Trustees of the Iowa Laborers Dist. Council Health v. Ankeny Cmty. Sch. Dist.
| Decision Date | 21 September 2011 |
| Docket Number | No. 1-398 / 10-1880,1-398 / 10-1880 |
| Parties | TRUSTEES OF THE IOWA LABORERS DISTRICT COUNCIL HEALTH AND WELFARE TRUST, TRUSTEES OF THE LABORERS NATIONAL PENSION FUND; TRUSTEES OF THE LABORERS LOCAL 177 TRAINING AND EDUCATION FUND; LABORERS-EMPLOYERS COOPERATION AND EDUCATION TRUST; and LABORERS LOCAL UNION 177 OF THE LABORERS INTERNATIONAL UNION OF NORTH AMERICA, Plaintiffs-Appellees, v. ANKENY COMMUNITY SCHOOL DISTRICT and UNIVERSAL MASONRY, INC., Defendants, and MERCHANTS BONDING COMPANY (Mutual) and HPC, L.L.C., Defendants-Appellants. |
| Court | Iowa Court of Appeals |
Appeal from the Iowa District Court for Polk County, Carla T. Schemmel, Judge.
A general contractor and its bonding company appeal the ruling of the district court in favor of the plaintiffs. AFFIRMED.
Douglas J. Reed, Des Moines, for appellees.
Robert W. Goodwin of Goodwin Law Office, P.C., Ames, for appellants.
Heard by Sackett, C.J., and Doyle and Tabor, JJ.
A general contractor on a public works project and its bonding company appeal the ruling of the district court holding plaintiffs, various union trusts, brought forth a valid claim under Iowa Code chapter 573 (2007) against the project's retainage and the general contractor's bond for the subcontractor's nonpayment to the union trusts of benefits contributions that were required to be paid on behalf of employees who were employed by the subcontractor on the project. Upon our review, we affirm.
In early 2007, defendant HPC, L.L.C. and its owner Harold Pike learned bids would be accepted by the Ankeny Community School District for constructing a public elementary school (hereinafter "the project"). HPC decided to bid on the project, and it solicited bids from various subcontractors for certain portions of the project, including masonry, electrical, roofing, mechanical, and drywall. One of the subcontractors that submitted a bid to HPC for the masonry portion of the contract was Universal Masonry (UM), of which Asim Nadarevich was the president.
HPC submitted a bid for the project using UM's bid for the masonry portion of the project. HPC was the lowest bidder, and the Ankeny Community School District awarded HPC the project. On May 21, 2007, the Ankeny Community School District and HPC entered into a contract for $12,250,000 for construction of the school with substantial completion to be by August 8, 2008. The contract called for monthly payments to HPC for progress on the project, with five percent of the payment amount to be withheld by the school district as retainage on theproject (a total retainage of $612,500). The retainage was to be paid after HPC fully performed the contract and a final certificate of payment had been issued by the project's architect.
On the same day it signed the contract, HPC obtained a payment bond from defendant Merchants Bonding Company (MBC) for the total amount of the contract as surety. HPC was obligated to indemnify the bonding company for any claims paid out under the bond. The terms of the bond required a claimant who did not have a direct contract with HPC to submit written notice of the claim within ninety days after having last performed labor on the project.
After HPC was awarded the project, its representatives met with Nadarevich to discuss the potential subcontract with UM. Nadarevich stated UM could meet HPC's December 2007 deadline for completing the structural block walls for the project. HPC's representatives also asked Nadarevich if UM could obtain a performance bond. Nadarevich told them UM could not, but HPC's representatives were unconcerned because it was not unusual for subcontractors to not be able to obtain a bond, particularly on a high-dollar project. HPC's representatives asked for references, and they contacted an employee at Nadarevich's bank, who advised them Nadarevich paid his bills on time. HPC's representatives contacted a few of UM's suppliers, who stated UM paid their bills on time. HPC's representatives also contacted the architect on the Waukee School project where UM had been previously awarded the masonry subcontract and had performed work. The architect told HPC's representatives it had not had any problems with UM.
On May 29, 2007, HPC and UM entered into a subcontract for completion of the masonry work on the project for $1,929,000. The subcontract specifically provided UM was not required to furnish a performance or payment bond. The subcontract stated UM's completion date for the project was "per approved construction schedule." The subcontract stated HPC agreed to make monthly payment to UM of ninety-five percent of all labor and materials. However, the contract provided HPC reserved "the right to pay a smaller percentage of the amount billed for either labor or materials if, in [HPC's] judgment, the circumstances necessitate increased retainage."
