Pierce Foundations, Inc. v. Jaroy Construction, Inc.

Supreme Court of Louisiana
FOR IMMEDIATE NEWS RELEASE NEWS RELEASE #025
FROM: CLERK OF SUPREME COURT OF LOUISIANA
The Opinions handed down on the 3rd day of May, 2016, are as follows:
BY CRICHTON, J.:
2015-C -0785 PIERCE FOUNDATIONS, INC. v. JAROY CONSTRUCTION, INC. (Parish of
Jefferson)
Pursuant to the foregoing, we hold that Pierce’s lawsuit was
timely filed against the general contractor and its surety, Ohio
Casualty, and that the failure of the plaintiff to perfect its
privilege against the public authority (as found by the trial
court) does not defeat its right of action against the surety.
The decision of the court of appeal is reversed and the decision
of the trial court is reinstated.
REVERSED.
KNOLL, J., dissents and assigns reasons.
GUIDRY, J., dissents and assigns reasons.
HUGHES, J., dissents for the reasons assigned by Guidry, J.,
and assigns additional reasons.
05/03/16
SUPREME COURT OF LOUISIANA
NO. 2015-C-0785
PIERCE FOUNDATIONS, INC.
VERSUS
JAROY CONSTRUCTION, INC.
ON WRIT OF CERTIORARI TO THE COURT OF APPEAL,
FIFTH CIRCUIT, PARISH OF JEFFERSON
CRICHTON, Justice.
This case involves the interpretation of two provisions of the Public Works
Act (“Act”), La. R.S. 38:2241, et seq. We granted the writ application to
determine whether, under La. R.S. 38:2247, the notice and recordation
requirements of La. R.S. 38:2242(B) are necessary conditions for a claimant’s right
of action against a bond furnished pursuant to La. R.S. 38:2241. Consistent with
the stated purpose of the Act, we hold that the claimant’s failure to file a sworn
statement with the public authority did not affect the right of the subcontractor, in
contractual privity with the general contractor, to proceed directly against the
contractor and its surety. We therefore reverse the decision of the court of appeal
and reinstate the decision of the trial court.
BACKGROUND
This matter arises out of a public works project for the construction of a
gymnasium in Terrytown, Louisiana. Pursuant to a contract between JaRoy
Construction Inc. (“JaRoy” or “contractor”) and Jefferson Parish Council
(“Jefferson Parish”), JaRoy was to serve as the general contractor. In compliance
with La. R.S. 38:2241, et seq., the contractor furnished to Jefferson Parish a bond,
on which the Ohio Casualty Insurance Company (“Ohio Casualty”) was the surety.
JaRoy thereafter entered into a written subcontract with Pierce Foundations,
1
Inc. (“Pierce”) to provide and install pilings on the project. On November 3, 2008,
Pierce completed the pile driving as called for in the contract. The contractor
failed to pay to Pierce certain funds Pierce contended were due under the contract. 1
In July 2009, Pierce filed a “Petition for Damages in Contract” against the
contractor, and, in July 2010, amended the petition to add Ohio Casualty as a
defendant. Pierce alleged that Ohio Casualty and the contractor were “jointly and
severally liable” to Pierce for the failure of the contractor to perform under the
contract. Ohio Casualty asserted several affirmative defenses to these allegations,
one of which was that Pierce failed to comply with conditions precedent to filing a
claim against the surety. When the contractor filed a petition for bankruptcy
protection in December 2010, the lawsuit proceeded solely against Ohio Casualty.
On October 17, 2011, when the project was substantially completed, the
Jefferson Parish government filed a notice of acceptance of work with the
Jefferson Parish mortgage records office. This occurred over a year after Pierce
amended its lawsuit to add Ohio Casualty as a defendant. It is undisputed that
Pierce never filed a sworn statement of claim in the mortgage records.
Before trial, Ohio Casualty filed a motion for summary judgment,
contending that Pierce was required to comply with the notice and recordation
requirements of La. R.S. 38:2242(B) and, because it failed to do so within 45 days
of Jefferson Parish’s acceptance of the project, Pierce could not recover from Ohio
Casualty under La. R.S. 38:2247. Pierce opposed the motion, asserting that the
statute does not affect the right to proceed in contract, and the Act never
contemplated a situation in which notice would be given and suit filed before the
events outlined in R.S. 38:2242. Pierce contended that the Act does not
contemplate any loss of rights, other than the privilege against the public entity.
1 Pierce alleged that the contractual base price was $359,987.00, to which was added $11,500.00
for a test pile program and $60,512.00 for standby/delay time, totaling $431,999.00. The balance
due, according to Pierce, is $116,716.96.
2
The trial court granted Ohio Casualty’s motion in part, “only to the extent that
there is no privilege in favor of [Pierce],” and otherwise permitted the suit to
proceed. Ohio Casualty sought supervisory review, and the court of appeal denied
relief, stating:
On the showing made, we decline to exercise our supervisory
jurisdiction. K Construction, Inc. v. Burko Construction, Inc., 629 So.
2d 1370 (La. App. 4 Cir. 1993); Wilkin v. Dev Con Builders, Inc., 561
So. 2d 66 (La. 1990).
Pierce Founds., Inc. v. The Ohio Casualty Ins. Co., 12-0859 (La. App. 5 Cir.
11/09/12) (unpublished).
On December 13, 2012, after a bench trial, the trial court rendered judgment
in favor of Pierce in the amounts of $59,428.96 for sums owed under the contract
and $57,000.00 for idle time, plus judicial interest from the date of the original
judgment. As to Ohio Casualty’s argument that Pierce’s exclusive right of action
against it was limited to the relief granted by the Act and subject to compliance
with its requirements, the trial court noted that it had “already rejected” this
defense and stated that there was “no reason for this court to revisit that issue.”
Following several motions for a new trial and amended judgments, the final
judgment was signed on May 19, 2014.
Ohio Casualty suspensively appealed the judgment, contending that the trial
court erred in failing to dismiss it prior to trial, because Pierce’s failure to comply
with the notice provisions of La. R.S. 38:2242(B) resulted in forfeiture of its right
of action against the surety. Pierce devolutively appealed, asserting the trial court
erred by awarding interest only from the date of judgment. The Court of Appeal,
Fifth Circuit, concluded that Pierce’s failure to comply with the relevant notice
provisions deprived it of a right of action against Ohio Casualty, reversed the trial
court judgment, and dismissed the suit as to Ohio Casualty. Pierce Founds., Inc. v.
JaRoy Constr., Inc., 14-669 (La. App. 5 Cir. 3/25/15), 169 So. 3d 580.
3
We then granted Pierce’s application for a writ of certiorari. Pierce Founds.,
Inc. v. JaRoy Constr., Inc., 15-0785 (La. 6/5/15), 171 So. 3d 938.
RELEVANT LAW
In 1918, the legislature enacted Act 224, the precursor to the modern Public
Works Act, La. R.S. 38:2241, et seq., to “protect those performing labor and
furnishing materials for public works.” Wilkin v. Dev Con Builders, Inc., 561 So.
