N-Tek Construction Services, Inc. v. Hartford Fire Insurance Co. , 89 Mass. App. Ct. 186 ( 2016 )

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14-P-1483 Appeals Court
N-TEK CONSTRUCTION SERVICES, INC. vs. HARTFORD FIRE INSURANCE
COMPANY.
No. 14-P-1483.
Essex. November 5, 2015. - March 14, 2016.
Present: Agnes, Sullivan, & Blake, JJ.
Public Works, Payment bond. Surety. Notice. Bond, Public
works, Construction contract bond. Contract, Public works,
Construction contract, Bond, Surety.
Civil action commenced in the Superior Court Department on
November 18, 2010.
After transfer within the Superior Court Department, the
case was heard by Timothy Q. Feeley, J.
Edward J. Quinlan for the plaintiff.
John W. DiNicola, II, for the defendant.
AGNES, J. In this case we address the notice provision
contained in G. L. c. 149, § 29, as amended by St. 1972, c. 774,
§ 5 (§ 29),1 in the context of a $23.29 million publicly funded
1
General Laws c. 149, § 29, third par., provides in part as
follows:
2
project to repair a bridge in Gloucester (project). In
particular, we decide whether the electronic mail message (e-
mail) notice given by the claimant, N-Tek Construction Services,
Inc. (N-Tek), to the general contractor, SPS New England, Inc.
(SPS), satisfied § 29. N-Tek contends that the Superior Court
judge, who tried this case without a jury, erred in concluding
that the e-mail sent to SPS by N-Tek's principal failed to
satisfy the requirements of § 29. For the reasons that follow,
we affirm.
SPS, the general contractor, posted a payment bond from a
surety, Hartford Fire Insurance Company (Hartford). N-Tek filed
the underlying action, seeking recovery against SPS's bond
"Any claimant having a contractual relationship with a
subcontractor performing labor or both performing labor and
furnishing materials pursuant to a contract with the
general contractor but no contractual relationship with the
contractor principal furnishing the bond shall have the
right to enforce any such claim as provided in [G. L.
c. 149, § 29, second par.,] only if such claimant gives
written notice to the contractor principal within sixty-
five days after the day on which the claimant last
performed the labor or furnished the labor, materials,
equipment, appliances or transportation included in the
[G. L. c. 149, § 29, first par.,] coverage, stating with
substantial accuracy the amount claimed, the name of the
party for whom such labor was performed or such labor,
materials, equipment, appliances or transportation were
furnished . . . . The notices provided for in this
paragraph . . . shall be served by mailing the same by
registered or certified mail postage prepaid in an envelope
addressed to the contractor principal at any place at which
the contractor principal maintains an office or conducts
his business, or at the contractor principal's residence,
or in any manner in which civil process may be served."
3
pursuant to G. L. c. 149, § 29, based on its claim that it had
not been fully paid for its work furnished to a subcontractor,
Seaway Coatings, Inc. (Seaway). N-Tek sought to reach and apply
the payment bond funds to satisfy outstanding invoices.
Hartford denied liability. After a bench trial, the judge found
that N-Tek did not provide sufficient written notice of its bond
claim to SPS as required by § 29, and ordered judgment to enter
for Hartford. On appeal, N-Tek argues that the judge
misinterpreted § 29 by imposing an added requirement that the
notice "include and communicate an intent to assert a claim
against the [g]eneral [c]ontractor's" bond, based on Federal
cases construing the Miller Act, 40 U.S.C. §§ 3131-3134 (2002),
the Federal analogue to § 29.2
Facts. We summarize the facts found by the judge,
supplemented by undisputed parts of the record.
2
The Miller Act requires, in pertinent part, that laborers
and material suppliers with no direct relationship with the
general contractor furnishing the payment bond give "written
notice to the contractor within 90 days from the date on which
the person did or performed the last of the labor or furnished
or supplied the last of the material for which the claim is
made." 40 U.S.C. § 3133(b)(2). It was appropriate for the
judge to look to Federal cases for guidance in these
circumstances. See Scaccia v. State Ethics Commn., 431 Mass.
