On 19 May 1995, H. G. Reynolds Company, Inc. ("defendant")
entered into a contract with the State of North Carolina through
its political subdivision, the Warren County School System, for the
construction of additions at three Warren County schools (“theproject”). Defendant was the general contractor on the project.
On 30 May 1995, defendant entered into a Labor and Material Payment
Bond Agreement in the amount of $3,303,600.00 for which defendant
was principal, codefendant Safeco Insurance Company of America
("Safeco") was surety and the Warren County Board of Education was
obligee.
In December of 1995, defendant entered into an oral
subcontract with McClure Estimating Company ("plaintiff") whereby
plaintiff agreed to design and construct sloping metal roof systems
on the three Warren County Schools for a contract price of
$315,052.38. Plaintiff performed several steps of the roof
construction at his office in Martin County. The design and
preparation of the roof system were performed in Martin County, the
trim flashing and roof curbs were cut, welded and fabricated in
Martin County and approximately 50% of the architectural trim was
cut, welded and fabricated in Martin County. Plaintiff completed
construction of the roof systems. Defendant refused to pay
plaintiff the final $27,101.61 due on the contract. Defendant
alleges that the roof constructed by plaintiff resulted in repeated
leaks, damages and delays in completion of the project in
accordance with the contract. Additionally, Safeco refused to
honor its obligations on the payment bond.
Plaintiff filed a summons and complaint, asserting a payment
bond claim and alleging breach of contract and Quantum Meruit.
Defendants filed an Answer, Counterclaim and Motions to Dismiss or
in the Alternative, to Remove to Warren County, asserting that the
payment bond claim was brought in the wrong county. Plaintifffiled an Answer to Defendants' Counterclaim and an Amended Answer
to Defendants' Counterclaim. Defendants filed an Amended Motion to
Dismiss and an Amended Motion to Compel Arbitration and Stay
Proceedings Pending Arbitration.
A hearing was held on 1 June 1998 in which plaintiff alleged
that venue was correct in Martin County. The trial court denied
defendants' Motion to Dismiss, stating that venue was proper in
Martin County. Defendants appeal.
The dispositive issue on appeal is whether a payment bond
claim may be brought in the county where some portion of a
subcontract was performed. By their first assignment of error,
defendants argue that the trial court committed reversible error in
denying defendants' Motion to Dismiss plaintiff's payment bond
claim because that claim was brought in the incorrect county. We
agree.
[1]We first address plaintiff's argument that defendants'
Motion to Dismiss Due to Improper Venue is premature in that it is
interlocutory and does not affect a substantial right. We disagree
and conclude that defendants' Motion to Dismiss is directly
appealable.
In
DesMarais v. Dimmette, 70 N.C. App. 134, 318 S.E.2d 887
(1984), this Court held that an order denying a Motion for Change
of Venue was directly appealable. “We hold that an erroneous order
denying a party the right to have the case heard in the proper
court would work an injury to the aggrieved party which could not
be corrected if no appeal was allowed before the final judgment.”
Id. at 136, 318 S.E.2d at 889. In the case
sub judice, an order
erroneously denying defendants' Motion to Dismiss for Lack of Venuewould similarly “work an injury . . . which could not be corrected
if no appeal was allowed before the final judgment.”
Id. Therefore, we conclude that an appeal lies of right to this Court.
[2]This is a case of first impression in North Carolina.
Under the North Carolina Model Payment and Performance Bond Act,
otherwise known as North Carolina's “Little Miller Act,” “[e]very
action on a payment bond . . . shall be brought in a court of
appropriate jurisdiction in a county where the construction
contract or any part thereof is to be or has been performed.” N.C.
Gen. Stat. § 44A-28(a) (1995).
The federal Miller Act requires payment bond claims to be
brought in “any district in which the contract was to be performed
and executed and not elsewhere.” 40 U.S.C.A. § 270b (West Supp.
1998). When the North Carolina General Assembly adopted the Act,
it added the phrase “or any part thereof.” N.C.G.S. § 44A-28(a).
Defendants argue that the statutory language within section
44A-28(a), “the construction contract,” refers to the prime
contract, or the contract between the general contractor and the
owner of the project.
Id. Therefore, defendants contend that
venue is proper only in the county where the prime contract was
performed. According to defendants, the statutory language “or any
part thereof” speaks to the situation where the construction of
public improvements contemplated by the prime contract physically
spans more than one county.
Id.
In contrast, plaintiff argues that the language “the
construction contract” addresses subcontracts as well as the prime
contract.