2d 66, 70 (La. 1990). The laws do not grant beneficiaries a lien on the public work
itself, but rather gives them “a privilege against the unexpended fund in the
possession of the public entity with whom the original contract was entered into.”
Id. (quoting Pigeon-Thomas Iron Co. v. Drew Bros., 111 So. 182, 183 (1926)). As
this Court stated:
The effect of these provisions is to give certain classes of persons not
enjoying privity of contract with the general contractor or with the
governing authority a claim nevertheless against the general
contractor and his surety and in some instances a claim against the
governing authority itself.
Id. at 70. The laws also protect a public authority complying with the requirements
of the statute from expenses caused by the failure of the contractor to perform the
contract. 561 So. 2d at 71.
The statutory framework set forth in the Act accomplishes this purpose, first,
by mandating that, when a public entity enters into a contract in excess of
$25,000.00 for the construction, alteration, or repair of any public works, the
contractor is required to post a bond “in a sum of not less than fifty percent of the
contract price for the payment by the contractor or subcontractor to claimants as
defined in R.S. 38:2242.” La. R.S. 38:2241(A)(2). The law further establishes a
means for asserting a claim under the Act, set forth in La. R.S. 38:2242(B):
Any claimant 2 may after the maturity of his claim and within forty-
five days after the recordation of acceptance of the work by the
2 La. R.S. 38:2242(A) defines “claimant” as “any person to whom money is due pursuant to the
contract with the owner or a contractor or subcontractor for doing work, performing labor, or
furnishing materials or supplies for the construction. . . of any public works. . . .” No party
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governing authority or of notice of default of the contractor or
subcontractor, file a sworn statement of the amount due him with the
governing authority having the work done and record it in the office
of the recorder of mortgages for the parish in which the work is done.
The Act also addresses a claimant’s direct right of action on the bond against
the general contractor and/or surety, making clear that the subcontractor maintains
a separate right of action outside of the parameters of the Act. To that end, La.
R.S. 38:2247 provides, in pertinent part:
Nothing in this Part shall be construed to deprive any claimant, as
defined in this Part and who has complied with the notice and
recordation requirements of R.S. 38:2242(B), of his right of action on
the bond furnished pursuant to this Part, provided that said action
must be brought against the surety or the contractor or both within one
year from the registry of acceptance of the work or of notice of default
of the contractor except that before any claimant having a direct
contractual relationship with a subcontractor but no contractual
relationship with the contractor shall have a right of action against the
contractor or the surety on the bond furnished by the contractor, he
shall in addition to the notice and recordation required in R.S.
38:2242(B) give written notice to said contractor within forty-five
days from the recordation of the notice of acceptance by the owner of
the work or notice by the owner of default, stating with substantial
accuracy the amount claimed and the name of the party to whom the
material was furnished or supplied or for whom the labor or service
was done or performed.
The court of appeal, construing La. R.S. 38:2247, held that “only those
claimants who have complied with the notice and recordation requirements of La.
R.S. 38:2242(B) shall not be deprived of a right of action on the bond.” Pierce
Founds., Inc. v. JaRoy Constr., Inc., 14-669, p.7 (La. App. 5 Cir. 3/25/15), 169 So.
3d 580, 585 (emphasis added). The court of appeal therefore concluded: “[T]he
notice and recordation requirements of La. R.S. 38:2242(B) are necessary
conditions for a right of action on a bond. The failure to comply with these
requirements deprives a claimant of a right of action on a bond.” Id. (emphasis
added). The court of appeal also rejected the reasoning of the case “K”
Construction, Inc. v. Burko Construction, Inc., 629 So. 2d 1370 (La. App. 4 Cir.
disputes that Pierce would qualify as a “claimant” under this definition.
5
1993), which it had previously cited in denying the relief that Ohio Casualty
sought pre-trial.
Ohio Casualty urges this Court to affirm the court of appeal, arguing that
Pierce’s failure to file the sworn statement of claim is fatal to its cause of action
against Ohio Casualty. Ohio Casualty argues that exclusive rights of action against
the surety are set forth in La. R.S. 38:2247, and Pierce’s failure to comply with the
requirements of the Act – including the notice and recordation requirements of La.
R.S. 38:2242(B) – bar recovery against Ohio Casualty.
Pierce argues that the court of appeal decision frustrates the purpose of the
Act – specifically, that the Act was adopted to protect those performing labor and
furnishing materials for public works, as set forth in Wilkin, not to immunize
sureties from lawsuits brought in contract related to unpaid funds. Pierce contends,
inter alia, that the court of appeal erred by converting the permissive “may” of La.
R.S. 38:2242(B) into a mandatory requirement, thereby holding that a claimant
who does not file the sworn statement is “deprived of all rights against the surety”
– including rights in contract. Additionally, because Pierce filed suit over a year
before Jefferson Parish filed the notice of acceptance, Ohio Casualty could not
reasonably claim it did not have notice of the claim. For the reasons set forth
below, we agree with Pierce.
ANALYSIS
Legislation is the solemn expression of the legislative will; thus, the
interpretation of legislation is primarily the search for the legislative intent. Cat's
Meow, Inc. v. City of New Orleans, 98-0601, p.15 (La. 10/20/98), 720 So. 2d 1186,
1198; La. Safety Ass'n of Timbermen Self-Insurers Fund v. La. Ins. Guar. Ass'n,
09-0023, p.8 (La. 6/26/09), 17 So. 3d 350, 355-56. See also La. R.S. 24:177(B)(1).
When a law is clear and unambiguous, and its application does not lead to absurd
consequences, it shall be applied as written, with no further interpretation made in
6
search of the legislative intent. La. R.S. 1:4. The starting point for interpretation
of any statute is the language of the statute itself. See, e.g., Cat's Meow, 98-0601,
p.15, 720 So. 2d at 1198; Timbermen, 09-0023, p.8, 17 So. 3d at 356.
Additionally, “all laws pertaining to the same subject matter must be interpreted in
pari materia, or in reference to each other.” See, e.g., State v. Williams, 10-1514
(La. 3/15/11), 60 So. 3d 1189, 1191; La. C.C. art. 13. When, on the other hand, a
statute is not clear and unambiguous, or its application leads to absurd
consequences, we rely on secondary rules of statutory interpretation to discern the
meaning of the statute at issue. See Red Stick Studio Dev., L.L.C. v. State ex rel.
Dep’t of Econ. Dev., 10-0193, p.10 (La. 1/19/11), 56 So. 3d 181, 187-88 (quotation
omitted). In such cases, the statute “must be interpreted as having the meaning that
best conforms to the purpose of the law. Moreover, when the words of a law are
ambiguous, their meaning must be sought by examining the context in which they
occur and the text of the law as a whole.” Id.Because this matter involves the interpretation of statutory provisions and
only questions of law are presented, review by this court is de novo. See, e.g., Red
Stick Studio, 56 So. 3d at 187. Additionally, because the case involves the Public
Works Act, it must be strictly construed. Wilkin, 561 So. 2d at 75.
