Court Opinion

ID: 9575671
Source: CourtListenerOpinion
Date Created: 2023-08-21 21:15:49.233184+00
Date Added: 2024-06-11T12:49:44.659084
License: Public Domain

Justice MULLARKEY
dissenting:
I respectfully dissent from the majority opinion denying protection of the public works statute, section 38-26-107, 16A C.R.S. (1982), to Western Metal Lath, a company that supplied dry-wall materials for building Senior High School Number 3 in Academy School District Number 20. I believe that, while we requested briefing *882and argument on the constitutionality of sections 38-26-105 to 107, 16A C.R.S. (1982), this case is truly one of statutory interpretation, and the statute must be construed to avoid a conflict with the constitution if possible. Ohmie v. Martinez, 141 Colo. 480, 485, 349 P.2d 131, 133 (1960). Properly construed, the statute is constitutional and protects Western.
Western is a manufacturer of metal lath materials which were to be used in the drywall process. Western was contacted by Acoustical and Construction Supply, Inc., to supply these materials. The record indicates that Acoustical itself did not perform any work on the high school project, nor did it perform any work on Western’s materials. Instead, the record suggests that Western delivered its products not to Acoustical, but to Hensel Phelps, the general contractor, at the construction site.
Section 38-26-107(1) provides in part that “Any person, copartnership, association of persons, company or corporation that has furnished labor, material, ... or other supplies used or consumed by such contractor or his subcontractor in or about the performance of the work contracted to be done whose claim therefor has not been paid by the contractor or the subcontractor” may file a claim with the public authority on the funds withheld from the contractor. Western claims that it is entitled to protection under this section. There is no dispute that the metal lath provided by Western was incorporated into the project and that Western was not paid. The question is whether Western is a company protected by the statute.
In my view, South-Way Construction Co., Inc. v. Adams City Service, 169 Colo. 513, 458 P.2d 250 (1969), is dispositive and requires a judgment in favor of Western. In South-Way, a case factually similar to the present one and one which the majority makes no attempt to distinguish, we held that a materials supplier to a “sub-subcontractor” on a public works project was within the scope of protection of 1963 C.R.S. section 86-7-7(3), which is the same as section 38-26-107(3), 16A C.R.S. (1982). Id. at 516, 458 P.2d at 251. There we refused to adopt the construction which the federal courts have placed upon the Miller Act, 40 U.S.C. sections 270a-270f (1988). Instead, we stated that we adhered to “the rule of liberal construction” which we had applied earlier to the public works statute. Id. at 518, 458 P.2d at 252. The Miller Act is a similar federal statute which requires performance and payment bonds from contractors on certain federal government construction projects. That statute has been held by the federal courts to extend protection only to the level of a sub-subcontractor, and not to a sub-subcontractor’s mate-rialman. See J. W. Bateson v. United States ex rel. Board of Trustees, 434 U.S. 586, 98 S.Ct. 873, 55 L.Ed.2d 50 (1978) (sub-subcontractor’s laborers not entitled to file Miller Act claim). A sub-subcontractor’s materialman is not in privity with the contract between the public authority and the general contractor. Western stands in the same relationship as the South-Way claimant and is similarly removed from any direct tie to the public authority/general contractor contract. Thus, the majority’s statement that “Section -107, like the mechanic’s lien statute, mandates that the claimant be in privity of contract with the contractor, or his representative, express or imputed, for its application,” Maj. op. at 879, rests on an unsupportable legal fiction.
In South-Way, the claimant under 1963 C.R.S. section 86-7-7(3) (which we also held, in South-Way, was an alternate method of relief to an action on the payment bond, 169 Colo. at 518, 458 P.2d at 252) was in privity of contract with neither the contractor nor the subcontractor. Instead, the claimant was a materials supplier to a subcontractor of a subcontractor. Despite the fact that the materials supplier was not an entity that was to be paid by the general contractor or its subcontractor, and arguably not within the protection of the plain language of the statute, we held that such a claimant was entitled to make a claim to the funds withheld under what is now section 38-26-107. Both the claimant in South-Way and Western were similarly situated; both were once-removed from being “deemed” in privity of contract under *883the majority’s construction of the Colorado Public Works Act.
