Pierce Foundations, Inc. v. Jaroy Constr., Inc.

• Decision Date: 03 May 2016
• Docket Number: No. 2015–C–0785.,2015–C–0785.
• Citation: 190 So.3d 298
• Parties: PIERCE FOUNDATIONS, INC. v. JAROY CONSTRUCTION, INC.
• Court: Louisiana Supreme Court

190 So.3d 298

PIERCE FOUNDATIONS, INC.

v.JAROY CONSTRUCTION, INC.

No. 2015–C–0785.

Supreme Court of Louisiana.

May 3, 2016.

Schafer & Schafer, Timothy G. Schafer, New Orleans, LA, for Applicant.

Shields/Mott LLP, Lloyd Noble Shields, Elizabeth Lapeyre Gordon, Ashley Brooke Robinson, New Orleans, LA, for Respondent.

CRICHTON, Justice.

This case involves the interpretation of two provisions of the Public Works Act (“Act”), La. R.S. 38:2241, et seq. We granted the writ application to determine whether, under La. R.S. 38:2247, the notice and recordation requirements of La. R.S. 38:2242(B) are necessary conditions for a claimant's right of action against a bond furnished pursuant to La. R.S. 38:2241. Consistent with the stated purpose of the Act, we hold that the claimant's failure to file a sworn statement with the public authority did not affect the right of the subcontractor, in contractual privity with the general contractor, to proceed directly against the contractor and its surety. We therefore reverse the decision of the court of appeal and reinstate the decision of the trial court.

BACKGROUND

This matter arises out of a public works project for the construction of a gymnasium in Terrytown, Louisiana. Pursuant to a contract between JaRoy Construction Inc. (“JaRoy” or “contractor”) and Jefferson Parish Council (“Jefferson Parish”), JaRoy was to serve as the general contractor. In compliance with La. R.S. 38:2241, et seq., the contractor furnished to Jefferson Parish a bond, on which the Ohio Casualty Insurance Company (“Ohio Casualty”) was the surety.

JaRoy thereafter entered into a written subcontract with Pierce Foundations, Inc. (“Pierce”) to provide and install pilings on the project. On November 3, 2008, Pierce completed the pile driving as called for in the contract. The contractor failed to pay to Pierce certain funds Pierce contended were due under the contract.¹

In July 2009, Pierce filed a “Petition for Damages in Contract” against the contractor, and, in July 2010, amended the petition to add Ohio Casualty as a defendant. Pierce alleged that Ohio Casualty and the contractor were “jointly and severally liable” to Pierce for the failure of the contractor to perform under the contract. Ohio Casualty asserted several affirmative defenses to these allegations, one of which was that Pierce failed to comply with conditions precedent to filing a claim against the surety. When the contractor filed a petition for bankruptcy protection in December 2010, the lawsuit proceeded solely against Ohio Casualty.

On October 17, 2011, when the project was substantially completed, the Jefferson Parish government filed a notice of acceptance of work with the Jefferson Parish mortgage records office. This occurred over a year after Pierce amended its lawsuit to add Ohio Casualty as a defendant. It is undisputed that Pierce never filed a sworn statement of claim in the mortgage records.

Before trial, Ohio Casualty filed a motion for summary judgment, contending that Pierce was required to comply with the notice and recordation requirements of La. R.S. 38:2242(B) and, because it failed to do so within 45 days of Jefferson Parish's acceptance of the project, Pierce could not recover from Ohio Casualty under La. R.S. 38:2247. Pierce opposed the motion, asserting that the statute does not affect the right to proceed in contract, and the Act never contemplated a situation in which notice would be given and suit filed before the events outlined in R.S. 38:2242. Pierce contended that the Act does not contemplate any loss of rights, other than the privilege against the public entity. The trial court granted Ohio Casualty's motion in part, “only to the extent that there is no privilege in favor of [Pierce],” and otherwise permitted the suit to proceed. Ohio Casualty sought supervisory review, and the court of appeal denied relief, stating:

On the showing made, we decline to exercise our supervisory jurisdiction. K Construction, Inc. v. Burko Construction, Inc., 629 So.2d 1370 (La.App. 4 Cir.1993) ; Wilkin v. Dev Con Builders, Inc., 561 So.2d 66 (La.1990).

Pierce Founds., Inc. v. The Ohio Casualty Ins. Co., 12–0859 (La.App. 5 Cir. 11/09/12) (unpublished).

On December 13, 2012, after a bench trial, the trial court rendered judgment in favor of Pierce in the amounts of $59,428.96 for sums owed under the contract and $57,000.00 for idle time, plus judicial interest from the date of the original judgment. As to Ohio Casualty's argument that Pierce's exclusive right of action against it was limited to the relief granted by the Act and subject to compliance with its requirements, the trial court noted that it had “already rejected” this defense and stated that there was “no reason for this court to revisit that issue.” Following several motions for a new trial and amended judgments, the final judgment was signed on May 19, 2014.

