United States Court of Appeals
For the First Circuit
No. 03-1453
SEABOARD SURETY COMPANY,
Plaintiff, Appellee,
v.
TOWN OF GREENFIELD,
acting by and through the
GREENFIELD MIDDLE SCHOOL BUILDING COMMITTEE,
Defendant, Appellant.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Frank H. Freedman, U.S. District Judge]
Before
Torruella, Circuit Judge,
Lipez, Circuit Judge,
and Lisi,* District Judge.
Wendy Sibbison, for appellant.
Thomas H. Hayman, with whom Bert J. Capone and Cetrulo &
Capone LLP, were on brief, for appellee.
June 9, 2004
*
Of the District of Rhode Island, sitting by designation.
TORRUELLA, Circuit Judge. Defendant-appellant Town of
Greenfield, acting by and through the Greenfield Middle School
Building Committee ("GMSBC")(hereinafter referred to collectively
as "Greenfield"), appeals the district court's grant of summary
judgment in favor of plaintiff-appellee Seaboard Surety Company
("Seaboard") discharging Seaboard from liability on a construction
performance bond. After careful review, we affirm.
I. Background
We summarize the lengthy narrative of the failed
relationship between the parties, relating only those facts
relevant to our review. On June 18, 1998, Greenfield contracted
with Interstate Construction Company ("ICC") to renovate its Middle
School building. ICC provided the performance bond required by
Massachusetts law, with Seaboard as surety. The bond is a standard
performance bond, Form A312, issued by the American Institute of
Architects in 1984. It provides that the Contractor (ICC) and the
Surety (Seaboard), jointly and severally, bind themselves to the
Owner (Greenfield) for the performance of the Construction
Contract, which the bond incorporates by reference.
Paragraph 3 of the bond provides that the surety's
obligation under the bond arises after:
3.1 The Owner has notified the Contractor
and the Surety . . . that the Owner is
considering declaring a Contractor
Default and has requested and attempted
to arrange a conference with the
Contractor and the Surety to be held
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not later than fifteen days after
receipt of such notice to discuss
methods of performing the Construction
Contract. If the Owner, the Contractor
and the Surety agree, the Contractor
shall be allowed a reasonable time to
perform the Construction Contract, but
such an agreement shall not waive the
Owner's right, if any, subsequently to
declare a Contractor Default; and
3.2 The Owner has declared a Contractor
Default and formally terminated the
Contractor's right to complete the
contract. Such Contractor Default
shall not be declared earlier than
twenty days after the Contractor and
the Surety have received notice as
provided in Subparagraph 3.1; and
3.3 The Owner has agreed to pay the Balance
of the Contract Price to the Surety in
accordance with the terms of the
Construction Contract or to a
contractor selected to perform the
Construction Contract in accordance
with the terms of the contract with the
Owner.
Once the owner has complied with the provisions of Paragraph 3, and
the surety's obligations are triggered, Paragraph 4 provides that
the surety "shall promptly and at the Surety's expense" take one of
a list of specified "actions." The action at issue in this case,
as described in subparagraph 4.2, is to "[u]ndertake to perform and
complete the Construction Contract itself, through its agents or
through independent contractors."
Paragraph 5 provides that "[i]f the Surety does not
proceed as provided in Paragraph 4 with reasonable promptness, the
Surety shall be deemed to be in default on the Bond fifteen days
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after receipt of an additional written notice from the Owner to the
Surety demanding that the Surety perform its obligations under this
Bond, and the Owner shall be entitled to enforce any remedy
available to the Owner."
In compliance with subparagraph 3.1, Greenfield notified
ICC and Seaboard on November 12, 1998, and again on March 23, 2000,
that it was considering declaring a Contractor Default. On
August 24, 2000, after continuous struggle regarding ICC's
tardiness, Greenfield sent ICC a notice of default and termination
and filed suit in state court. That same day, Greenfield notified
Seaboard of ICC's termination and agreed to pay the balance of the
contract price to Seaboard or to a replacement contractor, as
required by Paragraphs 3.2 and 3.3 of the bond.
