Title: Consolidated Construction Company of Alabama and Hartford Accident and Indemnity Company v. Metal Building Components, L.P. d/b/a MBCI, David Sorrells, and Gregory M. Horne (Appeal from Madison Circuit Court: CV-01-2775). Affirmed. No Opinion.
Citation: N/A
Docket Number: 1031498
State: Alabama
Issuer: Alabama Supreme Court
Date: January 12, 2007

rel:01/12/07consolidated
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before the opinion is printed in Southern Reporter.
SUPREME COURT OF ALABAMA
 OCTOBER TERM, 2006-2007
_________________________
1031498
_________________________
Consolidated Construction Company of Alabama and Hartford
Accident and Indemnity Company
v.
Metal Building Components, L.P., d/b/a MBCI; David Sorrells;
and Gregory M. Horne
Appeal from Madison Circuit Court
(CV-01-2775)
PER CURIAM.
AFFIRMED. NO OPINION.
See Rule 53(a)(1) and (a)(2)(F), Ala. R. App. P.
Nabers, C.J., and See, Lyons, Woodall, Stuart, Smith, and
Parker, JJ., concur.
Harwood and Bolin, JJ., concur specially.
1031498
In 
general, 
when a person has 
provided 
labor 
or 
materials
1
or has supplied services on private construction projects,
they are entitled to file a lien against the private property
and subsequently foreclose on the property, if not paid for
those services.  See § 35-11-210, Ala. Code 1975.  However, §
35-11-210, the mechanic's or materialman's lien statute, 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 
to 
§ 35-11-210).  
The 
Alabama 
Legislature 
provided
a remedy when it codified specific provisions to ensure that
2
BOLIN, Justice (concurring specially).
Consolidated 
Construction 
Company 
of 
Alabama
("Consolidated") and Hartford Accident and Indemnity Company
("Hartford") appeal from the trial court's judgment enforcing
a claim against Consolidated's public-works-payment bond.
Consolidated also appeals from the trial court's judgment in
favor of David Sorrells and Gregory M. Horne on its third-
party claims against Sorrells and Horne arising out of their
ownership interest and operation of D.S. Sorrells & Company.
In 2000, Consolidated entered into a contract with the
Madison County Board of Education ("the Board") to build the
Endeavor 
Elementary 
School. 
In 
accordance 
with 
the
requirements of § 39-1-1, Ala. Code 1975, Consolidated
supplied a payment bond in favor of the Board with Hartford as
the surety.  Subsequently, Consolidated executed a purchase
1
1031498
materialmen receive full payment for labor or materials
supplied to a public-works project.  § 39-1-1.  Alabama's
statute was adopted in 1927 and was originally patterned after
a federal act enacted in 1894 called the Heard Act. Ch. 280,
28 Stat. 278 (1894)(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 a federal act
called the Miller Act (enacted in 1935 to rectify inadequate
protections in the Heard Act).  See 40 U.S.C. §§ 3131-3133
(formerly 
40 
U.S.C. 
§§ 
270a-270b). 
State 
public-works-payment-
bond statutes are often referred to as "little Miller Acts."
3
order with D.S. Sorrells & Company.  D.S. Sorrells then
ordered materials from Metal Building Components, L.P., d/b/a
MBCI.
D.S. Sorrells paid each invoice owed MBCI until April
2001 when a check from D.S. Sorrells to MBCI in the amount of
$58,507.72 was returned due to insufficient funds. No payment
was made by D.S. Sorrells to cover the returned check.  D.S.
Sorrells 
ceased doing business shortly 
thereafter. 
At 
the time
D.S. Sorrells ceased operations, it owed MBCI $65,221.78.  
