State ex rel. Solsbury Hill, LLC v. Liberty Mut. Ins. Co.

Decision Date07 October 2011
Docket NumberDocket No. 30,068
PartiesSTATE OF NEW MEXICO ex rel. SOLSBURY HILL, LLC, d/b/a NEUMARK IRRIGATION, Plaintiff/Appellee and Cross-Appellant, v. LIBERTY MUTUAL INSURANCE COMPANY, Defendant/Appellant and Cross-Appellee. APPEAL FROM THE DISTRICT COURT OF BERNALILLO COUNTY Valerie A. Huling, District Judge
CourtCourt of Appeals of New Mexico


Valerie A. Huling, District Judge

Docket No. 30,068
Filing Date: October 7, 2011

Keleher & McLeod, P.A.

James Rasmussen

Justin Breen

Albuquerque, NM

for Appellee

Bingham, Hurst & Apodaca, P.C.

Lillian G. Apodaca

Albuquerque, NM

for Appellant


SUTIN, Judge.

{1} Defendant Liberty Mutual Insurance Company (Liberty) appeals from the district court's enforcement against its surety bond of the claim of lien of Plaintiff Solsbury Hill, LLC d/b/a Neumark Irrigation (Neumark) under New Mexico's Little Miller Act, NMSA1978, § 13-4-18 to -20 (1923, as amended through 1987) (the Act), for material supplied by Neumark to a subcontractor on a public works project. The district court entered judgment against Liberty in the amount of $42,321.29, plus prejudgment interest at the rate of 18% per annum pursuant to the open account credit agreements between the subcontractor and Neumark.

{2} On appeal, Liberty claims the court erred because Neumark failed to prove actual delivery of the material and incorporation of the material into the project, which, in Liberty's view, are essential requirements for recovery, and it also asserts that the court erroneously placed the burden on Liberty to show lack of actual delivery and incorporation. Liberty also claims that it has no liability because Neumark failed to comply with the Act's requirements relating to notice of Neumark's claim on the bond and notice to the obligee of the bond under Section 13-4-19 (A), (B), and (C). And Liberty claims that the court erred in awarding prejudgment interest. Neumark claims on cross-appeal that the court erred in not awarding it attorney fees and post-judgment interest at the rate of 18%.

{3} We hold that Neumark was entitled to recover its claim for unpaid invoices for material supplied. We further hold that the Act permits recovery by Neumark of prejudgment and post-judgment interest and that Neumark was entitled to recover the prejudgment interest it was awarded and the post-judgment interest it sought at the rate of 18%. In regard to attorney fees, we hold that the Act permits recovery of attorney fees, and we remand for further proceedings on the issue of the amount of attorney fees to which Neumark is entitled.


{4} We rely for the most part on the district court's findings of fact and conclusions of law. Pertinent findings are as follows. The City of Rio Rancho (the City) entered into a construction contract with Salls Brothers Construction, Inc. (the contractor) for the City's Unser Boulevard Widening Project (the project), part of which involved installing an irrigation system. Liberty was the surety on a payment bond for the project, the contractor entered into subcontracts with Desertscapes, Inc. (the subcontractor) for irrigation work, and Neumark accepted credit applications from the subcontractor for Neumark's supply of irrigation material for the project, which became the credit agreements between them. The credit agreements provided for interest at 18% per annum "from original due date."

{5} Liberty provided its payment bond pursuant to Section 13-4-18. A supplier may sue on the bond pursuant to Section 13-4-19(A), which reads:

Every person, firm[,] or corporation who has furnished labor or material in the prosecution of work provided for in such contract . . . shall have the right to sue on such payment bond for the amount of the balance thereof unpaid at the time of the institution of such suit, and to prosecute such action to final execution and judgment for the sum or sums justly due him[.]

{6} Neumark supplied material to the subcontractor for installation of the irrigationsystem. The invoices for the delivery of the material showed the dates or approximate dates of delivery or pickup of the material. Neumark was not paid for certain material provided for the project. Neumark had a good faith belief that the material for the project was "being supplied for the prosecution of work specified in the contract for the [project]." The invoices for which Neumark asserted its claim under the Act were for material for the project.

{7} Neumark sent its notice of claim on the bond to the contractor by certified mail, return receipt requested, and the notice stated Neumark's claims with substantial accuracy. The contractor received the notice. Neumark filed the present action in September 2007 and mailed a notice of its claim on the bond to the City in July 2009.