The court of appeal found that Ohio Casualty was entitled to summary
judgment before trial, because Pierce did not comply with the notice and
recordation requirements of La. R.S. 2242(B). In so holding, the court of appeal
construed La. R.S. 38:2247 as imposing an affirmative requirement: “[O]nly those
claimants who have complied with the notice and recordation requirements of La.
R.S. 38:2242(B) shall not be deprived of a right of action on the bond.” 14-669,
p.7, 169 So. 3d at 584. Accordingly, the court of appeal concluded: “Logic . . .
dictates that the notice and recordation requirements of La. R.S. 38:2242(B) are
necessary conditions for a right of action on a bond.” Id. In other words, the court
7
of appeal found that R.S. 38:2247’s reference to the “requirements” of 2242(B)
causes the formalities to become mandatory in any action against the bond. 3
We disagree with this holding, and find that where the subcontractor fails to
comply with the notice and recordation requirements of La. R.S. 2242(B), the
subcontractor loses his privilege against funds in the hands of the public authority,
but the failure to comply does not affect the right of the subcontractor, in
contractual privity with the general contractor, to proceed directly against the
contractor and its surety. As an initial matter, we point out that the plain language
of La. R.S. 38:2242(B) and La. R.S. 38:2247 conflict, because R.S. 38:2242(B)
provides that a claimant “may” file a sworn statement, but R.S. 38:2247 refers to
the recordation “requirements” of 2242(B). Because of this ambiguity, we pursue
the statutory meaning in the context of the statute as a whole, with particular focus
on the statute’s purpose.
The fundamental error in the court of appeal’s analysis is that it renders the
permissive “may” in La. R.S. 38:2242(B) – “[a]ny claimant may . . . file a sworn
statement” – mandatory in La. R.S. 38:2247. But the revised statutes instruct:
“The word ‘shall’ is mandatory and the word ‘may’ is permissive.” La. R.S. 1:3.
The court of appeal’s interpretation of the language of La. R.S. 38:2247 as
mandatory, even where preexisting contractual rights exist, is inconsistent with the
“cardinal rule of statutory interpretation that the word ‘may’ is permissive.” Kelly
v. State Farm Fire & Cas. Co., 14-1921, p.12 (La. 5/5/15), 169 So. 3d 328, 336.
Instead of employing this interpretive principle, the court of appeal
references the legislative history of La. R.S. 38:2247 to support its holding. Before
1985, La. R.S. 38:2247 provided, in pertinent part: “Nothing in this Part shall be
3 The dissent authored by Justice Hughes, which concludes that the only avenue for asserting a
claim against the surety for work performed pursuant to the Act is by means of the process set
forth in the Act (including the concursus proceeding), would effect a sweeping change in the
application of the Act. In effect, Justice Hughes reads out of the Act the direct right of action
against the bond that is expressly recognized and preserved in La. R.S. 38:2247. Such a holding
is not supported by the language or intent of the Act.
8
construed to deprive any person or claimant . . . of his right of action on the
contractor’s bond . . . .” 14-669, p.8, 169 So. 3d at 585. Then, in 1985 La. Acts
244, § 1, the legislature amended the provision to state: “Nothing in this Part shall
be construed to deprive any claimant . . . who has complied with the notice and
recordation requirements of R.S. 38:2242(B), of his right of action on the bond . .
. .” Id. (emphasis added). The court of appeal opinion implies that the amendment
was intended to overrule Honeywell, Inc. v. Jimmie B. Guinn, Inc., 462 So. 2d 145,
148 (La. 1985), in which this Court commented (in dicta) that “an unpaid
subcontractor having a direct contractual relationship with the contractor may sue
on the contractor’s bond without filing and recording a sworn claim or giving
written notice to the contractor.” Honeywell, 462 So. 2d at 148.
However, an examination of 1985 La. Acts 244, § 1 does not support the
court of appeal’s assumption that the legislature intended to modify or otherwise
limit La. R.S. 38:2242 in amending La. R.S. 38:2247. First, Honeywell stands only
for the proposition that La. R.S. 38:2247 contains a prescriptive period governing
the claims of subcontractors, as well as those of materialmen or laborers. 462 So.
2d at 148. Second, the amendment of La. R.S. 38:2247 was not the only change
caused by 1985 La. Acts 244, § 1. The Act also revised La. R.S. 38:2241, 2242,
2244, and 2247, but, despite these changes, the legislature did not alter the use of
the permissive “may” in La. R.S. 38:2242(B). If the legislature had intended La.
R.S. 38:2247 to have the effect ascribed to it by the court of appeal, it would have
altered the permissive “may” in La. R.S. 38:2242 to the mandatory “shall.”
Compare, e.g., La. R.S. 48:256.5(B) (“Public Contracts of the Department of
Transportation and Development,” providing: “Any claimant shall, after the
9
maturity of his claim and within forty-five days after the recordation of final
acceptance of the work by the [governing authority] ....”) (emphasis added). 4
Further, the court of appeal’s interpretation of La. R.S. 38:2247 to
essentially trump the permissive language in La. R.S. 38:2242(B) overlooks that
La. R.S. 38:2247 is first and foremost a prescription provision, providing an
additional year to parties filing suit after the acceptance of work or default notice
is filed. 5 In this case, Pierce filed suit over a year before the acceptance was filed,
the parties litigated the claims through discovery and motions, and Ohio Casualty
was no doubt on notice of Pierce’s suit. Requiring additional notice under these
unique circumstances is futile and merely duplicative.
We acknowledge that La. R.S. 38:2242 and La. R.S. 38:2247 use confusing
– even conflicting – language. But favoring the permissive (“may”) language of
La. R.S. 38:2242 rather than the restrictive (“requirements”) language of La. R.S.
38:2247, as we do here, best comports with the purpose of the act, which is to
“protect those performing labor and furnishing materials for public works” rather
than protecting the sureties on the bond. Wilkin, 561 So. 2d at 70. In other words,
the Act creates an additional remedy to persons contributing to the construction,
alteration, or repair of public works – a “privilege against the unexpended fund in
the possession of the authorities with whom the original contract ha[d] been
entered into.” Id. The Act is not intended to – and does not – affect rights
4 Though the court of appeal presumes that the amendment of La. R.S. 38:2247 was intended to
overrule Honeywell, it is just as likely that the revisions were intended to overrule the decisions
in Construction Materials, Inc. v. Am. Fidelity Fire Ins. Co., 388 So. 2d 365 (La. 1980), and
Valliant v. State, Dept. of Transp. and Development, 437 So. 2d 845 (La. 1983), which ruled that
sureties could contractually extend their liability for claims falling outside the ambit of the public
works statutes, and to make it clear that the bond furnished pursuant to the Act is a statutory one.
