Teche Electric Supply, LLC v. M. D. Descant, Inc.

STATE OF LOUISIANA
COURT OF APPEAL, THIRD CIRCUIT

08-171

TECHE ELECTRIC SUPPLY, L.L.C.

VERSUS

M.D. DESCANT, INC., ET AL.

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APPEAL FROM THE
THIRTY-FIRST JUDICIAL DISTRICT COURT
PARISH OF JEFFERSON DAVIS, NO. C-129-05
HONORABLE ANNE LENNAN SIMON, PRESIDING
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SYLVIA R. COOKS
JUDGE

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Court composed of Sylvia R. Cooks, J. David Painter and Christopher J. Roy, pro
tem, Judges.

REVERSED AND RENDERED.

Edward C. Abell, Jr.
The Onebane Law Firm
1200 Camellia Street
P.O. Box 3507
Lafayette, LA 70502
(337) 237-2660
COUNSEL FOR PLAINTIFF/APPELLEE:
Teche Electric Supply, L.L.C.

Russel W. Wray
Chris P. Pierce
Wray & Pierce, L.L.P.
509 St. Louis Street
P.O. Box 3238
Baton Rouge, LA 70821-3238
(225) 334-9200
COUNSEL FOR DEFENDANTS/APPELLANTS:
M.D. Descant, Inc., National Fire Insurance Company of Hartford, and
Western Surety Company

COOKS, Judge.

M.D. Descant, a general contractor, entered into a contract with the State of

Louisiana for the construction of the Southwest Louisiana War Veterans Home in

Jennings, Louisiana. The contract was duly recorded, and National Fire Insurance

Company provided a performance and payment bond for the project.

M.D. Descant subcontracted the electrical portion of the project to Kirk Knott

Electric, Inc. During the period from April, 2003 through February 17, 2004, Teche

Electric Supply, L.L.C., sold electrical materials to Kirk Knott. The bulk of the

electrical materials provided by Teche was delivered to the Kirk Knott yard in

Carencro and then transported by employees of Kirk Knott to the construction site.

During the time frame Teche was supplying electrical materials for the job in

question, Kirk Knott filed for bankruptcy.

Not having been paid for supplied electrical materials, Teche filed a Statement

of Lien and Privilege in the amount of $201,267.68 in the mortgage records against

Kirk Knott on April 23, 2004. Teche mailed a notice of nonpayment to the State and

to M.D. Descant on May 6, 2004. On June 2, 2004, M.D. Descant filed a Bond for

Removal of Lien, which substituted a bond of Western Surety Company to secure

payment of Teche’s outstanding lien. The State of Louisiana accepted the project,

with said acceptance recorded on February 14, 2005. On March 1, 2005, Teche filed

suit against Defendants, M.D. Descant, National Fire Insurance Company, and

Western Surety Company, for the full amount of its statement, interest, attorney fees,

and costs.

On June 18, 2007, Defendants filed a motion for summary judgment

contending Teche failed to preserve its right to lien the public works project when it

failed to furnish notice of nonpayment within 75 days of the delivery of materials as

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required by La.R.S. 38:2242(F). Teche filed a cross motion for summary judgment,

arguing its letter mailed on May 6, 2004, sufficiently provided notice of nonpayment

to the appropriate parties as required by law; and thus, urging it was entitled to

judgment as a matter of law.

After a hearing on the motions, the trial court took the matter under

advisement. Judgment was rendered denying Defendants’ motion for summary

judgment and granting Teche’s motion for summary judgment. The trial court agreed

with the parties that the motions “put before the court the issue of the correct

interpretation” of La.R.S. 38:2242(F). The trial court determined that Teche’s letter

mailed May 6, 2004, preserved its right to file a lien for nonpayment of materials sold

by Teche to Kirk Knott. The judgment awarded Teche the sum of $196,298.63,

together with legal interest thereon from the date of judicial demand until paid and

ten percent of said principal and interest as attorney fees. Defendants have appealed

the trial court’s judgment, asserting the following assignments of error:

1. The trial court erred in determining that Teche furnished the
notice of nonpayment required by La.R.S. 38:2242(F).

2. The trial court erred in construing La.R.S. 38:2242(F) to allow
one notice issued within 75 days of the last day of the month of
the last delivery to apply to all materials delivered.

3. The trial court erred in liberally construing La.R.S. 38:2242(F).

4. The trial court erred in finding that no genuine issue of material
fact existed as to the incorporation of the materials into the
Project.

5. The trial court erred in awarding amounts invoiced for freight
charges for deliveries made to a location other than the Project
site.