Id. Plaintiff further argues that the addition of the
phrase “or any part thereof” in the North Carolina Model Actdemonstrates legislative intent that venue be proper outside the
county where the prime contract was performed.
Id. In other
words, under plaintiff's interpretation, venue would be proper not
only where the contract between the general contractor and the
owner of the project was performed, but also where some portion of
a subcontract was performed.
In the instant case, plaintiff argues that venue is proper in
Martin County because plaintiff performed several steps in the
process of constructing the roof systems in its Martin County
office. Specifically, all roof system design as well as the
cutting and welding of trim flashing and roof curbs was performed
in Martin County.
In determining whether the statutory language, “the
construction contract,” in section 44A-28(a) of Article 3 refers
only to the prime contract, we first look to the applicable
statutory definitions.
In re Clayton-Marcus Co., 286 N.C. 215,
219, 210 S.E.2d 199, 203 (1974). The statutory definitions control
within Article 3 unless the context requires otherwise. N.C. Gen.
Stat. § 44A-25 (1995). “Construction contract” is defined as “any
contract for the construction, reconstruction, alteration or repair
of any public building or other public work or public improvement,
including highways.” N.C.G.S. § 44A-25(2). The definition of
“construction contract” is ambiguous. The words “any contract” do
not necessarily refer to the prime contract exclusively. Yet, the
definition does not explicitly include subcontracts.
A subcontractor is defined as “any person who has contractedto furnish labor or materials to, or who has performed labor for,
a contractor or another subcontractor in connection with a
construction contract.” N.C.G.S. § 44A-25(6). In other words,
pursuant to section 44A-25(6), the subcontractor enters into a
contract, best termed a “subcontract,” to “furnish labor or
materials . . . in connection with a construction contract.”
Id.
The statutory language suggests that “the construction contract” is
a single overarching contract.
A “contractor” is defined as “any person who has entered into
a construction contract with a contracting body.” N.C.G.S. § 44A-
25(4). “Contracting body” means “any department, agency, or
political subdivision of the State of North Carolina which has
authority to enter into construction contracts.” N.C.G.S. § 44A-
25(3). Pursuant to the statutory definitions, a construction
contract is a contract between a contractor and the State,
otherwise known as the prime contract. In the case at bar,
defendant, the contractor, entered into such a contract with the
State of North Carolina through its political subdivision, the
Warren County School System.
Where the statutory definitions are ambiguous, the words must
be given their ordinary meaning.
In re Clayton-Marcus Co., 286
N.C. at 219-20, 210 S.E.2d at 202. The plain meaning of the
language within North Carolina General Statutes section 44A-28(a)
supports an interpretation that “the construction contract” refers
to the prime contract. N.C.G.S. § 44A-28(a). Use of the definite
article “the” suggests that the legislature referred to onespecific contract, the prime contract, rather than all of the
subcontracts entered into on a given project.
The statutory definition of “construction contract” within
section 44A-25 must be read within context. N.C.G.S. § 44A-25.
The addition of the definite article “the” prior to the words
“construction contract” within section 44A-28(a) is a significant
limiting term. N.C.G.S. § 44A-28(a).
This Court has determined that the court will look to the
federal Miller Act where there is no corresponding state case
regarding North Carolina General Statute sections 44A-25
et seq.
Syro Steel Co. v. Hubble Highway Signs, Inc., 108 N.C. App. 529,
534, 424 S.E.2d 208, 211 (1993). Overwhelmingly, federal courts
have held that venue is proper where the project which is the
subject of the prime contract is located.
See, e.g., United States
ex rel. Vermont Marble Co. v. Roscoe-Ajax Constr. Co., 246 F. Supp.
439 (N.D. Cal. 1965);
United States ex rel. Caswell Equipment
Company v. Fidelity and Deposit Company of Maryland, 494 F. Supp.
354 (D. Minn. 1980);
United States ex rel. Essex Machine Works,
Inc. v. Rondout Marine, Inc., 312 F. Supp. 846 (S.D.N.Y. 1970);
United States ex rel. Coffey v. William R. Austin Company, Inc.,
436 F. Supp. 626 (W.D. Okla. 1977);
United States ex rel. Harvey
Gulf International Machine, Inc. v. Maryland Casualty Company, 573
F.2d 245 (5
th Cir. 1978);
McDaniel v. University of Chicago, 512
F.2d 583 (7
th Cir.),
vacated, 423 U.S. 810, 46 L.Ed.2d 30 (1975);
United States ex rel. Capolino Sons v. Electronic & Missile
Facilities, Inc., 364 F.2d 705 (2
nd Cir. 1966); and
United States
ex rel. Cal's A/C v. Famous Construction Corporation, 982 F. Supp.
