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Safety Signs, LLC v. Niles-Wiese Construction Co., Inc.

Supreme Court of Minnesota

December 4, 2013

Safety Signs, LLC, Appellant,
v.
Niles-Wiese Construction Co., Inc., Defendant, Westfield Insurance Co., Respondent.

Court of Appeals Office of Appellate Courts.

Gregory T. Spalj, Kristine Kroenke, Fabyanske, Westra, Hart & Thomson, P.A., Minneapolis, Minnesota, for appellant.

David D. Hammargren, Jason C. Tarasek, Hammargren & Meyer, P.A., Bloomington, Minnesota, for respondent.

Matthew D. Resch, Wagner, Falconer & Judd, Ltd., Minneapolis, Minnesota; and Eric B. Travers, Kegler, Brown, Hill & Ritter, LPA, Columbus, Ohio for amicus curiae American Subcontractors Association, Inc.

SYLLABUS

1. Pursuant to Minn. Stat. § 574.31, subd. 2(a) (2012), a claimant on a payment bond must serve notice of a claim on the surety and the contractor at their addresses as stated in the bond as a prerequisite to filing suit.

2. The surety did not waive its objection to the claimant's failure to serve notice on the contractor at the address stated in the bond.

3. The surety has standing to challenge the adequacy of the claimant's notice to the contractor even if the surety has been properly served.

Affirmed.

OPINION

WRIGHT, Justice.

The principal dispute in this case is whether a subcontractor gave proper notice of a payment-bond claim under Minn. Stat. § 574.31, subd. 2(a) (2012). Appellant Safety Signs, LLC, was a subcontractor on a public project. Safety Signs brought suit against general contractor Niles-Wiese Construction Company and respondent-surety Westfield Insurance Company, seeking to recover money owed under the subcontract. It is undisputed that Niles-Wiese defaulted. But Westfield moved for summary judgment on the payment-bond claim because Safety Signs mailed its pre-suit notice of claim to Niles-Wiese at the address listed on the subcontract rather than the address listed on the payment bond. The district court denied the motion and later entered judgment against Westfield. The court of appeals reversed, and we granted Safety Signs's petition for review. We conclude that Minn. Stat. § 574.31, subd. 2(a), requires a claimant to serve notice on the contractor at its address as stated in the bond as a prerequisite to filing suit. Because Safety Signs did not comply with the statutory notice requirements, we affirm.

In 2008, Niles-Wiese entered into a contract with the City of Owatonna to build a runway and taxiway at the City's airport (the Project) and entered into a subcontract with Safety Signs to provide traffic-control services and pavement-marking work for the Project. The subcontract listed Niles-Wiese's address as "112 South Main Street, P.O. Box 419, Medford, MN 55049." Westfield provided a payment bond for the Project, under which Westfield agreed to be liable in the event that Niles-Wiese failed to pay material suppliers or subcontractors. The payment bond listed Niles-Wiese's address as "215 NE First Street, Medford, MN 55049."

Safety Signs's work on the Project was divided into two phases. On November 7, 2008, Safety Signs completed its work on the first phase of the Project. The company submitted invoices to Niles-Wiese, but Niles-Wiese did not pay the full amount owed. Consequently, Safety Signs served notice of a bond claim on both Niles-Wiese and Westfield on February 13, 2009. The notice was sent by certified mail to Westfield's address as listed in the payment bond. But Safety Signs's notice to Niles-Wiese was sent to the address listed in the subcontract (112 South Main Street) rather than the address listed in the bond (215 NE First Street). Safety Signs received signed, certified return receipts from both Niles-Wiese and Westfield. Niles-Wiese paid Safety Signs the full amount of its claim in April 2009. Neither Niles-Wiese nor Westfield objected on the ground that Safety Signs had served notice of the claim at Niles-Wiese's address as listed in the subcontract rather than the address listed in the bond.

In September 2009, Safety Signs completed its work on the second phase of the Project. The City paid Niles-Wiese and Westfield for the work, but Niles-Wiese once again failed to pay Safety Signs in full. As a result, Safety Signs sent notice of a bond claim by certified mail to both Westfield and Niles-Wiese on January 7, 2010. As with the first bond claim, Safety Signs sent notice to Westfield at the address listed on the bond but sent notice to Niles-Wiese at the address listed on the subcontract, rather than the bond.

The certified letter to Niles-Wiese was returned to Safety Signs marked "Return to Sender – Unclaimed – Unable to Forward." Westfield, however, responded to the notice and requested that Safety Signs submit proof of its claim. Westfield indicated that it would then "solicit [Niles-Wiese's] position regarding your claim" and advise Safety Signs of its intentions. The letter also contained a reservation of rights, stating that Westfield reserved any defenses it might have to the claim, including "failure to comply with notice or time for suit requirements." After Safety Signs submitted proof of its claim, Westfield sent a letter notifying Safety Signs that Niles-Wiese had disputed the claim and Westfield was therefore denying payment. Westfield copied Gary Wiese of Niles-Wiese on the letter using the address "PO Box 419, Medford, MN 55049-9467."

On September 8, 2010, Safety Signs served a complaint asserting its payment-bond claim against Westfield and alleging breach of contract, unjust enrichment, and other claims against Niles-Wiese. Niles-Wiese did not answer the complaint, and the district court entered a default judgment against Niles-Wiese. Westfield, however, answered the complaint and moved for summary judgment, arguing that Safety Signs did not send the notice to Niles-Wiese at the proper address. In response, Safety Signs submitted evidence that the address to which notice was sent was the address Niles-Wiese listed on its website and the address used on invoices and correspondence between Niles-Wiese and Safety Signs. The district court denied Westfield's motion and instead ...


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