38-26-106. Contractor executes bond - applicability.
Statute text
(1) Before entering upon the performance of any work included in the contract, a contractor shall duly execute, deliver to, and file with the board, officer, body, or person by whom the contract was awarded a good and sufficient bond or other acceptable surety approved by the contracting board, officer, body, or person, in a penal sum not less than one-half of the total amount payable under the terms of the contract; except that, for a public works contract having a total value of five hundred million dollars or more, a bond or other acceptable surety, including but not limited to a letter of credit, may be issued in a penal sum not less than one-half of the maximum amount payable under the terms of the contract in any calendar year in which the contract is performed. The contracting board, office, body, or person shall ensure that the contract requires that a bond or other acceptable surety, including but not limited to a letter of credit, be filed and current for the duration of the contract.
(2) A bond or other acceptable surety shall be duly executed by a qualified corporate surety or other qualified financial institution, conditioned upon the faithful performance of the contract, and, in addition, shall provide that, if the contractor or his or her subcontractor fails to duly pay for any labor, materials, team hire, sustenance, provisions, provender, or other supplies used or consumed by such contractor or his or her subcontractor in performance of the work contracted to be done or fails to pay any person who supplies laborers, rental machinery, tools, or equipment, all amounts due as the result of the use of such laborers, machinery, tools, or equipment, in the prosecution of the work, the surety or other qualified financial institution will pay the same in an amount not exceeding the sum specified in the bond or other acceptable surety together with interest at the rate of eight percent per annum. Unless a bond or other acceptable surety is executed, delivered, and filed, no claim in favor of the contractor arising under the contract shall be audited, allowed, or paid. A certified or cashier's check or a bank money order made payable to the treasurer of the state of Colorado or to the treasurer or other officer designated by the governing body of the contracting local government may be accepted in lieu of a bond or other acceptable surety.
(3) This section applies to:
(a) A contractor who is awarded a contract for more than fifty thousand dollars for the construction, erection, repair, maintenance, or improvement of any building, road, bridge, viaduct, tunnel, excavation, or other public works for any county, city and county, municipality, school district, or other political subdivision of the state;
(b) A contractor who is awarded a contract for more than one hundred fifty thousand dollars for the construction, erection, repair, maintenance, or improvement of any building, road, bridge, viaduct, tunnel, excavation, or other public works for this state; and
(c) All contracts for more than one hundred fifty thousand dollars awarded by any county, city and county, municipality, school district, or other political subdivision of the state to a private entity for the construction, erection, repair, maintenance, or improvement of any building, road, bridge, viaduct, tunnel, excavation, or other public works that is situated or located on publicly owned property using any public or private money or public or private financing.
History
Source: L. 23: p. 480, 2. CSA: C. 39, 6. CRS 53: 86-7-6. C.R.S. 1963: 86-7-6. L. 75: (1) amended, p. 1427, 1, effective June 13. L. 77: Entire section amended, p. 1712, 1, effective June 3. L. 81: (1) amended, p. 1825, 2, effective May 28. L. 85: (2) amended, p. 1202, 2, effective May 10. L. 2000: (2) amended, p. 213, 18, effective August 2. L. 2004: (1) amended p. 228, 4, effective August 4. L. 2009: Entire section amended, (SB 09-248), ch. 270, p. 1225, 1, effective August 5. L. 2014: (1) amended, (HB 14-1387), ch. 378, p. 1853, 65, effective June 6. L. 2019: (1) amended and (3) added, (SB 19-138), ch. 117, p. 495, 4, effective August 2.
Annotations
Cross references: (1) For the legislative declaration in HB 14-1387, see section 1 of chapter 378, Session Laws of Colorado 2014.
(2) For the legislative declaration in SB 19-138, see section 1 of chapter 117, Session Laws of Colorado 2019.
Annotations
ANNOTATION
Annotations
Law reviews. For article, "Labor and Material Claims on State Public Works Projects", see 24 Colo. Law. 2165 (1995).
