United States Court of Appeals
Fifth Circuit
F I L E D
IN THE UNITED STATES COURT OF APPEALS
May 27, 2005
FOR THE FIFTH CIRCUIT
Charles R. Fulbruge III
Clerk
No. 04-30344
IN THE MATTER OF: WHITAKER CONSTRUCTION COMPANY, INC.,
Debtor,
WHITAKER CONSTRUCTION COMPANY, INC.,
Appellant,
versus
BENTON & BROWN, INC.; LS DECKER, INC.;
MCNEER ELECTRICAL CONTRACTING, INC.;
MARTIN SPECIALTY COATINGS, INC.;
OAK CLIFF MIRROR & GLASS, INC.;
OVERHEAD DOOR COMPANY OF SHREVEPORT, INC.;
THOMPSON DRYWALL & INTERIORS, INC.,
Appellees.
Appeal from the United States District Court
for the Western District of Louisiana
Before GARZA, DeMOSS, and STEWART, Circuit Judges.
CARL E. STEWART, Circuit Judge:
Whitaker Construction Company, Inc. (“Whitaker”) appeals from the district court’s judgm ent
affirming the bankruptcy court’s grant of summary judgment for Benton & Brown, Inc., LS Decker,
Inc., McNeer Electrical Contracting, Inc., Oak Cliff Mirror & Glass, Inc., Overhead Door Company
of Shreveport, Inc., Thompson Drywall & Interiors, Inc. (collectively the “Claimants”). Whitaker
argues t hat the bankruptcy court erred in holding that the Claimants timely filed their claim
statements. Whitaker contends that the bankruptcy court’s conclusion was based on an erroneous
interpretation of the Louisiana Public Works Act, LA. REV. STAT. 38:2241 et seq. For the following
reasons, we reverse the ruling of the district court and render judgment for Whitaker.
FACTUAL AND PROCEDURAL HISTORY
On July 19, 2000, Whitaker and the City of Shreveport (the “City”) entered into a standard
construction agreement. This construction agreement called for renovations to Independence
Stadium, a sports facility owned and operated by the City. The renovations entailed the construction
of a “South End Zone Shell Package,” which consisted of concession areas, bathrooms, and club
seating in the south end zone of the stadium. Alliance, Inc. (“Alliance”), a Shreveport architectural
firm, was designated the project architect. The agreement was recorded in the Caddo Parish public
records on July 26, 2000. Fidelity & Deposit Company of Maryland (“Fidelity”) issued a statutory
payment bond on behalf of Whitaker, pursuant to the Louisiana Public Works Act, LA. REV. STAT.
38:2241 et seq, guaranteeing that those supplying labor and materials to the project would be paid.
The project was scheduled to be completed by July 31, 2001. By December 2001, the project
had not been completed, nonetheless, on December 27, 2001, the NCAA’s Independence Bowl
football game was played in the stadium.
On January 8, 2002, an Alliance representative issued a certificate of substantial completion
for the project; representatives for Whitaker and the City signed the document on that same date.
The original date of issuance, January 8, 2002, was changed to read December 22, 2001. On January
10, 2002, the certification of substantial completion was filed in the Caddo Parish public records. The
City’s endorsement of the document stated that “[t]he Owner [City] accepts the work or designated
2
portion as substantially complete and will assume full possession at noon, 12:00 p.m. (time) on
December 22, 2001 (date).” Whitaker’s endorsement stated that “[t]he Contractor [Whitaker] will
complete or correct the Work on the list of items attached hereto within thirty (30) days from the
above date of Substantial Completion.” However, work on the project continued for the next several
months, until at least April 25, 2002.
The Claimants were subcontractors and suppliers to Whitaker on the Independence Stadium
project. On June 21, 2002, the first in a series of claim statements were filed on the project by
various claimants, all invoking the Public Works Act. Later that year, Whitaker voluntarily petitioned
for bankruptcy. Whitaker sent demand letters to claimants requesting that they cancel their claims
because Whitaker argued that the claim statements were all untimely filed. Some claimants complied;
the Claimants currently before this court are those who refused to cancel their claims.
Whitaker filed this adversary proceeding in bankruptcy court against the Claimants, requesting
a declaratory judgment that the Claimants’ claim statements were untimely because they were not
filed in the public records within 45 days of the City’s recorded acceptance of the project on January
10, 2002. Whitaker and the Claimants each filed cross-motions for summary judgment on the
timeliness issue; the motions centered on the interpretation of § 2241.1 of the Public Works Act. A
hearing on the issue took place on August 11, 2003.