6. The trial court erred in awarding attorney fees.

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ANALYSIS

In Hines v. Riceland Drilling Co., 04-503, pp. 3-4 (La.App. 3 Cir. 9/29/04), 882

So.2d 1287, 1289-90, writ denied, 04-2705 (La.1/07/05), 891 So.2d 681, this Court

set forth the law applicable to the appellate review of summary judgments, stating as

follows:

In Independent Fire Insurance Co. v. Sunbeam Corp., 99-2181,
99-2257, p. 7 (La.2/29/00), 755 So.2d 226, 230-31, the Louisiana
Supreme Court discussed the standard of review of a summary judgment
as follows:

Our review of a grant or denial of a motion for
summary judgment is de novo. Schroeder v. Board of
Sup'rs of Louisiana State University, 591 So.2d 342
(La.1991). A motion for summary judgment will be
granted “if the pleadings, depositions, answers to
interrogatories, and admissions on file, together with the
affidavits, if any, show that there is no genuine issue as to
material fact, and that the mover is entitled to judgment as
a matter of law.” La. C.C.P. art. 966(B). This article was
amended in 1996 to provide that “summary judgment
procedure is designed to secure the just, speedy, and
inexpensive determination of every action.... The
procedure is favored and shall be construed to accomplish
these ends.” La. C.C.P. art. 966(A)(2). In 1997, the article
was further amended to specifically alter the burden of
proof in summary judgment proceedings as follows:

The burden of proof remains with the movant.
Thereafter, if the adverse party fails to
produce factual support sufficient to establish
that he will be able to satisfy his evidentiary
burden of proof at trial, there is no genuine
issue of material fact. La. C.C.P. art.
966(C)(2).

Hines, 882 So.2d at 1289-90.

As the trial court noted, this appeal involves the correct interpretation of

La.R.S. 38:2442, the amended provision of the Louisiana Public Works Act, which

in part deals with the time period within which an unpaid materialman must give

written notice to a contractor and owner in order to file a lien on a public building

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project. Unlike workers and suppliers involved in private building projects, similarly

situated workers and suppliers engaged by public agencies on building projects

cannot protect themselves with liens against public property because liens are not

enforceable against publicly-owned property. State Through Div. of Admin. v.

McInnis Bros. Const., 97-0742 (La.10/21/97), 701 So.2d 937. As noted by the

supreme court in Wilkin v. Dev Con Builders, Inc., 561 So.2d 66, 70 (La.1990)

(Citations omitted):

Because of the need to protect those performing labor and furnishing
materials for public works, the Legislature in 1918 passed Act 224, the
precursor to current public works statutes, La. R.S. 38:2241 et seq.,
granting rights to laborers and materialmen involved in public works.
The public contract law did not grant its beneficiaries a lien on the
public work itself, but gave them, in effect, a “privilege against the
unexpended fund in the possession of the authorities with whom the
original contract ha[d] been entered into.”

The pertinent sections of La.R.S. 38:2442 provide:

B. Any claimant may after the maturity of his claim and within forty-five
days after the recordation of acceptance of the work by the governing
authority or of notice of default of the contractor or subcontractor, file
a sworn statement of the amount due him with the governing authority
having the work done and record it in the office of the recorder of
mortgages for the parish in which the work is done.

....

F. In addition to the other provisions of this Section, if the materialman
has not been paid by the subcontractor and has not sent notice of
nonpayment to the general contractor and the owner, then the
materialman shall lose his right to file a privilege or lien on the
immovable property. The return receipt indicating that certified mail
was properly addressed to the last known address of the general
contractor and the owner and deposited in the U.S. mail on or before
seventy-five days from the last day of the month in which the material
was delivered, regardless of whether the certified mail was actually
delivered, refused, or unclaimed satisfies the notice provision hereof or
no later than the statutory lien period, whichever comes first. The
provisions of this Subsection shall apply only to disputes arising out of
recorded contracts.

Prior to the passage of subsection F in the 1999 legislative acts, the right to file a

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privilege or lien in the described circumstances only required a statement to be filed

in the applicable court records. There was no requirement that notice be sent to the

owners and contractors. Subsection F now mandates that owners and contractors be

furnished with notice of nonpayment as a prerequisite to the right to file a lien or

privilege on the project. Failure to do so results in the materialman “los[ing] his right

to file a privilege or lien on the immovable property.”

