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03/20/80 Conesco Industries, Ltd. A v. Conforti and Eisele

March 20, 1980




Before MacKINNON and WILKEY, Circuit Judges, and GORDON, United States Senior District Judge for the Western District of Kentucky.


Rehearing Denied April 17, 1980.

Appeal from the United States District Court for the District of Columbia (D.C.Civil 77-0977).


Opinion for the Court filed by Senior District Judge JAMES F. GORDON.

Dissenting Opinion filed by Circuit Judge WILKEY.


This case involves an action brought by the appellant, Conesco Industries, Ltd., (hereinafter Conesco) for compensation for the use of concrete forming materials used in the construction of the Gallerie Mall shopping center. The appellee, Conforti & Eisele, Inc., D.C., (hereinafter C & E) was the general contractor of this project, and appellee Maryland Casualty Company (hereinafter Maryland) was the bonding company that executed the surety bond for the construction project. At the district court level, C & E was dismissed as a party as a result of Conesco's inability to prove the existence of either an express or implied contract between them and C & E. The district court also held that Conesco's cause of action on the surety bond against Maryland failed as the result of Conesco's supposed failure to comply with the notice provisions found in the surety bond. See Conesco Industries, Ltd. v. Conforti & Eisele, Inc., D.C., et al., Civil Action No. 77-0977 (D.D.C., filed on April 24, 1978). At issue is whether Conesco was barred from recovery for failure to comply with the notice provisions. For the following reasons, this Court reverses the decision of the district court. I.

In September of 1973, C & E entered into a general contract with HSL-DC Corporation, whereby the former agreed to be the general contractor for the construction of the Gallerie Mall. Subsequently, C & E executed a payment bond with Maryland in October of that same year (J.A. 12-16). In September of 1974, C & E entered into a subcontract with the Vespe Contracting Company (hereinafter Vespe), a concrete construction company, whereby Vespe agreed to perform all the concrete construction and supply all the material needed for this construction. Vespe then entered into a sales and lease agreement with Conesco who agreed to supply both equipment and supplies to Vespe.

Beginning in 1975, Conesco began having difficulties in receiving payment from Vespe. To insure payment, C & E would issue checks jointly to Vespe and Conesco which Vespe would endorse and turn over to Conesco. In October of 1975, Conesco demanded payment from Vespe for $33,477.34, a copy of this demand being sent to C & E. On or about November 5, 1975, Conesco wrote directly to C & E stating that Vespe owed Conesco $33,662.14. By November 25, 1975, the amount owed had grown to $38,872.44, and Conesco notified both Vespe and C & E of its demand for payment. On December 1, 1975, Conesco received a joint check for $7,998.

Vespe's relations with C & E were also strained, and after C & E had sent to Vespe a check made payable solely to Vespe for the amount of $70,000, the subcontractor walked off the job in December of 1975, leaving C & E to complete the concrete work on the project. No part of the $70,000 was ever paid over to Conesco.

When Vespe abandoned the project, it left some of Conesco's concrete forms at the site. Conesco alleges that it attempted to have the forms returned to it but that C & E used these forms until July of 1976. Conesco did not attempt to find out if the project was bonded until June of 1976, when it began making inquiries to both Vespe and HSL-DC. Counsel for Vespe informed Conesco that he did not believe that the Gallerie project was bonded, but that he could not verify this, and the owner of the project could not apparently answer this question but did surmise that it was bonded through a different bonding company (Plaintiff's Exhibit 26). The president of Vespe answered inquiries concerning the bond by stating that while he believed the project was bonded, he did not know who the bonding company was (Plaintiff's Exhibit 34e). It was not until July that Conesco was able to find out that Maryland was the surety on the payment bond. Notice of the claim was sent to Maryland in a letter dated July 30, 1976 (Plaintiff's Exhibits 28, 34).

As stated previously, the district court dismissed the subsequent action brought by Conesco against Maryland for the apparent failure of Conesco to comply with the notice provision found in the payment bond. The court gave as its reasoning the following:

Thus recovery hinges upon whether adequate notice was given to satisfy the requirements of the bond. The bond provided, to the extent here applicable, that a claimant such as plaintiff must give notice to the general contractor and the bonding company "within ninety (90) days after such claimant . . . furnished the last of the materials for which the claim is made." Vespe walked off the job the first week of December, 1975, and plaintiff had terminated business relations with it before that date. It is agreed that the general contractor had timely notice of plaintiff's claim. No notice, however, was given the bonding company until July 30, 1976.

The notice provision controls the rights of the parties, particularly in a private bond case such as this. . . . Time runs from the date Vespe walked off the job. . . . Plaintiff knew Vespe had quit, and the general contractor at the time had notified plaintiff to come pick up its rental equipment. Plaintiff seeks to extend the period by attempting to collect charges for a small amount of equipment still being used at the job site by someone other than Vespe. This in no way extended the notice period. (citations omitted).

Conesco (supra) at 2. II.

We must first take issue with the district court's apparent misreading of the notice provision of the payment bond. The lower court read the provision so as to require that notice must be given to the general contractor and the ...

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