Insurance Co. of North America v. Genstar Stone Products Co.

Decision Date01 September 1994
Docket NumberNo. 99,99
Citation656 A.2d 1232,338 Md. 161
PartiesINSURANCE COMPANY OF NORTH AMERICA v. GENSTAR STONE PRODUCTS COMPANY. ,
CourtMaryland Court of Appeals

Douglas G. Worrall (Roderick R. Barnes, Smith, Somerville & Case, on brief) Baltimore, for appellant.

Edward J. Gilliss (Royston, Mueller, McClean & Reid, on brief) Towson, amicus curiae.

Thomas F. McDonough (Royston, Mueller, McClean & Reid, on brief) Towson, for appellee.

Argued before ELDRIDGE, RODOWSKY, CHASANOW, KARWACKI, BELL and RAKER, JJ., and JOHN F. McAULIFFE, Judge (Retired, Specially Assigned).

RODOWSKY, Judge.

Here, a materials supplier to a subcontractor on a public school construction project sues on the prime contractor's payment bond required under the Maryland Little Miller Act (the Act), Maryland Code (1985, 1995 Repl.Vol.), §§ 17-101 through 17-110 of the State Finance and Procurement Article. The surety contends that the supplier's notice to the prime contractor, required by § 17-108(b)(1) of the Act, was untimely. Under the surety's submission, sales and deliveries to the subcontractor of materials that the subcontractor then used in making repairs to the work must be disregarded in computing the timeliness of the notice. The surety's second defense invokes the statute governing trust relationships in the construction industry, Md.Code (1974, 1988 Repl.Vol., 1994 Cum.Supp.), §§ 9-201 through 9-204 of the Real Property Article. The contention is that duties imposed by that statute were violated by the manner in which the supplier applied payments from the subcontractor on the latter's running account. For the reasons explained below we shall affirm the circuit court's rejection of both of these defenses.

In November 1989 Charles J. Frank, Inc. (Frank), as prime contractor, and the Baltimore County Board of Education, as owner, entered into a contract for the design, construction and financing of Hines Elementary School. The appellant, Insurance Company of North America (INA), furnished the payment and performance bonds that are required by § 17-103(a) of the Act. Frank subcontracted the concrete work to Beck Enterprises, Inc. (Beck). Beck, in turn, purchased materials, principally concrete and stone, from the appellee, Genstar Stone Products Company (Genstar). These purchases were made on an open account. Deliveries by Genstar to Beck at the school site commenced in April 1991. The last four invoices from Genstar to Beck were for the delivery of thirty-two cubic yards of concrete and one cubic yard of grout on September 27, for three cubic yards of concrete on October 4, and for one cubic yard of concrete on November 8, 1991. Beck did not pay Genstar in full, and, on January 23, 1992, Genstar gave Frank written notice of Beck's non-payment. In December 1992 Genstar instituted the instant complaint, naming Beck and INA as defendants.

Beck's president filed an answer for it advising that Beck's assets had been claimed under a lien by the Internal Revenue Service. Beck did not participate further in the proceedings. Frank, appearing by the same counsel who appeared for INA, petitioned the court to intervene. That petition was granted, and the court ordered that Frank be designated a defendant in the action and that it file an answer. Frank never filed an answer. Thereafter, INA's counsel, acting solely in INA's name, conducted the defense.

Genstar filed with its complaint a motion for summary judgment, supported, inter alia, by eighty-nine invoices, the affidavit of Genstar's bookkeeper, and Genstar's notice of January 23, 1992 to Frank. The eighty-nine invoices reflect that between April 5 and November 8, Genstar made thirty-eight deliveries of stone, one of grout, and fifty of concrete.

In opposition to summary judgment INA filed an affidavit of Frank's project manager on the Hines school project. This affidavit is the factual basis for INA's two legal defenses. The notice defense relies on § 17-108(b)(1) of the Act, which reads:

"A supplier who has a direct contractual relationship with a subcontractor ... of a contractor who has provided payment security but no contractual relationship with the contractor may sue on the security if the supplier gives written notice to the contractor within 90 days after the labor or materials for which the claim is made were last supplied in prosecution of work covered by the security."

In his affidavit, Frank's project manager in part states:

"The last date upon which ready-mix concrete and/or aggregate was supplied, necessary to complete the work on the contract, was September 27, 1991. However, on October 4, 1991 Beck was required to jack out and repair a doorway that had previously been constructed. In addition, on November 8, 1991 Beck returned to repair certain sills that had previously been constructed but were beginning to crack. In order to complete these repairs, on October 4, 1991 Beck supplied three cubic yards of its materials and on November 8, 1991 Beck supplied an additional one cubic yard of materials."

