This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. ' 480A.08, subd. 3 (1994).

STATE OF MINNESOTA
IN COURT OF APPEALS
C5-95-2377

Monarch Turf Supply,
Respondent,

vs.

Reliance Insurance Company,
Appellant.

Filed July 2, 1996

Affirmed
Holtan, Judge*

Hennepin County District Court
File No. 955013

Christopher S. Hayhoe, Christopher P. Chilstrom, Felhaber, Larson, Fenlon & Vogt, P.A, 4200 First Bank Place, 601 Second Avenue South, Minneapolis, MN 55402 (for Respondent)

M. T. Fabyanske, Richard G. Jensen, Fabyanske, Svoboda, Westra & Hart, P.A., 920 Second Avenue South, #1100, Minneapolis, MN 55402 (for Appellant)

Considered and decided by Huspeni, Presiding Judge, Klaphake, Judge, and Holtan, Judge.

U N P U B L I S H E D O P I N I O N

HOLTAN, Judge

Appellant Reliance Insurance Company challenges the trial court's finding that respondent Monarch Turf Supply filed a timely notice of payment bond claim under Minn. Stat. ' 574.31 (1990), and the trial court's order requiring appellant to pay the principal sum plus 18 percent interest per annum for materials supplied by respondent to a publicly-funded project for which appellant had issued a payment and performance bond. We affirm.

FACTS

The relevant facts underlying this appeal are largely undisputed. On October 17, 1989, Hennepin County entered into a construction contract with Knutson Construction. Pursuant to the contract, Knutson Construction agreed to supply all labor, materials and services necessary to construct a project known as the Brooklyn Park Waste Transfer Station. In accordance with the Minnesota Public Contractors' Performance and Payment Bond Act, appellant issued a payment and performance bond on behalf of Knutson Construction.

One of Knutson Construction's subcontractors on the project was Noble Nursery. Noble Nursery performed landscaping work on the project in the fall of 1990. Respondent provided Noble Nursery with the sod used. Knutson Construction paid Noble Nursery in full for all work and materials it provided for the project; however, Noble Nursery, which filed for bankruptcy on August 11, 1991, failed to pay respondent the principal sum of $22,858 for its sod.

During January, February, and March 1991, respondent had periodic telephone contact with Knutson Construction's project manager regarding Noble Nursery's failure to pay respondent for its sod. By letter dated April 30, 1991, respondent wrote the project manager that Noble Nursery continued to be in default on respondent's invoices, and requested payment from Knutson Construction. During this time, respondent also had telephone contact with Hennepin County's project manager, notifying him that respondent had not received payment from Noble Nursery for its sod.

By letter dated March 20, 1991, Hennepin County's project manager wrote Knutson Construction's project manager that it could not issue "this Final Payment for construction of the Brooklyn Park Transfer Station" until several items were completed/received (e.g. "executed Certificate of Substantial Completion," "consent of Surety to Final Payment," "proof of the resolution of the two mechanics' lien claims," and rewiring of roof vents). According to the trial testimony of Hennepin County's project manager, these requests were satisfied in April 1991.

A memorandum from Hennepin County's project manager, dated April 30, 1991, noted that Knutson Construction Company "has finished all work required of them. Final payment (Change Order No. 47) was made on April 15, 1991." In addition, it stated that only "[m]inor warranty items remain. It is therefore appropriate to closeout the Retainage Account." Hennepin County authorized release of the balance being held in the securities retainage account on May 3, 1991, and advised Knutson Construction of the release of the remaining retainage by letter dated May 23, 1991: "Hennepin County is releasing the remaining $20,000.00 from this account which will allow its closure and the termination of the agreement."

Hennepin County=s project manager testified that as of May 3, 1991, he had accepted Knutson Construction=s performance under the contract and that Knutson=s only remaining obligation under the contract was to honor its warranties. Also, the City of Brooklyn Park had issued Hennepin County a Certificate of Occupancy in 1990, and Hennepin County had been occupying and using the project for its intended purpose since summer 1990.

By letter dated May 16, 1991, Hennepin County's project manager demanded that Knutson Construction replace, by August 6, 1991, some dead plantings at the project that were covered under warranty. As of October 16, 1991, Knutson Construction had not replaced the dead plantings and Hennepin County's project manager again wrote to Knutson Construction demanding replacement of the plantings. The demand for completion of the work was made again by letter dated November 19, 1991. Knutson Construction then employed Wilson Nursery to complete the work, which was finished on November 26, 1991. [1]

Respondent filed its notice of bond claim with the Hennepin County Auditor on August 26, 1991. Respondent commenced this lawsuit on May 5, 1992, asserting a bond claim against appellant under the Minnesota Performance and Payment Bond Act, Minn. Stat. '' 574.26-.31 (1990) for materials supplied to a publicly-funded project for which appellant had issued a payment and performance bond.

After a bench trial, the trial court found that respondent properly complied with the notice requirements of Minn. Stat. ' 574.31 and held that appellant was liable to respondent for the principal sum of $22,858, plus interest at the rate of 18 percent per annum and costs and attorney fees. In a subsequent order, the trial court awarded respondent $11,594 in attorney fees and $399.37 in costs and disbursements. Appellant made a motion for a new trial or, in the alternative, for amended findings of fact, conclusions of law and order for judgment. The trial court denied appellant's motion. Appellant appeals from the trial court's denial of this motion and requests that the trial court's decision be reversed and the case remanded for judgment in favor of appellant.

D E C I S I O N

Ordinarily, the decision to grant a new trial does lie within the sound discretion of the trial court and will not be disturbed absent a clear abuse of that discretion.

