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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. 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.