On August 25, 2000, Seaboard responded, asserting its
need for a reasonable time to investigate, requesting documentation
of ICC's default, and reminding Greenfield of the owner's duty to
mitigate the surety's damages. Greenfield hired an Interim
Construction Management Consultant, Baybutt Construction
Corporation ("Baybutt"), to evaluate and to advise the town on the
emergency work needed in the interim. Greenfield notified Seaboard
that moisture had caused the subflooring of the new floors to
buckle and the carpets to detach, and that the allocation of
responsibility for this damage (between Greenfield and ICC) was
already before the state court.
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On September 26, 2000, Greenfield sent Seaboard further
documentation regarding ICC's termination and "formally ask[ed] the
surety to undertake to perform and complete the construction
itself, or through its agents or independent contractors as set
forth in the surety contract, paragraph 4.2," with a response
requested from Seaboard by October 20, 2000, so that work might
begin by November 4, 2000.
On October 11, 2000, representatives of Greenfield, ICC,
and Seaboard met. Seaboard agreed to prepare a proposal by
October 18th addressing the emergency work. After some delay,
Seaboard delivered a proposal to perform the emergency work -- not
including the floor remediation – stating that this was not an
offer to perform under the bond because ICC's termination remained
contested and Seaboard was still investigating its position with
respect to the completion of the project and the remediation of the
floors.
On October 31, 2000, Greenfield and Seaboard signed an
Emergency Work Agreement to mitigate both parties' damages.
Seaboard agreed to perform the emergency work, beginning on
November 6th and finishing by December 31st, for which Greenfield
would pay $207,000. Seaboard hired a Construction Manager, Wayne
Sheridan, for the emergency work.
On November 15, 2000, Greefield's attorney faxed three
letters to Seaboard's attorney. The first conveyed the conclusion
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of Greenfield's interim consultant, Baybutt, that work would need
to be commenced by December 1st for the building to be ready for
school the next fall. Estimated costs, including moisture
remediation, were $5.6 million -- $3.8 million more than the
remaining contract funds. The second letter informed Seaboard that
the Building Committee had approached the Town Council to
appropriate these funds "if Seaboard declines to complete" and
insisted again that work needed to commence by early December. The
third letter demanded that Seaboard "soon decide if it will honor
its obligations . . . under the performance bond and complete the
project." This letter reiterated the necessity that work begin by
early December and asked Seaboard to commit by November 20th.
On November 20, 2000, Seaboard responded that, while its
investigation of ICC's termination continued, Seaboard was "willing
to perform the remedial and contract work," and was "prepared to
take all necessary action to expeditiously arrive at a
comprehensive agreement with [Greenfield] so that the remedial and
contract work can be commenced as soon as possible." Seaboard
requested further documentation regarding the floor remediation
work.
On November 21, 2000, Greenfield sent Seaboard further
documentation and, on November 22nd, objected to the Town being
required to pay for the entire cost of the floor remediation.
While the allocation of responsibility for the floors was still in
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dispute, Greenfield offered to split the costs, under reservation
of rights. Greenfield also expressed concern about Seaboard's
management team and timely completion. Greenfield was concerned
that Seaboard's project manager, Wayne Sheridan, was frequently
absent from the work site. Greenfield sought the right to review
and to approve any new project management team. Greenfield warned
Seaboard that if construction did not begin by December 1st,
Greenfield "will be compelled to proceed with its other completion
options."
Eventually, Greenfield acceded, under reservation of
rights, to cover the costs of the floor remediation, and on
December 1st, Seaboard sent Greenfield a draft Takeover Agreement.
Greenfield proposed revisions and further negotiations ensued. On
December 8th, Greenfield's attorney notified Seaboard that the
Building Committee would meet on December 11th to decide how to
proceed. On December 11th, Seaboard faxed Greenfield a new draft
of the Takeover Agreement which identified Sheridan, the
Construction Manager with whom Greenfield was dissatisfied, as the
proposed Project Manager. At the Building Committee meeting that
night, the Committee decided to hire Baybutt to complete the
project. The next day, Greenfield notified Seaboard of the
decision to proceed without Seaboard's involvement.
On December 22, 2000, Seaboard filed a complaint in the
district court seeking a declaratory judgment discharging it from
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obligation under the performance bond on the grounds that
Greenfield had materially breached the bond by hiring its own
contractor. Seaboard claimed that it had elected to complete the
contract, as permitted under the bond, but that Greenfield had
refused to allow the takeover, and that Seaboard was thus denied
the opportunity to limit its financial exposure. Greenfield filed
counterclaims, alleging Seaboard's breach of the bond. After
discovery, cross motions for summary judgment were filed.