1219 (W.D. La. 1997).
Plaintiff relies on one federal case,
United States ex rel.
Expedia, Inc. v. Altex Enterprises, Inc., 734 F. Supp. 972 (M.D.
Fla. 1990), in which the court held that a bond claim was properly
brought in Florida where work on a construction project was
performed and delivered rather than in Bermuda where the project
was located. In
Expedia, the plaintiff had performed nearly all of
the subcontract in Florida; only the installation took place in
Bermuda. Additionally, the facts of
Expedia depart from the norm
in that the project was located in Bermuda, outside of the
territorial United States. The ruling in
Expedia is in conflict
with prior and subsequent federal court rulings and we decline to
follow it in the instant case.
We conclude that statutory definitions, the plain language,
context and federal case law support an interpretation that “the
construction contract” addressed in section 44A-28(a) is the prime
contract. N.C.G.S. § 44A-28(a). It follows that “any part
thereof” also refers to the prime contract.
Id. Therefore, we
agree with defendant's contention that the legislature included the
language “any part thereof” in contemplation of a construction
contract which physically spans more than one county. For example,
where the physical improvement is a highway which crosses county
lines, venue would be proper in any of the counties in which theproject is located.
In interpreting ambiguous statutory language, this Court
should avoid a construction which will lead to “unjust, oppressive,
or absurd consequences.”
Young v. Whitehall Co., 229 N.C. 360,
367, 49 S.E.2d 797, 802 (1948). If this Court were to interpret
“or any part thereof” to include the subcontractor's portion of the
work, an unjust result would be reached in that any subcontractor
or supplier who contributed to the completion of the prime contract
could file a payment bond claim in any county in North Carolina
where a small portion of the work was performed. A general
contractor would be forced to defend multiple claims in counties
throughout the state all related to the same public project.
Judicial resources would be wasted and an injustice to the general
contractor would ensue.
Finally, we agree with defendants that
Midsouth Const. Co. v.
Wilson, 71 N.C. App. 445, 322 S.E.2d 418 (1984), is not controlling
in the case at bar. In
Midsouth, the construction project was
located in Mecklenburg County. The general contractor brought a
breach of contract claim against a subcontractor on the project in
Harnett County. The subcontractor answered the complaint in
Harnett County, and filed a bond claim against the general
contractor in Mecklenburg County as well as a Motion for Change of
Venue to move the plaintiff's original breach of contract claim to
Mecklenburg County. The court ruled against the subcontractor,
finding that the general contractor had properly brought the breach
of contract claim in Harnett County. The subcontractor's bondclaim, however, was properly filed in Mecklenburg County where the
project was located.
In the instant case, plaintiff did not merely bring a breach
of contract claim against defendants but also brought a claim
against the payment bond. The holding in
Midsouth regarding proper
venue for a breach of contract claim does not expand venue for
claims against the payment bond and we decline to expand it now.
We conclude that the holding in
Midsouth does not control the issue
in the instant case of whether the claim against the payment bond
should have been brought in Warren County where the project was
located.
Where a defendant makes a Motion to Dismiss for Lack of Venue
and indicates that venue is proper elsewhere, and venue is indeed
proper elsewhere, the trial court should treat the Motion to
Dismiss as a Motion for a Change of Venue.
Coats v. Hospital, 264
N.C. 332, 141 S.E.2d 490 (1965).
In the present case, defendants made a Motion to Dismiss for
Lack of Venue in which they indicated that venue was proper in
Warren County rather than Martin County. Plaintiff filed a
complaint in Martin County where some portion of the subcontract
was performed. However, the prime contract was performed in Warren
County. Having determined that plaintiff's bond claim was brought
in the incorrect county, we conclude that the trial court erred in
failing to remove the case to Warren County.
Defendant did not seek to appeal or petition for certiorari on
the interlocutory orders relating to compelling arbitration andstaying the proceeding; therefore, these issues are not before us.
For the reasons stated herein, the judgment of the trial court
denying defendants' Motion to Dismiss plaintiff's payment bond
claim is reversed and the case is remanded for entry of an order
transferring venue to Warren County.
Reversed and Remanded.
Chief Judge EAGLES and Judge MARTIN concur.
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