In finding in favor of Teche below, the trial court issued the following reasons

for judgment:

With respect to the timeliness of notice, although McGinnis,
supra., the case relied upon by the defendants, clearly states that lien
statutes are to be strictly interpreted, the holding of the case contradicts
the proposition. The court upheld a lien filed after the pre-amendment
forty-five day period when the public entity had knowledge of the
amount due. Similarly, in Levingston Supply Co. v. American
Employers’ Ins. Company, La.App. 1 Cir. 1968) 216 So.2d 158, the First
Circuit court of Appeal liberally interpreted the pre-amendment statute
to uphold a lien filed prior to the beginning of the forty-five day period.
It appears to this court that McGinnis, the sole authority offered by the
defendants for a strict interpretation, is not persuasive in this matter.
The court is persuaded by the arguments presented by the
plaintiff. Without the 1999 amendment, the materialman’s lien could
have been timely noticed at any time before March 31, 2005, some
eleven months afer the deadline under the amendment. Under the pre-
amendment law, a materialman could file his “claim” without reference
to dates of delivery. If the legislature had wished to refine the
requirement to a claim for each delivery, one may assume they would
have done so. The court is also of the opinion that a requirement for
notice with each delivery would adversely impact the business
relationship between supplier and contractor, and increase bothersome
paperwork. Furthermore, the defendants do not contend that they had
no knowledge of the non-payment, which fact triggers the equity
considerations expressed in VPP America [951 So.2d 461]. Equity falls
on the side of the unpaid plaintiff.

Subsequent to the trial court’s judgment, the Second Circuit Court of Appeal in

Electric Supply Co., Inc. v. Great American Ins. Co., Inc., 42,727 (La.App. 2 Cir.

12/12/07), 973 So.2d 827, addressed the application of La.R.S. 38:2242(F). In that

case, the unpaid materialman recorded its lien on January 23, 2001 and mailed a copy

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to the contractor and owner on the next day. When the claim was not paid, the

materialman filed suit against the contractor and owner, who in turn filed a motion

to cancel the lien on the ground that the materialman did not comply with La.R.S.

2242(F) when it failed to send notice of nonpayment prior to filing the lien. The trial

court agreed with the owner and contractor and ordered that the lien be extinguished

and removed from the mortgage records. On appeal, the court noted that “the only

issue . . . [was] whether La.R.S. 38:2242(F) requires that notice of nonpayment be

given to the general contractor and owner before a materialman files his lien or

privilege.” Id. at 828. The second circuit reasoned as follows:

In examining La.R.S. 38:2242, we are mindful of the admonition
that in general, lien statutes are stricti juris and should thus be strictly
construed. Guichard Drilling Co. v. Alpine Energy Services, Inc.,
94-1275 (La.7/3/95), 657 So.2d 1307. “[P]ublic contract laws are to be
strictly construed such that the privileges granted are not extended
beyond the statutes.” Wilkin, 561 So.2d at 71. See also McInnis Bros.
Const., supra.

The first sentence of Subsection (F) is clear: “In addition to the
other provisions of this Section, if the materialman has not ... sent notice
of nonpayment [by the subcontractor] to the general contractor and the
owner, then the materialman shall lose his right to file a privilege or lien
on the immovable property.” Subsection (F) requires that the
materialman must send notice of nonpayment to preserve his right to file
a privilege or lien. The reason for this requirement is obvious. A
contractor or owner is not always going to be aware of the materialman
from whom a subcontractor has obtained materials that the subcontractor
has used on a public works project, so forcing the claimant materialman
first to give notice to the general contractor and owner places those
parties in the position of being able to withhold payment to the
subcontractor so as to avoid ultimately having to make a double
payment.

Subsection (F), which was added in 1999, places a notice
requirement upon materialmen that is in addition to the requirements
applicable to all claimants that are found in Subsection (B); hence,
Subsection (F) begins with, “In addition to the other provisions of this
Section....”

Electric Supply counters that the second sentence in Subsection
(F) sets forth the period in which notice can be given. However, the
second sentence in Subsection (F) apparently only explains how the

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notice provision can be satisfied, and the latest date on which the notice
can be given assuming a lien or privilege has not yet been filed. In fact,
according to this second sentence, the notice period could expire before
the end of the 45-day period to make a claim that is set out in Subsection
(B): “deposited in the U.S. mail on or before seventy-five days from the
last day of the month in which the material was delivered ... satisfies the
notice provision hereof or no later than the statutory lien period,
whichever comes first.”