On March 7, 2003, the district court granted Seaboard's
motion for summary judgment. Rejecting any anticipatory
repudiation defense for Greenfield as disallowed under
Massachusetts law, the court held that "[b]ecause a clear and
direct default notice was not served pursuant to Paragraph 5, . . .
Greenfield was in material breach of the Bond when it ceased its
dealings with Seaboard and hired another company." Seaboard Sur.
Co. v. Town of Greenfield, 266 F. Supp. 2d 189, 198 (D. Mass.
2003).
II. Analysis
Summary judgment is appropriate when the evidence before
the court shows "that there is no genuine issue as to any material
fact and that the moving party is entitled to a judgment as a
matter of law." Fed. R. Civ. P. 56(c). For the purposes of
summary judgment, "'genuine' means that 'the evidence is such that
a reasonable jury could return a verdict for the nonmoving party',
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and a 'material fact' is one which 'might affect the outcome of the
suit under the governing law.'" Hayes v. Douglas Dynamics, Inc.,
8 F.3d 88, 90 (1st Cir. 1993)(quoting Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 248 (1986)). We review de novo the district
court's grant of summary judgment, viewing the facts and making all
reasonable inferences in favor of Greenfield, the nonmoving party.
Rodríguez v. Smithkline Beecham, 224 F.3d 1, 5 (1st Cir. 2000). We
may affirm on any ground supported by the record. Id.
The parties agree that Greenfield complied with the
notice requirements regarding ICC's default provided by Paragraph
3 of the performance bond. Seaboard argues, however, that
Greenfield failed to provide notice of Seaboard's default before
terminating Seaboard's involvement, as required by Paragraph 5.
Greenfield contends that Seaboard had previously breached the
performance bond by failing to take prompt action following ICC's
default as required by Paragraph 4 and that Greenfield's
communications with Seaboard complied with Paragraph 5's notice
requirements.1
1
Greenfield argues in the alternative that Paragraph 5 does not
make notice a condition precedent of surety default but instead
simply provides an optional vehicle through which the owner may
protect itself from any future claims of the surety. We find this
reading of Paragraph 5 contrary to the unambiguous language of the
bond, and, under Massachusetts law, "when the wording of a contract
is unambiguous, the terms will be enforced." Paterson-Leitch Co.,
Inc. v. Mass. Mun. Wholesale Elec. Co., 840 F.2d 985, 991 (1st Cir.
1988)(citing Edmonds v. United States, 642 F.2d 877, 881 (1st Cir.
1981)).
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We find it unnecessary to address Seaboard's compliance
with Paragraph 4. The district court examined the evidence on the
issue and denied Greenfield's motion for summary judgment because
"the Court cannot find as a matter of law that Seaboard committed
a material breach of the terms and conditions of the Bond by
failing to promptly select and undertake action under paragraph 4."
Seaboard Sur. Co., 266 F. Supp. 2d at 195. The district court
opinion ultimately rests, however, on Greenfield's failure to
comply with Paragraph 5. The district court concludes that
Greenfield's Paragraph 4 claims against Seaboard "necessarily fail
. . . due to Greenfield's material breach of the Bond," and
describes Greenfield's breach thus: "Because a clear and direct
default notice was not served pursuant to Paragraph 5, the Court
finds that Greenfield was in material breach of the Bond when it
ceased its dealings with Seaboard and hired another company to
complete the Project." Id. at 198. The district court therefore
concludes that "Greenfield's refusal to allow Seaboard to complete
the Project renders the Bond null and void and discharges Seaboard
from any and all liability under the Bond." Id. (citing St. Paul
Fire & Marine Ins. Co. v. City of Green River, 93 F. Supp. 2d 1170
(D. Wyo. 2000), aff'd, 6 Fed. Appx. 828 (10th Cir. 2001)).
We agree with the district court's conclusion that
Greenfield's compliance with Paragraph 5 is dispositive of both
parties' claims. Even assuming that Seaboard failed to provide the
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prompt response to contractor default required by Paragraph 4, the
surety default provision of Paragraph 5 constitutes an important
contractual right of the surety. Paragraph 5 provides the surety
fifteen days during which it may attempt to cure the alleged breach
prior to default and thus to minimize its economic exposure.
