Case Title: Johnson Controls, Inc. v. Liberty Mutual Insurance Company

Citation: 

Docket Number: 1121288

State: alabama

Court: Alabama Supreme Court

Date: 2014-05-09T00:00:00Z

Document:
Rel: 05/09/2014
Notice: This opinion is subject to formal revision before publication in the advance
sheets of Southern Reporter.  Readers are requested to notify the Reporter of Decisions,
Alabama Appellate Courts, 300 Dexter Avenue, Montgomery, Alabama 36104-3741 ((334) 229-
0649), of any typographical or other errors, in order that corrections may be made before
the opinion is printed in Southern Reporter.
SUPREME COURT OF ALABAMA
OCTOBER TERM, 2013-2014
____________________
1121288
____________________
Johnson Controls, Inc.
v.
Liberty Mutual Insurance Company
Appeal from Randolph Circuit Court
(CV-11-900094)
PARKER, Justice.
Johnson Controls, Inc. ("JCI"), appeals a summary
judgment entered by the Randolph Circuit Court ("the circuit
court") in favor 
of 
Liberty Mutual Insurance Company ("Liberty
Mutual").  We reverse the judgment and remand the case.
1121288
Facts and Procedural History
This case arises out of a July 13, 2010, contract ("the
contract") between Roanoke Healthcare Authority ("Roanoke
Healthcare"), a public entity, doing business as Randolph
Medical 
Center 
("the 
medical 
center"), 
and 
Batson-Cook 
Company
("Batson-Cook"), 
a 
general 
contractor, 
to 
renovate 
the 
medical
center, which is located in Roanoke.  The contract price was
$1,059,000.
To avoid the unnecessary payment of sales and use taxes,
the contract provided as follows in § 8.6:
"SALES TAX AVOIDANCE: The Owner, [Roanoke
Healthcare,] is owned by the City of Roanoke.  It is
exempt by law from the payment of sales/use taxes. 
As such it is authorized to and desires to enter
into a purchasing agent agreement with [Batson-Cook]
whereby [Roanoke Healthcare] will purchase all, or
a portion of, the materials, supplies, equipment,
and other items (hereinafter referred to as
'materials') necessary for the performance of this
Contract by [Batson-Cook] and its subcontractors and
thereby save the amount of the sales and use tax
thereon.
"SALES AND USE TAXES ARE INCLUDED IN THE
CONTRACT SUM: The base bid submitted on the proposal
form and the Contract Sum ... INCLUDES the cost of
all required taxes, including sales and use taxes;
therefore, sales and use taxes are included in the
Contract Sum.
"ACTUAL SAVINGS WILL BE DEDUCTED FROM THE
CONTRACT AMOUNT: Prior to Final Payment the amount
2
1121288
of sales and use taxes actually saved shall be
deducted from the Contract amount by change order."
(Capitalization in original.)  
Consistent 
with 
these
provisions, Batson-Cook and Roanoke Healthcare entered into a
purchasing-agent agreement ("the PAA") on July 30, 2010.  The
PAA contained the following relevant provisions:
"a) During the prosecution of Project[, the
renovations to the medical center], [Batson-Cook] is
appointed authority to act as [Roanoke Healthcare's]
purchasing agent to bind [Roanoke Healthcare]
contractually for the purchase of tangible personal
property necessary to carry out [Batson-Cook's]
contractual obligations related to Project,
"b) [Batson-Cook] is solely responsible for
pricing and availability of tangible personal
property necessary to carry out [Batson-Cook's]
contractual obligations related to Project,
"c) Title to all materials and supplies
purchased 
pursuant 
to 
such 
appointment 
shall
immediately vest in [Roanoke Healthcare] at the
point of delivery,
"d) [Batson-Cook] shall notify all vendors and
suppliers of this agency relationship and make it
clear to such vendors and suppliers that the
obligation 
for 
payment 
is 
that 
of 
[Roanoke
Healthcare] and not [Batson-Cook],
"e) All purchase orders and remittance devices
furnished to the vendors shall clearly reflect this
agency relationship,
"....
3
1121288
"i) The net amount paid for tangible personal
property purchased under this agreement shall be
deducted from the total amount that would otherwise
be due from [Roanoke Healthcare] to [Batson-Cook]
under the Project agreement,
"....
"k) This agreement does not apply to tools,
machinery, equipment, materials, supplies, or other
property not incorporated into Project."
The contract falls within the scope of Alabama's "little
Miller Act," § 39-1-1 et seq., Ala. Code 1975, which provides,
in part:
"(a) Any person entering into a contract with an
awarding authority in this state for the prosecution
of any public works shall, before commencing the
work, execute a performance bond, with penalty equal
to 100 percent of the amount of the contract price.
In addition, another bond, payable to the awarding
authority letting the contract, shall be executed in
an amount not less than 50 percent of the contract
price, with the obligation that the contractor or
contractors shall promptly make payments to all
persons supplying labor, materials, or supplies for
or in the prosecution of the work provided in the
contract 
and 
for 
the 
payment 
of 
reasonable
attorneys' fees incurred by successful claimants or
plaintiffs in civil actions on the bond.
"(b) Any person that has furnished labor,
materials, or supplies for or in the prosecution of
a public work and payment has not been made may
institute a civil action upon the payment bond and
have their rights and claims adjudicated in a civil
action and judgment entered thereon. Notwithstanding
the foregoing, a civil action shall not be
instituted on the bond until 45 days after written
4
1121288
notice to the surety of the amount claimed to be due
and the nature of the claim. The civil action shall
be commenced not later than one year from the date
of final settlement of the contract. The giving of
notice by registered or certified mail, postage
prepaid, addressed to the surety at any of its
places of business or offices shall be deemed
sufficient under this section. In the event the
surety or contractor fails to pay the claim in full
within 45 days from the mailing of the notice, then
the person or persons may recover from the
contractor and surety, in addition to the amount of
the claim, a reasonable attorney's fee based on the
result, together with interest on the claim from the
date of the notice."
Pursuant to § 39-1-1(a), on September 1, 2010, Batson-Cook
obtained a payment bond from Liberty Mutual in the amount of
the contract price -- $1,059,000.  The payment bond
specifically provided "that beneficiaries or claimants
hereunder shall 
be limited to the subcontractors, 
and 
persons,
firms, and corporations having a direct contract 
with [Batson-
Cook] or its subcontractor."
On October 22, 2010, Batson-Cook entered into a
subcontract ("the subcontract") with Hardy Corporation
("Hardy") to perform "mechanical" work required by the
contract; the subcontract price was $329,791.  
The 
subcontract
specifically called for Hardy "to provide all 
material, labor,
supervision, and equipment necessary to complete [the] scope
5
1121288
of work in accordance with the contract documents."  On
October 27, 2012, Batson-Cook sent a letter to Hardy informing
it as follows:
"Batson-Cook ... is providing construction
services to Roanoke Healthcare ... in support of the
Renovations 
to 
[the] 
Randolph 
Medical 
Center
project.  As an agent of [Roanoke Healthcare], all
purchases of tangible personal property to be
incorporated into the realty by Batson-Cook ... (and
our subcontractors/vendors) in support of the stated
construction project will be paid directly by
[Roanoke Healthcare], but addressed to Batson-Cook
... who will forward them on to [Roanoke Healthcare]
for payment. [Roanoke Healthcare] payments will be
issued directly to the material supplier.  Batson-
Cook ... will be responsible for maintaining the
documentation necessary to support the tax exempt
nature of such purchases for review."
In the course of bidding on the subcontract, Ronnie
Vines, Hardy's project manager for the medical-center
renovation, received a quote from JCI on July 27, 2010, for
equipment and material Hardy would need to complete its
obligations under the subcontract.  Vines stated in his
deposition testimony that before he submitted the purchase
order for the equipment and materials that were eventually
furnished by JCI he informed JCI that Roanoke Healthcare would
pay for the equipment and materials directly and that the
invoices should be billed to Roanoke Healthcare but that Hardy
6
1121288
would collect the invoices and transmit them to Batson-Cook,
which would then forward the invoices on to Roanoke Healthcare
for payment.  On October 21, 2010, Vines sent Marc Newton, a
JCI employee, an e-mail to which he attached a letter from the
Alabama Department of Revenue ("ADR") stating that Roanoke
Healthcare was a tax-exempt entity.  Vines also stated in his
deposition testimony that he never told JCI that Batson-Cook
would be responsible for payment.
On November 4, 2010, Vines signed and submitted a
purchase order on Hardy's letterhead to JCI for equipment and
materials totaling $147,000 per the quote provided by JCI. 
The purchase order called for the equipment and materials to
be shipped to the medical center "c/o Batson-Cook Company" and
directed JCI to telephone Hardy 24 hours before delivery.  The
purchase order also contained the following notation: "P.O.,
Randolph County Medical Center, c/o Batson-Cook Company." 
