Specially Fabricated Materials Exception Applies to Bond Claims Under Section 255.05, Florida Statutes

SPECIALLY FABRICATED MATERIALS EXCEPTION APPLIES TO BOND CLAIMS UNDER SECTION 255.05, FLORIDA STATUTES

By: Larry Leiby, Esq. and Robert S. Tanner, Esq.

About the Authors: Larry Leiby, Esq. was the founder and first chairman of the Florida Bar Construction Law Committee in 1976. He is the author of the Florida Construction Law Manual. He is Board Certified in Construction Law and was on the Construction Law Certification Committee that creates and grades the tests for construction law board certification. He was awarded the lifetime achievement award by the Florida Bar Construction Law Committee and teaches construction law at the Florida International University College of Law. He can be reached at leiby@mkpalaw.com. Robert S. Tanner, Esq., has worked with Mr. Leiby in construction matters since 2006, occasionally covers Mr. Leiby’s classes at FIU law school, and has been litigating commercial cases for more than 10 years. He can be reached at rob@mkpalaw.com. For more information, please visit www.mkpalaw.com

In Aquatic Plant Management, Inc. v. Paramount Engineering, Inc., Case No. 4D06-4589 (Fla. 4th DCA Nov. 28, 2007), the City of Coral Springs (“Owner”) entered a contract with Paramount Engineering, Inc. (“Contractor”). Contractor entered into a subcontract with Aquatic Plant Management, Inc. (“Subcontractor”), pursuant to which Subcontractor was to furnish and install plants, among other things. As required by law, Contractor obtained payment and performance bonds from Surety.

When Subcontractor was not paid in full, it sued Contractor for breach of contract and unjust enrichment, and sued Surety and Contractor on the payment bond. In the complaint, Subcontractor alleged that the subcontract required Subcontractor to obtain and maintain until the time of installation plants that were not available on the open market, that were specific to the project, and that were not suited for use in another project. Based upon that allegation, Subcontractor further alleged that the materials it was to supply to the project were “specially fabricated” materials. The “specially fabricated” materials were never delivered to the project.

Surety moved to dismiss Subcontractor’s suit on the bond, arguing that Subcontractor’s bond rights never accrued because the statute governing claims on public project bonds, Florida Statutes, Chapter 255 (“Chapter 255”), requires that the materials for which recovery first be ‘incorporated’ into the improvement. Chapter 255 does not contain language one way or the other concerning whether specially fabricated materials must be incorporated into the improvement. The trial court found that specially fabricated materials must be incorporated into the improvement before the supplier of the materials would have bond rights. On that basis the trial court dismissed Subcontractor’s claim on the bond. Subcontractor appealed.

Although Chapter 255 does not contain definitions, it provides that those who would have a lien under Construction Lien Law are also proper bond claimants under section 255.05. Under the construction lien law, subcontractors may be lienors. Further, the Constructing Lien Law defines a subcontractor as one who performs labor and services or furnishes materials. The appellate court used that definition as a basis for looking at another definition contained in the Construction Lien Law, specifically, the definition of “furnish materials,” which the court said means “either to supply materials that are incorporated into the improvement or to supply ‘specially fabricated’ materials.” The appellate court also found that the legislature’s intent in enacting the public property payment bond statute was “to provide subcontractors and suppliers on public projects with the same type of protection available to them on private construction projects under the [construction] lien law.”

Based on the foregoing, the appellate court ruled that the “ ‘specially fabricated’ materials exception to the requirement of incorporation into the improvement has been incorporated in chapter 255 and, consequently, the trial court erred in dismissing [Subcontractor’s] claim on the ground that the plant materials were never incorporated into the project.” The result of that ruling was that Subcontractor’s bond claim was revived and Subcontractor was permitted to seek recovery from Surety.