On October 7, 2003, the bankruptcy court denied Whitaker’s motion and claim for attorney’s
fees, and granted summary judgment in favor of the Claimants. The bankruptcy court ruled that the
City’s recorded acceptance of the project was nullified because the project was not completed within
30 days after the purported substantial completion. The bankruptcy court interpreted § 2241.1 of the
Public Works Act to mean that acceptances cannot be recorded “unless either the job is complete or
3
it is substantially complete and actual completion occurs within 30 days.” The bankruptcy court
thereby held that the 45-day claim period under the Public Works Act had never begun to run because
of the City’s prematurely recorded acceptance. Whitaker appealed this decision to the Western
District of Louisiana. The district court adopted the bankruptcy court’s findings and affirmed the
judgment. Whitaker timely appealed, claiming legal error in the bankruptcy court’s and the district
court’s interpretation of the Public Works Act.
STANDARD OF REVIEW
Rule 7056 of the Federal Rules of Bankruptcy Procedure governs summary judgment in an
adversary proceeding in bankruptcy court. Rule 7056 incorporates Rule 56 of the Federal Rules of
Civil Procedure. FED. R. BANK. P. 7056. Under Rule 56(c), summary judgment is appropriate only
"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 any material fact and that the moving party
is entitled to a judgment as a matter of law." FED. R. CIV. P. 56(c).
"Bankruptcy court rulings and decisions are reviewed by a court of appeals under the same
standards employed by the district court hearing the appeal from bankruptcy court; conclusions of
law are reviewed de novo, findings of fact are reviewed for clear error, and mixed questions of fact
and law are reviewed de novo." In re CPDC, Inc., 337 F.3d 436, 441(5th Cir. 2003).
A district court's determination of state law is also reviewed de novo. Salve Regina College
v. Russell, 499 U.S. 225, 231 (1991). In the absence of a final decision by the state's highest court
on the issue at hand, it is the duty of the federal court to determine, in its best judgment, how the
highest court of the state would resolve the issue if presented with the same case. Transcon. Gas Pipe
Line Corp. v. Transp. Ins. Co., 953 F.2d 985, 988 (5th Cir. 1992).
4
DISCUSSION
I. Interpretation of Louisiana’s Public Works Act
Under the Public Works Act, whenever a public entity enters into a contract for the
construction, alteration, or repair of any public work in excess of $25,000, the contractor is required
to obtain a bond with a surety. LA. REV. STAT. 38:2441. The statute requires the bond for the
purpose of protecting persons contributing to the construction or repair of public works; i.e.,
subcontractors, laborers and other persons not in direct privity with the public entity. JAMES S.
HOLLIDAY, JR. & H. BRUCE SHREVES, LOUISIANA CONSTRUCTION LAW MANUAL 196 (1991).
In order for a subcontractor or laborer to protect their claim, they must file a sworn statement
of the amount due 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. LA. REV. STAT. 38:2242. The
sworn statement must be filed after the maturity of his claim and within 45 days after the recordation
of acceptance of the work. Id. § 2242.
The controversy at issue here centers on whether the Claimants timely filed their claim
statements. A certificate of substantial completion was signed by Whitaker and the City and filed in
Caddo Parish on January 10, 2002. The Claimants argue that the acceptance was premature, and
therefore a nullity, and as a result the 45-day time period never expired because it never began to run.
Whitaker counters that the recordation of acceptance was valid, and therefore, the Claimants were
required to file their claims by February 24, 2002. Our resolution of the dispute depends on our
interpretation of the relevant statute defining the requirements for proper recordation of acceptance.
5
A. Parties’ Arguments
Section 2241.1 of the Public Works Act provides in relevant part that:
Whenever the public entity enters into a contract for the construction, alteration, or
repair of any public works . . . the official representative of the public entity shall have
recorded in the office of the recorder of mortgages, in the parish where the work has
been done, an accept ance of said work or of any specified area thereof upon
substantial completion of the work. This acceptance shall not be executed except
upon the recommendation of the architect or engineer of the public entity whose
recommendation may be made upon completion or substantial completion of said
public works within thirty days of completion of the project.
LA. REV. STAT. 38:2241.1. Specifically at issue is what “within thirty days of completion of the
project” modifies. This latter phrase was added to the statute by a 1991 amendment. 1991 La. Sess.
Law Serv. 947 (West).