Vines stated in his deposition testimony that he included this
note because the purchase order was actually on "behalf of
[Roanoke Healthcare]" and the equipment was to be "billed
directly to [it]."  Vines also stated that he submitted the
purchase 
order on 
Hardy's 
letterhead because 
Roanoke
7
1121288
Healthcare did not provide its own letterhead.  The purchase
order 
also 
contained 
a 
provision 
stating 
that 
it
"constitute[d] the full understanding of the parties, and the
complete and exclusive statement of the terms of their
agreement."  On November 5, 2010, Vines also e-mailed Amy
Carmada, an individual Vines described as JCI's 
billing 
clerk,
and attached Batson-Cook's October 27, 2010, letter to Hardy
and the letter from ADR showing that Roanoke Healthcare was
exempt from sales and use taxes.  In the e-mail, Vines asked
Carmada to read the attached information and to telephone
Vines to discuss the billing method.  It is unclear from the
record whether a subsequent conversation took place.
Vines's 
deposition 
testimony 
concerning 
JCI's 
performance
and the relationship between the subcontract and the purchase
order contained the following:
"[JCI's trial attorney:] Okay. Let's talk about
Hardy's subcontract with Batson-Cook.  Would you
agree that the Hardy and Batson-Cook subcontract
included the equipment and the materials that JCI
provided to this project in both the scope of work
and the contract price?
"[Vines:] Yes, the subcontract and the pricing
included all the equipment and material for this
project for our portion of the work, that is
correct. 
8
1121288
"[JCI's trial attorney:] And ... the Batson-
Cook/Hardy subcontract scope of work also included
the equipment?
"[Vines:] That is correct.
"[JCI's trial attorney:] And would you agree
with me that at the time you issued the purchase
order to [JCI] that the equipment that [JCI] was to
provide to the project was part of Hardy's scope of
work and included in Hardy's subcontract price?
"[Vines:] That is correct.
"[JCI's trial attorney:] And would you agree
with me that at the time [JCI] delivered the
equipment and materials to the project that it was
part of Hardy's scope of work under the subcontract
and Hardy's subcontract price?
"[Vines:] Yes.  At that time, it was still in
the pricing of our subcontract with Batson-Cook.
"[JCI's trial attorney:] And also within the
scope of work of your subcontract with Batson-Cook?
"[Vines:] Yes.
"[JCI's trial attorney:] At the time [JCI]
invoiced for the materials and equipment provided to
the project, would you agree with me that at that
time it was still part of Hardy's scope of work and
Hardy's contract price under its subcontract with
Batson-Cook[?]
"[Vines:] That is correct.
"....
"[JCI's trial attorney:] And were the materials
and equipment provided by [JCI] on this project
accepted by Hardy ...? 
9
1121288
"[Vines:] Yes.
"[JCI's trial attorney:] And were the materials
and equipment provided by [JCI] to the project
accepted by Batson-Cook? 
"[Vines:] Yes.
"[JCI's trial attorney:] And were the materials
and equipment provided by [JCI] accepted by [Roanoke
Healthcare]? 
"[Vines:] Yes.
"[JCI's trial attorney:] And to your knowledge,
w[ere] the materials and equipment provided by [JCI]
incorporated into the project?
"[Vines:] Yes, that is correct."
Richard Copelan, a branch manager for JCI, stated the
following in his affidavit testimony:
"3. During the time period at issue in [this
case], I was the Systems HVAC Branch Manager for
JCI.  In this capacity, I regularly review,
negotiate, and approve purchase orders issued to
JCI.  I have personal knowledge regarding JCI's
involvement 
on 
the 
[medical-center-renovation]
Project ....
"4. On November 4, 2010, Hardy ... issued [the]
purchase order ... to JCI for equipment to be
provided to the Project.
"5. In negotiating, reviewing and accepting the
Purchase Order, JCI had no communications with
[Roanoke Healthcare].
10
1121288
"6. [Roanoke Healthcare] was not a party to the
Purchase Order issued by Hardy.
"7. The Purchase Order was the only agreement to
which JCI was a party that involved the material and
equipment provided by JCI to the Project.
"8. The Purchase Order was the only agreement to
which JCI was a party that involved payment for the
material and equipment provided by JCI to the
Project.
"9. JCI did not have any agreement with [Roanoke
Healthcare] or any third-party regarding payment for
the equipment and materials furnished by JCI to the
Project.
"10. JCI never agreed to look solely to [Roanoke
Healthcare] for payment of the equipment and
materials furnished by JCI to the Project.
"11. JCI never agreed to waive its rights under
the Payment Bond issued by Liberty Mutual ... for
the Project.
"12.  JCI never agreed to waive its rights under
the Alabama 'little Miller Act' as it relates to the
materials and equipment furnished by JCI to the
Project.
"13.  JCI never agreed to waive its rights under
the Purchase Order issued by Hardy."
Katherine Lynn, director of the Alabama Building
Commission, 
described 
in 
her 
affidavit 
testimony 
her
experience with contracts similar to the ones entered into in
this case:
11
1121288
"3. It is a very common practice in the State of
Alabama for owners of public projects to make direct
payments to the suppliers of a project's general
contractor[].  This is done as an arrangement to
take advantage of the owner's tax exempt status.  In
my experience with public contracts, I believe this
owner paid arrangement occurs in a very high
percentage of the public contracts in Alabama. 
Based on the projects that I am aware of it is rare
for a public project to have an arrangement other
than this arrangement where the cost of the
materials is included in the contract amount and the
bonds and [the] owner pays the suppliers.
"4. 
The 
State 
of 
Alabama 
Building 
Commission 
...
publishes sample agreements related to this sales
and use tax arrangement.[ ]
1
"5. 
Additionally, 
the 
Alabama 
Building
Commission also publishes Guidelines for [Sales] and
Use Tax Savings Arrangements for Public Construction
and Improvement Projects on its website that
addresses this arrangement.
"6.  Under these arrangements the general
contractor retains the traditional responsibilities
and liabilities for the materials purchased, except
that the owner must pay vendors directly for
materials purchased by the contract as agent for the
owner in order to realize the sales tax savings."
On January 31, 2011, and again on February 22, 2011, JCI
submitted an invoice to Hardy.  The invoice states that it was
billed to "Randolph County Medical Center, c/o Hardy
A sample agreement and a sample contractual provision
1
related 
to 
sales-and-use-tax-savings 
arrangements 
published 
by
the Alabama Building Commission were attached to a subsequent
affidavit given by Lynn and included in Liberty Mutual's
response to JCI's renewed motion for a summary judgment.
12
1121288
Corporation."  The total balance indicated on the invoice is
$147,000, which represents the cost of the equipment and
materials, exclusive of sales tax.
On March 16, 2011, Patricia Kettner, an employee of JCI,
sent an e-mail to Kelly Myers, an employee of Hardy, stating
that JCI's records indicated that the invoices would be paid
directly by Roanoke Healthcare and inquiring whether Kettner
should contact Roanoke Healthcare directly or go 
through 
Hardy
to discuss payment.  Myers replied to Kettner's e-mail by
informing her that Kettner would need to contact Vines and
supplied his contact information; Kettner then forwarded the
e-mails to Vines and asked him to advise her on the status of
the invoice to Roanoke Healthcare or to supply her with the
name and number of a Roanoke Healthcare representative so that
she could inquire about payment of the invoice.
On March 24, 2011, Batson-Cook received written notice
from Roanoke Healthcare that work on the renovation project
had been suspended.  On March 30, 2011, Batson-Cook notified
Hardy of the suspension and stated that "[t]he contract has
been suspended by [Roanoke Healthcare] through no fault of
Batson-Cook 
... 
or 
its 
subcontractors. 
[Roanoke 
Healthcare] 
is
13
1121288
currently out of funding and has subsequently closed the
facility while seeking a buyer."  Liberty Mutual alleged in
its answer that Roanoke Healthcare has failed to pay Batson-
Cook $241,940.51 for work performed pursuant to the contract.
On March 30, 2011, Batson-Cook sent Hardy a change order
stating:
"Roanoke 
Healthcare 
... 
is 
exempt 
by 
Alabama 
law
from the payment of sales/use taxes on [its]
purchase of tangible ... property incorporated into
the facility.  Batson-Cook acted as a Purchasing
Agent for the facility to utilize the tax exemption
status 
of 
[Roanoke 
Healthcare] 
for 
material
purchases; therefore, the obligation for payment is
that of [Roanoke Healthcare] and not Batson-Cook.
"This change order shall serve to remove all
material costs for items purchased directly by
[Roanoke Healthcare] along with any associated taxes
related 
to 
this 
purchase 
included 
in 
your
subcontract amount."
Among other things, the change order deducted from the
subcontract the $147,000 in equipment and materials JCI had
furnished for the renovation project and for which it has not
received payment.
