THE STATE OF SOUTH CAROLINA 

In The Court of Appeals 

J&H Grading & Paving, Inc., Respondent, 

v. 

Clayton Construction Company, Inc., Appellant. 

Appellate Case No. 2019-001950 

Appeal From Lexington County 

Walton J. McLeod, IV, Circuit Court Judge 

Opinion No. 6022 

Submitted December 1, 2022 – Filed August 30, 2023 

AFFIRMED 

Townes Boyd Johnson, III, of Townes B. Johnson III, 

LLC, of Greenville, for Appellant. 

Wesley Dickinson Peel and Chelsea Jaqueline Clark, of 

Bruner Powell Wall & Mullins, LLC, of Columbia, for 

Respondent. 

VINSON, J.: Clayton Construction Company, Inc. (Clayton) appeals the circuit 

court's ruling that Clayton was liable to J&H Grading & Paving, Inc. (J&H) for 

attorney's fees pursuant to section 27-1-15 of the South Carolina Code (2007). 

Clayton argues the circuit court erred by finding (1) Clayton failed to make a 

reasonable and fair investigation into the merits of J&H's claim under section 

27-1-15, (2) the "pay when paid" provision in the parties' subcontract created a 

condition precedent to payment, (3) the "pay when paid" provision was 

unenforceable under the South Carolina Subcontractors' and Suppliers' Payment 
 

 

 

 

 

 

 

 

 

 

 

 

 

Protection Act (the Act)1, and (4) any delay in payment beyond ninety days was 

unreasonable. We affirm.

2 

FACTS 

Clayton, the general contractor for the construction of a new car dealership owned 

by Herlong Chevrolet-Buick, Inc. and Herlong Family Properties, LLC, 

(collectively, Herlong) entered into a subcontract (the Subcontract) with J&H on 

September 24, 2015. Pursuant to the Subcontract, J&H agreed to complete site 

work for the project. Clayton agreed to pay J&H $688,075.00 for its work and to 

make progress payments less retainage of ten percent. Over the course of the 

project, an additional $28,855.70 was added to the contract price, bringing the total 

to $716,930.70. The Subcontract provided, "Final payment of the balance due 

shall be made to [J&H] no later than seven (7) days after receipt by [Clayton] of 

final payment from Owner [for J&H's] work." (hereinafter, "pay when paid" 

provision). Clayton made progress payments as agreed. 

J&H completed its work under the Subcontract and a certificate of occupancy was 

issued to the dealership on March 20, 2017. J&H submitted its final pay 

application via email to Clayton on April 26, 2017, seeking payment of 

$75,298.00, consisting of the retainage and a small outstanding balance. On July 

25, 2017, J&H resubmitted its pay application to Clayton. On August 1, 2017, 

Clayton responded that it had not been paid retainage by Herlong and therefore 

could not issue the remaining retainage until it was paid. J&H's final day of work 

on the project, completing punch list items, was in December of 2017. On January 

19, 2018, J&H again emailed Clayton seeking its final payment and retainage. 

Clayton responded on the same day and stated Herlong had not yet paid Clayton as 

required by the terms of Clayton's contract with Herlong. Clayton did not dispute 

the amount due or that J&H had satisfactorily completed the work. J&H sent a 

letter on January 25, 2018, again seeking payment from Clayton. J&H filed a 

notice and certificate of mechanics' lien3 on the property on February 27, 2018. 

