Title: Pete Lien & Sons, Inc. v. Ellsworth Peck Const. Co.

State: wyoming

Issuer: Wyoming Supreme Court

Document:

Pete Lien & Sons, Inc. v. Ellsworth Peck Const. Co.1995 WY 88896 P.2d 761Case Number: 94-203Decided: 06/09/1995Supreme Court of Wyoming

PETE 
LIEN & SONS, INC., d/b/a Dakota Block Company,

 Appellant 
(Plaintiff),

v.

ELLSWORTH PECK CONSTRUCTION CO.; and United States 
Fidelity and Guaranty Co.,

 Appellees 
(Defendants).

 

Appeal 
from District Court, Campbell County, Terrence O'Brien, 
J.

Michael Patchen, Gillette, 
and Craig D. Grotenhouse, Rapid City, SD, for appellant.

Wayne R. Wilson of Wilson 
Law Office, Hulett, for 
appellees.

Before GOLDEN, C.J., and THOMAS and LEHMAN, JJ., and 
STEBNER and BRACKLEY, District Judges.

LEHMAN, 
Justice.

[¶1]      Appellant, Pete 
Lien & Sons, Inc., d/b/a/ Dakota Block Compa`ny, (Lien) appeals the district 
court's grant of summary judgment in favor of appellee Ellsworth Peck 
Construction Company (Peck) and United States Fidelity and Guaranty Company 
(U.S.F. & G.). Lien claims it is entitled to payment under a labor and 
materials bond from Peck, as principal, and U.S.F. & G., as surety, for 
construction materials Lien supplied. The district court found the question one 
of contract interpretation and granted summary judgment in favor of Peck and 
U.S.F. & G.

[¶2]      We 
affirm.

[¶3]      Lien raises two 
issues:

I.          
Can a surety who secretly provides a labor and material payment bond 
unknown to material suppliers, but benefitting material suppliers, which by its 
written terms provides for a 90 day dual notice provision as a precondition to 
litigation, but also by its own terms specifically incorporates Wyoming law and 
amends the period of limitation in which to commence litigation to conform to 
Wyoming law, circumvent the statutory minimum period of limitation by requiring 
compliance with the more stringent 90 day dual notice precondition thus 
extinguishing the claim of a material supplier?

II.          
Are the due process requirements of the Fourteenth Amendment to the 
United States Constitution and Article 1 Section 6 of the Wyoming Constitution 
triggered in a private contractual relationship between a state chartered surety 
company and a state chartered general contractor under a labor and material 
payment bond posted by the surety thus requiring actual or personal notice to be 
given to known claimants under the bond before a claim against the bond is 
extinguished?

[¶4]      Peck and U.S.F. 
& G. phrase the issues as follows:

I.          
Did the trial court err in its interpretation of the plain and clear 
language of the labor and material payment bond?

II.          
Are the constitutional issues of due process raised by appellant in its 
brief properly presented before this court and preserved for appeal since 
appellant did not present these issues or present argument on them at the time 
of trial?

III.         Has 
appellant, a third party beneficiary, been deprived of any constitutional due 
process rights?

FACTS

[¶5]      Peck was in 
charge of constructing a K-Mart in Gillette, Wyoming, subcontracting the masonry 
work to Intermountain Contracting and Development Inc. (Intermountain). 
Intermountain purchased concrete block from Lien in the amount of $54,024.70, 
charged to an open account, with the last invoice from Lien to Intermountain 
being sent on June 19, 1992. Lien attempted unsuccessfully to secure payment 
from Intermountain.

[¶6]      A year later, in 
June 1993, Lien learned that Peck had furnished a labor and materials bond to 
the owner of the K-Mart. Lien received a copy of the bond with a letter dated 
August 31, 1993. Lien then filed a complaint against Intermountain, Peck and 
U.S.F. & G. on October 28, 1993, alleging that Intermountain had failed or 
refused to pay Lien for the concrete block used in the K-Mart job. Lien also 
claimed that Peck, as principal, and U.S.F. & G., as surety, are bound to 
Lien for payment of materials used in the project. Lien obtained a default 
judgment against Intermountain which remains unsatisfied.

[¶7]      In granting 
summary judgment in favor of Peck and U.S.F. & G., the district court found 
the question one of contract interpretation and concluded that Lien had failed 
to make a claim in compliance with the terms of the bond. Lien timely 
appeals.

DISCUSSION

[¶8]      Summary judgment 
is appropriate when no genuine issues of material fact exist and the prevailing 
party is entitled to judgment as a matter of law. Union Pacific Resources Co. v. 
Texaco, Inc., 882 P.2d 212, 218 (Wyo. 1994); W.R.C.P. 56(c). The interpretation 
of an unambiguous contract presents a question of law. Id., at 219. This court 
gives no special deference to the district court's decisions on matters of law. 
Id. The material facts in this case are not disputed, thus the question is 
whether Peck was entitled to summary judgment as a matter of 
law.

[¶9]      Lien contends the 
district court incorrectly interpreted the bond, arguing that the bond must be 
construed in its entirety, giving effect to all the various parts. Specifically, 
Lien argues paragraph 3(b) of the bond amends paragraph 3(a). The pertinent 
parts of the bond are as follows:

(3) No suit or action shall be commenced hereunder by 
any claimant,

(a) 
Unless claimant, other than one having a direct contract with the Principal, 
shall have given written notice to any two of the following: The Principal, the 
Owner, or the Surety above named, within ninety (90) days after such claimant 
did or performed the last of the work or labor, or furnished the last of the 
materials * * *.

(b) 
After the expiration of one (1) year following the date on which Principal 
ceased work on said Contract, it being understood, however, that if any 
limitation embodied in this bond is prohibited by any law controlling the 
construction hereof such limitation shall be deemed to be amended so as to be 
equal to the minimum period of limitation permitted by such 
law.