Failure to provide this notice constitutes a material breach of the
bond. School Bd. of Escambia Cty. v. TIG Premier Ins. Co., 110 F.
Supp. 2d 1351, 1353 (N.D. Fla. 2000)("[F]ailure to adhere to a
performance bond notification requirement is a material breach,
resulting in the loss of an obligee's rights under the bond."); St.
Paul, 93 F. Supp. 2d at 1178 ("Courts have consistently held that
an obligee's action that deprives a surety of its ability to
protect itself pursuant to performance options granted under a
performance bond constitutes a material breach, which renders the
bond null and void."); cf. Dragon Constr., Inc. v. Parkway Bank &
Trust, 678 N.E.2d 55, 58 (Ill. App. Ct. 1997)(owner's "failure to
provide adequate notice of [contractor's] termination . . .
stripped [surety] of its right to limit its liability and
constituted a material breach of contract which rendered the surety
bonds null and void.").
Greenfield seeks refuge in the contention that under
Massachusetts law "compensated sureties . . . ought not to be
relieved from their obligations on merely technical grounds, not
affecting substantially the character of the undertaking which they
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assumed." Bayer & Mingolla Constr. Co, Inc. v. Deschenes, 205
N.E.2d 208, 211 n.4 (Mass. 1965)(quoting Maryland Cas. Co. v.
Dunlap, 68 F.2d 289, 291 (1st Cir. 1933)). While it is true that
"Massachusetts courts have held that lack of prompt notice to the
compensated surety of a contractor's default (as required by a
Performance Bond) does not discharge the surety if it is not
harmed," notice requirements "exist[] precisely to provide the
surety an opportunity to protect itself against loss by
participating in the selection of the successor contractor to
ensure that the lowest bidder is hired and damages mitigated."
Enterprise Capital, Inc. v. San-Gra Corp., 284 F. Supp. 2d 166, 177
(D. Mass. 2003)(citations omitted). In the context of surety
default, the notice provision similarly provides an opportunity for
the surety to cure the breach and thus mitigate damages. As the
court concluded in Enterprise Capital, "even if [Seaboard] must
show injury, loss, or prejudice, it meets this hurdle, given its
deprivation of mitigation opportunities." Id.
We must therefore determine whether the record creates a
triable issue of fact as to Greenfield's compliance with Paragraph
5 of the performance bond. Paragraph 5 provides that:
If the Surety does not proceed as provided in
Paragraph 4 with reasonable promptness, the
Surety will be deemed to be in default on this
Bond fifteen days after receipt of an
additional written notice from the Owner to
the Surety demanding that the Surety perform
its obligations under this Bond, and the Owner
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shall be entitled to enforce any remedy
available to the Owner.
Greenfield contends that several letters it sent to Seaboard, and
particularly two letters dated November 15th, constituted "an
additional written notice . . . demanding that the surety perform
its obligations" in compliance with Paragraph 5 and that Seaboard
was thus properly deemed in default fifteen days thereafter and
prior to Greenfield's December 11th decision to hire Baybutt to
complete the project.
We describe and quote these letters at some length, as
our decision rests on whether a reasonable jury could find them to
constitute the "additional written notice" required by Paragraph 5.
The first, dated September 26, 2000, responds in detail to
Seaboard's requests for documentation regarding ICC's termination
and concludes thus:
Lastly, the Building Committee is
formally asking the surety to undertake to
perform and complete the construction contract
itself, or through its agents or independent
contractors as set forth in the surety
contract, paragraph 4.2. Please be further
advised that owner believes that they will
require a decision by the surety no later than
October 20, 2000 so that work may begin in
earnest to move forward on the project by
November 4, 2000.
Two additional letters were sent to Seaboard's counsel on
November 15th. The first informs Seaboard that Greenfield Middle
School Building Committee ("GMSBC") has presented a proposal to
obtain additional funding in case Seaboard declines to complete.
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It then discusses a report prepared by Baybutt indicating that work
must commence by early December in order for the school to be ready
for the 2001 school year. The pertinent paragraphs read:
The GMSBC believes Seaboard has
substantial financial exposure to the Town.
It would appear that one way for Seaboard to
minimize that financial exposure would be to
assume performance and complete the contract.