Ohio Casualty suspensively appealed the judgment, contending that the trial court erred in failing to dismiss it prior to trial, because Pierce's failure to comply with the notice provisions of La. R.S. 38:2242(B) resulted in forfeiture of its right of action against the surety. Pierce devolutively appealed, asserting the trial court erred by awarding interest only from the date of judgment. The Court of Appeal, Fifth Circuit, concluded that Pierce's failure to comply with the relevant notice provisions deprived it of a right of action against Ohio Casualty, reversed the trial court judgment, and dismissed the suit as to Ohio Casualty. Pierce Founds., Inc. v. JaRoy Constr., Inc., 14–669 (La.App. 5 Cir. 3/25/15), 169 So.3d 580.

We then granted Pierce's application for a writ of certiorari. Pierce Founds., Inc. v. JaRoy Constr., Inc., 15–0785 (La.6/5/15), 171 So.3d 938.

RELEVANT LAW

In 1918, the legislature enacted Act 224, the precursor to the modern Public Works Act, La. R.S. 38:2241, et seq., to “protect those performing labor and furnishing materials for public works.” Wilkin v. Dev Con Builders, Inc., 561 So.2d 66, 70 (La.1990). The laws do not grant beneficiaries a lien on the public work itself, but rather gives them “a privilege against the unexpended fund in the possession of the public entity with whom the original contract was entered into.” Id. (quoting Pigeon–Thomas Iron Co. v. Drew Bros., 162 La. 836, 111 So. 182, 183 (1926) ). As this Court stated:

The effect of these provisions is to give certain classes of persons not enjoying privity of contract with the general contractor or with the governing authority a claim nevertheless against the general contractor and his surety and in some instances a claim against the governing authority itself.

Id. at 70. The laws also protect a public authority complying with the requirements of the statute from expenses caused by the failure of the contractor to perform the contract. 561 So.2d at 71.

The statutory framework set forth in the Act accomplishes this purpose, first, by mandating that, when a public entity enters into a contract in excess of $25,000.00 for the construction, alteration, or repair of any public works, the contractor is required to post a bond “in a sum of not less than fifty percent of the contract price for the payment by the contractor or subcontractor to claimants as defined in R.S. 38:2242.” La. R.S. 38:2241(A)(2). The law further establishes a means for asserting a claim under the Act, set forth in La. R.S. 38:2242(B) :

Any claimant² may after the maturity of his claim and within forty-five days after the recordation of acceptance of the work by the governing authority or of notice of default of the contractor or subcontractor, file a sworn statement of the amount due him with the governing authority having the work done and record it in the office of the recorder of mortgages for the parish in which the work is done.

The Act also addresses a claimant's direct right of action on the bond against the general contractor and/or surety, making clear that the subcontractor maintains a separate right of action outside of the parameters of the Act. To that end, La. R.S. 38:2247 provides, in pertinent part:

Nothing in this Part shall be construed to deprive any claimant, as defined in this Part and who has complied with the notice and recordation requirements of R.S. 38:2242(B), of his right of action on the bond furnished pursuant to this Part, provided that said action must be brought against the surety or the contractor or both within one year from the registry of acceptance of the work or of notice of default of the contractor except that before any claimant having a direct contractual relationship with a subcontractor but no contractual relationship with the contractor shall have a right of action against the contractor or the surety on the bond furnished by the contractor, he shall in addition to the notice and recordation required in R.S. 38:2242(B) give written notice to said contractor within forty-five days from the recordation of the notice of acceptance by the owner of the work or notice by the owner of default, stating with substantial accuracy the amount claimed and the name of the party to whom the material was furnished or supplied or for whom the labor or service was done or performed.

The court of appeal, construing La. R.S. 38:2247, held that “only those claimants who have complied with the notice and recordation requirements of La. R.S. 38:2242(B) shall not be deprived of a right of action on the bond.” Pierce Founds., Inc. v. JaRoy Constr., Inc., 14–669, p. 7 (La.App. 5 Cir. 3/25/15), 169 So.3d 580, 585 (emphasis added). The court of appeal therefore concluded: “[T]he notice and recordation requirements of La. R.S. 38:2242(B) are necessary conditions for a right of action on a bond. The failure to comply with these requirements deprives a claimant of a right of action on a bond. ” Id. (emphasis added). The court of appeal also rejected the reasoning of the case ‘ ‘K” Construction, Inc. v. Burko Construction, Inc., 629 So.2d 1370 (La.App. 4...