(c) 
Other than in a state court of competent jurisdiction in and for the county or 
other political subdivision of the state in which the project, or any part 
thereof, is situated, or in the United States District Court for the district in 
which the project, or any part thereof, is situated, and not 
elsewhere.

Relying on paragraph 3(b), 
Lien claims W.S. 38-1-101 (1977) amends paragraph 3(a) so that the words "a 
reasonable time" lengthen the 90-day provision. Section 38-1-101 
states:

A 
person bound as surety in a written instrument for the payment of money, or 
other valuable thing, may, if right of action accrues thereon, require his 
creditor by a notice in writing, to commence an action on such instrument 
forthwith, against the principal debtor; and unless the creditor commences such 
action within a reasonable time thereafter, * * * shall thereby forfeit the 
right which he would otherwise have * * *.

Lien claims it did act 
within a "reasonable time," having discovered the bond's existence in June 1993, 
receiving a copy August 31, and initiating suit in October 
1993.

[¶10]   If an agreement is in writing, and 
its language is clear and unambiguous, the parties' intention is to be secured 
from the words of the agreement. Moncrief v. Louisiana Land & Exploration 
Co., 861 P.2d 516, 524 (Wyo. 1993); True Oil Co. v. Sinclair Oil Corp., 771 P.2d 781, 790 (Wyo. 1989). When the meaning of a contract is unambiguous, the plain 
meaning of the terms is used. Union Pacific, 882 P.2d  at 220; Prudential 
Preferred Properties v. J & J Ventures, Inc., 859 P.2d 1267, 1271 (Wyo. 
1993).

[¶11]   Wyoming contract law presumes 
parties enter into agreements in light of existing principles of law. Union 
Pacific, 882 P.2d  at 222; Black & Yates, Inc. v. Negros-Philippine Lumber 
Co., 32 Wyo. 248, 258, 231 P. 398, 401 (1924). "[E]xisting principles of law 
enter into and become a part of a contract as though referenced and incorporated 
into the terms of the agreement." Union Pacific, 882 P.2d  at 222; Century Ready 
Mix Co. v. Lower & Co., 770 P.2d 692, 696 (Wyo. 1989). In this case, we do 
not presumptively incorporate Wyoming law into the bond because paragraph 3(b) 
expressly incorporates it. We must determine, therefore, whether there is any 
law which would entitle Lien to recover.

[¶12]   We fail to see how W.S. 38-1-101 
amends the bond. Section 38-1-101 provides that a surety may require a debtor to 
give written notice. It goes on to say that unless a creditor commences an 
action within a reasonable time thereafter he forfeits his rights under the 
bond. We find the bond's 90-day notice provision 
reasonable.

[¶13]   Lien also argues a violation of its 
due process rights resulting from Peck and/or U.S.F. & G.'s failure to 
notify it of the existence of the bond. The district court found no Wyoming law 
or provision in the contract that made notice of the bond necessary. 

[¶14]   A plaintiff must show state action 
to activate Wyoming's due process clause. Hatfield v. Rochelle Coal Co., 813 P.2d 1308, 1310 (Wyo. 1991). Lien raises several grounds for state action, 
arguing that: U.S.F. & G. and Peck must be authorized to conduct business in 
Wyoming; W.S. 38-1-101 shows the State of Wyoming has a policy interest to 
ensure a forum for creditors; Wyoming courts actively participate in this type 
of litigation; U.S.F. & G. and Peck enjoy the limited liability aspects of 
corporations; and construction projects such as this involve necessity of zoning 
compliances, building permits, etc.

[¶15]   In Hanesworth v. Johnke, 783 P.2d 173, 176 (Wyo. 1989), we held the district court's involvement in extinguishing 
creditors' claims in probate proceedings were sufficient to invoke state action. 
The court relied on the United States Supreme Court's holding in Tulsa 
Professional Collection Serv., Inc. v. Pope, 485 U.S. 478, 108 S. Ct. 1340, 99 L. Ed. 2d 565 (1988) that substantial involvement of the probate court in the 
probate procedure constituted state action. Hanesworth, 783 P.2d  at 175. In 
Hanesworth and Tulsa Professional Collection Serv., the state court was 
substantially involved with probate proceedings because

(1) the non-claim statute became operative after 
probate proceedings had been commenced in state court; (2) the time bar could be 
triggered only after a court had appointed an executor or executrix; (3) the 
statute directed the executor or executrix to publish notice immediately after 
court appointment; and (4) the statute required the executor or executrix to 
file copies of the notice and an affidavit of publication with the 
court.

Hanesworth, 783 P.2d  at 175. 
We did not give express parameters of due process claims in Hanesworth. 
Hatfield, 813 P.2d  at 1310.

[¶16]   We are not convinced this type of 
action involves the requisite state action to invoke the federal or Wyoming due 
process clause. Wyoming courts' participation in this type of litigation does 
not mean they are "substantially involved" in the process. A business 
incorporated in Wyoming or subject to Wyoming's business regulations does not 
lose its private nature simply because it is subject to some regulation by the 
state or by turning to the courts to enforce its legal rights. See Parker v. 
Atlanta Gas Light Co., 818 F. Supp. 345, 347 (S.D.Ga. 1993); Liberty Mortgage 
Banking, Ltd. v. Federal Home Loan Mortgage Corp., 822 F. Supp. 956, 959 
(E.D.N.Y. 1993). No state action exists.

CONCLUSION

[¶17]   Lien is not entitled to payment 
under the bond because it did not comply with the 90-day notice provision. Peck 
and U.S.F. & G's failure to give notice of the bond does not constitute a 
due process violation. Summary judgment is affirmed.