Spartan Mechanical, Inc. v. St. Paul Fire & Marine Insurance Co.

414 N.W.2d 476, 1987 Minn. App. LEXIS 4959
CourtCourt of Appeals of Minnesota
DecidedOctober 27, 1987
DocketNo. C5-87-1023
StatusPublished
Cited by2 cases

This text of 414 N.W.2d 476 (Spartan Mechanical, Inc. v. St. Paul Fire & Marine Insurance Co.) 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
Spartan Mechanical, Inc. v. St. Paul Fire & Marine Insurance Co., 414 N.W.2d 476, 1987 Minn. App. LEXIS 4959 (Mich. Ct. App. 1987).

Opinion

OPINION

LANSING, Judge.

Spartan Mechanical, Inc., subcontracted to do mechanical work in the renovation of two Minneapolis schools and brought this action against St. Paul Fire & Marine Insurance Company to recover on the surety bond issued by St. Paul Fire & Marine to the general contractor of the projects. At the close of Spartan’s case-in-chief and again at the conclusion of the trial, St. Paul Fire & Marine moved to dismiss Spartan’s claim on the ground that Spartan had failed to comply with the notice requirements of Minn. Stat. § 574.31 (1984). The trial court ordered judgment dismissing Spartan’s action for failure to provide timely notice of its claim, and Spartan appeals. We reverse and remand for further proceedings.

[478]*478FACTS

In 1980, Spartan subcontracted to perform mechanical work on the renovation of the Tuttle School and the John Ericsson School, both owned by Minneapolis Special School District No. 1. As required by Minn.Stat. § 574.26 (1980), the general contractor obtained from St. Paul Fire & Marine a bond covering both projects. Spartan admits having completed its work on both projects by December 1982, and the trial court found that “all contract work on the school was completed in 1983.” By August 1983, Spartan was aware that both schools had been occupied and used for their intended purposes since sometime in 1982.

Spartan did not file a notice of claim on either project until June 28, 1984. Although no final certificate of payment had been authorized on either project, the trial court concluded that Spartan had failed to give timely notice and dismissed its claim on that ground. This appeal followed.

ISSUE

Do the facts support the trial court’s conclusion that Spartan failed to give timely notice under Minn. Stat. § 574.31?

ANALYSIS

The trial court found as facts: (1) all contract work on the schools was completed in 1983; (2) by August 1983, Spartan had notice that the buildings were being occupied and used for their intended purposes; and (3) Spartan did not file a notice of claim until June 28,1984. In its incorporated memorandum, the trial court further noted that “all that remained before the contracts could be fully closed out was the final resolution of some accounting issues.” Spartan does not challenge those findings, and they are supported by the record.

The trial court did not make a specific finding on the acceptance of the projects by the school district, but its memorandum implies that acceptance was “inferred from the use of the building and the surrounding circumstances.” Because “acceptance” triggers the notice requirement of Minn. Stat. § 574.31, the issue on appeal is the proper interpretation of “acceptance” under that statute.

Under Minn.Stat. § 574.31, no action can be maintained against a surety on a contractor bond unless the claimant files a written notice of the claim

within 90 days after the completion of the contract and acceptance thereof by the proper public authorities * * *.

Although strict compliance with this notice provision is a condition precedent to the maintenance of an action against the surety, the 90-day statute of limitations does not begin to run until there has been both completion and acceptance of the project. Alexander Construction Co., Inc. v. C & H Contracting, Inc., 354 N.W.2d 535, 538 (Minn.Ct.App.1984) (citing Wheeler Lumber Bridge & Supply Co. v. Seaboard Surety Co., 218 Minn. 443, 447, 16 N.W.2d 519, 521 (1944)).

In the memorandum accompanying its order, the trial court relied on Guaranteed Gravel & Sand Co. v. Aetna Casualty & Surety Co., 174 Minn. 366, 371, 219 N.W. 546, 548 (1928), for the proposition that acceptance does not require a formal motion or resolution but, rather, can be inferred from the use of the building and the surrounding circumstances. Noting the absence of any specific contract language on the issue of acceptance1 and that the [479]*479buildings in question had been fully occupied before Spartan filed its claim and only accounting issues remained before the contract could be closed, the trial court concluded that Spartan’s failure to give timely notice barred its claim.

The evidence on which this conclusion was based is sparse. Allen Johnson, construction coordinator for the Minneapolis public schools, testified on direct examination that (1) both projects were still “on hold” and not completed; (2) final certificates of payment had not been issued nor final payment made; and (3) no papers were on file indicating acceptance of the projects.

On cross-examination, however, Johnson admitted that the Tuttle School project was completed sometime in 1988 and that only one item concerning roof damage (which respondent challenged) remained to be done on the Ericsson School project. Johnson further testified that both schools had been used by the school district for their intended purpose, as public schools, since sometime in 1982. Finally, Johnson stated that what remained to be done in the school district’s relationship with the general contractor was a final contract accounting, which involved monetary adjustments.

St. Paul Fire & Marine argues that the trial court properly found acceptance on the basis of evidence that the buildings had been occupied since 1982 and completed since 1983. However, for acceptance to be inferred from the use of the building and the surrounding circumstances, the evidence must show an act by the owner with intent

to receive the building as its own as a compliance with the required duty of the contractor.

Guaranteed Gravel, 174 Minn, at 371, 219 N.W. at 548.

Evidence indicating that the owner considers the building to be in compliance with the contract is important, because acceptance by the owner operates as a waiver of any readily ascertainable defects in the construction. See 2 S. Stein, Construction Law 117.08 (1986). Mere use and completion of the building, without more, does not even raise an issue of fact on whether acceptance has occurred. See Alexander Construction, 354 N.W.2d 535, 538 (affirming grant of summary judgment in favor of subcontractor despite affidavits stating that building had been completed and in use months before the notice of claim was filed).

Even when completion is evidenced by the issuance of a final contract voucher, more is required for a finding of “acceptance” under the statute. After completion,

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Bluebook (online)
414 N.W.2d 476, 1987 Minn. App. LEXIS 4959, Counsel Stack Legal Research, https://law.counselstack.com/opinion/spartan-mechanical-inc-v-st-paul-fire-marine-insurance-co-minnctapp-1987.