Preussag Intern. Steel v. March-Westin

• Decision Date: 09 November 2007
• Docket Number: No. 33286.,33286.
• Citation: 655 S.E.2d 494
• Court: West Virginia Supreme Court
• Parties: PREUSSAG INTERNATIONAL STEEL CORPORATION, dba Infra-Metals Co., Plaintiff v. MARCH-WESTIN CO.; Titan Fabrication & Construction Co.; Zurich American Insurance Co.; and Fidelity Deposit Co. of Maryland, Defendants.

655 S.E.2d 494

PREUSSAG INTERNATIONAL STEEL CORPORATION, dba Infra-Metals Co., Plaintiff v. MARCH-WESTIN CO.; Titan Fabrication & Construction Co.; Zurich American Insurance Co.; and Fidelity Deposit Co. of Maryland, Defendants.

No. 33286.

Supreme Court of Appeals of West Virginia.

Submitted September 12, 2007.

Decided November 9, 2007.

Syllabus by the Court

1. "Necessary material furnished for, or necessary labor performed on, a public structure under a contract with the general contractor or subcontractor, is protected by the bond required by Code, 38-2-39. Material supplied to, or labor performed for, a furnisher of material on a public structure is not so protected." Syllabus Point 1, Marsh v. Rothey, 117 W.Va. 94, 183 S.E. 914 (1936).

2. "A subcontractor, ordinarily, is one to whom the principal contractor sublets a portion or even all of the contract itself. A materialman, ordinarily, is one from whom the principal contractor or a subcontractor secures material of a general type for use on the structure." Syllabus Point 2, Marsh v. Rothey, 117 W.Va. 94, 183 S.E. 914 (1936).

3. For purposes of the public construction bond statute, W.Va.Code, 38-2-39 [2004], a party need not necessarily perform work at the construction job site itself in order to be considered a subcontractor. To make the determination in a public construction bond case whether a party that furnishes labor or materials to the project should be classified as a subcontractor or as a materialman, a multi-factorial analysis should be used, with no single factor being determinative. The core inquiry is whether the party in question takes from the prime contractor a specific and substantial part of the labor or material requirements of the original contract, thus excluding ordinary laborers and materialmen.

James F. Companion, Esq., John Porco, Esq., Schrader, Byrd & Companion, PLLC, Wheeling, William K. Kane, Esq., Erin Bolan Hines, Esq., Lovells, Chicago, IL, for Plaintiff.

Rochelle R. Koerbel, Esq., Blumling & Gusky, LLP, Pittsburgh, PA, for Amicus Curiae The Surety & Fidelity Association of America.

William H. Hutchens, III, Esq., Jackson Kelly, PLLC, Morgantown, for March-Westin Co., Inc.

Carl L. Fletcher, Jr., Esq., Daniels Law Firm, PLLC, Charleston, for Amicus Curiae Contractors Association of West Virginia.

STARCHER, J.:

In the instant case we hold that a bond posted to guarantee the payment of those who provide labor and materials for a public building construction project is available to pay a company that provided the raw steel used by another company to custom-fabricate the steel structure of the building.

I. Facts & Background

Pursuant to W.Va.Code, 51-1A-3 [1996] (the "Uniform Certification of Questions of Law Act"), the United States District Court for the Northern District of West Virginia has certified a question of law to the Supreme Court of Appeals of West Virginia. We quote from the District Court's order framing the question:

I. THE QUESTION OF LAW TO BE ANSWERED

Under W. Va.Code, 38-2-39 (2004), is a steel fabricator deemed to be a "subcontractor" where:

A. The steel fabricator enters a fixed-price contract with the general contractor of a public works construction project, pursuant to which the fabricator

i. Agrees to fabricate and deliver structural steel components conforming to the construction project's unique design specifications;

ii. Produces shop drawings for the fabricated steel components based on the project's engineering calculations and design specifications;

iii. Submits its shop drawings for approval by the project's architect and general contractor before fabricating the structural steel components; and

iv. Delivers the fabricated steel components on a delivery schedule based on construction progress;

B. The steel fabricator performs all physical fabrication processes at its own facility, away from the project site; AND

C. The fabricated steel components are not fungible and not readily marketable without further modification?

The District Court's order also included the following "Statement of Facts":¹

On August 25, 2003, Fairmont State College ("FSC") retained MarchWestin Co. ("March") as general contractor to construct a new Student Recreation Center at FSC (the "Project"). The contracted price for the completed Project was $20,210,140. In accordance with W.Va.Code, 38-2-39, March obtained a surety Bond through two private surety companies, Zurich American Insurance Co. and Fidelity Deposit Co. of Maryland (the "Sureties"). Subsequently, on September 19, 2003, March and Titan Fabrication & Construction Co. ("Titan") entered into a fixed price contract,¹ wherein Titan agreed to fabricate and deliver $1,204,584 worth of specially fabricated structural steel components required for the Project. In performing its "scope of work,"² Titan purchased non-fabricated steel from numerous materialmen, including Preussag International Steel Corp., dba Infra-Metals Co. ("Infra"), the plaintiff in the present controversy. In pertinent part, the record before the court shows that:

