
USCA1 Opinion

	




          March 25, 1994         NOT FOR PUBLICATION                                 NOT FOR PUBLICATION                            UNITED STATES COURT OF APPEALS                                FOR THE FIRST CIRCUIT                                 ____________________        No. 93-1970                                BROX INDUSTRIES, INC.,                                 Plaintiff, Appellee,                                          v.                          H.J. STABILE & SONS, INC. ET AL.,                               Defendants, Appellants.                                 ____________________                     APPEAL FROM THE UNITED STATES DISTRICT COURT                          FOR THE DISTRICT OF NEW HAMPSHIRE                [Hon. Martin F. Loughlin, Senior U.S. District Judge]                                          __________________________                                 ____________________                                        Before                               Torruella, Circuit Judge,                                          _____________                            Bownes, Senior Circuit Judge,                                    ____________________                              and Selya, Circuit Judge.                                         _____________                                 ____________________            James  E. Owers,  with whom  Sulloway &  Hollis was  on brief  for            _______________              __________________        appellant Reliance Insurance Company  and Morgan A. Hollis, with  whom                                                  ________________        Gottesman & Hollis  was on brief  for appellant H.J.  Stabile &  Sons,        __________________        Inc.            Frank P. Spinella, Jr., with whom Hibbard &  Spinella, P.A. was on            ______________________            _________________________        brief for appellee.                                 ____________________                                 ____________________                      BOWNES,  Senior Circuit  Judge.      This diversity                      BOWNES,  Senior Circuit  Judge.                               _____________________            case  requires us  to rule on  the timeliness of  a notice of            claim under a  payment bond.   The district  court, after  an            evidentiary  hearing, held  that  the notice  was timely  and            therefore  granted  judgment   for  plaintiff-appellee   Brox            Industries in the amount of $178,155.86.   We affirm.                                            I.                                          I.                                      BACKGROUND                                      BACKGROUND                                      __________                      We set forth a summary of the pertinent facts found            by the district court.  In June 1991 defendant-appellant H.J.            Stabile &  Son, Inc.  entered into a  contract with  Wal-Mart            Stores, Inc. to build a store in Seabrook, New Hampshire.  In            July 1991 Stabile obtained  a payment bond from co-defendant-            appellant Reliance  Insurance Company.  Reliance,  of course,            is  the  real  party   in  interest.    Stabile  subsequently            subcontracted  with Atom Contracting Corp.  to do work on the            Wal-Mart  project.  Atom  then subcontracted with  Brox to do            both on-site and off-site paving.                      Under Stabile's contract with Wal-Mart all work was            to be  completed on the project by December 3, 1991.  By mid-            December Brox had not completed  a substantial portion of the            paving work under  its contract  with Atom.   On December  13            Stabile instructed  Brox that  it should cease  operations on            the project due  to the onset of winter.   Because all of the            parties recognized that paving cannot be done properly in the                                         -2-                                          2            winter,  they agreed  that  Brox would  return the  following            spring to  complete the  work.  Stabile  fully expected  that            Brox  would return to the  work-site in the  spring, and Brox            anticipated  doing so.   On December  23, 1991  Brox notified            Stabile  that  substantial  work  remained  for  the  spring,            provided Stabile with an estimate of the remaining  work, and            stated  that the total amount of the paving work performed to            date  was $201,106.50.  Brox  invoiced Atom for  this work in            December 1991.                      In February and March 1992, in response to concerns            of  Wal-Mart  about  the   quality  of  Brox's  paving,  Brox            conducted tests  of its work.   Also  in March  1992, a  Brox            employee  filled  in  several  potholes at  the  worksite  in            preparation for returning to the project.                      By March of 1992 Stabile had paid Atom all sums due            for work performed by  Atom and its subcontractors, including            Brox.   Atom, however,  still owed Brox  $178,155.86 for work            done through December 13, 1991.  On March 18, 1992 Brox  sent            a  notice of claim for that amount  to Reliance as surety for            Stabile.  Nonetheless, Brox  anticipated that it would finish            the paving work in the spring under its contract with Atom.                      On  May  14, 1992  Atom  informed  Stabile that  it            intended to honor their  contract, and that the State  of New            Hampshire  wanted two  roads,  which were  contiguous to  the            planned  store, to  be paved by  June 1.   