Appeal by the North Carolina Department of Transportation from
order entered 21 February 2003 by Judge Larry G. Ford in Rowan
County Superior Court. Heard in the Court of Appeals 11 October
2004.
KLUTZZ, REAMER, BLANKENSHIP, HAYES, & RANDOLPH, LLP, by Roman
C. Pibl, for defendant-appellee American Home Assurance Co.
WOMBLE CARLYLE SANDRIDGE & RICE, PLLC, by Burley B. Mitchell,
Jr., Sean E. Andrussier, Timothy Barber, and Mark Henriques,
and LEWIS & McKENNA, by Paul Z. Lewis, pro hac vice, for
defendant/third-party plaintiff-appellee Jones Brothers, Inc.
Attorney General Roy Cooper, by Assistant Attorney General
Joseph E. Herrin, for third-party defendant-appellant North
Carolina Department of Transportation.
TIMMONS-GOODSON, Judge.
The North Carolina Department of Transportation (“NCDOT”)
appeals the trial court order denying its motion to dismiss the
third-party complaint of Jones Brothers, Inc. (“Jones”). For the
reasons discussed herein, we reverse.
The facts and procedural history pertinent to the instant
appeal are as follows: In 1996, NCDOT began receiving bids for
Highway Project No. 8.1631701 (“the project”), which involved the
construction of a new bridge on Highway 49 over the Yadkin River at
Tuckertown Lake. On 17 December 1996, Jones submitted the lowest
bid for the project, and on 5 February 1997, NCDOT awarded Jones a
contract to perform the work on the project. Jones subsequently
received bids from subcontractors for separate portions of the work
required by the project. On 13 February 1997, Jones entered into
a subcontract with A.H. Beck Foundation Company, Inc. (“Beck”),
whereby Beck would drill vertical subsurface shafts and install
casings therein, in order to stabilize and retain the hillside
slopes above and adjacent to the roadway approaching the bridge.
In June 1997, Beck began drilling the slope-stabilization
shafts and immediately encountered hard, dense rock below the
surface. On 6 August 1997, Beck advised Jones that it was
encountering significant problems related to the subsurface
conditions, and that it would require additional compensation and
a time extension in order to complete the work. In response, Jones
submitted a claim to NCDOT on Beck's behalf on 11 August 1997. On
20 August 1997, NCDOT Resident Engineer K.E. Raulston (“Raulston”)
replied by letter as follows: I have received your letter dated August 11,
1997, which contained notification of intent
to file a claim. The claim is filed on behalf
of [Beck] who claim that they are encountering
conditions different than that shown in the
subsurface plans.
I refer you to Section 102-07 on the North
Carolina Standard Specifications “subsurface
information.” The department does not warrant
or guarantee the accuracy of the subsurface
information. The contractor
shall have no
claim for additional compensation or for an
extension of time for any reason resulting
from the actual conditions encountered at the
site differing from those indicated in the
subsurface information. Therefore any claim
regarding subsurface conditions is denied.
Beck continued to encounter dense rock at the drill sites, and
as a result was unable to finish the slope-stabilization portion of
the work until 17 April 1998. Beck thereafter submitted to Jones
a “Claim for Adjustment in Compensation Relative to Slope
Stabilization Piles,” which detailed Beck's “unanticipated delays
disruptions, denials, interference, [and] altered and/or extra
work” in the form of “force account records.” Jones forwarded
Beck's claim to NCDOT on 12 August 1998, but subsequently requested
return of the claim. On 15 October 1998, Raulston advised Jones
that “initial review of the claim indicates that it would have been
denied for the same reason it was denied the first time.”
Subsequent claims were filed by Jones on behalf of Beck; however,
each claim was denied by NCDOT.
On 23 April 2000, Beck filed a complaint against Jones,
alleging,
inter alia, breach of subcontract, breach of implied
warranty, unfair and deceptive trade practices, wrongful
termination, and mutual mistake. The complaint requested “at
least” $7,973,528.14 in damages. On 10 October 2000, Jones filedan answer, counterclaim, and third-party complaint against NCDOT.
