Court Opinion

ID: 5154130
Source: CourtListenerOpinion
Date Created: 2022-01-02 02:09:48.59696+00
Date Added: 2024-06-11T08:25:13.527071
License: Public Domain

MATTHEWS, Justice,
concurring.
A.
The question in this case is whether the language of AS 08.18.071(a)(8), "breach of contract in the conduct of the contracting business," refers to any breach of contract by a contractor relating to its contracting business or, more narrowly, only to breaches directly related to the performance of a building contract.1 I think this is a close question because the statutory language could reasonably be read to encompass either definition. If we were to adopt the first meaning, contracts for a wide variety of overhead items-office equipment, rent, insur*345ance-would be covered by a contractor's bond. Under the narrow definition, only contract breaches directly related to a specific project, such as a failure to complete a building on time, would be covered. I slightly favor the narrow definition for one of the reasons relied on by today's opinion.
Like other businesses, contractors must make a wide variety of contracts. But only contractors can undertake and perform building contracts. Since other businesses are not required to post bonds, it seems likely that the legislature meant contractor's bonds to cover only those activities unique to contractors. This is the point made by the opinion of the court on pages 8 through 10 and it seems sufficient to tip the scales in favor of the narrow definition.
B.
The superior court relied heavily on Balboa Insurance Co. v. Senco Alaska Inc.2 in concluding that workers' compensation insurance premfums are not covered by a statutory contractor's bond. I think that it is worth noting that Bailbow has been overruled by a statutory change and therefore has doubtful precedential effect.
The Balboa court held that the seller of an air compressor to a contractor had no claim on the contractor's bond where the compressor was not incorporated into or used up on any particular project.3 This seems surprising since AS 08.18.071(a)(@) then, as now, covered persons supplying equipment to a contractor. But the court read subsection (5) of the exemptions section of the statute, AS 08.18.161, to exclude the transaction.4 That section provided that "[this chapter does not apply to ... (5) the sale or installation of finished products, materials, or articles of merchandise which are not actually fabricated into and do not become a permanent, fixed part of a structure." The Balbow court read this provision as referring to, and thus disqualifying from bond coverage, sales of construction equipment to a contractor.5
But this extremely narrow reading is no longer possible. In 2008 the legislature amended the lead-in language of section .161 so that it now begins with the phrase "[to the extent that this chapter governs contractors, this chapter does not apply to."6 This amendment indicates that subsection (5) refers to sales by a potential contractor rather than to a contractor. Under the amendment a seller is not required to register as a contractor based on sales described in subsection (5). But sales to a contractor are not excluded by section .161 from bond coverage.
Judged at least by the 2008 amendment, the Balboa court construed the registration statute too narrowly. This mistaken reading potentially taints the inferences that the court drew concerning the intended coverage of the bonding provision. Therefore, in my view, Balboa should no longer be considered to have precedential value either as to its direct holding or as to its dicta concerning the intended seope of bond coverage.
For the reason expressed in Part A of this concurring opinion, I agree to affirm the decision of the superior court.

. I use the term "building contract' here as shorthand for contracts to undertake projects listed in the statutory definition of the word "contractor" in AS 08.18.171(4). The listed projects may only be undertaken by a registered contractor. AS 08.18.171(4) provides:
"[ClJontractor"" means a person who, in the pursuit of an independent business, undertakes or offers to perform, or claims to have the capacity to perform, or submits a bid for a project to construct, alter, repair, move, or demolish a building, highway, road, railroad, or any type of fixed structure, including excavation and site development and erection of scaffolding; "contractor" includes a general *345contractor, builder, mechanical contractor, specialty contractor, and subcontractor(.]

. 567 P.2d 295 (Alaska 1977). The superior court referred to Balboa as "the most relevant case'"' to the present question.

. Id. at 296-97.

. Id. at 297.

. Id.

. AS 08.18.161(5) currently provides:
To the extent that this chapter governs contractors, this chapter does not apply to
(5) the sale or installation of finished products, materials, or articles of merchandise that are not actually fabricated into and do not become a permanent, fixed part of a structure.]
(2003 amendments are underlined.)