Brox v. H.J. Stabile ( 1994 )


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  • USCA1 Opinion









    March 25, 1994 NOT FOR PUBLICATION
    NOT FOR PUBLICATION
    UNITED STATES COURT OF APPEALS
    FOR THE FIRST CIRCUIT
    ____________________

    No. 93-1970

    BROX INDUSTRIES, INC.,

    Plaintiff, Appellee,

    v.

    H.J. STABILE & SONS, INC. ET AL.,

    Defendants, Appellants.

    ____________________

    APPEAL FROM THE UNITED STATES DISTRICT COURT

    FOR THE DISTRICT OF NEW HAMPSHIRE


    [Hon. Martin F. Loughlin, Senior U.S. District Judge]
    __________________________

    ____________________

    Before

    Torruella, Circuit Judge,
    _____________
    Bownes, Senior Circuit Judge,
    ____________________
    and Selya, Circuit Judge.
    _____________

    ____________________

    James E. Owers, with whom Sulloway & Hollis was on brief for
    _______________ __________________
    appellant Reliance Insurance Company and Morgan A. Hollis, with whom
    ________________
    Gottesman & Hollis was on brief for appellant H.J. Stabile & Sons,
    __________________
    Inc.
    Frank P. Spinella, Jr., with whom Hibbard & Spinella, P.A. was on
    ______________________ _________________________
    brief for appellee.


    ____________________


    ____________________





















    BOWNES, Senior Circuit Judge. This diversity
    BOWNES, Senior Circuit Judge.
    _____________________

    case requires us to rule on the timeliness of a notice of

    claim under a payment bond. The district court, after an

    evidentiary hearing, held that the notice was timely and

    therefore granted judgment for plaintiff-appellee Brox

    Industries in the amount of $178,155.86. We affirm.

    I.
    I.

    BACKGROUND
    BACKGROUND
    __________

    We set forth a summary of the pertinent facts found

    by the district court. In June 1991 defendant-appellant H.J.

    Stabile & Son, Inc. entered into a contract with Wal-Mart

    Stores, Inc. to build a store in Seabrook, New Hampshire. In

    July 1991 Stabile obtained a payment bond from co-defendant-

    appellant Reliance Insurance Company. Reliance, of course,

    is the real party in interest. Stabile subsequently

    subcontracted with Atom Contracting Corp. to do work on the

    Wal-Mart project. Atom then subcontracted with Brox to do

    both on-site and off-site paving.

    Under Stabile's contract with Wal-Mart all work was

    to be completed on the project by December 3, 1991. By mid-

    December Brox had not completed a substantial portion of the

    paving work under its contract with Atom. On December 13

    Stabile instructed Brox that it should cease operations on

    the project due to the onset of winter. Because all of the

    parties recognized that paving cannot be done properly in the



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    winter, they agreed that Brox would return the following

    spring to complete the work. Stabile fully expected that

    Brox would return to the work-site in the spring, and Brox

    anticipated doing so. On December 23, 1991 Brox notified

    Stabile that substantial work remained for the spring,

    provided Stabile with an estimate of the remaining work, and

    stated that the total amount of the paving work performed to

    date was $201,106.50. Brox invoiced Atom for this work in

    December 1991.

    In February and March 1992, in response to concerns

    of Wal-Mart about the quality of Brox's paving, Brox

    conducted tests of its work. Also in March 1992, a Brox

    employee filled in several potholes at the worksite in

    preparation for returning to the project.

    By March of 1992 Stabile had paid Atom all sums due

    for work performed by Atom and its subcontractors, including

    Brox. Atom, however, still owed Brox $178,155.86 for work

    done through December 13, 1991. On March 18, 1992 Brox sent

    a notice of claim for that amount to Reliance as surety for

    Stabile. Nonetheless, Brox anticipated that it would finish

    the paving work in the spring under its contract with Atom.

    On May 14, 1992 Atom informed Stabile that it

    intended to honor their contract, and that the State of New

    Hampshire wanted two roads, which were contiguous to the

    planned store, to be paved by June 1. On June 4 Stabile



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    agreed to the additional paving with a charge back to Atom.

    Although the specifics are unclear, shortly thereafter

    Stabile recognized that Atom would be unable to meet its

    contractual obligations, and therefore it sought to engage a

    new contractor to complete the paving work.

    On June 11, after a brief bidding period, Stabile

    and Brox entered into two contracts for the completion of the

    paving at the project, one for on-site and one for off-site

    work. On June 30 Stabile formally terminated its contract

    with Atom. Brox finished the paving work at the project.

