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McCormick v. Reliance Insurance Co. (5/10/2002) sp-5569
McCormick v. Reliance Insurance Co. (5/10/2002) sp-5569
Notice: This opinion is subject to correction before
publication in the Pacific Reporter. Readers are
requested to bring errors to the attention of the Clerk
of the Appellate Courts, 303 K Street, Anchorage,
Alaska 99501, phone (907) 264-0608, fax (907) 264-0878,
e-mail corrections@appellate.courts.state.ak.us.
THE SUPREME COURT OF THE STATE OF ALASKA
JOHN McCORMICK, )
) Supreme Court No. S-9813
Appellant, )
) Superior Court No. 3AN-99-
11659 CI
v. )
) O P I N I O N
RELIANCE INSURANCE CO., )
) [No. 5569 - May 10, 2002]
Appellee. )
________________________________)
Appeal from the Superior Court of the State
of Alaska, Third Judicial District,
Anchorage, Peter A. Michalski, Judge.
Appearances: Mary L. Pate, Eide & Miller,
P.C., Anchorage, for Appellant. Randall E.
Farleigh, Choquette & Farleigh, LLC,
Anchorage, for Appellee.
Before: Fabe, Chief Justice, Matthews,
Eastaugh, Bryner, and Carpeneti, Justices.
EASTAUGH, Justice.
I. INTRODUCTION
I. Alaska Statute 08.18.151 bars a contractor from suing
for compensation unless the contractor either met or was in
substantial compliance with the contractor registration
requirements when the contract was formed. Because there are
genuine, material fact disputes about whether John McCormick
substantially complied with these requirements when he contracted
to perform services on a public works project, we reverse the
summary judgment that dismissed his Little Miller Act claim
against the general contractors surety. We do not reach
McCormicks alternative argument that he was Alaska Electrics
employee.
II. FACTS AND PROCEEDINGS
In May 1999 John McCormick orally contracted with
Alaska Electric Company, an electrical subcontractor on an
Anchorage International Airport runway project, to provide end-
dump trucking services at the rate of $60 per hour. McCormick
worked on the runway project from May 10 through September 8,
1999. Although McCormick initially provided only end-dump
trucking services on the project, Alaska Electric eventually
asked McCormick to provide additional services, including
excavation, installing electrical vaults, and driving an Alaska
Electric truck to purchase fuel and materials for the
construction site. McCormick also furnished a service van, a
small semi-tractor, and various tools to the site.
McCormick submitted invoices for completed work to
Alaska Electric, which forwarded the invoices to Wilder
Construction Company, the general contractor on the project.
Wilder then issued checks made out to both Alaska Electric and
McCormick for invoices approved by Alaska Electric. McCormick
was paid for all work performed through July 17, 1999.
As of October 1, 1999 McCormick had received no payment
for work he performed after July 17, 1999. On October 1 he gave
Wilder written notice, as required by AS 36.25.020(b),1 of a
claim for $48,186.23 for services he claimed he rendered from
July 18 through September 8, 1999. The same day Wilder sent
McCormick a check for $12,375.96.2 Wilder claimed that the
services McCormick rendered from July 18 through September 8 were
outside the scope of the agreement to provide end-dump trucking
services at the rate of $60 per hour, and that McCormick was
entitled only to a labor rate of $27.32 per hour for those
services.
On November 12, 1999 McCormick filed a superior court
complaint against Alaska Electric and Reliance Insurance Company.
The complaint alleged that Alaska Electric breached the contract
and the covenant of good faith and fair dealing. It asserted a
Little Miller Act3 claim against Reliance, which had furnished a
surety bond for Wilder. In April 2000 Reliance moved for summary
judgment, claiming that it was entitled to judgment as a matter
of law, because (1) McCormicks registration with the state as a
contractor had expired before he contracted with Alaska Electric,
and (2) McCormick filed his claim prematurely. McCormick opposed
Reliances motion and cross-moved for summary judgment.
The superior court dismissed McCormicks Little Miller
Act claim against Reliance on summary judgment because John
McCormick was not registered under AS 08.18.011 et seq. at
relevant times. The court denied McCormicks cross-motion for
summary judgment.
McCormick moved for reconsideration, claiming that the
superior court had failed to consider his alternative argument
that he was an employee of Alaska Electric, and that he was
therefore not required to register as a contractor in order to
sue for unpaid compensation. The superior court denied the
reconsideration motion and entered a final judgment in favor of
Reliance. McCormick appeals.
III. DISCUSSION
A. Standard of Review
We review a grant of summary judgment de novo and
affirm if the evidence in the record fails to disclose a genuine
issue of material fact, and the moving party is entitled to
judgment as a matter of law.4 We view the facts in the light
most favorable to the non-moving party.5 We apply our
independent judgment to any questions of law, adopting the rule
of law that is most persuasive in light of precedent, reason, and
policy.6
B. It Was Error to Dismiss McCormicks Little Miller Act Claim
Against Reliance on Summary Judgment.