On  June 4 Stabile                                         -3-                                          3            agreed to the additional  paving with a charge back  to Atom.            Although  the  specifics  are  unclear,   shortly  thereafter            Stabile  recognized that  Atom would  be unable  to meet  its            contractual obligations, and therefore  it sought to engage a            new contractor to complete the paving work.                      On June  11, after a brief  bidding period, Stabile            and Brox entered into two contracts for the completion of the            paving at the project,  one for on-site and one  for off-site            work.   On June 30  Stabile formally terminated  its contract            with Atom.  Brox finished the paving work at the project.                      In August 1992 Brox commenced a diversity action in            the  United States  District Court  for the  District of  New            Hampshire against Stabile and  Reliance seeking payment under            the bond issued by Reliance as surety for Stabile.  Under the            bond,  a party not in direct privity with the principal, such            as Brox, must  give notice of its  claim to:   the Principal,            the Surety, or the Owner, "within ninety (90) days after such            claimant did or  performed the last of the  work or labor, or            furnished the last of  the materials for which said  claim is            made."  No claim is  made that Brox failed to give  notice as            required to the Principal, Surety or Owner.                      The principal defense  of Stabile  and Reliance  is            that  Brox's March  18, 1992  notice was  untimely under  the            bond's requirements.   Brox moved for  summary judgment based            on two alternative  theories.  It argued first that, assuming                                         -4-                                          4            arguendo  that its  notice was  untimely, Reliance  must show            ________            prejudice from the  tardiness in order to bar  recovery under            the  bond.  According to  Brox, no prejudice  could be shown.            Alternatively, Brox  maintained that  its  notice was  timely            under the bond.                      The district court, in  an opinion dated August 18,            1993,  found that Brox's notice was timely.  According to the            district court, "[t]he crux of  the case . . . appears  to be            whether [Brox's]  work  [was] completed  in December,  1991."            Brox  Industries, Inc. v. H.J.  Stabile & Son,  Inc., No. 92-            ______________________    __________________________            426-L,  slip op.  at  6 (D.N.H.  August 18,  1993).   At  the            evidentiary  hearing the  court stated  that "[i]f  . .  . an            agreement  [about  a winter  hiatus]  was  made then  clearly            [Brox's]  work  under  its  subcontract  with  Atom  was  not            completed  on December 13, 1991 and  [Brox's] failure to give            notice  within ninety days of that day would not bar recovery            under  the bond."   Because the  court eventually  found that            Brox still had  substantial work to do on  the contract as of            December 13, and that  the parties agreed to a  winter hiatus            of greater than ninety  days, it held that Brox's  notice was            not untimely.  Id. at 7.                           ___                      In response  to Brox's  argument that work  done at            the project  site in February  and March 1992,  i.e., quality                                                            ____            tests  and  pothole  repairs,  reset  the  ninety-day  notice            period,  the district court found that both the tests and the                                         -5-                                          5            pothole repairs were remedial in nature  and did not "advance            the  completion of  the project."   Id.  at 5.   Accordingly,                                                ___            under New  Hampshire law, the  district court found  that the            above work  had no effect upon the  ninety-day notice period.            See Tolles-Bickford Co.  v. School, 94 A.2d  374 (N.H. 1953).            ___ ___________________     ______            This conclusion  and its predicate factual  findings have not            been appealed.  The  court entered judgment for Brox  for the            full amount of its claim, and defendants appealed.                                         II.                                         II.                                      DISCUSSION                                      DISCUSSION                                      __________                      The focus of this litigation has been twofold:  (1)            whether, given the circumstances  surrounding Brox's work  on            the  project, its notice of  March 18, 1992  was timely under            the bond issued by  Reliance; and (2) whether, if  the notice            was not timely, Reliance  must demonstrate prejudice from the            delay  in order to bar Brox's recovery.  Because the district            court ruled in the  affirmative on the first issue,  it never            reached the second.                      Because this is a diversity action, the substantive            law  of the forum  attaches.  Erie R.R.  Co. v. Tompkins, 304                                          ______________    ________            U.S.  64,  78  (1938).   