The alternative to completion by Seaboard is
completion by the GMSBC through a totally
different construction team, possibly after
receipt of competitive bids. If the GMSBC
must obtain competitive proposals, the
completion costs could rise even higher than
Baybutt's estimate.
The Greenfield Town Council is
scheduled to vote on the GMSCB's $4.35 million
request for additional funding on November 21,
2000. The GMSBC has asked that Seaboard
provide me with a statement of Seaboard's
intentions by Monday, November 20, 2000.
The second letter of November 15th begins thus: "Seaboard Surety
Co. must soon decide if it will honor its obligations to the
Greenfield Middle School Building Committee . . . under the
performance bond and complete the project." It explains the
GMSBC's insistence that Seaboard respond promptly:
The GMSBC must now decide how it will
complete the project. It is still the GMSBC's
preference to have Seaboard complete.
Seaboard has been aware of the problems with
ICC for several years and Seaboard has had two
and one half months since ICC's termination to
assess and determine its position on
completion. The time for Seaboard to make a
decision is here.
The GMSBC is concerned by Seaboard's
indecision regarding completion of the Project
and is concerned that Seaboard may be giving
too much credit to ICC's explanations and
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excuses as to what went wrong on the project.
The GMSBC asks that Seaboard undertake an
objective review of the facts that culminated
in the GMSBC's decision to terminate ICC,
before it decides if it will honor its
performance bond.
The letter then presents a detailed explanation of Greenfield's
decision to terminate ICC. It concludes thus:
The critical issue, at this time, is to
determine how the project will be completed.
The GMSBC believes it is in the best interests
of the Town and Seaboard to work together to
complete the Project since a mutual effort
will be required to get the school opened as
quickly as possible. If there are differences
in our positions that cannot immediately be
resolved, the GMSBC will entertain the
adoption of solutions that will allow the
parties to "agree to disagree" over those
differences, as long as construction
progresses. If Seaboard assumes completion of
the Project and adheres to a reasonable
construction schedule, the GMSBC's consultants
believe that the Project can still be
completed before the September 2001 school
opening. If, however, the GMSBC is compelled
to develop new bid packages and receive
competitive proposals to complete, the
increases in project cost and the delay in
completion could be even more severe than the
GMSBC's current projections.
Should Seaboard decide to honor its
performance bond, there will be a substantial
amount of work that will need to be completed
in a timely manner. Seaboard will need an
experienced project management team on site to
carefully direct the work.
Please ask Seaboard to give this matter
its immediate and careful consideration. The
GMSBC has asked that Seaboard provide it with
an indication of its intentions by
November 20, 2000, since an important vote in
the Town government on financing the
completion of the work, has been scheduled for
November 21, 2000.
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The final letter is dated November 22, 2000, and begins thus:
The [GMSBC] is somewhat encouraged by
your November 20, 2000 correspondence
indicating [Seaboard's] position on completing
the Project. The GMSBC wants Seaboard to
complete the Project and is anxious to get the
work underway. However, the GMSBC has
concerns with Seaboard's position that the
GMSBC must pay for all the costs to remedy the
floor damage . . . In addition to resolving
the question of who between Seaboard and the
GMSBC pays what portion of the floor
remediation work, the GMSBC has a number of
additional concerns that must be
satisfactorily addressed in a takeover
agreement.
The letter proceeds to describe the GMSBC's position on the floor
remediation costs and proposes that Seaboard and the GMSBC split
the costs, reserving their rights against one another and against
ICC, until the allocation of responsibility is determined in court.
The letter then lists and discusses seven "other key issues that
must be satisfactorily addressed in any takeover agreement." It
concludes thus:
Please contact me at your earliest
opportunity, to discuss Seaboard's position
regarding the above issues. The GMSBC would
like to be able to reach a general agreement
on the issues to be covered in the takeover
agreement by the end of the day on
November 27, 2000, with a written takeover
agreement to follow a few days thereafter.
Should we be able to successfully negotiate a
takeover agreement, construction
representatives of all parties should be
prepared to meet on short notice at the site .
. . .
Time is truly of the essence in
negotiating a takeover agreement and
commencing the completion of the work. The
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GMSBC has targeted December 1, 2000 as the
date by which work on the completion of the
contract should commence. The GMBSC is
prepared to do what is necessary to meet that
date. If the takeover agreement cannot be
reached, the GMSBC will be compelled to
proceed with its other completion options.