In its third-party complaint, Jones alleged that its contract with
NCDOT “contained terms and conditions providing for the preparation
of Supplemental Agreements and change orders to compensate the
contractor for modifications to the contract and any alterations in
the plans or the details of construction for extra work, for
suspensions of work, and for quantity adjustments.” Jones further
alleged that “supplemental agreements should have been issued by
NCDOT,” and that “[t]o the extent that the [project] conditions
differ from those represented by NCDOT in its plans and
specifications and amount to an alteration of the plans or the
details of construction,” Jones was entitled to “indemnity and
reimbursement from NCDOT in full payment of any and all damages
that may be due to Beck.”
On 29 January 2001, NCDOT filed a motion to dismiss in lieu of
answer. On 2 May 2001, the trial court granted NCDOT's motion to
dismiss, concluding that Jones “ha[d] not yet exhausted the
administrative remedies provided under N.C.G.S. § 136-29.” The
trial court granted the motion to dismiss without prejudice to
Jones' right to reassert its third-party claim against NCDOT, “in
the event the administrative process does not fully resolve the
disputes between the parties.”
Jones and NCDOT continued to correspond regarding the
resolution of their dispute. On 22 June 2001, R.C. Martin
(“Martin”), Jones' Chief Operating Officer, sent to NCDOT “the
three completed documents required for the closeout and the release
of retainage” on the project, including an affidavit delineatingJones' third-party claim. On 24 September 2001, Martin wrote NCDOT
again, whereby he advised NCDOT as follows:
[W]e are submitting, in accordance with
Section 109-10 of the NCDOT Standard
Specifications, our intent to continue to
pursue the claims filed on behalf of our
subcontractor, [Beck]. Their request for
additional compensation and time has been
filed and received by NCDOT. Upon receipt of
our Final Estimate, it is our intent to file a
verified claim for the areas in dispute in
accordance with section 107-25.
On 19 October 2001, NCDOT State Construction Engineer Steven
D. DeWitt (“DeWitt”) sent Jones a letter regarding Jones' claim.
The letter was sent via certified mail and its subject line read
“Payment of Final Estimate.” The letter stated as follows:
Attached is final estimate warrant number
1212064 in the amount of $5,299.81 which
represents the final payment of the contract.
Also attached for your files is a copy of the
final estimate which is your final statement.
As stated, attached to the letter was a check in the amount of
$5,299.81 (“final pay warrant”) and a copy of estimate number 40
(“Estimate 40”). Estimate 40 was entitled “Contract Final
Estimate.” Next to the “Remarks” section of Estimate 40 was the
phrase “The Final Estimate.” Next to the “Percent Complete”
section of Estimate 40 was the number 100, and next to the “%
Complete By Progress Chart” section of Estimate 40 was the number
100. Estimate 40 further indicated that the “Amount Transferred To
Trust Account This Estimate” was $149,420.58.
On 30 October 2001, NCDOT received confirmation through a
certified return receipt that the 19 October letter was delivered
to Jones on 24 October 2001. On 25 October 2001, Jones tendered
the final pay warrant. On 21 December 2001, Martin sent NCDOTConstruction Estimates & Claims Engineer Phil Watts (“Watts”) an
email which stated:
When you have a spare moment, could you please
check on the status of Final Quantities and
Retainage for the above referenced project,
your NCDOT PROJECT 8.1631701. A couple of the
subs on the project have contacted us and
asked about their retainage. . . . If this
reaches you at a bad time with the holidays
and year end coming up, when you get a chance
after the new year . . . would be appreciated.
Otherwise, have a nice Holiday Season and
we'll see you next year.
(emphasis in original).
On 3 January 2002, Watts responded via an email which stated:
Yesterday was my first day back to work since
Christmas. . . . Regarding the final payment,
there was little money coming from DOT but
that was sent two months ago. We authorized
the trustee to release the retainage that was
in the trust account. If that money has not
been received, I recommend you contact the
trustee . . . . If they have not received our
letter authorizing release of the money, let
me know.
