VANGUARD BUILDERS, INC. v. GRANITE RE, INC.

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VANGUARD BUILDERS, INC. v. GRANITE RE, INC.

2015 OK CIV APP 35

348 P.3d 1093

Case Number: 112507

Decided: 11/25/2014

Mandate Issued: 04/15/2015

DIVISION II

THE COURT OF CIVIL APPEALS OF THE STATE OF OKLAHOMA, DIVISION II

Cite as: 2015 OK CIV APP 35 , 348 P.3d 1093

VANGUARD BUILDERS, INC., an Oklahoma corporation,

Plaintiff/Appellant,

v.

GRANITE RE, INC., Defendant/Appellee,

and

L.

WALLACE CONSTRUCTION COMPANY, INC., an Oklahoma corporation; TRILOGY DEVELOPMENT

GROUP, INC., an Oklahoma corporation; LARRY WALLACE, an individual; L. ADAM

WALLACE, an individual; and JOHN DOES 1 through 5, Defendants.

APPEAL FROM THE DISTRICT COURT OF

CLEVELAND COUNTY,

OKLAHOMA

HONORABLE LORI M. WALKLEY, TRIAL JUDGE

VACATED AND REMANDED

Steven K. Metcalf, William H. Spitler, McDONALD, McCANN, METCALF &

CARWILE, L.L.P., Tulsa, Oklahoma, for Plaintiff/Appellant

Evan B. Gatewood,

HAYES MAGRINI & GATEWOOD, Oklahoma City, Oklahoma, for

Defendant/Appellee

P. THOMAS THORNBRUGH, JUDGE:

¶1 Vanguard Builders, Inc. (Vanguard), appeals a summary judgment in favor of

Granite Re, Inc. (Granite), decided on the grounds that Vanguard did not file

suit within the applicable limitations period to recover on a statutory bond

made pursuant to 61 O.S.2011 §§ 1

and 2. We vacate the summary judgment for the reasons set forth below, and

remand for further proceedings.

BACKGROUND

¶2 This appeal comes to us pursuant to 12 O.S.2011 § 994, from a summary

judgment made early in the underlying case. As a result, many of the facts which

are recited for background are disputed. For the purposes of this opinion, we

recite the disputed facts as alleged by Vanguard without commenting on any final

disposition of these facts.

¶3 Vanguard is a metal building, roofing, and siding contractor. In February

2011, Vanguard entered into a contract with the L. Wallace Construction Company,

Inc., and Trilogy Development Group, Inc. (LWCC/Trilogy), 1 to perform part of the

construction of a gymnasium at Wilson Public Schools (School) in Wilson,

Oklahoma. Trilogy was the main contractor, and Vanguard was a subcontractor.

Pursuant to 61 O.S.2011 §§ 1 and

2 (Bonding Statute), Trilogy obtained the required statutory bond (Bond) from

Granite as surety, to cover any payments due to subcontractors if the main

contractor defaulted. Trilogy paid Vanguard regular progress payments, but

withheld a 10% "retainage." The total of the withheld payments was $37,600.

¶4 Vanguard completed its portion of the work on January 20, 2012, and

invoiced LWCC for the remaining $37,600 as final payment. LWCC replied that it

was not required to make a final payment to Vanguard until final payment by

School, which was due only on "substantial completion" of the project. LWCC told

Vanguard that School had not yet made this payment. Vanguard checked

periodically with LWCC in the following months, but received a similar

response.

¶5 On October 1, 2012, after LWCC had again asserted that School had not

paid, Vanguard inquired of School concerning the delay in payment. School

informed Vanguard that all sums due to Trilogy had been paid. Vanguard later

learned that Trilogy had received a final payment from School some four months

earlier, on May 31, 2012.

