131 F.3d 28 | 1st Cir. | 1997


                UNITED STATES COURT OF APPEALS
                    FOR THE FIRST CIRCUIT

                                         

No. 97-1577

          UNITED STATES OF AMERICA FOR THE USE AND,
          BENEFIT OF WATER WORKS SUPPLY CORPORATION,

                     Plaintiff, Appellee,

                              v.

              GEORGE HYMAN CONSTRUCTION COMPANY,
           NATIONAL UNION FIRE INSURANCE COMPANY OF
         PITTSBURGH, P.A., FEDERAL INSURANCE COMPANY
                 AND SEABOARD SURETY COMPANY,

                   Defendants, Appellants.

                                         

         APPEAL FROM THE UNITED STATES DISTRICT COURT

              FOR THE DISTRICT OF MASSACHUSETTS

          [Hon. Patti B. Saris, U.S. District Judge]
                                                               

                                         

                            Before

                    Torruella, Chief Judge,
                                                      

               Campbell, Senior Circuit Judge,
                                                         

                  and Boudin, Circuit Judge.
                                                       

                                         

   Steven  J. Comen,  with whom  Jeremy M.  Sternberg, Dori  C.
                                                                           
Gouin,  Howard J. Hirsch and Goodwin,  Procter & Hoar LLP were on
                                                                   
brief for appellant, The George Hyman Construction Company.
   Bert  J. Capone,  with  whom  CharCretia  V.  DiBartolo  and
                                                                      
Cetrulo & Capone were on brief for appellant, National Union Fire
                          
Insurance Company  of Pittsburgh,  PA; Federal  Insurance Company
and Seaboard Surety Company.
   Gary H. Kreppel for appellee.
                              
                                         
                      December 10, 1997
                                         


          CAMPBELL,   Senior  Circuit   Judge.     Defendant-
                                                         

appellant George Hyman Construction Company ("Hyman") appeals

from the district  court's judgment awarding recovery  to the

Water  Works Supply  Corporation  ("Water Works")  under  the

Miller  Act, 40 U.S.C.    270a-270d  (1986) (the "Miller Act"

or the "Act").   Hyman makes a number of arguments  as to why

the district  court  erred in  allowing  recovery.   In  this

opinion we  concentrate particularly on  Hyman's contentions:

(1) that Water  Works did  not satisfy  the Act's  ninety-day

notice requirement; and  (2) that Water Works did  not have a

sufficiently  close  relationship  to  Hyman  to  qualify for

recovery under the Miller Act.  Finding no merit in these  or

in the other arguments that Hyman advances, we affirm.

                       I.  BACKGROUND.

          The  facts are largely  undisputed.  Hyman  was the

general contractor  on  a $70  million  federal  construction

project  to  build  a  mail  processing  center  in  Waltham,

Massachusetts (the "Post  Office Project" or  the "Project").

Pursuant  to  the  requirements  of  the  Miller  Act,  Hyman

obtained  a payment bond  from National Union  Fire Insurance

Company  of Pittsburgh,  PA, Federal  Insurance Company,  and

Seaboard Surety Company  (collectively, the "Sureties").   On

or  about  September 16,  1994,  Hyman entered  into  an oral

agreement with Calvesco,  Inc. ("Calvesco"), wherein Calvesco

                             -2-


promised to  serve as  demolition, excavation  and site  work

subcontractor for the Post Office Project.

          On  September 16,  1994, the  same  day that  Hyman

hired Calvesco, Calvesco submitted an application for  credit

to  Water Works,  a  purveyor of  pipe and  piping materials.

Water Works extended an unlimited line of credit to Calvesco.

Calvesco was working on at least three projects at that time,

and the  credit application did  not indicate whether  it was

for a particular project.

          Subsequently, Calvesco informed Hyman that it could

not legally serve as subcontractor on the Post Office Project

because  it was  a non-union  shop.   On September  27, 1994,

Hyman  and  Calvesco  agreed to  replace  Calvesco  with Iron

Holdings,  Inc. d/b/a Charles  A. Jackson Co.  ("Jackson"), a

unionized company created by the principals of Calvesco. 