Furthermore, neither the majority in the present case, nor the court of appeals in Lovell Clay Products Co. v. Statewide Supply Co., 41 Colo.App. 166, 580 P.2d 1278 (1978), on which the court below relied, recognizes that section 38-26-107 does not define “subcontractor,” and does not contain any mention of “materialmen.” By comparison, the mechanics’ lien statute and the public contractor’s bond section specifically address materialmen. See § 38-22-101, 16A C.R.S. (1982) (mechanics’ lien statute specifically mentions “materialmen” as persons protected by mechanics’ lien), and § 38-26-105(1) (specifically mentioning “mechanics” and “materialmen” as persons protected by the payment bond). The majority, as did the Lovell court, avoids the South-Way decision by rewriting our holding, despite South-Way’s plain language: “We hold that a materialman to a sub-subcontractor is within the scope of protection granted under our statutes.... ” South-Way, 169 Colo. at 518, 458 P.2d at 252. The majority, echoing Lovell, says that a subcontractor to a subcontractor under the statute (which, as noted earlier, does not define “subcontractor”), was deemed by the South-Way court to be simply a subcontractor, therefore entitling its materials supplier to protection under the statute. That was not our holding and I do not see any principled way to distinguish this case (or Lovell) from South-Way. A materials supplier, such as Acoustical, could easily be considered a “subcontractor,” in that it is “[o]ne who takes portion of a contract from a principal contractor or another subcontractor.” Black’s Law Dictionary 1424 (6th ed. 1990); see also Kobayashi v. Meehleis Steel Co., 28 Colo.App. 327, 333-34, 472 P.2d 724, 727-28 (1970) (company that contracted with subcontractor to fabricate precast concrete structural columns away from the construction site held to be a “subcontractor” for mechanics’ lien purposes, and not a “materialman”). The difference between a “materialman” and a “subcontractor” is often unclear and does not provide a basis for distinguishing South-Way.1
The statute does not demand a construction that protects direct suppliers (or their assignees), even though they are no more than intermediaries, while leaving completely unprotected those who actually fabricate and furnish materials to such intermediaries for use in public works contracts. The statute instead, by its plain language, protects any person who has furnished materials used or consumed by the contractor or its subcontractor in performing the work. The statute does not require that persons making claims for withheld funds be, or be deemed to be, in privity of contract with the public authority (nor does it include language which requires the use of such a legal fiction); it only requires that such a person has had his or her labor or materials incorporated into the work or consumed in performing the work.2 In fact, the construction of the statute employed by the majority works an injustice against Western, encouraging American Builders and Contractors Supply Co., Acoustical’s successor and assignee, to claim and take money which rightfully belongs to Western. The result is an undeserved windfall to American which bought *884Acoustical’s assets but did not assume its debts.
I also cannot support a construction of this statute which not only allows but actually may encourage fraudulent activities. Statutes such as the one now before us were enacted because of well-known recurrent problems in the construction trade with contractors not paying subcontractors, subcontractors not paying laborers, and both not paying suppliers. The majority’s decision invites sharp practices, by allowing materials suppliers to go unpaid simply because the contractor uses an intermediary as a direct materials supplier when that intermediary neither does work on the construction project nor manufactures materials. The possibilities for sham transactions require no great imagination.
Because the statute does not demand the construction placed upon it by the majority, because I believe the majority is ignoring our decision in South-Way, and because a straight forward construction of the statute would afford a more just result as well as avoid a constitutional conflict in this case, I dissent.

. The majority notes that, in Schneider v. J.W. Metz Co., 715 P.2d 329, 332 n. 3 (Colo.1986), we said that a manufacturer of prefabricated log homes performed no work in assembling the structure in the case, and therefore it was “simply a materialman.” I wonder, however, if, under the majority’s reasoning, had the concrete column fabricator in Kobayashi contracted with an intermediary, as Western did here, would it have been deemed to be a materialman. Just as in Kobayashi, Western’s "materials" were incorporated, apparently directly and without alteration, into the structure.

. The majority complains that a ruling in Western’s favor would open the floodgates to "endless liability on a general contractor.” Maj. op. at 881 n. 8. We do not face any such problem here with trying to discern the limits of who is and is not protected under section 38-26-107, because Western is similarly situated with regard to the public authority/prime contractor contract as was the claimant in South-Way. Furthermore, here the general contractor did in fact protect itself by requiring Acoustical to give it a Mechanics’ Lien Release (which was identical to that given by Hensel Phelps’ subcontractors) certifying that its suppliers had been paid.