¶6 On October 3, 2012, Vanguard notified Granite that LWCC had defaulted, and

demanded payment of the $37,600 as a final payment pursuant to the Bond. Granite

contacted Trilogy regarding the default. Trilogy replied that it disputed the

claim for return of the $37,600 retainage because Vanguard had "gone over its

allotted time" during several phases of construction. Later, Trilogy apparently

informed Granite that it did not have to pay Vanguard because Vanguard was

liable for a "charge back" due to alleged damage to School's gymnasium

floor.

¶7 Eleven weeks after notification, the dispute as to whether Trilogy was

required to make the payment to Vanguard still had not been resolved. Vanguard

states that, during this period, Granite represented that it would eventually

pay, but that it could not do so until Trilogy determined the final amount owed

to Vanguard. However, on February 4, 2013, one year and fifteen days after

Vanguard last performed work at School, Granite denied the claim on the

Bond.

¶8 On March 21, 2013, Vanguard filed suit against the Defendants. Vanguard's

petition included a claim against Granite for payment of the $37,600, plus

interest. On July 12, 2013, Granite filed a motion for summary judgment,

alleging that Vanguard had failed to file suit to recover on the Bond within the

one-year statute of limitation provided by the Bonding Statute. The district

court granted Granite's motion. Vanguard appeals.

STANDARD OF REVIEW

¶9 "A moving party is entitled to summary judgment as a matter of law when

the pleadings, affidavits, depositions, admission or other evidentiary materials

establish that no genuine issue of material fact exists." Smith v. City of

Stillwater , 2014 OK 42, ¶

21 , 328 P.3d 1192 (citing

Miller v. David Grace, Inc. , 2009 OK 49, ¶ 10 , 212 P.3d 1223 ; and Davis v.

Leitner , 1989 OK 146, ¶ 9 , 782 P.2d 924 ). "In reviewing the

grant or denial of summary judgment, this Court views all inferences and

conclusions to be drawn from the evidentiary materials in a light most favorable

to the nonmoving party." Id. "Because a grant of summary judgment is

purely a legal issue, this Court's standard of review on appeal is de

novo. " Id .

ANALYSIS

I. THE BONDING STATUTE

A. Statutory Text and Purpose

¶10 The statutory language in question is found in 61 O.S.2011 § 2(A),which states in

relevant part:

Any person to whom there is due any sum for labor, material or repair to

machinery or equipment, furnished as stated in Section 1 of this title, the

heirs or assigns of such person, may bring an action on the bond for the

recovery of the indebtedness, provided that no action shall be brought on the

bond after one (1) year from the day on which the last of the labor was

performed or material or parts furnished for which the claim is made.

This language originates in R.L.1910, §§ 3881 and 3882. At that time,

§ 3882 provided that:

. . . no action shall be brought on said bond after six months from the

completion of said public improvements or public

buildings.

In 1965, the Legislature amended the Bonding Statute, changing the

limitations period from six months to one year. In 1968, the Legislature again

amended the statute, changing the occurrence that triggered the running of the

limitation period from the "completion of the building" to "the day on which the

last of the labor was performed . . . for which such claim is made." 1968 Okla.

Sess. Laws. ch.77 § 2.

¶11 In Boren v. Thompson & Associates , 2000 OK 3, ¶ 16 , 999 P.2d 438 , the Oklahoma Supreme

Court identified two "fundamental objective[s]" of the Bonding Statute: the

first is "protecting laborers and materialmen on public construction projects

who have no lien rights against public land or improvements"; the second is

"saving the public from all liability for liens for material and labor furnished

on public improvements." Id .

B. Vanguard's Arguments and the Statutory Text

¶12 Vanguard brings two arguments. The first is that the right to call on the

Bond did not accrue until the amount due was finally decided, and the limitation

period thus did not begin to run until the right to payment was determined. The

second is that Vanguard's right to payment did not accrue until the project was

"substantially complete," i.e., at the time payment was made by School on May

31, 2012; hence, Vanguard had one year from that date to file suit.