Thus, under the 1985 amendments, sureties are “immune” from claims of those who do not
qualify as “claimants” under the Act. See La. Prac. Series: La. Constr. Law § 13:10.
5 Though we respectfully disagree with the dissent authored by Justice Knoll, which adopts a
similar analysis to the court of appeal, we emphasize that the statutory provisions are
complicated and, unfortunately, less than clear. Given the divergence in analysis by the courts
below and even the justices on this court, we believe that this is a matter ripe for review by the
Louisiana Law Institute and the legislature.
10
between parties proceeding directly in contract and is, in fact, silent on the question
of parties that are in contract and, as here, file suit well before the notice of
acceptance or default is filed. See, e.g., James S. Holliday, et al., La. Prac. Series:
La. Constr. Law, § 13:14 (2015 ed.) (“[C]laimants have a direct right of action
against the contractor and the surety on the bond. This action can be filed any time
after maturity of the claim, rather than requiring that the claimants wait for forty-
five days after acceptance of the entire project, which in many cases could occur
long after the claim matures.”). See also, e.g., La. C.C. art. 3045 (“A surety . . . is
liable to the creditor . . . for the full performance of the obligation of the principal
obligor, . . . even in the absence of an express agreement of solidarity.”); Id. cmt.
(c) (“The creditor may include in the same suit both the principal obligor and the
surety or he may sue the surety without joinder of the principal obligor.”). The
court of appeal’s holding has the effect of foreclosing the exercise of preexisting
contractual rights, which exist outside the parameters of the Act and are expressly
preserved in the Act, between a subcontractor and the general contractor’s surety. 6
A court of appeal case, “K” Construction, Inc. v. Burko Construction, Inc.,
93-1338 (La. App. 4 Cir. 12/16/93), 629 So. 2d 1370, authored by former Chief
Justice John Dixon sitting pro tempore, is instructive in its analysis of the
relationship between La. R.S. 38:2242(B) and 38:2247 (post-1985 amendment). In
Burko – a case, like this one, in which the claimant filed a lawsuit before the public
6 We note further that R.S. 38:2241(C) contains language that purports to “immunize” sureties
from liability for or payment of claims “not required by this Part.” La. R.S. 38:2241(C)
(“Sureties and contractors executing payment bonds for public works contracts under this Part
shall be immune from liability for or payment of any claims not required by this Part.”). It has
been suggested that the aim of this provision is to “clearly state[] that a bond given pursuant to
the Public Works Act is a statutory bond which is strictly construed and that only claimants who
are specifically named in the statutes have a right to sue under the bond.” La. Prac. Series: La.
Constr. Law, § 13:10. Though this language is less than clear, there is no indication that it was
intended to supplant contractual remedies that persons who qualify as “claimants” under the Act
otherwise possess. This is consistent with the federal Miller Act, 49 U.S.C. § 3131, et seq.
(related to federal public construction projects), which requires no special notice for claimants
directly in contract with the general contractor. See La. Prac. Series: La. Constr. Law § 13:15
(noting that a subcontractor in a direct contractual relationship with a contractor is not required
to give notice under the Miller Act before filing suit).
11
body filed its notice of acceptance or default – the court considered and rejected
the same arguments made by the surety (and adopted by the court of appeal) in this
case. The court noted that the case was unique, because the notice of default was
filed long after the plaintiffs had sent notice of nonpayment to the general
contractor and after the plaintiffs filed the lawsuit. In reasoning we find
compelling, Chief Justice Dixon wrote:
[The sureties] claim that although R.S. 38:2242 B says “may” instead
of “shall,” R.S. 38:2247's reference to the formalities of notice/filing
and recordation as “requirements” causes the formalities to become
mandatory. The sureties contend that the formalities are discretionary
in R.S. 38:2242 B because that provision deals with perfecting a
statutory claim against the prime contract funds in the hands of the
public owner. R.S. 38:2247, they believe, is a separate provision for
filing suit against the sureties in which the permissive provisions of
R.S. 38:2242 B become mandatory.
The sureties also claim that the “may” in R.S. 38:2242 simply means
that a claimant has the option to: 1) file and record a sworn statement
to “perfect” his statutory claim, or 2) not file and record a sworn
statement and not have a “perfected” statutory claim. R.S. 38:2247,
the sureties assert, is what creates a cause of action against the bond
and it requires a perfected claim to proceed against the bond.
The statutes do not, however, operate together as the sureties suggest.
R.S. 38:2242 gives no consequence of not filing and/or recording the
sworn statement. And, styled as a prescription article, R.S. 38:2247
does not actually create a cause of action on the bond. The
assumption that the legislature intended to explain or limit R.S.
38:2242 in R.S. 38:2247 is not warranted.
Burko, 629 So. 2d at 1372.
We agree with the Burko court that any other interpretation of La. R.S.
38:2242 and 38:2247 would undermine the stated purpose of the Act: to protect
those contributing to the construction, alteration, or repair of public works, not to
foreclose preexisting contractual rights between parties. Here, as in Burko, Pierce
filed suit against the surety long before the event occurred that triggers the 45-day
period during which a claimant may file and record his sworn statement under La.
R.S. 38:2242, as well as the prescriptive period of one year during which suit may
be filed in accordance with La. R.S. 38:2247. As noted by Chief Justice Dixon in
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Burko, the provisions of the Act simply do not address the situation where suit is
filed prior to these triggering events. Id. at 1374 (“Simply put, the Public Works
Act does not appear to envision a situation where suit is filed before the notice of
default [or acceptance of the work by the governing authority] is recorded.”). 7
Because the statutory language at issue is ambiguous, and because the
purpose of the Act is to assist laborers in recovery – not to immunize sureties
where parties may proceed in contract – the purpose of the Act is effectuated by
this decision.
DECREE
Pursuant to the foregoing, we hold that Pierce’s lawsuit was timely filed
against the general contractor and its surety, Ohio Casualty, and that the failure of
the plaintiff to perfect its privilege against the public authority (as found by the
trial court) does not defeat its right of action against the surety. The decision of the
court of appeal is reversed and the decision of the trial court is reinstated.
REVERSED.
7 The other cases relied upon by the court of appeal are inapposite under the unique facts
presented in this case, because the claimants in those cases (i) did not file a lawsuit before the
notice of acceptance of work was filed, and (ii) filed their lien in the record after the expiration
of the 45 day period. See, e.g., Gulf Coast Refrigeration, LLC v. Houma Terrebonne Hous.
Auth., 13-1512 (La. App. 1 Cir. 3/24/14), 2014 WL 1175898, at *7 (unpublished), writ denied,
14-0855 (La. 6/20/14), 141 So. 3d 811 (lien filed and recorded more than 45 days after default
and did not file lawsuit until months later); John F. Sanchez Plumbing Co. v. Aetna Cas. &
Surety Co., 564 So.2d 1302, 1303 (La. App. 1 Cir.1990), writ denied, 567 So.2d 1128 (La. 1990)
(lien filed more than 45 days after notice of acceptance of work and lawsuit filed approximately
three months later); Interstate Sch. Supply Co. v. Guitreau's Constr. & Consulting Co., 542
So.2d 138, 139 (La. App. 1 Cir.1989) (sworn statement filed 46 days after recordation of the
notice of acceptance).