A. Titan performed all fabrication at a facility away from the Project site;³

B. Titan's material suppliers, including Infra, provided Titan with non-fabricated steel of a general nature;

C. In accordance with the Project's design specifications, Titan worked the raw steel into specially fabricated structural steel components;

D. The specially fabricated steel components were not readily marketable without further modification;

E. Titan's invoices to March separately accounted for various aspects of its scope of work, showing costs of materials supplied by each of Titan's materialmen, including Infra.

F. Titan's inability to deliver the specially fabricated steel would have effectively shut the project down;

G. Infra allegedly supplied $557,264.97 of non-fabricated steel to Titan, for use on the Project, for which it was never paid;⁴

H. Infra filed for payment under the Bond on June 22, 2004;

I. The Sureties denied payment to Infra, claiming that Titan was a "mere materialman" and that Infra is not within the class of persons protected under Bonds issued pursuant to W. Va.Code, 38-2-39.

All parties agree that, if Titan is deemed to have been a subcontractor rather than a materialman, then Infra would be entitled to payment under the Bond. Given the facts of this case, both parties agree that whether Titan is a subcontractor or a materialman presents an unsettled question of West Virginia law appropriate for certification. The parties also agree that Marsh v. Rothey, 183 S.E. 914 (1936), is the leading case construing W. Va.Code, 38-2-39. They also agree, however, that the facts before the Marsh court were distinguishable from those now before the court and that the Marsh holding is not dispositive of the issue at bar. Nonetheless, Infra contends that the Bond statute, as construed by the Marsh court, mandates that one who supplies material that is not of a general type, but instead if worked according to project specifications, is a subcontractor. By contrast, March and the Sureties assert that an entity's status as a materialman or subcontractor is contractually defined, and that, even if such status is not contractually defined, there is nonetheless a requirement that one physically perform work at the Project site to be deemed a subcontractor.

¹ [Footnotes to District Court's order] Both the general contract between March and FSC and the contract between March and Titan were executed on documents formally entitled "Purchase Orders."

² Record documents authored and provided by March refer to Titan's role in terms of its "scope of work."

³ The record is silent as to whether any of Titan's duties were performed at the Project site.

⁴ Titan filed for bankruptcy protection in November 2004 and is currently under a protective stay.

To summarize the facts and central issue of the instant case: March was the general contractor for a twenty-million-dollar public building. March contracted with Titan to fabricate and deliver the steel structural elements of the building, at a price of more than a million dollars. Titan ordered and received raw steel beams, plates, etc. from Infra — but Titan did not pay Infra. Infra, which the parties agree was a "materialman," now seeks payment from the bond posted by March. It is settled law (as we discuss further infra) that if Titan was a "subcontractor" on the project, Infra has a right to make a claim against the bond. But If Titan was a mere "materialman," Infra cannot make a claim against the bond.

II. Standard of Review

In Wilson v. Bernet, 218 W.Va. 628, 631, 625 S.E.2d 706, 709 (2005), this Court said:

The issues presented by the instant matter involve questions of law certified to this Court. When called upon to consider certified questions, we employ a plenary review and review anew the answers provided by the circuit court. "The appellate standard of review of questions of law answered and certified by a circuit court is de novo." Syl. pt. 1, Gallapoo v. Wal-Mart Stores, Inc., 197 W.Va. 172, 475 S.E.2d 172 (1996). See also Syl. pt. 1, Bower v. Westinghouse Elec. Corp., 206 W.Va. 133, 522 S.E.2d 424 (1999) ("This Court undertakes plenary review of legal issues presented by certified question from a federal district or appellate court."); Syl. pt. 1, Light v. Allstate Ins. Co., 203 W.Va. 27, 506 S.E.2d 64 (1998) ("A de novo standard is applied by this Court in addressing the legal issues presented by a certified question from a federal district or appellate court.").

(Emphasis added.)²

III. Discussion

W. Va.Code, 38-2-39 [2004], states as follows:

It shall be the duty of the state commissioner of public institutions, and of all county courts, boards of education, boards of trustees, and other legal bodies having authority to contract for the erection, construction, improvement, alteration or repair of any public building or other structure, or any...