Halla Nursery v. Baumann-Furrie & Co., 454 N.W.2d 905, 910 (Minn. 1990). The standard of review for a trial court's findings is whether they are clearly erroneous. First Trust Co. v. Union Depot Place, 476 N.W.2d 178, 181 (Minn. App. 1991), review denied (Minn. Dec. 13, 1991).

At the time respondent filed its bond claim, Minn. Stat. ' 574.31 (1990), [2] provided:

No action shall be maintained on any such bond unless within 90 days after the completion of the contract and acceptance thereof by the proper public authorities, the claimant shall file a written notice * * * in the office of the auditor of the county letting the contract * * *.

Strict compliance with the notice requirement is a condition precedent to the maintenance of an action against a surety on a contractor's bond. Spetz & Berg, Inc. v. Luckie Constr. Co., 353 N.W.2d 233, 235 (Minn. App. 1984), review denied (Minn. Nov. 9, 1984). The statute of limitations, however, does not begin to run until there has been both completion and acceptance of the contract. Wheeler Lumber Bridge & Supply Co. v. Seaboard Surety Co., 218 Minn. 443, 447, 16 N.W.2d 519, 521 (1944).

In its order for judgment, the trial court concluded that respondent complied with the applicable statutory requirements, noting:

Knutson did not complete performance of its contract with Hennepin County more than 90 days in advance of the date that [respondent] filed its notice of public contractor=s bond claim on August 26, 1991. Knutson did not complete performance of that contract until November 26, 1991.

In the memorandum to its order for judgment, the trial court, relying on Guaranteed Gravel & Sand Co. v. Aetna Casualty & Surety Co., 174 Minn. 366, 219 N.W. 546 (1928), explained:

Minn. Stat. Sec. 574.31 (1990) makes no distinction in terms of Acompletion of the contract@ between Awarranty@ or Anon-warranty@ work. Knutson had not completed performance on that contract until November 26, 1991, when the original deficiency in its tree installation was finally corrected. That work satisfied the project manager for Hennepin County and was deemed acceptance (finally) of the completion of performance on the contract.

Appellant contends the trial court erred in its determination that warranty obligations extended the date of completion and acceptance of the contract until November 26, 1991, because final completion and acceptance had already occurred on May 3, 1991, arguing (1) when Hennepin County made final payment to Knutson Construction on April 15, 1991, the project was completed according to the terms of the contract and the payment constituted a waiver of all claims other than certain specific claims such as warranty work, (2) Hennepin County=s acceptance of the project was demonstrated by its release of retainages to Knutson Construction authorized on May 3, 1991, and its letter to Knutson Construction dated May 23, 1991, noting: AHennepin County is releasing the remaining $20,000.00 from this account which will allow its closure and the termination of the agreement,@ (3) Hennepin County=s project manager testified he had accepted Knutson Construction=s performance under the contract as of May 3, 1991, and Knutson=s only remaining obligation under the contract then was to honor its warranties, (4) Hennepin County had been issued a Certificate of Occupancy by the City of Brooklyn Park in 1990, and (5) Hennepin County had been occupying and using the project for its intended purpose since summer 1990.

In Guaranteed Gravel, a contractor failed to complete certain items required under a contract. 174 Minn. at 368-69, 219 N.W. at 547. The plaintiffs asserted payment bond claims against the defendant surety on a public contractor=s bond. Id. The surety argued that the plaintiff=s notices were untimely because they were not filed within the specified 90-day time period. Id. Specifically, the surety argued that the contractor=s work upon which the plaintiffs relied to establish timeliness was not work necessary to complete initial construction. Id. at 369-70, 219 N.W. at 547-48. The court described the situation as follows:

It is claimed that the work necessary on the roof was repair work covered by the guaranty, but not due to a failure to properly construct in the first instance. This is disputed by plaintiffs. We think the evidence * * * supports the apparent conclusion of the trial court that the roof work was necessary because of failure to properly and completely construct, and not a necessary repair attributable to or made necessary by use.

* * *

We conclude that the evidence supports the finding that the physical structure of the building was not completed 90 days prior to the service of the notice, nor had the contract been completed at that time.

Id.

Similarly, we find that the replacement of plantings in this case was necessary because of an original deficiency, thereby delaying completion and acceptance of the project until the original deficiency was corrected on November 26, 1991, and rendering respondent's notice of bond claim, filed on August 26, 1991, timely. It is noteworthy that Hennepin County accepted the project subject to Knutson Construction's contractual obligations to honor its warranties, and that Knutson Construction and Hennepin County both knew at the time of purported acceptance of the contract of the need for replacement of the dead plantings pursuant to Knutson Construction's warranty agreement, preventing the contract's completion.

The trial court also ordered:

[Appellant] shall pay to [respondent] the principal sum of $22,858.00, plus interest of 18% per annum from December 9, 1990 [as allegedly specified in respondent=s contract with Noble Nursery].

Appellant argues that respondent failed to prove that either Knutson Construction or appellant had any contractual obligation to pay interest at such a rate. Consequently, appellant maintains that to the extent respondent may arguably be entitled to recover any interest, such interest is limited by the prejudgment interest statute, Minn. Stat. ' 549.09 (1994). Respondent's principal, however, testified that Noble Nursery agreed to pay interest at the rate of 18 percent per annum, and this was a contractual commitment. We see no reason to dispute the trial court's rationale.

Affirmed.


Footnotes

* Retired judge of the district court, serving as judge of the Minnesota Court of Appeals by appointment pursuant to Minn. Const. art. VI, ' 10.

[1] The bond provides that it "shall cover any and all warranty, guarantee or corrective periods which are specifically set forth in the contract documents and shall be in effect throughout the duration of each and every such period."

[2] Minn. Stat. ' 574.31 has since been amended.