¶13 Both of these arguments appear to fail, since neither the date the

payment was due, nor the date of substantial completion, trigger the running of

the limitation period. Although an accrued right to payment is a prerequisite

for suit pursuant to § 2 ("Any person to whom there is due any sum"), the

limitation period of § 2 is not triggered by the accrual of a right to payment

but by the expiration of the "day on which the last of the labor was performed

or material or parts furnished for which the claim is made." The language of the

statute, without further inquiry, appears to show a statute of repose. A

statute of repose "restricts potential liability by limiting the time during

which a cause of action can arise," and may bar a cause of action before it

accrues. Smith v. Westinghouse Elec. Corp ., 1987 OK 3, n.11 , 732 P.2d 466 . 2

C. Historical Supreme Court Interpretation of the Bonding

Statute

¶14 Further inquiry regarding the period in which a claim against the Bond

may be filed reveals that, in Phillips Petroleum Co. v. U. S. Fidelity &

Guaranty Co ., 1968 OK 23, ¶

15 , 442 P.2d 303 , the Oklahoma

Supreme Court held:

[T]he limitation provision for bringing the action referred to in 61 O.S.1961,§§ 1 and 2, is

subject to waiver and estoppel where the necessary facts are established

as in other instances of the application of waiver and estoppel to a statute

of limitation. (Emphasis added.)

Phillips Petroleum was decided in February 1968, and was based on the

1961 version of the Bonding Statute. The Legislature amended § 2 in 1965 to

expand the limitation period to one year. Further, two months after Phillips

Petroleum was decided, yet another version of the statute became effective,

changing the triggering event from "completion of said public improvements or

public buildings" to "the day on which the last of the labor was performed" as

noted above.

¶15 In 1970, the Supreme Court again commented on the limitation period

of

§ 2, in Gasteam Radiator Co. v. U. S. Fidelity & Guaranty Co ., 1970 OK 121 , 471 P.2d 883 , and appeared to

reaffirm that a claim of immunity from recovery pursuant to the limitation

period was subject to claims of waiver and estoppel. However, we note that,

similarly, Gasteam Radiator did not interpret the current statutory

language regarding the triggering occurrence. 3 Like Phillips Petroleum, it did

not discuss the effects of the 1968 change from the limitation being triggered

by "completion of said . . . buildings" to "the day on which the last of the

labor was performed" for which the claim is made. The Supreme Court has not

cited Gasteam for this principle since that opinion was issued.

¶16 In 1987, the Supreme Court cited Phillips Petroleum in a footnote

to Whitley v. Oologah Independent School District No. I-4 , 1987 OK 67 , n.4, 741 P.2d 455 (Opala, J.,

concurring). It did so again in a footnote to Trent By & Through Trent v.

Board of County Commissioners , 1988 OK 15 , n.9, 755 P.2d 615 (Opala, J., and Kauger,

J., dissenting), and in a footnote to Hart v. Bridges , 1979 OK 31, n.3 , 591 P.2d 1172 . These citations,

however, appear to raise the general principle of estoppel being applied to a

statute of limitations, rather than to a post-1968 affirmance of the Phillips

Petroleum interpretation of the limitation period of § 2. Overall, we find

the rule of Phillips Petroleum clear, but find no binding precedent

indicating that its interpretation of § 2 applies to the current version of the

Bonding Statute.

II. IS PHILLIPS PETROLEUM STILL GOOD LAW?

¶17 It is a general principle of statutory construction that "[w]hen amending

a statute the legislature is presumed familiar with the extant judicial

construction then in force." TXO Prod. Corp. v. Oklahoma Corp. Comm'n , 1992 OK 39 , ¶ 10, 829 P.2d 964 . See also

Huff v. State , 1988 OK

118, ¶ 4 , 764 P.2d 183 ;

Lekan v. P & L Fire Protection Co ., 1980 OK 56, ¶ 4 , 609 P.2d 1289 . Compared to the

current statute, the 1961 statute construed in Phillips Petroleum had

both a shortened limitation period (six months versus one year) and a different

trigger for the running of the limitation period ("completion of said . . .