1. There are genuine issues of material fact about whether
McCormick substantially complied with AS 08.18s registration
requirements.
1. McCormicks only claim against Reliance was under the Little
Miller Act. That statute requires that the primary contractor .
. . on a public works project post a bond to the state or
political subdivision thereof for the protection of all persons
who supply labor and material in the prosecution of the work
provided for in the contract . . . . 7 The Little Miller Act
further provides:
A person who furnishes labor or material in
the prosecution of the work provided for in
the contract for which a payment bond is
furnished . . . and who is not paid in full
before the expiration of 90 days after the
last day on which the labor is performed or
material is furnished for which the claim is
made, may sue on the payment bond for the
amount unpaid at the time of suit.[8]
A contractor may not sue under the Little Miller Act
without alleging and proving that the contractor was a registered
contractor at the time of contract formation.9 Registration as a
construction contractor under AS 08.18 requires: a registration
fee, a surety bond, and public liability and property damage
insurance.10 Registration was intended by the legislature to
ensure competence and financial responsibility in those who
undertake work as contractors. 11
Because the legislature chose the closing of the doors
of the courts as a fundamental tool to enforce its policy of
ensuring competence and financial responsibility in those who
undertake work as contractors, we have consistently enforced AS
08.18.151s requirement that a contractor must be registered at
the time of contract formation in order to maintain an action for
compensation.12 But because statutes which cause forfeiture are
not favored,13 we have adopted the doctrine of substantial
compliance.14 We have held that AS 08.18.151s statutory bar may
be abrogated by a contractors substantial compliance with the
registration requirements.15
[S]ubstantial compliance involves conduct which falls
short of strict compliance with the statutory registration
requirements, but which affords the public the same protection
that strict compliance would offer.16 Substantial compliance
generally requires that the contractor be registered [usually
under a different name] and have bonding and insurance coverage,
since these are the primary means by which the statute seeks to
protect parties dealing with contractors.17 But when a contractor
is not registered at the time of contract formation, a court can
still find substantial compliance if (1) the contractors prior
registration or other public information would give the public
the same information that current registration would give (i.e.,
the contractors insurance information); and (2) the contractors
bond and insurance remained effective during the period his or
her registration lapsed.18
It is undisputed that McCormicks registration with the
state as a general contractor expired on December 31, 1998, and
that McCormick was not registered when he contracted with Alaska
Electric. McCormick contends that it was nonetheless error to
dismiss his Little Miller Act claim on summary judgment based on
his lack of registration, because he substantially complied with
AS 08.18s registration requirements.
We first address McCormicks argument that information
about his bonding and insurance was readily available to the
public even after his registration expired. McCormick asserts
that [a] phone call to the Alaska Department of Labor, Division
of Occupational Licensing would have revealed all [of] McCormicks
information, including his bonding and insurance because the
Department keeps these records for several years on their system,
even when a contractor is currently unregistered. McCormick also
notes that when he contracted with Alaska Electric, he had a
valid contractors license issued by the Municipality of
Anchorage, and a business license issued by the state.
Drawing all reasonable factual inferences in favor of
McCormick, the non-moving party, as we must when reviewing a
grant of summary judgment,19 we conclude that evidence of (1)
McCormicks prior registration with the Division of Occupational
Licensing, (2) the valid contractors license issued by the
Municipality of Anchorage, and (3) the business license issued by
the state was sufficient to raise a genuine factual dispute about
the continuing availability of McCormicks bonding and insurance
information to the public during the lapse in his registration.
We next consider McCormicks argument that his bond and
insurance actually remained in effect after his registration
lapsed. We conclude that the evidence in the record does not
establish as a matter of law that McCormick was not bonded during
the relevant period.20
McCormick upgraded his state license from specialty
contractor to general contractor in March 1998. At the same
time, he increased his surety bond from $5,000 to $10,000 by
obtaining a rider to the bond his surety, the Star Insurance
Company, had previously issued to him. The rider incorporated
the agreements, limitations and conditions of the original bond.
The original bond provided that liability under the bond shall be
continuous until the certificate of registration is revoked or
otherwise terminated by the Department of Commerce and Economic
Development or until 30 days after the surety sends written
notice of cancellation [to] the Department of Commerce and
Economic Development, Division of Occupational Licensing, State
of Alaska.