An additional notice provision for claimants who have contractual
privity with a subcontractor, but not with a contractor, is set forth in La.
R.S. 38:2247, which states, with our emphasis:

Nothing in this Part shall be construed to deprive any
claimant, as defined in this Part and who has complied with
the notice and recordation requirements of R.S.
38:2242(B), of his right of action on the bond furnished
pursuant to this Part, provided that said action must be
brought against the surety or the contractor or both within
one year from the registry of acceptance of the work or of
notice of default of the contractor; except that before any
claimant having a direct contractual relationship with a
subcontractor but no contractual relationship with the
contractor shall have a right of action against the
contractor or the surety on the bond furnished by the
contractor, he shall in addition to the notice and
recordation required in R.S. 38:2242(B) give written
notice to said contractor within forty-five days from the
recordation of the notice of acceptance by the owner of the
work or notice by the owner of default, stating with
substantial accuracy the amount claimed and the name of
the party to whom the material was furnished or supplied
or for whom the labor or service was done or performed.
Such notice shall be served by mailing the same by
registered or certified mail, postage prepaid, in an envelope
addressed to the contractor at any place he maintains an
office in the state of Louisiana.

We note that the above-referenced notice is not the same as the
notice required of materialmen found in Subsection (F) of La. R.S.
38:2242. The notice of nonpayment in Subsection (F) is to be given to
the owner and contractor to preserve the right to file a claim, while the
notice referenced in La. R.S. 38:2247 is to be given to the contractor to
preserve the right of action against the contractor or the surety. In
addition, the notice required in Subsection (F) would be untimely if it
was given before a claim was filed but after 75 days had elapsed since
the last day of the month in which material was delivered, even if the
45-day statutory lien period had not elapsed. The notice requirement
found in La. R.S. 38:2247 references only the 45-day statutory lien
period provided in La. R.S. 38:2242(B)

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In the present case, Teche filed its lien on April 23, 2004 and furnished a copy

of the lien and made demand by its letter dated May 3, 2004. Teche does not attempt

to factually distinguish Electric Supply, but rather argues that the Second Circuit’s

holding in that case is “in error, that it contradicts prior interpretations of R.S.

38:2242(F), defeats the intent of the statute, and should not be followed by this

Honorable Court.” We do not agree.

Under the previous law, a materialman was not required to furnish any notice

of nonpayment. La.R.S. 38:2242(F) clearly changed the law to require a materialman

to furnish notice of nonpayment to preserve the right to file a lien. To interpret

La.R.S. 38:2242(F) as Teche argues, that it allows for a post-filing notice, would

defeat the clear intent of that statute and revert the law to its pre-amendment status.

La.R.S. 38:2242(F) clearly provides that the failure to send notice of nonpayment

“shall” cause the loss of the right to file a lien.

Teche relies on the Second Circuit case of VPP America, Inc. v. Design Build

Development Services, Inc., 41,652 (La.App. 2 Cir. 1/31/07), 951 So.2d 461. In that

case, the lien was filed by the materialman on July 20, 1999, and the letter demanding

payment was not sent until August 29, 2000. The Second Circuit concluded the

materialman was entitled to recover the money and that the sequence of the lien being

filed before the notice was sent was not fatal to the claim. However, as appellants

point out, VPP America is clearly distinguishable from the present case. The court

in VPP America did not discuss La.R.S. 38:2242(F) because that statute did not

become effective until after the last delivery of materials occurred in that case. Thus,

the court in VPP America was still bound by the prior law.

Teche argues equity demands that M.D. Descant be ordered to pay for the

electrical supplies, as they will unfairly profit if they are not forced to pay. Teche’s

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cries for equity apparently extend only to materialmen and not contractors and

owners. As noted by appellants in their brief, a ruling designed solely to assure

compensation for materialmen may create a double payment scenario. If a

subcontractor receives payment from the contractor but fails to pay his materialman,

then a lien filed by the materialman may cause the contractor to pay twice for the

same materials. As the court noted in Electric Supply, “forcing the claimant

materialman first to give notice to the general contractor and owner places those

parties in the position of being able to withhold payment to the subcontractor so as

to avoid ultimately having to make a double payment.” Id. at 829-30.

We find the second circuit’s ruling in Electric Supply applicable to this case.

Teche failed to furnish notice of nonpayment prior to filing its lien. Thus, under

La.R.S. 38:2242(F), the failure to meet the notice requirements by Teche causes a

“loss” of the “right to file a lien or privilege.” As a result, Teche has no claim against

Defendants. Therefore, the trial court erred in granting Teche’s motion for summary

judgment.

DECREE

For the foregoing reasons, we reverse the trial court’s grant of summary

judgment in favor of Teche Electric. Judgment is hereby rendered in favor of M.D.

Descant dismissing Teche Electric’s petition with prejudice. All costs of this appeal

are assessed against Teche Electric.

REVERSED AND RENDERED.

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