On 8 January 2002, Jones sent NCDOT a Verified Claim
requesting additional compensation and time and alleging that Beck
is “entitled to either an increase in the Subcontract amount by at
least $7,973,528.14 or damages for breach of the subcontract in a
similar amount.” On 11 January 2002, State Highway Administrator
Len A. Sanderson (“Sanderson”) replied as follows:
This is [in] response to your claim received
by my office on January 10, 2002.
Unfortunately, the submission cannot be
accepted as a verified claim. North Carolina
General Statute 136-29 and the contract
documents are very stringent that verified
claims must be presented to the Highway
Administrator within sixty (60) days after
receipt of the final estimate payment.
The records reflect the final payment was madeto the Jones Bros., Inc. on October 24, 2001,
a period of seventy-eight (78) days before the
claim was received on January 10, 2002. Thus,
Jones Bros., Inc has failed to timely submit
the claim. Therefore, I can only return your
submission herein without action.
On 4 February 2002, Martin sent NCDOT a letter requesting that
NCDOT reconsider its decision in light of “the circumstances
surrounding transmission of The Final Estimate[.]” Martin stated
that “[o]n further investigation,” Jones had “determined that the
retainage which was released by your directive was carried by the
Escrow Agent as a NCDOT Surry County project which, by coincidence,
was closed out roughly at the same time.” Martin recounted the
email sent to Watts on 21 December 2001 and noted that “NCDOT
attorneys did not notify our counsel of [the transmission of the
Final Estimate] which also contributed to the confusion.”
Nevertheless, on 6 February 2002, Sanderson returned Jones' claim
and referred Jones to his 11 January 2002 letter.
On 29 April 2002, Jones filed a second third-party complaint
against NCDOT. On 30 May 2002, Jones filed an amended third-party
complaint against NCDOT, requesting,
inter alia, that the trial
court award Jones damages in the amount of $7,973,528.14, or, in
the alternative, no amount less than the amount Beck may be awarded
as a result of its complaint against Jones. On 17 July 2002, NCDOT
filed a motion to dismiss in lieu of answer, requesting that the
trial court dismiss plaintiff's appeal pursuant to N.C. Gen. Stat.
§ 1A-1, Rule 4, N.C. Gen. Stat. § 1A-1, Rule 14, and N.C. Gen.
Stat. § 1A-1, Rule 12(a)(1), (b)(1), (b)(2), (b)(6), and (h)(3).
On 21 February 2003, the trial court denied NCDOT's motion to
dismiss, concluding that “[b]ecause a properly titled and executedfinal estimate was not received by [Jones], the time for [Jones] to
file a verified claim under N.C.G.S. § 136-29 has not run.” The
trial court also concluded that “[a]lternatively, to the extent the
document submitted on October 19, 2001 did constitute a final
estimate . . . the failure of NCDOT to respond to [Martin's]
December 21, 2001 e-mail equitably tolled the running of the
statute of limitation[,]” and “NCDOT's conduct in improperly
titling the final estimate, not executing the final estimate, not
including documentation of release of retainage, not including
notice regarding the 60-day period, not notifying [Jones'] counsel
and not responding to [Martin's] e-mail g[a]ve rise to equitable
estoppel.” NCDOT appeals.
The dispositive issue on appeal is whether the trial court
erred in denying NCDOT's motion to dismiss. NCDOT argues that
Jones' complaint should have been dismissed for lack of subject
matter jurisdiction because Jones failed to follow the statutory
procedures required to file a complaint against NCDOT. We agree.
N.C. Gen. Stat. § 1A-1, Rule 12(b)(1) (2003) allows a
defendant to raise in a motion to dismiss the affirmative defense
of lack of subject matter jurisdiction. “An appellate court's
review of an order of the trial court denying or allowing a Rule
12(b)(1) motion is
de novo, except to the extent the trial court
resolves issues of fact and those findings are binding on the
appellate court if supported by competent evidence in the record.”