The  parties'  arguments  as to  the            timeliness  of Brox's  notice  hinge upon  two New  Hampshire            Supreme Court cases.                      In  American Fidelity  Co.  v. Cray,  194 A.2d  763                          ______________________     ____            (N.H. 1963) a claimant  on a payment bond was  precluded from                                         -6-                                          6            recovering due to  late notice  of claim.   The principal  in            Cray  was under a contract  with the State  of New Hampshire.            ____            It was required by statute to obtain a contract bond, and the            bond's notice  requirement was prescribed by  statute.  Under            the version  of N.H.  RSA 447:17 in  effect at that  time, in            order to obtain the benefit of the bond, a claimant for labor            performed or  materials furnished  "shall within  ninety days            after said claimant ceases to  perform said labor or  furnish            said materials . . . file . . . with the department of public            works and highways . . . a statement of the claim."  From May            to  November 1958, Cray  provided fuel and  lubricants to the            principal on a  highway construction project.   In late 1958,            prior to the  completion of the  project, the principal  shut            down the  job for the  winter.   It never returned.   In  the            spring  of  1959 the  surety  completed  the project  through            another construction  company.   In May  1959 Cray noticed  a            claim with the proper  authority for money owed to it  by the            principal.                      Although Cray did not  provide any materials to the            principal  after November 1958 -- more than ninety days prior            to  its filing a claim under the bond -- Cray maintained that            it did not "cease"  to furnish fuel and lubricants  under the            bond at the  time of  the winter shutdown  in November  1958.            Cray  argued that  its  agreement with  the  principal was  a            continuing one  such that  the ninety day  notice requirement                                         -7-                                          7            should have been  tolled during the  seasonal hiatus.   After            reviewing  the facts of  the case, the  New Hampshire Supreme            Court stated:                      We cannot accept  Cray's contention  that                      it  ceased to  furnish  materials not  in                      November  1958,  after   which  date   no                      materials were in fact furnished, but the                      following spring when  LaClair failed  to                      resume operations.            Id. at  766.   Defendants  argue that  Brox  is in  the  same            ___            position  as Cray  was,  and  that  its notice  is  therefore            untimely.                      Defendants' position is  substantially undercut  by            the New  Hampshire Supreme Court's subsequent  opinion in New                                                                      ___            England Metal Culvert Co.  v. A.E. Williams Construction Co.,            _________________________     ______________________________            196  A.2d 713 (N.H. 1963).  In  New England Metal Culvert the                                            _________________________            contractor on a highway  construction project placed a single            order  with  the  plaintiff   in  January  1961  for  various            materials,  including a metal culvert  and pipe.   As was the            case in  Cray, the  contractor  was under  contract with  the                     ____            State,  and  was  required  by statute  to  obtain  a  bond.1            Delivery of  the pipe was to  be "as required."   Id. at 714.                                                              ___            On April  25, 26 and 27, 1961  a metal culvert was delivered,            but the contractor  was not ready to receive the pipe, and it            was  not delivered.  In October 1961, after learning that the                                            ____________________            1.  On April 29, 1961 the notice requirement contained in RSA            447:17, see supra p. 7, was amended to require such  a filing                    ___ _____            "within ninety  days after  the completion and  acceptance of            the project."                                         -8-                                          8            contractor was  in financial  straits, the plaintiff  filed a            notice of claim under  the bond for payment of  the materials            that it had delivered in  April.  The contractor subsequently            defaulted  on   the  project,   and   the  surety   completed            construction through  a different  construction company.   In            December 1961  a new construction  company was  hired by  the            surety to finish the job.  This new company ordered the exact            same  pipe from the plaintiff  that had been  ordered by, but            never delivered to, the  original contractor.  Id.   The pipe                                                           ___            was delivered by plaintiff to the  new contractor on December            13 and 15, 1961 and was paid for in a timely manner.                      The court ruled that  plaintiff's October 27,  1961            notice  was timely  under  the pre-amendment  version of  the            notice statute.   Id. at 715.   This conclusion was  based on                              ___            two  factors.  