Aetna Cas. & Sur. Co. v. Doleac Elec. Co., Inc.

Decision Date06 March 1985
Docket NumberNo. 54571,54571
Citation471 So.2d 325
CourtMississippi Supreme Court
PartiesAETNA CASUALTY & SURETY COMPANY v. DOLEAC ELECTRIC COMPANY, INC.

Aultman, Tyner, Weathers & Gunn, Lawrence C. Gunn, Jr., Hattiesburg, for appellant.

M. Ronald Doleac, Finch, Wicht & Doleac, Hattiesburg, for appellee.

Before ROY NOBLE LEE, P.J., and DAN M. LEE and PRATHER, JJ.

PRATHER, Justice, for the Court:

This appeal addresses liabilities of a surety on a public works construction bond. Three "co-prime" contractors were awarded contracts by the Mississippi State Building Commission to construct a public building. Doleac Electric Company (Doleac), one of the "co-prime" contractors sued the surety, Aetna Casualty and Surety Company (Aetna), of another prime contractor on the same construction project for breach of contract. From a judgment awarded against Aetna in the Chancery Court of Forrest County, both parties appeal.

Aetna appeals assigning as error:

(1) The chancery court erred in proceeding with the suit where the obligee failed to publish notice of final acceptance of the project and appellee failed to publish notice of the pendency of the suit as required by Miss.Code Ann. Secs. 31-5-7 and 31-5-15 (1972).

(2) The chancery court erred in awarding damages for extra labor costs where the work performed was required under the terms of the initial contract;

(3) The chancery court erred in awarding Doleac damages for fixed overhead expenses.

Doleac cross-appeals assigning as error:

(1) The trial court erred in denying appellee damages for loss of profit resulting from breach of contract;

(2) The lower court erred in denying Doleac prejudgment interest on its damages;

(3) The lower court erred in denying Doleac attorney's fees as an item of damage.

I.

On October 15, 1973, the Mississippi State Building Commission, obligee, awarded three separate and substantially identical "co-prime" contracts for the construction of a Student Union Building on the Campus of the University of Southern Mississippi at Hattiesburg. These contracts were with Hanberry Corporation, for the general building construction, Mississippi Mechanical Contractors, Inc., for the mechanical installations and construction, and appellee, Doleac Electric Co., Inc., for the electrical work. The appellant, Aetna Casualty & Surety Co., entered into a performance-payment bond as surety for Mississippi Mechanical Contractors, Inc.

Each of the three co-prime contractors agreed in their respective contracts with the State Building Commission to coordinate their work and cooperate with each other so as to facilitate the completion of the project within 487 days.

On June 2, 1975, Mississippi Mechanical withdrew from the job, defaulting in the performance of its contract with the state. The mechanical construction was completed by another construction company secured and paid by the appellant, Aetna Casualty & Surety Co.

On September 3, 1981, Doleac instituted this action against Aetna for damages caused by the delay in construction resulting from Mississippi Mechanical's default. The suit was originally filed in circuit court with another similar suit by the third co-prime contractor, Hanberry, on the same project. The suit was transferred to chancery court because of the complex issues involved, and according to the briefs, the suit by Hanberry was settled and is not in issue.

II.

The first issue is whether the lack of publication notice of final acceptance and the lack of publication of notice of the pendency of this suit defeated the jurisdiction of the trial court?

The statutory basis of this suit is founded on Miss.Code Ann. Sec. 31-5-1 (1972) et seq. governing public works contracts. The purpose of these provisions is to provide protection for persons providing labor and materials on public construction projects in the absence of mechanics' and laborers' lien rights on public property. Miss. Fire Ins. Co. v. Evans, 153 Miss. 635, 120 So. 738 (1929); National Surety Co. v. Hall-Miller Decorating Co., 104 Miss. 626, 61 So. 700 (1913); Yarbrough, Rights and Remedies Under Mississippi's New Public Construction Bond Statute, 51 Miss.L.J. 351 (1980). The procedure requires two publication notices: (1) by the obligee, State Building Commission, stating that the construction has been given final acceptance to trigger the limitation of actions period and (2) a second publication by a party initiating a suit for unpaid labor or materials against the surety to notify all other unpaid laborers and materialmen who may desire to intervene. The second notice contemplates that only one lawsuit will be filed against a surety. United States Fidelity and Guaranty Co. v. Plumbing Wholesale Co., 175 Miss. 675, 166 So. 529 (1936). Any person entitled to sue may intervene within the time allowed for bringing suit. Miss.Code Ann. Sec. 31-5-9 (1972).