On October 31, 2001, MBCI made a demand for payment on
the bond against Consolidated and Hartford pursuant to § 39-1-
1.  No payment was made on the demand, and on December 27,
2001, MBCI sued D.S. Sorrells, Consolidated, and Hartford to
recover amounts owed for the materials that had been furnished
1031498
Consolidated's misrepresentation claim stated:
2
"Sorrells, acting individually and on behalf of
Horne, intentionally, recklessly and/or innocently
misrepresented to Consolidated that: (a) the metal
roofing materials supplied on the Project would be
paid for; (b) all MBCI invoices related to the
Project had been paid in full; (c) payments were
misallocated to the Fort Payne High School account;
and (d) MBCI was reassigning all incorrectly posted
invoices to show that all outstanding invoices on
the Endeavor School Project were paid in full." 
Consolidated's fraudulent-suppression claim stated that
Sorrells and Horne owed a duty to Consolidated to disclose
4
by MBCI. Specifically, MBCI alleged (1) that D.S. Sorrells was
liable for breach of contract; (2) that D.S. Sorrells and
Consolidated were 
liable under 
the 
Alabama Prompt 
Payment Act,
§ 8-29-1 et seq., Ala. Code 1975; (3) that Consolidated was
liable to pay the amounts owed MBCI from its payment bond
pursuant to § 39-1-1; and (4) that Hartford was also liable to
pay MBCI on the payment bond pursuant to § 39-1-1.
Consolidated filed a third-party complaint against D.S.
Sorrells and  David Sorrells and Greg Horne, as officers,
directors, and shareholders of D.S. Sorrells. In its third-
party complaint, Consolidated asserted claims of fraudulent
misrepresentation and fraudulent suppression against Sorrells
and Horne  and Consolidated sought to pierce D.S. Sorrells's
2
1031498
that
"a. D.S. Sorrells intended to purchase the metal
roofing materials using credit; b. D.S. Sorrells did
not intend to pay for the metal roofing materials
using the funds paid by the Madison County School
Board; c. D.S Sorrells had an open account with MBCI
to which payments would generally be applied without
reference to specific projects; d. Payments would be
commingled with the Fort Payne High School account;
and e. MBCI would not be paid for outstanding
invoices on the Project."
5
corporate veil.  We note that Sorrells was president of D.S.
Sorrells and Horne was the secretary/treasurer. 
MBCI moved for a summary judgment. Consolidated and
Hartford filed motions for a partial summary judgment, asking
the trial court to dismiss all of MBCI's claim asserted under
§ 39-1-1.  In support of their argument, Consolidated and
Hartford argued that § 39-1-1 does not allow a materialman to
a materialman to recover on a public-works-payment bond.
Consolidated also filed a motion for a partial summary
judgment with regard to MBCI's claims asserted under § 8-29-1
et seq., Ala. Code 1975. Sorrells and Horne each moved for a
summary judgment with regard to Consolidated's third-party
claims against them.
1031498
6
The trial court denied MBCI's motion for a summary
judgment and denied Consolidated's and Hartford's motions for
a partial summary judgment as to MBCI's claims under § 39-1-1.
The trial court granted Consolidated's motion for a partial
summary judgment with regard to MBCI's claims under § 8-29-1.
Also, the trial court denied Sorrells's and Horne's summary-
judgment motions.
Following a bench trial, the trial court entered a final
judgment on May 14, 2004.  In its order, the trial court found
that MBCI had not been paid for materials it furnished for use
in the construction of the Endeavor Elementary School
building. The court concluded that § 39-1-1 allows a
materialman to a materialman to recover on a public-works-
payment bond.  The court also determined that even if § 39-1-1
did not protect a materialman to a materialman, D.S. Sorrells
was a subcontractor to Consolidated; therefore, MBCI, as a
materialman to a subcontractor, would be able to recover from
Consolidated and Hartford under their interpretation of § 39-
1-1. The court found that Sorrells and Horne had made material
misrepresentations to Consolidated, but the court concluded
1031498
7
that 
Consolidated 
had 
failed 
to 
present 
sufficient 
evidence 
to
pierce the corporate veil.  