Whitaker contends the grammatical structure of the revised sentence makes plain that the
purpose of the 1991 amendment was to place a deadline on the architect or engineer responsible for
recommending acceptance. Whitaker presents a hyper-technical analysis of the disputed sentence that
dissects its syntax and structure, illuminating the prepositional and subordinate phrases and seeking
to connect them to compound objects and adjective clauses. Whitaker’s main argument is that the
phrase “within thirty days” modifies “recommendation of the architect or engineer.” Whitaker asserts
that the result is the sentence should be read: “acceptance shall not be executed except upon the
recommendation of the architect or engineer of the public entity [whose recommendation may be
made upon completion or substantial completion of said public works] within thirty days of
completion of the project.” In other words, the City’s designated architect may accept the public
work either upon completion or substantial completion, but regardless, the architect or engineer must
accept the public work within thirty days of completion of the project. Whitaker asserts that the
6
amendment was added to address the evil of slow architects and engineers delaying the recordation
of acceptances.
The Claimants, unsurprisingly, disagree. The Claimants instead argue that the legislature
added the 1991 amendment in order to address an inverse problem, namely, prematurely recorded
acceptances. Prior to the amendment, the Claimants argue that the broad language of the statute
allowed contractors and public entities to abuse their discretion by recording acceptances significantly
premature. The purpose of the amendment, they assert, is to prevent situations exactly like the one
at hand where certificates of substantial completion are filed months before actual completion.
Furthermore, they assert that based on the plain language of the statute the sentence should be read:
“acceptance shall not be executed except upon the recommendation of the architect or engineer of
the public entity whose recommendation may be made upon [completion] or [substantial completion
of said public works within thirty days of completion of the project].” The Claimants are essentially
asserting that the City’s architect is given the option of accepting the public work upon completion
of the project or upon substantial completion of the project, but acceptance in the latter circumstance
is perfected only if completion follows within thirty days. The Claimants argue that if the architect
or engineer accepts the project upon substantial completion but completion does not occur within
thirty days, then the previously recorded acceptance is null as premature. The Claimants’ arguments
were accepted by the bankruptcy court and upon appeal were adopted by the district court.
Whitaker rebuts the Claimants’ interpretation of the statute by asserting that it is counter to
the plain language of the sentence and inconsistent with the purpose of the Public Works Act. First,
Whitaker argues that the statute states that an acceptance “shall” be recorded upon substantial
completion thereby making recordation compulsory upon substantial completion. Substantial
7
completion is defined “as the finishing of construction . . . to the extent that the public entity can use
or occupy the public work or use or occupy the specified area of the public works for the use fo r
which it was intended.” Id. § 2241.1. Here, it is undisputed that the City used and occupied the
stadium on December 27, 2001, for the Independence Bowl game. Thus, Whitaker argues that the
project was substantially complete and the City was therefore required to record the acceptance.
Additionally, Whitaker argues that the recording of acceptance is crucial to the operation of
the statute because a number of other parties’ interests depend on their notice of the public entity’s
acceptance. Whitaker contends that recording the acceptance in the public record is crucial to secure
a certain date for notice so that other time periods defined in the statute can begin to run. Whitaker
asserts that the bankruptcy court’s construction of the statute denies other parties the ability to rely
on the recorded acceptance.
Finally, Whitaker argues that the bankruptcy court’s construction of the statute violates
principles of statutory interpretation by adopting the least restrictive interpretation and subjecting the
surety to open-ended liability.1
1
We recognize the arguments submitted by the Surety Association of America (SAA) in their
amicus brief filed on behalf of Whitaker Construction. SAA submitted documents from the scant
legislative history of the 1991 amendment, which it asserts demonstrates that the purpose of the
amendment was to address situations where the public entity delayed making a recommendation for
acceptance upon substantial completion or completion. SAA contends that contractors successfully
lobbied the legislature to add the thirty-day time period to the statute so that the public entity would
promptly file the acceptance to start the 45-day period and close out the project. To support this
assertion, the SAA points to the statements of two representatives made during conferences regarding
the 1991 amendment. The Claimants observe that the legislative history also contains the statement
that “there was concern over approval of jobs being sought prior to completion,” which they contend
supports their position. Moreover, they cite case law which counsels against relying on statements
from only two of the 100 plus members of the state legislature, to di vine the purpose of the
amendment. Finally, they object to the introduction of the legislative history of the amendment
because it had not been raised as an issue in this case up to this point nor is it in the record. Indeed,
in the transcripts of the bankruptcy proceedings, counsel for Whitaker stated that he could find no
8
Whitaker relies on Honeywell, Inc. v. Jimmie B. Guinn, Inc., to support its argument that
the performance of work more than 30 days after the notice of acceptance and substantial completion
is filed, does not render the acceptance premature. 462 So.2d 145 (La. 1985). In Honeywell, the
subcontractor did not complete his work on the public works project until more than 45 days after
the public entity recorded its acceptance of the project in the public record. Id. at 147. The state
court did not expound upon that fact in its discussion and never considered whether the acceptance
was recorded prematurely. Ultimately, the court concluded that the subcontractor’s suit was time
barred. Id. at 149. However, as the Claimants note, the state court decided Honeywell before the
1991 amendment. In fact, the Claimants argue that Honeywell serves to further emphasize that prior
to the 1991 amendment, premature acceptances were a problem in public works projects, which
contravened the purposes of the Public Works Act by divesting subcontractors and laborers of their
statutory rights.
