Opinion ID: 38347
Heading Depth: 2
Heading Rank: 2

Heading: How to Cure a Premature Acceptance

Text: 35 The harder question to resolve is whether the premature filing of the certificate of substantial completion renders the acceptance a nullity. Upon determining that final completion must occur 30 days after substantial completion, if the project is accepted based on substantial completion, the bankruptcy court held that the City's premature acceptance was null and void. The bankruptcy court opined that the only way to cure the prematurely recorded acceptance was to file another acceptance that complies with the statute. The statute states that an acceptance should be filed in order to begin the 45-day period. Because neither the City nor Whitaker 3 ever filed a subsequent acceptance that complied with the statute, the bankruptcy court held that the 45-day period never began to run, and therefore, the Claimants' claims could not be untimely. 36 The bankruptcy court offered no authority for its finding that the premature acceptance should be rendered a nullity. The district court offered no authority to support the bankruptcy court's conclusion when the district court adopted the bankruptcy court's ruling. Before this court, the Claimants assert that the bankruptcy court was correct in its decision, however, they also offer no authority for the bankruptcy court's conclusion. They simply assert that making the acceptance null, and requiring Whitaker or the City to submit another acceptance, is the only cure that is workable. Despite our best efforts, we have found nothing in the statute that supports the conclusion that a premature acceptance is null or that supports requiring the City or Whitaker to file any number of certificates of substantial completion until an acceptance complies with the requirements of the statute. We therefore reject the Claimants' arguments. Instead, we find that the bankruptcy court impermissibly expanded the scope of remedies available to the Claimants by declaring that Whitaker's acceptance was null. 37 The Public Works Act restricts contractors from entering into a contract with the state until the contractor obtains a payment bond. La.Rev.Stat. 38:2241. Laws of limitation are to be strictly construed if there are any ambiguities in the law. Ruiz v. Oniate, 713 So.2d 442, 444-45 (La.1998). The Public Works Act, like other lien statutes, is  sui generis and provides exclusive remedies to parties in public construction work. State Through Div. of Admin. v. McInnis Bros. Const., 701 So.2d 937, 944 (La.1997) (citation omitted). [P]ublic contract laws are to be strictly construed such that the privileges granted are not extended beyond the statutes, and the obligations of the bond must be limited to the exact provisions of the statute. Id. (emphasis added). The Public Works Act is preemptive rather than prescriptive, meaning the existence of the rights granted therein are extinguished if not filed within the time period prescribed and the applicable time period can not be suspended or interrupted. Id. at 948. 38 In keeping with Louisiana principles of statutory interpretation, the statute here must be strictly construed so as to prevent extending the obligations of the surety or the privileges granted to the subcontractors beyond that warranted by the statute. The bankruptcy court declared that filing the certificate of substantial completion too early rendered the acceptance a nullity and as a result the 45-day lien period never began to run. According to the bankruptcy court, because of the prematurely filed acceptance, months after even final completion the surety could be subject to liability to claimants who had still not filed a claim statement. Under that scenario, today, almost 3 years from when construction finally ended, a claimant could file a suit against the surety to collect on debts owed from the Independence Stadium project because Whitaker never filed a corrected acceptance. However, § 2241.1 states that sureties are only liable for claims filed within a 45-day window. The Public Works Act was enacted for the purpose of protecting the interests of those who supply materials and labor to public works contracts; but by limiting the time in which a claimant can enforce that right, the Public Works Act balances both the interests of the protected group and the interests of the surety. By infinitely expanding the time that the surety may be subject to liability, and the Claimants may be permitted to file suit, the bankruptcy court afforded the Claimants privileges that are not granted by the statute. See id. at 946 (holding that the Public Works Act sets forth a precise period of time to govern the filing of suits [in that case a suit by a state entity against a general contractor or its surety] and to suspend or interrupt that period for any reason would render the time limitations in the statute meaningless). 39 To determine a resolution more consistent with the statute, and in the absence of cases construing the Public Works Act under these circumstances, we turn to case law regarding the Private Works Act for guidance because the state courts have addressed this identical issue, premature recording of acceptances, with regard to the Private Works Act. In Lighting, Inc. v. Trans-Gulf Const. Co., Inc. , the state district court granted judgment against a contractor and surety on a contractor's bond because formal acceptance by the owner was prematurely filed; the state court held that as a result of the premature filing the statutory prescription period never began to run. 324 So.2d 454, 455 (La.1975). The Louisiana Supreme Court reversed the judgment and dismissed the suit. Id. Under the Louisiana Private Works Act, the subcontractor had to file his claim statement within 30 days of recordation of acceptance by the owner. Id. The owner could record an acceptance of work upon either completion or upon substantial completion of the work, or any specified area thereof, upon the recommendation of the architect or engineer of the owner. Id. The state district court found that the work was not complete or substantially complete on the date of the registry of acceptance so the acceptance was null. Id. at 456. In reversing the state district court, the Louisiana Supreme Court held that a premature acceptance is not null but rather is inchoate and becomes operative when the building is complete or substantially complete. Id. 40 An acceptance is a notice of completion. It becomes operative when it conforms to the facts of construction. We think the better view is that prematurely recorded acceptance is inchoate and becomes operative when the building is complete or substantially complete. At that time, the two essential factors concur: recordation and completion. To hold otherwise would mean that the misjudgment of the owner in assessing substantial completion, though in good faith, would defeat the prescription in favor of the surety contrary to the legislative purpose. 