Genstar's November 8, 1991 delivery to Beck is critical to the timeliness of its January 23, 1992 notice to Frank. If INA is correct that the deliveries of October 4 and November 8 cannot be considered because the subcontractor used the materials in making repairs, then Genstar's claim fails.

The project manager further affirmed that he had "conducted an investigation into the payment history" between Frank and Beck and between Beck and Genstar pertaining to the Hines school project. He said that "[i]t appears that shortly after we [i.e., Frank] would pay Beck for its concrete services, Beck would pay Genstar but allocate the money to cover unsecured jobs." If INA is correct that Genstar had a statutory duty to apply to invoices for Hines school materials payments by Beck utilizing funds paid by Frank, then a remand would be required to recompute the account.

The circuit court concluded that there was no genuine issue of material fact, and, by docket entry of May 24, 1993, summary judgment was entered in favor of Genstar against Beck and INA for $100,164.69. Within ten days thereafter, INA moved to alter the judgment on the grounds that the court had erred in rejecting the untimely notice defense and that the court had not ruled on the misapplication of payments defense. By an undocketed letter of May 25 to the court, counsel for Genstar requested amendment of the judgment to add $18,969.50 in finance charges.

In a memorandum opinion dated June 23, 1993 and docketed June 25, 1993, the court explained its reasons for rejecting the notice defense, and the court amended the judgment against Beck and INA to $119,134.19. 1

INA moved to revise the amended judgment. This second post-judgment motion was filed on the eleventh day after entry on the docket of the amended judgment. By a "MEMORANDUM TO THE FILE" dated July 30, signed by the court and with copies to counsel, the court ruled that the INA motion to alter the original judgment of May 24, 1993 was denied, that the motion to revise the amended judgment was denied with respect to the notice defense, but that, "[t]o the extent that the court will consider further doctrine of the misapplication of funds, the judgment is opened for further consideration." These rulings of July 30, 1993 do not appear on the docket. This memorandum, although included in the original record transmitted by the clerk, contains no date stamp by the clerk.

By a written "POST JUDGMENT RULING" dated November 16 and docketed November 22, 1993, the court explained its reasons for rejecting INA's misapplication of funds defense and denied INA's motion to revise the amended judgment. The court stated that denial of the INA motion made final the amended judgment of June 25, 1993.

INA appealed to the Court of Special Appeals. It also petitioned this Court to issue the writ of certiorari prior to consideration of the matter by the intermediate appellate court. We granted the writ.

I

This Court will notice on its own motion problems relating to appealability. Medical Mut. Liab. Ins. Soc'y v. B. Dixon Evander & Assocs., 331 Md. 301, 306 n. 6, 628 A.2d 170, 172 n. 6 (1993); Albert W. Sisk & Son, Inc. v. Friendship Packers, Inc., 326 Md. 152, 158, 604 A.2d 69, 72 (1992). INA's motion to revise the amended judgment can only be treated as a motion under Rule 2-535, inasmuch as it was not filed within ten days of the amended judgment. Alitalia Linee Aeree Italiane v. Tornillo, 320 Md. 192, 200, 577 A.2d 34, 38 (1990). The motion to revise did not halt the running of the time for appeal. Md.Rule 8-202(c). If INA and Beck were the only defendants, the order for appeal would be too late to bring up for review the amended judgment of June 25. Frank, however, was made a party defendant upon its intervention. There is no judgment as to Frank, and there has been no certification pursuant to Rule 2-602(b). Accordingly, there is no final judgment in the action. Md.Rule 2-602(a). The appeal is premature.

We exercise our discretion, however, under Md.Rule 8-602(e)(1)(C) to enter as a final judgment the amended judgment in favor of Genstar against INA and Beck. See Adams v. Manown, 328 Md. 463, 469 n. 1, 615 A.2d 611, 613-14 n. 1 (1992); Shofer v. Stuart Hack Co., 324 Md. 92, 98, 595 A.2d 1078, 1080-81 (1991), cert. denied, 502 U.S. 1096, 112 S.Ct. 1174, 117 L.Ed.2d 419 (1992).

II
A

The rule for which INA contends, which we shall call the "repair rule," is based on federal case law interpreting the notice provisions of the Miller Act, 40 U.S.C. § 270b(a). That section provides in relevant part:

" § 270b. Rights of persons furnishing labor or material

"(a) Every person who has furnished labor or material in the prosecution of the work provided for in such contract, in respect of which a payment bond is furnished under section[ ] 270a ... shall have the right to sue on such payment bond for the amount ... unpaid.... Provided, however,...

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1 books & journal articles
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    • Defense Counsel Journal Vol. 63 No. 1, January 1996
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