Title: Safeco Insurance Company of America and Johnson Controls, Inc. v. Graybar Electric Company, Inc.
Citation: N/A
Docket Number: 1090422
State: Alabama
Issuer: Alabama Supreme Court
Date: September 30, 2010

REL:09/30/2010
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
SPECIAL TERM, 2010
____________________
1090422
____________________
Safeco Insurance Company of America and Johnson Controls,
Inc.
v.
Graybar Electric Company, Inc.
Appeal from Jefferson Circuit Court
(CV-08-3201)
BOLIN, Justice.
Safeco 
Insurance 
Company 
of 
America 
("Safeco") 
and 
Johnson
Controls, Inc. ("JCI"), appeal from a summary judgment entered
in favor of Graybar Electric Company, Inc. ("Graybar").  
1090422
2
Facts and Procedural History
In October 2006, JCI entered into a contract with the
Birmingham Airport Authority to perform work in connection
with upgrades to the closed-circuit television system at the
airport.  As the general contractor for the project, JCI was
required to furnish surety bonds, including a payment bond.
JCI procured the bonds from Safeco, as surety on the project.
In performing the work on the project, JCI entered into
a subcontract with TDC Systems Integration, Inc. ("TDC").
Graybar supplied electrical parts and equipment to TDC on
credit pursuant to a contract.  TDC failed to pay Graybar for
the materials.  
On January 10, 2008, Graybar sued TDC and its president,
Antonio Dozier, who had signed a personal guaranty on behalf
of TDC, in Georgia.  Graybar alleged that TDC and its
president owed Graybar $255,639.27 under a credit agreement
and the personal guaranty.  This amount included amounts
Graybar alleged TDC owed on the airport project in Birmingham
and on a project in New Orleans.  
On April 18, 2008, Graybar notified JCI and Safeco by
certified mail, pursuant to the payment bond and pursuant to
1090422
3
§ 39-1-1, Ala. Code 1975, concerning bonds required of persons
contracting for public works, that TDC had failed to pay for
materials and supplies sold to TDC for work performed on the
airport project.  The notice also provided that Graybar would
seek reasonable attorney fees and interest in accordance with
§ 39-1-1(b).  In the notice, Graybar stated that a complete
set of Graybar's invoices and proofs of delivery compiled to
date containing approximately 400 pages would be sent to
Safeco and JCI and that TDC had already been provided with a
copy of those documents.  On April 23, 2008, those documents
were sent to Safeco, JCI, and the Birmingham Airport
Authority.  JCI did not respond.  On May 28, 2008, Safeco
responded to the notice, denying Graybar's claim on the
grounds that Graybar had not complied with the notice
requirements of § 39-1-1 and that the invoices and other
materials sent by Graybar were insufficient to satisfy Safeco
that the materials TDC ordered and allegedly failed to pay for
were actually used on the airport project.  Safeco contended:
"TDC 
admits 
that 
they 
ordered 
the
materials/supplies, received the good[s] and did not
pay for them.  They did not indicate which job the
goods were used on or whether they were used at all.
They admitted to ordering and receiving only.  At no
time, in any of the court documents[,] did they
1090422
4
indicate that any of the goods were used on the
Birmingham job.  Thus, the provided court documents
fail to shed any light on the subject." 
On October 3, 2008, Graybar filed a verified complaint for
money damages against Safeco and JCI (hereinafter collectively
referred to as "the defendants") in the Jefferson Circuit
Court.  Graybar alleged that TDC failed to pay for materials
used in the airport project in the amount of $202,076.22.
Attached to the complaint, among other things, was an
affidavit from TDC's president stating that TDC had purchased
materials having a total value of $202,076.22 from Graybar for
use on the airport project and that TDC had not paid for the
materials.  Also, there was an affidavit from Graybar's
financial officer attesting to the amount of money spent on
attorney fees and costs in trying to obtain satisfaction under
the payment bond. On November 26, 2008, the defendants filed
an answer denying Graybar's claims. 
On February 26, 2009, Graybar entered into a settlement
agreement with TDC and its president in the lawsuit that had
been filed in Georgia.  The settlement provided as follows:
"This Settlement Agreement is entered into as of
this 26th day of February, 2009, between Plaintiff,
Graybar Electric Company, Inc., (herein 'Graybar'),
and Defendants, TDC Systems Integration, Inc. and
1090422
5
Antonio 
Dozier, 
jointly 
and 
severally 
(herein
'Defendants').
