Opinion
No. 3-387 / 02-1212
Filed October 15, 2003
Appeal from the Iowa District Court for Clinton County, C. H. Pelton, Judge.
Mel Foster Construction Company and Merchants Bonding Company appeal judgment against them on a contract and a bond. AFFIRMED.
Richard Davidson and Diane Reinsch of Lane Waterman, Davenport, for appellants.
Stephen Fieweger of Katz, Huntoon Fieweger, P.C., Rock Island, Illinois, for appellee.
Heard by Huitink, P.J., and Vaitheswaran and Eisenhauer, JJ.
A subcontractor obtained a judgment against two general contractors and a bonding company for work done on a construction project. The bonding company and one of the contractors appealed, arguing the subcontractor had no "direct contract" with the appellant contractor that would entitle it to payment under the bond. We disagree and affirm.
I. Background Facts and Proceedings
Meredith Construction Company ("Meredith") and Mel Foster Construction Company ("Mel Foster") entered into a general contract with Grace Lutheran Foundation ("Grace") to construct a retirement complex in DeWitt. Shortly after executing the general contract, Mel Foster also executed a payment bond in favor of Grace. The bond was issued by Merchants Bonding Company ("Merchants"). The bond made no direct reference to Meredith.
Meanwhile, Meredith entered into a subcontract with General Asphalt Construction Company ("General Asphalt"). General Asphalt completed its work on the project and provided Meredith with an invoice. When, six months later, General Asphalt still had not received payment, the company sued. Following a bench trial, the district court entered judgment against Meredith, Mel Foster, and Merchants in the amount of $36,532.
Mel Foster and Merchants appealed. As the parties tried the case in equity, our review is de novo. Weinhold v. Wolff, 555 N.W.2d 454, 458 (Iowa 1996).
II. Payment Bond
This controversy is premised on language in the payment bond relating to the timing of claims. Under the bond, claimants having a "direct contract" with the "Contractor" do not have a time limit for filing their claims, while those who do not have a "direct contract" with the "Contractor" must file their claims within ninety days of completing their work.
The relevant language of the payment bond is as follows:
The Surety shall have no obligation to Claimants under this Bond until:
4.1 Claimants who are employed by or have a direct contract with the Contractor have given notice to the Surety (at the address described in Paragraph 12) and sent a copy, or notice thereof, to the Owner, stating that a claim is being made under this Bond, and, with substantial accuracy, the amount of the claim.
4.2 Claimants who do not have a direct contract with the Contractor:
.1 Have furnished written notice to the Contractor and sent a copy, or notice thereof, to the Owner, within 90 days after having last performed labor or last furnished materials or equipment included in the claim stating, with substantial accuracy, the amount of the claim and the name of the party to whom the materials were furnished or supplied or for whom the labor was done or performed . . . .
General Asphalt did not file its claim within ninety days of completing its work. Mel Foster and Merchant concede that, if it had, the company would have been entitled to payment under that portion of the bond governing claimants without a "direct contract."
Given its failure to meet the 90 day deadline, General Asphalt was required to proceed under the provision for claimants having a "direct contract" with the "Contractor." Mel Foster and Merchants argue that General Asphalt could not establish a "direct contract" with Mel Foster because its subcontract was with Meredith and the payment bond named only Mel Foster as the contractor. General Asphalt counters that the bond covered work performed by Meredith as well as Mel Foster. In its view, the construction project was a joint venture, resulting in a "direct contract" with both entities and obviating the need to have both listed as signatories on the payment bond and the subcontract. We agree with General Asphalt.
A joint venture is "an association of two or more persons to carry out a single business enterprise or a common undertaking in which they combine their property, money, efforts, skill, or knowledge." Hartig v. Franoi, 519 N.W.2d 393, 394 (Iowa 1994). The "usual indicia" of a joint venture are "(1) a common undertaking; (2) a joint proprietary interest in the subject matter; (3) a mutual right to control; (4) a right to share in the profits; and (5) a duty to share the losses." Thomas v. Hansen, 524 N.W.2d 145, 146 (Iowa 1994). All five of these indicia "need not necessarily appear." Id.
There is no question Mel Foster and Meredith engaged in a "common undertaking." They submitted a joint bid on the project signed by representatives of both companies. They jointly entered into the general contract with Grace to "fully execute the Work described in the Contract Documents . . . ." The general contract listed the "Contractor" as "Mel-Foster Construction-Meredith Construction, Inc." The general contract incorporated a letter to the project architects written on Mel Foster letterhead and signed by representatives of both companies. All these contract documents were incorporated by reference in the payment bond, which defined "Construction Contract" as "[t]he agreement between the Owner and the Contractor identified on the signature page, including all Contract Documents and changes thereto." The payment bond reiterated the joint nature of this undertaking, stating:
The Contractor and the Surety, jointly and severally, bind themselves, their heirs, executors, administrators, successors and assigns to the Owner to pay for labor, materials and equipment furnished for use in the performance of the Construction Contract, which is incorporated herein by reference.
There was also evidence that both contractors participated in the construction project, withMel Foster performing the ground work and Meredith handling the carpentry work. In sum, the "common undertaking" characteristic was easily satisfied.
There is also no question the two contractors had a "joint proprietary interest" in the construction project. The general contract provided they would jointly receive $1,967,785 for their efforts.
What is less clear is whether each contractor had the mutual right to control the other's work. The contract documents did not provide for joint rights of control and a representative of General Asphalt testified that its work was only supervised by Meredith. However, Mel Foster was involved in paying Meredith. Meredith submitted bills to Mel Foster, Grace paid Mel Foster, and Mel Foster, in turn, disbursed funds to Meredith. To the extent Mel Foster controlled the flow of payments to Meredith, we find it exercised control over Meredith and its work. Cf. Thomas, 524 N.W.2d at 147 (finding mutual right of control from fact one party was to receive portion of other's billings).
As for the "sharing of profits" characteristic, Mel Foster was to take approximately $50,000 in profit "off the first portion of the job." Meredith appears to have been paid intermittently throughout the course of the project.
There is no evidence regarding the final characteristic, an agreement to share losses. However, such an agreement "may be implied from an agreement for a sharing of capital and profits." Farm-Fuel Prod. Corp. v. Grain Processing Corp., 429 N.W.2d 153, 158 (Iowa 1988).
On our de novo review, we agree with the district court that "Meredith Construction and Mel Foster Construction have a joint venture . . . ." Therefore, General Asphalt had a "direct contract" with both and they, together, were the "Contractor" under the payment bond. Cf. id. at 157 (noting party not signatory to contract could be held liable for warranties in contract on joint venture theory). We further agree with the district court that Mel Foster and Meredith were "liable to General Asphalt jointly and severally as general contractor. . . ." See Bridgman v. Curry, 398 N.W.2d 167, 174 (Iowa 1986); 46 Am. Jur.2d Joint Ventures § 41, at 70 (1994).
We find it unnecessary to address the parties' remaining arguments.