Key Constructors, Inc. v. H & M Gas Co., 58193

Decision Date04 January 1989
Docket NumberNo. 58193,58193
Citation537 So.2d 1318
PartiesKEY CONSTRUCTORS, INC. and Reliance Insurance Company v. H & M GAS COMPANY.
CourtMississippi Supreme Court

Roger C. Landrum, Jackson, for appellant.

Dale H. McKibben, McKibben & Spencer, Jackson, for appellee.


ROBERTSON, Justice, for the Court:


A supplier of materials to a public works project has sued the subcontractor which it had supplied, the prime contractor and its bonding company. Based upon affidavit and deposition testimony, the lower court granted summary judgment in favor of the plaintiff/materialman.

As they did at the last minute in the court below, the prime contractor and bonding company struggle mightily on this appeal to muddy the water, raising a plethora of irrelevant and meritless issues. In the end, we share the view of the Circuit Court: that there are no genuine issues of material fact and that the plaintiff/materialman is entitled to judgment as a matter of law.

We affirm, except on the issue of the attorneys fees where the materialman's proof fails as a matter of law.



First, the players:

H & M Gas Company, formerly H & M Butane Company ("H & M") is a Mississippi corporation and is a supplier of petroleum products located in Edwards, Mississippi. The company is owned by W.H. Montgomery, Jr., and his family. Although H & M is primarily in the business of the sale of propane gas, it also services the needs of road-building contractors regarding diesel fuel and various lubricants used by large earth-moving machinery.

Cox Construction Company ("Cox") is a Mississippi corporation also having its principal place of business in Edwards, Mississippi. Cox is a contractor whose primary business is the subcontracting of earth-moving and drainage work for highway construction projects.

Key Constructors, Inc. ("Key") is a Mississippi corporation having its principal place of business in Jackson, Mississippi. Key is a general contractor in the field of highway construction, particularly highway bridges. The president of Key is Charles R. Webster. Because of the nature of its business, Key necessarily engages in a great deal of public works contracts.

By law, the general contractor of any public works project must furnish performance and payment bonds in an amount equal to the value of the contract. Whenever Key is required to furnish such a bond, it frequently uses the services of Reliance Insurance Company ("Reliance"), a Pennsylvania corporation having its principal place of business in Philadelphia and being qualified to do business in the State of Mississippi.


On September 2, 1983, Key entered into a contract with the Mississippi State Highway Commission for the making of improvements on U.S. Highway 61 in Warren County. Key subcontracted the earth-moving portion of the contract to Cox. Key often employed Cox for this purpose and, at the time the Warren County project was in progress, Cox was performing various earth-moving services for Key in other locations. Cox was also performing work for contractors other than Key.

As work progressed on the Warren County project, H & M supplied the fuel and lubricant needs of the machinery owned by Cox. By the time the earth-moving phase of the project was completed in September of 1984, H & M had supplied fuel and lubricants valued in excess of $20,000.00 to the Warren County work-site. The financial condition of Cox, however, had become such that it was unable to pay for the fuel which H & M had delivered.

H & M attempted to negotiate payment from representatives of Cox and Key. When these negotiations reached an impasse, H & M on October 25, 1984 hand-delivered a letter demanding payment to the prime contractor, Key. H & M's repeated demands for payment remained unavailing.


On February 14, 1986, H & M commenced this civil action by filing its complaint in the Circuit Court of Hinds County, naming as defendants, Cox, Key and Reliance. Attached to the complaint were the invoices representing deliveries to Cox at the Warren County jobsite. Although these invoices are written on forms provided by Waring Oil Company of Vicksburg, Mississippi, H & M's relationship with Waring was such that H & M was ultimately entitled to payment for these deliveries. Also included as an exhibit to the complaint was an assignment from Waring to H & M of the rights of payment represented by these invoices. The assignment is dated January 2, 1986.

In its answer, Key filed a cross-claim against Cox for any indebtedness of Cox it may be required to pay. See Rule 13(g), Miss.R.Civ.P. Cox did not answer either the Complaint or the Cross-Complaint.