 
"WHEREAS, Graybar filed a Complaint against
Defendants in this court seeking to recover money
owed to Graybar for materials supplied to TDC Systems
Integration, Inc., in connection with two (2)
construction projects, namely. Project NOIA SOC-1542
Access Control, Security Network Integration &
Electrical Systems, at the New Orleans, Louisiana
Airport (the 'New Orleans Job') and Closed Circuit
Television (CCTV) System Upgrade Project at the
Birmingham 
International 
Airport, 
Birmingham, 
Alabama
(the 'Birmingham Job'); and 
"WHEREAS, Defendants desire to settle the above-
captioned [Georgia] civil action and reduce or
eliminate expenses of litigation; and
 
"WHEREAS, Defendants acknowledge and agree that
the total principal amount due to Graybar is
$233,996.79, comprised of the principal amount of
$31,920.57 due on the New Orleans Job and the
principal amount of $202,076.22 due on the Birmingham
Job; and 
"WHEREAS, the parties desire to stay the
captioned civil action pending payment by Defendants
to Graybar of said principal amount plus interest
thereon as hereinafter provided. 
"NOW THEREFORE, for and in consideration of
Graybar's 
agreement 
under 
the 
terms 
of 
this
Settlement Agreement to forbear from the entry,
enforcement and collection of the Consent Judgment,
a copy of which is attached hereto as Exhibit 'A.'
and specifically made a part hereof. Defendants agree
and consent as follows: 
"1.
1090422
6
"Defendants shall consent to a Consent Judgment
by and through Defendants' counsel of record in the
above-captioned 
civil 
action 
granting 
Graybar
judgment against Defendants, jointly and severally,
for the principal amount of $233,996.79, plus accrued
interest thereon, or so much thereof as may from time
to time remain outstanding and unpaid, at the rate
hereinafter set forth from May 15, 2009, until said
Consent Judgment is entered in the above captioned
civil action, and thereafter at the rate provided by
law until the unpaid principal amount with all
interest accrued thereon is paid in full, together
with reasonable attorney's fees, and costs and
expenses incurred in connection with the above
referenced civil action. The original of said Consent
Judgment shall be surrendered to Graybar or its
attorney. Graybar or its attorney, as applicable,
will hold the Consent Judgment and only have said
Judgment presented to the Court for signature and
entered in the above captioned civil action if
Defendants default in the terms and conditions of
this Settlement Agreement. 
"2.
 
"In 
further 
consideration 
of 
Graybar's 
agreement
and forbearance as aforesaid, Defendants agree to pay
to Graybar the principal amount of $233,996.76 plus
accrued interest at the rate hereinafter set forth in
accordance with the following terms and conditions:
"Said principal sum, or the amount outstanding
and unpaid from time to time, shall bear interest at
the rate of five and one-quarter per cent (5 1/4%)
per annum from May 15, 2009. Interest shall be
computed on a 365-day year simple interest basis and
shall be computed on the daily outstanding principal
balance. Said principal sum from time to time
outstanding 
and 
unpaid, 
with 
accrued 
interest
thereon, shall be due and payable monthly in
installments 
of 
principal 
and 
of 
interest, 
commencing
May 15, 2009, in accordance with the payment schedule
1090422
7
attached hereto as Exhibit B and made a part hereof,
with the final installment of principal and of
interest being due and payable on October 10, 2010.
Interest at the rate aforesaid on said principal sum
from time to time outstanding and unpaid shall
continue until said principal sum and all accrued
interest thereon have been paid in full or until said
Consent Judgment is entered in the above captioned
civil action, whichever event first occurs. Time is
of the essence of this Agreement. 
"Payments as made shall be applied first to the
payment of interest on the principal sum, or the
balance thereof remaining from time to time unpaid,
and the balance of said payments shall be applied to
principal. All payments shall be made by bank check
in lawful money of the United States of America which
shall at the time of payment be legal tender in
payment of all debts, public and private, and shall
be payable to Graybar Electric Company, Inc., and
mailed to Graybar Electric Company, Inc., Attention:
John Kahne, Director Finance, 2050 Nancy Hanks Drive,
Norcross, Georgia 30071-2956. 
"It is acknowledged and agreed between the
parties that the principal amount due and payable for
the New Orleans Job is $31,920.57 and that upon
payment by Defendants of the first payment due
hereunder on May 15, 2009 in accordance with the
attached payment schedule, the principal portion of
said first payment equal to said $31,920.57 amount
will be deemed the full and final payment due by
Defendants to Graybar in connection with the New
Orleans Job.  The principal portion of said first
payment remaining, that is $5,226.26, will be
credited 
against 
the 
principal 
amount 
due 
by
Defendant to Graybar for the Birmingham Job.
"3. 