1 S.C. Code Ann. §§ 29-6-10 to -250 (2007 & Supp. 2022). 

2 We decide this case without oral argument pursuant to Rule 215, SCACR. 

3 See S.C. Code Ann. § 29-5-10(a) (2007) ("A person to whom a debt is due for 

labor performed or furnished or for materials furnished and actually used in the 

erection, alteration, or repair of a building or structure upon real estate . . . by 

virtue of an agreement with . . . the owner of the building or structure . . . shall 

have a lien upon the building or structure and upon the interest of the owner of the 
 

 

 

 

 

 

 

 

 

 

 

Thereafter, on March 2, 2018, J&H mailed Clayton a demand pursuant to section 

27-1-15 requesting payment. In its March 9, 2018 response, Clayton pointed to the 

Subcontract's "pay when paid" provision. Clayton stated it had not received 

payment from Herlong for the work, was in litigation seeking payment,4 and would 

"remit any undisputed contract balances to J&H" as soon as it received such 

payment or the litigation was fully adjudicated. Clayton therefore stated that in 

accordance with the provisions of the Subcontract, "there [we]re no amounts due 

and owing to J&H" at the time. 

J&H brought this action against Clayton and Herlong on May 21, 2018, for 

foreclosure of its mechanics' lien and alleging causes of action for breach of 

contract and quantum meruit. In its answer, Clayton claimed that no amounts were 

currently due to J&H pursuant to the Subcontract. In February 2019, Herlong, 

Clayton, and J&H entered into a settlement agreement pursuant to which Herlong 

"agree[d] to release $75,298.00 under its contract with Clayton directly to J&H as 

payment for J&H's subcontract with Clayton on the [p]roject" and J&H agreed to 

dismiss its claims against Herlong. The settlement agreement provided, however, 

that J&H reserved its claims and rights against Clayton for attorney's fees and 

interest on the allegedly wrongfully withheld contract balance. Thereafter, both 

parties filed motions for summary judgment, which the circuit court denied. 

The circuit court held a bench trial on the matter in August 2019. The only issue at 

trial was whether J&H was entitled to attorney's fees under section 27-1-15 based 

on Clayton's reliance on the "pay when paid" provision in the Subcontract. The 

circuit court found in favor of J&H and concluded it was entitled to attorney's fees 

under section 27-1-15. The circuit court rejected Clayton's argument that pursuant 

to Elk & Jacobs Drywall v. Town Contractors, Inc., 267 S.C. 412, 229 S.E.2d 260 

(1976), "pay when paid" clauses were not conditions precedent to payment such 

that they violated the Act. The circuit court concluded the "pay when paid" 

provision in the Subcontract was unenforceable because the plain language of the 

Act expressly prohibited such terms. It therefore determined "Clayton's refusal to 

pay [wa]s unreasonable on its face." The circuit court ruled the Act—which was 

passed decades after Elk—was controlling as to the issue and, at most, Elk stood 

only for the proposition that a contractor had a reasonable time to attempt to obtain 

building or structure in the lot of land upon which it is situated to secure the 

payment of the debt due to him."). 

4 In August 2017, Clayton filed a mechanics' lien on the property and sued Herlong 

for the balance owed on the project. 
payment from the owner before paying a subcontractor. The circuit court 

determined that a reasonable delay was "such that would not force [J&H] to resort 

to legal action" to comply with the provisions of the mechanics' lien statute. The 

circuit court found delaying payment to J&H longer than ninety days after it 

requested payment was per se unreasonable because J&H was required to file a 

mechanics' lien within ninety days of completing its work to preserve its right to 

payment. The circuit court reasoned that by suspending payment past the statutory 

deadline for filing the mechanics' lien, Clayton required J&H to initiate legal 

proceedings that dragged on for two years before J&H was finally paid, even 

though Clayton did not dispute the amount or that J&H had satisfactorily 

completed its work. The circuit court "additionally f[ound] Clayton failed to 

conduct a reasonable and fair investigation" pursuant to section 27-1-15 when it 

knew the amount owed was undisputed yet still refused to pay J&H. Clayton filed 

a motion to reconsider, which the circuit court denied. This appeal followed. 

ISSUES ON APPEAL 

1. Did the circuit court err by finding Clayton failed to make a reasonable and fair 

investigation into the merits of J&H's claim under section 27-1-15? 