{8} The court's pertinent conclusions of law relating to Liberty's appeal are:

4. Neumark supplied irrigation materials for the [project] in prosecution of the work provided for in the contract for the project.
5. Neumark had a reasonable good faith belief that the irrigation materials at issue for the [project], reflected in Neumark's invoices . . .[,] were being supplied for the prosecution of work specified in the contract for the [project].
6. [Liberty] produced no evidence to contradict that Neumark had a good faith belief that the materials were being provided for the bonded [project].
7. Neumark's notice on its claim on the bond for the [project], mailed to [the contractor] on May 22, 2007, substantially complied with the notice requirements of [the Act], [Section] 13-4-19(A).
8. Neumark's notice to [the contractor] of its claim on the bond for the [project] was timely.
9. [Liberty] is liable as surety on the bond issued pursuant to the [Act] for sums justly due to Neumark under its credit agreements with [the subcontractor] (not including attorney[] fees) for materials supplied for the [project].
10. Interest of 18% was justly due to Neumark and part of the balance unpaid on the . . . project at the time of the institution of the suit.

The court denied Neumark's claim for attorney fees on the ground that Liberty and the contractor were not parties to the credit agreements between Neumark and the subcontractor. The court further awarded Neumark post-judgment interest at the rate of 8.75% instead of at the rate of 18% requested by Neumark.

The Issue of Delivery and Incorporation of Material Raised by Liberty

{9} Liberty contends that the district court erred by allowing recovery by Neumark when Neumark failed to prove that it delivered the material and that the material was actually incorporated into the project. Liberty asserts "[i]t is well established in New Mexico that in order for a materials supplier to collect against a payment bond, the supplier must not only prove the materials were delivered but that they were incorporated into the project." Based on this assertion, Liberty contends that it was entitled to a judgment of dismissal of Neumark's claim under the Act. Liberty relies on Crane O'Fallon Co. v. Via, 56 N.M. 772, 251 P.2d 260 (1952), and State ex rel. Goodmans Office Furnishings, Inc. v. Page & Wirtz Constr. Co., 102 N.M. 22, 690 P.2d 1016 (1984). Liberty also contends that the district court erroneously applied a "good faith" standard in allowing Neumark's claim.

{10} The question whether the Act requires a supplier to prove that the material supplied was delivered and incorporated in the project is a question of law, which we review de novo. See Maes v. Audubon Indem. Ins. Group, 2007-NMSC-046, ¶ 11, 142 N.M. 235, 164 P.3d 934 (stating that statutory interpretation is an issue of law, which appellate courts review de novo); Allen v. Timberlake Ranch Landowners Ass'n, 2005-NMCA-115, ¶ 13, 138 N.M. 318, 119 P.3d 743 ("Conclusions of law by the district court are reviewed de novo.").

{11} Furthermore, "on appeal, the evidence is to be viewed in the aspect most favorable to the action of the court which is being appealed" and "[e]very reasonable intendment and presumption will be resolved against appellants in favor of proceedings in the trial court." Lopez v. N.M. Bd. of Med. Exam'rs, 107 N.M. 145, 146, 754 P.2d 522, 523 (1988); see also Allen, 2005-NMCA-115, ¶ 13 ("We resolve all disputed facts and indulge all reasonable inferences in favor of the trial court's findings.").

{12} Neither Crane O'Fallon nor Goodmans Office Furnishings supports Liberty's view of New Mexico law. In Crane O'Fallon, the sole issue on appeal was whether the plaintiff met the statutory notice requirement. 56 N.M. at 775, 776, 778, 251 P.2d at 262, 263, 264. Our Supreme Court reversed the district court's holding in favor of a supplier, holding that the supplier failed to give a timely statutory notice to the surety. Id. at 778-81, 251 P.2d at 264-66. The supplier's recovery in Crane O'Fallon depended on one particular item, a lavatory, constituting the last item of material furnished to the subcontractor. Id. at 773-74, 251 P.2d at 261-62. It turned out that the lavatory the supplier delivered was not the one called for in the contract specifications, was an item for which no change order was issued, was never installed in the building that was being constructed, and remained uncrated in a storage room. Id. at 773-74, 776, 251 P.2d at 261-62, 263. The contractor knew nothing about the planned substitution, did not consent to it, and upon its arrival declined to receive or install it. Id. at 777, 251 P.2d at 263. The Court determined that the supplier's notice of claim was not timely because the supplier could not use the substitute lavatory to prove when the last item of material was furnished. See id. at 772-81, 251 P.2d at 260-66.

{13} Liberty does not contend that Crane O'Fallon''s ultimate determination or the analysis from which the determination was derived controls the outcome in this case. Indeed, it could not contend as much given the significant difference in facts and because,in Crane O'Fallon, the material was not called for in the contract or expected to be incorporated into the...

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