The Claimants argue that Whitaker’s interpretation is the version that does damage to the
purposes of the statute. First, they note that the statute states that claimants are to file their claims
“upon maturity of his claim and within forty-five days of recordation of acceptance.” LA. REV.
STAT. 38:2242 (emphasis added). The Claimants argue that interpreting the statute to allow the
public entity to record an acceptance months before actual completion would result in the 45 day
period expiring before some subcontractors’ or laborers’ claims have even matured because those
potential claimants are still working on the project.
Furthermore, the Claimants argue that Whitaker’s interpretation of the statute is faulty
because of other absurd results. For example, if the 30 days referred to in the statutory provision is
support or guidance in the legislative record for his position.
9
indeed a deadline before which the architect or engineer must record acceptance then it is possible
that the deadline could lapse without action and the 45-day period would never begin to run. The
Claimants argue that they would never be able to make a claim and receive protection from the Public
Works Act. The Claimants contend that by contrast under their interpretation an acceptance could
always be filed anytime after completion and therefore there is no possibility that a third party’s delay
could permanently divest the Claimants of their rights under the statute.
The relevant portions of the statute are poorly drafted to be sure. The ambiguity in the
meaning and grammatical structure of the provision at issue makes both constructions of the statute
at least possible, when viewing the disputed sentence in isolation. However, after taking into
consideration the arguments of the parties, the relevant case law, and the Public Works Act as a
whole, we find that § 2241.1 should be interpreted as requiring public work projects that are accepted
based on substantial completion to be completed within 30 days of purported substantial completion.
B. Analysis
The fundamental question in all cases of statutory construction is legislative intent and the
reasons that prompted the legislature to enact the law. In re Succession of Boyter, 756 So.2d 1122,
1128 (La. 2000). When a law is susceptible to different meanings, “it must be interpreted as having
the meaning that best conform s to the purpose of the law.” LA. CIV. CODE art. 10; SWAT 24
Shreveport Bossier, Inc. v. Bond, 808 So.2d 294, 302 (La. 2001); Smith v. Town of Vinton, 25
So.2d 237, 239 (La. 1946) (stating that “in applying a statute to specific cases it is necessary to
determine the intent of the Legislature in enacting it,” so as to not interpret the statute in a manner
that the legislature never intended). Courts should give effect to all parts of a statute and should not
adopt a statutory construction that makes any part superfluous or meaningless, if that result can be
10
avoided. Bond, 808 So.2d at 302. Furthermore, “[c]ourts should avoid constructions which will
render legislation absurd. Rather, statutes must be interpreted in such a manner as to render their
meaning rational, sensible, and logical.” State Through Dept. of Public Safety and Corr., Office of
State, 655 So.2d 292, 302 (La. 1995).
The purpose of the Public Works Act is to protect those not in direct privity with the
governing authority, namely the subcontractors and other parties who supply materials and labor to
the construction or repair of a public work. Slagle-Johnson Lumber Co., Inc. v. Landis Const. Co.,
Inc., 379 So.2d 479, 486 (La. 1979). “The purpose of the statute is evident from both its text and
the title indicative of its object. The Public Works Act title, in pertinent part, provides that it was
enacted: ‘. . . to pro tect persons doing work, performing labor or furnishing material for the
construction, erection, alteration or repair of public buildings, public roads or public works of any
character; . . .’” Slagle-Johnson, 379 So.2d at 486 n.** (quoting Act No. 224 of 1918).