"Provided, however, in the event Defendants
default in any of the terms and conditions of this
1090422
8
Settlement Agreement, and such default is not cured
within five (5) days after receipt of written notice
from Graybar to Defendants as hereinafter provided,
then Graybar immediately thereafter shall have the
right to present the Consent Judgment to the court
for signature and to have said Judgment entered in
the above captioned civil action, and thereafter the
right to enforce and collect the unpaid principal
balance with accrued interest thereon at the rate of
five and one-quarter per cent (5 1/4%) per annum from
May 15,2009 to the date said Consent Judgment is
entered in the above captioned civil action, and
thereafter at the rate as provided by law until said
unpaid principal amount and all accrued interest
thereon are paid in full, together with reasonable
attorney's fees and costs and expenses incurred in
connection with the captioned civil action. 
"Any notice to Defendants shall be in writing
and deemed given to Defendants by delivery of the
same to Defendants' counsel .... Rejection or other
refusal to accept any notice shall be deemed to be
receipt of said notice. 
"4.
 
"The parties further agree that the captioned
civil action shall be stayed and not subject to
dismissal for lack of prosecution pending payment
under this Settlement Agreement. The parties further
agree that there are no intended third party
beneficiaries to this Settlement Agreement and do not
intend this Settlement Agreement to benefit any third
party. 
Further, 
this 
Settlement 
Agreement 
encompasses
the entire agreement between the parties and neither
party has relied upon any implied or express
representations not contained herein." 
On March 11, 2009, the trial court in the Alabama action
held a status conference.  On March 17, 2009, Graybar filed a
1090422
9
notice of the settlement agreement in the Georgia action with
the trial court in the present case.  On May 14, 2009, the
trial court conducted a second status conference.  The
defendants had not sought any discovery from Graybar.  On May
20, 2009, the trial court set the case for trial on October
19, 2009.
On August 27, 2009, the defendants moved for a summary
judgment on the ground that the settlement agreement in the
Georgia action was a novation and that it extinguished
Graybar's assertion of any claim arising out of Graybar's
contract with TDC and that the settlement agreement was a
complete defense to Graybar's claims under the payment bond
issued by Safeco.  On October 1, 2009, Graybar filed a cross-
motion for a summary judgment.  Attached to Graybar's motion
were updated affidavits from TDC's president and Graybar's
financial officer.            
The trial court held a hearing on the summary-judgment
motions, and on October 22, 2009, denied the defendants'
motion and granted Graybar's cross-motion.  Specifically, the
trial court stated, in denying Safeco's motion, that Bledsoe
v. Cargill, Inc., 452 So. 2d 1334 (Ala. Civ. App. 1984), holds
1090422
10
that the intention of the parties is determinative of whether
there has been a novation or a substitution of one contract
for another.  The trial court, relying on Bledsoe, held that
the parties to the settlement agreement –- Graybar, TDC, and
its president -- did not intend to benefit any third party and
that the intent of the parties was not to substitute the
settlement agreement for rights under the payment bond issued
by Safeco.  With regard to the Graybar's summary-judgment
motion, the trial court stated that the bond remained in
effect and that there was no dispute as to the amount still
owed.  The trial court awarded attorney fees to Graybar.  The
defendants appeal.
Standard of Review
Our standard of review of a summary judgment is well
settled:
"'The standard of review applicable to a summary
judgment is the same as the standard for granting 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
1090422
11
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).
Analysis
The defendants argue that the trial court erred in denying
its 
summary-judgment 
motion 
because, 
they 
assert, 
the
settlement agreement between Graybar and TDC in the Georgia
action was a novation and the novation extinguished Graybar's
claims under the payment bond.  
At the outset, we note that this case arises under § 39-1-
1 et seq., Ala. Code 1975, commonly referred to as Alabama's
1090422
12
little Miller Act.  Federal Ins. Co. v. 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
1090422
13
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 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).  
"The legal standard for determining whether a
supplier has relinquished its statutory rights is
firmly established: absent a novation or clear
expression to the contrary, a supplier does not
forfeit its right to sue under the public works
statute. United States v. Forrester, 441 F.2d 779,
782 (5th Cir. 1971); Warrior Constructors Inc. v.
Harders, Inc., 387 F.2d 727, 729 (5th Cir. 1967).
1090422
14
"'The right to sue on a surety bond is a
right created by statute, and in the
absence of a novation or clear expression
to the contrary, the contention that there
has been a waiver or release of that right
must fail.'