          On October 11,  1994, Jackson notified Water  Works

that it  had replaced Calvesco  as subcontractor on  the Post

Office  Project.    Jackson requested  that  it,  rather than

Calvesco,  receive  Water Works's  invoices.   Because  Water

Works  had  extended  credit  only to  Calvesco  and  not  to

Jackson,  Water  Works  refused   to  supply  Jackson  unless

Calvesco executed a corporate guarantee.  Until the corporate

guarantee could be signed, Water Works agreed to  ship piping

materials  to the  Post  Office  Project  site  at  Jackson's

request and to send the invoices to Calvesco.  That same day,

                             -3-


Jackson placed  an order for  pipe.  Water Works  shipped the

material to  "Charles A. Jackson  Co., c/o Calvesco."   Water

Works  sent  the  invoice to  "Calvesco,  Inc.  Attn: Jackson

Gateman, Treas." ("Gateman").

          From early October through December 29, 1994, Water

Works  filled  seven  purchase orders  relating  to  the Post

Office Project.  Water Works  continued to ship materials  to

the  Post Office  Project site  and to  send the  invoices to

Gateman  at Calvesco.   Jackson  paid for  five of  the seven

shipments; the other  two invoices remain unpaid and  are the

subject  of  this action.    The  first unpaid  invoice,  for

$53,493.83  and dated November  30, 1994, corresponded  to an

order placed on  November 1, 1994 by Lou  Ingegneri, the Post

Office  Project manager  for  Jackson.    The  second  unpaid

invoice,  for $157.76 and dated  January 12, 1995, related to

the last delivery  made by Water Works to  the Project, which

occurred on December 29, 1994.   This second invoice does not

indicate the name of the person placing the order.

          During  January and February of 1995, Water Works's

credit manager Stanley Wernick  ("Wernick") conversed on  the

telephone  with   several  employees   of  Hyman   about  the

outstanding  November and  December invoices.    On March  7,

Wernick sent a demand letter  to Calvesco.  Wernick also sent

a  copy of  this letter  to Hyman  and the  Sureties.   Hyman

responded  to Wernick's communications in writing on March 22

                             -4-


by  indicating that  it had  turned  the matter  over to  its

attorneys and was not  paying any claims until it had a clear

picture of its options.

          On  April  5,  1995,  Water  Works  filed  suit  in

Middlesex  County  Superior Court  against  Calvesco and  its

personal guarantor for monies owed on several jobs, including

the Post Office Project.  This state court suit resulted in a

settlement in  which Calvesco agreed  to pay Water  Works for

the cost of  its materials.  Calvesco has  not satisfied this

judgment.

          On the  same day that  Water Works filed  its state

action,  it also  filed  a  one-count  Miller  Act  complaint

against Hyman and the Sureties  in the United States District

Court for the District of Massachusetts.  The  district court

consolidated Water  Works's federal  action with  twenty-five

other actions  brought against  Hyman arising  from the  Post

Office Project in  order to determine issues of  fact and law

common to all  the claimants.  The district  court found that

Calvesco  and Jackson  were separate corporate  entities, and

that Calvesco  was Hyman's  subcontractor from September  16,

1994  through September  27, 1994,  with  Jackson serving  as

subcontractor thereafter.

          Water  Works argued to  the district court  that it

was in a direct contractual relationship with Calvesco during

the  period  of   time  when  Calvesco  was   Hyman's  direct

                             -5-


subcontractor.   The district  court rejected  this argument,

finding that the  credit application between Water  Works and

Calvesco did not constitute a contract.

          Nevertheless, the court held that Water Works could

recover under the  Miller Act.  Finding that  Water Works had

satisfied  the 90-day notice  requirement in the  Miller Act,

the  court  held  that  Water Works  could  recover  from the

payment bond on the amount  owed for its November order under

two alternative theories.  First, Jackson had an open account

with  Water Works.   Second, Water Works  could recover under

the doctrine of quantum meruit.

          The district court  allowed Water Works  to recover

the amount of its November shipment -- $53,493.83, plus costs

and interest -- but not the amount of its December shipment -

- $157.76.   The key  distinction between the two  orders, in

the court's view,  was that the November order  was signed by

Jackson's project manager, whereas the December  order, being

unsigned, could not be plainly attributed to Jackson.

                   II. STANDARD OF REVIEW.

          We   review   de novo    questions   of   statutory
                                           

interpretation that present pure questions  of law.  See Riva
                                                                         

v. Commissioner of Mass., 61 F.3d 1003, 1007 (1st Cir. 1995).
                                    