13
05/03/16
SUPREME COURT OF LOUISIANA
NO. 2015-C-0785
PIERCE FOUNDATIONS, INC.
VERSUS
JAROY CONSTRUCTION, INC.
KNOLL, Justice, dissenting.
I disagree with the majority’s finding failure to comply with the notice and
recordation requirements of La. R.S. 38:2247 does not affect the right of a
subcontractor to proceed directly against the surety on the bond. 1 For the following
reasons, I respectfully dissent. Indeed, to the contrary, I find the surety is immune
from suit unless the subcontractor gives notice and recordation as required under
the Public Works Act (“PWA”), the provisions of which must be strictly
construed. The majority clearly errs as a matter of law and reaches its result by
broadly construing, notwithstanding it recognizes the statute requires strict
construction, and misinterpreting the PWA.
As the majority correctly notes, the issue in this case concerns a
subcontractor’s direct right of action on the bond against the surety to which La.
R.S. 38:2247 provides:
Nothing in this Part shall be construed to deprive any claimant,
as defined in this Part and who has complied with the notice and
recordation requirements of R.S. 38:2242(B), of his right of action
on the bond furnished pursuant to this Part, provided that said action
must be brought against the surety or the contractor or both within one
year from the registry of acceptance of the work or of notice of default
1 I do agree the Public Works Act does not prevent or prohibit a subcontractor’s right of action
against a general contractor with which the subcontractor shares contractual privity, but this issue
is not presently before this Court.
of the contractor; except that before any claimant having a direct
contractual relationship with a subcontractor but no contractual
relationship with the contractor shall have a right of action against the
contractor or the surety on the bond furnished by the contractor, he
shall in addition to the notice and recordation required in R.S.
38:2242(B) give written notice to said contractor within forty-five
days from the recordation of the notice of acceptance by the owner of
the work or notice by the owner of default, stating with substantial
accuracy the amount claimed and the name of the party to whom the
material was furnished or supplied or for whom the labor or service
was done or performed. Such notice shall be served by mailing the
same by registered or certified mail, postage prepaid, in an envelope
addressed to the contractor at any place he maintains an office in the
state of Louisiana. (Emphasis added).
Clearly, La. R.S. 38:2247 expressly reserves as well as grants the claimant
(subcontractor) a direct right of action on the bond against the surety, provided he
first complies with the notification and recordation requirements of La. R.S.
38:2242(B).
The recognition of this direct action has been in the PWA since its inception,
providing in Section 3 of Act 224 of 1918: “nothing in this act shall be so
construed as to deprive any person or claimant within the terms of this act of his
right of action on the [bond], which right shall accrue any time after the maturity of
his claim.”2 Notably in Act 16 of 1962, the Legislature amended La. R.S. 38:2247,
imposing the one-year prescriptive period for suits on the bond:
2 In its entirety, Section 3 provided:
Be it further enacted, etc., That any person, firm, corporation or
association of persons or partnership to whom any money shall be due, on account
of having done any work, performed any labor, or furnished any material in the
construction, erection, alteration or repair of any such building, public road or
public work or improvement shall within forty-five days after the acceptance of
said work by the State, parish, city, town, village, public board or body, or within
forty-five days after the default of the contractor or sub-contractor, file with the
said authority a sworn statement of the amount due, and record a sworn statement
thereof with the Recorder of Mortgages of the Parish in which the work is done,
or being done, provided that the said 45 days shall not being to run until the said
authorities shall record in the mortgage office of the parish in which the work was
done as acceptance of the work, or notice of the default of the contractor or
subcontractor, as the case may be; provided further that nothing in this act shall be
so construed as to deprive any person or claimant within the terms of this act of
his right of action on the bo[nd], which right shall accrue at any time after the
maturity of his claim.
2
Nothing in this Part shall be construed to deprive any person or
claimant within the terms of this Part of his right of action on the
contractor’s bond which shall accrue at any time after maturity of his
claim, which said action must be brought against the surety and/or the
contractor within one year from the registry of acceptance of the work
or of notice of default of the contractor.
The Legislature stated its purpose in enacting Act 16 was “[t]o amend and re-enact
Section 2247 … to define the rights of persons or claimants to have or bring a
right of action against a contractor or the surety.” By expressly defining and
limiting the right of action, the Legislature brought the claimant’s direct action on
the bond against the surety squarely within the protection of the PWA.
The LOUISIANA PRACTICE SERIES: LOUISIANA CONSTRUCTION LAW § 13:14
provides:
The Louisiana Public Works Act contemplates that if there are
unpaid claims at the expiration of forty-five days after recordation of
acceptance or default, the public body can file a concursus
proceeding, citing all claimants, the contractor and the surety on the
bond, and requiring them to assert whatever claims they have against
one another. If the public body does not file such a proceeding, any of
the unpaid claimants may do so. In these proceedings, all claimants
can assert their claims against the surety and the contractor, and those
claims are paid in preference to any claims of the governing authority.
As a practical matter, the concursus proceeding is very seldom
used because claimants have a direct right of action against the
contractor and the surety on the bond. This action can be filed any
time after maturity of the claim, rather than requiring that the
claimants wait for forty-five days after acceptance of the entire
project, which in many cases could occur long after the claim matures.
It further provides:
The Public Works Act also provides a separate remedy for
claimants against the contractor and its surety who have complied
with notice and recordation requirements of La. R.S. 38:2242(B). If
the claimant is a materialman or laborer, this separate suit must be
filed by the claimant against the contractor or the surety within one
year after recordation of acceptance or notice of default. The
Louisiana Supreme Court has held that a subcontractor’s suit is also
governed by the one year prescription period La. R.S. 38:2247.
Id. at § 13.11.
3
As authority, the authors cite to La. R.S. 38:2247 and Honeywell, Inc. v.
Jimmie B. Guinn, Inc., 462 So.2d 145, 148 (La. 1985) in which this Court, with
Justice Marcus as organ, interpreted a previous version of La. R.S. 38:2247, which
provided:
Nothing in this Part shall be construed to deprive any person or
claimant within the terms of this Part of his right of action on the
contractor’s bond which shall accrue at any time after maturity of his
claim, which said action must be brought against the surety or the
contractor or both within one year from the registry of acceptance of
the work or of notice of default of the contractor; except that before
any person having a direct contractual relationship with a
subcontractor but no contractual relationship with the contractor shall
have a right of action against the contractor or the surety on the bond
furnished by the contractor, he shall record his claim as provided in
R.S. 38:2242 or give written notice to said contractor within forty-five
days from the recordation of the notice of acceptance by the owner of
the work....
