Unpublished Disposition, 914 F.2d 265 (9th Cir. 1989)

MEMORANDUM^* 

First State Builders, Inc. and E.U. Bevilacqua, president of First State, appeal from summary judgment entered in favor of Superior Building Materials. Bevilacqua argues that the district court erred in imposing attorneys' fees and contractual interest against him based solely on his liability as a principal under a Miller Act payment bond. He also argues that he was denied due process of law by the district court's ruling on a motion in limine. First State argues that insufficient evidence was introduced at the trial to establish its liability and that it did not have sufficient notice of the district court proceedings.

FACTS AND PROCEEDINGS BELOW

On June 14, 1983, Bevilacqua and First State executed a joint venture agreement with the stated purpose "to enter into a contract or contracts with the Owner for professional services in connection with the following Project: To bid and bond the Child Care Center, Alameda, California for the Dept. of the Navy."

On June 29, 1983, the joint venture executed a construction contract with the Navy. As contractor, the joint venture furnished a Miller Act payment bond pursuant to 40 U.S.C. § 270(a) on July 15, 1983. First State and Bevilacqua as joint venturers were named as principals; two corporate sureties were also parties. Bevilacqua signed the bond both as president of First State and as an individual.

On May 13, 1985, "First State Builders, Inc." as "Contractor" entered into a subcontract agreement with California Kitchen & Bath & Floor Center. Superior Building Materials dba California Kitchen & Bath was to do certain work as called for in the construction contract with the Navy. The subcontract stated that in the event of a suit between the parties or against a surety of one of them, the prevailing party should recover its attorneys' fees.

LITIGATION HISTORY

For work allegedly performed under the subcontract, Superior instituted this suit under the Miller Act against First State, Bevilacqua, and the two co-sureties for $35,225, plus interest, attorneys' fees, and court costs. The co-sureties on the bond became insolvent, and First State Builders filed for bankruptcy in December 1985. First State's bankruptcy was dismissed in February 1988.

In October 1987, Superior's motion for summary judgment primarily on the issue whether Bevilacqua was liable as a principal on the bond and therefore liable to Superior was denied.

On August 4, 1987, the case of United States for the use of Half Moon Bay Sealing & Paving, Inc. v. First State Builders, Inc., E.U. Bevilacqua, American Druggists Ins. Co., No. C-85-7460 DLJ (ARB) ("Half Moon Bay "), was decided in the Northern District of California. In that case, another subcontractor on the same Navy contract with First State and Bevilacqua prevailed on a summary judgment motion against Bevilacqua. Excluding the joint venture agreement as parol evidence, the court held that Bevilacqua was liable as a principal for any claims arising under the payment bond. The award of attorneys' fees and interest was not before the court in that case.

After judgment in Half Moon Bay, on March 17, 1988, Superior made a motion in limine to collaterally estop Bevilacqua's denial of liability to valid claims under the Miller Act payment bond issued in connection with the Navy contract. The district court in this case applied collateral estoppel, holding that Bevilacqua was bound by the Miller Act bond. The court then held that "Bevilacqua's liability under this bond is coterminous with the terms of the subcontract," and that he was therefore liable to Superior for attorneys' fees under the bond and as provided in the subcontract. The only issue left by the district court for trial was the question of set-offs. A trial date was set to determine whether a set-off against the amount due Superior was appropriate, apparently because a portion of Superior's work had been rejected by the Navy.

The day before the trial date, the court and counsel held a conference call on the record. Bevilacqua's attorney said that just that day or the day before, the attorney for Superior had told him that he would request that judgment be also entered against First State. Counsel for Bevilacqua said this was a "new issue," and that Bevilacqua was "very concerned." In addressing this issue, the court said that it thought that First State and Bevilacqua were "one and the same," and that there was an admission to this effect in one of the pleadings. First State and Bevilacqua were represented by the same attorney.

On the day scheduled for trial, the court entered summary judgment for Superior, having treated the motion in limine as a motion for summary judgment. Judgment against First State and Bevilacqua was filed on April 20, 1989, in the amount of $30,224.¹  The motions of First State and Bevilacqua for reconsideration of judgment were denied on June 8, 1988. Timely notice of appeal was filed on July 1, 1988.

