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

• Decision Date: 01 September 1989
• Docket Number: LTD,No. 131,SEA-CO,131
• Citation: 582 A.2d 981,321 Md. 275
• Parties: ATLANTICet al. v. ROBERT DANN COMPANY. ,
• Court: Maryland Court of Appeals

Page 275

321 Md. 275

582 A.2d 981

ATLANTIC SEA-CON, LTD. et al. v. ROBERT DANN COMPANY.

No. 131, Sept. Term, 1989.

Court of Appeals of Maryland.

Dec. 10, 1990.

Fulton P. Jeffers (Christopher F. Davis, Hearne & Bailey, P.A., Salisbury on brief), for petitioners.

John C. Seipp (A. Gillis Allen, II, Adkins, Potts & Smethurst, Salisbury, on brief), for respondent.

Argued before MURPHY, C.J., and ELDRIDGE, COLE, RODOWSKY, McAULIFFE, ADKINS ^* and CHASANOW, JJ.

CHASANOW, Judge.

On March 18, 1986, Petitioner, Atlantic Sea-Con, Ltd. (Atlantic), entered into a contract with the State of Maryland for scour protection at the Route 50 bridge in Ocean City, Maryland. The work covered under the contract included, among other things, the placement of stone and rock (riprap) under and adjacent to the bridge, as well as along the bulkhead and shore. Atlantic was responsible for furnishing riprap that met State guidelines and State specifications, as well as for installing it at the Ocean City job site. Pursuant to the "Maryland Little Miller Act," Maryland Code (1985), State Finance and Procurement Article, § 13-501, ¹ Atlantic posted a payment bond in the amount of the total contract price with Federal Insurance Company, Co-Petitioner, as its surety.

On May 12, 1986, Atlantic issued a purchase order for the rock needed for the Route 50 bridge project to Marine Structural Applications, Inc. (MSA). MSA was to deliver the rock to a location in Snow Hill, Maryland, from where Jarmon's Construction would truck the riprap to the job site in Ocean City. MSA purchased the rock from an approved quarry in Occoquan, Virginia. At that quarry, MSA sorted the riprap according to contract specifications and loaded it onto barges for transport from Occoquan to Snow Hill via the Potomac River, Chesapeake Bay, and Pocomoke River. In delivering the rock to Snow Hill, MSA initially used its own barges and tugboats.

When one of MSA's tugboats failed, MSA contracted with the Respondent, Robert Dann Company (Dann), for towing services. From August 11 to August 31, Dann tugged MSA's barges carrying the riprap from Occoquan to Snow Hill. Dann billed MSA for its services rendered, but MSA never paid. In the fall of 1986, MSA filed for bankruptcy and Dann filed suit for payment under Atlantic's payment bond for its towing services in the amount of $37,100.00. Atlantic refused to pay Dann's claim, contending that Dann was not entitled to recover under the Maryland Little Miller Act ² because MSA, the entity with which Dann had contracted, was an ordinary material supplier and not a subcontractor of Atlantic.

Atlantic filed a motion for summary judgment before trial and made a motion for judgment at trial alleging there was no dispute as to any material fact and that it was entitled to judgment as a matter of law. The trial judge denied the motions and submitted the case to the jury. The court instructed the jurors that if they found that MSA was a subcontractor of Atlantic, then they should find for Dann; but if they found that MSA was an ordinary material supplier of Atlantic, they should find in favor of Atlantic. The jury found that MSA was a subcontractor of Atlantic, and a verdict was returned in favor of Dann.

Upon appeal, the Court of Special Appeals initially noted that the issue of MSA's status as a subcontractor or materialman should not have been submitted to the jury because "the evidence failed to generate any material disputed facts...." The intermediate appellate court then held that, even though Dann was a supplier of labor to a materialman, Dann was "nevertheless" entitled to coverage under Atlantic's payment bond as a matter of law. Atlantic Sea-Con v. Dann Co., 80 Md.App. 161, 164, 560 A.2d 592, 593 (1989). We agree that there was no dispute of material facts and that, as a matter of law, MSA was a materialman rather than a subcontractor. We granted certiorari, however, to review the Court of Special Appeals' determination that one who supplies labor or materials to a materialman is entitled to the protection of the Little Miller Act.

