Medical Clinic Board of Birmingham-Crestwood v. Smelley
1981 Ala. LEXIS 3828, 408 So. 2d 1203 (1981)
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Rule of Law:
A public agency has a mandatory statutory duty to require a general contractor on a public works project to execute a payment bond for the protection of laborers and materialmen. If the agency breaches this duty, it is liable in tort to an unpaid subcontractor for the damages the subcontractor would have recovered had the bond been in place.
Facts:
- The Medical Clinic Board of the City of Birmingham-Crestwood (Medical Clinic Board), a public agency, entered into a contract with Garland Co., Inc. (Garland) for the construction of a nursing home wing on January 31, 1977.
- Medical Clinic Board failed to require Garland to execute the performance and payment bond mandated by Alabama Code § 39-1-1 for the protection of persons supplying labor or materials.
- On June 27, 1978, E. E. Smelley subcontracted with Garland to perform drywall installation, which Smelley understood to be for work up to an eight-foot ceiling height.
- During the project, Garland's foreman insisted that Smelley install drywall above the eight-foot level, which Smelley contended was extra work not included in the contract.
- A dispute arose over payment for this additional work, and Smelley quit the project on September 7, 1978, after completing approximately 90% of the work, including the disputed work.
- Smelley was not fully paid by Garland for the labor and materials he provided.
Procedural Posture:
- E. E. Smelley filed suit against Garland Co., Inc. in the circuit court (trial court), alleging breach of contract.
- Smelley amended his complaint to add the Medical Clinic Board as a defendant, alleging it negligently failed to require Garland to furnish the statutory bond.
- The circuit court, sitting without a jury, entered judgment for Smelley and against both Garland and the Medical Clinic Board.
- The Medical Clinic Board appealed the judgment to the Supreme Court of Alabama.
- Garland also appealed but later moved to dismiss its appeal, leaving the Medical Clinic Board as the sole appellant.
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Issue:
Does a public agency have a legal duty under Alabama Code § 39-1-1 to require a general contractor to obtain a payment bond, and can the agency be held liable to a subcontractor for damages if it breaches that duty?
Opinions:
Majority - Almon, Justice
Yes. A public agency has a duty under § 39-1-1 to require a bond, and its failure to do so makes it liable for a subcontractor's resulting damages. The court reasoned that the doctrine of sovereign immunity, which previously shielded public bodies from such liability in 'Robbins v. City of Sheffield', was overruled by 'Jackson v. City of Florence'. Furthermore, the statute creating the Medical Clinic Board explicitly grants it the power to 'sue and be sued,' independently removing any immunity defense. The court also rejected the defendant's contributory negligence argument, holding that a subcontractor is entitled to assume the public agency has complied with its statutory duty and is not required to inquire about the existence of a bond. Finally, the court determined the subcontractor's cause of action accrued not when the contract was formed, but when the injury occurred upon non-payment at the time of final settlement, making the lawsuit timely.
Analysis:
This decision solidifies the tort liability of public agencies in Alabama for negligently failing to comply with statutory bond requirements on public works projects. By explicitly tying this liability to the abrogation of sovereign immunity, the court makes clear that the precedent set in 'Robbins v. City of Sheffield' is no longer good law. The ruling provides a crucial remedy for subcontractors and suppliers, shifting the risk of a general contractor's failure to post a bond from the subcontractor to the public owner who holds the statutory duty. This holding incentivizes public bodies to be diligent in enforcing bond requirements to protect both public funds and the rights of those who provide labor and materials.