buildings" versus "the day on which the last of the labor was performed . . .

for which the claim is made.") We find, however, no structural difference

between the 1961 statute and the current statute that would indicate any intent

of the Legislature to undo the holding of Phillips Petroleum. Further,

the Legislature has amended 61 O.S. §

2 three times since the Phillips Petroleum opinion was published. We

find no indication that the Legislature, although aware of the rule of

Phillips Petroleum , intended to overturn that rule by subsequent

statutory amendments. We therefore hold that Phillips Petroleum is still

good law, and its rule that "the limitation provision for bringing the action

referred to in 61 O.S.[] §§ 1 and

2, is subject to waiver and estoppel where the necessary facts are established

as in other instances of the application of waiver and estoppel to a statute of

limitation" controls in this case.

III. WAIVER AND ESTOPPEL

¶18 The factual record in this case is very limited, and many significant

questions remain unanswered. Vanguard's right to payment or any amount due is

not yet established, nor is LWCC's exact status as the main contractor. However,

Vanguard alleged that it attempted to call on the Bond well within the

limitation period; that it waited a substantial period before calling on the

Bond because of misrepresentation by LWCC; that it relied on assurances by

Granite that payment was merely delayed by questions as to the amount of a

chargeback or a delay penalty; and that Trilogy and Granite delayed decision by

eleven weeks before deciding, immediately after the limitation period expired,

that Vanguard was owed no money. We note that the bonding contract required this

decision be made "[w]ithin a reasonable period of time." 4 These disputed facts alone

could support a waiver or estoppel argument.

¶19 We also return to the clear policy stated in Boren of "protecting

laborers and materialmen on public construction projects who have no lien rights

against public land or improvements." Modern construction contracts such as the

contract in this case may inherently involve both long delays before "final

payment," and complex disputes as to the final amount due. It is entirely

possible that "final payment" may not be determined and due for more than

a year after the last day of work. Allegedly, the main contractor in this case

concealed the fact of payment by School, and failed to inform Vanguard that it

disputed Vanguard's right to a final payment. It raised a defense to payment

only when demand was made on the Bond. The bonding company then failed to

admit or deny liability on the Bond for more than eleven weeks, until the

statute of limitations had run. 5 If these allegations are true, the stated purpose of

the statute appears ill-served by denying recovery on the Bond. 6

CONCLUSION

¶20 We find the grant of summary judgment in favor of Granite on the basis of

the statute of limitations was improvidently made at this time. We therefore

vacate it, and remand this matter to the district court.

¶21 VACATED AND REMANDED .

RAPP, J., concurs, and FISCHER, P.J., dissents.

FISCHER, P.J., dissenting:

¶1 In my view, the amendments to 61 O.S. § 2 discussed by the

Majority were made to conform the statute with other lien statutes. In my view,

section 2 is still "an ordinary statute of limitation, not an extinguishment

provision of the rights, liabilities and cause of action referred to in 61 O.S. 1961 §§ 1 and 2."

Phillips Petroleum Co. v. U.S. Fid. & Guar. Co. , 1968 OK 23, ¶ 0 , 442 P.2d 303, 304 (Syllabus 1).

Accepting as true Vanguard's argument that it was a direct subcontractor, it is

undisputed that Vanguard did not file suit against Granite within the one-year

limitation period required by section 2(A). Further, in its response to

Granite's motion for summary judgment, Vanguard only asserted that its delay in

filing this case resulted from its reliance on misleading statements by the

contractor and its employee. Any suit on the bond not filed within the one-year

limitation period is barred "unless the acts or conduct of the surety against

whom the judgment is sought operates to estop such surety from pleading the

limitation." Id . ¶ 0, 442 P.2d at 304 (Syllabus 2). No such "acts or

conduct" of Granite are asserted by Vanguard. I would affirm the judgment of the

district court and, therefore, respectfully dissent.