In accordance with § 39-1-1(b), JCI notified Liberty
Mutual, Roanoke Healthcare, Batson-Cook, and Hardy by
certified letters dated May 4, 2011, of its claim on the
payment bond.  The letters identified Batson-Cook as the
14
1121288
general contractor and Hardy as the debtor.  Liberty Mutual
denied the claim.
On November 10, 2011, JCI sued Liberty Mutual, alleging
that JCI is entitled to payment on the payment bond Liberty
Mutual had issued to Batson-Cook pursuant to § 39-1-1(a).  On
December 8, 2011, Liberty Mutual filed its answer and denied
liability.
On October 12, 2012, JCI filed a motion for a summary
judgment.  Following a hearing on JCI's summary-judgment
motion, held on December 6, 2012, the circuit court issued an
order denying JCI's motion because it determined that genuine
issues of material fact existed.
On November 29, 2012, before the hearing on JCI's motion,
Liberty Mutual responded to JCI's motion by filing a cross-
motion for a summary judgment.   In its motion, Liberty Mutual
2
argued:
"A long standing rule of law in Alabama with
respect to payment bonds is that if there is no
right of recovery against the general contractor,
then there is no right of recovery against the
surety on a payment bond.  Magic City Paint &
Varnish Co. v. American Surety Co. of New York, 228
Liberty Mutual's cross-motion for a summary judgment was
2
not considered at the December 6, 2012, hearing because of the
proximity of its filing to the hearing date.
15
1121288
Ala. 40[,] 152 So. 42 [(1934)].  In this instant
action, the equipment supplied by JCI for which it
seeks to recover in this lawsuit was outside of the
scope of the contract between the general contractor
and the owner of the project at issue.  As such, it
is outside of the scope of the '[w]ork' as defined
in the contract and payment bond at issue.  The
equipment supplied by JCI was supplied at the
owner's 
request, 
directly 
to 
the 
owner. 
Accordingly, no liability may be had against the
contractor, and thus, there is no right of recovery
against Liberty [Mutual]."
Liberty Mutual also argued that § 8.6 of the contract "clearly
excludes ... materials, supplies, and equipment" like those
provided by JCI.
 
On February 14, 2013, JCI filed a brief in opposition to
Liberty Mutual's summary-judgment motion.  In its brief, JCI
argued 
that 
Liberty 
Mutual's 
summary-judgment 
motion 
should 
be
denied because the circuit court had found that genuine issues
of material fact existed when it considered and denied JCI's
summary-judgment motion.  JCI also argued that there was no
evidence to support Liberty Mutual's argument that the
equipment furnished by JCI was outside the scope of the
contract and the payment bond.  JCI argued that the evidence
indicated that the equipment and materials furnished by JCI
were included in the scope of work under the contract and in
the price of Hardy's subcontract with Batson-Cook.  JCI also
16
1121288
argued that by accepting the purchase order from Hardy, JCI
had entered into a direct contract with Hardy and, therefore,
was entitled to payment from Liberty Mutual because the
payment 
bond 
defined 
beneficiaries 
or 
claimants 
as
"subcontractors, and persons, firms, and corporations having
a direct contract with the principal or its subcontractor." 
JCI also noted that the payment bond was issued for the
precise amount of the contract price –- $1,059,000 –- and that
the PAA called for "the net amount paid for tangible personal
property purchased under this agreement [to] be deducted from
the total amount that would otherwise be due from [Roanoke
Healthcare] to [Batson-Cook] under the Project agreement." 
(Emphasis added.)  JCI argued that, under the terms of the
PAA, payment for the equipment and materials JCI furnished for
the project would be deducted from the amount due under
Roanoke Healthcare's contract with Batson-Cook only upon
actual payment from Roanoke Healthcare to JCI, which
undisputedly has not occurred.
Finally, JCI argued that Liberty Mutual's argument that
the equipment and materials furnished by JCI were outside the
scope of the contract was inconsistent with the fundamental
17
1121288
purpose of Alabama's little Miller Act, which is "to ensure
that a materialman receives full payment for labor or
materials that he supplies to a public works project,"  SGB
Constr. Servs., Inc. v. Ray Sumlin Constr. Co., 644 So. 2d
892, 895 (Ala. 1994), and "to 'shift the ultimate risk of
nonpayment from workmen and suppliers to the surety.'" 
Federal Ins. Co. v. I. Kruger, Inc., 829 So. 2d 732, 736 (Ala.
2002)(quoting trial court's order).
On June 7, 2013, JCI filed a renewed motion for a summary
judgment.  In its brief in support of its renewed summary-
judgment motion, JCI made the following argument:
"[A] claimant must satisfy the following four
elements to be entitled to a recovery under the
payment bond: '(1) that materials or labor were
supplied for work on the public project at issue;
(2) that the supplier was not paid for the materials
or labor supplied; (3) that the supplier had a good
faith belief that the materials furnished were for
the 
project 
in 
question; 
and 
(4) 
that 
the
jurisdictional requisites [i.e., timely notice and
filing of suit] had been met.'  Federal Ins. Co. v.
I. Kruger, Inc., 829 So. 2d 732, 736 (Ala. 2002). 
The undisputed facts in this case are sufficient to
satisfy each of the four elements of the analysis
and demonstrate that JCI is entitled to recover
against the Payment Bond issued by Liberty Mutual."
On June 21, 2013, Liberty Mutual filed a brief in
opposition to JCI's renewed summary-judgment motion and
18
1121288
reasserted its argument that the equipment and materials
supplied by JCI were outside the scope of the contract because
Roanoke Healthcare was to issue payment directly to JCI. 
Accordingly, Liberty Mutual made the following argument:
"[I]f the labor, materials, or supplies fall outside
of the scope of the work as set forth in the
contract between the general contractor and the
owner, no proper payment bond claim may be made. 
Stated another way '[a]ll other questions may
therefore be laid aside, as of course, if liability
be not shown against the contractor, clearly none
can be established against the surety.' Magic City
Paint & Varnish Co.[ v. American Surety Co. of New
York, 228 Ala. 40,] at 44[, 152 So. 42, 44 (1934)];
see also [Hicks, supra]. '["]The threshold issue on
[the] bond is whether the contractor ... is liable
to the subcontractor ... for labor, materials, or
supplies.["]' [Hicks, 674 So. 2d at 547 (quoting
trial court's order)]. '["]The contractor must be
liable for some claim, however, before the surety
can be liable.["]' Id."
On June 26, 2013, the circuit court held a hearing on
both Liberty Mutual's cross-motion for a summary judgment and
JCI's renewed motion for a summary judgment.
On July 23, 2013, the circuit court issued the following
order:
"On June 26, 2013, the court called for hearing
[JCI's] renewed motion for a summary judgment and
[Liberty Mutual's] cross-motion for a summary
judgment.  All parties were represented by counsel. 
Extensive argument along with copies of various
exhibits to the briefs of both parties were
19
1121288
submitted by counsel.  The court heard, reviewed and
considered the same, along with previous submissions
on file and in the record.
"After consideration of all submissions, the
court finds that the equipment and materials at
issue were purchased directly from [JCI] by [Roanoke
Healthcare] and thus were outside of the scope of
the contract between [Roanoke Healthcare] and
[Batson-Cook], the general contractor, who was also
acting 
as 
the 
purchasing 
agent 
of 
[Roanoke
Healthcare].  Since the equipment and materials at
issue were outside the scope of the contract between
[Batson-Cook] and [Roanoke Healthcare], they are not
covered by the payment bond pursuant to the Alabama
Little Miller Act (Ala. Code [1975,] § 39-1-1 et
seq.), which applies only to labor, materials and
supplies for or in prosecution of the work included
in contracts between the owner and the contractor
for public work projects.
"Accordingly, the court hereby finds that there
is no genuine issue of material fact and [Liberty
Mutual] is entitled to judgment as a matter of law
pursuant to Rule 56 of the Alabama Rules of Civil
Procedure and hereby denies [JCI's] renewed motion
for a summary judgment and grants [Liberty Mutual's]
cross-motion for a summary judgment.  This resolves
all issues pending before the court; therefore, this
is a final order."
JCI appealed, challenging both the summary judgment in favor
of Liberty Mutual and the denial of its renewed motion for a
summary judgment.
Standard of Review
"'The 
standard 
of 
review 
applicable 
to 
a 
summary
judgment is the same as the standard for granting
20
1121288
the motion....' McClendon v. Mountain Top Indoor
Flea Market, Inc., 601 So. 2d 957, 958 (Ala. 1992).