Smith v. Privette, 128 N.C. App. 490, 493, 495 S.E.2d 395, 397,
appeal dismissed, 348 N.C. 284, 501 S.E.2d 913 (1998). The instantcase involves the determination of a question of law, that is,
whether the trial court had subject matter jurisdiction over
plaintiff's third-party claim against NCDOT, and thus we review the
trial court's decision
de novo.
“It is an established principle of jurisprudence, resting on
grounds of sound public policy, that a state may not be sued in its
own courts or elsewhere unless it has consented by statute to be
sued or has otherwise waived its immunity from suit.”
Battle Ridge
Cos. v. N.C. Dep't of Transp., 161 N.C. App. 156, 157, 587 S.E.2d
426, 427 (2003),
disc. review denied, 358 N.C. 233, 594 S.E.2d 191
(2004). In
Smith v. State, 289 N.C. 303, 310, 222 S.E.2d 412, 418
(1976), our Supreme Court held that, where the state enters into a
contract, it implicitly consents to suit for damages resulting from
breach of the contract.
N.C. Gen. Stat. § 136-29 was enacted to provide a statutory
ground under which contractors may sue NCDOT, and the statute is
made a part of every contract for highway construction entered into
by NCDOT.
Battle Ridge Cos., 161 N.C. App. at 157-58, 587 S.E.2d
at 427. This Court has held that “to satisfy G.S. 136-29 the
contractor must submit a claim, accompanied by evidence of
verification, within the statutory time limit.”
E.F. Blankenship
Co. v. N.C. Dept. of Transportation, 79 N.C. App. 462, 464, 339
S.E.2d 439, 441 (1986),
aff'd per curium, 318 N.C. 685, 351 S.E.2d
293 (1987). Thus, “[b]efore a party may pursue a judicial action
against the state for money claimed to be due under a highway
construction contract, it must first pursue its administrative
remedies.”
In re Huyck Corp. v. Mangum, Inc., 309 N.C. 788, 792,309 S.E.2d 183, 186 (1983).
N.C. Gen. Stat. § 136-29(a) (2003) provides as follows:
A contractor who has completed a contract with
the Department of Transportation to construct
a State highway and who has not received the
amount he claims is due under the contract may
submit a verified written claim to the State
Highway Administrator for the amount the
contractor claims is due. The claim shall be
submitted within 60 days after the contractor
receives his final statement from the
Department[.]
Section 107-25 of the North Carolina Department Of
Transportation Standard Specifications For Roads And Structures
(2002) (“the Standard Specifications”) mirrors the provisions of
N.C. Gen. Stat. § 136-29, stating that the verified claim “shall be
submitted to the State Highway Administrator within 60 days from
the time the Contractor receives the final estimate[.]” Section
101-38 of the Standard Specifications defines a “final estimate” as
follows:
The document which contains a final statement
of all quantities and total dollar amount for
each item of work performed during the life of
the contract including any adjustments to
those amounts made under the terms of the
contract. The final statement will be titled
The Final Estimate and will be the document
utilized to document final payment to the
Contractor. Receipt of this document by the
Contractor will begin the time frame for
filing of a verified claim with the Department
as provided for in G.S. 136-29 of the General
Statutes of North Carolina.
In the instant case, the trial court determined that the 19
October 2001 letter and its accompanying documents were
insufficient to be a final estimate. The trial court found that
Because of the improper heading, lack of
signature or verification and small size of
the check enclosed, Jones Bros.' regularprocedures for handling final estimates were
not initiated.
The trial court thereafter concluded that “[t]he document NCDOT
sent to Jones Bros. on October 19, 2001 did not constitute the
final estimate because it was improperly titled and was not signed
or certified,” and that “[b]ecause a properly titled and executed
final estimate was not received by Jones Bros., the time for Jones
Bros. to file a verified claim under N.C.G.S. § 136-29 has not
run.” We conclude that the trial court erred.
