Brox v. H.J. Stabile

Opinion

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March 25, 1994         NOT FOR PUBLICATION
                                 NOT FOR PUBLICATION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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                                          7

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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                                          9

.  .   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 &
                                 ______________________    ______________

                                         -10-
                                          10

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.
            _________

                                         -11-
                                          11

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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                                          12

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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