The Court concluded:
… an unpaid subcontractor having a direct contractual
relationship with the contractor may sue on the contractor’s bond
without filing and recording a sworn claim or giving written notice to
the contractor. Although the action against the contractor is subject to
the ten-year prescriptive period ordinarily applied to actions in
contract, La.Civ.Code art. 3499, the action against the surety on the
bond must be brought within one year from the registry of acceptance
of the work by the governing authority….
Honeywell, 462 So.2d at 148.
In what can only be logically explained as action taken in response to the
Honeywell holding, the Legislature immediately enacted Act 244 of 1985,
amending La. R.S. 38:2247 to provide, as it presently does, that “Nothing in this
Part shall be construed to deprive any claimant ... who has complied with the
notice and recordation requirements of R.S. 38:2242(B), of his right of action on
the bond.” It follows, therefore, where compliance with the notice requirements
had not been necessary in order to proceed on the bond, the amendment evidences
4
a specific as well as explicit legislative intent requiring compliance with the notice
requirements in order to do so, effectively “legislatively overruling” Honeywell.
Read this way, the specific language of La. R.S. 38:2247 requires
compliance with the notice and recordation requirements of La. R.S. 38:2242(B) in
order to proceed via ordinaria against the surety “on the bond.” Thus, a
subcontractor/claimant to preserve his direct right of action on the bond against the
surety must: (1) “after the maturity of his claim and 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, file a sworn statement of the amount due
him with the governing authority having the work done and record it in the office
of the recorder of mortgages for the parish in which the work is done,” and (2) file
suit “against the surety or contractor or both within one year from the registry of
acceptance of the work or of notice of default of the contractor.” La. R.S. 38:2247.
The Legislature went one step further in Act 244 by adding a provision to
La. R.S. 38:2241(C), providing as it still does today: “Sureties and contractors
executing payment bonds for public works contracts under this Part shall be
immune from liability for or payment of any claims not required by this Part.”
Reading the term “claim” in pari materia with the definition of “claimant”
contained in La. R.S. 38:2242 leads to the most reasonable conclusion that claim
means “money … due pursuant to a contract … in the construction … of any
public works.” Clearly, if a claimant is seeking money due pursuant to his public
work contract from the surety bond, his direct right of action against the surety on
the bond is governed exclusively by the PWA and its notice/recordation
requirements, otherwise the surety is “immune from liability … or payment of any
claims.” La. R.S. 38:2241(C).
5
Nowhere does the majority opinion address this key provision in the PWA—
the immunity granted the surety under La. R.S. 38:2241(C)—, which renders the
majority’s analysis clearly erroneous. A proper statutory analysis would address
the immunity provision, which the surety, Ohio Casualty, is urging in this case.
The immunity provision clearly grants Ohio Casualty immunity because Pierce
Foundation did not follow the notice and recordation requirements before (or even
after) it filed suit against Ohio Casualty. By failing to address the immunity
provision in the PWA, the majority reaches a flawed interpretation.
The majority randomly dismisses the mandatory requirements of notice and
recordation and states: “We disagree with this holding, and find that where the
subcontractor fails to comply with the notice and recordation requirements of La.
R.S. 38:2242(B), the subcontractor loses his privilege against the funds in the
hands of the public authority, but the failure to comply does not affect the right of
the subcontractor, in contractual privity with the general contractor, to proceed
directly against the contractor and its surety.” Slip. Opn. at p. 8. This new twist in
misinterpreting the PWA is nothing more than legislating from the bench by
declaring “the subcontractor loses his privilege against funds” for failing to comply
with the PWA. Nowhere does the PWA proclaim this. Moreover, the statement as
to the subcontractor’s privity of contract with the general contractor is misplaced.
The contract between these two is not at issue. Importantly, there is no contract
between the subcontractor and the surety. The issue before us does not concern
contractual obligations, but rather how a subcontractor can make a claim for
payment on the bond under the PWA directly against a statutory surety when the
general contractor has gone “belly-up.”
The majority opinion further fails to address the strong policy consideration
of ensuring proportional payment of all claimants, which is the primary purpose of
6
the PWA, by requiring the queuing of claimants through recordation and
preventing depletion of the bond until all claimants have an opportunity to notify
and record their claims.
In its analysis, the majority summarily dismisses the appellate court’s
examination of legislative history in its search for legislative intent. However, by
not addressing the steady and consistent changes made by the Legislature in direct
correlation to misinterpretations rendered by this Court, I find the majority
mistakenly focuses on its interpretation of the specific words used by the
Legislature without examining why the Legislature employed those very words—
its purposeful intent to rectify this Court’s repeated attempts to expand the PWA
beyond its terms. This jurisprudential history and later legislative amendments
“overruling” this Court’s opinions are very telling and important to a correct
statutory interpretation of the PWA.
Concededly, the direct right of action of a subcontractor in direct contractual
privity with the general contractor and his surety most likely first arose from our
suretyship provisions. La. C.C. art. 3035. 3 However, over time, the Legislature
brought the surety bond within the exclusive parameters of the PWA and, in doing
so, transformed the direct right of action from contractual to statutory. 4 An in depth
examination of the legislative history of the PWA—the actions taken by the
3 La. C.C. art. 3035 provides: “Suretyship is an accessory contract by which a person binds
himself to a creditor to fulfill the obligation of another upon the failure of the latter to do so.”
And since the inception of our Civil Code, beginning in the Digest of Civil Laws of 1808, which
became the Louisiana Civil Code of 1808, Louisiana has codified rules relating to suretyship,
which gives creditors rights of action to proceed against the surety for fulfillment of the obligor’s
contractual obligation. See La. C.C. 1808, p. 428, Art. 1; La. C.C. art. 3004 (1825); La. C.C. art.
3035 (1870); see also CN 1804, Art. 2011 (“Celuí quí se rend caution d’une obligation, se
soumet envers le créancier à satisfaire à cette obligation, si le dàbiteur n’y satisfait pas lui-
même” translated “The person who becomes surety on a debt agrees with the creditor to satisfy
the obligation if the debtor does not.”).
4 Significantly, the surety herein is not bound to the subcontractor. Rather, it is bound to the
State by operation of the PWA. And unlike of old, the subcontractor is not privy to the surety
contract; the surety has no contractual relationship with the subcontractor. The subcontractor’s
right of action on the bond now arises strictly from the PWA.
7
Legislature in direct response to interpretations of this Court—clearly reveals this
transformation. The Legislature said as much in Act 16 of 1962.
Likewise, this Court has over time revised its interpretation of the limits of a
surety’s liability on the bond, starting from a statutory limitation then moving to a
contractual expansion, returning to its statutory position, and now with the majority
opinion resurrecting its contractual approach. And each time the Legislature has
responded, with its last amendment expressly limiting the liability on the bond only
to “claims … required by this Part.”
