John A. Sergovic, Jr, Esquire Sergovic, Carmean & Weidman, P.A.
Victoria K. Petrone, Esquire Logan and Petrone, LLC.
Kevin W. Gibson, Esquire.
Dear Counsel, Before the Court is the Motion for Summary Judgment of Third-Party Defendant Stephen Pope ("Pope") against Third-Party Plaintiff Daystar Sills, Inc. ("Daystar").
This is a fraud case with liability in dispute. Pope is an authorized representative of Sens Mechanical, Inc. ("Sens"), a company hired by Daystar.On October 8, 2013 Pope executed a Partial Release of Liens for Application and Certificate for Payment in which he warranted:
…that all laborers and subcontractors employed by it, all suppliers or materialmen from which it has acquired materials incorporated into the Project and any lien or bond claimant relating to the undersigned's work have been paid in full and that none of such laborers, subcontractors, suppliers, materialmen, or claimant has any claim, demand or lien against the Premises through the 31st day of August, 2013.
By executing the partial release, Pope certified that Sens had paid for all labor, materials and equipment through August 31, 2013. Relying on this certification, Daystar paid an application and certificate for payment to Sens. After payment, Sens certified all line items related to any equipment or other materials purchased from Critical Systems, LLC ("Critical Systems"), a vendor used by Sens, were paid in full.
On February 11, 2014, Daystar's President, David Sills ("Sills"), was contacted by Critical Systems regarding HVAC equipment it sold to Sens.Critical Systems informed Sills that Sens owed Critical Systems more than $200, 000 for equipment it provided for the project. Also, Critical Systems notified Sills this matter was being referring to an attorney.
Daystar alleges Pope knowingly signed certifications under oath stating falsely that subcontractors had been paid in full and there were no outstanding claims against this project. Daystar further contends the continued payments were made to Sens in reliance on Pope's false certifications. As a result, Daystar has alleged Pope is personally liable for fraud based on his personal participation.
Pope, in turn, argues when executing the certifications he was acting as an agent of Sens. Also, Pope claims he lacked knowledge as to whether the information he attested to was false. Pope, as Vice President, was an authorized signatory for Sens when the certifications were executed. Pope asserts his position as Vice President in itself did not make him privy to payment records or invoices involving the project. Pope denies individual liability, contending the representations in the certification were made in his capacity as an authorized agent of Sens. Based on agency principles and Pope's lack of knowledge of the falsity of the statements contained in the certification, Pope claims he did not commit fraud and cannot be held personally liable.
This fraud action arises from an underlying contract dispute involving Sens. Sens filed a claim for a Mechanic's Lien on Hyatt Place, ("Property") in the Delaware Superior Court on December 18, 2013. One of the parties named as a defendant by Sens is Daystar. Daystar, in response, filed a Petition to Discharge the Mechanic's Lien in the amount of $121, 900.14 and agreed to secure an irrevocable letter of credit on February 7, 2014. Also, Daystar asserted a breach of contract counterclaim against Sens for damages. Sens filed a response on February 20, 2014 disputing the proposed dollar amount, asserting if the amount of the letter of credit was increased by $14, 010 to include, what it calculated to be, appropriate interest, Sens would not object to the Petition.
On February 25, 2014, Daystar filed a Third-Party Complaint against Pope alleging the following: (1) materially false applications and certifications of payment were knowingly signed and submitted by Pope; (2) the false representations were known by Pope prior to execution of the partial releases of liens; and (3) Pope knew or should have known that Daystar would rely on the certifications. Pope answered the Third-Party Complaint on ...