351, 355 (2000).
4
1. Project. On August 14, 2008, the Massachusetts Highway
Department (department)3 entered into a contract with SPS to
perform repairs to the A. Andrew Piatt Bridge in Gloucester.
Built in 1950, the four-lane deck bridge spans the Annisquam
River and is a primary access way to the Cape Ann area. In
turn, SPS engaged Seaway, a Maryland-based painting
subcontractor, to install a platform to be used by all trades,
and to clean and paint the bridge. Seaway and SPS executed two
subcontracts, which had a total combined value of $5,765,360.
At SPS's request, Seaway posted separate payment and performance
bonds,4 which were issued by its surety, First Sealord Surety,
Inc. (First Sealord).5
3
The department has since merged into a new State agency,
the Department of Transportation, pursuant to St. 2009, c. 25
(the Transportation Reform Act of 2009). See G. L. c. 6C, §§ 1
et seq. See also Boxford v. Massachusetts Highway Dept., 458
Mass. 596, 597 n.4 (2010) (functions of Massachusetts Highway
Department merged into newly created Department of
Transportation). Our use of "department" refers to both
entities.
4
Seaway's payment bond was not the "statutory bond" to
which laborers or suppliers may turn if unpaid. The statutory
bond is the one given by the project's general contractor.
Marinucci Bros. & Co. v. Semper Constr. Co., 343 Mass. 738, 740
(1962).
5
SPS was within its rights to request Seaway to post the
bonds. Even though there is a lack of privity between a general
contractor's surety and the project's sub-subcontractors, this
circumstance does not bar a sub-subcontractor from recovering
under a general contractor's payment bond. See Peters v.
Hartford Acc. & Indem. Co., 377 Mass. 863, 871 (1979).
5
2. N-Tek's work for Seaway. In 2008, Joseph P. Toffoloni
formed N-Tek, a Massachusetts firm, to provide construction
management consultant (or project manager) services to out-of-
State subcontractors, such as Seaway, whose business operations
in the Commonwealth did not support having their employees act
as an on-site manager or superintendent. Toffoloni was N-Tek's
president and sole employee.6 On October 6, 2008, Toffoloni sent
a proposal to Seaway (October 6 proposal), offering his services
as a project manager on the project.7 For his compensation,
Toffoloni proposed, in part, a base fee of $150 per hour, "plus
reasonable expenses."
N-Tek and Seaway did not enter into or otherwise bind
themselves to a written contract of hire. Nor did Seaway agree,
in any writing, to the terms and conditions of N-Tek's October 6
proposal.8 Seaway engaged Toffoloni, albeit informally, to serve
as a project manager, and fully paid N-Tek's first twenty-one
6
We refer to Toffoloni and N-Tek interchangeably, as did
the judge.
7
The judge found that Toffoloni was "highly qualified to"
manage the project, and that he had "a great deal of experience
in all facets of such work, from estimating and bidding jobs to
administering contracts, purchasing materials, and providing
field supervision."
8
On direct examination, Toffoloni identified the unsigned
October 6 proposal as "the contract that [he] had with Seaway."
He testified that his role was "to provide Seaway management
assistance on this project." On cross-examination, Toffoloni
agreed that Seaway had never signed the October 6 proposal.
6
invoices, for the period between October of 2008 and September
13, 2009. Those invoices represented $190,821 in total
billings.
3. Toffoloni's e-mail to SPS regarding unpaid work.
Seaway's painting work, scheduled to start in May of 2009,
stalled for various reasons, including the fact that certain
preparatory steps, such as demolition and concrete repairs, had
not been completed. Seaway experienced financial difficulties,
initially in the summer of 2010 and thereafter, causing it to
fall behind on payments to its suppliers and others. In the
run-up to Seaway's financial troubles, Toffoloni sent the
following e-mail on March 16, 2010 (March 16 e-mail) to Robert
A. Naftoly, SPS's vice-president of project management:
"Hello Bob. Enclosed is the January 15, 2010
Statement to Seaway Coatings, Inc./Mr. Athanasios
Koussouris for services through that date by N-Tek
Construction Services, Inc. for the [project] that are
still unpaid.