The Louisiana legislature recognized that in contrast to privately owned property,
subcontractors and laborers of public works could not secure payment for their work by placing a
privilege or lien against the property because the property has no private entity as an owner. JAMES
S. HOLLIDAY, JR. & H. BRUCE SHREVES, LOUISIANA CONSTRUCTION LAW MANUAL 196-201
(1991). Claimants could preserve their interest by freezing the further distribution of payments under
the contract. Id. at 196. If funds are paid out in violation of the freeze, the governing authority is
personally liable for the claim. Id. The Public Works Act shifts the risk of loss from the governing
authority to the surety and contractor through contract and bond requirements. Id.
As previously noted, we must interpret the provision in a way that best comports with the
legislative intent of the statute. LA. CIV. CODE art. 10. Here it is clear that the legislative intent in
11
enacting the statute was to protect those who provide labor and materials to public works and to shift
the risk of loss that may result from claims by those parties to the contractor and the surety. The
Claimants’ construction of the statute is most consistent with the purpose of the statute. Moreover,
although the statute is unquestionably poorly drafted, resulting in more than one possible reading of
the disputed sentence, we conclude that the interpretation presented by the Claimants offers a less
constrained reading of the plain meaning of the provision at issue. For instance, Whitaker argues that
the language of the statute dictates that acceptance be reco rded immediately upon substantial
completion. However, that argument is inconsistent with Whitaker’s contention that the 30-day time
period applies to the architect or engineer’s recommendation for acceptance, i.e., that the 30 days is
essentially a deadline before which the architect or engineer must record acceptance. In other words,
it is inconsistent to say that the statute mandates that acceptance be filed immediately upon
substantial completion and then say that the very same provision gives the public entity the flexibility
of recording acceptance any time within 30 days after final completion of the project.
Most importantly, interpreting the statute to require that completion follow within 30 days
of substantial completion in order for the recorded acceptance to be valid, avoids absurd results
surely not intended by the legislature. As the Claimants observed, interpreting the statute to allow
the public entity to record acceptance significantly before final completion actually occurs would
result in the 45-day period expiring before some subcontractors’ or labors’ claims have even matured
because those potential claimants are still working on the project. A subcontractor or laborer can not
know that he has a claim for the collection of withheld payments on a public works project until he
has at least stopped working on the project, had a chance to assess payment due and, if necessary,
make a demand of payment. At oral argument, counsel for the Claimants emphasized that some of
12
his clients in fact were still working on the Independence Stadium project well after the 45-day period
had expired. Indeed, it is undisputed that work continued until at least April 25, 2002, even though
the 45-day period to submit a claim statement assessing the amount due expired on February 24,
2002. To require a subcontractor to file claim statements before they have finished working on the
project is not feasible because the subcontractor can not make a claim for an uncollected debt when
that debt has not even had time to accrue.2
In addition, § 2242 mandates that a claimant file written claim statements “after the maturity
of his claims and within 45 days from the recordation of acceptance.” Therefore, not only would it
be absurd to interpret the statute to allow the 45-day period to expire before work has been
completed, such an interpretation would conflict with the prescription in the statute that claim
statements be filed after the claims have matured.
We do not find, as Whitaker argues, that the Claimants’ statutory interpretation is inconsistent
with the plain language of the statute and would contravene the purposes of the statute. Instead, for
the reasons stated, we find that the Claimants’ interpretation of the statute best comports with the
purpose of the statute and prevents absurd results. Accordingly, we find that the bankruptcy court,
2
At oral argument, Whitaker asserted that final completion should not be required to occur
30 days after substantial completion because construction frequently continues months after
substantial completion. First, we note that completion must occur 30 days after purported substantial
completion only if the acceptance is recorded based on substantial completion. Moreover, Whitaker’s
observation further supports not adhering to Whitaker’s statutory interpretation. If Whitaker’s
assertion is correct then subcontractors may frequently be prevented from asserting claims on a public
works project because they were st ill working on the project months after acceptance based on
substantial completion was filed. Considering the statute was enacted to protect subcontractors’
interests in collecting debts on a public works project, interpreting the statute to frequently prevent
just that objective would be contrary to the legislative purpose.
13
and the district court, were correct in adopting the Claimants’ interpretation of the language in the
disputed provision.
Although the City recorded a certificate of substantial completion in the public record on
January 10th, it is undisputed that work continued well beyond 30 days from that date. Because the
recorded acceptance was based on substantial completion and substantial completion did not occur
within 30 days of purported completion, the City’s acceptance of the project was premature.