The 
trial 
court 
ordered: 
(1) 
that 
MBCI 
recover
$109,997.02 
in 
principal and attorney fees 
from 
D.S. Sorrells,
Consolidated, and Hartford (jointly and severally); (2) that
MBCI recover $23,446.12 in interest from D.S. Sorrells; (3)
that MBCI recover $9,542.04 in interest from Consolidated and
Hartford; (4) that Consolidated recover from 
D.S. 
Sorrells 
any
amounts Consolidated pays MBCI in satisfaction of the final
judgment.  The trial court also entered a final judgment in
favor 
of 
Sorrells 
and 
Horne. 
Consolidated and Hartford appeal.
The trial court correctly entered a judgment in favor of
MBCI as to MBCI's right to recover under the payment bond
supplied by Consolidated in favor of the Board with Hartford
as the surety.  However, I write specially to address the
trial court's judgment in favor of Sorrells and Horne on
Consolidated's fraud claim based on the insufficiency of the
evidence to warrant piercing the corporate veil. 
The 
trial 
court 
expressly 
found 
that 
there 
was
insufficient evidence to pierce the corporate veil, and it
entered a judgment in favor of Sorrells and Horne on
1031498
8
Consolidated's 
claims. 
 However, 
the 
court 
found 
that 
Sorrells
and Horne individually made material misrepresentations and
concealed information on behalf of D.S. Sorrells.  The trial
court stated in its judgment:
"D.S. Sorrells, acting through David Sorrells
and Greg Horne, implicitly and expressly represented
to Consolidated, on a repeated basis in early 2000
and up to the trial of this civil action, that D.S.
Sorrells intended to pay, and had in fact paid, all
monies owed by it to MBCI for materials supplied for
use in the Endeavor Elementary construction project.
This is a material representation that D.S. Sorrells
knew to be false.
"When Consolidated became aware that MBCI was
claiming it had not been fully paid by D.S. Sorrells
for materials used in connection with the Endeavor
Elementary construction project, D.S. Sorrells
implicitly and 
expressly represented to Consolidated
that the claim was a mere misunderstanding or
accounting error.  This is a material representation
that D.S. Sorrells knew to be false.
"In the summer of 2001 D.S. Sorrells repeatedly
represented to Consolidated that any misallocations
of monies which should have been applied to D.S.
Sorrells' indebtedness to MBCI in connection with
the Endeavor Elementary construction project were
being remedied by either D.S. Sorrells or MBCI or
both. These are material representations D.S.
Sorrells knew to be false.
"D.S. Sorrells concealed from Consolidated the
material fact that D.S. Sorrells was having
difficulty, as early as late 2000, paying any number
of creditors, including MBCI.  D.S. Sorrells also
concealed from Consolidated the material fact that
D.S. 
Sorrells 
was 
utilizing 
payments 
from
1031498
9
Consolidated, that were to be used for the Endeavor
Elementary construction 
project, 
for other purposes.
"....
"Consolidated 
and 
Hartford 
further 
stipulated 
at
trial that each were notified by MBCI of MBCI's
claims on the Payment Bond by certified mail on Oct.
31, 2001.
"....
"This 
Court 
has 
found 
that 
D.S. 
Sorrells, 
acting
through David Sorrells and Greg Horne, implicitly
and expressly made material misrepresentations to
Consolidated.
"These false and material misrepresentations
made by D.S. Sorrells were made willfully with
knowledge of their falsity or were made recklessly
without knowledge of the truth or falsity thereof;
and were made with the intention to induce
Consolidated to continue paying D.S. Sorrells
substantial sums rather than allowing Consolidated
to invoke its right to pay MBCI directly.
"Moreover, 
D.S. 
Sorrells 
concealed 
from
Consolidated the material fact that D.S. Sorrells
was having difficulty in paying its creditors and
was misusing payments from Consolidated for purposes
in contradiction of the contract between D.S.
Sorrells and Consolidated.