"'A summary judgment is proper when
there is no genuine issue of material fact
and the moving party is entitled to a
judgment as a matter of law. Rule 56(c)(3),
Ala. R. Civ. P. The burden is on the moving
party to make a prima facie showing that
there is no genuine issue of material fact
and that it is entitled to a judgment as a
matter of law. In determining whether the
movant has carried that burden, the court
is to view the evidence in a light most
favorable to the nonmoving party and to
draw all reasonable inferences in favor of
that party. To defeat a properly supported
summary judgment motion, the nonmoving
party must present "substantial evidence"
creating a genuine issue of material fact
-— "evidence of such weight and quality
that fair-minded persons in the exercise of
impartial 
judgment 
can 
reasonably 
infer 
the
existence of the fact sought to be proved."
Ala. Code 1975, § 12–21–12; West v.
Founders Life Assurance Co. of Florida, 547
So. 2d 870, 871 (Ala. 1989).'
"Capital Alliance Ins. Co. v. Thorough–Clean, Inc.,
639 So. 2d 1349, 1350 (Ala. 1994). Questions of law
are reviewed de novo. Alabama Republican Party v.
McGinley, 893 So. 2d 337, 342 (Ala. 2004)."
Pritchett v. ICN Med. Alliance, Inc., 938 So. 2d 933, 935
(Ala. 2006). 
Discussion
JCI's claim against Liberty Mutual is based upon its
argument that it is a proper claimant under the payment bond
21
1121288
issued by Liberty Mutual to Batson-Cook pursuant to Alabama's
little Miller Act.  As this Court noted in Safeco Insurance
Co. of America v. Graybar Electric Co., 59 So. 3d 649, 655-56
(Ala. 2010):
"[Section] 39–1–1 et seq., Ala. Code 1975, [is]
commonly referred to as Alabama's little Miller Act.
Federal Ins. Co. v. I. Kruger, Inc., 829 So. 2d 732,
734 (Ala. 2002). The Alabama statute is patterned
after the Federal Miller Act, now codified at 40
U.S.C. §§ 3131–3133. 'The construction given to the
federal act has been adopted in Alabama, unless
otherwise noted.' Kruger, 829 So. 2d at 734 n. 1.
Generally, when a person has provided labor or
materials or has supplied services on a private
construction project, the person is entitled under
§ 35–11–210, Ala. Code 1975, the mechanic's or
materialman's lien statute, to file a lien against
the private property and subsequently to foreclose
on the property, if not paid for those services.
However, § 35–11–210 does not apply to public
property. Martin v. Holtville High School Bldg., 226
Ala. 45, 145 So. 491 (1933)(public-school building
was not subject to foreclosure sale under the
predecessor statute to § 35–11–210). The Alabama
Legislature provided a remedy in 1927 when it
codified 
specific 
provisions 
to 
ensure 
that
materialmen receive full payment for labor or
materials supplied on a public-works project. §
39–1–1. Alabama's statute was patterned after a
federal act enacted in 1894 called the Heard Act.
Ch. 280, 28 Stat. 278 (1894) (since repealed); see
also State v. Southern Sur. Co., 221 Ala. 113, 127
So. 805 (1930) (discussing the essential provisions
of the state and federal payment-bond statutes
existing in 1930). Alabama first amended its
public-works-payment-bond statute in 1935 to pattern
it after the federal act called the Miller Act
(enacted in 1935 to rectify inadequate protections
22
1121288
in the Heard Act). See 40 U.S.C. §§ 3131–3133
(formerly 40 U.S.C. §§ 270a–270d).
"'[T]he 
purpose 
of 
a 
payment 
bond required 
under
the little Miller Act is to "shift the ultimate risk
of nonpayment from workmen and suppliers to the
surety."' Kruger, 829 So. 2d at 736 (quoting
American Sur. Co. v. Hinds, 260 F.2d 366, 368 (10th
Cir. 1958)). 'The purpose of the [little Miller] act
is to provide security for those who furnish labor
and material in performance of government contracts
as a substitute for unavailable lien rights, and is
liberally construed to accomplish this purpose.'
Headley v. Housing Auth. of Prattville, 347 So. 2d
532, 535 (Ala. Civ. App. 1977)."
Under Federal Insurance Co. v. I. Kruger, Inc., supra, a
supplier is entitled to recover under a payment bond issued
pursuant to Alabama's little Miller Act if the supplier
establishes:
"'"(1) that materials or labor were supplied for
work on the public project at issue; (2) that the
supplier was not paid for the materials or labor
supplied; (3) that the supplier had a good faith
belief that the materials furnished were for the
project in question; and (4) that the jurisdictional
requisites had been met."'"
829 So. 2d at 736 (quoting A.G. Gaston Constr. Co. v. Hicks,
674 So. 2d 545, 547 (Ala. Civ. App. 1995), quoting in turn
United States ex rel. Krupp Steel Prods., Inc. v. Aetna Ins.
Co., 831 F.2d 978, 980 (11th Cir. 1987)).
23
1121288
As set forth above, the circuit court concluded in its
final order that the equipment and materials supplied by JCI
were not furnished by JCI for or in prosecution of the public
work included in the contract because, it found, the items
were purchased directly from JCI by Roanoke Healthcare.  JCI
argues on appeal that the undisputed facts indicate that the
equipment and materials it supplied were furnished for the
prosecution of the renovation project provided for in the
contract and that JCI is a proper claimant on the payment bond
under the four-part test set forth in Kruger.  Accordingly,
JCI argues that the summary judgment in favor of Liberty
Mutual is due to be reversed and that it is entitled to a
summary judgment in its favor.  We agree with JCI.
As a threshold matter, the circuit court found that JCI
sold the equipment and materials directly to Roanoke
Healthcare.  Although JCI disputes this fact on appeal, it is
immaterial to a determination whether JCI is a proper claimant
under the payment bond.  As opposed to the federal Miller Act,
supra, and the little Miller Acts adopted by several of our
sister states, § 39-1-1 is silent as to the issue of privity
24
1121288
of contract.   Rather, § 39-1-1(b) focuses exclusively on the
3
intent for which the labor, materials, or supplies are
furnished by using the following broad language: "Any person
that has furnished labor, materials, or supplies for or in the
prosecution of a public work ... may institute a civil action
upon the payment bond ...."
The terms of the payment bond here limit claimants to
those having a direct contract with either the contractor or
a subcontractor.  However, when a payment bond is issued to
satisfy the provisions of § 39-1-1, as it was in the present
case, the requirements of the statute will be read into the
bond.  See Kruger, 829 So. 2d at 736 ("Where a payment bond
shows on its face that it was executed in compliance with the
[little Miller] Act, a court is authorized to read into the
bond the provisions of the statute and to give the bond the
See 40 U.S.C. § 3133(b)(2) (provisions pertaining to
3
persons having a direct contractual relationship with a
subcontractor); § 13-10-63, Ga. Code Ann. (same); §
255.05(1)(a), Fla. Stat. (mandating that a payment bond cover
all persons defined in § 713.01, Fla. Stat., which defines
"materialman" in subsection (20) as "any person who furnishes
materials 
under 
contract 
to 
the 
owner, 
contractor,
subcontractor, or sub-subcontractor on the site of the
improvement or for direct delivery to the site of the
improvement or, for specially fabricated materials, off the
site of the improvement for the particular improvement, and
who performs no labor in the installation thereof").
25
1121288
form and effect the statute contemplated, regardless of the
contents of the bond."); Water Works, Gas & Sewer Bd. of the
City of Oneonta, Inc. v. P.A. Buchanan Contracting Co., 294
Ala. 402, 405-06, 318 So. 2d 267, 269 (1975)("This court has
held that even when a bond ... is not literally in statutory
form, if it was given 'for the purposes named in the statute
and accepted and acted upon as such,' the statute will be read
into the bond.  Royal Indemnity Co. v. Young & Vann Supply
Co., 225 Ala. 591, [594,] 144 So. 532[, 534 (1932)].");
American Cas. Co. of Reading, Pa. v. Devine, 275 Ala. 628,
640, 157 So. 2d 661, 672 (1963)("[T]his court has said that
there was no compulsion on the surety to execute such a bond,
but since the surety did so, knowing the purpose for which the
bond was given and being charged with knowledge of the law
which required the bond, the bond must be construed and
applied as if the parties making it had complied with the law.
Universal Electric Const[r]. Co. of Alabama v. Robbins, 239
Ala. 105, 194 So. 194 [(1940)]. The bond shows on its face
that it was executed in compliance with the statute and the
court is authorized to read into it the provisions of the
statute, 'and give it the form and effect the statute
26
1121288
contemplated, regardless of its contents.' 239 Ala. 109, 194
So. 198. In short the statute is written into the bond."). 
Thus, JCI is a proper claimant on the payment bond if it
demonstrates that it is statutorily eligible under the four-
part test set forth in Kruger.
First, under Kruger, JCI must show that the equipment and
materials it furnished "were supplied for work on the public
project at issue."  Kruger, 829 So. 2d at 736.  As set forth
above, the contract and the PAA obligated Batson-Cook to
procure the tangible personal property necessary for the
completion of Batson-Cook's obligations under the contract. 
