incompetent, inexperienced, unlawful and fraudulent acts of contractors,' by making null and void any contracts for construction for which a certificate of responsibility should have been issued. Associated Dealers, 589 So.2d at 1248 (citing Miss.Code Ann. §§ 31-3-1, -2, & -15 (1972)). [22] While Steven Mordue and Tom McCurdy of McMo both claimed to have held a Florida specialty license for signs, no proof of licensing in Mississippi was forthcoming. The record provides no insight into whether the Florida specialty license was accompanied by a certificate of responsibility or whether such a certificate, if present, would be recognized in Mississippi under § 31-3-15. Therefore, additional genuine issues of material fact exist regarding the validity of McMo's contracts with the Plaintiffs.