As indicated by the return of the certified mail receipt,
Jones received the NCDOT's 19 October 2001 letter on 24 October
2001. As detailed above, the letter was sent to Jones following an
inquiry by Martin regarding the issuance of the final estimate.
The subject line of the letter read “Payment of Final Estimate,”
and the letter stated that the “final estimate warrant” was
attached and that the final estimate warrant represented the “final
payment of the contract.” The letter also stated that a copy of
the “final estimate” was attached.
Estimate 40 was attached to the letter and was entitled
“Contract Final Estimate.” Estimate 40 stated that it was “The
Final Estimate,” and it indicated that the project was one-hundred
percent complete. Estimate 40 further indicated that $149,240.58
had been “Transferred to [Jones'] Trust Account” by the estimate.
Following receipt of the 19 October 2001 letter, Jones
tendered the final pay warrant on 25 October 2001, and the
Department of the State Treasurer paid the warrant. However, Jones
failed to file a verified complaint against NCDOT until 8 January
2002, seventy-six days after its receipt of the final estimate. In his affidavit, Martin stated that “Janet Gibbs, the Jones
Bros.' clerk responsible for the opening and directing of the mail
at that time . . . processed [the final estimate warrant] as just
another partial pay estimate because it was virtually identical to
the previous partial Project pay estimates.” However,
notwithstanding the requirement that the final statement be
entitled “The Final Estimate,” no provision contained within the
Standard Specifications or Chapter 136 of the North Carolina
General Statutes requires that the final statement follow a
particular framework. In the instant case, Estimate Number 40 was
entitled “Contract Final Estimate” and stated plainly that it was
“The Final Estimate.” The phrase “final estimate” was written five
times within the cover letter and its accompanying documents. The
documents were sent via certified mail and followed an inquiry from
Jones regarding the status of the final estimate. We conclude that
these documents satisfy the requirements of N.C. Gen. Stat. § 136-
29 as well as the Standard Specifications, and thus qualify as a
final estimate.
As noted above, the trial court considered the amount of the
final pay warrant as a basis for its finding that Jones had not yet
received a final estimate. The trial court agreed with Jones, who
argued that the final estimate also should have included a check
for $149,240.58, the amount due to Jones in retainage. However,
this argument ignores the plain language of Estimate 40, which
stated that the “Amount Transferred To Trust Account This Estimate”
was $149,240.58. Contained within the record is the 1 October 2001
letter from NCDOT which authorized the trustee bank to transfer theremaining retainage to Jones. The letter specified the project
number, stated that “[t]his project has been completed and the
final estimate is being processed,” and granted the bank the
“authority to release to the Contractor the remaining amount in
trust, which is $149,420.58.” The following information appeared
at the end of the letter:
cc-
Mr. Wayne Stallings
Jones Brothers, Incorporated
Although Jones contends that it did not receive a copy of this
letter, Jones does not dispute that it received the funds
authorized for release by the letter. In a letter to NCDOT dated
4 February 2002, Martin stated that “[o]n further investigation by
our office we determined that the retainage which was released by
your directive was carried by the Escrow Agent as a NCDOT Surry
County project which, by coincidence, was closed out at roughly the
same time.” Although Jones contends that “[t]he fact that the
retainage did not accompany Estimate 40 . . . added to the
understanding that this was simply another estimate,” as discussed
above, no provision of the Standard Specifications or Chapter 136
requires that the retainage payment accompany the final estimate.
Estimate 40 was attached to a cover letter entitled “Payment of
Final Estimate” and a pay warrant deemed the “final payment of the
contract.” Estimate 40 was entitled “Contract Final Estimate” and
stated that the project was one hundred percent complete, while the
other estimates stated different percentages of completion and were
entitled “Contract Monthly Estimate.”
Thus, in light of the
foregoing evidence, we conclude that the 19 October 2001 letter andits accompanying documents were sufficient to constitute a final
estimate.
The trial court concluded in the alternative that “to the
extent the document submitted on October 19, 2001 did constitute a
final estimate . . . the failure of NCDOT to respond to Mr.