The purchasing power granted by the PAA was limited to items
Batson-Cook needed to perform its obligations under the
contract.  While the renovation project was ongoing, Batson-
Cook entered into a subcontract with Hardy to perform the
mechanical work for the project and "to provide all material,
labor, supervision, and equipment necessary to complete [the]
scope of work in accordance with the contract documents." 
Hardy, after being awarded the subcontract and with knowledge
of the existence of the PAA, submitted a purchase order to JCI
for equipment and materials necessary for Hardy's performance
27
1121288
under the subcontract.  The purchase order indicates that it
was submitted pursuant to a bid provided by JCI to Hardy
before Roanoke Healthcare awarded the project to Batson-Cook. 
The purchase order called for the equipment and materials to
be shipped to the medical center "c/o Batson-Cook Company" and
directed JCI to telephone Hardy 24 hours before delivery.  JCI
furnished the equipment and materials to the project site, and
the equipment and materials were accepted and incorporated
into the renovation of the medical center.
Vines's 
deposition 
testimony 
indicates 
that 
the 
equipment
and materials furnished by JCI were included in Hardy's
subcontract with Batson-Cook, both in the scope of work and in
the price of the subcontract, and were incorporated into the
renovation project pursuant to Batson-Cook's contract with
Roanoke 
Healthcare. 
 
Vines's deposition testimony 
is
consistent with the fact that the amount of the payment bond
equals the exact amount of the contract price, which covered
the cost of Batson-Cook's subcontract with Hardy, including
the cost of the equipment and materials furnished by JCI
pursuant to the purchase order submitted to JCI by Hardy. 
Accordingly, JCI has demonstrated that the equipment and
28
1121288
materials it supplied were furnished for work on the
renovation of the medical center called for under the contract
and, therefore, has satisfied the first prong of the Kruger
test.
Additionally, we note that the fact that JCI agreed to
accept payment from Roanoke Healthcare neither precludes a
conclusion that JCI furnished the equipment and materials for
the pubic work nor necessarily removes JCI from the protection
of § 39-1-1, which was enacted "'to provide security for those
who furnish labor and material in performance of government
contracts as a substitute for unavailable lien rights, and is
liberally construed to accomplish this purpose.'"  Safeco, 59
So. 3d at 656 (quoting Headley v. Housing Auth. of Prattville,
347 So. 2d 532, 535 (Ala. Civ. App. 1977)).  Because JCI would
have lien rights available to it but for the fact that Roanoke
Healthcare is a public entity, we construe § 39-1-1 so as to
effectuate the purpose for which it was enacted.
Second, it is undisputed that JCI has not been paid;
thus, JCI had satisfied the second prong of the Kruger test –-
that it was not paid for the equipment and materials it
furnished for the renovation project.
29
1121288
Third, JCI must show that it had a good-faith belief that
the equipment and materials it furnished were furnished for
the renovation project.  As set forth above, the purchase
order indicates that the equipment and materials were ordered
for use in the renovation project.  Additionally, e-mails and
telephone conversations between employees of Hardy and JCI
indicate that JCI had knowledge that the equipment and
materials were needed for the renovation project.  Moreover,
JCI delivered the equipment and materials to the project site. 
Thus, JCI had a good-faith belief that the equipment and
materials were furnished for the project in question;
therefore, the third prong of the Kruger test is satisfied.
Fourth, 
JCI 
must 
show 
that 
it 
satisfied 
the
jurisdictional requisites of § 39-1-1(b) before commencing
this action.  Section 39-1-1(b) provides that "a civil action
shall not be instituted on the bond until 45 days after
written notice to the surety of the amount claimed to be due
and the nature of the claim."  Furthermore, § 39-1-1(b)
provides that "[t]he civil action shall be commenced not later
than one year from the date of final settlement of the
contract."  On March 24, 2011, Roanoke Healthcare notified
30
1121288
Batson-Cook that it was suspending the renovation project;
Batson-Cook notified Hardy of the suspension on March 30,
2011.  JCI notified Liberty Mutual, Batson-Cook, and Hardy by
letters dated May 4, 2011, that it was making a claim on the
payment bond.  JCI then filed this lawsuit on November 10,
2011 –- more than 45 days after giving notice of its claim and
within one year from the suspension of the renovation project. 
Thus, JCI has met the jurisdictional requisites to bring a
claim under § 39-1-1(b); therefore, the fourth prong of the
Kruger test is satisfied.
Liberty Mutual cites Magic City Paint & Varnish Co. v.
American Surety Co. of New York, 228 Ala. 40, 152 So. 42
(1934), and Hicks, supra, in support of its argument that the
circuit court's judgment is due to be affirmed because, it
argues, JCI has not demonstrated that Batson-Cook is liable
for the payment of the equipment and materials furnished by
JCI.  However, both cases relied upon by Liberty Mutual are
inapposite.
In Magic City, the plaintiff agreed to supply paint to a
bonded contractor for a public-works project.  The agreement
allowed for unused paint to be returned for "full credit." 
31
1121288
The plaintiff sued the surety for payment for the paint the
plaintiff had delivered for the project.  The statute that
governed the payment bond in Magic City was modeled after the
federal Heard Act, as explained in Safeco, supra, rather than
after the federal Miller Act, as is the little Miller Act, the
pertinent statute here.   The trial court held that the surety
4
The difference between the Heard Act and the Miller Act
4
was 
explained 
in 
Riley-Stabler 
Construction 
Co. 
v.
Westinghouse Electric Corp., 396 F.2d 274, 276 (5th Cir.
1968):
"The Heard Act specifically provided that bond
coverage extended only to materials 'used' on a
bonded project. The Miller Act deleted that
provision and, as heretofore stated, has been
interpreted to cover materials diverted to other
uses.
"But 
irrespective 
of 
the 
historical 
context, 
and
approaching the issue as an original question, we
are constrained to hold that the statutory words
'for ... the prosecution of the work' encompass the
furnishing of diverted materials as well as
non-diverted ones. The insertion of the preposition,
'for,' in the 1935 Act constitutes a significant
change over the 1927 Act. The legislature is
presumed to have made the change for a purpose. The
phrase, as revised in the 1935 Act, shifts the
inquiry from how or whether the materials were used
to the purpose for which they were supplied. The
natural and ordinary connotation of the phrase as it
now reads is that a bond covers payment of materials
which are used on a bonded project or which are
furnished in the contemplation of being used on that
project whether they are in fact so used or not."
32
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was liable only for the paint that was used.  The plaintiff
appealed to this Court, arguing that it was entitled to full
payment under the bond for both the used and the unused paint. 
However, this Court found that the record indicated that there
was no liability as between the original contracting parties
because the contractor had a right to return the unused paint
for a full credit.  This Court stated that the "[p]laintiff,
in making the sale, accepted a tentative order only, and has
no right to ignore its meaning and effect."  Magic City, 228
Ala. at 42, 152 So. at 43.  Accordingly, the Court held that
"[a]ll other questions may therefore be laid aside, as of
course, if liability be not shown against the contractor,
clearly none can be established against the surety."  228 Ala.
at 43, 152 So. at 44.  In the present case, the finality of
the sale of the equipment and materials furnished by JCI is
not in question.  It is undisputed that the equipment and
materials were accepted and incorporated into the renovation
of the medical center and that JCI is entitled to payment. 
Magic City, therefore, is inapposite.
Hicks likewise does not support Liberty Mutual's
argument.  In Hicks, the Court of Civil Appeals upheld a trial
33
1121288
court's finding that a subcontractor who had agreed with the
general contractor to be paid for "satisfactory performance"
could maintain an action against the bond surety only for work
that met the condition precedent to its payment –-
satisfactory performance.  In the present case, it is
undisputed that the equipment and materials furnished by JCI
were satisfactory and that JCI is entitled to payment.  Hicks,
therefore, is also inapposite.
JCI has satisfied the four-part test set forth in Kruger;
accordingly, JCI is a proper claimant on the payment bond. 
Therefore, the circuit court erred in entering a summary
judgment in favor of Liberty Mutual and denying JCI's summary-
judgment motion.
Conclusion
Based on the foregoing, we reverse the circuit court's
summary judgment in favor of Liberty Mutual and remand the
case for the circuit court to enter a summary judgment for
JCI.
REVERSED AND REMANDED.
Stuart, Bolin, Murdock, Main, Wise, and Bryan, JJ.,
concur.
Moore, C.J., and Shaw, J., dissent.
34
1121288
MOORE, Chief Justice (dissenting).
Because Batson-Cook Company ("Batson-Cook") must be
liable to Johnson Controls, Inc. ("JCI"), before Liberty
Mutual Insurance Company ("Liberty Mutual") can be liable to
JCI, I respectfully dissent.