Section is to be liberally construed. CPS Distrib., Inc. v. Federal Ins. Co., 685 P.2d 783 (Colo. App. 1984).
Section is not a nonclaim statute. Therefore, the provision of subsection (2) that states that "[u]nless a bond or other acceptable surety is executed, delivered, and filed, no claim in favor of the contractor shall be audited, allowed, or paid" does not deprive a court of subject matter jurisdiction to consider the claim of a contractor who failed to comply with the provision if the contractor claims that the doctrine of equitable estoppel should prevent enforcement of the provision. Tarco, Inc. v. Conifer Metro. Dist., 2013 COA 60, 316 P.3d 82.
Indifference in ascertaining existence of bond equivalent to negligence. Under this section the bond required of contractors on public works is in the interest of those furnishing material and labor therefor, and where a materialman, furnishing material for a public school building, fails to ascertain that no contractor's bond has been given, his indifference is equivalent to negligence, and precludes a recovery from the school district. Sch. Dist. No. 28 v. Denver Pressed Brick Co., 91 Colo. 288, 14 P.2d 487 (1932).
Advancement or loan connected with work not payment. An advancement or loan by a principal contractor to a subcontractor, which is used in connection with the work, is not a payment which will affect the liability of, or relieve the surety on the subcontractor's bond, and this is equally true if sums advanced are payments rather than advancements or loans. Federal Sur. Co. v. White, 88 Colo. 238, 295 P. 281 (1930).
Where a subcontractor "steps into the shoes" of a principal contractor, so far as the work to be performed under the original contract is concerned, the surety on the subcontractor's bond is bound by the terms and conditions of the original contract where he is fully apprised thereof and of the relations and obligations of the parties thereunder. Federal Sur. Co. v. White, 88 Colo. 238, 295 P. 281 (1930).
Judgment against surety may include interest. Judgment against the surety on a contractor's bond may include interest from the time of default, even though this may make the judgment exceed the penalty named in the bond. Federal Sur. Co. v. White, 88 Colo. 238, 295 P. 281 (1930).
To release compensated surety from liability, by an alteration or departure from the contract, it must have been prejudiced thereby. Empire State Sur. Co. v. Lindenmeier, 54 Colo. 497, 131 P. 437(1913); Nat'l Sur. Co. v. Queen City Land Mtg. Co., 63 Colo. 105, 164 P. 722 (1917); Federal Sur. Co. v. White, 88 Colo. 238, 295 P. 281 (1930).
Surety company not required party. The surety company which wrote the bond to the contracting agency was not required to be made a party since it had no contingent liability on the materialman's withholding claim because the contracting body had enough withheld funds to pay the claim sued upon. South-Way Constr. Co. v. Adams City Serv., 169 Colo. 513, 458 P.2d 250 (1969).
Six-month statute of limitation applicable. Although this section does not contain a statute of limitations, the six-month statute of limitations contained in 38-26-105 is applicable to actions on a bond posted pursuant to this section. Hensel Phelps Constr. Co. v. Gen. Signal Corp., 460 F.2d 109 (10th Cir. 1972); Fountain Sand & Gravel Co. v. Chilton Constr. Co., 40 Colo. App. 363, 578 P.2d 664 (1978).
Action filed pursuant to 38-26-107. Section 38-26-107 (3) permits qualified claimants, within 90 days of the date for final settlement of claims, regardless of the date of completion, to file actions against sureties who have posted performance bonds pursuant to this section. Rocky Mt. Ass'n of Credit Mgt. v. Marshall, 44 Colo. App. 467, 615 P.2d 68 (1980).
While the six-month limitations provision of 38-26-105 is applicable to actions on a performance bond, 38-26-107 (3) contains no bonding provisions and establishes a new remedy for suppliers. Rocky Mt. Ass'n of Credit Mgt. v. Marshall, 44 Colo. App. 467, 615 P.2d 68 (1980).
