Court Opinion

ID: 2995407
Source: CourtListenerOpinion
Date Created: 2015-09-24 19:20:10.968485+00
Date Added: 2024-06-11T13:22:58.787877
License: Public Domain

In the
United States Court of Appeals
For the Seventh Circuit

No. 00-4013

Kamphuis Pipeline Co.,

Plaintiff-Appellant,

v.

Lake George Regional Sewer District,

Defendant-Appellee.

Appeal from the United States District Court
for the Northern District of Indiana, Fort Wayne Division.
No. 1:99-CV-363 William C. Lee, Chief Judge.

Argued November 1, 2001--Decided November 30, 2001

  Before Flaum, Chief Judge, and Manion and
Kanne, Circuit Judges.

  Flaum, Chief Judge. Plaintiff-Appellant
Kamphuis Pipeline Co. ("Kamphuis") sued
the Lake George Regional Sewer District
("Lake George") under Indiana’s Municipal
Public Works Statute. The district court
granted Lake George’s motion for summary
judgment because Kamphuis failed to
comply with the statute’s notice
provisions, and Kamphuis appeals. For the
reasons stated herein, we affirm.

I.   Background

  Lake George is a municipal corporation
created to construct a sewer system in
Lake George, Indiana. Lake George
contracted with Civil Constructors, Inc.
("Civil"), who served as general
contractor. Indiana law obligates public
works contractors to purchase a labor and
material bond to secure payment of
potential claimants, including
subcontractors. Civil purchased a bond
pursuant to this law from Capitol
Indemnity Corporation ("Capitol"), which
acted as surety and underwrote the bond.

  Civil subcontracted certain aspects of
the project to Kamphuis, which performed
more than $1.7 million in work. Kamphuis
Vice President Russell DeJonge monitored
progress throughout Kamphuis’s work on
the project. DeJonge visited the site on
numerous occasions and attended meetings
held by the Lake George Regional Sewer
District Board ("the Board"), which was
comprised of neighborhood residents who
owned homes on Lake George. At the
meetings, the Board identified Richard
Fox as the Board’s attorney and
instructed meeting attendees to forward
all correspondence regarding non-payment
to Mr. Fox.

  Civil ultimately refused to pay
Kamphuis. In late April 1997, DeJonge
informed Arashdeep Pannu, the project en
gineer’s field representative, that Civil
had failed to pay a substantial amount of
money to Kamphuis. On that same day, Abe
Munfah, another employee of the project
engineer, forwarded a letter to Lake
George recommending that the Board
release payment to Civil for work
completed through March 24, 1997.

  DeJonge learned that Lake George
continued to pay Civil despite the fact
that Civil owed subcontractors
substantial sums of money. Accordingly,
Kamphuis mailed a letter to Capitol (the
project surety) notifying Capitol of
Civil’s failure to pay and itemizing the
amounts due. The letter, dated May 9,
1997, advised Capitol that Kamphuis
sought recovery on the "Payment and
Performance Bonds" that Capitol had
issued. Kamphuis forwarded copies of the
letter to three additional sources: (1)
Richard Fox, Lake George’s attorney and
contact representative; (2) Abe Munfah, a
representative of the project engineer;
and (3) Thomas LaCosse, an employee at
Civil./1

  In August 1997, having received no
payment, Kamphuis sued both Civil and
Capitol for breach of contract in the
United States District Court for the
Western District of Michigan. Immediately
before the case proceeded to trial,
Kamphuis and Capitol settled. Under the
agreement, Capitol paid Kamphuis $1.2
million, and Kamphuis released Capitol
from all liability under the payment
bond. The district court ultimately
entered judgment in favor of Kamphuis for
approximately $1.7 million. On September
15, 1998, Civil filed for bankruptcy
protection under Chapter 7.

  Kamphuis then filed suit against Lake
George in the Northern District of
Illinois under the Indiana Municipal
Public Works Statute ("MPWS") for
$479,955.01, which represents the
difference between the judgment and the
amount received from Kamphuis’s
settlement with Capitol. Both parties
moved for summary judgment before
thedistrict court, which granted Lake
George’s motion. The district court held
that Kamphuis failed to comply with the
notice provisions of the MPWS, which are
a prerequisite to recovery under Indiana
law. Kamphuis had argued that its May 9
letter addressed to Capitol--and copied
to Lake George, Civil, and the project
engineer--constituted adequate notice
under the act. The district court
rejected this argument as wholly
inconsistent with the MPWS’s plain
language. Kamphuis appeals.

II.   Discussion

  We review de novo the district court’s
grant of summary judgment, see Feldman v.
American Memorial Life Ins. Co., 196 F.3d
783, 789 (7th Cir. 1999), and draw all
reasonable inferences in favor of the
nonmoving party. Pugh v. City of Attica,
259 F.3d 619, 625 (7th Cir. 2001).
Moreover, in this diversity action,
Indiana law governs all substantive
disputes, while federal law applies to
procedural matters. Allen v. Cedar Real
Estate Group, LLP, 236 F.3d 374, 380 (7th
Cir. 2001).

