Opinion ID: 1334973
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Heading Rank: 1

Heading: Right of action arising under the bond statute

Text: Prior to the year 2000, South Carolina law afforded limited protection to subcontractors and suppliers providing labor and materials on public projects. See S.C.Code Ann. § 11-30-3030 (Supp.2006) (outlining a bonding scheme applicable to projects under the direction of governmental bodies generally) and S.C.Code Ann. § 57-5-1660 (outlining a bonding scheme specific to highway projects under the direction of SCDOT). Known as Little Miller Acts, these provisions are the state counterpart to the federal Miller Act legislation enacted to address the problem of subcontractors who may not use liens on public property to secure payment for work performed on public projects and must otherwise rely on the financial solvency of prime contractors. See United States v. Munsey Trust Co. of Washington, D.C., 332 U.S. 234, 241, 108 Ct.Cl. 765, 67 S.Ct. 1599, 91 L.Ed. 2022 (1947). See also Atl. Coast Lumber Corp. v. Morrison, 152 S.C. 305, 309, 149 S.E. 243, 245 (1929) (acknowledging that a mechanics' lien may not be enforced on public property). Consistent with the federal Miller Act, the bonding schemes contained in the Little Miller Acts require both a performance bond to ensure the timely performance of the contract by the general contractor and a payment bond to cover payment of subcontractors and suppliers in the event of the general contractor's default. See S.C.Code Ann. § 11-35-3030 and S.C.Code Ann. § 57-5-1660. In 2000, the South Carolina legislature enacted the Subcontractors' and Suppliers' Payment Protection Act (SPPA), S.C.Code Ann. §§ 29-6-210 et. seq. (Supp.2006). The SPPA is specifically applicable to subcontractors and suppliers on government projects and outlines a detailed bonding scheme that significantly expands the protections already afforded these parties under the Little Miller Acts. The SPPA reads in pertinent part as follows: (1) When a governmental body is a party to a contract to improve real property, and the contract is for a sum in excess of fifty thousand dollars, the owner of the property shall require the contractor to provide a labor and material payment bond in the full amount of the contract.... .... (3) For purposes of any contract covered by the provisions of this section, it is the duty of the entity contracting for the improvement to take reasonable steps to assure that the appropriate payment bond is issued and is in proper form. S.C.Code Ann. § 29-6-250. The SPPA does not expressly provide for a right of action between the subcontractor and the contracting government body. The court of appeals relied heavily on federal court interpretations of the Miller Act in holding that statutory bonding requirements under the SPPA do not establish a duty for which the government may be liable to a subcontractor. See Arvanis v. Noslo Eng'g Consultants, Inc., 739 F.2d 1287, 1290 (7th Cir.1984) (holding that the failure of a government agency to comply with the Miller Act's bonding requirements does not give rise to a private right of action against the agency) and Syro Steel Co. v. Eagle Constr. Co., Inc., 319 S.C. 180, 182, 460 S.E.2d 371, 373 (1995) (holding that absent a contrary expression of legislative intent, cases construing the federal Miller Act will be given great weight in interpreting the South Carolina counterpart). We find that the court of appeals improperly analyzed the SPPA bond statute under Miller Act rubric in arriving at its conclusion. The SPPA has neither ever been characterized as a Little Miller Act nor does it otherwise appear to be patterned after the Miller Act, which seeks to protect both the owner/government entity and the subcontractor through its bonding requirements. Instead, we look to our jurisprudence which holds that when a statute defining a government duty does not specifically create a private cause of action for breach of that duty, a cause of action may be implied if the legislation was enacted for the special benefit of a private party rather than the public at large. Adkins v. S.C. Dept. of Corr., 360 S.C. 413, 418, 602 S.E.2d 51, 54 (2004). Accordingly, we find that the relevant determination is whether an implied right of action exists under the SPPA. Beginning with an analysis of the statutory framework, we first find that the very title of the SPPA clearly indicates the General Assembly intended to provide stronger payment protection specifically for subcontractors and suppliers on government projects. See Broadhurst v. City of Myrtle Beach Elec. Comm'n, 342 S.C. 373, 381, 537 S.E.2d 543, 546 (2000) (using title of statute to support a judicial interpretation). We also find the placement of the SPPA within the South Carolina Code significant. Instead of appearing in the Procurement Code, [1] the SPPA is framed solely in the context of payment security by virtue of its location in Chapter 6 of Title 