"Please give me a call at [telephone number] when you
have a chance. Thanks. Joe[.]"
An attached statement listed ten invoices, totaling $77,166.72,
unpaid by Seaway.9 As of March 16, 2010, Naftoly "had never
heard of N-Tek" but he "clearly" understood that Toffoloni was
9
Toffoloni identified each invoice by a date and
corresponding number.
7
connected in some way to N-Tek. Naftoly did not understand
Toffoloni to be making a claim against SPS or Hartford.10
On October 20, 2010, SPS informed Seaway that it was
henceforth barred from performing further work on the project,
per an order of the department. SPS hired a substitute firm,
which soon abandoned the project. Three other firms came and
went before SPS engaged a fifth (and final) firm that managed to
substantially complete the cleaning and painting work.
Prior proceedings. Pretrial rulings pared down what had
been a sprawling multiparty case to the present dispute between
N-Tek and Hartford. At trial, N-Tek called Toffoloni as its
only witness. Naftoly testified on behalf of Hartford.
Summarizing its case, N-Tek asserted that SPS had been put on
notice by the March 16 e-mail that N-Tek had not been paid for
its work performed for Seaway. Relying on evidence of a
"business relationship" between Seaway and N-Tek and the unpaid
invoices, N-Tek's trial counsel argued in closing that his
client was entitled, under § 29, to reach and apply the SPS bond
funds to pay down the invoices in question.
On the other hand, Hartford argued that no legally valid,
enforceable contract existed between Seaway and N-Tek; that N-
Tek failed to provide legally sufficient written notice to SPS;
10
Naftoly believed that Toffoloni was merely "looking for
my help to get these invoices resolved or paid."
8
and that N-Tek fell well short of proving any legitimate damages
recoverable under § 29.
Standard of review. In reviewing a judgment entered after
a bench trial, we review the trial judge's factual findings,
based on the "clearly erroneous" standard of Mass.R.Civ.P.
52(a), as amended, 423 Mass. 1402 (1996). City Rentals, LLC v.
BBC Co., 79 Mass. 559, 560 (2011). If a trial judge's ultimate
finding involves the interpretation of a statute, as is the case
here, our review is de novo.11 See Sutton Corp. v. Metropolitan
Dist. Commn., 423 Mass. 200, 209-210 (1996).
Analysis. Section 29, which has long-standing
antecedents,12 is a remedial law intended to protect laborers and
11
When presented with a question of statutory
interpretation, we look first to the applicable statutory
language, which is the "principal source of insight into the
legislative purpose." Registrar of Motor Vehicles v. Board of
Appeal on Motor Vehicle Liab. Policies & Bonds, 382 Mass. 580,
585 (1981). "When a statute does not define its words we give
them their usual and accepted meanings, as long as these
meanings are consistent with the statutory purpose."
Commonwealth v. Zone Book, Inc., 372 Mass. 366, 369 (1977).
Procurement of public construction in this Commonwealth is
governed by three distinct but related statutes: G. L. c. 149,
§§ 44A-44H; G. L. c. l49A, §§ 1-11; G. L. c. 30, § 39M.
12
An early forerunner of § 29, St. 1878, c. 209, provided
in pertinent part: "it shall be the duty of the officers or
agents contracting in behalf of the Commonwealth to provide
sufficient security, by bond or otherwise, for payment by the
contractor and all sub contractors for all labor performed or
furnished, and all materials used in the construction or repair
thereof." See International Heating & Air Conditioning Corp. v.
Rich Constr. Co., 372 Mass. 134, 136 (1977). See also Burgess,
9
material suppliers from nonpayment by contractors and
subcontractors involved in the construction or repair of public
buildings and public works. See Otis Elevator Co. v. Long, 238
Mass. 257, 264 (1921); Peters v. Hartford Acc. & Indem. Co., 377
Mass. 863, 865 (1979); Costa v. Brait Builders Corp., 463 Mass.