Early on this Court held the bond was statutory and therefore limited by the
statute:
But the claimant contends that the bond executed by the
appellant surety company is broader in its terms than those required
by the statute. The bond provides, among other things, that the surety
company will pay, if the contractor does not, ‘all bills for materials
and labor entered into in the construction of said work or used in the
course of the performance of the work.’ The engagement of the
contractor’s surety to pay for material and labor ‘used in the course of
the performance of the work’ is, admittedly, more comprehensive than
the requirement of the statute.
The claimant argues that, whatever may be the inhibition
imposed by the legislative act on the public body executing the
contract and bond, there is no inhibition against the incurring by the
contractor’s surety of a liability beyond that fixed by the statute. In
support of his argument, claimant cites certain decisions from other
jurisdictions.
But we see no reason for departing from the well-established
rule of our own jurisprudence that in a statutory bond the statute must
be read into the instrument; superadded stipulations must be
disregarded and necessary obligations which have been omitted must
be supplied. John H. Murphy Iron Works v. United States F. & G. Co.,
169 La. 163, 124 So. 768; Minden Presbyterian Church v. Lambert,
167 La. 719, 120 So. 61; Miller v. Bonner, 163 La. 342, 111 So. 776;
Davis v. West Louisiana Bank, 155 La. 245, 99 So. 207; Id., 155 La.
252, 99 So. 210.
Long Bell Lumber Co. v. S.D. Carr Const. Co., 172 La. 182, 187-88, 133 So. 438,
439-40 (1931). Then in Construction Materials, Inc. v. American Fidelity Fire Ins.
8
Co., 388 So.2d 365, 366-67 (La. 1980), with Justice Dennis as organ, this Court
contrarily held a surety could contractually extend his liability:
The statute’s aim is to define the types of claims to be given
protection and to make the governing authority responsible for their
deduction and payment out of the contractor’s receipts. The legislation
clearly does not forbid a contractor and his surety from providing
security for the payment of claims falling outside the ambit of
statutory protection. In fact, the Public Works Act makes clear that it
shall not be construed to deprive any person of his right of action on
the contractor’s bond. La.R.S. 38:2247, in pertinent part, provides:
“Nothing in this Part shall be construed to deprive any
person or claimant within the terms of this Part of his
right of action on the contractor’s bond which shall
accrue at any time after maturity of his claim . . . .”
Defendant surety argues that this provision was intended to
provide protection only for “a claimant within the terms” of the
statute. We think it clear, however, that the section was designed to
protect “any person” with a “right of action on the contractor’s bond.”
Claimants whose claims fall within the ambit of the statutory
protection have no need of the savings clause. It was specifically for
the benefit of those persons and claimants whose rights depend solely
on the contractor’s bond that the section preserving their actions was
added.
The surety also contends that extending coverage of Public
Works bonds will conceivably allow extra-statutory claims to dilute
the protection afforded traditional claimants and public bodies. These
are legitimate concerns addressing themselves to the legislative
process, which thus far has given more weight to other considerations.
One such consideration might be found in the words of the court of
appeal, which aptly suggested that there is “little merit in a rule of law
which permits a surety to evade the conditions of its own bond, which
it has written, and for which it has charged a premium . . . .” 383
So.2d at 1294.
Construction Materials, Inc., 388 So.2d at 367. Through its enactment of the 1985
amendments, discussed supra, the Legislature codified this Court’s earlier position
on the bond’s statutory nature. Then in State v. McInnis Brothers Const., 97-0742
(La. 12/12/97), 701 So.2d 937, this Court once again adopted the interpretation of
the bond as statutory:
As explained in Wilkin, supra, La. R.S. 38:2241 et seq. require
of the general contractor a statutory bond (the labor and materials
9
payment bond) and give to the qualifying claimant a “privilege against
the unexpended fund in the possession of the authorities.” Wilkin, 561
So.2d at 70…. Because it is required by the statute and the parties are
not free to enter into the contract without it, the bond is in the nature
of a statutory bond which exists for the benefit of the public authority
and in essence creates a “privilege” or a source of funds available to
the State should it be successful in a suit against the general contractor
and the surety …. “The Act is to be strictly construed and the liability
of the surety should not be expanded beyond the statute.” Metro
Builders Hardware, Inc. v. Burko Construction, Inc., et al., 93-1970
(La.App. 4th Cir. 2/25/94), 633 So.2d 838, writ denied, 94-0727
(La.5/6/94), 637 So.2d 1049. “[T]he obligations of a statutory bond
are limited to the exact provisions of the statute.” Martinolich v.
Albert, 143 So.2d 745, 747 (La.App. 1st Cir.1962).
McInnis Brothers Const., 97-742 at pp. 9-10, 701 So.2d at 944.
Our role as civilian jurists is to interpret the laws in search of the
Legislature’s intent. In this matter, the Legislature has made clear its intent to limit
the liability of the surety on the bond to only those claims provided for in the
PWA. Under the facts herein, the only right of action on the bond the PWA
recognizes and provides for is that of a claimant “who has complied with the notice
and recordation requirements of R.S. 38:2242(B).” The majority’s reading of the
statutory language authorizes a right of action on the surety bond arising from the
“contractual privity” between the general contractor and the subcontractor not
provided for by the PWA in direct contravention of the immunity provisions set
forth in La. R.S. 38:2241(C). In so doing, the majority once again adopts the
position of this Court in Honeywell and Construction Materials, Inc., which
ironically prompted the very amendments we are now charged with interpreting.
Therefore, in my view, the only interpretation that will give effect to all the
statutory provisions and comply with the Legislature’s expressed intent is one that
requires compliance with the notice and recordation requirements before a
subcontractor may proceed directly against the surety on the bond.
10
Much is also made by the majority herein of “K” Construction, Inc. v.
Burko Construction, Inc., 629 So.2d 1370 (La. App. 4th Cir. 1993), authored by
former Chief Justice Dixon, then sitting pro tempore, in which the court held:
styled as a prescription article, R.S. 38:2247 does not actually
create a cause of action on the bond.
…
While it is arguable that the reason for the notice provision of
R.S. 38:2242 is to ensure that the governing authority and its surety
are not subject to claims long after a project is completed, it is not
reasonable to penalize a sub-contractor who has given timely notice
sufficient to apprise the governing authority of its claim, merely
omitting to provide the governing authority with a sworn statement.
…
Simply put, the Public Works Act does not appear to envision a
situation where suit is filed before the notice of default is recorded.
Consequently, our task is to determine if what the claimants did in
this case was sufficient to notify HANO and, in Laurent’s case,
Burko of the claims.
“K” Construction, Inc., 629 So.2d at 1372-74 (emphasis added). This
interpretation is flawed, however, in its complete failure to recognize as well as
preserve the notice to other claimants, which the recordation requirement of La.
R.S. 38:2242(B) is meant to ensure. Further, in holding La. R.S. 38:2247 is merely
prescriptive, the question from where does the right of action arise is left
unanswered. The logical resolution of this inquiry is ultimately fatal to “K”
Construction’s conclusion because if the right does not arise from the PWA, the
subcontractor’s action is preempted by the surety’s statutory immunity.