Appellant argues that the chancery court lacked jurisdiction to proceed with this suit because the statutory prerequisites of the two above publications on a performance payment bond for a public construction project have not been met. 1 Miss.Code Ann. Sec. 31-5-7 (1972) provides as follows:

When suit is instituted by any of such persons on a bond, it shall not be commenced until after the complete performance of said contract and final settlement thereof, and shall be commenced within one year after the performance and final settlement of said contract and not later. If the contractor quits or abandons the contract before its completion, suit may be instituted by any such person on said bond and shall be commenced within one year after such abandonment and not later. But said time for the institution of said action shall not begin to run until the obligee shall have made said final settlement or determined said abandonment and published notice thereof in some newspaper published in said county, or if there be none then in some newspaper having a general circulation therein. (Emphasis added).

Additionally, Miss. Code Ann. Sec. 31-5-13 (1972) provides as follows:

In all suits instituted under the provisions of this chapter, notice of the pendency of such suits shall be made by publication in some newspaper of general circulation published in the county or town where the contract is being performed, and if there be no such paper, then in a paper having a general circulation therein, for at least three weeks, the last publication to be at least one week before the trial of said cause. In all such suits the parties interested shall be summoned as provided by section 85-7-145. (Emphasis added).

This Court has repeatedly held that notice of final acceptance and notice of pendency of the suit by laborers and materialmen provided by the statutes governing public work contracts are jurisdictional. Stanton & Associates, Inc. v. Bryant Construction Co. (No. 54,599, decided Feb. 20, 1985, but not yet reported); Travelers Indemnity Co. v. Munro Oil & Paint Co., 364 So.2d 667 (Miss.1978); U.S.F. & G. Co. v. Plumbing Wholesale Co., supra; Kershaw v. Day, 176 Miss. 757, 169 So. 690 (1936); Dunn, "Federal and State Statutory and Case Law Pertinent to Construction Contract Claims and Litigation--Suits on Public Bonds And Suits on Private Bonds", Construction Litigation 137 (1976). In the case sub judice, it is undisputed that the State Building Commission never published final acceptance of the Student Union Project and Doleac failed to publish notice of the pendency of its suit.

Doleac argues that the above statutory requirements do not apply to a suit by one co-prime contractor against the surety of another "co-prime" contractor, citing Hanberry Corp. v. State Building Commission, 390 So.2d 277 (Miss.1980). The Hanberry case arose out of this same Student Union building contract. Hanberry Corp., the general building contractor, sued Aetna as surety for Mississippi Mechanical, claiming--as Doleac does in the case at bar--that it suffered damages as a result of Mississippi Mechanical's default in the completion of the project. This Court's decision in Hanberry was grounded in the two contracts of the parties. First, the contract of Hanberry with the Building Commission provided that all three co-prime contractors would coordinate their operations with those of the other parallel contractors and settle with the other parallel contractors for any damage to the work for negligence acts. Secondly, the payment/performance bond between Aetna and its principal provided that Aetna would guarantee to perform "all the undertakings, covenants, terms, conditions, and agreements of said contract with [the State Building Commission] ..." undertaken by its principal. 390 So.2d 281.

This Court concluded in Hanberry that the contract of each co-prime contractor made the other parallel contractors third party beneficiaries. Having determined that third-party beneficiary rights applied, the court concluded that the express terms and extent of Aetna's undertaking under its bond would control its liabilities. Aetna contracted to perform all "undertakings, covenants, conditions, and agreements of said contract" between the Building Commission and Mechanical. A breach was alleged against Aetna "who stepped into the shoes of Mechanical," and a cause of action was stated.

This Court's opinion in Hanberry does not discuss the threshold jurisdictional question raised by appellant's first assignment of error that the failure to give the two statutory notices makes this suit premature.

Therefore, the question which must be addressed is whether a suit by one co-prime contractor against the surety of another co-prime contractor based upon a performance payment bond obtained pursuant to this state's Public Works Contracts statute is subject to the publication and notice requirements of that statute?

To answer this threshold question, this Court notes that Hanberry was appealed to this Court on the sustaining of ...

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