Longer period of limitation permitted for actions on bond. Although 38-26-105 prescribes a six-month limitation on actions on a labor and material bond, neither 38-26-105 nor this section prohibit the parties from establishing a longer period of limitation in the bond. Montezuma Plumbing & Heating, Inc. v. Hous. Auth., 651 P.2d 426 (Colo. App. 1982).
Failure to meet statutory requirements does not deprive subcontractor of common-law claims. Failure of a subcontractor or materialman to meet the statutory requirements of this section and 38-26-105 and 38-26-107, e.g., time limitations within which a claim must be filed, does not deprive it of its common-law claims against the principal contractor and the principal contractor's surety. Montezuma Plumbing & Heating, Inc. v. Hous. Auth., 651 P.2d 426 (Colo. App. 1982).
Attorney's fees not recoverable. Section 38-26-105 and this section, which require execution of a payment and performance bond, do not expressly allow for the attorney's fees, and the general rule is that, absent express statutory authority or an enforceable contract provision, attorney's fees are not recoverable. Cement Asbestos Prods. Co. v. Hartford Accident & Indem. Co., 592 F.2d 1144 (10th Cir. 1979).
Prior to amendment in 1985, the costs of rental equipment were not covered by a payment and performance bond issued on a public works contract and even though the bonding statute has been amended to allow claims for the use of rented equipment, the extent of a surety's obligation on a public works bond is determined according to the terms of the statutes in effect at the time the bond was written. Colo. Crane & Hauling v. McKee, Inc., 761 P.2d 792 (Colo. App. 1988) (decided under law in effect prior to 1985 amendment).
Interest award under this section was not error since although subcontractor requested contract rate of interest in its complaint, its memorandum brief in support of a motion for summary judgment did request the interest rate under this section and presentation of the issue in this manner, in effect, constituted an amendment to the complaint. SaBell's, Inc. v. City of Golden, 832 P.2d 974 (Colo. App. 1991), cert. denied, 846 P.2d 189 (Colo. 1993).
Right to the interest rate set forth in the statute is not waived if the contract rate is requested in the complaint, when the statutory interest rate is requested in the memorandum brief in support of a motion for summary judgment, constituting an amendment to the complaint. SaBell's, Inc. v. City of Golden, 832 P.2d 974 (Colo. App. 1991), cert. denied, 846 P.2d 189 (Colo. 1993).
Where city's retainage was sufficient to pay all claims, the surety for a public project is not even a necessary party to litigation over a subcontractor's claim. Instead, the city serves as a stakeholder and pays out the funds in conformity with the court's order, and it necessarily follows that the surety is not liable for interest on the retainage. SaBell's, Inc. v. City of Golden, 832 P.2d 974 (Colo. App. 1991), cert. denied, 846 P.2d 189 (Colo. 1993).
Surety not liable for interest on retainage when the municipality has not withheld sufficient funds to pay all claims. SaBell's, Inc. v. City of Golden, 832 P.2d 974 (Colo. App. 1991), cert. denied, 846 P.2d 189 (Colo. 1993).
A subdivision agreement calling for the construction of certain public improvements prior to the annexation of a subdivision or the issuance of certificates of occupancy for structures built in the subdivision does not constitute a contract for the construction of public improvements pursuant to this section. Brannan Sand & Gravel v. F.D.I.C., 928 P.2d 1337 (Colo. App. 1996), rev'd on other grounds, 940 P.2d 393 (Colo. 1997).
Surety's obligation to pay interest to subcontractor was governed by this section and not the contract rate between surety and contractor where subcontractor was not party to that contract. SaBell's, Inc. v. City of Golden, 832 P.2d 974 (Colo. App. 1991), cert. denied, 846 P.2d 189 (Colo. 1993).
Applied in General Elec. Co. v. Webco Constr. Co., 164 Colo. 232, 433 P.2d 760 (1967); Fulton v. Coppco, Inc., 407 F.2d 611 (10th Cir. 1969); Trustees of Colo. Carpenters & Millwrights Health Benefit Trust Fund v. Pinkard Constr. Co., 39 Colo. App. 564, 574 P.2d 506 (1977).