2. Did the circuit court err by finding the "pay when paid" provision created a 

condition precedent to payment? 

3. Did the circuit court err by finding the "pay when paid" provision was 

unenforceable under the Act? 

4. Did the circuit court err by finding any delay in payment beyond ninety days 

was unreasonable? 

STANDARD OF REVIEW 

"When an action at law is tried without a jury, the standard of review extends only 

to the correction of errors of law." Gowdy v. Gibson, 391 S.C. 374, 379, 706 

S.E.2d 495, 497 (2011). "The circuit [court]'s findings of fact will only be 

disturbed on appeal if the findings are wholly unsupported by the evidence or 

controlled by an erroneous application of the law." Id. Statutory interpretation is a 

question of law, which this court reviews de novo. Town of Summerville v. City of 

North Charleston, 378 S.C. 107, 110, 662 S.E.2d 40, 41 (2008). 
 

 

 

 

 

 

 

ANALYSIS 

I. Enforceability of "Pay When Paid" Provision 

Clayton argues the circuit court erred by finding the "pay when paid" provision in 

the Subcontract created a condition precedent to payment and was unenforceable 

under section 29-6-230. Clayton contends that pursuant to the holding in Elk, such 

provision did not create a condition precedent to payment but instead allowed a 

general contractor to withhold payment for a reasonable time to allow it an 

opportunity to obtain payment from the owner. We disagree. 

Section 29-6-230 provides, 

Notwithstanding any other provision of law, performance 

by a construction subcontractor in accordance with the 

provisions of its contract entitles the subcontractor to 

payment from the party with whom it contracts. The 

payment by the owner to the contractor or the payment 

by the contractor to another subcontractor or supplier is 

not, in either case, a condition precedent for payment to 

the construction subcontractor. Any agreement to the 

contrary is not enforceable. 

(emphasis added). By its plain language, section 29-6-230 expressly prohibits 

parties from conditioning payment to the subcontractor upon the owner's payment 

to the general contractor and further provides that any agreement to the contrary is 

unenforceable. See Hodges v. Rainey, 341 S.C. 79, 85, 533 S.E.2d 578, 581 (2000) 

("Where the statute's language is plain and unambiguous, and conveys a clear and 

definite meaning, the rules of statutory interpretation are not needed and the court 

has no right to impose another meaning."). Here, the Subcontract provided, "Final 

payment of the balance due shall be made to [J&H] no later than seven (7) days 

after receipt by [Clayton] of final payment from Owner [for J&H's] work." The 

record shows Clayton used this "pay when paid" provision to condition its payment 

to J&H upon its first receiving payment from Herlong. When J&H invoiced 

Clayton for final payment, Clayton relied upon the "pay when paid" provision and 

refused to pay because it had not yet received payment from Herlong. The clause 

therefore created a condition precedent for payment to J&H in violation of section 

29-6-230. Thus, we find the circuit court did not err in concluding section 

29-6-230 expressly prohibits parties from agreeing to condition payment to a 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

subcontractor upon payment to the general contractor and therefore the "pay when 

paid" provision of the Subcontract was unenforceable. 

We reject Clayton's argument that, based upon the holding in Elk, the "pay when 

paid" provision did not create a condition precedent and we find section 29-6-230 

is controlling as to this issue. This statute was passed almost twenty-five years 

after Elk and specifically addresses the issue. See TNS Mills, Inc. v. S.C. Dep't of 

Revenue, 331 S.C. 611, 620, 503 S.E.2d 471, 476 (1998) ("T[his c]ourt must 

presume the legislature did not intend a futile act, but rather intended its statutes to 

accomplish something."). Its plain language demonstrates a legislative intent that 

parties cannot condition payment to a subcontractor upon the general contractor 

receiving payment from the owner. See Hodges, 341 S.C. at 85, 533 S.E.2d at 581 

("Where the statute's language is plain and unambiguous, and conveys a clear and 

definite meaning, the rules of statutory interpretation are not needed and the court 

has no right to impose another meaning."). Here, Clayton relied on the language of 

the "pay when paid" provision to refuse to pay J&H for its work and therefore 

applied the provision as a condition precedent to payment. Thus, regardless of the 

holding in Elk, we hold section 29-6-230 rendered the "pay when paid" provision 

unenforceable because Clayton used it to condition payment to J&H upon 

Clayton's receiving payment from Herlong. 

