Preliminary Notice Delivery Method Clarified

In Arizona, every party without a direct contract with the general contractor is required to give a preliminary notice within 20 days of the party’s first furnishing of labor and/or materials in order to preserve the right to make any necessary future bond claim. While the failure to provide the notice within the noted 20 days may not necessarily be completely fatal to a later bond claim, there are other statutory requirements with which the noticing party must strictly comply. One such requirement is the methods by which the notice may be sent.

Background of the Recent Case

In Cemex v. Falcone Bros. & Assocs., Inc.the Arizona Court of Appeals examined the delivery method of preliminary notices for public projects in contrast to sufficient methods for giving equivalent notices on public projects. In the case at issue, Falcone was the general contractor for a Tuscon public works project. Falcone hired J & S Commercial Concrete Contractors as a subcontractor for concrete work on the project, and J & S subsequently subcontracted with Cemex.

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Cemex was unpaid for materials delivered to the project, and filed a complaint in court requesting payment and alleging it was entitled to recover against the bond. In the suit, Cemex alleged that it had complied with the applicable statutory notice requirements set forth by § 34-223(A), by sending the required 20-day notices via first-class mail with a certificate of mailing. Falcone argued, in part, that it did not receive the 20-day notices, and that the notices were insufficient because they were mailed via first class mail (with a certificate of mailing) rather than by registered or certified mail, as alleged to be set forth by the controlling statute.

Mailing Method Discussion

In order to determine the validity of the mailing method, the court looked at the text of the statutes at issue. § 34-223(A) sets forth the notice requirements for public projects and states:

[a]ny such claimant having a direct contractual relationship with a subcontractor of the contractor furnishing such payment bond but no contractual relationship express or implied with such contractor shall have a right of action upon such payment bond upon giving the contractor only a written preliminary twenty day notice, as provided for in section 33-992.01, subsection C, paragraphs 1, 2, 3 and 4 and subsections E and H, and upon giving written notice to such contractor within ninety days from the date on which such claimant performed the last of the labor or furnished or supplied the last of the material for which such claim is made, stating with substantial accuracy the amount claimed and the name of the party to whom the material was furnished or supplied for whom the labor was done or performed. Such notice shall be served by registered or certified mail…

Falcone’s argument stemmed from the last sentence of the above quoted statute which specifies that “such notice shall be served by registered or certified mail”. Cemex, on the other hand, contended that the “such notice” portion of that last sentence referred to the “ninety day” notice only, and that notice may be given as set forth by section 33-992.01.

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Mailing Service for Private Projects Under 33-992.01

Cemex’s argument hinges on the fact that § 34-223(A) notes that the 20-day notice required is “as provided for in section 33-992.01”, the preliminary notice statute governing private projects. This is interesting to Cemex’s position in that private 20-day notices may be served “by mailing the notice by first class mail sent with a certificate of mailing, registered or certified mail”. Comex argued that since the public 20-day notice is “as provided for” in the private statute, the ability it serve by first class mail with a certificate of mailing should be analogous.

The Court’s Decision on Service of Public 20-day Preliminary Notices

Because the provision that the notice may be served by first class mail is contained within subsection F, it is not incorporated into the service methods contemplated by § 34-223(A).
The court examined the legislative history of the statute at issue and decided that, because § 34-223(A) explicitly provided that certain subsections of § 33-992.01 apply to public 20-day preliminary notices (specifically “subsection C, paragraphs 1, 2, 3 and 4 and subsections E and H”), the portions of § 33-992.01 not specifically referenced were excluded. Because the provision that the notice may be served by first class mail is contained within subsection F, it is not incorporated into the service methods contemplated by § 34-223(A).

Further support was found in that if the “such notice” language was determined to only apply to the 90-day notice, there would be a statutory gap depriving parties of guidance on how the 20-day notice should be sent. This was determined to be an absurd result, and one which the legislature must not have intended.

None of the above, however, matters when the notice was actually received by the party to whom the notice must be given. Unfortunately for Cemex in this case, Falcone contended that the notices were never received. While the improper delivery method of the preliminary notices was fatal to Cemex’s summary judgment motion, there remains an issue of fact as to whether the notices were actually received. Because of this, the case was remanded for a new trial consistent with the court of appeals decision.

Take-Aways

Despite the fact that the actual receipt of notices may overrule the delivery method, the take-away is clear. The statutorily mandated method for service of 20-day preliminary notices on public projects is registered or certified mail, postage prepaid.

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Arizona Public Preliminary Notice Delivery Method Clarified
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Arizona Public Preliminary Notice Delivery Method Clarified
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In Arizona a preliminary notice can be required on public projects. The method by which this notice must be served was recently clarified by the AZ Court of Appeals.
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Levelset
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