41 Id. The court observed that even assuming that the acceptance was filed prematurely, the subcontractor's suit was not filed within 30 days from the date the parties agreed the project was substantially complete. Id. Therefore, the subcontractor's suit was dismissed as untimely. Id. 42 Particularly instructive to us on the matter of nullity is the Louisiana Supreme Court's admonition in Lighting: 43 We find nothing in the statute which allows an owner's premature acceptance to wipe out the one-year prescription in favor of the surety. To impose such a penalty on the surety should require clear statutory authority. 44 Id. 45 Citing no case law, the bankruptcy court dismissed the argument that the prematurely filed acceptance could be inchoate rather than null. The bankruptcy court in its oral rendering of judgment, and the district court in adopting the bankruptcy court's opinion, gave minimal attention to Lighting. The bankruptcy court opined that Lighting was not applicable because it was governed by the Private Works Act, whereas this case is governed by the Public Works Act. Moreover, the bankruptcy court noted that the Private Works Act does not require private owners to record an acceptance in the public record while the Public Works Act does require a recordation of acceptance. We hasten to agree with the bankruptcy court's observation and we thoroughly appreciate that Lighting is not controlling because the Private Works Act does not govern this case. However, we sit as a Erie court who must divine what the Louisiana Supreme Court might do if faced with the same facts as those before us. 4 Although the Louisiana Supreme Court has not made a definite pronouncement on this exact issue, Louisiana's highest court has stated that where an acceptance is not perfected as a matter of law, that acceptance is inchoate. More importantly, the Louisiana Supreme Court stated that declaring an acceptance a nullity would be a penalty imposed upon the surety, because of the miscalculation of a third-party, that can only be levied pursuant to express statutory authority. The case before us is not governed by the Private Works Act and the Private Works Act is distinguishable from the Public Works Act in many respects; however, we find the principle in Lighting, that declaring an acceptance a nullity requires express statutory authority, is a principle in positive law that is very persuasive to us. The bankruptcy court did not — nor did the district court or the Claimants — offer any statutory authority for declaring an acceptance a nullity under the Public Works Act, therefore, ipso facto, we hold that we can not impose such a penalty upon the surety here. 46 Moreover, we conclude that for our purposes, the relevant provisions of the statutes are substantially indistinguishable. The Private Works Act, like the Public Works Act, was enacted to provide protection for subcontractors and other claimants and provide for a source for payments should the general contractor fail to pay. Metropolitan Erection Co., Inc. v. Landis Const. Co., Inc., 627 So.2d 144, 148 (La.1993). However, because the Private Works Act and the Public Works Act are lien statutes that grant special privileges to claimants that are not provided for by contract, both statutes also seek to protect the interests of the sureties who issue the bonds. Id. Therefore, as here, the Louisiana Supreme Court in Lighting had to balance the dual purposes of the statute of protecting the claimants as well as protecting the interests of the surety. In addition, in both Lighting and the present case, the parties were subject to a payment bond. The private owners in Lighting and the public entity here both recorded an acceptance of the work in the public record based upon substantial completion. See Lighting, 324 So.2d at 455. Both subcontractors were required to submit a claim statement within a specified period of time from the recordation of acceptance. 5 Even the definitions of substantial completion are identical. 6 For all the reasons stated, we find the reasoning employed in Lighting to be persuasive in resolving the issue currently before this court. 47 In order to determine when the recorded acceptance became operative, the Lighting court sought to ascertain when the project was substantially complete. Here, in order to determine when the recorded acceptance became operative we would have to determine if and when substantial completion occurred within 30 days of completion, or when the project was complete. Even though the Independence Bowl game was played on December 27, 2001, the parties dispute whether the project was substantially complete at that time. Although, the stadium as a whole was sufficiently useable to allow the game to be played, the project at issue only concerned the construction of concession areas, bathrooms, and club seating in the south end zone of the stadium. As to those specific portions of the stadium, there was at least anecdotal evidence that the bathrooms were not complete at the time of the game. Whitaker emphasizes that the certificate of substantial completion filed in the public record stated that the project has been reviewed and found, to the Architect's best knowledge, information and belief, to be substantially complete. The Claimants assert that the certificate of substantial completion was signed by the architect not because the project was actually substantially complete, but rather in order to pass title to the City in time for the Independence Bowl game. Otherwise, Whitaker would have been liable for any accidents that occurred during the game. That is why, the Claimants charge, the certificate of substantial completion was backdated to ensure that the certificate reflected that the project was accepted before the date of the game. The Claimants contend that whether the project was actually substantially complete at the time of recordation was not a fact that was stipulated to in the bankruptcy court nor is there any evidence in the record to support such a conclusion. 48 We need not make a definite determination of when substantial completion actually occurred in accordance with the statute. The record reflects that the parties agreed that the project was finally complete by April 25, 2002, 7 thus, the recorded acceptance became operative by that date. The first claim was not filed until June 21, 2002. None of the claims were filed within 45 days of completion. Although we may sympathize with the Claimants' position as subcontractors who have not been compensated for their work, unfortunately the claim statements filed by the Claimants were all untimely.