Board of Education v. Alcrymat Corp. of America

Barnes, J., delivered the opinion of the Court. Two questions are principally involved in this appeal (1) whether the Circuit Court for Charles County (Bowen, J.) erred in granting a judgment against the appellant, Board of Education of Charles County (Board) in a tort action filed by Alcrymat Corporation of America, the appellee, (Alcrymat) and (2) whether the Board waived its immunity from tort liability by its failure to raise the issue of governmental immunity by a motion raising preliminary objection pursuant to Maryland Rule 323 b. We have concluded that the trial court erred in granting the judgment against the Board and that there ⁵¹⁰ has been no effective waiver of governmental immunity, so that it is not necessary for us to decide whether the Board was negligent in accepting a payment bond issued by a corporation not authorized to do business in Maryland or whether Alcrymat was guilty of contributory negligence in failing to review the payment bond filed by the Board. The facts are not in dispute.

The Board on September 9, 1965, awarded a contract for a shop addition at the LaPlata High School to Spa Construction Company, Inc. (Spa). Spa, on September 16, 1965, furnished the Board with a payment bond for labor and materials in the amount of $118,898.00 issued by the Metropolitan Fund, Inc. (Metropolitan), 1 Cathedral Street, Annapolis, Maryland. This bond was for the use and benefit of claimants who supplied labor or materials, or both, in the performance of the prime contract. When the Board received the payment bond from Spa, it did not make inquiry of the State Insurance Department of Maryland to ascertain whether Metropolitan was authorized to conduct a surety business in Maryland.

This information could have been obtained by the Board from the Insurance Department by a telephone call or by a letter of inquiry. The Board did forward the payment bond to the Supervisor of School Plant Planning for the Maryland State Department of Education for his approval and the bond was approved by the supervisor. Alcrymat entered into a subcontract with Spa, the prime contractor, on December 10, 1965, to furnish labor and materials in the performance of the roofing and sheet metal portions of the prime contract and satisfactorily completed its work on or before April 6, 1966. The amount claimed by Alcrymat for this work, which included an extra amount for work not included in the original contract, is $3,392.91.

The correctness of this amount is not disputed. Alcrymat has not been paid the amount of its claim. After the Board discovered that Metropolitan was not and never had been licensed as an insurance company in ⁵¹¹ Maryland, Spa was notified by letter on May 6, 1966, that under the prime contract it was required to file a payment bond (and also a performance bond) which would meet all of the requirements of the laws of Maryland, retroactive to the date of the prime contract and was given 10 days to meet this requirement, and that the failure to do this would necessitate the termination of the prime contract. Spa, not having met the requirement within the 10-day period, was notified by letter of May 18, 1966, that the prime contract was cancelled.

Alcrymat, on February 27, 1968, filed an action at law against the Board to recover the amount of $3,392.91 alleging, inter alia, the Board’s breach of its statutory duty and the Board’s unjust enrichment by its conduct in derogation of the rights of Alcrymat. The Board demurred to the declaration relying on (1) the one year statute of limitations provided by Code (1957), Art. 90, § 11, (2) lack of privity between the parties and the absence of any duty owed by the Board to Alcrymat and (3) the absence of liability for errors in regard to the adequacy of the surety. This demurrer was overruled by the lower court on November 14, 1968, after which the Board pleaded the general issue plea. Judge Bowen, after hearing testimony and argument, on October 2, 1969, concluded that the Board had been negligent in filing a payment bond written by a surety not authorized to do business in Maryland or approved by the State Insurance Department, that Alcrymat was not guilty of contributory negligence and directed that a judgment be entered in favor of the plaintiff, Alcrymat, for $3,392.91, with interest from date and costs.

The Board filed a timely motion for a new trial alleging in substance that Alcrymat could not recover in tort and had failed to show that the Board owed a duty to Alcrymat “and in fact the Defendant owed no duty to the Plaintiff,” and assuming that such a duty was shown to exist, Alcrymat was guilty of contributory negligence as a matter of law when it failed to review the bond filed with the Board which was available for public inspection. The lower court overruled ⁵¹² this motion for a new trial and from the final judgment entered upon the verdict, a timely appeal was taken by the Board to this Court. (1) In our opinion, the trial court erred in granting the judgment against the Board in an action in tort. Our recent decisions in Bolick v. Board of Education of Charles County, 256 Md. 180 , 260 A. 2d 31 (1969) and in Higdon v. Board of Education of Charles County, 256 Md. 595 , 261 A. 2d 783 (1970), both decisions having been filed after Judge Bowen’s determination in the present case, illustrate the law on this point.

In both Bolick and Higdon , the same prime contract and the same payment bond were involved, but with claims of other subcontractors. We held in Bolick that boards of education in Maryland are immune from liability from tort actions and that the courts could not change that firmly established rule without legislative sanction. Judge E. Mackall Childs, specially assigned, aptly stated for the Court: “Boards of education in this State do not per se enjoy governmental immunity from suit, Code (1957) Article 77, Section 38. However, it has been conclusively established that boards of education are immune from liability in tort actions, since the legislature has given them no power to raise money for the purpose of paying damages, nor to pay judgments against them.

Weddle v. Board of County School Commissioners, 94 Md. 334 , 51 A. 289 . In Weisner v. Board of Education, 237 Md. 391 , 206 A. 2d 560 , this Court held that the Weddle doctrine was too firmly established in Maryland law to justify a change affecting their tort liability without legislative sanction.” (256 Md. at 183, 260 A. 2d at 32 .) We cited Bolick and considered it to be controlling in Higdon . ⁵¹³ It is clear that under our decision in Hamilton & Spiegel, Inc. v. Board of Education of Montgomery County, 233 Md. 196 , 195 A. 2d 710 (1963) there could be no recovery in contract on the theory of creditor beneficiary under the contract between the Board and Spa or under the theory of unjust enrichment. Alcrymat could only recover, if at all, upon the theory of liability in tort and, as we have observed, there can be no recovery under this theory under our decisions in Higdon and Bolick . (2) In the present case, Alcrymat earnestly contends that even assuming for the argument that it would ordinarily be barred from recovery in tort because of the Board’s governmental immunity, the Board, by its failure to raise this defense in accordance with Rule 323 b has effectively waived it in the present case.

Rule 323 provides in paragraph a the eight defenses including lack of jurisdiction over the subject matter or over the person “may at the option of the pleader” be