The district court found that none of the letters, taken
together or separately, constituted the additional written notice
required by Paragraph 5 of the bond, because the letters do not
demand performance in a manner sufficient to alert Seaboard to a
presumed default, nor do they indicate that Seaboard was in
material breach for failing to choose or to undertake performance
with reasonable promptness, nor do they reference the Paragraph 5
default provisions or warn that Seaboard will be deemed in default
in fifteen days. Seaboard Sur. Co., 266 F. Supp. 2d at 197. We
agree.
In the context of contractor default, courts have found
that "[a] declaration of default sufficient to invoke the surety's
obligations . . . must be made in clear, direct, and unequivocal
language." L & A Contracting Co. v. S. Concrete Serv., Inc., 17
F.3d 106, 111 (5th Cir. 1994)(finding insufficient notice of
default when owner's letters never mentioned the word "default");
Elm Haven Constr. Ltd. P'ship v. Neri Constr., LLC, 281 F. Supp. 2d
406 (D. Conn. 2003) (insufficient notice when letters only
complained about performance and financial status); Balfour Beatty
Constr., Inc. v. Colonial Ornamental Iron Works, Inc., 986 F. Supp.
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82, 86 (D. Conn. 1997) (insufficient notice when letters only
mention delay in performance). The district court applied this
standard in the related context of surety default before us and
concluded that Greenfield's letters failed to provide "a clear and
direct default notice" to Seaboard. Seaboard Sur. Co., 266 F.
Supp. 2d at 198.
While the standard for sufficiency of notice applied by
the district court comports with the general standard that
"[n]otice must be clear, definite, explicit, and unambiguous," 58
Am. Jur. 2d Notice § 2, there is no dispute that the performance
bond at issue here is governed by Massachusetts law. Although
neither party before us nor the decision below suggests that
Massachusetts law provides a relevant standard for sufficiency of
notice meaningfully distinct from that applied by the district
court, we must address the issue. In introducing the "clear,
direct and unequivocal" standard, the district court states, citing
Comm'r of Corps. & Taxation v. Springfield, 321 Mass. 31, 35
(1947), that "[l]ikewise, contractually required notices must
always be clear and unambiguous in order to fulfill their intended
purpose." Seaboard Sur. Co., 266 F. Supp. 2d at 196. Comm'r of
Corps., however, states the requirement under Massachusetts law
that "[n]otices required by law or by contract to be given by one
party to the other in order to establish rights or obligations must
state with reasonable certainty the essential facts required by law
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or by contract." Comm'r of Corps., 321 Mass. at 35. This
principle has been applied to suggest that the "form [of notice] is
not important but it must convey with reasonable certainty the
information reasonably needed to serve the statutory purpose."
Carey v. Planning Bd. of Revere, 335 Mass. 746, 748 (1957). In
both Carey and Comm'r of Corps., the notice in question was found
to be insufficient because it failed to supply the information
necessary to serve the purpose of the statutory notice provision at
issue. Carey, 335 Mass. at 747; Comm'r of Corps., 321 Mass. at 35.
As discussed earlier, the purpose of the notice provision
in Paragraph 5 of the performance bond is to provide the surety
with a fifteen-day period during which it might attempt to cure the
alleged breach prior to default. As Greenfield's letters to
Seaboard did not alert Seaboard to a presumed default, nor indicate
that Seaboard was in material breach, nor refer to Paragraph 5, nor
warn that Seaboard would be deemed in default in fifteen days, no
reasonable jury could find that Greenfield's letters "convey[ed]
with reasonable certainty the information reasonably needed" to
serve the purpose of Paragraph 5's notice requirement. Carey, 335
Mass. at 748. Therefore, as Greenfield's letters to Seaboard fail
to create a triable issue of fact under this threshold standard for
sufficiency of notice under Massachusetts law, we need not explore
the question further. Paragraph 5 of the performance bond provided
Seaboard with a fifteen-day period during which it might attempt to
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cure the alleged breach. No reasonable jury could find that
Greenfield's letters put Seaboard on notice that this fifteen-day
period had commenced.2
III. Conclusion
Greenfield failed to provide an "additional written
notice" that could reasonably be found to put Seaboard on notice
that the fifteen-day period had begun after which Seaboard would be
deemed in default under Paragraph 5. This material breach by
Greenfield discharges Seaboard from liability under the bond as a
2
The negotiations and exchanges of proposed and revised takeover
agreements that ensued and continued until the day of the Building
Committee's vote also belie Greenfield's claim that the letters
served as notice of default. Whether or not Seaboard was
inappropriately demanding concessions in the negotiations, as
Greenfield alleges, the record shows that neither Seaboard nor
Greenfield framed the proceedings in the context of impending
default. Greenfield argues that its efforts to work toward a
compromise after December 1st should not be held against it,
contending that Greenfield's efforts "to obtain even dilatory
performance" did not excuse Seaboard from its contractual duty to
act promptly. Bayer & Mingolla Const. Co., 205 N.E.2d at 212.