First, the contract  between plaintiff and the            original contractor "was a single contract although separable            or  divisible  as to  deliveries."   Id.   And  second, "[o]n                                                 ___            October, 27,  1961, when the  plaintiff first gave  notice of            its claim, although more  than ninety days had  elapsed since            delivery of the  culvert it  had not then  ceased to  furnish            materials, but was  bound by its [original]  contract to make            additional deliveries on request."  Id.  Moreover,                                                ___                      the  remaining pipe was  furnished to the                      job on  December 13 and 15,  1961 for use                      in  carrying out  the  contract with  the                      State.  Thus the  plaintiff did not cease                      to furnish materials  within the  meaning                      of RSA 447:17 until December 15, 1961 . .                                         -9-                                          9                      .  .   Unlike  the situation  in American                                                       ________                      Fidelity   Co.   v.   Cray,  supra,   the                      ______________        ____   _____                      plaintiff  in  this  case  had  a  single                      contract  for a  series of  deliveries of                      specified materials.            Id.    (citation omitted).    The court  concluded  that "[a]            ___            notice  filed within  ninety  days of  the  last delivery  on            December 15, 1961 would  have constituted compliance with the            requirements of  the statute before amendment,  and permitted            recourse to the bond for recovery of the price of the culvert            delivered in April 1961."   Id.  The court further held  that                                        ___            although  plaintiff's filing  was  premature,  the  premature            notice satisfied the notice requirement.  Id. at 716.                                                      ___                      Brox argues  that it  is similarly situated  to the            plaintiff in  New England Metal Culvert, and  that its notice                          _________________________            was therefore  timely.  We  agree.   As in New  England Metal                                                       __________________            Culvert, Brox  had a single contract with  Atom.  At the time            _______            Brox  gave notice  of its  claim, more  than ninety  days had            passed   since  its   last  paving   work  on   the  project.            Nevertheless,  at the time Brox gave its notice, it was still            obligated to complete the paving work  after the spring thaw.            Brox  eventually  completed  the paving  work  necessary  for            carrying  out  Stabile's  contract   with  Wal-Mart.    These            factors,  we  believe, place  this  case  squarely under  the            shadow cast by New England Metal Culvert.2                           _________________________                                            ____________________            2.  The  district  court  also  found,  consistent  with  New                                                                      ___            England  Metal Culvert,  that Brox's  notice was,  in effect,            ______________________            prematurely  filed.  Brox Industries,  Inc. v. H.J. Stabile &                                 ______________________    ______________                                         -10-                                          10                      Accordingly, under the rule articulated  by the New            Hampshire  Supreme Court in  New England Metal  Culvert, if a                                         __________________________            claimant is still obligated  to perform additional work under            its original contract  at the  time notice is  given under  a            payment bond, such  as the one at  issue here, the  notice is            not  untimely even if more than ninety days have passed since            the  last  work was  performed  by  the  claimant  under  the            original contract.  In effect,  the claimant's notice can  be            viewed as  covering the claimant's  prior work, for  which it            has  not been paid, as well as  the work that it is obligated            to perform  in the future --  work for which it  has also not            yet been paid.   The ninety-day notice period does  not begin            to run until the claimant actually completes the work that it            was contractually obligated to perform at the time notice was            given.  Thus, as  the New Hampshire Supreme Court  has noted,            although the claimant's notice is premature, it is valid.                      At oral argument Reliance sought to distinguish New                                                                      ___            England  Metal Culvert on the ground that one contract was at            ______________________            issue in that  case whereas two  contracts are implicated  in            the present case.   Defendants' contention is not persuasive.            It  is clear, as in  the present case,  that the plaintiff in            New England Metal  Culvert completed  its performance,  i.e.,            __________________________                              ____            made the December 13  and 15 pipe deliveries, under  a second                                            ____________________            Son, Inc., slip op. at 7.            _________                                         -11-                                          11            contract which required completion of  the performance called            for under the original contract.  Id. at 714.                                              ___                      Although  New  England  Metal  Culvert  involves  a                                ____________________________            statutory notice  requirement, as  opposed  to a  contractual            requirement,  we can  see  no reason  why  the New  Hampshire            Supreme Court's interpretation of  the former would not apply            to the latter.  See, e.g., Raitt v. National Grange Ins. Co.,                            ___  ____  _____    ________________________            285 A.2d 799  (N.H. 1971) (contractual subrogation  provision            construed consistently with  identical statutory  subrogation            right).  In  fact, the  notice requirement at  issue here  is            identical  to the Miller Act's ninety-day notice requirement,            and  the New Hampshire Supreme Court has looked to Miller Act            cases in construing the  pre-amendment version of RSA 447:17.            See  New  England Metal  Culvert,  196  A.2d at  715  (citing            ___  ___________________________            cases).                      Aside  from the two  New Hampshire  cases discussed            above,  the parties  have focussed  their attention  on cases            construing  the ninety-day  notice requirement in  the Miller            Act,  40 U.S.C.   270b(a).  Because we have found controlling            precedent under  New Hampshire  law, we need  not delve  into            these cases.  Nevertheless, we note that the Miller Act cases            are not hostile to our holding.                      On   the  question   of  ninety-day   gaps  between            performances,  we have  uncovered  only a  handful of  cases.            Those cases have held, where there is a break of greater than                                         -12-                                          12            ninety  days between  deliveries under  a series  of purchase                                                      ___________________            orders,  that the last delivery does not resurrect claims for            ______            payment for  the earlier  deliveries.   See United  States v.                                                    ___ ______________            Peter  Reiss  Constr.  Co.,  273  F.2d  880  (2d  Cir.  1959)            __________________________            (Friendly,  J.).  This was essentially the issue in Cray, and                                                                ____            the court there reached  the same conclusion.  Of  course, in            Cray,  the  plaintiff never  made  any  deliveries after  the            ____            ninety-day plus hiatus.   On  the other hand,  where work  is            performed  under a  contract,  as  opposed  to  a  series  of            purchase  orders,  a  greater  than  ninety-day  interval  in            performances will not bar recovery on the earlier performance            despite the absence  of immediate  notice.  See  Id. at  882;                                                        ___  ___            United States v. Chester  Constr. Co., 104 F.2d 648  (2d Cir.            _____________    ____________________            1939).   This was the situation in New England Metal Culvert,                                               _________________________            and the New Hampshire Supreme Court reached the same result.                      The three Miller Act  cases relied on by defendants            in  their brief would not warrant a contrary conclusion.  The            first  case,  United States  ex rel.  J.A.  Edwards &  Co. v.                          ____________________________________________            Thompson  Constr.  Corp.,  273   F.2d  873  (2d  Cir.  1959),            ________________________            concerned the substance of a notice of claim under the Miller            Act,  not   its  timeliness   under  the   ninety-day  notice            requirement.  And the  last two cases, United States  ex rel.                                                   ______________________            John D. Ahern Co. v. J.F. White Contracting Co.,  649 F.2d 29            _________________    __________________________            (1st Cir. 1981) and A.B.  Cooley v. Barten & Wood,  Inc., 249                                ____________    ____________________            F.2d 912 (1st  Cir. 1956), although more closely analogous to                                         -13-                                          13            the  instant  case, do  not  involve gaps  in  the claimant's            performance of greater than ninety days, and are therefore of            limited relevance.   This is particularly true  given the New            Hampshire Supreme Court's clear statement in this matter.                      Defendants' have  failed to identify, and we cannot            decipher,  any substantive  distinction  between New  England                                                             ____________            Metal Culvert and the case at bar.  Accordingly, the judgment            _____________            of the district court is Affirmed.                                     Affirmed                                     ________                                         -14-                                          14