The sufficiency of notice under the Miller Act, to the extent

based  on undisputed  facts, is  commonly  reviewed de  novo.
                                                                        

                             -6-


See United States  ex rel.  Consol. Elec.  Distribs., Inc. v.
                                                                      

Altech, Inc.,  929 F.2d  1089, 1092  (5th Cir.  1991); United
                                                                         

States ex rel. Moody v. American Ins. Co.,  835 F.2d 745, 748
                                                     

(10th  Cir. 1987).    We uphold  a  district court's  factual

findings unless they are clearly erroneous.  See Fed. R. Civ.
                                                            

P. 52(a); United  States ex rel. Calderon &  Oyarzun, Inc. v.
                                                                      

MSI Corp., 408 F.2d 1348, 1348 (1st Cir. 1969).
                     

                       III. DISCUSSION.

     A.   The Statutory Scheme of the Miller Act.
                                                            

          The  Miller  Act  requires  a  general   contractor

performing a contract  valued at over  $25,000 on any  public

construction project  to obtain  a performance  bond for  the

protection of  persons supplying  labor and  material in  the

prosecution  of the  work on  the project.   See 40  U.S.C.  
                                                            

270a(a)(2).    The   Act  provides  that  persons   who  have

"furnished labor or material" to  a public project may sue to

recover from the payment bond  any amount owed to them.   Id.
                                                                         

  270b(a).

          The  purpose of  the  Miller  Act  is  "to  protect

persons  supplying labor and material for the construction of

federal public buildings in lieu of the protection they might

receive under state statutes with respect to the construction

of nonfederal buildings."   United States ex  rel. Sherman v.
                                                                      

Carter, 353 U.S.  210, 216 (1957); see also  United States ex
                                                                         

                             -7-


rel. Pittsburgh Tank  & Tower, Inc. v. G&C Enters.,  Inc., 62
                                                                     

F.3d 35, 35  (1st Cir. 1995) (same).   Courts give the  Act a

liberal interpretation to  achieve that purpose.   See, e.g.,
                                                                        

Carter, 353  U.S. at 216;  Clifford F. MacEvoy Co.  v. United
                                                                         

States ex rel. Calvin Tomkins Co., 322 U.S. 102, 107 (1944).
                                             

          Despite the  "highly remedial"  nature of the  Act,

MacEvoy, 322 U.S. at 107, there are two important limitations
                   

on who can recover from the  payment bond.  First, the Miller

Act  allows recovery  from the  bond  by persons  who have  a

"direct  contractual relationship"  with  either the  general

contractor  or  a  first-tier  subcontractor  of  the general

contractor.   40 U.S.C.    270b(a).   The  Supreme Court  has

interpreted  this  provision  to  preclude  recovery  on  the

payment  bond by  anyone whose  relationship  to the  general

contractor is  more remote than a  second-tier subcontractor.

See J.W. Bateson Co. v. United States ex rel. Bd. of Trustees
                                                                         

of the  Nat'l Automatic  Sprinkler Indus.  Pension Fund,  434
                                                                   

U.S. 586, 590-91 (1977); MacEvoy, 322 U.S. at 107.
                                            

          Second, the Act imposes a strict notice requirement

upon  suppliers who  have a  direct  contractual relationship

with a first-tier subcontractor, but no relationship with the

general contractor.   In  order to  recover from  the payment

bond, such suppliers must send written notice of  their claim

on  the payment bond to  the general contractor within ninety

days from the date that they supply the last of the materials

                             -8-


for which they  make a claim.  40  U.S.C.   270b(a); see also
                                                                         

United  States  ex  rel.  John D.  Ahern  Co. v.  J.F.  White
                                                                         

Contracting Co., 649 F.2d 29, 31 (1st Cir. 1981).1
                           

     B.   Notice under the Miller Act.
                                                 

          Fulfilling the Act's  notice provision is  a strict

condition precedent  to recovery  by suppliers of  first-tier

subcontractors.   See  Ahern, 649  F.2d  at 31.   The  notice
                                        

provision serves an important purpose:  it establishes a firm

date  after  which   the  general  contractor  may   pay  its

subcontractors  without  fear  of  further  liability to  the

materialmen or suppliers  of those subcontractors.   See id.;
                                                                        

Noland Co. v. Allied Contractors, Inc., 273 F.2d 917,  920-21
                                                  

(4th Cir. 1959).