STANDARD OF REVIEW

We review a grant of summary judgment de novo, Kruso v. Int'l Tel. & Tel. Corp., 872 F.2d 1416, 1421 (9th Cir. 1989), and, viewing the evidence in the light most favorable to the nonmoving party, we determine whether there exist any genuine issues of material fact and whether the district court correctly applied the relevant substantive law. Tzung v. State Farm Fire & Casualty Co., 873 F.2d 1338, 1339-40 (9th Cir. 1989).

ANALYSIS

I. Imposing Attorneys' Fees Against Bevilacqua

First State and Bevilacqua argue that, although their joint venture was with the Navy, only First State entered into the subcontract with Superior. Thus, only First State should be liable under the Miller Act payment bond. They claim that the intent of all the parties to the payment bond was that Bevilacqua's name in the bond was only for the purpose of providing additional indemnification for the sureties, and that it was not intended that he be held liable to a third party under the bond.

The district court held that Bevilacqua was collaterally estopped from denying his liability under the payment bond in light of Judge Jensen's decision in Half Moon Bay. The court reasoned, in part, in Half Moon Bay, that the language of the payment bond unambiguously held the sureties and principals to be bound jointly and severally for claims arising under the bond. The parol evidence rule thus precluded Bevilacqua from introducing the joint venture agreement to show that he was not intended to be held liable under the bond.²  The court held, therefore, that Bevilacqua was in fact liable according to the terms of the bond.

We adopt Judge Jensen's reasoning. "Terms set forth in a writing intended by the parties as a final expression of their agreement with respect to such terms as are included therein may not be contradicted by evidence of any prior agreement or of a contemporaneous oral agreement." Cal.Civ.Proc.Code Sec. 1856(a) (West 1983). The language of the payment bond is clear in stating that "we, the Principal and Surety(ies) hereto, are firmly bound to the United States of America ... in the above penal sum for the payment of which we bind ourselves ... jointly and severally...." We find that the payment bond was intended as a final expression of the parties' agreement with respect to its terms. See Cal.Civ.Proc.Code Sec. 1856(d). Since Bevilacqua is listed as one of the principals on the bond, he cannot now seek to introduce evidence that he was not meant to be bound. We hold that he is liable on the payment bond.

B. Imposing Attorneys' Fees on the Basis of Payment Bond Liability

Bevilacqua challenges the award of contractual interest and attorneys' fees against him. Since, however, the district court did not make any award of contractual interest, only the grant of attorneys' fees is at issue on appeal.

To protect those who supply labor and materials for public projects, the Miller Act requires a government contractor to post a payment bond in an amount determined under the statute. 40 U.S.C. § 270a(a) (2). If payment to the subcontractor is not made,

[e]very person who has furnished labor or material in the prosecution of the work provided for in such contract, in respect of which a payment bond is furnished ... and who has not been paid in full therefor ... shall have the right to sue on such payment bond for the amount, or the balance thereof, unpaid at the time of institution of such suit and to prosecute said action to final execution and judgment for the sum or sums justly due him....

40 U.S.C. § 270b(a).

What sum is "justly due" is determined with reference to the contract with the subcontractor making the claim under the Miller Act, and is not limited to those obligations specifically listed in the prime contractor's contract with the United States. See United States v. Carter, 353 U.S. 210, 218, 220 (1957). A contractual provision for attorneys' fees in a contract with a subcontractor "becomes part of the compensation 'justly due' ... the subcontractor or material supplier under the Miller Act." Travelers Indemnity Co. v. United States, 362 F.2d 896, 899 (9th Cir. 1966).

Here, the subcontract with Superior specifically provided for the award of attorneys' fees to the prevailing party in any legal action arising out of a dispute concerning the contract. Thus, under the Miller Act, Superior has a right to sue principals and sureties on the payment bond for the attorneys' fees it is "justly due" under its subcontract. Since Bevilacqua is a principal, he is liable for the attorneys' fees as a matter of law.