"Forrester, 441 F.2d at 782; Warrior, 387 F.2d at
729. Thus, absent a novation, waiver, estoppel, or
other clear and explicit relinquishment of the
statutory right, a supplier is entitled to pursue
payment under a bond. [United States ex rel. Clark-
Fontana Paint Co. v.] Glassman, 397 F.2d [8] at 10
[(4th Cir. 1968)] (express waiver must be both clear
and explicit); see also Forrester, 441 F.2d at 783
(estoppel a valid defense under the Miller Act);
Glassman, 397 F.2d at 11 (same); Graybar Elec. Co. v.
John A. Volpe Constr. Co., 387 F.2d 55, 59 (5th Cir.
1967) (same); United States v. James Stewart Co., 336
F.2d 777, 779 (9th Cir. 1964) (same)."
Trane Co. v. Whitehurst-Lassen Constr. Co., 881 F.2d 996, 1003
(11th Cir. 1989).
"A novation is the substitution of one contract for
another; a novation releases the party bound by the original
contract. 
 
A 
novation 
extinguishes 
the 
preexisting
obligation."  Golden v. Bank of Tallassee, 639 So. 2d 1366,
1369 (Ala. 1994). "Novation requires: '(1) a previous valid
obligation; (2) an agreement of the parties thereto to a new
contract or obligation; (3) an agreement that it is an
extinguishment of the old contract or obligation; and (4) the
new contract or obligation must be a valid one between the
1090422
15
parties thereto.'" Boh Bros. Constr. Co. v. Nelson, 730 So. 2d
132, 134 (Ala. 1999) (quoting Warrior Drilling & Eng'g Co. v.
King, 446 So. 2d 31, 33 (Ala. 1984)). 
Graybar cites Medly v. SouthTrust Bank of the Quad Cities,
500 So. 2d 1075 (Ala. 1986), for the proposition that  a
novation is a substituted contract that includes a party who
was neither the obligor nor the obligee to the original duty.
The appellate courts of this State have used the terms
"novation" 
and 
"substituted 
contract" 
interchangeably.
However, there is a technical distinction: "a substituted
contract is one that is accepted in satisfaction of the
original contract and thereby discharges it, while a novation
is a substituted contract that includes a party who was not
part of the original contract." 66 C.J.S. Novation § 1 (2009)
(footnotes omitted).   In the present case, it is obvious that
the issues is whether a substituted contract was accepted in
satisfaction of the original contract.
The defendants argue that Bledsoe v. Cargill, Inc., 452
So. 2d 1334 (Ala. Civ. App. 1984), cited by the trial court,
is  inapposite here because the Bledsoe court rejected the
argument that the defendant was not a party to the subsequent
1090422
16
agreement and, therefore, the subsequent agreement could not
replace the prior agreement to which the defendant was a
party.  The defendants contend that in the present case both
the prior agreement and the present agreement were between
Graybar and TDC and that it is relying on the substitution of
the later agreement for the earlier agreement between those
same parties that created the substituted contract upon which
the defendants rely.
In Bledsoe, supra, Cargill, Inc., supplied feed and
supplies  for use in livestock production.  Sidney Bledsoe was
a shareholder in a corporation with three other shareholders.
All the shareholders had signed personal guaranties in the
amount of $10,000 each to obtain credit with Cargill.  The
guaranty agreements provided that Cargill could take, extend,
or renew collateral from other persons without changing or
releasing or discharging Bledsoe from his obligation under the
guaranty agreement, and that the guaranty was an absolute
continuing guaranty that would remain in full force and effect
until the delivery to Cargill of a notice in writing signed by
Bledsoe terminating the guaranty agreement.  Subsequently,
Bledsoe sold his shares in the corporation. Bledsoe did not
1090422
17
notify Cargill of his intent to terminate the guaranty
agreement.  The remaining shareholders then executed new
personal guaranty agreements in the amount of $50,000 each
with Cargill.  The new guaranty agreements were expressly
intended by Cargill and the remaining shareholders  to be
substituted for their original guaranty agreements.  At some
point after the new guaranty agreements were executed, Bledsoe
received a letter from Cargill informing him that the
corporation was in debt and that he owed Cargill $10,000 on
his personal guaranty.  Bledsoe refused to pay, and Cargill
sued.  Bledsoe argued that once he sold his interest in the
corporation and once the shareholders of the corporation
executed the new guaranty agreements for $50,000, there was,
in effect, a substitution of the $50,000 guaranties for the
earlier $10,000 guaranties.  The Bledsoe court held that
Bledsoe was not a party to the substitution of the $50,000
guaranties for the $10,000 guaranties nor did he consent to
the substitution of the new guaranties for the old guaranties.