II. How to Cure a Premature Acceptance
The harder question to resolve is whether the premature filing of the certificate of substantial
completion renders the acceptance a nullity. Upon determining that final completion must occur 30
days after substantial completion, if the project is accepted based on substantial completion, the
bankruptcy court held that the City’s premature acceptance was null and void. The bankruptcy court
opined that the only way to cure the prematurely recorded acceptance was to file another acceptance
that complies with the statute. The statute states that an acceptance should be filed in order to begin
the 45-day period. Because neither the City nor Whitaker3 ever filed a subsequent acceptance that
complied with the statute, the bankruptcy court held that the 45-day period never began to run, and
therefore, the Claimants’ claims could not be untimely.
The bankruptcy court offered no authority for its finding that the premature acceptance should
be rendered a nullity. The district court offered no authori ty to support the bankruptcy court’s
3
Under § 2241.1 of the Public Works Act, either the public entity or the contractor can file
the acceptance. LA. REV. STAT. 38:2241.1 (“the official representative of the public entity shall have
recorded in the office of the recorder of mortgages, in the parish where the work has been done, an
acceptance of said work or of any specified area thereof upon substantial completion of the work.
Those public entities which do not file said recordation, shall require the contractor to have recorded
in the office of the recorder of mortgages, in the parish where the work has been done, an acceptance
of said work or of any specified area thereof upon substantial completion of the work.”).
14
conclusion when the district court adopted the bankruptcy court’s ruling. Before this court, the
Claimants assert that the bankruptcy court was correct in its decision, however, they also offer no
authority for the bankruptcy court’s conclusion. They simply assert that making the acceptance null,
and requiring Whitaker or the City to submit another acceptance, is the only cure that is “workable.”
Despite our best efforts, we have found nothing in the statute that supports the conclusion that a
premature acceptance is null or that supports requiring the City or Whitaker to file any number of
certificates of substantial completion until an acceptance complies with the requirements of the
statute. We therefore reject the Claimants’ arguments. Instead, we find that the bankruptcy court
impermissibly expanded the scope of remedies available to the Claimants by declaring that Whitaker’s
acceptance was null.
The Public Works Act restricts contractors from entering into a contract with the state until
the contractor obtains a payment bond. LA. REV. STAT. 38:2241. Laws of limitation are to be
strictly construed if there are any ambiguities in the law. Ruiz v. Oniate, 713 So.2d 442, 444-45 (La.
1998). The Public Works Act, like other lien statutes, is “sui generis and provides exclusive remedies
to parties in public construction work.” State Through Div. of Admin. v. McInnis Bros. Const., 701
So.2d 937, 944 (La. 1997) (citation omitted). “[P]ublic contract laws are to be strictly construed
such that the privileges granted are not extended beyond the statutes,” and the obligations of the bond
“must be limited to the exact provisions of the statute.” Id. (emphasis added). The Public Works Act
is preemptive rather t han prescriptive, meaning the existence of the rights granted therein are
extinguished if not filed within the time period prescribed and the applicable time period can not be
suspended or interrupted. Id. at 948.
15
In keeping with Louisiana principles of statutory interpretation, the statute here must be
strictly construed so as to prevent extending the obligations of the surety or the privileges granted
to the subcontractors beyond that warranted by the statute. The bankruptcy court declared that filing
the certificate of substantial completion too early rendered the acceptance a nullity and as a result the
45-day lien period never began to run. According to the bankruptcy court, because of the
prematurely filed acceptance, months after even final completion the surety could be subject to
liability to claimants who had still not filed a claim statement. Under that scenario, today, almost 3
years from when construction finally ended, a claimant could file a suit against the surety to collect
on debts owed from the Independence Stadium project because Whitaker never filed a corrected
acceptance. However, § 2241.1 states that sureties are only liable for claims filed within a 45-day
window. The Public Works Act was enacted for the purpose of protecting the interests of those who
supply materials and labor to public works contracts; but by limiting the time in which a claimant can
enforce that right, the Public Works Act balances both the interests of the protected group and the
interests of the surety. By infinitely expanding the time that the surety may be subject to liability, and
the Claimants may be permitted to file suit, the bankruptcy court afforded the Claimants privileges
that are not granted by the statute. See id. at 946 (holding that the Public Works Act sets forth a
precise period of time to govern the filing of suits [in that case a suit by a state entity against a general
contractor or its surety] and to suspend or interrupt that period for any reason would render the time
limitations in the statute meaningless).
