Atlantic Sea-Con. Ltd. v. Robert Dann Co.

KARWACKI, Judge. The Maryland State Highway Administration (Highway Administration) on March 18, 1986, awarded one of the appellants, Atlantic Sea-Con, Ltd. (Atlantic), a $3,243,885 ¹⁶³ contract to fortify the foundation of the U.S. Route 50 bridge leading into Ocean City against erosion caused by the swift currents prevailing at the Sinepuxent Bay inlet from the Atlantic Ocean. In accordance with Maryland’s “Little Miller Act,” State Fin. & Proc.Code Ann. §§ 17-101 through 17-110, Atlantic, as the State’s prime contractor, posted a payment bond in the amount of the total contract price, with Federal Insurance Co., another appellant, as its surety. On May 12, 1986, Atlantic sent a purchase order to Marine Structural Applications, Inc. (MSA) for approximately 56,200 tons of rock needed for the project.

Under the terms of the agreement, this rock was to be mined from a state-approved quarry and delivered to Snow Hill in Worcester County, where a trucking company would then load the rock and transport it to the construction site. MSA elected to purchase the stone from an approved quarry located in Occoquan, Virginia. At that site, MSA sorted the rock so that it would match contract specifications and loaded it on barges on the Potomac River. MSA’s tug boats would then tow the barges to the destination point at Snow Hill.

The final cost of MSA’s performance was $385,708.17, or 11.9% of the total contract price. In August of 1986, after one of its tug boats became disabled, MSA contracted with the Robert Dann Company, the appellee, for its towing services. From August 11 to August 31, appellee’s boats operated by appellee’s employees tugged MSA’s rock-filled barges from Occoquan to Snow Hill without incident. When MSA went bankrupt in the fall of 1986, appellee sought reimbursement for its outstanding bill of $37,100.00 from the payment bond posted by Atlantic.

Appellants refused payment, contending that appellee was not covered by the bond. This litigation ensued. Appellee filed suit on July 20, 1987 in the Circuit Court for Worcester County to collect its unpaid tugging fees from appellants’ payment bond. The parties agreed upon all of the facts giving rise to appellee’s claim.

The only ¹⁶⁴ issue in dispute was whether the appellee qualified for protection under the statutory bond. Perceiving this question to be one of fact, the court denied appellants’ motion for summary judgment and its motions for judgment. 1 The jury, in turn, concluded that appellee was protected by appellants’ bond and returned a verdict in favor of the appellee. In their appeal from the judgment entered on that, verdict, appellants pose the following questions for our review: I. Did the trial court err in denying appellant’s [sic] motion for summary judgment and submitting to the jury the issue of whether the Little Miller Act afforded appellee payment security; and II. Was appellee, as a matter of law, among the class of persons that the Little Miller Act was designed to protect?

While we agree with appellants that the evidence failed to generate any material disputed facts below, we nevertheless hold that appellee was entitled as a matter of law to coverage under appellants’ payment bond. Consequently, we shall affirm the judgment of the trial court. Contractors on all construction projects exceeding $50,000 which are funded by “a public body” must furnish security to “guaranty payment for labor and materials____” State Fin. & Proc. Law Ann. §§ 17-103(a) and 17-101(b) (1988 Repl.Vol.). 2 This security usually takes the form of a bond “executed by a surety company authorized to do business in this State.” § 17-104(1).

Section 17-108 in its pertinent parts defines the scope of protection under that security as follows: ¹⁶⁵ (a) In general. — Subject to subsection (b) of this section, a supplier may sue on payment security if the supplier: (1) supplied labor or materials in the prosecution of work provided for in a contract subject to this subtitle; and (2) has not been paid in full for labor or materials within 90 days after the day that the person last supplied labor or materials for which the claim is made. (b) Payment owed by subcontractor. — (1) A supplier who has a direct contractual relationship with a subcontractor or sub-subcontractor of a contractor who has provided payment security but no contractual relationship with the contractor may sue on the security if the supplier gives written notice to the contractor within 90 days after the labor or materials for which the claim is made were last supplied in prosecution of work covered by the security. 3 Putting aside for the moment the issue of whether the trial court erred in permitting the jury to determine whether appellee could sue on appellants’ bond, we address the more general, and in this case, dispositive issue of whether the court articulated the proper standard for assessing a claimant's standing to sue under a Little Miller Act bond. This is an issue of pure statutory construction which is a matter for the court’s resolution. See Mangum v. Md. St. Bd. of Censors, 273 Md. 176, 192-93 , 328 A.2d 283 (1974) (“[cjonstruing statutes in connection with applying statutory provisions to specific cases, is a large and essential part of the judicial process.”) In construing the meaning and scope of any statute, courts seek to ascertain and effectuate legislative intent, the most useful indicator of which is the actual statutory language.

Rucker v. Comptroller of the Treasury, 315 Md. 559, 564-65 , 555 A.2d 1060 (1989); Dean v. Pinder, 312 ¹⁶⁶ Md. 154, 161 , 538 A.2d 1184 (1988). Such language is to be given its ordinary, conventional meaning, and should be read in the context of the statute's overarching goals and purposes. Tucker v. Fireman’s Fund Ins. Co., 308 Md. 69, 73 , 517 A.2d 730 (1986); Comptroller of the Treasury v. Fairchild Industries, Inc., 303 Md. 280, 284-87 , 493 A.2d 341 (1985).

Only when the statutory language is ambiguous will the courts look beyond the text to other aids of construction. Ryder Truck Lines, Inc. v. Kennedy, 296 Md. 528, 536 , 463 A.2d 850 (1983); Bledsoe v. Bledsoe, 294 Md. 183, 189 , 448 A.2d 353 (1982). At the heart of the instant dispute lies a fundamental determination of the import of § 17-108, supra. A number of courts, construing language identical or similar to that of § 17-108(b)(1), have held that this provision restricts the class of persons entitled to sue on a public works bond to those who stand in a proximate relationship with the prime contractor.