The court concluded that evidence failed to show that the
parties intended that the new guaranties discharge Bledsoe
from his $10,000 guaranty.    
1090422
18
In the present case, the trial court correctly cites
Bledsoe for the proposition that whether there has been a
substituted contract depends upon the intention of the
parties, 
which 
may 
be 
determined 
by 
the 
facts 
and
circumstances.  The trial court expressly found that Graybar
and TDC, as parties to the settlement agreement, did not
intend to benefit any third party and that the intent of the
parties was not to substitute the settlement agreement for
rights arising under the payment bond issued by Safeco. 
Without citing any authority, the defendants argue that the
settlement agreement amounts to a substituted contract for the
payment bond because, they say, the terms substantially and
materially alter the terms of the original agreement as to the
amount of interest that may be charged and  when payment may
be demanded and because the president of TDC surrendered any
defenses as a guarantor and become jointly and severally
liable for the  debt.  The defendants' argument ignores
Graybar and TDC's express statements in the settlement
agreement that TDC was not released from the previous
obligation to pay for the materials supplied for the airport
project and that the settlement agreement was not intended to
1090422
The defendants cite no authority regarding a surety's
1
status as a third-party beneficiary.
19
benefit any third party, which would clearly include the
defendants, who were nonparties to the settlement agreement.1
The defendants cite Trane, 881 F.2d 996, supra, in support
of its position that there was a novation in the context of
the little Miller Act.  In Trane, 881 F.2d 996, supra, a board
of education had entered into a contract for the renovation of
a school cafeteria.  The prime contractor entered into a
payment bond with a surety to secure payment to persons
furnishing materials for the project as required by Ala. Code
1975, § 39-1-1.  Trane, a supplier of air-conditioning and
heating equipment, successfully bid to provide equipment to
the mechanical subcontractor.  The mechanical subcontractor
owed Trane for another job unrelated to the school cafeteria
and was 60 days past due on that debt.  Trane ordered the
equipment 
for 
the 
school cafeteria, which 
had to 
be
manufactured, but ordered that the shipment be held until a
"credit hold" was lifted.  When the equipment was ready to
ship, Trane ultimately contacted the prime contractor and told
it that Trane would require a purchase order directly from the
prime contractor before the equipment would be shipped, which
1090422
20
the prime contractor provided.  Trane shipped the equipment
but was not paid.  Subsequently, the prime contractor
terminated its contract with the mechanical subcontractor but
did not inform Trane.  The prime contractor entered into a
settlement with the mechanical subcontractor, but Trane was
not paid.  
The prime contractor argued that Trane had relinquished
its statutory right to payment under the payment bond because
Trane had entered into a new agreement with the prime
contractor in place of the preexisting agreement with the
mechanical subcontractor; that it had waived its statutory
right 
by 
requesting 
a purchase order from the prime
contractor; or that it was estopped from asserting its right
to payment because the prime contractor had overpaid the
mechanical subcontractor in its settlement agreement. With
regard to its novation, the court held that there was no
evidence indicating that there had been no mutual assent,
consideration, or definitive terms to support the prime
contractor's argument that there was a new contract.  Trane
still had a commitment to provide the mechanical subcontractor
with air-conditioning and heating equipment, and Trane did not
1090422
21
intend the new purchase order to substitute for the prior
agreement.  The court held that Trane's request for a new
purchase order was akin to a request for additional security
and that it did not constitute a waiver of its statutory
rights under the little Miller Act.  In the present case, the
settlement agreement did not release TDC from its obligation
to pay the full contract price.              
We also find instructive with regard to the Miller Act
Liebman v. United States ex rel. California Electric Supply
Co., 153 F.2d 350 (9th Cir. 1946).  In Liebman, California
Electric supplied electrical fixtures and materials to a
subcontractor for a public-works project involving an airport.
The prime contractor obtained a payment bond from a surety.
The subcontractor did not pay for the fixtures and materials,
and California Electric filed a claim under the Miller Act.
Subsequently, 
the 
subcontractor 
filed 
a 
petition 
in
bankruptcy.  California Electric filed a claim against the
bankrupt's estate and asserted that it was a priority claim
under the Miller Act.  The referee refused to rule on the
claim because the funds were not in court, and the prime
contractor 
refused 
to 
pay 
over 
the 
amount 
owed 
the
1090422
22
subcontractor until there was an order directing to whom it
was to be paid.  To avoid a suit by the bankruptcy trustee,
the parties entered into a written stipulation, which stated
the circumstances under which the controverted sum was to be
deposited into the bankruptcy estate.  The referee determined
that 
California 
Electric's 
claim 
was 
not 
a 
priority.
