South Carolina Court Holds Architect Can Be Liable To Subcontractors For Certifying Payments To Prime Contractor If It Knows That Subcontractors Are Not Being Paid

Cullum Mechanical Construction, Inc. v. South Carolina Baptist Hospital
Case Volume, Reporter: 344 S.C. 426, 544 S.E.2d 838 (2001)

Jenkins, Hancock & Sides Architects & Planners, Inc. (the “Architect”) entered into a design contract for the renovation of a medical center. Under its contract, the Architect was responsible for reviewing the General Contractor’s payment applications and certifying amounts due. Moreover, the Architect had the ability to withhold certification if the General Contractor failed to pay its subcontractors.

Miller-Sharpe, Inc. (“General Contractor”) was to serve as the general contractor for the renovations. Under its contract, the General Contractor was required to post a payment bond to ensure payment to its subcontractors. The General Contractor, however, failed to obtain a bond.

The General Contractor, in turn, entered into a subcontract with Cullum Mechanical Construction for the HVAC and plumbing work on the project.

During the project, the General Contractor was late in paying Cullum. Cullum informed the Architect that the General Contractor was not paying its subcontractors. After several other complaints and upon request from the owner, the Architect asked to see the General Contractor’s payment bond. The General Contractor did not submit a payment bond but rather submitted an indemnification agreement.

Although the Architect knew that (1) there was no payment bond and (2) the subcontractors were not being paid, it continued to certify payments. Moreover, the Architect reduced the retainage from ten percent to five percent.

After the project was complete, Cullum had not been fully paid. It brought an action against, inter alia, the owner, the Architect and the General Contractor. The Architect moved for summary judgment. The trial court granted the motion finding that the Architect owed no duty to Cullum. An intermediate appellate court affirmed.

The Supreme Court of South Carolina, however, reversed the award of summary judgment. The court held that, while an architect does not generally owe a duty to subcontractors, “special conditions” in these particular contracts may have given rise to a duty of care owed by the Architect. The court stated that these special conditions may have created a duty arising independently of any contract and that there was no logical reasons to insulate architects for tort liability to third parties. Because the question – whether a special relationship existed between the Architect and Cullum such that the Architect owed a duty of care – raised a factual issue, summary judgment was improper.

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