To determine a resolution more consistent with the statute, and in the absence of cases
construing the Public Works Act under these circumstances, we turn to case law regarding the Private
Works Act for guidance because the state courts have addressed this identical issue, premature
16
recording of acceptances, with regard to the Private Works Act. In Lighting, Inc. v. Trans-Gulf
Const. Co., Inc., the state district court granted judgment against a contractor and surety on a
contractor’s bond because formal acceptance by the owner was prematurely filed; the state court held
that as a result of the premature filing the statutory prescription period never began to run. 324 So.2d
454, 455 (La. 1975). The Louisiana Supreme Court reversed the judgment and dismissed the suit.
Id. Under the Louisiana Private Works Act, the subcontractor had to file his claim statement within
30 days of recordation of acceptance by the owner. Id. The owner could record an acceptance of
work upon either completion or “upon substantial completion of the work, or any specified area
thereof, upon the recommendation of the architect or engineer of the owner.” Id. The state district
court found that the work was not complete or substantially complete on the date of the registry of
acceptance so the acceptance was null. Id. at 456. In reversing the state district court, the Louisiana
Supreme Court held that a premature acceptance is not null but rather is inchoate and becomes
operative when the building is complete or substantially complete. Id.
An acceptance is a notice of completion. It becomes operative when it conforms to
the facts of construction. We think the better view is that prematurely recorded
acceptance is inchoate and becomes operative when the building is complete or
substantially complete. At that time, the two essential factors concur: recordation and
completion. To hold otherwise would mean that the misjudgment of the owner in
assessing substantial completion, though in good faith, would defeat the prescription
in favor of the surety contrary to the legislative purpose.
Id. The court observed that even assuming that the acceptance was filed prematurely, the
subcontractor’s suit was not filed within 30 days from the date the parties agreed the project was
substantially complete. Id. Therefore, the subcontractor’s suit was dismissed as untimely. Id.
Particularly instruct ive to us on the matter of nullity is the Louisiana Supreme Court’s
admonition in Lighting:
17
We find nothing in the statute which allows an owner's premature acceptance to wipe
out the one-year prescription in favor of the surety. To impose such a penalty on the
surety should require clear statutory authority.
Id.
Citing no case law, the bankruptcy court dismissed the argument that the prematurely filed
acceptance co uld be inchoate rather than null. The bankruptcy court in its oral rendering of
judgment, and the district court in adopting the bankruptcy court’s opinion, gave minimal attention
to Lighting. The bankruptcy court opined that Lighting was not applicable because it was governed
by the Private Works Act, whereas this case is governed by the Public Works Act. Moreover, the
bankruptcy court noted that the Private Works Act does not require private owners to record an
acceptance in the public record while the Public Works Act does require a recordation of acceptance.
We hasten to agree with the bankruptcy court’s observation and we thoroughly appreciate that
Lighting is not controlling because the Private Works Act does not govern this case. However, we
sit as a Erie court who must divine what the Louisiana Supreme Court might do if faced with the
same facts as those before us.4 Although the Louisiana Supreme Court has not made a definite
pronouncement on this exact issue, Louisiana’s highest court has stated that where an acceptance is
not perfected as a matter of law, that acceptance is inochate. More importantly, the Louisiana
Supreme Court stated that declaring an acceptance a nullity would be a penalty imposed upon the
surety, because of the miscalculation of a third-party, that can only be levied pursuant to express
4
It is axiomatic that as an Erie court we attempt to discern how Louisiana’s highest court
would resolve the issue at hand. Erie R. Co. v. Tompkins, 304 U.S. 64 (1938) (emphasizing that
federal courts can not make common law on matters reserved to the states). That doctrine is no less
applicable where, as here, we are addressing an unsettled area of Louisiana law. It is incumbent upon
us to avoid creating new rights and remedies in Louisiana state law where we lack express statutory
authority or clear directive from the Louisiana Supreme Court.
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statutory authority. The case before us is not governed by the Private Works Act and the Private
Works Act is distinguishable from the Public Works Act in many respects; however, we find the
principle in Lighting, that declaring an acceptance a nullity requires express statutory authority, is a
principle in positive law that is very persuasive to us. The bankruptcy court did not–nor did the
district court or the Claimants–offer any statutory authority for declaring an acceptance a nullity
under the Public Works Act, therefore, ipso facto, we hold that we can not impose such a penalty
upon the surety here.