California Electric then sued the prime contractor and the
surety.  The prime contractor and surety argued that the
stipulation constituted a release of the obligation under the
Miller Act.  The court stated:
"The language of the stipulation is a mere
recital 
of 
the 
circumstances 
under 
which 
the
controverted 
sum 
was 
deposited 
with 
bankruptcy 
court.
As the lower court stated there is no language in the
stipulation expressing or suggesting a release from
the obligation under the surety bond. The record
discloses no written or oral waiver or release of
right under the Miller Act. The purpose of the Miller
Act is to protect those who furnish materials or
labor or both for public buildings and to insure the
payment in full for such materials and labor. The
right to sue on a surety bond is a right created by
statute, and in the absence of a novation, the
appellants' contention that there was a waiver or
release of that right must fail.
"Appellants urge that the California Electric
Supply Company by entering into the stipulation is
now estopped from seeking relief on the surety bond.
Because they relied upon the stipulation as a waiver
of rights to sue on the payment bond, appellants
claim they have placed themselves in the position
1090422
23
where they will have to pay this obligation twice.
The materialman here receives payment but once.
Appellants' 
position 
has 
not 
been 
changed
prejudicially. The situation here would be the same
if there had been no stipulation at all."
153 F.2d at 352.
The defendants cite City of Philadelphia v. Joseph S.
Smith Roofing, Inc., 410 Pa. Super. 95, 599 A. 2d 222 (1991).
However, that case is clearly distinguishable from the present
case.  In Smith Roofing, the general contractor for a public-
works project had entered into a subcontract with a roofer.
The roofer had entered into a contract with a supplier.  The
roofer failed to pay the supplier, and the supplier then sued
the roofer.  Subsequently, the supplier entered into a
settlement agreement with the roofer, agreeing to accept 25
percent of the debt owed it.  The settlement agreement
released all guarantors and sureties of the roofer's debt.
The supplier sought to recover the balance under the payment
bond issued by the surety for the general contractor.  The
court held that, under the terms of the settlement agreement,
the debt owed the supplier for the materials used had been
fully satisfied and the surety discharged of any duty.  In the
present case, the settlement agreement provided that Graybar
1090422
24
"forbear from the entry, enforcement, and collection of the
consent judgment" in exchange for TDC's agreement to consent
to the entry of the consent judgment and set out TDC's
obligation to pay the entire amount owed of debt owed.  Also,
unlike the settlement agreement in Smith Roofing, the
settlement agreement here did not discharge the surety. 
Next, the defendants argue that the trial court erred in
entering 
a 
summary 
judgment 
in 
favor 
of 
Graybar.
Specifically, the defendants argue that Graybar failed to meet
the requirements under Alabama law for recovery under the bond
because, they argue,  Graybar's claims included materials from
another project, Graybar did not prove its good-faith belief
that the materials were for the Birmingham airport project,
and Graybar's negligence precluded a summary judgment in its
favor.     
In order to be entitled to a summary judgment, Graybar had
to present substantial evidence showing that all the elements
of its claim under the little Miller Act had been met.  In
A.G. Gaston Construction Co. v. Hicks, 674 So. 2d 545 (Ala.
Civ. App. 1995), the Court of Civil Appeals quoted the United
States Court of Appeals for the Eleventh Circuit and
1090422
25
identified four elements that must be proven before a supplier
or a subcontractor is entitled to recover under a payment bond
issued pursuant to the little Miller Act:
 "'(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.'"
674 So. 2d at 547 (quoting United States ex rel. Krupp Steel
Prods., Inc. v. Aetna Ins. Co., 831 F.2d 978, 980 (11th Cir.
1987)). 
Section 39-1-1(b) provides:
"(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 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
1090422
26
the result, together with interest on the claim from
the date of the notice."
The defendants 
argue that they submitted two invoices from
Graybar to TDC in opposition to Graybar's summary-judgment
motion that show that Graybar had included in its invoices
materials that were not for the Birmingham airport project and
that, because there was evidence indicating that materials for
which Graybar was seeking payment under the payment bond were
used in other projects, and because some of the materials were
generic in nature and could have been used on any project,
then it was doubtful that the president of TDC's recollections
would be accurate as to where the materials had been used, and
Graybar could not show a good-faith belief that the materials
were for the Birmingham project.  
In S.T. Bunn Construction Co. v. Cataphote, Inc., 621 So.
