G U E S T E D I T O R I A L South Carolina Supreme Court Rules on Bond Claims Case Guest Editorial by John Davidson, Member, Nexsen Pruet On November 13 th , the South Carolina Supreme Court reversed a recent ruling of a state Circuit Court. The opin- ion involved “notice provisions” which help subcontractors and suppliers to preserve bond payment rights. My law partner, Henry W. Brown, wrote about the Circuit Court ruling for the South Carolina Construction News web- site in November. The heart of the matter is S.C. Code § 29-5-440 and its “Notice of Project Commencement” and the responsive “Notice of Furnishing.” In the initial ruling, the lower court awarded summary judgment to an insur- ance company that issued a bond on a high school con- struction project. The court held that even if a General Contractor does not provide “Notice of Project Com- mencement,” subcontractors must still provide “Notice of Furnishing.” In its reversal, the S.C. Supreme Court seems to give some additional protections to claimants under certain payment bonds. See: Hard Hat Workforce Solutions, LLC v. Mechanical HVAC Services, Inc. et al, Op. No. 27329 (S.C.Nov. 13, 2013) History of the Case The case arose like this. The General Contractor on a public high school project hired a first-tier subcontractor for mechanical work and required that first-tier subcontrac- tor to provide a payment bond. The payment bond pro- vided read, in pertinent part: NOW, THEREFORE, THE CONDITION OF THIS OBLI- GATION IS SUCH, that if the Principal shall promptly make payment to all persons supplying labor and ma- terial in the prosecution of the work provided for in said Subcontract and any and all modifications of said Subcontract that may hereafter be made, then his obligation shall be null and void otherwise it shall remain in full force and effect. . . . There said Principal and the said Surety agree that this Bond shall inure to the benefit of all persons sup- plying labor and material in the prosecution of the work provided for in said Subcontract, as well as to the Obligee, and that such persons may maintain in- dependent actions upon this Bond in their own names. The first-tier subcontractor supplied the bond and then subcontracted ductwork installation to a second-tier sub- contractor, who subcontracted with Hard Hat for skilled labor. During the project, Hard Hat’s manager sent three emails to the first-tier subcontractor informing them of work they were doing and also to offer to do other work directly for the first tier sub. After completing the work, Hard Hat made a claim on the payment bond alleging that it was unpaid for $85,000 of work. The payment bond surety took the position that Hard Hat could not collect on the payment bond because it had not given adequate notice of its work through a Notice of Furnishing, as required by section 29-5-440 and because the first-tier subcontractor had paid the second-tier sub- contractor in full. The trial court granted summary judgment to the surety on the basis that section 29-5-440 was implied to be a part of all bonds. The pertinent portion of 29-5-440 relied upon by the trial court provides: Every person who has furnished labor, material, or rental equipment to a bonded contractor or its sub- contractors in the prosecution of work provided for in any contract for construction, and who has not been paid in full…shall have the right to sue on the payment bond for the amount…unpaid at the time of the institution of such… A remote claimant shall have a right of action on the payment bond only upon giving written notice by certified or registered mail to the bonded contractor The South Carolina Construction News — December 2013 / January 2014 – 17