Shirley's Iron Works, Inc. v. City of Union, S.C., Gilbert Grp. LLC

• Citation: 403 S.C. 560,743 S.E.2d 778
• Decision Date: 29 May 2013
• Docket Number: No. 27256.,27256.
• Parties: SHIRLEY'S IRON WORKS, INC., and Tindall Corporation, Respondents, v. CITY OF UNION, South Carolina, Gilbert Group LLC and William E. Gilbert, Defendants, Of whom, City of Union, South Carolina is Petitioner. Appellate Case No. 2010–170066.
• Court: United States State Supreme Court of South Carolina

403 S.C. 560

743 S.E.2d 778

SHIRLEY'S IRON WORKS, INC., and Tindall Corporation, Respondents,

v.CITY OF UNION, South Carolina, Gilbert Group LLC and William E. Gilbert, Defendants,Of whom, City of Union, South Carolina is Petitioner.

Appellate Case No. 2010–170066.

No. 27256.

Supreme Court of South Carolina.

Heard March 6, 2013.

Decided May 29, 2013.

William E. Whitney, Jr., of Whitney Law Firm, of Union, and Andrew F. Lindemann, of Davidson & Lindemann, PA, of Columbia, for Petitioner.

Boyd B. Nicholson, Jr., of Haynsworth Sinkler Boyd, PA, of Greenville, and Norman W. Lambert and Raymond P. Smith, both of Harper Lambert & Brown, P.A., of Greenville, for Respondents.

Justice KITTREDGE.

This case concerns the interplay between the Subcontractors' and Suppliers' Payment Protection Act (SPPA) ¹, the Tort Claims Act (TCA) ² , and this Court's opinion in Sloan Construction Co. v. Southco Grassing, Inc. (Sloan I), 377 S.C. 108, 659 S.E.2d 158 (2008). When subcontractors Shirley's Iron Works, Inc. and Tindall Corporation (collectively Respondents) did not receive full payment from the general contractor Gilbert Group, LLC (Gilbert) for their work on a public construction project for the City of Union (the City), they filed suit, asserting the City failed to comply with the statutory bond requirements pertaining to contractors working with subcontractors on public projects found in the SPPA. The circuit court granted summary judgment to the City. The court of appeals reversed and remanded. Shirley's Iron Works, Inc. v. City of Union, 397 S.C. 584, 726 S.E.2d 208 (Ct.App.2009). We granted a writ of certiorari to review the court of appeals decision. We now affirm in part, reverse in part, and remand. Further, we clarify Sloan I and hold that a governmental entity may be liable to a subcontractor only for breach of contract for failing to comply with the SPPA bonding requirements.

I.

In 2002, the City issued a request for proposals for the design and construction of a spec building. Thereafter, the City contracted with Gilbert for the project, the cost of which totaled approximately $875,000. Gilbert entered into contractual agreements with various subcontractors, including Respondents. The City did not require Gilbert to secure a payment bond, and it is undisputed no payment bond was secured. Ultimately, Gilbert failed to fully compensate all of the subcontractors after they completed work on the project.

At the project's completion, the City contended it owed $111,270 on its contract with Gilbert. Respondents also had significant unpaid invoices. ³ After the City was notified of Gilbert's failure to pay its subcontractors,⁴ the City offered to distribute the balance of its contract with Gilbert to the unpaid subcontractors in exchange for a release of the City's liability. The City offered each Respondent $25,000. Upon Respondents' refusal to accept the offer and execute a release in favor of the City, the City distributed their pro rata portions to the other unpaid subcontractors.

In 2003, Respondents filed a Complaint against the City, alleging the City should be required to pay the amounts owed under their respective subcontracts because the City failed to require Gilbert to secure a payment bond in violation of S.C.Code Ann. section 29–6–250.⁵ Respondents also requested attorney's fees pursuant to S.C.Code Ann. section 15–77–300 (Supp.2012).⁶ The City filed an answer denying Respondents' allegations. The City also filed a third-party complaint against Gilbert, alleging Gilbert was negligent in failing to acquire a payment bond.

In 2004, Judge Paul Short granted the City's motion to strike Respondents' request for attorney's fees.⁷ No appeal was taken from the order granting the motion to strike.