2d 1325 (Ala. Civ. App. 1993), the Court of Civil Appeals
addressed "good faith" in the context of a claim under the
little Miller Act.  A supplier to a public-works project was
not paid, and it sought relief against the general contractor
and the surety.  The supplier filed a summary-judgment motion
asserting that it reasonably believed in good faith that all
the supplies sent to the subcontractor were intended for use
1090422
Rule 56(f) protects against the premature or improvident
2
entry of a summary judgment by permitting a nonmovant to file
an affidavit stating how discovery would enable the nonmovant
to effectively oppose summary judgment. 
27
on the project and that the subcontractor never advised it
that some of the materials were to be used on other projects.
The supplier further asserted that, because it neither knew of
nor consented to the use of some of the materials for other
projects, it was entitled to recover for the materials it had
shipped to the subcontractor.  In response, the general
contractor submitted an affidavit stating that it had paid for
certain materials used in the project and that the remainder
of the materials provided had not been delivered to the
project site.  The general contractor's affidavit called the
supplier's good faith into question, making summary judgment
inappropriate.  
In the present case, unlike S.T. Bunn, the affidavits
submitted in support of Graybar's summary-judgment motion were
unequivocal that the materials were used in the Birmingham
airport project.  The defendants challenge the recollections
of TDC's president, yet they did not seek to depose him,
despite having ample time to have done so, and no affidavit
was 
filed 
pursuant 
to 
Rule 
56(f), 
Ala. 
R. 
Civ. 
P.2
1090422
28
Additionally, the two invoices attached to the defendants'
response to Graybar's summary-judgment motion, without more,
fail to show that a genuine issue of fact exists as to
Graybar's little Miller claim.  The two invoices that appear
to be from Graybar to TDC include one shipment to TDC's home
office.  This would not contradict the president's sworn
statements that the materials were used in the Birmingham
airport project.  Section 39-1-1 provides that the materials
be supplied for use in a public-works project -- not that the
materials be shipped to the project site. "[A] materialman
need not prove that his material was actually installed by the
subcontractor .... He may recover upon showing a reasonable,
good faith belief that the subcontractor intended the material
for the government job."  United States ex rel. Pomona Tile
Mfg. Co. v. Kelley, 456 F.2d 148, 
151-52 (9th Cir.
1972)(citations omitted).  We recognize that the phrase "good
faith belief that the materials would be used for the project"
is not used in the affidavits attached to Graybar's summary-
judgment motion; however, there is evidence through the
affidavits that Graybar intended for the materials to be used
1090422
29
in the Birmingham airport project and that the materials were
indeed used in the project.    
The defendants argue that Graybar's own negligence in
continuing to supply TDC with materials caused or contributed
to Graybar's failure to be paid and, thus, precludes Graybar
from recovering under the payment bond.  The defendants cite
authority arguing that summary judgment is inappropriate when
contributory negligence is at issue.  However, contributory
negligence is not a defense to a claim under the Miller Act.
Essentially, the defendants are arguing estoppel, which is a
defense to a claim under the Miller Act.  See Trane, supra.
In Graybar Electric Co. v. John A. Volpe Construction Co.,
387 F.2d 55 (5th Cir. 1967), the prime contractor had issued
checks to the subcontractor that had been endorsed to the
order of the supplier and then endorsed back to the
subcontractor by the supplier. The general contractor made
progress payments to the subcontractor, provided that the
subcontractor would endorse the check to each supplier so that
the money would not be diverted to other uses. Pursuant to a
prior 
understanding 
between 
the 
subcontractor 
and 
the
supplier, of which the general contractor had no knowledge,
1090422
30
the 
supplier 
would 
endorse 
the 
checks 
back 
to 
the
subcontractor. The general contractor argued that the supplier
was obligated to credit the amount of the checks against the
amount owed by the subcontractor.  The court agreed with the
general contractor and found that the general contractor did
everything it reasonably could to protect itself, short of
taking over the subcontractor's business.  Under those
circumstances, the supplier was estopped from seeking payment
under the bond.
In United States ex rel. Gulfport Piping Co. v. Monaco &
Son, Inc., 336 F.2d 636 (4th Cir. 1964), the supplier was
estopped from recovering under a payment bond because a third
party had falsely claimed to be the supplier and the
contractor had paid the third party.  The real supplier knew
of and acquiesced in the false representation of the third
party.  Here, the defendants' position is that continuing to
send materials to a subcontractor who has been delinquent for
several months in paying for materials to be used in a public-
works project supports estoppel.  We disagree.  Furthermore,
the little Miller Act, like the Miller Act, is highly remedial
1090422
31
in nature and is entitled to a liberal construction and
application in order to effectuate its purpose.  
