Honeywell, Inc. v. Arnold Const. Co., Inc.

• Decision Date: 23 September 1982
• Docket Number: CA-CIV,No. 1,1
• Citation: 134 Ariz. 153,654 P.2d 301
• Parties: HONEYWELL, INC., a corporation, Plaintiff-Appellee, v. ARNOLD CONSTRUCTION COMPANY, INC., an Arizona corporation; and Safeco Insurance Company, an Insurance Co., Defendants-Appellants. ARNOLD CONSTRUCTION COMPANY, INC., an Arizona Corporation; and Safeco Insurance Company, an Insurance Co., Plaintiffs-Appellants, v. John H. OWENS and Joan M. Owens, Defendants-Appellees. 5148.
• Court: Arizona Court of Appeals

Page 301

654 P.2d 301

134 Ariz. 153

HONEYWELL, INC., a corporation, Plaintiff-Appellee, v. ARNOLD CONSTRUCTION COMPANY, INC., an Arizona corporation; and Safeco Insurance Company, an Insurance Co., Defendants-Appellants.

ARNOLD CONSTRUCTION COMPANY, INC., an Arizona Corporation; and Safeco Insurance Company, an Insurance Co., Plaintiffs-Appellants, v. John H. OWENS and Joan M. Owens, Defendants-Appellees.

No. 1 CA-CIV 5148.

Court of Appeals of Arizona Division 1, Department B.

Sept. 23, 1982.

Goldman & Kaplan, Ltd. by Morris A. Kaplan, Phoenix, for appellee Honeywell, Inc

Taylor & Petica, P.C. by Ron Petica, Scottsdale, and James V. McMahon, Phoenix, for appellees Owens.

Peter T. D'Angelo, Phoenix, for appellants.

OPINION

GRANT, Judge.

This case was originally brought by Plaintiff-Appellee Honeywell, Inc., under Arizona's public construction bonding statute, known as the "Little Miller Act," A.R.S. §§ 34-221 to 224. ¹ The facts material to a resolution of the issues presented are as follows. On July 22, 1975, Arnold Construction Company was awarded the general contract for construction of a business education addition to the Trevor G Browne High School in Phoenix, Arizona. On the same day Arnold executed a payment bond, required by A.R.S. § 34-222, naming Safeco Insurance Company of America as its surety. Shortly thereafter, Arnold subcontracted the ventilation work to Southwest Air Conditioning, Inc. Southwest in turn hired Honeywell, Inc. to furnish and install a "comprehensive pneumatic system of automatic temperature control," which would be connected to the high school's fire alarm system.

Work progressed with no apparent difficulty. Arnold fully paid Southwest except for the contractual ten percent retention, which would only become payable ten days after Arnold received full payment for the entire project. The architects issued their certificate of substantial completion for the whole addition, effective June 1, 1976. On that same date, the project engineer issued a "punch list," identifying various items still requiring completion, repair or replacement before the project would be finished. Honeywell continued to perform both the punch list and other work at the construction site, after the June 1st substantial completion date, until approximately October 21, 1976. Characterization of this work, more completely described below, is the central issue in this appeal.

Honeywell first notified Arnold by letter dated June 14, 1976, that Southwest had failed to pay them any amounts due on their $31,127.00 contract. Again, on July 21, 1976, Honeywell sent written notice to Arnold which said that they still had not been paid by Southwest. This letter further stated that if payment was not soon made, Honeywell would look to Arnold and Safeco for satisfaction of the debt. On September 16, 1976, Honeywell sent one last letter to Arnold indicating that suit would be brought against Arnold's payment bond if the debt remained unsatisfied by the end of the month. Honeywell received no payment.

On June 21, 1977, Honeywell filed suit against Arnold, Safeco and Southwest for payment of the $31,127.00 contract price. ² Arnold cross-claimed against Southwest for any amounts it would be found to owe Honeywell. Arnold also filed a third party complaint against John and Joan Owens, claiming they were alter egos of Southwest and therefore liable for its debts.

Honeywell moved for, and was granted, judgment on the pleadings against Southwest, who did not contest the motion. At the end of Arnold's presentation of evidence, the Owenses moved for a directed verdict in their favor on Arnold's third party complaint. The motion was granted, relieving the Owenses of any possible personal liability. Upon completion of the non-jury trial, the court granted judgment in favor of Honeywell against Arnold and Safeco. Additionally, Arnold was granted judgment against Southwest on its cross-claim. Arnold's and Safeco's subsequent motion for new trial was denied. Filing a timely notice of appeal, Arnold and Safeco challenged the judgment in favor of Honeywell and the directed verdict granted in favor of the Owenses. They also appealed the denial of their motion for a new trial.