Reliance argues that under the terms of the bond
agreement, McCormicks bond was automatically canceled on December
31, 1998, when McCormicks state registration as a general
contractor expired, and that McCormick was therefore not bonded
when he worked on the runway project beginning in May 1999. But
the Star Insurance Company, McCormicks surety, sent a notice of
cancellation to the state Department of Commerce and Economic
Development on August 10, 1999. That notice stated: The above
bonding Company hereby notifies you that it has elected to cancel
said bond in its entirety. This Notice is given to you in
accordance with the cancellation provision in above mentioned
bond and applicable state insurance statutes. The fact that
McCormicks bonding company sent the notice reasonably permits an
inference that it considered itself still bound when it sent that
notice to the state in August 1999. If the bonding company had
thought that the bond had already expired when the registration
expired on December 31, 1998, it is arguable that the bonding
company would have had no reason to send the August 10, 1999
notice informing the state that Star had elected to cancel the
bond. This inference in turn raises a genuine factual dispute
about whether McCormick was bonded when he worked on the runway
project, and thus, whether he was in substantial compliance. We
therefore reverse the grant of summary judgment against McCormick
and remand for further proceedings.21
Citing AS 36.25.020(a), Reliance argues that because
McCormick filed suit before the expiration of 90 days after the
last day on which the labor [was] performed . . . for which the
claim is made, it was not error to dismiss McCormicks Little
Miller Act claim.22 But because there is no evidence in the
record that Reliance was prejudiced by McCormicks premature
filing, requiring McCormick to commence a new and separate action
in these circumstances would [be] to insist upon an empty
formalism.23 We therefore reject this argument as a basis for
affirming the grant of summary judgment.
2. We do not reach McCormicks alternative argument
that he was Alaska Electrics employee.
Alternatively, McCormick argued below, and maintains on
appeal, that he was Alaska Electrics employee rather than an
independent contractor, and that he was therefore not required to
register as a contractor under AS 08.18.171(4).24
The superior courts order granting Reliance summary
judgment did not address McCormicks argument that he was Alaska
Electrics employee.
Because our ruling on the substantial compliance issue
requires remand and because the superior court did not consider
McCormicks alternative claim that he was an employee, there is no
reason for us to address this alternative claim.
IV. CONCLUSION
For these reasons we REVERSE the grant of summary
judgment and REMAND for further proceedings consistent with this
opinion.
_______________________________
1 AS 36.25.020(b) provides in relevant part:
[A] person having direct contractual
relationships with a subcontractor but no
contractual relationship express or implied
with the contractor furnishing the payment
bond has a right of action on the payment
bond upon giving written notice to the
contractor within 90 days from the last date
on which the person performed labor or
furnished material for which the claim was
made.
(Emphasis added.)
2 According to Reliances brief, [p]ayment of the last
check [for $12,375.96] had nothing to do with the demand by
counsel for [McCormick] which was received after Wilders check
was issued.
3 AS 36.25.010 - .025.
4 Mathis v. Sauser, 942 P.2d 1117, 1120 (Alaska 1997).
5 Id.
6 Id.
7 State v. Tyonek Timber, Inc., 680 P.2d 1148, 1156
(Alaska 1984) (quoting AS 36.25.010).
8 AS 36.25.020(a).
9 AS 36.25.020(c) (A suit under this section is subject
to AS 08.18.151.); AS 08.18.151 (providing that contractor may
not bring action in a court of this state for the collection of
compensation for the performance of work or for breach of a
contract for which registration is required . . . without
alleging and proving that the contractor was a registered
contractor at the time of contracting for the performance of the
work).
10 Gross v. Bayshore Land Co., 710 P.2d 1007, 1012 (Alaska
1986) (citations omitted).
11 Id. (citations omitted).
12 Tyonek Timber, 680 P.2d at 1157 (emphasis omitted)
(quoting Sumner Dev. Corp. v. Shivers, 517 P.2d 757, 763 (Alaska
1974)).
13 Id.
14 Gross, 710 P.2d at 1012-13; Jones v. Short, 696 P.2d
665, 667 (Alaska 1985); Alaska Protection Serv. v. Frontier
Colorcable, Inc., 680 P.2d 1119, 1122 (Alaska 1984).
15 E.g., Jones, 696 P.2d at 668.
16 Jones, 696 P.2d at 668 n.10 (quoting Alaska Protection
Serv., 680 P.2d at 1122).
17 Alaska Protection Serv., 680 P.2d at 1122.
18 Jones, 696 P.2d at 668.
19 Anchorage Police Dept Employees Assn v. Municipality of
Anchorage, 24 P.3d 547, 549 (Alaska 2001).
20 Reliance does not dispute McCormicks assertion that he
was insured during the period he worked on the runway project.
21 Although McCormick argues on appeal that he has
established that he is owed $35,810 for the work he performed
between July 18 and September 8, 1999, the only relief he
requests on appeal is reversal of the summary judgment granted to
Reliance and a remand for further proceedings. We therefore do
not decide here whether McCormick is entitled to partial summary
judgment on the issue of damages.
22 McCormick filed suit on November 12, 1999. The last
day on which he claimed he performed work for Alaska Electric was
September 8, 1999.
23 United States v. Reiten, 313 F.2d 673, 675 (9th Cir.
1963).
24 AS 08.18.171(4) defines contractor as
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
contractor, builder, mechanical contractor,
specialty contractor, and subcontractor . . .
.
(Emphasis added.) McCormick asserts that employees on a public
works project have a Little Miller Act claim under AS
36.25.020(a). Reliance does not dispute this assertion.
