Allied Bldg. Products Corp. v. United Pacific Ins. Co.
| Decision Date | 01 September 1988 |
| Docket Number | No. 279,279 |
| Citation | 549 A.2d 1163,77 Md.App. 220 |
| Parties | ALLIED BUILDING PRODUCTS CORPORATION v. UNITED PACIFIC INSURANCE COMPANY. , |
| Court | Court of Special Appeals of Maryland |
William M. Huddles (Andrew H. Vance and Braude & Margulies, P.A., on the brief), Baltimore, for appellee.
Argued Before GILBERT, C.J., and ROSALYN B. BELL and FISCHER, JJ.
Allied Building Products Corporation (Allied) appeals from a decision of the Circuit Court for Baltimore City granting cross-summary judgment for United Pacific Insurance Company (United Pacific). Allied is a large supplier of roofing and other building materials. United Pacific was the surety of a payment bond posted by Triangle General Contractors, Inc. (Triangle), guaranteeing payment for labor and materials on a State building project. Allied filed suit against United Pacific on August 20, 1987, alleging that it was entitled to relief from United Pacific due to the nonpayment of a subcontractor, Sain & Son Contractors, Inc. (S & S).
We are presented with two issues in this appeal:
--Did a joint check agreement operate to extinguish Allied's right to recover under Maryland's Little Miller Act?
--Was Triangle's affidavit, alleging that Allied had billed it for more roofing materials than actually delivered, sufficient to withstand Allied's summary judgment motion?
We reverse and remand.
The relevant facts are as follows. Triangle was the general contractor on a State project to construct the Francis Scott Key Elementary-Middle School in Baltimore City. United Pacific, appellee, was the surety for Triangle in accordance with Triangle's obligations to provide a payment bond pursuant to § 13-501(a)(2) of the Little Miller Act, Md.State Fin. & Proc.Code Ann. (1985). Briefly stated, this section requires a general contractor to post a payment bond in any construction contract awarded by the State which exceeds $50,000 in order to make certain that persons providing building materials are paid. By providing the payment bond, United Pacific guaranteed payment to all persons supplying materials for the school building project After the project was underway, Allied became concerned about receiving its payments on an open account it had provided to S & S. Consequently, Allied, S & S, and Triangle entered into a joint check agreement in November of 1985, pursuant to which Triangle agreed to pay S & S with joint checks made payable to S & S and Allied, thus ensuring that Allied would be paid for the building materials it had supplied to S & S. The agreement provided that Triangle assumed no liability for any materials purchased in excess of $100,000. Nevertheless, Triangle paid out a total of $123,846.74 to Allied under the joint check agreement. 1 When S & S did not meet its obligations, Allied gave notice and filed suit on the payment bond underwritten by United Pacific, claiming an unpaid balance of $75,889.18 for building materials delivered to the job site.
undertaken by Triangle. S & S, a construction subcontractor for Triangle, used roofing and other building materials supplied by Allied, which Allied delivered to the job site
The trial court granted Allied's summary judgment motion on November 10, 1987, and United Pacific filed a motion to vacate the judgment, a motion in opposition of the summary judgment, and a cross-motion for summary judgment on November 20, 1987. 2 These motions were heard in an unrecorded hearing in chambers on January 5, 1988. Judgment was entered in favor of United Pacific on both motions. Because the hearing was unrecorded, we can only assume that the trial court entered judgment for United Pacific based on its pleadings, which asserted, in essence, that the joint check agreement limiting Triangle's liability The effect of the joint check agreement is thus the primary issue in this case. We hold that the lack of a specific waiver was fatal to United Pacific's cross-motion. The second question involves Allied's own motion, and for that answer we revisit the problem of the adequacy of an affidavit opposing summary judgment. We hold that United Pacific's affidavit was sufficient to raise a material factual issue regarding delivery, and as a result, Allied was not entitled to summary judgment. We begin our explanation with a brief history of the Little Miller Act and what it was intended to accomplish.
to $100,000 operated as a waiver of Allied's rights under the Little Miller Act.