65, 72 (2012) (§ 29 also "benefits" general public).
1. General principles. "Suretyship may be defined as a
contractual relation whereby one person engages to be answerable
for the debt or default of another." Stearns, Law of Suretyship
§ 1.1, at 1 (5th ed. 1951). "The fact that this [payment] bond
[issued by Hartford] is required by statute does nothing to
alter the settled principles of contract and suretyship law."
Peerless Ins. Co. v. South Boston Storage & Warehouse, Inc., 397
Mass. 325, 327 (1986). See Wood v. Tuohy, 67 Mass. App. Ct.
335, 341 (2006); C & I Steel, LLC v. Travelers Cas. & Sur. Co.
of America, 70 Mass. App. Ct. 653, 657 (2007). A statutory
payment bond is a contract, although its terms and conditions
are largely defined by statute, in this case, § 29. A surety's
obligation under a statutory payment bond corresponds to that of
its principal. John W. Egan Co. v. Major Constr. Mgmt. Corp.,
46 Mass. App. Ct. 643, 646 (1999). In essence, a surety is
liable to make good any default of its principal within the
Creditors Problems on Public Works Projects in Mass., 40 B.U. L.
Rev. 239, 240 (1960).
10
bond's penal sum. See George H. Sampson Co. v. Commonwealth,
202 Mass. 326, 339 (1909); Di Fruscio v. New Amsterdam Cas. Co.,
353 Mass. 360, 364 (1967).
A person who has furnished labor or materials for public
works and who has not been fully paid has a right under § 29 to
seek recovery under the bond of the general contractor in
satisfaction of amounts justly due. Section 29 attaches three
conditions to this right. A claimant must be eligible to claim
protection under § 29; give written notice to the general
contractor of its claim; and commence an action in Superior
Court within the time limitations established by the statute.
2. Section 29. a. Eligible claimant. The Legislature
has defined those persons who are entitled to § 29's
protections, including "[a]ny claimant having a contractual
relationship with a subcontractor performing labor . . .
pursuant to a contract with the general contractor but no
contractual relationship with the contractor principal
furnishing the [payment] bond . . . ." § 29, third par.13 N-Tek
says it fits this category. We agree.
N-Tek had a contractual relationship, albeit implied by
law, with Seaway but not with the "contractor principal" (SPS)
13
The only other eligible claimants, as defined by § 29,
second par., are those persons "having a contractual
relationship with the contractor principal furnishing the bond,"
a category that plainly does not encompass N-Tek.
11
furnishing the bond. The record evidence warranted a finding
that Seaway and N-Tek, by their largely unambiguous conduct, had
established a business arrangement, or course of dealing, to the
extent that N-Tek agreed to provide managerial services for
Seaway for the project and, in return, Seaway agreed to pay for
N-Tek's services, described by written invoices, which were
often submitted by N-Tek to Seaway on a biweekly basis. While
it is unnecessary for us to be any more precise about the nature
of the relationship between N-Tek and Seaway, N-Tek's invoices
are remarkable for the lack of meaningful information,14 much
less any detail, respecting the particular work for which N-Tek
sought payment.
b. Written notice. A claimant, like N-Tek here, who has
dealt exclusively with a subcontractor (Seaway) and has had no
contractual relationship with the general contractor (SPS) must
give written notice of its claim to the general contractor.
Specifically, pursuant to § 29, N-Tek had to give "written
notice to the contractor principal [i.e., SPS] within sixty-five
days after the day on which the claimant [N-Tek] last performed
the labor" on the public works project, "stating with
substantial accuracy the amount claimed, [and] the name of the
14
Toffoloni testified that he had kept a notebook that
contained detailed information for (or an itemization of) his
hourly work. He conceded that the notebook had not been offered
to Hartford in the course of litigation; the notebook was
apparently destroyed prior to the commencement of this action.