Further, Elk supports the circuit court's conclusion that Clayton could not rely on 

the "pay when paid" provision to refuse to pay J&H. In Elk, our supreme court 

held the circuit court erred in directing a verdict in favor of the general contractor 

"solely on the basis it had not received full payment from the owner and, 

consequently, was not yet liable on its contract with [the subcontractor]." 267 S.C. 

at 418, 229 S.E.2d at 262. Stated differently, the court disagreed that the general 

contractor could refuse to pay the subcontractor under these circumstances. Id. 

The facts of Elk are similar to this case. In Elk, the parties disputed whether the 

retainage was due to the subcontractor under the terms of their contract because the 

general contractor had not yet received payment from the owner. Id. at 414-16, 

229 S.E.2d at 260-61. The parties' subcontract included a clause that stated the 

general contractor would pay the retainage sixty days after it received "[f]ull and 

final payment . . . of all the funds due him for th[e] project." Id. at 415, 229 S.E.2d 

at 261. The general contractor raised no question as to the subcontractor's 

performance under the contract. Id. at 415, 229 S.E.2d at 261. Our supreme court 

noted the circuit court "construed [the provision] as creating a condition precedent 

to [the general contractor's] liability for the retainage." Id. at 416, 229 S.E.2d at 

261. Our supreme court rejected this interpretation and held the clause did not 

"create[] a condition precedent but rather only postponed payment by [the general 
 

 

 

 

 

 

 

 

 

 

 

 

 

contractor] for a reasonable time so as to afford [it] an opportunity to obtain funds 

from the owner." Id. at 418, 229 S.E.2d at 262. Had our supreme court upheld the 

circuit court's ruling, it would have allowed the general contractor to avoid paying 

the subcontractor indefinitely, depending on when—and if—it received payment 

from the owner. See id. at 417, 229 S.E.2d at 262 ("To construe [such provision] 

as requiring the subcontractor to wait to be paid for an indefinite period of time 

until the general contractor has been paid by the owner, which may never occur, is 

to give to it an unreasonable construction . . . ." (emphasis added) (quoting Thos. J. 

Dyer Co. v. Bishop Int'l Eng'g Co., 303 F.2d 655, 661 (6th Cir. 1962))). This is 

precisely the scenario section 29-6-230 prohibits. 

Here, as in Elk, Clayton employed the Subcontract language to delay payment to 

J&H indefinitely. Although the court in Elk determined a similar contract 

provision was not a condition precedent to payment, the result of this interpretation 

was only to allow the general contractor to delay payment for a reasonable time— 

not to allow it to withhold payment indefinitely. Because Clayton used the clause 

to delay payment indefinitely, Elk supports the circuit court's conclusion that the 

"pay when paid" provision could not be used as a condition precedent to payment 

but, at most, could only be interpreted to delay payment for a reasonable time. As 

we discuss further below, we hold the circuit court did not err in finding a delay of 

more than ninety days from the date the request was first made was per se 

unreasonable. See Elk, 267 S.C. at 418, 229 S.E.2d at 262 (holding the question of 

what constituted a reasonable time was a question of fact). However, because J&H 

also made a demand for payment under section 27-1-15, which imposes its own 

deadline for payment, section 27-1-15 determines what constitutes a "reasonable 

time" from the date of the demand. 