We first address the challenge by Arnold and Safeco to the judgment in favor of Honeywell. As noted above, Honeywell's suit was brought under authority of Arizona's A.R.S. §§ 34-221 to 224. This statute generally covers the award, execution and performance of public construction contracts. The general contractor on a public construction project is required to furnish, "[a] payment bond in an amount equal to the full contract amount solely for the protection of claimants supplying labor or materials to the contractor or his subcontractors in the prosecution of the work...." A.R.S. § 34-222(A)(2). A right of action against this payment bond is granted to subcontractors, and their labor or materialmen, in the event they are not fully paid within ninety days from the date on which they last performed labor or furnished materials. A.R.S. § 34-223. The right of action contains, however, two significant limitation periods. First, one not having a direct contractual relationship with the general contractor who furnished the bond, but who has such a relationship with one of his subcontractors, must give the general contractor written notice of the claim within ninety days from the date on which he last performed labor or supplied materials. A.R.S. § 34-223(A). Second, every suit brought under this statute must be commenced within "one year from the date on which the last of the labor was performed or materials were supplied...." A.R.S. § 34-223(C).

While they do not contest the timeliness or adequacy of compliance with the ninety day notice period, Arnold and Safeco argue that Honeywell has run afoul of the one year period of limitation for filing the action. Specifically, Arnold and Safeco contend that Honeywell performed no work of sufficient magnitude to constitute "labor ... performed or materials ... supplied" within one year prior to the filing of its complaint on June 21, 1977. They claim that any work done by Honeywell within the statutory period was only for minor repair or correction of defects. [Honeywell filed its complaint on June 21, 1977.] The focus of our inquiry is therefore whether any of the work performed by Honeywell between June 21, 1976, and October 21, 1976, the last date on which it claims to have performed anything under the contract, could be considered labor performed or materials supplied within the meaning of A.R.S. § 34-223(C).

We note the conspicuous lack of reported decisions dealing with Arizona's version of this statute. Because our formulation so closely follows the federal legislation, however, federal cases interpreting the Miller Act are highly persuasive. Western Asbestos Co. v. TGK Construction Co., Inc., 121 Ariz. 388, 590 P.2d 927 (1979). We also note that cases dealing with either the ninety day notice provision or the one year limitation period are applicable for our analysis, since both periods begin to run and are measured from the date on which the last labor was performed or materials supplied by the plaintiff.

The applicable test asks whether the work was done in furtherance of the original contract, or whether it was for the purpose of correcting defects or making repairs. United States ex rel. Austin v. Western Electric Co., 337 F.2d 568 (9th Cir.1964). Work done solely to effect repairs, make corrections or complete a final inspection is insufficient to qualify as work pursuant to the original contract and is not considered work performed or material supplied within the one year statutory limitation. General Insurance Co. of America v. United States ex rel. Audley Moore & Son, 406 F.2d 442 (5th Cir.1969) rehearing denied, 409 F.2d 1326 (5th Cir.1969) cert. denied, 396 U.S. 902, 90 S.Ct. 214, 24 L.Ed.2d 178 (1969); United States ex rel. Erie City Iron Works v. Fullerton Construction Co., 298 F.Supp. 1157 (D.S.C.1969); United States ex rel. Laboratory Furniture Co. v. Reliance Insurance Co., 274 F.Supp. 377 (D.Mass.1967); United States ex rel. T Square Equipment Corp. v. Gregor J. Schaefer Sons, Inc., 272 F.Supp. 962 (E.D.N.Y.1967). "Labor furnished in the prosecution of the work is not co-terminous with the outer limits of all duties provided by the contract." General Insurance Co. of America v. United States ex rel. Audley Moore & Son, 409 F.2d at 1327. Yet, the one year limitation period does not necessarily begin to run merely because a project has been declared "substantially complete." United States ex rel. Austin v. Western Electric Co. Furthermore, because tasks are simple in nature does not preclude their characterization as integral parts of the contract. United States ex rel. Joseph T. Richardson, Inc. v. E.J.T. Construction Co., 453 F.Supp. 435 (D.Del.1978).

Examination of the record discloses several instances within the relevant year during which Honeywell employees visited the construction site to perform various tasks. On approximately June 24, 1976, Honeywell was notified that the smoke detector system it supplied had not been electrically connected to the central fire alarm panel. In recognition that this work was specifically required by the electrical plans, Honeywell engineer Moosa Marafi designed a "relay" which would accomplish the task. He gave both the plan and the actual device to another employee, Secrest, who delivered it to an electrician at the site for installation. Lazar, a Honeywell employee in the computer field, programmed a computer panel known as "group 12" into the master control system memory on October 9, 1976. This was done in order that the panel could monitor air and temperature conditions, triggering the fire alarm system in case of emergency. Lastly, on October 21, 1976, Marafi received a thirty-five millimeter slidegraphic, which he had designed, from...