See, e.g., J. W. Bateson Co., Inc. v. U.S., 434 U.S. 586 , 98 S.Ct. 873 , 55 L.Ed.2d 50 (1978); Clifford F. MacEvoy Co. v. U.S., 322 U.S. 102 , 64 S.Ct. 890 , 88 L.Ed. 1163 (1944); U.S. v. Blount Bros. Constr. Co., 168 F.Supp. 407 (D.Md.1958) (all construing the federal Miller Act). Proponents of this interpretation thus hold that subsection (b)(1), or its equivalent, is essentially a standing requirement, designed to insulate the prime contractor from the claims of remote suppliers. 4 The statute, under this interpretation, defines the proximate relationship as any direct contractual relationship with a “subcontractor or sub-subcontractor.” A “subcontractor,” in turn, is “one who performs for and takes from the prime contractor a specific part of the labor or material requirements of the ¹⁶⁷ original contract, thus excluding ordinary laborers and materialmen." Clifford F. MacEvoy Co., supra, 322 U.S. at 109 , 64 S.Ct. at 894 . 5 Other courts hold that the statute’s only restrictions on the class of potential bond claimants appear in subsection 17-108(a), which grants standing to those who have supplied labor or materials in the prosecution of work and have not been paid within 90 days of their performance.

Not coincidentally, this provision mirrors the broad criteria under the mechanics’ lien statute for determining whether a supplier has standing to assert a lien. See Md.Real Prop. Code Ann. § 9-102; Evans Marble Co. v. Intnt’l Trust Co., 101 Md. 210 , 60 A. 667 (1905). According to the latter interpretation, subsection (b)(1) is merely a notice requirement for claimants who, though within the statute’s protective parameters, are nevertheless remotely associated with the general contractor.

See, e.g., Huddleston Concrete Co. v. Safeco Ins. Co., 186 Ga.App. 531 , 368 S.E.2d 117 (1988); Peters v. Hartford Accident & Indem. Co., 377 Mass. 863 , 389 N.E.2d 63 (1979); Richards & Conover Steel Co. v. Nielsons, 755 P.2d 644 (Okla.1988). As the Court explained in Huddleston Concrete Co., “The purpose of the notice requirement is to protect the [general] contractor, so that he may with impunity pay subcontractors if no notice of claims by materialmen and suppliers has been filed.” Huddleston Concrete Co., supra, 186 Ga.App. at 533 , 368 S.E.2d 117 .

Cf. Dickerson Lumber Co. v. Herson, 230 Md. 487, 491 , 187 A.2d 689 (1963) (“The Mechanics’ Lien Law seeks to protect materialmen who are not in a position to protect themselves if the owner negligently pays the contractor without first ascertaining that the materialmen have been paid”) (emphasis supplied; citations omitted). Indeed, as a practical matter, the general contractor’s only means of learning about the existence of these claims is through formal notice. ¹⁶⁸ We believe that the second interpretation espoused by a number of our sister states is more consonant with the general purposes and history of our Little Miller Act. That interpretation, moreover, is in keeping with our pattern of liberally construing the Act “to protect persons whose labor and materials go into government projects.” Stauffer Constr.

Co., Inc. v. Tate Engineering, Inc., 44 Md.App. 240, 245 , 407 A.2d 1191 (1979), cert. denied, 286 Md. 753 (1980) (citation omitted). See also Montgomery County Bd. of Educ. v. Glassman Constr. Co., 245 Md. 192, 201 , 225 A.2d 448 (1967); Mullan Contracting Co. v. International Business Machines Corp., 220 Md. 248, 258-59 , 151 A.2d 906 (1959); Allied Building Products Corp. v. United Pacific Ins. Co., 77 Md.App. 220, 226 , 549 A.2d 1163 (1988); Viscount Constr.

Co., Inc. v. Dorman Elec. Supply Co., Inc., 68 Md.App. 362, 367 , 511 A.2d 1102 (1986). In determining the Legislature’s intent, it is useful to trace the development of Maryland’s present public works bond statute. After creating the State Roads Commission in 1908, ch. 141 of the Laws of 1908, the Legislature by ch. 721 of the Acts of 1910 enacted the Little Miller Act’s earliest precursor, which we shall refer to as the highway construction statute.

It provided, inter alia, that: In all cases where the contract for work and materials shall be given out after competitive bidding, the successful bidder shall promptly execute a formal contract to be approved as to its form, terms and conditions by said Commission, and shall also execute and deliver to said Commission a good and sufficient bond to be approved by said Commission to the State of Maryland in not less than the amount of the contract price. In no case shall any such bond be approved or accepted unless the obligators bind themselves therein to the payment of all just debts for labor and materials incurred by the bidder in the construction and improvement of the road contracted for. The Court in American Fidelity Co. v. State, 128 Md. 50 , 97 A. 12 (1916), recognized that the mischief which this ¹⁶⁹ statute sought to remedy arose from the inability of laborers and materialmen on public projects to secure their payment by attaching state-owned property. In the words of the Court, absent an alternative remedy, these suppliers “could acquire no protection against insolvent contractors by the lien laws of this State.” Id., 128 Md. at 59 , 97 A. 12 .

Thus, by requiring the execution of a payment bond, the Legislature sought to place suppliers of labor and materials on public projects in the same secure position they would have occupied had they been engaged in a private construction contract, the only difference being the form of the available security. Indeed, because a supplier’s participation in a public contract was to affect