In August 2005, Respondents filed an Amended Complaint against the City and Gilbert, asserting third-party beneficiary status of the contract between the City and Gilbert, alleging Gilbert failed to pay Respondents for their work, and contending the City failed to require Gilbert to secure a payment bond in violation of the SPPA. This Amended Complaint was considerably more detailed than the original complaint. In the “Facts” section, Respondents contended section 29–6–250(1) created an obligation on the City to ensure that a payment bond is in place to protect subcontractors and is a term of the City's contract with Gilbert. Respondents asserted they were third-party beneficiaries of the City's contract with Gilbert because the bonding requirements of section 29–6–250 serve to protect Respondents as subcontractors and are “legislatively mandated contractual obligations” incorporated into the contract as a matter of law. Respondents argued they were damaged by the City's breach of its statutorily imposed contractual obligation to secure a payment bond from Gilbert. Respondents asserted causes of action for (1) “[v]iolation of S.C.Code Ann. [section] 29–6–250,” (2) attorney's fees for violation of S.C.Code Ann. section 27–1–15, (3) negligence, (4) quantum meruit, and (5) attorney's fees and prejudgment interest.

Thereafter, Judge Steven John granted the City's motion to strike Respondents' claims for attorney's fees and prejudgment interest. Judge John noted that Judge Short's previous order stated Respondents' original complaint sounded in tort, and that attorney's fees and prejudgment interest were not available under the TCA. Judge John held that Judge Short's unappealed order “constitute [d] the law of the case,” which he was “bound to apply.”

Subsequently, both parties moved for summary judgment. Judge John Few granted the City's motion for summary judgment on all of Respondents' causes of action and denied Respondents' motion. Judge Few found Respondents' claims sounded in tort and were barred by the TCA. Additionally, Judge Few held that a governmental entity's violation of the SPPA does not give rise to a private cause of action by a subcontractor.⁸ Respondents appealed, and the court of appeals reversed and remanded.

Specifically, the court of appeals reversed Judge Few's findings with respect to Respondents' negligence claim, holding that the SPPA provided for a tort cause of action which was not governed by the TCA. The court reasoned that Sloan I supported its conclusion. Additionally, the court of appeals held Judge John's and Judge Short's previous orders stating Respondents' claims sounded in tort were not the law of the case and Respondents' Amended Complaint, when read as a whole, sufficiently pled a third-party beneficiary breach of contract cause of action for violation of the SPPA. Concluding a ruling on the merits would be premature, the court of appeals remanded to the circuit court for findings regarding Respondents' tort, breach of contract, and quantum meruit claims to determine liability and damages.⁹This court granted the City's writ of certiorari to review the court of appeals opinion.

II.

In reviewing a grant of summary judgment, the appellate court applies the same standard as the trial judge under Rule 56(c), SCRCP. Bovain v. Canal Ins., 383 S.C. 100, 105, 678 S.E.2d 422, 424 (2009). Summary judgment is proper if, viewing the evidence in a light most favorable to the nonmoving party, there is no genuine issue of material fact and the moving party is entitled to a judgment as a matter of law. Id.

III.

A.

With the enactment of the TCA in 1986, the legislature intended to remove the common law bar of sovereign immunity in certain circumstances, but only to the extent legislatively authorized. SeeS.C.Code Ann. § 15–78–20 (declaring it is the public policy of the state that government entities are only liable for torts within the limitations of this chapter). However, the TCA expressly delineated many exceptions to the waiver of immunity, including that the governmental entity is not liable for loss resulting from failure to enforce any law or statute. See id. § 15–78–60(4).

Thereafter, in 2000, the legislature enacted the SPPA. The SPPA reads in pertinent part as follows:

(1) When a governmental body is a party to a contract to improve real property, and the contract is for a sum in excess of fifty thousand dollars, the owner of the property shall require the contractor to provide a labor and material payment bond in the full amount of the contract....

....

(3) For purposes of any contract covered by the provisions of this section, it is the duty of the entity contracting for the improvement to take reasonable steps to assure that the appropriate payment bond is issued and is in proper form.

S.C.Code Ann. § 29–6–250 (emphasis added).

It is the interplay of these two statutory schemes which is implicated in the present case. Both parties rely on Sloan I to advance their respective positions.

In Sloan I, this Court addressed whether a subcontractor may bring a private right of action against a governmental entity for failure to comply with the statutory bonding requirements of the SPPA. A subcontractor working on a state highway maintenance project brought claims against the Department of Transportation (SCDOT) for its alleged failure to comply with the bonding requirements of the SPPA. The subcontractor brought an action for negligence against SCDOT pursuant to the TCA and a breach of contract claim alleging SCDOT was obligated to it, as a third-party beneficiary to the contract between SCDOT and the contractor, to ensure that the contractor was properly bonded pursuant to the SPPA.

We held the SPPA is specifically applicable to subcontractors and suppliers on government projects and outlines a detailed bonding scheme that significantly expands the protections already afforded these parties. Sloan I, 377 S.C. at 114, 659 S.E.2d at 161. However, the Court noted the SPPA does not expressly provide for a private right of action between the subcontractor and the contracting government body. Id. at 114, 659 S.E.2d at 162. Nevertheless, the Court reasoned the “very title of the SPPA...