Martin's December 21, 2001 e-mail equitably tolled the running of
the statute of limitation[.]” In support of this conclusion, both
the trial court and Jones cite
Reynolds Co. v. State Highway
Commission, 271 N.C. 40, 155 S.E.2d 473 (1967). We conclude that
Reynolds Co. is distinguishable from the instant case.
In
Reynolds Co., the State Highway Commission first mailed to
the plaintiff a final estimate and warrant, together with an
accompanying letter characterizing the payment as “final payment of
this contract.” 271 N.C. at 42, 155 S.E.2d at 476. The plaintiff
was concerned that acceptance of the payment would constitute a bar
to liquidated damages claims, and therefore the plaintiff wrote the
State Highway Commission a letter asking to modify the wording of
the final estimate. In a response letter mailed several days
later, the State Highway Commission complied with the plaintiff's
requests. However, when the plaintiff filed suit following
rejection of its verified complaint, the State Highway Commission
moved to dismiss the suit for lack of subject matter jurisdiction,
arguing that its first letter to the plaintiff triggered the sixty-
day notice period and therefore the plaintiff's verified complaint
was ten days late. On appeal from the trial court's order denying
the motion to dismiss, this Court concluded that “[c]onsidering the
facts in this particular case, it seems to us clear that defendant,by its letter written on 24 January 1964, voluntarily waived its
rights to contend that plaintiff received its final estimate on 14
January 1964 when it received defendant's letter of 13 January
1964.”
Id. at 46, 155 S.E.2d at 478.
We conclude NCDOT did not waive its right to contend that
Jones received the final estimate in the instant case on 24 October
2001. “Equitable estoppel arises when a party has been induced by
another's acts to believe that certain facts exist, and that party
'rightfully relies and acts upon that belief to his detriment.'”
Jordan v. Crew, 125 N.C. App. 712, 720, 482 S.E.2d 735, 739
(quoting
Thompson v. Soles, 299 N.C. 484, 487, 263 S.E.2d 599, 602
(1980)),
disc. review denied, 346 N.C. 279, 487 S.E.2d 548 (1997).
“In order for equitable estoppel to bar application of the statute
of limitations, a plaintiff must have been induced to delay filing
of the action by the misrepresentations of the defendant.”
Id.
(citing
Duke University v. Stainback, 320 N.C. 337, 341, 357 S.E.2d
690, 693 (1987)).
In the instant case, Jones has failed to demonstrate that
NCDOT engaged in any affirmative acts requiring equitable relief.
As discussed above, NCDOT's 19 October 2001 letter satisfied the
requirements of N.C. Gen. Stat. § 136-29 and the Standard
Specifications. Jones tendered the final pay warrant and admitted
in affidavits that it failed to notice the release of the
retainage. Although we recognize that NCDOT did not respond to
Martin's email, we find no support for the conclusion that NCDOT's
failure to respond to the email constituted an affirmative act or
misrepresentation giving rise to an equitable defense. In his ownemail, Martin acknowledges that the message could reach NCDOT “at
a bad time with the holidays and year end closing coming up[.]”
Watts, the intended recipient of the email, stated in an affidavit
that he “worked 2 hours and took 6 hours vacation” on 21 December
2001, and did not “recall receiving or reading any E-mail from
Jones Brothers or its personnel[.]” Watts did not acknowledge
receipt of the email or comment on its request prior to the running
of the sixty-day notice period, and there is no indication that he
acted in bad faith in connection with Jones' claim. Thus, we
conclude that the doctrine of equitable estoppel does not apply in
the instant case, and therefore the trial court should not have
utilized equitable estoppel as an alternative ground to deny
NCDOT's motion.
In light of the foregoing conclusions, we hold that the trial
court erred in denying NCDOT's motion to dismiss Jones' claim. The
decision of the trial court is therefore reversed.
Reversed.
Chief Judge MARTIN and Judge HUDSON concur.
*** Converted from WordPerfect ***