I. The Terms of the Payment Bond Control
The majority opinion fails to address the operative terms
of the payment bond between Batson-Cook and Liberty Mutual
("the bond"). "[S]uretyship is a contractual relationship.
Consequently, we begin our inquiry into the liability of [the
surety] by reviewing the terms of the surety contract itself."
Ex parte Lawyers Sur. Corp., 719 So. 2d 833, 835 (Ala. 1998).
In a suretyship contract, "one person engages to be answerable
for the debt, default, or miscarriage of another. It is an
obligation accessorial to that of the principal debtor: the
debt is due from the principal, and the surety is merely a
guarantor for its payment." Evans v. Keeland, 9 Ala. 42, 46
(1846). The "general principles of contract interpretation
apply with equal force to surety contracts." Fidelity &
Deposit Co. of Maryland v. Jefferson Cnty. Comm'n, 756 F.
Supp. 2d 1329, 1335 (N.D. Ala. 2010) (applying Alabama law). 
35
1121288
The bond states that Batson-Cook, as principal, and
Liberty Mutual, as surety, bind themselves for the payment of
$1,059,000 
to 
Roanoke 
Healthcare 
Authority 
("Roanoke
Healthcare") and all "persons, firms, and corporations" who
furnished labor and materials under the Batson-Cook/Roanoke
Healthcare contract. Liberty Mutual agreed to be liable for
Batson-Cook's unpaid debts if Batson-Cook did not "properly
make payment to all persons, firms, and corporations
furnishing materials for or performing labor in the
prosecution of the WORK provided for in such contract ...."
(Capitalization in original.) Batson-Cook's obligation to
Roanoke Healthcare controls Liberty Mutual's liability.
Liberty Mutual is answerable for Batson-Cook's default, not
Roanoke 
Healthcare's 
default. 
We 
must 
"enforce 
an 
unambiguous,
lawful contract, as it is written. ... A court may not make a
new contract for the parties or rewrite their contract under
the guise of construing it." Ex parte Dan Tucker Auto Sales,
Inc., 718 So. 2d 33, 35-36 (Ala. 1998). The majority ignores
the plain language of § 39-1-1, Ala. Code 1975, and rewrites
the surety contract to make Liberty Mutual answerable for
36
1121288
Roanoke Healthcare's debts, in addition to those of the
principal, Batson-Cook. 
II. The Proper Claimant Under the Bond
The majority states that the fact that JCI sold equipment
and 
materials directly to Roanoke Healthcare "is immaterial 
to
a determination whether JCI is a proper claimant under the
payment bond." ___ So. 3d at ___. I disagree. This fact is not
only material but also dispositive of the question whether JCI
is a proper claimant under the bond. "[I]t is of the essence
of such a [suretyship] contract, that there be a valid
obligation of the principal debtor." Evans v. Keeland, 9 Ala.
at 46. "There can be no surety unless there is a principal
primarily liable." City of Birmingham v. Trammell, 267 Ala.
245, 248, 101 So. 2d 259, 262 (1958). "'The threshold issue on
this bond claim is whether the contractor ... is liable to the
subcontractor ... for labor, materials, or supplies.'" A.G.
Gaston Constr. Co. v. Hicks, 674 So. 2d 545, 547 (Ala. Civ.
App. 1995) (quoting the trial court's order).  
5
"Inherent in the existence of any surety relationship is
5
the requirement that the principal owe some obligation." 72
C.J.S. Principal and Surety § 18 (2005).
37
1121288
Although the majority relies on the four elements for
recovery on a § 39-1-1 payment bond stated in Federal
Insurance Co. v. I. Kruger, Inc., 829 So. 2d 732 (Ala. 2002),
it overlooks Kruger's statement of the threshold element of
suretyship law –- the liability of the surety to the
principal: 
"It is true that if Kruger has no right of
recovery against the principal ... Kruger may not
recover against the surety ... on the payment bond.
... [I]n order to determine whether Kruger is
entitled to recover under the terms of the payment
bond, we must first determine whether Kruger is
entitled 
to 
recover 
under 
the 
Harbert–Kruger
subcontract." 
Kruger, 829 So. 2d at 736-37 (emphasis added). Likewise,
Batson-Cook must be liable to JCI before Liberty Mutual can be
liable to JCI. Because Batson-Cook is not liable to JCI,
neither is Liberty Mutual. "All other questions may therefore
be laid aside, as of course, if liability be not shown against
the contractor, clearly none can be established against the
surety." Magic City Paint & Varnish Co. v. American Sur. Co.
of New York, 228 Ala. 40, 43, 152 So. 42, 44 (1934). Until
today's 
decision, 
an Alabama surety was "never answerable upon
an undertaking unless his principal is bound thereby."
38
1121288
McKissack v. McClendon, 133 Ala. 558, 562, 32 So. 486, 487
(1902) (Tyson, J., dissenting).
III. Reading the Statute into the Bond
The majority states that "[t]he terms of the payment bond
here limit claimants to those having a direct contract with
either the contractor or a subcontractor." ___ So. 3d at ___.
The bond provides "that beneficiaries or claimants hereunder
shall be limited to the SUBCONTRACTORS, and persons, firms,
and corporations having a direct contract with the PRINCIPAL
or it's [sic] SUBCONTRACTOR." (Capitalization in original.)
The majority continues: "[W]hen a payment bond is issued to
satisfy the provisions of § 39-1-1, as it was in the present
case, the requirements of the statute will be read into the
bond." ___ So. 3d at ___. On its face, Liberty Mutual's bond
does not exclude JCI, which had a direct contract with Hardy,
Batson-Cook's subcontractor. Because the bond facially
complies with § 39-1-1, we have no need to read additional
provisions into the bond. The majority opinion reads an extra-
statutory obligation into the bond, namely, the obligation of
Roanoke Healthcare, as the owner, to make payments. We may not
39
1121288
insert into a bond additional obligations not stated in § 39-
1-1.
IV. The Batson-Cook/Hardy Subcontract
  
The majority also neglects the terms of the Batson-
Cook/Hardy 
subcontract, 
which 
provides 
that 
"the 
Subcontractor
agrees not to perform any work directly for the Owner ... or
deal directly with the Owner's representatives in connection
with the project, unless otherwise directed in writing by the
Contractor." (Emphasis added.) Batson-Cook directed Hardy to
deal directly with Roanoke Healthcare because
"all purchases of tangible personal property to be
incorporated into the realty by Batson-Cook ... will
be paid directly by [Roanoke Healthcare], but
addressed to Batson-Cook ... who will forward them
on to [Roanoke Healthcare] for payment. [Roanoke
Healthcare] payments will be issued directly to the
material supplier." 
The Batson-Cook/Hardy subcontract incorporated the Batson-
Cook/Roanoke Healthcare contract, which states that Roanoke
Healthcare would directly purchase all or a portion of the
materials and equipment. Batson-Cook agreed to serve as a
purchasing agent to bind Roanoke Healthcare contractually for
the purchase of equipment and materials necessary to carry out
Batson-Cook's contractual obligations. The purchasing-agent
40
1121288
agreement provides that "the net amount paid for tangible
personal property purchased under this agreement shall be
deducted from the total amount that would otherwise be due
from [Roanoke Healthcare] to [Batson-Cook] under the project
agreement."
After reviewing these contracts, the trial court found
that 
"the equipment and materials at issue were purchased
directly from [JCI] by [Roanoke Healthcare] and thus
were outside of the scope of the contract between
[Roanoke Healthcare] and [Batson-Cook], the general
contractor, who was also acting as the purchasing
agent of [Roanoke Healthcare] for equipment and
materials. 
[JCI's] 
invoices 
also 
reflect 
the
purchaser being [Roanoke Healthcare]. Since the
equipment and materials at issue were outside the
scope of the contract between [Batson-Cook] and
[Roanoke Healthcare], they are not covered by the
payment bond." 
The majority does not give proper deference to the trial
court's order, which was in accord with the "principle of the
common law, that whatever operates as a partial, or total
exoneration of the principal, will necessarily have the same
effect in favor of the surety." State v. Parker, 72 Ala. 181,
184 (1882). "A surety ... may be discharged from its
obligation ... by a discharge of the principal." 17 Am. Jur.
2d Contractors' Bonds § 15 (2004). The purchasing-agent
41
1121288
agreement 
partially 
discharged 
Batson-Cook 
from 
its 
obligation
to make payments to materialmen and "operated to discharge,
not only [Batson-Cook], but also [Liberty Mutual].... The
liability of the principal being adjudged not to exist, the
liability of the sureties falls with its extinguishment."
Parker, 72 Ala. at 184. 