  The Indiana Municipal Public Works
Statute is a remedial statutory scheme
intended to secure payment for
subcontractors, laborers, materialmen,
and service providers who perform public
works construction projects. See Dow-Par,
Inc. v. The Lee Corp., 644 N.E.2d 150,
153 (Ind. App. 1995). The MPWS requires
public works boards/2 to withhold final
payment from the general contractor until
all subcontractors, laborers and
materialmen have been paid. In the event
of non-payment, the MPWS creates
alternative statutory remedies: a
subcontractor may proceed either against
the public works board, or against the
surety that underwrites the labor and
materials bond. See Indiana Carpenters
Central and Western Indiana Pension Fund
v. Seaboard Surety Co., 601 N.E.2d 352,
357-58 (Ind. App. 1992).

  The first remedy, which is at issue in
this case, allows subcontractors to
recover directly from the board by
petitioning the board to impound funds.
To receive payment under this remedy,

(b) the subcontractor . . . shall file
their claims with the board within sixty
(60) days after the last labor performed,
last material furnished, or last service
rendered by them, as provided in section
13 of this chapter.

* * *

(e) A claim form must be signed by an
individual from the political subdivision
or agency who is directly responsible for
the project and who can verify:

(1)   the quantity of a purchased item; or

(2) the weight or volume of the material
applied, in the case of a road, street,
or bridge project.

Ind. Code sec. 36-1-12-12(b), (e)
(emphasis added) ("Section 12"). Section
12 refers explicitly to Section 13, which
serves two functions relevant to this
appeal. First, Section 13 describes the
proper procedures for filing claims under
the act; second, it provides the
alternate statutory remedy for
subcontractors seeking to recover for
non-payment of work performed on a public
construction project.
  Under Section 13, an unpaid
subcontractor may recover directly from
the surety who underwrote the risk of
non-payment on the materials and labor
bond. To trigger this provision, the
statute states that:

(d) A person whom money is due for labor
performed, material furnished, or
services provided shall . . . file with
the board signed duplicate statements of
the amount due. The board shall forward
to the surety of the payment bond one (1)
of the signed duplicate statements.

Ind. Code sec. 36-1-12-13.1(d) (emphasis
added) ("Section 13"). Section 13
requires subcontractors to file duplicate
forms with the board. Thus, although
Indiana’s statutory scheme creates two
alternative remedies for non-payment, the
notice provision under either remedy is
the same: the subcontractor seeking
payment must file duplicate copies with
"the board." If the subcontractor seeks
recovery directly from the board pursuant
to Section 12, then the statute requires
no further action. If, however, the
subcontractor triggers the alternative
remedy and seeks recovery from the
surety, then the statute requires the
board to forward one copy to the project
surety.

  Indiana case law is clear that the
notice provisions of the MPWS are
procedural precedents "which must be per
formed prior to commencing an action."
Seaboard Surety, 601 N.E.2d at 357; see
also Moduform, Inc. v. Verkler Contractor
Inc., 681 N.E.2d 243, 245-46 (Ind. App.
1997). In this case, Kamphuis claims that
its May 9 letter to Capitol constitutes
adequate notice under the MPWS because,
by addressing the cover letter directly
to Capitol, Kamphuis obviated the need
for Lake George to forward a copy to the
surety. We disagree.

  Nothing in the statute’s plain language
or Indiana case law suggests that a
subcontractor may deviate from the
requisite statutory notice provisions. It
is easy to discern why Indiana courts
require strict compliance with the
statute’s notice provisions. Here,
Kamphuis mailed a letter to the surety
indicating that it sought recovery under
the "Payment and Performance Bonds."
While Kamphuis forwarded a carbon copy to
Lake George’s representative, nothing in
the original letter suggests that
Kamphuis also sought recovery from the
Board under the alternative
statutoryremedy. Moreover, to proceed
directly against Lake George, Section 12
also required Kamphuis to obtain the
signature of "an individual from the
political subdivision or agency who is
directly responsible for the project and
who can verify: (1) the quantity of a
purchased item; or (2) the weight or
volume of the material applied . . . ."
Ind. Code sec. 36-1-12-12. Kamphuis
failed to comply with this provision as
well.

III.   Conclusion

  Kamphuis neither filed duplicate copies
of its claim with the Board, see Ind.
Code sec. 36-1-12-13.1, nor obtained an
authorized signature verifying the
amounts owed, see Ind. Code sec. 36-1-12-
12. As a result, Kamphuis failed to
comply with the procedural requisites of
the Indiana Municipal Public Works
Statute. Accordingly, we AFFIRM the
decision of the district court.

FOOTNOTES

/1 The entire letter   is reprinted in the district
court’s opinion. See   Kamphuis Pipeline Co. v.
Lake George Regional   Sewer District, No. 99-CV-
363, slip op. at 2-3   (N.D. Ind. December 7,
2000).

/2 The statute defines board as "the board or office
of a political subdivision or an agency having
the power to award contracts for public work."
Ind. Code sec. 36-1-12-1.2(1). This definition
includes the Board of the Lake George Regional
Sewer District.