"This Court concludes that D.S. Sorrells had a
duty to disclose these material facts and that
Consolidated, without knowledge of such material
facts, acted to its injury by continuing to pay D.S.
Sorrells substantial sums rather than paying the
suppliers of D.S. Sorrells directly."
1031498
10
A corporate officer who commits fraud will not be
shielded 
from 
liability 
because he used the instrumentality 
of
the corporation to commit the fraud.  "In Alabama, the general
rule is that officers or employees of a corporation are liable
for torts in which they have personally participated,
irrespective of whether they were acting in a corporate
capacity."  Ex parte Charles Bell Pontiac-Cadillac-GMC, Inc.,
496 So. 2d 774, 775 (Ala. 1986). 
"It is well-established that a director of a
corporation 
'may 
not 
participate 
in 
a 
tort
perpetrated through the agency of a corporation, or
in a fraudulent injury to another, without being
civilly responsible.' Rudisill Soil Pipe Co. v.
Eastham Soil Pipe & Foundry Co., 210 Ala. 145, 150,
97 So. 219 (1923). See, Alabama Music Co. v. Nelson,
282 Ala. 517, 213 So. 2d 250 (1968); Roan v.
McCaleb, 264 Ala. 31, 84 So. 2d 358 (1956); Finnell
v. Pitts, 222 Ala. 290, 132 So. 2 (1930); Chandler
v. Hunter, 340 So. 2d 818 (Ala. Civ. App. 1976).
Fletcher's Cyclopedia of Corporations, at 202-203
(1975), explains the rule as follows:
"'It is thoroughly well settled that
a man is personally liable for all torts
committed 
by 
him, 
consisting 
in 
misfeasance
–- 
as 
fraud, 
conversion, 
acts 
done
negligently, 
etc. 
-– 
notwithstanding 
he 
may
have acted as the agent or under directions
of another.  And this is true to the full
extent as to torts committed by the
officers or agents of a corporation in the
management of its affairs. The fact that
the circumstances are such as to render the
corporation 
liable 
is 
altogether 
immaterial
1031498
11
.... Corporate officers are liable for
their 
torts, 
although 
committed 
when 
acting
officially. In other words, corporate
officers, charged in law with affirmative
official responsibility in the management
and control of corporate business, cannot
avoid 
personal 
liability 
for 
wrongs
committed by claiming that they did not
authorize and direct that which was done in
the regular course of that business, with
their knowledge and with their consent or
approval, or such acquiescence on their
part as warrants inferring such consent or
approval.'
"This rule does not depend on the same grounds as
'piercing the corporate veil,' that is, inadequate
capitalization, use of the corporate form for
fraudulent purposes, or failure to comply with the
formalities of corporate organization.  See L.C.L.
Theatres v. Columbia Pictures Indus., 619 F.2d 455
(5th Cir. 1980)."
Criglar v. Salac, 438 So. 2d 1375, 1379-80 (Ala. 1983).
Sorrells's and Horne's status as corporate officers did
not shield them from individual liability in tort for their
actions.  As the Criglar Court noted, individual liability in
tort is not dependent upon the same grounds as piercing the
corporate veil.  The corporate veil is pierced to prevent a
shareholder, who is not normally liable for corporate debts or
liabilities, from hiding behind the corporate shield when the
shareholder is operating the corporation as an alter ego.
Econ Marketing, Inc. v. Leisure American Resorts, Inc., 664
1031498
12
So. 2d 869 (Ala. 1994).  However, where a tort action is
brought against an officer of the corporation, there is no
need to pierce the corporate veil, and the officer will be
held liable if the elements of the tort are satisfied.
Although 
the 
trial 
court 
concluded 
that 
there 
was 
insufficient
evidence to pierce the corporate veil, it expressly found that
Sorrells and Horne had made fraudulent misrepresentations to
Consolidated and that they owed Consolidated a duty to
disclose certain information.