JCI "must take notice of the terms and character of the
contract between the owner and the 
original 
contractor." Selma
Sash, Door & Blind Factory v. Stoddard, 116 Ala. 251, 254, 22
So. 555, 556 (1897). Once JCI had notice of the contract
between Batson-Cook and Roanoke Healthcare, that contract
could not be changed "to the prejudice of any one having a
legal 
interest 
in 
it, 
owner, 
original 
contractor,
subcontractor, or materialman." Cranford Mercantile Co. v.
Wells, 195 Ala. 251, 255, 70 So. 666, 668 (1916). Justice
Joseph Story stated that "the liability of a surety is not to
be extended, by implication, beyond the terms of his
contract." Miller v. Stewart, 22 U.S. (9 Wheat.) 680, 703
(1824). Accordingly, JCI is bound by the contract and
subcontract. Under these documents, JCI agreed 
to 
seek payment
from Roanoke Healthcare, not from Batson-Cook. 
42
1121288
Because JCI agreed that Batson-Cook was not liable to
JCI, JCI has no right to recover from Batson-Cook. Where
"there is no liability shown as between the original
contracting parties, [there can be] of consequence none, of
course, against the surety." Magic City Paint, 228 Ala. at 42,
152 So. at 43. JCI "can recover no greater balance from
[Liberty Mutual] than he can from the principal in the bond."
Royal Indem. Co. v. Young & Vann Supply Co., 225 Ala. 591,
595, 144 So. 532, 535 (1932). The majority overlooks the fact
that "[Batson-Cook's] liability ... is the limit of the
liability of [Liberty Mutual] and a necessary element to
[Liberty Mutual's] liability." American Cas. Co. of Reading,
Pa. v. Devine, 275 Ala. 628, 641, 157 So. 2d 661, 673 (1963).
V. Statutory Construction of § 39-1-1
The majority extends Liberty Mutual's liability and does
so purportedly to further the purposes of § 39-1-1. Although
§ 39-1-1 should be "liberally construed" to accomplish its
purpose of protecting materialmen, Headley v. Housing
Authority of Prattville, 347 So. 2d 532, 535 (Ala. Civ. App.
1977), the purpose of the statute is plainly found in the
language of the statute. See Ex parte State Dep't of Revenue,
43
1121288
683 So. 2d 980, 983 (Ala. 1996) (noting that, "where plain
language is used, the court is bound to interpret that
language to mean exactly what it says"). We must construe the
statute, not create obligations it omits. 
The majority never construes subsection (a) of § 39-1-1,
which defines the bonding obligation that provides a cause of
action under subsection (b). The Court's duty is to give
effect to both subsections of § 39-1-1 because "every part of
a statute should, if possible, be upheld and given appropriate
force." State v. Western Union Tel. Co., 196 Ala. 570, 573, 72
So. 99, 100 (1916). "[P]arts of the same statute are in pari
materia and each part is entitled to equal weight." Darks
Dairy, Inc. v. Alabama Dairy Comm'n, 367 So. 2d 1378, 1381
(Ala. 1979).
A materialman may bring "a civil action upon the payment
bond" under § 39-1-1(b). The bond at issue is "the obligation
that the contractor ... shall promptly make payments to all
persons supplying labor, materials, or supplies for or in the
prosecution of the work provided in the contract." § 39-1-1(a)
(emphasis added). The majority ties JCI's claim to its intent
to provide materials for "a public work," but the statute
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limits JCI's claim to payment for materials and supplies to
"the work provided in the contract." The Court, however, has
no "liberty to rewrite statutes," Ex parte Carlton, 867 So. 2d
332, 338 (Ala. 2003), and "may not detract from or add to the
statute." Water Works & Sewer Bd. of Selma v. Randolph, 833
So. 2d 604, 607 (Ala. 2002). The majority has rewritten this
statute and has effectively cut § 39-1-1(b) loose from any
moorings to § 39-1-1(a), its companion subsection. 
VI. The Purpose of § 39-1-1
The majority makes much of the purpose of § 39-1-1, which
is "'"to provide security for those who furnish labor and
material in performance of government contracts as a
substitute for unavailable lien rights, and [it] is liberally
construed to accomplish this purpose."'" ___ So. 3d at ___
(quoting Safeco Ins. Co. of America v. Graybar Elec. Co., 59
So. 3d 649, 656 (Ala. 2010), quoting in turn Headley v.
Housing Auth. of Prattville, 347 So. 2d at 535). The remedial
purpose of the statute, however, does not justify expanding
the liability of sureties. "[A] court will not enlarge the
scope of a statutory bond beyond the express terms of a
statute ...." 74 Am. Jur. 2d Suretyship § 27 (2012). The
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purpose of § 39-1-1, like the parallel federal Miller Act,
"does not justify ignoring plain words of limitation and
imposing wholesale liability on payment bonds." Clifford F.
MacEvoy Co. v. United States, for Use & Benefit of Calvin
Tomkins Co., 322 U.S. 102, 107 (1944). Likewise, "courts are
not justified in writing liability into a Miller Act bond."
Graybar Elec. Co. v. John A. Volpe Constr. Co., 387 F.2d 55,
58 (5th Cir. 1967).
The majority has expanded Liberty Mutual's liability at
the expense of its rights as a surety under Alabama law. See
§ 8-3-1 et. seq., Ala. Code 1975 (stating the rights of a
surety who pays a principal's debts). If the Court requires
Liberty Mutual to pay Roanoke Healthcare's debt to JCI,
Liberty Mutual will not be entitled to reimbursement against
Batson-Cook. "When a surety satisfies the principal's
obligation, it is entitled to reimbursement or restitution
from the principal." SouthTrust Bank of Alabama, N.A. v.
Webb-Stiles Co., 931 So. 2d 706, 712 (Ala. 2005). Liberty
Mutual's "right to indemnity does not arise ... until one
acting as surety satisfies his principal's obligation."
Alabama Kraft Co. v. Southeast Alabama Gas Dist., 569 So. 2d
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697, 700 (Ala. 1990) (emphasis added). The majority opinion,
when "followed to its logical conclusion, necessarily results
in imposing a liability upon [Liberty Mutual] never contracted
by [it], and leaving [Liberty Mutual] without a right of
reimbursement from [Batson-Cook]."  McKissack, 133 Ala. at
563, 32 So. at 487 (Tyson, J., dissenting). I agree that the
Court should protect materialmen who provide equipment and
material for public-works contracts. However, the majority
opinion would remedy JCI's legal injury by wrongly imposing on
Liberty Mutual the liability for the injury.
VII. Conclusion
Because JCI is not entitled to recover from Batson-Cook,
JCI is not entitled to payment from Liberty Mutual. Therefore,
I would hold that the judgment of the trial court should be
affirmed.
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SHAW, Justice (dissenting).
I respectfully dissent.
This case involves an attempt by Johnson Controls, Inc.
("JCI"), to collect payment for certain equipment and
materials it provided to a public-works project designed to
renovate the medical-center facility owned by the Roanoke
Healthcare Authority ("Roanoke Healthcare"), a public entity. 
Generally, when a person has provided labor or materials
to a private construction project, that person is entitled,
under Ala. Code 1975, § 35–11–210, to a lien against that
private property.  Safeco Ins. Co. of America v. Graybar Elec.
Co., 59 So. 3d 649, 655 (Ala. 2010).  Section 35–11–210 does
not apply, however, to public property.  Id.  Thus, in what is
commonly called Alabama's "little Miller Act," Ala. Code 1975,
§ 39-1-1 et seq., the legislature has required contractors
involved in public-works projects to obtain certain bonds to
protect those who provide labor and materials on those
projects.  
Specifically, § 39-1-1(a) requires that any person
entering into a contract with a governmental entity  to build
6
Such governmental entities are referred to as "awarding
6
authorities" and are more specifically defined in Ala. Code
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any "public works" shall execute what is described in § 39-1-
1(b) as a "payment bond."  Such a bond must be "payable to the
awarding authority" and must "be executed in an amount not
less than 50 percent of the contract price."  § 39-1-1(a). 
The scope of this bond, i.e., what the Code section states
that the bond must cover, is defined as follows: the bond
shall contain "the obligation that the contractor or
contractors shall promptly make payments to all persons
supplying labor, materials, or supplies for or in the
prosecution of the work provided in the contract ...."  § 39-
1-1(a).
Section 39-1-1(b) allows persons who have "furnished
labor, materials, or supplies for or in the prosecution of a
public work," but who have not been paid, to file a civil
action.  Such an action provides those persons a means to have
adjudicated any rights or claims they might have under the
payment bond: "Any person that has furnished 
labor, 
materials,
or supplies for or in the prosecution of a public work and
payment has not been made may institute a civil action upon
1975, § 39-2-1(1).  There appears no dispute in this case that
Roanoke Healthcare is an "awarding authority."   
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the payment bond and have their rights and claims adjudicated
in a civil action and judgment entered thereon."  