26, entitled Payments to Contractors, Subcontractors, and Suppliers. This Court has long held that such remedial statutes should be liberally construed in order to effectuate their purpose. S.C. Dept. of Mental Health v. Hanna, 270 S.C. 210, 213, 241 S.E.2d 563, 564 (1978). The statutory terms which tend to distinguish the SPPA from the Little Miller Acts likewise demonstrate the SPPA's enactment for the particular benefit of subcontractors and suppliers. First, the SPPA addresses only the requirement of a payment bond to protect subcontractors in the event of a contractor's nonpayment. The statute does not mention a corresponding performance bondrequired in the Little Miller Actsto protect the owner/government entity in the event of a contractor's nonperformance. Furthermore, the SPPA takes the Little Miller Acts' bond requirement one step further by establishing both a duty on the part of the governmental body to require payment bonding, as well as a standard of care for overseeing the issuance of a proper payment bond. See S.C.Code Ann. § 29-6-250 (providing that it is the duty of the entity contracting for the improvement to take reasonable steps to assure that the appropriate payment bond is issued and is in proper form). In placing an affirmative duty on the government that is absent from the Little Miller Acts, we find that the legislature must have intended for those to whom the government owed the duty to be able to vindicate their rights under a statute enacted for their special benefit. See State ex. rel . McLeod. v. Montgomery, 244 S.C. 308, 314, 136 S.E.2d 778, 782 (1964) (finding that a court must presume that the legislature intended by its action to accomplish something and not to do a futile thing); see also Steinke v. S.C. Dep't. of Labor, Licensing and Regulation, 336 S.C. 373, 388, 520 S.E.2d 142, 149 (1999) (acknowledging that an affirmative legal duty may be created by statute (quoting Jensen v. Anderson County Dept. of Soc. Servs., 304 S.C. 195, 199, 403 S.E.2d 615, 617 (1991))). For these reasons, we hold that an implied private right of action by a subcontractor against the government exists under the SPPA. [2] We briefly address SCDOT's suggestion that a suit on the bond in the event of nonpaymenta remedy expressly permitted under the statute [3] adequately serves any legislative purpose to protect subcontractors. In our view, this argument fails. A right to sue on the bond provides absolutely no protection for the subcontractor where, as alleged here, the government agency has altogether failed to secure or maintain proper bonding; clearly, a subcontractor cannot sue on a bond that does not exist in the first instance. Moreover, a suit on the bond, standing alone, gives the government entity no incentive to comply with the statute's bonding requirement when the entity 1) has no financial stake in the event of a contractor's nonpayment, and 2) no legal stake in its own noncompliance. In our opinion, the legislative purpose of the SPPA is only served by permitting subcontractors and suppliers on government projectsthe only parties with a financial interest in enforcing the bond requirements of the SPPAto bring a claim under the statute. Finally, although neither party raised the issue, the dissent asserts that the SPPA does not apply in the instant case, and that the bonding provisions relevant to SCDOT highway construction projects are found exclusively in S.C.Code Ann. § 57-5-1660 (2006). In doing so, the dissent draws a dubious distinction between highways and roadways that cannot be sustained in light of the principle that statutory language must be given its plain and ordinary meaning without resort to subtle or forced construction to limit or expand the statutes operation. Cohen's Drywall Co. Inc. v. Sea Spray Homes, 374 S.C. 195, 200, 648 S.E.2d 598, 600 (2007). Although, as the dissent points out, there are apparent discrepancies between § 57-5-1660 and the SPPA, [4] a basic presumption exists that the legislature has knowledge of previous legislation when later statutes are passed on a related subject. Berkebile v. Outen, 311 S.C. 50, 53, 426 S.E.2d 760, 762 (1993). Accordingly, and without an indication of legislative intent to the contrary, we find that any directive on the application of one statute to the exclusion of the other is within the province of the legislature. State v. Blackmon, 304 S.C. 270, 275, 403 S.E.2d 660, 662 (1991) (holding that the legislature, and not the court, is responsible for amending laws to resolve inconsistencies). In our view, the enactment of the SPPA in 2000 illustrates the legislature's intent to, in essence, pick up where the Little Miller Acts left off by outlining a more extensive payment protection scheme dedicated specifically to subcontractors and suppliers. Accordingly, we hold that the duty created under the SPPA gives rise to a private right of action against a government entity for failure to ensure that a contractor is properly bonded. [5]