Similarly, however, Greenfield's continued efforts toward
compromise do not excuse Greenfield from its obligation to provide
an additional written notice of default to Seaboard as required by
Paragraph 5.
Greenfield also argues that Seaboard's complaint conceded that
the November 15th letter complied with Paragraph 5. The complaint
states that "[o]n or about November 15, 2000, Greenfield (through
its attorneys) called upon Seaboard to undertake completion of the
Project, and called for a response by November 20, 2000. Seaboard
duly responded on November 20, 2000, stating that Seaboard was
willing to undertake the work in question." No reasonable jury
could find that Seaboard's characterization of Greenfield's
November 15th letter as "call[ing] upon Seaboard to undertake
completion" conceded that the letter provided notice to the surety
that the fifteen-day period before it would be deemed in default
under Paragraph 5 had begun.
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matter of law. The district court's grant of summary judgment is
therefore affirmed.
Affirmed.
"Dissenting opinion follows"
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LIPEZ, Circuit Judge (Dissenting). Paragraph 5 of the
surety bond provides in relevant part:
If the Surety does not proceed as provided in
Paragraph 4 with reasonable promptness, the
Surety shall be deemed to be in default on
this Bond fifteen days after receipt of an
additional written notice from the Owner to
the Surety demanding that the Surety perform
its obligations under this Bond, and the Owner
shall be entitled to enforce any remedy
available to the Owner.
On August 24, 2000, Greenfield notified Seaboard of ICC's default
and termination, and agreed to pay the balance of the contract
price to Seaboard or to a replacement contractor pursuant to
Paragraphs 3.2 and 3.3 of the bond. Thus, after August 24, 2000,
Seaboard was required to "proceed as provided in Paragraph 4 with
reasonable promptness." If it did not, Greenfield was entitled to
deliver the "additional written notice" under Paragraph 5,
beginning the 15 day period before Seaboard would be deemed in
default.
As the majority recognizes, Massachusetts law governs the
provisions of the surety bond. In Massachusetts, "[n]otices
required by law or by contract to be given by one party to the
other in order to establish rights or obligations must state with
reasonable certainty the essential facts required by law or by
contract, as the case may be." Comm'n of Corps. & Taxation v.
Springfield, 321 Mass. 31, 35 (1947). See also Carey v. Planning
Bd. of Revere, 335 Mass. 746, 748 (1957) ("[The] form [of the
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notice] is not important but it must convey with reasonable
certainty the information reasonably needed to serve the statutory
purpose."). In this case, the essential information required by
Paragraph 5 was a "demand[] that the Surety perform its obligations
under [the] Bond." Thus, our task is to determine whether a
reasonable jury could find that Greenfield's communications to
Seaboard constituted an "additional written notice" that, with
reasonable certainty, "demand[ed] that the Surety perform its
obligations under [the] Bond."
In my view, there are several communications between
Greenfield and Seaboard that a reasonable jury might find meet this
requirement. As early as September 26, 2000, Greenfield had
formally asked Seaboard to perform its obligations under the bond
and had laid out a timetable for Seaboard's decision:
Lastly, [Greenfield] is formally asking the
surety to undertake to perform and complete
the construction contract itself, or through
its agents or independent contractors as set
forth in the surety contract, paragraph 4.2.
Please be further advised that [Greenfield]
believes that they will require a decision by
the surety no later than October 20, 2000 so
that work may begin in earnest to move forward
on the project by November 4, 2000.