FOOTNOTES

1 The

exact relationship between Trilogy and LWCC is disputed. For the purposes of

this opinion only, they are considered to be the same entity.

2

Pursuant to the contract in this case, it appears possible that a right to

payment might not accrue until the limitation period on the bond has already

passed ; i.e., by the time final payment was actually due, it could already

be too late to call on the Bond. Such a result does not apparently comport with

the public policy behind the Bonding Statute as stated in Boren , in that

it clearly does not serve to "protect laborers and materialmen on public

construction projects" who lack normal lien rights to protect their

recovery.

3

Gasteam interpreted the 1965 statute, and revolved around the question of

whether the 1965 extension of the limitation period from six months to one year

applied to contracts that were in effect when the limitation period

changed.

4 Granite

MSJ Exhibit B para 5.

5 We note

that an apparent conflict of interest arises because it is the bonding

company that investigates and determines when payment is due, and an

extended investigation that may postpone a decision until it is too late to

collect on the bond is thus in the bonding company's interest .

6 The law

may require that a subcontractor who has not been paid must both make

demand on the bond, and sue the bonding company if the matter is not

resolved when the statute of limitations approaches, even though the right to

payment is not yet established, and the bonding company has not yet refused

payment. However, requiring suit against the bond before payment is refused

appears contrary to the evident purpose of the Bonding Statute to protect

subcontractors and encourage participation in public projects by attempting to

guarantee payment without the need for suit.

Citationizer © Summary of Documents Citing This Document

Cite

Name

Level

None Found.

Citationizer: Table of Authority

Cite

Name

Level

Oklahoma Supreme Court Cases

Cite Name Level

1987 OK 3 , 732 P.2d 466 , 58 OBJ 68, Smith v. Westinghouse Elec. Corp. Discussed

1987 OK 67 , 741 P.2d 455 , 58 OBJ 2216, Whitley v. Oologah Independent School Dist. No. I-4 of Rogers County Discussed

1988 OK 15 , 755 P.2d 615 , 59 OBJ 1715, Trent By and Through Trent v. Board of County Com'rs of Johnston County Discussed

1988 OK 118 , 764 P.2d 183 , 59 OBJ 2931, Huff v. State Discussed

1989 OK 146 , 782 P.2d 924 , 60 OBJ 2833, Davis v. Leitner Discussed

1992 OK 39 , 829 P.2d 964 , 63 OBJ 942, TXO Production Corp. v. Oklahoma Corp. Com'n Discussed

1968 OK 23 , 442 P.2d 303 , PHILLIPS PETROLEUM CO. v. U.S. FIDEL. & G. CO. Discussed at Length

1970 OK 121 , 471 P.2d 883 , GASTEAM RADIATOR CO. v. UNITED STATES F. & G. CO. Discussed

2009 OK 49 , 212 P.3d 1223 , MILLER v. DAVID GRACE, INC. Discussed

2014 OK 42 , 328 P.3d 1192 , SMITH v. CITY OF STILLWATER Discussed

1980 OK 56 , 609 P.2d 1289 , Lekan v. P & L Fire Protection Co. Discussed

1979 OK 31 , 591 P.2d 1172 , HART v. BRIDGES Discussed

2000 OK 3 , 999 P.2d 438 , 71 OBJ 121, Boren v. Thompson & Associates Discussed

Title 12. Civil Procedure

Cite Name Level

12 O.S. 994 , Procedure When There is More Than One Claim or Party - Final Judgment Cited

Title 61. Public Buildings and Public Works

Cite Name Level

61 O.S. 1 , Contracts Exceeding Certain Amount - Bond - Irrevocable Letter of Credit - Affidavit of Payment Discussed at Length

61 O.S. 2 , Filing of Bond - Action on Bond - Subcontractors Discussed at Length