II. Compliance with Section 27-1-15 

Clayton argues the circuit court erred in finding it failed to conduct a reasonable 

and fair investigation as to J&H's demand for payment. Clayton contends it replied 

to J&H's March 2, 2018 demand letter promptly and within the forty-five-day 

requirement. Clayton asserts its refusal to pay was based upon the "pay when 

paid" provision in the contract, the fact Herlong had not paid Clayton for J&H's 

work, and the holding in Elk. We disagree. 

"The party seeking an award of attorney's fees and interest under the statute has the 

initial burden of presenting prima facie evidence that the opposing party did not 

make a fair and reasonable investigation. Whether a party's steps taken were 

'reasonable and fair' is a question of fact." Hardaway Concrete Co. v. Hall 
 

 

 

 

 

 

 

Contracting Corp., 374 S.C. 216, 229, 647 S.E.2d 488, 495 (Ct. App. 2007) 

(citation omitted) (quoting Moore Elec. Supply, Inc. v. Ward, 316 S.C. 367, 

374-75, 450 S.E.2d 96, 100 (Ct. App. 1994)). 

Whenever a contractor . . . has expended labor, services, 

or materials under contract for the improvement of real 

property, and where due and just demand has been made 

by certified or registered mail for payment for the labor, 

services, or materials under the terms of any regulation, 

undertaking, or statute, it is the duty of the person upon 

whom the claim is made to make a reasonable and fair 

investigation of the merits of the claim and to pay it, or 

whatever portion of it is determined as valid, within 

forty-five days from the date of mailing the demand. If 

the person fails to make a fair investigation or otherwise 

unreasonably refuses to pay the claim or proper portion, 

he is liable for reasonable attorney's fees and interest at 

the judgment rate from the date of the demand. 

§ 27-1-15 (emphases added). 

We hold the circuit court did not err in concluding Clayton failed to comply with 

the requirements of section 27-1-15 and is therefore liable to J&H for attorney's 

fees. Section 27-1-15 requires a person upon whom a claim is made to pay a valid 

claim within forty-five days of the demand and if that person "fails to make a fair 

investigation or otherwise unreasonably refuses to pay the claim or proper portion, 

he is liable for reasonable attorney's fees." (emphasis added). It is undisputed 

Clayton did not pay any portion of J&H's claim within forty-five days of the 

demand. Further, Clayton did not dispute the amount of J&H's demand or that 

J&H satisfactorily completed its work. In addition to finding Clayton failed to 

make a reasonable and fair investigation, the circuit court found Clayton's "refusal 

to pay [wa]s unreasonable on its face" because its refusal was premised on the "pay 

when paid" provision. Although Clayton challenges the circuit court's conclusion 

that it failed to make a reasonable and fair investigation, it does not specifically 

challenge the circuit court's conclusion that it unreasonably refused to pay. See 

Lindsay v. Lindsay, 328 S.C. 329, 339, 491 S.E.2d 583, 588 (Ct. App. 1997) 

(noting unchallenged rulings "are the law of the case"). As we stated, the "pay 

when paid" provision was unenforceable pursuant to section 29-6-230. Therefore, 

the record supports the circuit court's conclusion that Clayton's refusal to pay was 

unreasonable, which triggered Clayton's liability under section 27-1-15. 
 

 

 

 

 

 

 

 

 

 

Accordingly, we hold the circuit court did not err in concluding Clayton is liable to 

J&H for attorney's fees. 

Further, the circuit court did not err in finding Clayton failed to conduct a 

reasonable and fair investigation under section 27-1-15. Although Clayton 

responded to the March 2, 2018 demand within the forty-five-day period, it refused 

to pay solely because it had not yet received payment from Herlong and was 

therefore not required to pay J&H based on the "pay when paid" provision. 

Clayton never disputed the amount of the demand or that J&H completed its work 

as required under the Subcontract at the time it made its final pay application. In 

other words, Clayton did not challenge the merits of the claim yet it refused to pay. 