A November 15, 2000, letter again called on Seaboard to decide
whether it would complete the project:
[Greenfield] must now decide if it will
complete the project. It is still
[Greenfield's] preference to have Seaboard
complete. Seaboard has been aware of the
problems with ICC for several years and
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Seaboard has had two and one half months since
ICC's termination to assess and determine its
position on completion. The time for Seaboard
to make a decision is here.
The November 15th letter concluded by asking that "Seaboard provide
[Greenfield] with an indication of its intentions by November 20,
2000," setting yet another deadline for Seaboard's decision.
Finally, a November 22, 2000, letter set a third deadline
and clearly indicated that Greenfield was prepared to pursue
completion by another contractor if Seaboard did not perform its
obligations under the bond:
Time is truly of the essence in negotiating a
takeover agreement and commencing the
completion of the work. [Greenfield] has
targeted December 1, 2000 as the date by which
work on the completion of the contract should
commence. [Greenfield] is prepared to do what
is necessary to meet that date. If the
takeover agreement cannot be reached,
[Greenfield] will be compelled to proceed with
its other completion options.
Each of these letters asked Seaboard to either perform its
obligations under the bond or allow Greenfield to pursue other
options. In my view, a reasonable jury could find that these
letters constituted an "additional written notice" that, with
reasonable certainty, "demand[ed] that the Surety perform its
obligations under the Bond."
The majority reasons that "[a]s Greenfield's letters to
Seaboard did not alert Seaboard to a presumed default, nor indicate
that Seaboard was in material breach, nor refer to Paragraph 5, nor
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warn that Seaboard would be deemed in default in fifteen days, no
reasonable jury could find that Greenfield's letters 'convey[ed]
with reasonable certainty the information reasonably needed' to
serve the purpose of Paragraph 5's notice requirement." Paragraph
5, however, does not require that Greenfield's notice contain any
of these provisions. It merely requires a "demand[] that the
Surety perform its obligations under the Bond." If the parties had
wished to require a more comprehensive notice -- including explicit
reference to Paragraph 5 and a recitation of the consequences of
Greenfield's notice -- they could have altered Paragraph 5's
requirements. They did not do so, and it is not our province to
read more stringent requirements into that provision.
Moreover, Greenfield was not required by principles of
contract law to educate Seaboard as to the consequences of
Greenfield's demand that Seaboard perform its obligations under the
bond. "[U]nder Massachusetts law, 'one who signs a writing that is
designed to serve as a legal document . . . is presumed to know
its contents.'" Salois v. Dime Sav. Bank, 128 F.3d 20, 26 n.10
(1st Cir. 1997) (quoting Hull v. Attleboro Sav. Bank, 33 Mass. App.
Ct. 18, 24 (1992)). Thus, we must presume that Seaboard understood
Paragraph 5's requirements, including that it would be deemed in
default 15 days after receiving additional written notice demanding
that it perform its obligations under the bond. It was Seaboard's
responsibility to protect its rights by acting within its 15 day
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window of opportunity. Greenfield's only duty was to provide the
notice required by Paragraph 5 in compliance with the Massachusetts
"reasonable certainty" standard, regardless of whether Seaboard
recognized that the notice formally triggered the terms of
Paragraph 5. See, e.g., Univ. Emergency Med. Found. v. Rapier
Inves., Ltd., 197 F.3d 18, 21 (1st Cir. 1999) (holding that the
parties to a contract may specify the manner of sufficient
termination notice in the terms of the contract); Westmoreland v.
Gen. Acc. Fire & Life Assur. Corp., 144 Conn. 265, 270 (1957) ("It
is always competent for parties to contract as to how notice shall
be given, unless their contract is in conflict with law or public
policy. When they do so contract, the giving of a notice by the
method contracted for is sufficient whether it results in actual
notice or not.") (collecting cases).
Greenfield and Seaboard have been engaged in a long and
bitter dispute over their respective obligations under the surety
contract. The financial stakes are considerable for both parties.
We should not resolve this case with a legal ruling that rewrites
the content of the notice required by Paragraph 5 of the bond.
Rather, whether Greenfield's multiple letters constituted an
adequate "demand[] that the Surety perform its obligations under
[the] Bond" is a quintessential jury question. I would therefore
vacate the entry of summary judgment and remand to the district
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court so that this issue could be resolved by the appropriate fact
finder.
I respectfully dissent.
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