Opinion ID: 1866936
Heading Depth: 2
Heading Rank: 2

Heading: The Public Works Act

Text: The Public Works Act provides protection to claimants who have been hired by a general contractor for the construction, alteration, or repair of public works. Those persons who qualify as claimants are specifically defined in LSA-R.S. 38:2242(A), which, at the time Wilkin filed the lien, provided: Claimant, as used in this Chapter, means any person to whom money is due pursuant to a contract with a contractor or subcontractor for doing work, performing labor, or furnishing materials or supplies for the construction, alteration, or repair of any public works, or for transporting and delivering such materials or supplies to the site of the job by a for-hire carrier, or for furnishing oil, gas, electricity, or other materials or supplies for use in machines used in the construction, alteration, or repair of any public works, including persons to whom money is due for the lease or rental of movable property, used at the site of the immovable and leased to the owner by written contract, and including any architect or consulting engineer engaged by the contractor or subcontractor in connection with the building of any public work. (emphasis added). Under the Act, the general contractor must obtain a bond which secures its obligation to pay claimants. Within forty-five days after the recordation of acceptance of the work by the governing authority or of notice of default of the contractor or subcontractor, a claimant may file a sworn statement with the governing authority of any amount due him by the general contractor, and record it in the mortgage records for the parish in which the work was done. LSA-R.S. 38:2242(B). The filing of this claim preserves the claimant's statutory privilege whereby he is entitled to payment from the governing authority in preference to any payment due by the authority to the general contractor. A governing authority's failure to pay claimants with outstanding claims in preference to the general contractor, renders the governing authority liable for the amount of the outstanding claims. LSA-R.S. 38:2242(D). The Public Works Act, as a whole, evidences an intent to protect those who directly aid in the construction of a public project. [2] Generally, materialmen and laborers have contractual privity with the general contractor, but not with the governing authority. The Public Works Act provides a method for claimants to obtain payment from the primary source of funds for the project (i.e., the governing authority), rather than from the secondary source of funds (i.e., the general contractor who receives from the governing authority funds which are to be used to pay the materialmen and laborers). This privilege provides a measure of protection to those who have no contractual relationship with the governing authority, and no control over the funds advanced by the authority to the general contractor during construction of the project. In the event the general contractor does not use the funds advanced by the authority to pay the laborers and materialmen, as contemplated by the authority, but uses them instead for his own personal benefit, or to pay a debt he owes to another, the claimants are protected. The provisions of the Public Works Act must be strictly construed. American Creosote Works, Inc. v. City of Natchitoches, 182 La. 641, 162 So. 206 (1935); Rester v. Moody & Stewart, 172 La. 510, 134 So. 690, 692 (1931); Javeler Construction Company, Inc. v. Federal Insurance Company, 472 So.2d 258, 263 (La.App. 1st Cir.1985); Adams v. Magnolia Construction Co., 431 So.2d 38, 39 (La.App. 1st Cir.1983); Construction Materials, Inc. v. American Fidelity Insurance Co., 383 So.2d 1291 (La.App. 1st Cir.1980); Coating Specialists, Inc. v. Pat Caffey Contractor, Inc., 194 So.2d 380, 384 (La.App. 4th Cir. 1967); and Jesse F. Heard & Sons v. Southwest Steel Products, 124 So.2d 211, 219 (La.App. 2d Cir.1960). The privilege created by the Public Works Act is afforded only to claimants as defined in the Act. LSA-R.S. 38:2242(A). See, Subdivision Planning Engineers v. Manor, etc., 349 So.2d 247, 249 (La.1977) [statutes creating civil penalties and privileges are not to be extended by implication]. The definition of claimants cannot be extended to provide protection to third parties like Wilkin. He is not one to whom the legislature intended to afford the protection provided by this privilege. Plaintiff argued, and the majority apparently agreed, that our decision in Subdivision Planning Engineers v. Manor, etc., supra, supports his contention that the privilege afforded claimants under the Public Works Act may be transferred by subrogation. See note 15 of majority opinion. In Manor, two partners performed work on a project which was governed by the Private Works Act, LSA-R.S. 9:4801 et seq. They subsequently incorporated their business and the corporation performed the remainder of the work. The partners assigned their claim to the corporation, which filed the lien. This court found the rights resulting from the work done by the incorporators prior to incorporation were assigned by them to the corporation, and the transfer of the right included the transfer of the accessory lien. While recognizing statutes creating civil penalties and privileges are not to be extended by implication, this court found there was no extension of the Private Works Act in its holding because part of the work was done by the corporation. We also noted the corporation's contract was directly with the owner. Thus, the defendant owner's obligation to the plaintiff corporation would exist without the lien statute. We note there is no contractual privity between Wilkin and the Ponchatoula Housing Authority. Manor is therefore inapposite. While State v. Miller, 169 La. 914, 126 So. 422 (1930), seems to conflict with my analysis, it was decided at a time when financial maneuvers available to contractors and investors were not as sophisticated as they are today. Also, it was decided in a different context and without our pivotal issue being raised. In the instant case, allowing subrogation of rights granted by the Public Works Act provides a method whereby Wilkin and Watkins may establish a business relationship for future purposes and projects, while using the present project as security for the loan from Wilkin to Dev Con. Although Wilkin could sue Watkins for collection of his debt by virtue of the promissory note, the majority's holding allows him to look to the surety on the project for collection of his debt. [3] Thus, Wilkin was able to loan money to Dev Con to benefit his friend and future partner, Watkins, and Watkins and Dev Con are completely absolved of repayment of the debt. By making Dev Con the debtor, Wilkin and Watkins have collaborated on a venture to enhance their business relationship and Watkins' reputation, and have obtained the benefit of security which is intended only for claimants. Additionally, under the majority's holding, more opportunistic methods for profit, such as speculation in claimants' claims by virtue of purchase of such claims at a discount, becomes potential method of investment. Finally, I am not persuaded by the treatment afforded the federal equivalent to our own public contract law, which the majority uses by analogy to bolster its result. The source provision varies from our own statute and we should adhere to our oft repeated admonition that our Public Works Act must be strictly construed.