We hold the foregoing supports the circuit court's conclusion that Clayton failed to 

conduct a reasonable and fair investigation into the merits of the claim under 

section 27-1-15. Based on the foregoing, we affirm the circuit court's finding that 

J&H was entitled to attorney's fees pursuant to section 27-1-15. 

III. Reasonableness of Delay in Payment 

Finally, Clayton argues the circuit court abused its discretion in concluding a delay 

of more than ninety days was per se unreasonable. Clayton contends the holding in 

Elk provides a general contractor must be given a reasonable time to allow it to 

obtain payment from the owner before it is required to pay its subcontractor when 

the parties' agreement contains a "pay when paid" provision. Clayton contends that 

pursuant to section 29-5-20(B) of the South Carolina Code (2007),

5 if a general 

contractor has already filed a mechanics' lien that includes the amount owed to its 

subcontractors, a subcontractor has no additional rights to protect by filing its own 

mechanics' lien. Clayton argues J&H's pursuit of a mechanics' lien was therefore 

unnecessary and a voluntary undertaking of incurring legal expenses. Clayton 

further contends the circuit court erred by considering events that took place after 

March 9, 2018, in determining whether Clayton made a fair and reasonable 

investigation under section 27-1-15. Clayton contends that in determining the 

reasonableness of its investigation pursuant to section 27-1-15, the circuit court 

should have considered only whether the "pay when paid" provision was 

enforceable and if so whether it was reasonable for Clayton to rely on that 

provision when it replied on March 9, 2018, to J&H's demand. Clayton contends it 

fulfilled its obligation under the "pay when paid" provision in February of 2019 

5 See § 29-5-20(B) (providing "in no event shall the total aggregate amount of liens 

on the improvement exceed the amount due by the owner"). 
 

 

 

 

 

 

 

 

 

 

 

when Herlong paid J&H through the parties' mediated settlement agreement. We 

disagree. 

A person seeking to avail himself of a mechanics' lien must file and serve such lien 

"within ninety days after he ceases to labor on or furnish labor or materials for [a] 

building or structure." S.C. Code Ann. § 29-5-90 (2007). Further, he must 

commence suit to enforce the lien within six months after he ceases to furnish 

labor or materials for the building or structure. S.C. Code Ann. § 29-5-120(A) 

(Supp. 2022). 

First, because J&H made a demand under section 27-1-15, which gives the 

responding party forty-five days to pay a meritorious claim, a "reasonable time" to 

pay such demand is forty-five days. However, prior to making its demand under 

section 27-1-15, J&H submitted its final pay application in April 2017 and 

resubmitted it several times thereafter. We find the circuit court's determination as 

to the reasonableness of the delay concerned the requests that were made prior to 

J&H's formal demand and the circuit court did not err in concluding a delay in 

payment of more than ninety days was per se unreasonable. The circuit court 

concluded a reasonable time under the circumstances could not exceed ninety days 

because Clayton did not dispute the amount or that J&H had satisfactorily 

completed its work and J&H had ninety days to file a mechanics' lien to protect its 

right to obtain payment. Clayton refused to pay J&H after several requests. J&H's 

recourse was to file a mechanics' lien to protect its right to payment. Thus, it had 

ninety days to file the lien and six months to commence suit to enforce the lien. 

The certificate of occupancy for the dealership was issued in March 2017. J&H 

submitted its final pay application on April 26, 2017. Had Clayton paid J&H 

within ninety days of J&H submitting its final pay application, J&H would not 

have been forced to file the lien and could have avoided the associated fees and 

costs of doing so. Based on the foregoing, we find the record supports the circuit 

court's conclusion that a delay beyond ninety days was unreasonable. 

CONCLUSION 

For the foregoing reasons, the circuit court's order finding Clayton was liable to 

J&H for attorney's fees pursuant to section 27-1-15 is 

AFFIRMED. 

KONDUROS and HEWITT, JJ., concur.