Green Electric System, Inc. v. Metropolitan Airports Commission

486 N.W.2d 819, 1992 Minn. App. LEXIS 710, 1992 WL 152213
CourtCourt of Appeals of Minnesota
DecidedJuly 7, 1992
DocketC3-91-2420
StatusPublished
Cited by4 cases

This text of 486 N.W.2d 819 (Green Electric System, Inc. v. Metropolitan Airports Commission) is published on Counsel Stack Legal Research, covering Court of Appeals of Minnesota primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Green Electric System, Inc. v. Metropolitan Airports Commission, 486 N.W.2d 819, 1992 Minn. App. LEXIS 710, 1992 WL 152213 (Mich. Ct. App. 1992).

Opinions

OPINION

KALITOWSKI, Judge.

Appellant challenges the trial court’s determination that it is liable for the unpaid balance of a contract between respondent, a subcontractor, and the general contractor, because it failed to obtain a payment bond under Minn.Stat. § 574.26 (1990).

FACTS

Appellant, the Metropolitan Airports Commission (MAC), solicited competitive bids for the installation, placement and maintenance of commercial advertising at the Minneapolis-St. Paul International Airport. Airport Media Marketing (AMM) submitted a bid which the MAC accepted, and they entered into the Terminal Facilities Display Agreement (agreement). Pursuant to the agreement, AMM designed and constructed the advertising display fixtures and marketed display space to commercial advertisers. In return, AMM paid a percentage of the commercial revenue to the MAC.

AMM hired a subcontractor, respondent Green Electric Systems, Inc. (Green Electric), to install and repair the displays’ electrical wiring. Green Electric was unable to collect from AMM and sought payment from the MAC. Green Electric argued the MAC was liable because it failed to obtain a payment bond under Minn.Stat. § 574.26 (1990) which requires a public body to obtain a payment bond for contracts which involve the doing of “public work.” 1 If a payment bond is not obtained, the public body shall be liable for any loss. Minn. Stat. § 574.28 (1990).2

Under the agreement, AMM did obtain a “performance” bond as required by the MAC. The parties dispute, however, whether this bond ran to the benefit of [822]*822Green Electric. Green Electric commenced this action after AMM released the performance bond. The trial court granted Green Electric summary judgment and this appeal followed.

ISSUES

1. Did the trial court err in determining the contract between the MAC and AMM was a contract for the doing of “public work” under Minn.Stat. § 574.26?

2. Did the trial court err in determining the MAC’S performance bond did not comply with the bond requirement in Minn. Stat. § 574.26?

3. Is Green Electric estopped from maintaining an action for failing to take steps to protect itself under Minn.Stat. § 574.31?

4. Is Green Electric required to show AMM was insolvent at the time of the default before recovering against the MAC?

ANALYSIS

On appeal from summary judgment, the reviewing court must review the record for the purpose of answering two questions: (1) whether there are any issues of material fact and (2) whether the trial court erred in its application of the law. Offerdahl v. University of Minn. Hosps. & Clinics, 426 N.W.2d 425, 427 (Minn.1988). The issues decided by the trial court are matters of law. We therefore are not bound by and need not give deference to the trial court’s determination. See Frost-Benco Elec. Ass’n v. Minnesota Pub. Utils. Comm’n, 358 N.W.2d 639, 642 (Minn.1984).

I.

The MAC argues the trial court erred in concluding its contract with AMM was a contract for “public work.” We disagree.

The term “public work” is not defined by statute. We adopt, however, the following factors which both parties set forth to determine whether a contract is for the doing of “public work”: (1) ownership of the project; (2) funding of the project; (3) the scope of the municipality's participation in the project; and (4) the extent the project is put to a public use. See Judd Supply Co. v. Merchants & Mfrs. Ins. Co., 448 N.W.2d 895, 899 (Minn.App.1989), (public works typically are projects owned and paid for by the government, exempt from property taxes and put to common use), pet. for rev. denied (Minn. Feb. 21, 1990).

Our review of the agreement indicates the MAC retained significant ownership interests in the advertising displays; the MAC participated greatly in the project including complete control over all aspects of AMM’s use, construction and placement of the display fixtures; and the project was put to a public use through use of public service announcements which benefitted the MAC. Although the funding was primarily private, no one factor is controlling. The totality of the factors indicates the contract between the MAC and AMM was for the doing of “public work.” Therefore the trial court correctly concluded this was a contract for “public work” which required the MAC to obtain a payment bond pursuant to Minn.Stat. § 574.26.

II.

The MAC asserts that if its contract with AMM was for the doing of “public work,” the performance bond it obtained satisfied the payment bond requirement in Minn.Stat. § 574.26. We disagree.

The agreement required AMM to execute and deliver a performance bond to the MAC which AMM did. The performance bond, however, contained no language indicating it was conditioned to pay subcontractors such as Green Electric. Where a building contract merely requires a .bond for the faithful performance of the contract and does not require the bond to be conditioned to pay laborers and persons supplying materials, there is no implied promise by the surety to pay the laborers and persons supplying materials. Crow & Crow, Inc. v. St. Paul-Mercury Indem. [823]*823Co., 247 Minn. 426, 429-31, 77 N.W.2d 429, 431-32 (1956).

The MAC argues Green Electric could have recovered under the performance bond because the agreement was incorporated into the bond’s terms and the agreement required AMM to obtain a bond conditioned to pay subcontractors. We disagree. Material suppliers may maintain an action directly against the surety only if the building contract “specifically required a bond conditioned to pay laborers and materialmen.” See id. at 429, 77 N.W.2d at 431-32. Here, the agreement itself did not specifically require a bond conditioned to pay laborers and persons supplying materials, thus Green Electric could not have maintained an action directly against the surety. See id. We therefore conclude the bond only protected the MAC by ensuring AMM performed its obligations under the agreement. The bond did not run to the benefit of Green Electric.

The MAC contends its extension of the bond for six months shows that Green Electric could make a claim under the bond. We find this reasoning unpersuasive. It was in the MAC’s own self-interest to extend the bond to protect itself in the event AMM declared bankruptcy.

Additionally, we note that since the MAC now owns the display fixtures, it has received the benefit of Green Electric’s work. It is not unreasonable that the MAC pay for the benefit it received where the MAC could have taken steps to protect itself. The stipulated facts indicate the MAC has obtained payment bonds complying with Minn.Stat. § 574.26 in the past, and considered obtaining such a bond in this case. Thus the MAC could have insulated itself from liability in the event AMM defaulted, but chose not to do so. We conclude the MAC failed to comply with the bond requirement in Minn.Stat.

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Green Electric System, Inc. v. Metropolitan Airports Commission
486 N.W.2d 819 (Court of Appeals of Minnesota, 1992)

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Bluebook (online)
486 N.W.2d 819, 1992 Minn. App. LEXIS 710, 1992 WL 152213, Counsel Stack Legal Research, https://law.counselstack.com/opinion/green-electric-system-inc-v-metropolitan-airports-commission-minnctapp-1992.