                    
                                

1.  The relevant  statutory language concerning  notice reads
as follows:

          Every person who has furnished labor or material in
     the  prosecution of  the work  provided  for [a  federal
     project]  .  .  . and  who  has  not been  paid  in full
     therefor  . .  . shall  have the  right to  sue on  such
     payment bond  . . .  Provided, however, That  any person
                                                       
     having   direct   contractual    relationship   with   a
     subcontractor but no contractual relationship express or
     implied with the contractor furnishing said payment bond
     shall have a right of  action upon the said payment bond
     upon  giving  written notice  to said  contractor within
     ninety days  from the date  on which such  person .  . .
     furnished or supplied the last of the material for which
     such claim  is made,  stating with  substantial accuracy
     the amount claimed and the name of the party to whom the
     material was furnished  or supplied. .  . . Such  notice
     shall be served by mailing the same by  registered mail,
     postage  prepaid,  in   an  envelop  addressed  to   the
     contractor . . . .

40 U.S.C.   270b(a).

                             -9-


     1.   Substance of Water Work's Notice.
                                                      

          While  adherence  to  the  notice  requirement   is

mandatory, courts have allowed some informality  in complying

with  the terms  of the  Miller Act  regarding the  method by

which notice  must be  served.  See,  e.g., Fleisher  Eng'g &
                                                                         

Constr. Co. v. United States ex rel. Hallenbeck, 311 U.S. 15,
                                                           

18  (1940) (holding written notice sufficient although it was

not  sent via registered mail as statute provides); Coffee v.
                                                                      

United States  ex rel.  Gordon, 157 F.2d  968, 969  (5th Cir.
                                          

1946)  (holding that  a  writing  exhibited  to  the  general

contractor in the  course of a discussion  served as adequate

notice  under the  Act).    Courts  have also  been  somewhat

forgiving of deviations from  the statutory requirement  that

the  notice be in  writing.  See,  e.g., Altech,  929 F.2d at
                                                           

1092 (holding  that the  "only reasonable  inference" from  a

meeting  was that the  subcontractor sought payment  from the

general contractor).

          The language of  the Miller Act requires  notice to

the general contractor of the amount of the claim and name of

the party  to whom  the material was  furnished; it  does not

expressly require a  demand that the general  contractor pay.

40 U.S.C.   270b(a);  see also McWaters &  Bartlett v. United
                                                                         

States ex  rel. Wilson, 272  F.2d 291, 295 (10th  Cir. 1959).
                                  

Nevertheless,  courts   have  consistently,   and  we   think

correctly,  held that  "the  written notice  and accompanying

                             -10-


oral statements must inform the general contractor, expressly

or impliedly,  that the  supplier is  looking to  the general

contractor for payment  so that it  plainly appears that  the

nature and state of the  indebtedness was brought home to the

general  contractor."   United States  ex  rel. Kinlau  Sheet
                                                                         

Metal Works,  Inc. v. Great Am.  Ins. Co., 537 F.2d  222, 223
                                                     

(5th  Cir.  1976)  (internal quotation  marks  omitted);  see
                                                                         

also United States ex  rel. Bailey v Freethy, 469  F.2d 1348,
                                                        

1350-51 (9th Cir. 1972).

          Hyman  argues that such  notice as Water  Works was

shown to have  provided to Hyman did not  indicate that Water

Works was looking to it  for payment because the only "formal

notice" that it  received was a copy of  Water Works's demand
                                                

letter to Calvesco.  Hyman points to court  decisions holding

that the mere forwarding to  the general contractor of a copy

of  a demand  sent to  a subcontractor  does not  satisfy the

Miller  Act's notice  requirement.   See Maccaferri  Gabions,
                                                                         

Inc. v. Dynateria, Inc., 91  F.3d 1431, 1437 (11th Cir. 1996)
                                   

(denying recovery under the Miller Act because sending to the

general contractor  a copy  of a  collection letter  that was

sent to the  subcontractor, even when  combined with a  joint

payment plan  and invoices, was insufficient  notice); United
                                                                         

States ex rel. Jinks Lumber Co. v. Federal Ins. Co., 452 F.2d
                                                               

485, 488 (5th Cir. 1971).  

                             -11-


          But while adequate notice requires bringing home to

the general contractor that the supplier is looking to it for

payment,  courts have not required formalistic proof of this.

