Alliance Steel, Inc. v. TNT Constr., Inc.
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ARKANSAS COURT OF APPEALS
DIVISION II
No. CA08-986
ALLIANCE STEEL, INC.
Opinion Delivered May
20, 2009
APPELLANT
APPEAL FROM THE BOONE
COUNTY CIRCUIT COURT
[NO. CV2003-209-3]
V.
TNT CONSTRUCTION, INC., and
TILLMAN ADKINS
APPELLEES
HONORABLE JOHN R. PUTMAN
JUDGE
AFFIRMED
JOSEPHINE LINKER HART, Judge
Appellant, Alliance Steel, Inc. (Alliance), appeals from the circuit court’s judgment
rejecting both its fraud and negligence claims against appellee Tillman Adkins, but awarding
it judgment against appellee TNT Construction, Inc. (TNT) on Alliance’s contract claim
against TNT. On appeal, Alliance asserts that the court erred in rejecting the fraud and
negligence claims. We affirm the circuit court’s decision.
On June 10, 2002, TNT contracted with the Omaha School District to construct a
metal building for the sum of $168,000. Also on June 10, 2002, TNT executed a contract
with Alliance for the purchase of a metal building for the sum of $83,611. The contract was
signed by Tillman Adkins, as president of TNT, and subsequent change orders were made to
the contract increasing the price to $83,655.
Before executing the contract with TNT, Alliance prepared and required TNT to
complete a document entitled “Jobsite Information Sheet,” which in part asked, “Is the
project bonded?” The question was answered, “Yes.” The document further provided, “If
yes, attach a copy of the bond.” A bond, however, was not attached. In fact, no payment
bond was ever applied for or issued.
Alliance completed manufacture of the building and delivered it to TNT. The Omaha
School District paid TNT as agreed, but Alliance was not fully paid by TNT. Alliance
brought a cause of action against TNT alleging breach of contract. Alliance also sought
recovery from TNT and Adkins, alleging that “[p]rior to Alliance entering into the contract,
and to induce Alliance to enter into the contract, Adkins expressly represented to Alliance that
TNT had obtained a payment bond to assure all amounts that may become due to Alliance
under the contract,” that “Alliance reasonably relied on Adkins’s representation by entering
into the contract,” that “Alliance would not have entered into the contract but for Adkins’s
representation,” that “contrary to Adkins’s express representation, TNT did not obtain a
payment bond,” and that Alliance suffered damages “[a]s a direct consequence of Adkins’s
misrepresentation.” Further, Alliance sought recovery against Adkins, alleging that Adkins
“undertook the obligation and duty to obtain a payment bond,” that Adkins “represented to
Alliance that he had obtained a payment bond to assure all amounts that may become due and
payable to Alliance under the contract,” that “Adkins failed and neglected to actually obtain
the payment bond in breach of his duty to Alliance,” and that “[a]s a result of the negligence
of Adkins in failing to obtain a payment bond,” Alliance suffered damages.
Following a hearing, the circuit court found in favor of Alliance on its breach-ofcontract claim. On the claim of fraud, the circuit court found that the representation in the
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Jobsite Information Sheet that there was a payment bond was false. The court noted,
however, that no bond was attached as requested. The court opined that, to claim fraud or
constructive fraud, one has an affirmative duty to make further inquiry into conflicting
information, and Alliance’s failure to require a copy of the bond before entering into the
contract precluded Alliance from claiming fraud or constructive fraud. On the negligence
claim, the court concluded that Adkins “merely failed to obtain the bond,” and that this was
“nonfeasance which will not give rise to a tort claim against him.”
On appeal from the circuit court’s decision, Alliance raises two points. First, Alliance
asserts that the court erred in rejecting its fraud claim against Adkins. Specifically, Alliance
argues that the circuit court “imposed on Alliance a duty to investigate the truth of Adkins’s
representation” when “[n]o such duty exists.” Second, Alliance asserts that the court erred in
rejecting Alliance’s negligence claim against Adkins. It argues that Adkins, “as the party acting
on behalf of TNT, owed a duty to subcontractors and materialmen like Alliance to obtain a
bond, that it negligently breached that duty, and that Alliance suffered damages as a result of
that breach.” Alliance cites to Ark. Code Ann. § 18-44-503(a) (Repl. 2003), as requiring
TNT to post a bond.
The statute cited by Alliance provides in part that “[n]o contract in any sum exceeding
twenty thousand dollars ($20,000) providing for the repair, alteration, or erection of any
public building, public structure, or public improvement shall be entered into by . . . any .
. . school district . . . unless the contractor shall furnish to the party letting the contract a
bond in a sum equal to the amount of the contract.” Ark. Code Ann. § 18-44-503(a).
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Further, “[b]efore any work is performed under the contract, the bond shall be filed with the
clerk of the circuit court of the county in which the repairs, alterations, or erection of any
building, structure, or improvements are made.” Ark. Code Ann. § 18-44-507 (Repl. 2003).
The effect of these statutes was discussed in Beebe School District v. National Supply Co.,
280 Ark. 340, 658 S.W.2d 372 (1983). There, a school district contracted with a contractor
to supply materials and perform labor in connection with work on a school gymnasium. The
contractor neither furnished nor filed a contractor’s bond as required by the statutes. The
contractor purchased building supplies from a materialman, but after the school district paid
the contractor, the contractor failed to fully pay the materialman for the materials purchased
and used in the gymnasium. After the project was completed, the materialman discovered that
no bond existed and that the contractor was insolvent.
The Arkansas Supreme Court reversed the chancellor’s imposition of an equitable lien
on the gymnasium, and further, found no merit in the materialman’s allegations of
constructive fraud and unjust enrichment. The court stated, “Although the statute does
require a contractor’s bond, we have placed the burden on materialmen dealing with a
contractor to check the public records to verify the fact that such a bond has been obtained
before selling supplies to the contractor.” 280 Ark. at 343, 658 S.W.2d at 374. Further, it
stated that the “duty was clearly on the [materialman] to ascertain whether a contractor’s bond
was filed.” 280 Ark. at 344, 658 S.W.2d at 374.
Thus, Beebe School District answers both issues raised by Alliance. While Alliance argues
that it had no duty to investigate the truth of Adkins’s representations, in Beebe School District,
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the Arkansas Supreme Court rejected a claim of constructive fraud and squarely placed the
burden on the materialman to check public records to determine if there was a bond filed of
record. Thus, contrary to Alliance’s assertion, it cannot make out a claim of fraud, as it did not
determine that there was not a bond until after it had provided supplies to Alliance. As for
Alliance’s assertion that Adkins owed a duty to Alliance to obtain a bond, again, the Arkansas
Supreme Court in Beebe School District indicated that it was instead Alliance’s duty to
determine whether a bond was filed. Thus, as Alliance had a duty to determine whether a
bond was filed, Alliance cannot make out a claim of negligence based on its assertion that
TNT and Adkins had a duty to obtain a bond. Accordingly, we affirm the circuit court’s
decision.1
Affirmed.
R OBBINS and B AKER, JJ., agree.
1
We may affirm the trial court where it is correct, but states wrong reason for its
ruling. See, e.g., Miles v. Southern, 297 Ark. 274, 760 S.W.2d 868 (1988).
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