The majority opinion focuses on whether JCI provided
equipment and materials for the public-works project;
specifically, the opinion states that § 39-1-1(b) "focuses
exclusively on the intent" for which the equipment and
materials were provided and quotes the following from § 39-1-
1(b): "'Any person that has furnished labor, materials, or
supplies for or in the prosecution of a public work ... may
institute a civil action upon the payment bond ....'"      So.
3d at     (omissions in the majority opinion).  If that is all
the Code section stated, the majority opinion might have a
point.  But the majority omits controlling language.  As
quoted fully above, the Code section states: "Any person that
has furnished labor, materials, or supplies for or in the
prosecution of a public work and payment has not been made may
institute a civil action upon the payment bond and have their
rights and claims adjudicated in a civil action and judgment
entered thereon."  (Emphasis added.)  The action one files
under § 39-1-1(b) is to determine one's rights and claims upon
the payment bond.  Such "rights and claims" are spelled out in
§ 39-1-1(a); specifically, as noted above, the payment bond
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obligates the contractor to pay persons supplying "labor,
materials, or supplies" for "the work provided in the
contract," not simply for "labor, materials, or supplies"
provided to the public-works project.  § 39-1-1(a) (emphasis
added).   
7
The majority opinion, by omitting pertinent language,
rewrites the Code section to provide that persons are entitled
to payment under the bond simply because they have provided
"labor, materials, or supplies" to a public-works project in
any way.  By focusing on whether the equipment and supplies
are used in the project, and not on whether the equipment and
supplies were used for "the work provided in the contract" for
the project, any expense for the project is covered, even if
the expense is outside the contract.  The majority opinion
holds that the contractor's bond must cover everything, even
things beyond the scope of the terms of the contract.  This is
not what the Code section states.
Section 39-1-1(b) has broad language allowing "any
7
person" providing materials to a public-works project to file
an action under the "payment bond"; however, it is clear that
it does not allow "any person" to recover under the bond. 
Instead, the action determines only the rights and claims of
the plaintiff under that bond.
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Under the facts of the instant case, the "work provided
in the contract" between the general contractor, Batson-Cook
Company ("Batson-Cook"), and Roanoke Healthcare called for
Batson-Cook to purchase materials and to provide labor for the
renovation project.   However, the contract also recognized
8
that Roanoke Healthcare was a tax-exempt entity that could
purchase materials without paying sales taxes.  Thus, to
"avoid" those taxes, the contract indicated that the parties
would enter into what it termed a "Purchasing Agent Agreement"
("PAA").  Roanoke Healthcare would actually purchase "all, or
a portion of," the "materials, supplies, equipment, and other
items" for the project.  Batson-Cook would act as Roanoke
Healthcare's "agent" for those purchases.  See paragraphs a.
and d. of the PAA, quoted in the main opinion.      So. 3d at 
  .  Under the PAA, the cost of items purchased by Roanoke
Healthcare is deducted from the overall total amount due
Batson-Cook under the contract; thus, the purchases made by
Roanoke Healthcare are removed from the "work provided in the
Batson-Cook purchased a payment bond from Liberty Mutual
8
Insurance Company ("Liberty Mutual").  There is evidence in
the record suggesting that Batson-Cook is required to
indemnify Liberty Mutual for any claims made under the payment
bond.
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contract."  See id., paragraph i.  Batson-Cook did not
purchase JCI's equipment and materials (it did not perform
that "work") and was not, and would not be, paid for the
purchase of the equipment and materials  (it would not be paid
for that "work"), and the purchase of the JCI equipment and
materials was to be removed from the contract (that "work" was
removed from the contract).  Although the JCI equipment and
materials were certainly used for the public-works project, §
39-1-1(a) focuses on "the work provided in the contract," not
all work provided for the public-works project.  I cannot
conclude that Roanoke Healthcare's separate purchase of the
JCI equipment and materials was "work provided in the
contract" and was covered by Batson-Cook's payment bond.9
JCI suggests that there is an issue of fact as to whether
9
the purchase was outside the scope of the contract,
specifically, whether JCI understood that it was selling
directly to Roanoke Healthcare or directly to Batson-Cook's
subcontractor,  Hardy Corporation ("Hardy").  I disagree that
there is a question of fact regarding to whom JCI sold the
equipment and materials. Numerous items of documentary
evidence and testimony show that the terms of the PAA were
communicated to JCI.  Hardy's agent, Ronnie Vines, twice told
JCI that Roanoke Healthcare, and not Batson-Cook or Hardy, was
buying the equipment and materials and that invoices should
show Roanoke Healthcare as the buyer.  JCI twice received e-
mails stating this and twice received a letter from the
Alabama Department of Revenue stating that Roanoke Healthcare
was a  tax-exempt entity.  Further, after the sale, JCI sent
an e-mail to Hardy inquiring as to how to bill Roanoke
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JCI also argues that the trial court's decision violates
"public policy" intended by the "little Miller Act," namely,
to "ensure that a materialman receives full payment for labor
or materials that he supplies to a public works project."  SGB
Constr. Servs., Inc. v. Ray Sumlin Constr. Co., 644 So. 2d
892, 895 (Ala. 1994).  However, the legislature "has the
exclusive domain to formulate public policy in Alabama" and
has done so through the text of § 39-1-1.  Boles v. Parris,
952 So. 2d 364, 367 (Ala. 2006).  The text of § 39-1-1 does
not provide for JCI under the payment bond.
The majority holds that we should "construe § 39-1-1 so
as to effectuate the purpose for which it was enacted."     
So. 3d at    .  However,
"'"[w]ords used in a statute must be given their
natural, plain, ordinary, and commonly understood
meaning, and where plain language is used a court is
bound to interpret that language to mean exactly
what it says. If the language of the statute is
unambiguous, then there is no room for judicial
construction and the clearly expressed intent of the
legislature must be given effect."'"
Healthcare.  But the most important fact showing that JCI knew
that it was selling the equipment and materials to Roanoke
Healthcare is the fact that JCI charged no sales tax.  Who did
JCI think the purchaser was, other than the only tax-exempt
entity in this case?  I see no issue of fact.
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DeKalb Cnty. LP Gas Co. v. Suburban Gas, Inc., 729 So. 2d 270,
275 (Ala. 1998) (quoting Blue Cross & Blue Shield v. Nielsen,
714 So. 2d 293, 296 (Ala. 1998), quoting in turn IMED Corp. v.
Systems Eng'g Assocs. Corp., 602 So. 2d 344, 346 (Ala. 1992)). 
We "construe" a statute only when it is ambiguous; if the
statute is unambiguous, then there is no room for the courts
to do anything other than to give effect to the plain language
of the Code section: "When the language of a statute is plain
and unambiguous, as in this case, courts must enforce the
statute as written by giving the words of the statute their
ordinary plain meaning--they must interpret that language to
mean exactly what it says ...."  Ex parte T.B., 698 So. 2d
127, 130 (Ala. 1997).  Here, the majority opinion fails to
give effect to all the language of § 39-1-1, thus altering the
actual wording of the Code section to achieve a reading in
conformity with its "purpose."  The legislature chose the
words of § 39-1-1 to effectuate the purpose it intended; we
cannot change those words to say what we believe the
legislature actually intended to say.  To do so would "turn
this Court into a legislative body, and doing that, of course,
would be utterly inconsistent with the doctrine of separation
of powers."  DeKalb County, 729 So. 2d at 276.  
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The statutory scheme set forth by the little Miller Act
protects the property owner from claims by persons who have
supplied "labor, materials, or supplies" but who have not been
paid by the contractor.    Thus, the payment bond is "payable
to the awarding authority" and contains the "obligation that
the contractor 
or contractors shall promptly make payments" to
those persons.  § 39-1-1(a).  In this case, the payment bond
was payable to Roanoke Healthcare, and Roanoke Healthcare
could call upon the bond to pay the debts Batson-Cook--the
"contractor"--accumulated for the project but failed to pay.
Here, Batson-Cook did not buy JCI's materials and equipment,
and the price for the materials and equipment was removed from
the contract.  Batson-Cook was not to be paid by Roanoke
Healthcare to buy JCI's materials and equipment and is not the
party obligated to pay JCI.  The effect of the majority
opinion, however, is that Batson-Cook is now responsible to
pay for materials and equipment Roanoke Healthcare purchased
and, under the contract for the project, for which Batson-Cook 
would not be paid in the first place.  The majority holds that
the payment bond stands good for the debts of the awarding
authority, even though the Code section calls for the bond to
stand good for the debts of the contractor.   
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JCI seeks, under § 39-1-1(b), to have its "rights and
claims adjudicated" "upon the payment bond."  Because the
purchase of the equipment and materials was not "work provided
in the contract," JCI has no right or claim under the payment
bond.  I would affirm the trial court's summary judgment for
Liberty Mutual Insurance Company.     
57