Moreover, we conclude that for our purposes, the relevant provisions of the statutes are
substantially indistinguishable. The Private Works Act, like the Public Works Act, was enacted to
provide protection for subcontractors and other claimants and provide for a source for payments
should the general contractor fail to pay. Metropolitan Erection Co., Inc. v. Landis Const. Co., Inc.,
627 So.2d 144, 148 (La. 1993). However, because the Private Works Act and the Public Works Act
are lien statutes that grant special privileges to claimants that are not provided for by contract, both
statutes also seek to protect the interests of the sureties who issue the bonds. Id. Therefore, as here,
the Louisiana Supreme Court in Lighting had to balance the dual purposes of the statute of protecting
the claimants as well as protecting the interests of the surety. In addition, in both Lighting and the
present case, the parties were subject to a payment bond. The private owners in Lighting and the
public entity here both recorded an acceptance of the work in the public record based upon substantial
completion. See Lighting, 324 So.2d at 455. Both subcontractors were required to submit a claim
statement within a specified period of time from the recordation of acceptance.5 Even the definitions
5
“Before any person 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 must record his claim as provided in R.S. 9:4802
19
of substantial completion are identical.6 For all the reasons stated, we find the reasoning employed
in Lighting to be persuasive in resolving the issue currently before this court.
In order to determine when the recorded acceptance became operative, the Lighting court
sought to ascertain when the project was substantially complete. Here, in order to determine when
the recorded acceptance became operative we would have to determine if and when substantial
completion occurred within 30 days of completion, or when the project was complete. Even though
the Independence Bowl game was played on December 27, 2001, the parties dispute whether the
project was substantially complete at that time. Although, the stadium as a whole was sufficiently
useable to allow the game to be played, the project at issue only concerned the construction of
concession areas, bathrooms, and club seating in the south end zone of the stadium. As to those
specific portions of the stadium, there was at least anecdotal evidence that the bathrooms were not
or give written notice to said contractor within thirty days from the recordation of the notice of
acceptance by the owner of the work or notice by the owner or default, stating with substantial
accuracy the amount claimed and the name o f the party to whom the material was furnished or
supplied or for whom the labor or service was done or performed. . . .” Lighting, 324 So.2d at 455.
“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.” LA. REV. STAT. 38:2242.
6
“‘Substantial completion’ is defined for the purposes of the Chapter, as the finishing of
construction, in accordance with contract documents as modified by any change orders agreed to by
the parties, to the extent that the owner can use or occupy the works or use or occupy the specified
area of the works for the use for which it was intended.” Lighting, 324 So.2d at 455.
“‘Substantial completion’ is defined for the purpose of this Chapter, as the finishing of
construction, in accordance with the contract documents as modified by any change orders agreed
to by the parties, to the extent that the public entity can use or occupy the public works or use or
occupy the specified area of the public works for the use for which it was intended.” LA. REV. STAT.
38:2241.1.
20
complete at the time of the game. Whitaker emphasizes that the certificate of substantial completion
filed in the public record stated that the project “has been reviewed and found, to the Architect’s best
knowledge, information and belief, to be substantially complete.” The Claimants assert that the
certificate of substantial completion was signed by the architect not because the project was actually
substantially complete, but rather in order to pass title to the City in time for the Independence Bowl
game. Otherwise, Whitaker would have been liable for any accidents that occurred during the game.
That is why, the Claimants charge, the certificate of substantial completion was backdated to ensure
that the certificate reflected that the project was accepted before the date of the game. The Claimants
contend that whether the project was actually substantially complete at the time of recordation was
not a fact that was stipulated to in the bankruptcy court nor is there any evidence in the record to
support such a conclusion.
We need not make a definite determination of when substantial completion actually occurred
in accordance with the statute. The record reflects that the parties agreed that the project was finally
complete by April 25, 2002,7 thus, the recorded acceptance became operative by that date. The first
claim was not filed until June 21, 2002. None of the claims were filed within 45 days of completion.
Although we may sympathize with the Claimants’ position as subcontractors who have not been
compensated for their work, unfortunately the claim statements filed by the Claimants were all
untimely.
CONCLUSION
7
In the bankruptcy proceedings, specifically in the hearing on the motion for summary
judgment, counsel for both Whitaker and the Claimants agreed that the construction project was
finally completed by April 25, 2002. Counsel also agreed that although a change order on the project
was recorded after that date, the change order regarded work that had already been done.
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For the aforementioned reasons, we REVERSE the district court’s ruling affirming the grant
of summary judgment for the Claimants on the timeliness issue and we render judgment for Whitaker.
REVERSED and RENDERED.
22