Communications sent  to the general  contractor detailing the

supplier's  claim against the subcontractor may, for example,

be supplemented by  oral and other written exchanges if these

make  it unambiguously  clear that  the  supplier is  seeking

payment from the general contractor.  See Altech, 929 F.2d at
                                                            

1093; Coffee, 157 F.2d at 970; Kinlau, 537 F.2d at 223.
                                                 

          The record  here shows  not only  that Water  Works

sent Hyman  the amount  and details  of Water  Works's claims

against the subcontractor, but that these were accompanied by

further  oral and written  communications that could  only be

perceived, and  were in fact  perceived, as looking  to Hyman

itself for payment.   Water Works's credit  manager, Wernick,

initiated  matters on February  3, 1995,  by speaking  on the

telephone with two Hyman employees who were handling the Post

Office Project account.   During the course of  several calls

on that day,  Wernick informed them that Water  Works had not

been paid  by the subcontractor  for its materials.   Wernick

thereupon faxed copies  of Water Works's unpaid  invoices and

proofs  of delivery  to Hyman,  thus informing  Hyman of  the

amount  Water  Works  claimed from  the  subcontractor.   The

district court found that, in these calls, Wernick also asked

to obtain  a copy  of Hyman's payment  bond for  "the express

                             -12-


purpose of filing  a bond claim."  Hyman's  personnel refused

to release  the requested  bonding information,  but, as  the

district  court found,  they countered  with  a promise  that

Hyman would issue  joint checks payable to  Jackson and Water

Works,  a  device   to  ensure  payment  for   Water  Works's

materials.  Wernick continued to communicate about the unpaid

claims with  Hyman  throughout the  month  of February.    On

February  9,  Wernick   spoke  again  with  the   same  Hyman

employees, who informed him that they were attempting to meet

with the  subcontractor to  discuss the issue  of the  unpaid

invoices.  Finally on March  7, after more phone calls, Water

Works sent to Hyman a copy of  a demand letter it had written

to Calvesco.2  The copy reflected at the bottom not only that

a copy  had gone to  Hyman but that  copies had been  sent to

Hyman's three  Miller Act  Sureties.   Finally, on March  22,

1995, Hyman wrote Water Works  thanking it for its  patience,

indicating that it  had already paid Jackson,  expressing its

                    
                                

2.  Hyman argues that "the facts of the present case are even
more persuasive  than Maccaferri or  Kinlau since Water Works
                                                       
purported demand  letter  .  .  .  was  not made  to  Hyman's
                                                       
subcontractor Jackson, but rather to Calvesco."  However, the
names  "Calvesco"  and  "Jackson"  seem  to  have  been  used
interchangeably on various occasions, and there is absolutely
no evidence that Hyman was  confused over the identity of the
subcontractor  identified  by  Water  Works.    Calvesco  and
Jackson were owned in  common and Hyman had  been a party  to
the  agreement  that  substituted  Jackson  for  Calvesco  as
subcontractor for the  Project.  While Hyman  personnel, like
Water  Works,  sometimes  referred  to "Calvesco,"  the  name
"Jackson" was correctly used by  Hyman in its March 22 letter
to Water Works declining to pay its claim, showing that Hyman
was fully aware of thecorrect identity of the subcontractor. 

                             -13-


reluctance  to pay the  same bill twice,  and informing Water

Works  that it  had "turned  the  entire matter  over to  our

attorneys and, on  their advi[c]e, we  are not paying  anyone

until we have a clear picture of our options."

          The above  evidence provides clear  indication that

Hyman  understood  that Water  Works  was looking  to  it for

payment, having received, as the district court found "actual

notice."  Wernick's  initial request for a copy  of the bond,

following his faxing of the unpaid invoices and his telephone

calls to Hyman about the debt, suggested that Water Works was

looking to it for payment.  Hyman's comprehension of this can

be  inferred from  Hyman's promise to  issue joint  checks in

substitute for information  about the bond.  But  we need not

decide  whether  these  actions  by  themselves  sufficed  to

constitute  notice.   Following  these  and other  exchanges,

Water Works  sent Hyman on  March 7  a copy of  Water Works's

demand   upon  the  subcontractor.     Unlike  the   copy  in

Maccaferri, this  indicated at  the bottom  that copies  were
                      

also being sent  to Hyman's three Sureties on  the Miller Act

bond, each of which was designated  by name.  It is not  easy

to  think of  a reason  to notify  the Sureties  unless Water

Works was looking to the bond for payment.