    In August 1992 Brox commenced a diversity action in

    the United States District Court for the District of New

    Hampshire against Stabile and Reliance seeking payment under

    the bond issued by Reliance as surety for Stabile. Under the

    bond, a party not in direct privity with the principal, such

    as Brox, must give notice of its claim to: the Principal,

    the Surety, or the Owner, "within ninety (90) days after such

    claimant did or performed the last of the work or labor, or

    furnished the last of the materials for which said claim is

    made." No claim is made that Brox failed to give notice as

    required to the Principal, Surety or Owner.

    The principal defense of Stabile and Reliance is

    that Brox's March 18, 1992 notice was untimely under the

    bond's requirements. Brox moved for summary judgment based

    on two alternative theories. It argued first that, assuming



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    arguendo that its notice was untimely, Reliance must show
    ________

    prejudice from the tardiness in order to bar recovery under

    the bond. According to Brox, no prejudice could be shown.

    Alternatively, Brox maintained that its notice was timely

    under the bond.

    The district court, in an opinion dated August 18,

    1993, found that Brox's notice was timely. According to the

    district court, "[t]he crux of the case . . . appears to be

    whether [Brox's] work [was] completed in December, 1991."

    Brox Industries, Inc. v. H.J. Stabile & Son, Inc., No. 92-
    ______________________ __________________________

    426-L, slip op. at 6 (D.N.H. August 18, 1993). At the

    evidentiary hearing the court stated that "[i]f . . . an

    agreement [about a winter hiatus] was made then clearly

    [Brox's] work under its subcontract with Atom was not

    completed on December 13, 1991 and [Brox's] failure to give

    notice within ninety days of that day would not bar recovery

    under the bond." Because the court eventually found that

    Brox still had substantial work to do on the contract as of

    December 13, and that the parties agreed to a winter hiatus

    of greater than ninety days, it held that Brox's notice was

    not untimely. Id. at 7.
    ___

    In response to Brox's argument that work done at

    the project site in February and March 1992, i.e., quality
    ____

    tests and pothole repairs, reset the ninety-day notice

    period, the district court found that both the tests and the



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    pothole repairs were remedial in nature and did not "advance

    the completion of the project." Id. at 5. Accordingly,
    ___

    under New Hampshire law, the district court found that the

    above work had no effect upon the ninety-day notice period.

    See Tolles-Bickford Co. v. School, 94 A.2d 374 (N.H. 1953).
    ___ ___________________ ______

    This conclusion and its predicate factual findings have not

    been appealed. The court entered judgment for Brox for the

    full amount of its claim, and defendants appealed.

    II.
    II.

    DISCUSSION
    DISCUSSION
    __________

    The focus of this litigation has been twofold: (1)

    whether, given the circumstances surrounding Brox's work on

    the project, its notice of March 18, 1992 was timely under

    the bond issued by Reliance; and (2) whether, if the notice

    was not timely, Reliance must demonstrate prejudice from the

    delay in order to bar Brox's recovery. Because the district

    court ruled in the affirmative on the first issue, it never

    reached the second.

    Because this is a diversity action, the substantive

    law of the forum attaches. Erie R.R. Co. v. Tompkins, 304
    ______________ ________

    U.S. 64, 78 (1938). The parties' arguments as to the

    timeliness of Brox's notice hinge upon two New Hampshire

    Supreme Court cases.

    In American Fidelity Co. v. Cray, 194 A.2d 763
    ______________________ ____

    (N.H. 1963) a claimant on a payment bond was precluded from



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    recovering due to late notice of claim. The principal in

    Cray was under a contract with the State of New Hampshire.
    ____

    It was required by statute to obtain a contract bond, and the

    bond's notice requirement was prescribed by statute. Under

    the version of N.H. RSA 447:17 in effect at that time, in

    order to obtain the benefit of the bond, a claimant for labor

    performed or materials furnished "shall within ninety days

    after said claimant ceases to perform said labor or furnish

    said materials . . . file . . . with the department of public

    works and highways . . . a statement of the claim." From May

    to November 1958, Cray provided fuel and lubricants to the

    principal on a highway construction project. In late 1958,

    prior to the completion of the project, the principal shut

    down the job for the winter. It never returned. In the

    spring of 1959 the surety completed the project through

    another construction company. In May 1959 Cray noticed a

    claim with the proper authority for money owed to it by the

    principal.

    Although Cray did not provide any materials to the

    principal after November 1958 -- more than ninety days prior

    to its filing a claim under the bond -- Cray maintained that

    it did not "cease" to furnish fuel and lubricants under the

    bond at the time of the winter shutdown in November 1958.