To 
establish 
the 
elements 
of 
fraudulent 
misrepresentation
Consolidated had to show: "(1) that the representation was
false, (2) that it concerned a material fact, (3) that it
relied on the false representation, and (4) that actual injury
resulted from that reliance."  Boswell v. Liberty Nat'l Life
Ins. Co., 643 So. 2d 580, 581 (Ala. 1994).  
To establish fraudulent suppression, Consolidated had to
show: "'(1) that the defendant had a duty to disclose material
facts; (2) that the defendant concealed or failed to disclose
those facts; (3) that the concealment or failure to disclose
induced the plaintiff to act [or to refrain from acting]; and
(4) that the defendant's action resulted in harm to the
1031498
13
plaintiff.'"  Bethel v. Thorn, 757 So. 2d 1154, 1162 (Ala.
1999)(quoting Booker v. United American Ins. Co., 700 So. 2d
1333, 1339 n. 10 (Ala. 1997)).
"The question whether a party had a duty to disclose is
a question of law to be determined by the trial court."
Barnett v. Funding Plus of America, Inc., 740 So. 2d 1069,
1074 (Ala. 1999).  In Armstrong Business Services, Inc. v.
AmSouth Bank, 817 So. 2d 665, 677 (Ala. 1999), this Court
held:
"The trial court must consider and apply the
following factors in determining whether, under the
particular circumstances, a duty to disclose exists:
'(1) the relationship of the parties; (2) the
relative knowledge of the parties; (3) the value of
the particular fact; (4) the plaintiffs' opportunity
to ascertain the fact; (5) the customs of the trade;
and (6) other relevant circumstances.'"
(Quoting State Farm Fire & Cas. Co. v. Owen, 729 So. 2d 834,
842-43 (Ala. 1998).)
With regard to the duty to disclose, this Court has
stated:
"A duty to communicate can arise from a
confidential relationship between the plaintiff and
the defendant, from the particular circumstances of
the case, or from a request for information, but
mere silence in the absence of duty to disclose is
not fraudulent. ...
1031498
14
"....
"This Court has stated that whether one has a
duty to speak depends upon a fiduciary, or other,
relationship of the parties, the value of the
particular fact, the relative knowledge of the
parties, and other circumstances of the case. ...
When the parties to a transaction deal with each
other at arm's length, with no confidential
relationship, no obligation to disclose information
arises when the information is not requested."
Mason v. Chrysler Corp., 653 So. 2d 951, 954-55 (Ala. 1995).
In the present case, Consolidated contacted D.S. Sorrells
after it became aware that MBCI had not been paid for
materials used in connection with the Endeavor Elementary
School project.  The trial court found that Sorrells and Horne
then made false statements regarding D.S. Sorrells's payments
to MBCI, representing that the nonpayment had been the result
of 
an 
accounting 
error.  Nevertheless, Consolidated has 
failed
to prove the element of detrimental reliance.  Testimony from
Consolidated's vice president indicates that when a supplier
complained to Consolidated that it was not getting paid by a
subcontractor, Consolidated would verify that fact and then
would issue a joint payee check to both the subcontractor and
the supplier in order to ensure that the supplier was paid.
Consolidated did not become aware of D.S. Sorrells's failure
1031498
Pursuant to this public-works project, the check was
3
written by the Madison County Board of Education, the school
system that was building the Endeavor Elementary School after
Consolidated presented a voucher to the school system.
15
to pay MBCI until June or July 2001.  At that time,
Consolidated had already paid D.S. Sorrells all that it was
owed.  The last payment from Consolidated  to D.S. Sorrells
3
was on March 28, 2001, several months before the fraudulent
misrepresentation occurred.
Testimony from Consolidated's senior estimator indicated
that Consolidated's last payment to D.S. Sorrells was on March
28, 2001. He stated that he contacted D.S. Sorrells in June or
July 2001, after MBCI refused to give Consolidated a warranty
on the material it supplied to the project. The estimator
testified that Consolidated had no way of knowing that D.S.