          In  Maccaferri,  the  Eleventh  Circuit  held  that
                                    

merely sending the general contractor a copy of the demand to

the subcontractor did not suffice  to show that the  supplier

                             -14-


was looking for  payment to the general, but  the surrounding

circumstances  were  far  less  indicative that  payment  was

sought, and there  was no indication  that the Sureties  were

being sent  copies.  Here,  upon receipt of  a copy of  Water

Works's  demand upon  the subcontractor showing  plainly that

other  copies had been sent  to Hyman's Sureties, Hyman could

have had no illusion that it was not being asked to pay.

          Hyman's letter of March 22, 1995 fully confirms our

interpretation.   In the  letter, Hyman  thanked Water  Works

"for being so patient with us while we are trying to sort out

the problems"  relative to  the Jackson  claims.   The letter

went  on to  speak  of  Hyman's  difficulties  with  Jackson,

Hyman's strong  reluctance to  pay the  same bill  twice, and

that it had  "turned the entire matter over  to our attorneys

and,  on their advice, we are not paying anyone until we have
                                                           

a clear  picture of our  options" (emphasis added).   "In the

end,"  the  letter  went  on,  "we  may,  in  fact,  be  held

responsible for paying these  invoices.  But we  will exhaust

every legal  remedy  before  we  do."    The  district  court

inferred, and we  entirely agree, that this  letter must have

been in  response to  what Hyman believed  was a  request for

payment  by  Water Works.    See  Altech,  929 F.2d  at  1093
                                                    

(general  contractor's  letter held  to  provide  evidence of

notice).  

                             -15-


          We, therefore,  agree with the district  court that

in this period  Hyman received notice sufficient  to meet the

requirements of the Miller Act.

     2.   Timing of Water Works's Notice.
                                                    

          The district court found that the ninety-day period

began  to run on December 29,  1994, the day that Water Works

made its  final  delivery of  materials  to the  Post  Office

Project.   Thus, by  the court's calculations,  Water Works's

letter of March  7, 1995, a copy  of which was sent  to Hyman

and the Sureties,  and which in combination with  the earlier

invoices constituted the  written portion of the  notice, fit

within the ninety-day limit.

          In support of  its assertion that the  court should

have used the  date of the November order,  November 1, 1994,

rather  than the date of  the December order when calculating

the ninety-day  time limit,  Hyman suggests  that each  order

under an  open account represents a separate contract with an

individual  ninety-day  limit.   See  United  States  ex rel.
                                                                         

Robert  DeFilippis  Crane  Serv.,  Inc. v.  William  L.  Crow
                                                                         

Constr.   Co.,  826  F.   Supp.  647,  655   (E.D.N.Y.  1993)
                         

(concluding  that "[w]here  claims are based  on a  series of

contracts, a claim must be made within  90 days from the date

on which the supplier 'furnished  or supplied the last of the

material' for each  underlying contract");  United  States ex
                                                                         

rel. I. Burack, Inc. v. Sovereign  Constr. Co., 338 F.  Supp.
                                                          

                             -16-


657,  661 (S.D.N.Y.  1972).    Under  this  reasoning,  Hyman

argues,  the limit on the November order  had run by the time

that Water Works sent notice to Hyman.

          While several district courts have held that Miller

Act  notice runs  from each  order on  an open  contract, the

weight  of authority contradicts  that position.   See United
                                                                         

States ex rel. A&M Petroleum, Inc. v. Santa  Fe Eng'rs, Inc.,
                                                                        

822  F.2d 547  (5th  Cir. 1987)  (collecting  cases from  the

Second, Fourth,  and Tenth  Circuits that  have held,  either

implicitly or explicitly, that notice on an open account runs

from the  last delivery  of materials);  Noland, 273  F.2d at
                                                           

920-21.    In  Noland,  the  Fourth  Circuit  reasoned  that,
                                 

although a  strict reading might  fulfill the purpose  of the

notice provision by  offering more protection to  the general

contractor, the goal  of a specific statutory  provision must

take a back seat to the purpose of the overall statute, which

is  to provide  recovery  for  suppliers  who  have  provided

materials but  not received  compensation.   See Noland,  273
                                                                   

F.2d at 920-21.

          We  agree  with  the reasoning  in  Noland.   Where
                                                                

claims are based  on an open  account theory, the  ninety-day

notice period for all of the deliveries begins on the date of

the last delivery to the project.  The parties to this action

agree that Water Works delivered the last of its materials to

the Post Office  Project on December 29, 1994.   We therefore

                             -17-


conclude  that the district  court correctly refused  to deny

recovery on the November order  merely because it was part of

an open account.