Guided by the Legislature’s intent expressed in its 1962 and 1985
amendments to the PWA, I find a claimant, in order to maintain its direct action
against the surety on the bond under La. R.S. 38:2247, must first satisfy the notice
and recordation requirements of La. R.S. 38:2242(B) as well as file suit within the
one-year prescriptive period; otherwise, its action on the bond prescribes. This
interpretation ensures the primary purpose of the PWA—the proportional payment
of all claims—is both met and satisfied.
11
Finally because its holding is contrary to this interpretation, I would overrule
“K” Construction. And I would strongly discourage reliance on any statement in
the LOUISIANA PRACTICE SERIES, which likewise does not conform to the
Legislature’s clear intent recited above.
12
05/03/16
SUPREME COURT OF LOUISIANA
NO. 2015-C-0785
PIERCE FOUNDATIONS, INC.
VERSUS
JAROY CONSTRUCTION, INC.
GUIDRY, Justice, dissents and assigns reasons.
I disagree with the majority’s holding that failure to comply with the notice
and recordation requirements of La. Rev. Stat. 38:2247 does not limit the right of a
subcontractor, in contractual privity with the general contractor, to proceed directly
against the surety on the statutory bond. I do not disagree that there is arguably
some ambiguity at first glance in the permissive language used in La. Rev. Stat.
38:2242 and the language used in La. Rev. Stat. 38:2247. However, in my view
the interpretation of the two statutes made by the court of appeal best follows the
intent of the legislature and the Public Works Act, La. Rev. Stat. 38:2241 et seq.
I agree with the majority that the Act is intended to protect those
contributing to the construction, alteration, or repair of public works, rather than to
foreclose preexisting contractual rights between parties. In enacting the subject
version of La. Rev. Stat. 38:2247, the legislature sought to define the rights of
persons or claimants to have or bring a right of action against a contractor or a
surety. Acts 1962, No. 16. In my view, one purpose of the notice requirements of
La. Rev. Stat. 38:2242 is to ensure the governing authority and the statutory surety
are not subject to claims long after a project is completed. See “K” Construction,
Inc. v. Burko Construction, Inc., 629 So.2d 1370, 1374 (La. App. 4th Cir. 1993),
However, I do not believe that is the only purpose. The notice to the governing
authority, together with recordation in the public records as required in La. Rev.
Stat. 38:2242(B), also alerts other claimants and interested persons to the
subcontractor’s claim against not only the contractor, but also any claims on the
statutory bond. As the majority opinion notes, the Act, in lieu of a lien against the
public work itself, gives claimants a privilege against the unexpended funds in the
possession of the public entity, including certain claimants like materialmen and
laborers who do not enjoy contractual privity with the general contractor or the
governing authority. Slip op. at 4, citing Wilkin v. Dev. Con Builders, Inc., 561
So.2d 66, 70 (La. 1990). The governing authority, however, is also protected if it
complies with the Act. Id. The bond itself, deemed a statutory bond, need only be
at least 50% of the contract price. La. Rev Stat. 38:2241(A)(2). Importantly,
sureties and contractors executing payment bonds for public works contracts under
this Act “shall be immune from liability for or payment of any claims not required
by this Part.” La. Rev. Stat. 38:2241(C). Ultimately, because the pool of funds
established by the statutory bond may be finite, the Act is intended to provide
proportional payment to all eligible claimants.
To that end, I believe La. Rev. Stat. 38:2247 is intended to put all of the
claimants, whether in contractual privity with the general contractor or not, on
relatively equal footing when it comes to asserting their statutory liens, or
privileges, against the surety on the bond. The subcontractor who enjoys
contractual privity with the general contractor may nonetheless exercise his right of
action directly against the contractor, and most assuredly so, but he may also
proceed directly against the surety on the statutory bond, so long as he first
establishes his statutory lien or privilege as required by La. Rev. Stat. 38:2242(B).
I see no unreasonable intrusion into the contractual rights of the subcontractor in
2
such a situation, as he may still proceed against the contractor, in any case, but he
may also proceed against the surety without waiting until after the recordation of
acceptance of the work by the governing authority. The only condition for
proceeding against the surety on the statutory bond is compliance with the notice
and recordation requirements of La. Rev. Stat. 38:2242. In my view, this reading
of the two statutes in pari materia gives effect to all of the language in both.
Accordingly, I would find that a claimant to maintain his direct action against the
surety on the statutory bond under La. Rev. Stat. 38:2247, must first establish his
privilege thereon through the notice and recordation requirements set forth in La.
Rev. Stat. 38:2242(B), as well as file suit within the time limitations of La. Rev.
Stat. 38:2247.
3
05/03/16
SUPREME COURT OF LOUISIANA
NO. 2015-C-0785
PIERCE FOUNDATIONS, INC.
VERSUS
JAROY CONSTRUCTION, INC.
ON WRIT OF CERTIORARI TO THE COURT OF APPEAL,
FIFTH CIRCUIT, PARISH OF JEFFERSON
HUGHES, J., dissents for the reasons assigned by Guidry, J., and assigns
additional reasons.
The courts are supposed to follow the law, not make it.
Louisiana Revised Statute 38:2241(C) provides, in pertinent part: “Sureties
and contractors executing payment bonds for public works contracts under this Part
shall be immune from liability for or payment of any claims not required by this
Part.” (Emphasis added.)
The Louisiana Supreme Court, in an opinion authored by Justice Kimball,
stated that:
It is a long standing principle of statutory interpretation that “[a]s a
general rule, lien statutes are stricti juris and should thus be strictly
construed.” Guichard Drilling Co. v. Alpine Energy Services, Inc.,
94-1275 p. 7 (La. 7/3/95), 657 So.2d 1307, 1313, rehearing denied
(La. 1995). “[P]ublic contract laws are to be strictly construed such
that the privileges granted are not extended beyond the statutes.”
Wilkin, supra, 561 So.2d at 71. See also American Creosote Works,
Inc. v. City of Natchitoches, 182 La. 641, 162 So. 206 (1935); and
Rester v. Moody & Stewart, 172 La. 510, 134 So. 690 (1931). “The
Public Works Act is sui generis and provides exclusive remedies to
parties in public construction work.” U.S. Pollution Control, Inc. v.
National American Ins. Co., 95-153 p. 4 (La. App. 3d Cir. 8/30/95)
663 So.2d 119, 122.[1]
1 U.S. Pollution Control was authored by Judge, now Justice, Jeannette Theriot Knoll.
State Division of Administration v. McInnis Brothers Construction, 97-0742
(La. 10/21/97), 701 So.2d 937, 944.
In the present case the claimant intentionally chose not to comply with the
Public Works Act and did not comply with the notice and recordation requirements
of this Part. The statutory surety is therefore immune.
2