Sorrells had been falling behind in its payments to
materialmen "and nobody bothered to voluntarily send us any
information saying these invoices were not being  paid so
we're going to have a claim." He stated that if Consolidated
had known earlier that D.S. Sorrells was not paying the
materialmen, a two-party check would have been issued.
However, he admitted that the last payment to D.S. Sorrells
1031498
16
was in March 2001 and that Consolidated did not know MBCI had
not been paid until the summer of 2001. Therefore,
Consolidated 
did 
not 
rely 
on 
the 
fraudulent 
misrepresentations
in paying D.S. Sorrells, because Consolidated's last payment
to D.S. Sorrells was issued in March 2001, at least three or
four months before the fraudulent misrepresentations by D.S.
Sorrells.
I recognize that the trial court made a specific finding
of fact that Sorrells and Horne falsely represented to
Consolidated on a repeated basis in early 2000 and up to the
trial of this civil action, that D.S. Sorrells intended to
pay, and had in fact paid, all moneys owed to MBCI for the
Endeavor Elementary School project. However, this particular
finding contradicts other findings of the trial court.
Specifically, the trial court found that D.S. Sorrells had
failed to pay MBCI for invoices totaling $65,221.78. Those
invoices begin with a shipping date for materials of February
1, 2001. The trial court also found, as evidenced by the
contract between MBCI and D.S. Sorrells, that MBCI had 30 days
in which to pay MBCI.  D.S. Sorrells did not owe MBCI for any
bills before those submitted into evidence for materials
1031498
17
supplied with a beginning shipping date of February 1, 2001.
The evidence indicates that D.S. Sorrells paid MBCI for each
invoice until April 2001, when a check from D.S. Sorrells to
MBCI in the amount of $58,507.72 was returned due to
insufficient funds, and by the time D.S. Sorrells ceased
operations, it showed a balance of $65,221.78 owed to MBCI.
With regard to fraudulent suppression, the trial court
stated in its order that D.S. Sorrells concealed from
Consolidated that it was having difficulty in paying its
creditors and that it was misusing payments from Consolidated
for purposes in contradiction of the contract between D.S.
Sorrells and Consolidated.  The trial court found that
Sorrells 
and 
Horne 
were 
presented 
with 
multiple 
inquiries 
from
Consolidated in the summer of 2001 regarding payments made by
D.S. Sorrells to MBCI for the material used in the Endeavor
Elementary School project.  Those inquiries required Sorrells
and Horne to disclose fully the correct status of the payments
made to MBCI.  Until Consolidated requested information from
D.S. Sorrells, D.S. Sorrells did not have a duty to disclose
any information regarding its payments to MBCI or its own
financial status. By the summer of 2001, Consolidated had
1031498
18
already paid D.S. Sorrells; therefore, Consolidated was not
induced to act or did not refrain from acting based on the
false information regarding D.S. Sorrells's payments to MBCI.
Furthermore, 
the 
trial 
court 
expressly 
found 
that 
Consolidated
had failed to establish its theory that some or all of the
amounts claimed by MBCI on the Endeavor Elementary School
project 
had 
been 
paid 
by 
D.S. 
Sorrells 
and 
then
inappropriately applied by MBCI to other debts D.S. Sorrells
owed to MBCI for other construction projects. 
Although the trial court entered a judgment in favor of
Sorrells and Horne on Consolidated's fraud claims based on
insufficient evidence to warrant piercing the corporate veil,
the trial court should have found in favor of Sorrells and
Horne on the grounds that Consolidated failed to prove all the
elements of fraudulent misrepresentation and fraudulent
suppression.  This Court can affirm the judgment of the trial
court even if we disagree with the trial court's reasoning in
entering the judgment, so long as the judgment itself is
proper.  Progressive Specialty Ins. Co. v. Hammonds, 551 So.
2d 333 (Ala. 1989). 
Harwood, J., concurs.