On July 18, 1986, H & M filed a motion for summary judgment. Attached to the motion was the affidavit of W.H. Montgomery, Jr., detailing the deliveries made to Cox, H & M's contractual relationship with Waring and verifying the amounts represented in the invoices. A hearing on this motion was scheduled for September 17, 1986. The day before this hearing, Key and Reliance filed the affidavit of Charles R. Webster, President of Key, in opposition to the motion. In substance, the brief affidavit disputes only H & M's computations, stating:

That in its answer Key denied Paragraph 6 of the complaint, partially because it did not have sufficient knowledge to form a belief as to whether plaintiff furnished the itemized fuels. Subsequent investigation shows that as to Invoice No. 19743 for $2229.52 that at least $186.45 thereof was used on a completely separate contract in the state of Louisiana. Further, as to an Invoice No. 19619, there was a credit of $40.00 for which Key is not given credit on plaintiff's statement or in its suit. That these two items make the rest of the account suspect to the end that Key is entitled to strict proof as to delivery to the job-sites and use thereon.

At the hearing, H & M abandoned any claim to the $40.00 credit or the $186.45 allegedly diverted delivery and requested judgment on the balance of the account, the sum of $20,529.59. Although the motion hearing was not transcribed, at the conclusion of the hearing the Circuit Court apparently let it be known to the parties that it was disposed to grant the plaintiff's motion for summary judgment.

Facing the imminent entry of judgment against them, Key and Reliance proceeded to muddy the theretofore clear factual waters. Before an order could be entered, Key and Reliance, perhaps realizing the inadequacy of their original response, filed a "Motion to Reconsider" supported by a more detailed, seven-page affidavit executed by Charles Webster. The affidavit makes broad allegations as to the involvement of W.H. Montgomery, Jr. and his family in other local businesses, including Cox Construction and the Bank of Edwards, a major creditor of Cox. Essentially, Key alleges in this affidavit that it was misled by Montgomery, acting in his capacity as a director of the bank, as to the financial condition of Cox. The affidavit further states that, in reliance upon the representations of Montgomery and his son, Key continued to do business with Cox and was damaged by this continued business association.

On October 8, 1986, five days after the Motion to Reconsider had been filed, Key filed a "Supplement to Motion to Reconsider". In this motion, Key claimed a right of set-off against Cox Construction, claiming that "there are questions of fact involving this case ... and disputes between Key and Reliance, on the one hand, and Cox Construction Company, Inc., on the other hand, on all of said subcontracts as to monies owed, the nature and amounts of set-offs as between all said parties, the effect that this would have on the claims of Cox's vendors and assignees, and related matters ..."

On December 15, 1986, the Circuit Court of Hinds County granted plaintiff's motion for summary judgment against and entered judgment summarily against Cox, Key and Reliance. On the principal claim of H & M, the Court held there were no disputed issues of material fact. As to the allegations contained in Key's post-hearing motions, the Court stated that Key and Reliance

first attempted to defend by averring that Key Constructors, Inc. had disputes with, and possibly set-offs against Cox Construction Company, and possibly others, involving this and other jobs, which the Court once found, and here finds, is not a reasonable or bona fide defense to this action by a materialman plaintiff ... Insofar as they attempt to assert other factors that might legally create an issue of fact, they first come too late and also address themselves to alleged irregularities in procedural matters which are in the discretion of the court and are found not to go to either the merits of the case nor to procedural fairness or due process.

The Court also awarded to H & M attorneys fees in the amount of $7,000.00. Key and Reliance now appeal the entry of judgment against them.


This is an action against the prime contractor and his surety on a public works construction project. In 1980, the Mississippi Legislature substantially revamped the law in this area. 1980 Miss. Laws 1230 (codified at Miss.Code Ann. Secs. 31-5-51 to -57 (Supp.1980)). Federal law--the Miller Act--provided the model for this new statutory scheme relating to public works projects. 40 U.S.C. Sec. 270a et seq. The particular portion of the Mississippi Code at issue in this case, Section 31-5-51(3), appears to have been taken verbatim from that portion of the Miller Act addressing the rights of persons furnishing labor or material to subcontractors engaged in public works projects. See 40 U.S.C. Sec. 270b.

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 (90) days...

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