Last, the defendants argue that the court erred in
awarding Graybar attorney fees and interest because recovery
under the little Miller Act is not absolute and a claimant
must adequately prove its entitlement to the damages it seeks.
The defendants argue that, because they presented meritorious
defenses, Graybar was not entitled to recover at all under the
little Miller Act.  The defendants argue that the amount
claimed to be due must be a valid and correct amount, because
it is specifically the nonpayment of that amount that gives
the court the discretion to award attorney fees and interest.
We have already addressed the validity of Graybar's claim
under the little Miller Act.  
The defendants further argue that Graybar did not present
proof that the amount of attorney fees requested was
reasonable.  Safeco and JCI were notified on April 18, 2008,
of Graybar's claim for unpaid materials under the little
Miller Act along with its claim for attorney fees.  Section
39-1-1(b) of the little Miller Act provides that a supplier
may recover a reasonable attorney fee.  In support of its
1090422
The defendants did not file an affidavit pursuant to Rule
3
56(f), Ala. R. Civ. P., which, as noted previously, protects
against the premature or improvident entry of a summary
judgment by permitting a nonmovant to file an affidavit
stating 
how 
discovery 
would 
enable 
the 
nonmovant 
to
effectively oppose the entry of summary judgment.      
32
request for attorney fees, Graybar attached to its cross-
motion for a summary judgment an affidavit setting out the
amount of attorney fees Graybar had paid.  The defendants did
not file anything to controvert the amount requested.
Instead, the defendants argued to the trial court that they
would be forced to seek discovery if the trial court ruled in
favor of Graybar on its summary-judgment motion.  
I n  t h e i r
3
brief to this Court, the defendants argue:  
"In their response to Graybar's summary
judgment motion, Safeco and JCI pointed out
to the trial court that discovery and a
hearing on attorney's fees held after the
court ruled on the merits of the summary
judgment motions would be appropriate.
Otherwise, Safeco and JCI would have been
compelled to seek discovery on opposing
counsel's fees, including time records,
before 
the 
merits 
of 
a 
case 
were
adjudicated. See Tolar Constr., LLC v. Kean
Elec. Co., 944 So. 2d 138, 143 (Ala. 2006)
('The trial court entered a judgment on
this verdict on March 23 and set a hearing
on 
May 
2 
for 
"the 
determination 
of
attorney's 
fees, 
litigation 
costs 
and
interest, 
to 
be 
assessed 
against
[Tolar]."') (C. 196-197.)"
1090422
33
(Defendants' brief, p. 33.)  The case cited by the defendants,
Tolar Construction, LLC v. Kean Electric Co., 944 So. 2d 138
(Ala. 2006), did not involve the little Miller Act, but
instead involved the Prompt Payment Act (§ 8-29-1, Ala. Code
1975), also known as the Deborah K. Miller Act.  Also, Tolar
did not involve a summary judgment but involved a jury trial
in which the trial court charged the jury that the court would
determine the amount of attorney fees owed depending on the
jury's verdict.  Accordingly, we cannot say that the trial
court exceeded its discretion in awarding Graybar attorney
fees.    
Based on the foregoing, we affirm the judgment of the
trial court.
AFFIRMED.
Lyons, Stuart, Smith, Parker, and Shaw, JJ., concur.
Murdock, J., concurs specially.
Cobb, C.J., recuses herself.  
1090422
34
MURDOCK, Justice (concurring specially).
I have never understood that, in order for a new agreement
to constitute a "novation" of a prior agreement, the new
agreement must involve a party that was not a party to the
prior agreement.  That is, the elements of a novation listed
in Boh Bros. Construction Co. v. Nelson 730 So. 2d 132, 134
(Ala. 1999), as quoted in the main opinion and numerous other
decisions by this Court, are accurate and complete as quoted;
this includes the second element quoted, i.e., "'"an agreement
of the parties ... to a new contract or obligation."'"  ___
So. 3d at ___ (emphasis added).  This Court's recitation of
these elements in Boh Bros. and other cases is consistent with
what I always have understood to be the general rule.  See 58
Am Jur. 2d Novation § 3 (2002) (reciting the same four
elements stated in Boh Bros.), § 5 ("A novation may result
from the substitution of a new obligation or contract between
the same parties, with intent to extinguish the old obligation
or contract."), § 6 ("Although the Restatement and some other
definitions of novation require the substitution of a new
party, the term is now generally applied to any new contract
entered into for the purpose and with the effect of dissolving
1090422
35
an existing obligation, whether or not accompanied by change
of parties.") (footnotes omitted); 66 C.J.S. Novation Part
II.B.  (2009) (titled and discussing "Novation Between Same
Parties").