Construction projects such as office buildings and factories have increased dramatically. These projects typically involve large amounts of money; hence, if the contractor's business failed, suppliers who had extended credit could suffer substantial losses. Since suppliers had no recourse at common law, statutes providing for mechanics' liens were enacted to address this problem. See Cahn, Contractors' Payment Bonds in Maryland, 32 Md.L.Rev. 226 (1972).
Public projects such as schools, highways and public hospitals were typically exempt from mechanics' liens, however, and suppliers on State public projects in Maryland had no remedy until 1918, when Maryland adopted its version of a federal law known as the Heard Act, which required contractors to post bonds for State projects. 1918 Md.Laws ch. 127. In 1959, Maryland replaced this law with a new statute requiring contractors to post payment bonds on State construction projects. This new statute was patterned on a federal act known as the Miller Act. 3
Although nothing in the legislative history of the Maryland Act explicitly states that it was based on the federal Miller Act, the legislative history does show parallel development and, except for minor variations, the language of the two statutes is essentially the same. Williams Constr. Co. v. Construction Equip. Inc., 253 Md. 60, 61, 251 A.2d 864 (1969); Viscount Constr. Co. v. Dorman Elec. Supply Co., 68 Md.App. 362, 363, 511 A.2d 1102 (1986). In fact, the statute is commonly referred to as the "Little Miller Act."
Maryland State Fin. & Proc.Code Ann. §§ 17-101 through 17-110 (1988) 4 sets out the Little Miller Act in its present form, and provides in pertinent part:
(i) for performance security, in an amount that the public body considers adequate for its protection; and
(ii) for payment security, at least 50% of the total amount payable under the contract." "17-104. Type of security.
The purpose of the Little Miller Act is remedial. The Act is intended to protect suppliers on State and other public projects where they would otherwise have no lien as a result of sovereign immunity. Hamilton & Spiegel, Inc. v. Board of Educ. of Montgomery County, 233 Md. 196, 200, 195 A.2d 710 (1963). The Act is to be liberally construed to effectuate this public purpose. Montgomery County Bd. of Educ. v. Glassman Constr. Co., 245 Md. 192, 201, 225 A.2d 448 (1967).
D & L Constr. Co. v. Triangle Elec. Supply Co., 332 F.2d 1009, 1013 (8th Cir.1964). The obligation is one, not of contract, but of statute, and therefore privity is not required. The liabilities of lower tier subcontractors to their suppliers are passed up the ladder to the surety. For example, in the instant case, it is S & S's liability to Allied that becomes the benchmark in determining Allied's damages as against Triangle, and ultimately United Pacific.
What is significant about both the federal and the state acts is that, although there have been amendments to both statutes, 5 the basic coverage, purpose and procedures remain substantially the same. Generally, this Court will look to federal decisions construing the Miller Act to provide guidance in interpreting the Little Miller Act. Viscount 8 Md.App. at 366, 511 A.2d 1102; General Fed. Constr., Inc. v. D.R. Thomas, Inc., 52 Md.App. 700, 709, 451 A.2d 1250 (1982); Montgomery County v. Glassman, 245 Md. 192, 201, 225 A.2d 448 (1967).
On appeal, Allied contends that the trial court erred in granting judgment for United Pacific, asserting that at no time did it waive its right to the protection of the Little Miller Act. On the other hand, United Pacific asserts that it had no obligation to Allied because Triangle fulfilled its obligations under the joint check agreement. Since Triangle had no further liability to Allied, United Pacific claims it follows that it had no liability as Triangle's surety. We disagree with United Pacific's position, and explain.
Whether the cross motion for summary judgment was properly granted to appellee rests on the claim that Triangle's liability to appellant under the Little Miller Act was limited to $100,000. The joint check agreement was in the form of a letter from Triangle to S & S dated November 25, 1985. The letter stated in pertinent part:
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