12
party [Seaway] for whom such labor was performed." N-Tek argues
that the written notice need not "contain any express or
explicit statements that the claimant is seeking payment from
the general contractor or that a claim against its bond will be
pursued." While it is true that the statutory "notice
requirement can be satisfied by a brief letter" from the
supplier or laborer to the general contractor, it is essential
nonetheless that the notice "make unambiguous the claimed rights
of all." Barboza v. Aetna Cas. & Sur. Co., 18 Mass. App. Ct.
323, 328 (1984).15
N-Tek's argument disregards the purpose of the notice
requirement and judicial decisions interpreting § 29 and the
Federal Miller Act's virtually identical language. See
Bastianelli v. National Union Fire Ins. Co., 36 Mass. App. Ct.
367, 369-370 (1994). See also United States ex rel. J.A.
Edwards & Co. v. Thompson Constr. Corp., 273 F.2d 873, 875-879
(2d Cir. 1959); United States ex rel. Water Works Supply Corp.
v. George Hyman Constr. Co., 131 F.3d 28, 32 (1st Cir. 1997).
Section 29 establishes a firm date -- i.e., sixty-fifth day from
15
The judge ruled that N-Tek's March 16 e-mail was "in
writing" and "notice of something, but it was not timely notice
of a claim against SPS and its surety bond." The judge assumed
(and Hartford does not dispute) that a sufficiently detailed e-
mail would satisfy § 29's requirement that the notice must "be
served by mailing the same by registered or certified mail
postage prepaid in an envelope addressed to the contractor
principal" at its place of business. In view of the result we
reach, we are not required to resolve this issue.
13
and after the date when the claimant last furnished labor --
after which the general contractor may pay a first-tier
subcontractor without fear of such further liability to sub-
subcontractors or suppliers who had furnished labor or material
to the first-tier subcontractor. The notice requirement
bolsters the legislative policy to protect the general
contractor, by requiring the claimant's writing to serve as a
presentation of a claim against the general contractor. As to
this narrow point of law, "courts have consistently, and we
think correctly, held that 'the written notice and accompanying
oral statements must inform the general contractor, expressly or
impliedly, that the supplier [or, as here, the laborer] 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.
Water Works Supply Corp. v. George Hyman Constr. Co., supra at
32, quoting from United States ex rel. Kinlau Sheet Metal Works,
Inc. v. Great Am. Ins. Co., 537 F.2d 222, 223 (5th Cir. 1976).
Toffoloni's March 16 e-mail, when considered in light of
all the material surrounding circumstances (as this court did in
Bastianelli v. National Union Fire Ins. Co., supra at 370),
fails to state, explicitly or implicitly, that he (or his firm)
was making a claim against SPS for services rendered on the
14
project, and thus fails to satisfy § 29.16 We think that the
strict notice provision of § 29 was intended to relieve the
general contractor of the need to engage in guesswork as to
whether a claim was being made against it or the statutory
bond.17 We do not believe that the Legislature "intended to have
it held that such little expenditure of effort is too much
diligence to require" of a claimant, sub-subcontractor or
supplier, to preserve its rights against the general
contractor's payment bond. United States ex rel. J.A. Edwards &
16
We note that N-Tek made a formal claim against First
Sealord, Seaway's surety, by letter dated May 28, 2010, which,
the judge found, "could not [have been] more explicit as to its
purpose."
17
In analogous cases, compliance by a claimant with the
statutorily required notice has been held to be a condition
precedent to the existence of a cause of action. See, e.g.,
Webber Lumber & Supply Co. v. Erickson, 216 Mass. 81, 82-83
(1913) (mechanic's lien could not attach unless claimant gave
written notice to owner of property to be affected by lien "of
an intention to claim a lien"; notice in question "was fatally
defective" and, thus, lien never attached [emphasis added]);
Warren Bros. Co. v. Peerless Ins. Co., 8 Mass. App. Ct. 719, 723
(1979) ("function of the notice [in mechanic's lien situation]
is to establish who are potential claimants[,]" which is "a
subject in which the principal [the general contractor] and the
surety [the bonding company] have a lively interest"). The same
is true here. Without the proper notice required by § 29, the
general contractor, and its surety, may well not know who the
sub-subcontractor is, in terms of its relationship with the
project and other basic facts underlying the claim.