Bevilacqua argues that his due process rights were violated because he was not permitted to present evidence regarding the subcontract agreement and his liability to Superior under that agreement. Since, however, he is liable for the fees solely on the basis of his signature on the payment bond, any evidence about the subcontract is irrelevant. Failure to permit the introduction of irrelevant evidence does not constitute a violation of due process. See Queen Mary Restaurants Corp. v. NLRB, 560 F.2d 403, 412 (1977) (" [T]he exclusion of marginally relevant evidence is no denial of due process.")

Nor is there merit in Bevilacqua's claim that he was denied adequate time to prepare his defenses for the summary judgment motion because the court sua sponte converted the motion in limine to a summary judgment motion without giving him advance notice. Once the court had ruled that Bevilacqua was collaterally estopped from denying his liability under the payment bond, Bevilacqua's liability for attorneys' fees followed automatically as a matter of law. Nothing that Bevilacqua could have prepared would have affected the judgment against him.

First State and Bevilacqua claim there was insufficiency of evidence to establish the liability of First State under the payment bond or subcontract agreement. Specifically, they argue that the district court had no justification for finding that Superior performed the subcontract, that full payment was due Superior on August 31, 1985, and that Superior received no payment from the joint venture.

First State asserts that the district court received in evidence only the construction contract, the payment bond, and the subcontract agreement. However, the Court also had before it the judgment in Half Moon Bay holding Bevilacqua liable on the payment bond.

In addition to those documents listed above, the district court considered Superior's previous motion for summary judgment along with the collateral estoppel motion. At the hearing on April 13, 1988, Superior stated to the court its understanding that "the court is going to treat the collateral estoppel motion as a motion for summary judgment in connection with the declarations in evidence before the court on a prior summary judgment motion."³  Counsel for the appellants did not object to Superior's statement. The prior summary judgment motion contained a declaration by Dennis Nultemeier which established Superior's performance and the date payment was due.

The court admitted certain documents into evidence at the April 13, 1988 hearing. Although it did not specifically state that it was considering the documents appended to the earlier summary judgment motion, it seemed to rely on Nultemeier's declaration. The court stated "the subcontract was duly performed. Payment was due to Superior on August 31, 1985. Superior received no payment on the subcontract from the joint venture...." Rule 56 clearly provides that judgment shall be rendered forthwith if the "pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue of material fact...." Although the court did not cite to Nultemeier's affidavit by name, it clearly relied upon its substance in making its findings of fact. The district court had the right to rely on Nultemeier's affidavit and was therefore justified in finding the facts as it did.

First State argues that it was denied procedural due process by lack of sufficient notice that the motion to estop Bevilacqua on the issue of liability would be applied to First State. First State went into bankruptcy and therefore was granted an automatic stay. The record does not reveal when First State entered bankruptcy, but its bankruptcy action was dismissed on February 24, 1988. First State asserts that the Court first indicated on April 12, 1988 that summary judgment would enter against it as well as Bevilacqua, thus "depriving First State of the opportunity to be fairly heard on the merits of its defenses to the complaint...."

First State's argument is that once its bankruptcy action was dismissed and the automatic stay had expired, Superior was entitled to go against it; but Superior did not give notice to First State or the Court that it would do so; the motion upon which the court ruled was addressed only to the estoppel of Bevilacqua; and therefore, entry of judgment against it was improper.

In response, Superior asserts that, at all times, Micheal Dodge was attorney of record for both Bevilacqua and First State. Dodge had notice of all the proceedings in the litigation, as did Bevilacqua, the president of First State. Because they were joint venturers, notice to one was effectively notice to the other and therefore no prejudice was suffered.

When discussing appellants' motion for reconsideration, the district court briefly addressed this issue. It held that the argument that judgment should not be entered against First State had been raised and rejected. The court stated that "judgment against First State is proper because First State admitted to being a joint venturer with Bevilacqua in its answer to the complaint. First State's interests are aligned (sic) with Bevilacqua's interests, the same evidence required against both, and First State is not prejudiced by treating it as a joint venture in line with Bevilacqua." The district court's ruling is correct.

The judgment of the district court is AFFIRMED.