          Hyman also  argues that, since  the district  court

denied  recovery to  Water  Works for  the December  order of

$157.76,  it should not have used  the date of that order for

purposes of calculating the timeliness of notice.  We are not

persuaded.

          As  an initial  matter, we  note  that the  statute

states that  the time  limit runs from  the date of  the last

delivery of material "for which a claim  is made."  40 U.S.C.

  270b(a).  The statute does not  start the time limit on the

last  claim for which the plaintiff eventually recovers; such

a provision might prove unworkable.

          But   even  if  the  statute  runs  from  the  last

recoverable claim, we see little  problem.  In denying  Water

Works  recovery on  the December  order,  the district  court

wrote a footnote explaining its reasoning for  distinguishing

between  the November and December orders: the November order

form contained the name of a Jackson employee while there was

no name on the December  order.  The district court concluded

that there was "no evidence as to whether Calvesco or Jackson

placed the [December] order."  Accordingly, the court limited

Water Works's recovery  to the amount  of the November  order

($53,493.83) plus costs and interest.

                             -18-


          The  undisputed facts are as follows.  First, Water

Works provided materials that were incorporated into the Post

Office Project.   Second, Water Works did  not begin shipping

these materials until after Jackson became the  subcontractor

on the  Project.  Third,  although Water Works  insisted upon

sending its invoices  to Calvesco, Jackson paid for the first

five shipments  by Water Works.   Fourth, Calvesco was  not a

subcontractor on the Project during the time that Water Works

shipped materials to the Project.   Fifth, the last date that

Water Works delivered  materials to the Project  was December

29, 1994.

          On these facts,  we see no reason for  the court to

have  questioned if Calvesco  rather than Jackson  placed the

December order.  Calvesco, having been replaced by Jackson as

the  subcontractor on the Post  Office Project, had no reason

to  order  materials  for  this  job.   The  only  reasonable

inference  is  that  Jackson placed  this  order,  as  it did

earlier ones.   While in the  absence of a  cross appeal, the

court's denial  of the  $157.76 stands, we  see no  reason to

reject the court's  determination that the December  29, 1994

date triggered the notice period.

          As  the notice  was adequate  and  as the  district

court  did  not  err  in  beginning  the  notice period  from

December   29,  1994,  Water   Works  satisfied   the  notice

requirements of the Miller Act.

                             -19-


     C.   Water Works's Relationship to Hyman.
                                                         

          In order to recover from the payment bond, a person

must have a "direct contractual relationship" either with the

general contractor or with a direct subcontractor.  40 U.S.C.

  270b(a); see  also Bateson, 434 U.S. at 590-91.   Hyman and
                                        

Water  Works  agree  that they  had  no  direct relationship.

Hyman argues further  that Water Works did not  have a direct

contractual relationship with any of Hyman's  subcontractors.

Hyman  relies upon  the  undisputed  fact  that  Water  Works

consistently refused to extend credit to Jackson and regarded

Calvesco as its customer.

          As  the district court correctly noted, courts have

allowed  recovery under  the  Miller  Act  by  suppliers  who

furnish materials  to a subcontractor  "from time to  time on

open account  . .  . without formal  contract."   Noland, 273
                                                                    

F.2d at  919; see also  Apache Powder Co. v. Ashton  Co., 264
                                                                    

F.2d  417, 422-23  (9th Cir.  1959).   It is  undisputed that

Water  Works supplied  materials  to  the  Project  and  that

Jackson  was  the   demolition,  excavation  and   site  work

subcontractor  on the Post Office Project after September 27,

1994.  In addition, Jackson, rather than Calvesco, paid Water

Works's  first five invoices.  This evidence clearly supports

the  district court's  finding  of the  existence of  an open

account  between Jackson and Water  Works.  Since Jackson was

                             -20-


Hyman's direct subcontractor,  the Act's tiering requirements

are satisfied.

          Since we  find  that the  district court  correctly

allowed Water Works to recover  under an open account theory,

we need not address the propriety of its alternative holding,

which allowed recovery on the basis of quantum meruit.

          We   have   carefully  considered   Hyman's   other

arguments; none of them  persuade us that the district  court

erred in its determination.

          Affirmed.
                              

                             -21-

© 2024 Midpage AI does not provide legal advice. By using midpage, you consent to our Terms and Conditions.