    Cray argued that its agreement with the principal was a

    continuing one such that the ninety day notice requirement



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    should have been tolled during the seasonal hiatus. After

    reviewing the facts of the case, the New Hampshire Supreme

    Court stated:

    We cannot accept Cray's contention that
    it ceased to furnish materials not in
    November 1958, after which date no
    materials were in fact furnished, but the
    following spring when LaClair failed to
    resume operations.

    Id. at 766. Defendants argue that Brox is in the same
    ___

    position as Cray was, and that its notice is therefore

    untimely.

    Defendants' position is substantially undercut by

    the New Hampshire Supreme Court's subsequent opinion in New
    ___

    England Metal Culvert Co. v. A.E. Williams Construction Co.,
    _________________________ ______________________________

    196 A.2d 713 (N.H. 1963). In New England Metal Culvert the
    _________________________

    contractor on a highway construction project placed a single

    order with the plaintiff in January 1961 for various

    materials, including a metal culvert and pipe. As was the

    case in Cray, the contractor was under contract with the
    ____

    State, and was required by statute to obtain a bond.1

    Delivery of the pipe was to be "as required." Id. at 714.
    ___

    On April 25, 26 and 27, 1961 a metal culvert was delivered,

    but the contractor was not ready to receive the pipe, and it

    was not delivered. In October 1961, after learning that the


    ____________________

    1. On April 29, 1961 the notice requirement contained in RSA
    447:17, see supra p. 7, was amended to require such a filing
    ___ _____
    "within ninety days after the completion and acceptance of
    the project."

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    contractor was in financial straits, the plaintiff filed a

    notice of claim under the bond for payment of the materials

    that it had delivered in April. The contractor subsequently

    defaulted on the project, and the surety completed

    construction through a different construction company. In

    December 1961 a new construction company was hired by the

    surety to finish the job. This new company ordered the exact

    same pipe from the plaintiff that had been ordered by, but

    never delivered to, the original contractor. Id. The pipe
    ___

    was delivered by plaintiff to the new contractor on December

    13 and 15, 1961 and was paid for in a timely manner.

    The court ruled that plaintiff's October 27, 1961

    notice was timely under the pre-amendment version of the

    notice statute. Id. at 715. This conclusion was based on
    ___

    two factors. First, the contract between plaintiff and the

    original contractor "was a single contract although separable

    or divisible as to deliveries." Id. And second, "[o]n
    ___

    October, 27, 1961, when the plaintiff first gave notice of

    its claim, although more than ninety days had elapsed since

    delivery of the culvert it had not then ceased to furnish

    materials, but was bound by its [original] contract to make

    additional deliveries on request." Id. Moreover,
    ___

    the remaining pipe was furnished to the
    job on December 13 and 15, 1961 for use
    in carrying out the contract with the
    State. Thus the plaintiff did not cease
    to furnish materials within the meaning
    of RSA 447:17 until December 15, 1961 . .


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    . . Unlike the situation in American
    ________
    Fidelity Co. v. Cray, supra, the
    ______________ ____ _____
    plaintiff in this case had a single
    contract for a series of deliveries of
    specified materials.

    Id. (citation omitted). The court concluded that "[a]
    ___

    notice filed within ninety days of the last delivery on

    December 15, 1961 would have constituted compliance with the

    requirements of the statute before amendment, and permitted

    recourse to the bond for recovery of the price of the culvert

    delivered in April 1961." Id. The court further held that
    ___

    although plaintiff's filing was premature, the premature

    notice satisfied the notice requirement. Id. at 716.
    ___

    Brox argues that it is similarly situated to the

    plaintiff in New England Metal Culvert, and that its notice
    _________________________

    was therefore timely. We agree. As in New England Metal
    __________________

    Culvert, Brox had a single contract with Atom. At the time
    _______

    Brox gave notice of its claim, more than ninety days had

    passed since its last paving work on the project.

    Nevertheless, at the time Brox gave its notice, it was still

    obligated to complete the paving work after the spring thaw.

    Brox eventually completed the paving work necessary for

    carrying out Stabile's contract with Wal-Mart. These

    factors, we believe, place this case squarely under the

    shadow cast by New England Metal Culvert.2
    _________________________


    ____________________

    2. The district court also found, consistent with New
    ___
    England Metal Culvert, that Brox's notice was, in effect,
    ______________________
    prematurely filed. Brox Industries, Inc. v. H.J. Stabile &
    ______________________ ______________

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    Accordingly, under the rule articulated by the New

    Hampshire Supreme Court in New England Metal Culvert, if a
    __________________________

    claimant is still obligated to perform additional work under

    its original contract at the time notice is given under a

    payment bond, such as the one at issue here, the notice is

    not untimely even if more than ninety days have passed since

    the last work was performed by the claimant under the

    original contract. In effect, the claimant's notice can be

    viewed as covering the claimant's prior work, for which it

    has not been paid, as well as the work that it is obligated

    to perform in the future -- work for which it has also not

    yet been paid. The ninety-day notice period does not begin

    to run until the claimant actually completes the work that it

    was contractually obligated to perform at the time notice was

    given. Thus, as the New Hampshire Supreme Court has noted,

    although the claimant's notice is premature, it is valid.