15
Co. v. Thompson Constr. Corp., 273 F.2d at 879 (quotation
omitted).18
Section 29's written notice requirement constitutes a
"condition precedent" under Massachusetts law -- i.e., an event
that must occur before the principal or its surety is obligated
to perform19 -- that N-Tek had to meet to be able to enforce its
statutory (§ 29) rights.20 See International Bus. Machs. Corp.
18
In Warren Bros. Co. v. Peerless Ins. Co., supra, the
claimant (like N-Tek here) relied on the "line of decisions
which stands for the principle that where 'the statutory purpose
is remedial in nature, it should be broadly construed to
effectuate its self-evident policies.'" 8 Mass. App. Ct. at
721-722, quoting from M. Lasden, Inc. v. Decker Elec. Corp., 372
Mass. 179, 183 (1977). This court responded that, without
sufficient written notice by the lien claimant, the general
contractor and its surety "may well not know who the sub-
subcontractors are and have no basis for holding back an
appropriate retainage from the intervening subcontractor." Id.
at 723. This court added that the claimant "overlooks this
practical consideration when it argues that the filing of a lien
bond makes compliance with G. L. c. 254, § 4, a useless
formality, serving no purpose other than to clutter the
registries of deeds." Ibid. "[N]o lien exists for a
subcontractor unless the notice provisions of § 4 have been
complied with." Ibid.
19
See Massachusetts Mun. Wholesale Elec. Co. v. Danvers,
411 Mass. 39, 45-46 (1991). See also Drake Fishing, Inc. v.
Clarendon Am. Ins. Co., 136 F.3d 851, 853 (1st Cir. 1998).
20
Written notice has always been a part of the statutory
bond regulatory scheme. An early forerunner to § 29, G. L.
c. 30, § 39 (since repealed), had required a creditor to file a
sworn statement of claim with the Commonwealth's contracting
officers within ninety days after the claimant ceased to perform
labor or supply material. See Di Fruscio v. New Amsterdam Cas.
Co., 353 Mass. at 361. In Di Fruscio, the Supreme Judicial
Court held, "[t]here was no failure in the jurat adequately to
identify the claim that was sworn to." Id. at 362. The notice
16
v. Quinn Bros. Elec. Co., 321 Mass. 16, 17 (1947); Armco
Drainage & Metal Prods., Inc. v. Framingham, 332 Mass. 129, 132
(1954). If a creditor fails to meet a condition precedent to
the principal's liability, the surety is not obligated to
perform. Stearns, Law of Suretyship § 7.18, at 225. "It ill
serves the statutory scheme, however, and would stimulate
litigation, if we obscured the relatively simple statutory
prerequisites upon which all parties in public contracting,
including the sureties, presumably rely." Barboza v. Aetna Cas.
& Sur. Co., 18 Mass. App. Ct. at 328.
Conclusion. A fair reading of § 29, in light of its
history, the legislative aims advanced by the statute, settled
contract and suretyship principles not displaced or altered by
§ 29, and governing Massachusetts case law -- bolstered by
Federal court decisions interpreting the Miller Act's parallel
text that is virtually identical to the provisions of § 29 in
question here -- leads us to conclude that the judge was correct
in ruling that N-Tek did not give SPS sufficient written notice
of its bond claim to satisfy § 29.
Judgment affirmed.
named the alleged debtor, identified the contract, stated the
account, had been "subscribed," and indicated that the "Balance
due" was $21,718.02. Ibid. See Mosaic Tile Co. v. Rusco Prods.
of Mass., Inc., 350 Mass. 432, 440 (1966) (plaintiff's fact-
based allegations, set out in its complaint, "sufficiently
assert[ed] compliance with" § 29). See also John W. Egan Co. v.
Major Constr. Mgmt. Corp., 46 Mass. App. Ct. at 648.