HPC decided to set up a two-party check system to insure payment of UM's creditors. HPC's representatives asked Nadarevich for a list of UM's creditors, and Nadarevich provided the names of all of UM's suppliers. However, HPC's representatives did not ask if UM was a union employer, based upon a company policy to avoid potential discrimination claims.
UM was, in fact, a union employer, information which Nadarevich did not volunteer to HPC. UM was a signatory to collective bargaining agreements with the Laborers' Local Union 177 and the Bricklayers and Allied Craftworkers' Local Union No. 3 (BAC). UM's agreement with the unions provided, among other things, that UM would pay fringe benefits; requiring UM to pay certain amounts for each hour worked by employees to various union trust funds1 for employees'health and welfare, pension, training and education, and for union dues.2 The agreement between UM and the LLU required UM to post a bond unless the LLU waived the bond. The BAC's agreement required contractors who had either been working with the BAC for less than five years or had failed to make proper contributions under the agreement for two successive months to post a bond.
UM had a history of not paying the fringe benefits and dues required under the agreements. In August 2007, the LLU obtained a consent judgment from UM for UM's failure to pay fringe benefits from November 2006 to May 2007 to the LLU. The judgment ordered UM to pay the LLU $70,265.65 in monthly installments of $5,855.47. Despite this history, neither the LLU nor the BAC required the UM to post a bond on the school project.
UM moved onto the project on August 10, 2007, and it began work shortly thereafter. However, HPC began to have concerns that UM did not have enough bricklayers and laborers on the job. John Williams met with Nadarevich in September due to HPC's continuing concerns that UM would not meet the December deadline. Despite HPC's concerns, UM continued to work on the project and to file monthly applications for payment from HPC. UM's payment applications included requests for payment directly to UM for stated labor expenses, which HPC paid to UM.
Although UM in turn paid its employees their weekly wages, UM did not pay the unions for the employees' fringe benefits and dues required under the collective bargaining agreements. Nevertheless, after HPC remitted payment toUM, UM provided to HPC mechanic's lien waivers waiving and releasing "any and all [sic] my/our claim of rights to file and establish a mechanic's lien" against the school for labor and materials. The waiver also stated UM warranted it had "already paid or will use the monies [it] receive[d] from [the] progress payment to promptly pay in full all subcontractors and suppliers for all work, material, equipment or services provided" on the project.
On October 22, 2007, Harold Pike received a telephone call from Gary Crees, the business agent for the BAC. Crees advised Harold that UM was a union signatory to a collective bargaining agreement with the BAC and UM had not been paying the required dues and fringe benefits under the agreement. Crees told Harold UM owed the BAC $264,000 on another project. Harold told Crees to let him know if the BAC had any problems with UM on this project. HPC did not take any further action concerning Crees's call.
HPC continued to have concerns with the number of bricklayers UM had on the project. UM ultimately failed to meet HPC's December deadline for construction of the project's structural block walls. HPC then incurred expenses associated with preserving the worksite from the winter weather, including renting scaffolding and purchasing polyurethane to cover the structure, for which HPC later billed UM. UM continued to work on the project.
In May 2008, Crees again contacted HPC's representatives, advising that UM had not made payments for the BAC's fringe benefits and dues as set out in the collective bargaining agreement. On June 3, 2008, Crees met with Harold and Curtis Pike, John Williams, and Joni Bachman (HPC's accountant and business manager). Cress presented HPC's representative with a spreadsheetasserting fringe benefits and dues payments owed by UM to the BAC for November 2007, portions owed for December 2007, and then January 2008 to March 2008, totaling $109,297.98. Harold asked Crees why he waited seven months to contact him about UM's failure to pay. Crees responded that the BAC had tried to work with UM for payment, but UM defaulted on the payment arrangements. Harold asked Crees to provide an itemized statement of how he arrived at the figures stated on the spreadsheet. Later that day, the BAC faxed to HPC monthly fringe benefit reports. The reports were very blurry and difficult to read, and they were not signed.
HPC terminated UM's contract in July 2008. UM's last day on the project was July 18, 2008. The last progress payment HPC made to UM was on May 28, 2008. HPC had paid to UM $1.1 million for labor, and $260,000 was left to pay to UM on the contract.
On September 2, 2008, UM's attorney Chip Lowe faxed a letter it had received from...
To continue reading
Request your trial