The statutory language at issue in this case was found in section 13-501(c) of the State Fin. & Proc. Art., which is now codified at State Fin. & Proc. Art., § 17-108. ³ Section 13-501(c) states:

"(c) Suits on payment bonds--Right to institute.--Every 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 or other security is furnished under this section and who has not been paid in full therefor before the expiration of a period of 90 days after the day on which the last of the labor was done or performed by him or material was furnished or supplied by him for which such claim is made, shall have the right to sue on the payment bond or other security for the amount, or balance thereof, unpaid at the time of institution of such suit and to prosecute said action to final judgment and execution for the sum or sums justly due him; provided, however, that any person having direct contractual relationship with a subcontractor of the contractor, or with any sub-subcontractor of the contractor but no contractual relationship express or implied with the contractor furnishing said payment bond or other security, shall have a right of action upon the payment bond or other security upon giving written notice to the contractor...." (Emphasis added.)

As the Court of Special Appeals recognized in its discussion of this language, there are two clauses dealing with who may assert a claim under a Little Miller Act bond. Under the first part of section 13-501(c) (which is now codified at section 17-108(a)), to acquire a lien one must have supplied "labor or material in the prosecution of the work." The last clause of this statute (which is now codified at section 17-108(b)(1)), however, is susceptible to more than one interpretation. Atlantic Sea-Con, 80 Md.App. at 166-67 560 A.2d at 594-95. It is either a notice requirement or a limitation on who may make a claim on the contractor's bond.

The intermediate appellate court construed the last clause of the Little Miller Act as merely a requirement of notice to the principal contractor by claimants as a prerequisite to collection under the payment bond. Atlantic Sea-Con, 80 Md.App. at 168, 560 A.2d at 595. This interpretation deviates from the construction accorded a similar provision contained in the federal Miller Act, 40 U.S.C. § 270b(a) (1988), ⁴ which has been interpreted by the federal courts since 1944 as a limitation restricting the class of persons who have standing to file a claim against a payment bond under the Act. See J.W. Bateson Co. v. United States ex rel. Bd. of Trustees, 434 U.S. 586, 98 S.Ct. 873, 55 L.Ed.2d 50 (1978); Clifford F. MacEvoy Co. v. United States, 322 U.S. 102, 64 S.Ct. 890, 88 L.Ed. 1163 (1944); U.S. for Use of Morris Const. v. Aetna Cas. Ins., 908 F.2d 375 (8th Cir.1990); United States v. Blount Brothers Construction Co., 168 F.Supp. 407 (D.Md.1958). We conclude that the Maryland Legislature, when it patterned the Maryland Little Miller Act after the federal Miller Act in 1959, intended to import the federal judicial interpretation that this provision restricts the class of persons who may claim under the statute.

When the Little Miller Act was adopted in Maryland, it contained the following explanatory preamble:

"This Bill is recommended by the Budget and Finance Committee of the Legislative Council following a study of Senate Bill No. 91 which was introduced in 1958 by Senator George B. Rasin. The main purpose of the Bill is to provide greater protection to sub-contractors on contracts awarded by the State.... The present law on this subject, it is pointed out, does not adequately cover sub-sub-contractors. The Bill ... is patterned after the Miller Act which has been enacted by the Congress for the Federal Government and is frequently referred to as a 'Little Miller Act.' "

Legislative Council of Maryland, Report to the General Assembly of 1959, at 17 (1959). We presume the Maryland Legislature was aware that, in the years between 1935 when the federal Miller Act was passed and 1959 when it adopted the Maryland Little Miller Act, the federal Act was the subject of judicial interpretation in the federal courts. See Farmers & Merchants Bank v. Schlossberg, 306 Md. 48, 60, 507 A.2d 172, 178 (1986). Certainly, if the Maryland Little Miller Act was "patterned after" the federal Miller Act, federal authority that existed at the time it was enacted should be persuasive in interpreting the statute. Faulk v. State's Attorney for Harford Co., 299 Md. 493, 506, 474 A.2d 880, 887 (1984). Our conclusion that the last clause is a limitation--not a notice requirement--is further bolstered by the fact that in 1988, when the Little Miller Act was last revised, subsection 17-108(a), which grants power to claim under the statute, is expressly made "subject to" subsection 17-108(b)(1), which is the provision we now construe as a limitation. ⁵

In order to determine the scope of protection afforded by the Maryland Little Miller Act to those who supply labor or materials to public construction projects, we must resolve two issues. We have resolved the first issue by determining that the Legislature, when it enacted the Little Miller Act, intended to restrict its coverage to persons who contract directly with the contractor, a subcontractor, or a sub-subcontractor. We must now determine how the Legislature intended that we construe the terms "subcontractor" and "sub-subcontractor."

At the outset, we should distinguish between "materialman" and "subcontractor." A meaningful analysis of the Maryland Little Miller Act requires that we emphasize that these two words are not interchangeable. With regard to the federal Miller Act, "the Supreme Court indicated that the word 'subcontractor' as used in the Miller Act is to be interpreted in its technical...