    At oral argument Reliance sought to distinguish New
    ___

    England Metal Culvert on the ground that one contract was at
    ______________________

    issue in that case whereas two contracts are implicated in

    the present case. Defendants' contention is not persuasive.

    It is clear, as in the present case, that the plaintiff in

    New England Metal Culvert completed its performance, i.e.,
    __________________________ ____

    made the December 13 and 15 pipe deliveries, under a second




    ____________________

    Son, Inc., slip op. at 7.
    _________

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    contract which required completion of the performance called

    for under the original contract. Id. at 714.
    ___

    Although New England Metal Culvert involves a
    ____________________________

    statutory notice requirement, as opposed to a contractual

    requirement, we can see no reason why the New Hampshire

    Supreme Court's interpretation of the former would not apply

    to the latter. See, e.g., Raitt v. National Grange Ins. Co.,
    ___ ____ _____ ________________________

    285 A.2d 799 (N.H. 1971) (contractual subrogation provision

    construed consistently with identical statutory subrogation

    right). In fact, the notice requirement at issue here is

    identical to the Miller Act's ninety-day notice requirement,

    and the New Hampshire Supreme Court has looked to Miller Act

    cases in construing the pre-amendment version of RSA 447:17.

    See New England Metal Culvert, 196 A.2d at 715 (citing
    ___ ___________________________

    cases).

    Aside from the two New Hampshire cases discussed

    above, the parties have focussed their attention on cases

    construing the ninety-day notice requirement in the Miller

    Act, 40 U.S.C. 270b(a). Because we have found controlling

    precedent under New Hampshire law, we need not delve into

    these cases. Nevertheless, we note that the Miller Act cases

    are not hostile to our holding.

    On the question of ninety-day gaps between

    performances, we have uncovered only a handful of cases.

    Those cases have held, where there is a break of greater than



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    ninety days between deliveries under a series of purchase
    ___________________

    orders, that the last delivery does not resurrect claims for
    ______

    payment for the earlier deliveries. See United States v.
    ___ ______________

    Peter Reiss Constr. Co., 273 F.2d 880 (2d Cir. 1959)
    __________________________

    (Friendly, J.). This was essentially the issue in Cray, and
    ____

    the court there reached the same conclusion. Of course, in

    Cray, the plaintiff never made any deliveries after the
    ____

    ninety-day plus hiatus. On the other hand, where work is

    performed under a contract, as opposed to a series of

    purchase orders, a greater than ninety-day interval in

    performances will not bar recovery on the earlier performance

    despite the absence of immediate notice. See Id. at 882;
    ___ ___

    United States v. Chester Constr. Co., 104 F.2d 648 (2d Cir.
    _____________ ____________________

    1939). This was the situation in New England Metal Culvert,
    _________________________

    and the New Hampshire Supreme Court reached the same result.

    The three Miller Act cases relied on by defendants

    in their brief would not warrant a contrary conclusion. The

    first case, United States ex rel. J.A. Edwards & Co. v.
    ____________________________________________

    Thompson Constr. Corp., 273 F.2d 873 (2d Cir. 1959),
    ________________________

    concerned the substance of a notice of claim under the Miller

    Act, not its timeliness under the ninety-day notice

    requirement. And the last two cases, United States ex rel.
    ______________________

    John D. Ahern Co. v. J.F. White Contracting Co., 649 F.2d 29
    _________________ __________________________

    (1st Cir. 1981) and A.B. Cooley v. Barten & Wood, Inc., 249
    ____________ ____________________

    F.2d 912 (1st Cir. 1956), although more closely analogous to



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    the instant case, do not involve gaps in the claimant's

    performance of greater than ninety days, and are therefore of

    limited relevance. This is particularly true given the New

    Hampshire Supreme Court's clear statement in this matter.

    Defendants' have failed to identify, and we cannot

    decipher, any substantive distinction between New England
    ____________

    Metal Culvert and the case at bar. Accordingly, the judgment
    _____________

    of the district court is Affirmed.
    Affirmed
    ________





































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