Sloan Construction Company, Inc. v. Southco Grassing, Inc.

717 S.E.2d 603, 395 S.C. 164, 2011 S.C. LEXIS 355
CourtSupreme Court of South Carolina
DecidedOctober 31, 2011
Docket27061
StatusPublished
Cited by7 cases

This text of 717 S.E.2d 603 (Sloan Construction Company, Inc. v. Southco Grassing, Inc.) is published on Counsel Stack Legal Research, covering Supreme Court of South Carolina primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Sloan Construction Company, Inc. v. Southco Grassing, Inc., 717 S.E.2d 603, 395 S.C. 164, 2011 S.C. LEXIS 355 (S.C. 2011).

Opinions

Justice HEARN.

This is the second appeal involving a highway construction project and the payment bond for it required by the Subcontractors and Suppliers Payment Protection Act (SPPA). After examining Sloan Construction Co. v. Southco Grassing, Inc., 377 S.C. 108, 659 S.E.2d 158 (2008) (Sloan I), we find a [167]*167governmental entity does not have a continuing obligation to maintain a payment bond. However, we hold that Sloan I is the law of the case and affirm the circuit court’s order that SCDOT was liable to Sloan Construction. We further affirm the circuit court’s finding SCDOT did not meet its burden in proving Sloan Construction failed to mitigate its damages.

FACTUAL/PROCEDURAL BACKGROUND

Southco Grassing, Inc. (Southco) and SCDOT were parties to a contract in January 2000 for the performance of highway maintenance in Greenville, South Carolina. In connection with the contract and the SPPA, Southco supplied to SCDOT a performance bond and a payment bond with Southco as principal and Amwest Insurance Company (Amwest) as surety in the penal sum of 100% of the face value of the contract. On November 27, 2000, Sloan Construction Company entered into a subcontract with Southco, and it is undisputed that Sloan Construction properly performed all of its work. During the course of performance on the project, Amwest was adjudged insolvent in Nebraska and ordered to be liquidated; all outstanding bonds, including the bond with Southco, were can-celled. A Nebraska court approved a distribution amount of forty percent of each claim to be relinquished to claimants who previously held bonds.1

On July 28, 2001, SCDOT wrote Southco, advising it of the need to obtain a replacement surety company for the payment bond. Southco did not respond or replace the bond. Sloan Construction submitted to Southco its final billing on October 31, 2001; however, Southco never paid any amount of money to Sloan Construction. A few months later, on January 15, 2002, Sloan Construction notified SCDOT of its demand for payment from SCDOT by reason of Southco’s failure to pay. Shortly thereafter, on February 6, 2002, Sloan Construction’s lawyer advised SCDOT that SCDOT was liable for its failure to require Southco to obtain a bond in substitution for the cancelled Amwest payment bond. The following day, SCDOT [168]*168responded that “[a]ll payments under the contract with South-co have not been made. It is likely some funds may remain and may therefore be available to at least partially satisfy your client’s claims.” Wanda Surrett, Southco’s principal, represented in writing to SCDOT on March 6, 2003, that all payments had been made in full for work performed in connection with the project. Later that same month, SCDOT completed its checklist confirming Southco had completed all contract work and dispersed to Southco its final retainage. However, Southco never paid Sloan Construction for its work.

Thereafter, Sloan Construction commenced this action against Southco, Surrett, SCDOT, and Greer State Bank, but it made no claim against Amwest. Sloan Construction alleged negligence against SCDOT pursuant to the South Carolina Tort Claims Act and breach of contract as a third party beneficiary of Southco and SCDOT’s contract, both relating to SCDOT’s obligation under the SPPA to ensure a contractor is properly bonded. SCDOT moved to dismiss Sloan Construction’s complaint against it under Rule 12(b)(6), SCRCP, and the circuit court granted the motion on the ground that there was no private right of action to sue for violations of the SPPA. The court of appeals affirmed this dismissal, but we reversed that decision in Sloan I and remanded the matter for a determination of SCDOT’s liability to Sloan Construction consistent with the opinion. 377 S.C. at 121, 659 S.E.2d at 166. On remand, the circuit court found SCDOT liable in the amount of $26,393.37. The court also held SCDOT did not meet its burden of proof in showing Sloan Construction failed to mitigate its damages when it did not file a claim against Amwest. This appeal followed.

ISSUES PRESENTED

SCDOT raises two issues on appeal:

I. Did the circuit court err in ruling SCDOT had a duty to maintain a payment bond under the SPPA?
II. Did the circuit court err in ruling SCDOT failed to meet its burden of proof regarding mitigation?

[169]*169LAW/ANALYSIS

I. DUTY TO MAINTAIN BOND

In Sloan I, we granted certiorari on the following issue: “Did the court of appeals err in holding that statutory-bond requirements applicable to public projects do not create an enforceable duty giving rise to a private right of action by a subcontractor against a government entity?” 377 S.C. at 112, 659 S.E.2d at 161. In answering that question, we held 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.” Id. at 118, 659 S.E.2d at 164. We instructed that the SPPA is separate from the “little Miller Acts” enacted in various states which address the problem of subcontractors not being able to use liens on public property to secure payment. Id. at 114, 659 S.E.2d at 161-62. As we noted, the SPPA was intended to give stronger payment protection to subcontractors on government projects than the “little Miller Acts.” Id. at 115, 659 S.E.2d at 162. As to the third-party beneficiary claim, we first determined that public policies contained in the SPPA plus its applicability to public procurement incorporated the bond requirements into construction contracts. Id. at 120, 659 S.E.2d at 165. We then found that because subcontractors are the only ones with a financial stake in enforcing bond requirements, they are direct third-party beneficiaries to these contracts and could bring suit against governmental entities for their failure to ensure a payment bond is properly in place. Id.

We stated in Sloan I that “a government agency’s failure to secure and maintain statutory bonding as required by the SPPA” gives rise to an action against the agency. Id. at 120, 659 S.E.2d at 165 (emphasis added). Sloan Construction thus argues SCDOT’s claim that it had no duty to continuously monitor the bond was already determined in Sloan I and therefore is the law of the case. We agree.

Under the law of the case doctrine, “a party is precluded from relitigating, after an appeal, matters that were either not raised on appeal, but should have been, or raised on appeal, but expressly rejected by the appellate court.” Judy v. Martin, 381 S.C. 455, 458-59, 674 S.E.2d 151, 153 (2009) (citing Bakala v. Bakala, 352 S.C. 612, 632, 576 S.E.2d 156, [170]*170166 (2003)). “The law of the case applies both to those issues explicitly decided and to those issues which were necessarily decided in the former case.” Nelson v. Charleston & Western Carolina Railway Co., 231 S.C. 351, 357, 98 S.E.2d 798, 800 (1957). While Sloan I

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Sloan Construction Company, Inc. v. Southco Grassing, Inc.
717 S.E.2d 603 (Supreme Court of South Carolina, 2011)

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Bluebook (online)
717 S.E.2d 603, 395 S.C. 164, 2011 S.C. LEXIS 355, Counsel Stack Legal Research, https://law.counselstack.com/opinion/sloan-construction-company-inc-v-southco-grassing-inc-sc-2011.