Construction Claims_--breach of contract--unjust enrichment--payment bond--contractual
limitations period
The trial court did not err in a breach of contract and unjust enrichment case by granting
defendant surety's motion to dismiss under N.C.G.S. § 1A-1, Rule 12(c) plaintiff subcontractor's
action to collect money owed from the general contractor under provisions of a payment bond
arising out of a construction project based on the one-year contractual limitations period
contained in the payment bond, because: (1) although plaintiff contends the document attached to
defendant's answer referring to a final request for payment on the project should not have been
considered, it was specifically referred to in defendant's answer on four separate occasions and
could properly be considered part of the pleadings in ruling upon defendant's motion to dismiss;
(2) plaintiff lost the right to contest the issue of when the one-year limitations period set forth in
the payment bond commenced since plaintiff failed to argue in its brief that the trial court erred
by stating the parties stipulated that plaintiff failed to file this action prior to the expiration of the
one-year contractual limitations period contained within the payment bond, nor does it argue that
it did not enter into the stipulation or that it was somehow invalid; (3) although plaintiff contends
the one-year limitations period contained in the payment bond is unenforceable, plaintiff who is
seeking the benefit of the payment bond must also accept its burdens and by its own stipulation,
plaintiff did not present its claim in a timely manner; (4) although plaintiff argues that insurance
contracts are to be construed in favor of the insured and against the insurer, a payment bond is a
contract of suretyship and plaintiff is a third-party beneficiary of the payment bond, and there is
no need to apply rules of construction when the provision in the contract is clear; (5) although
plaintiff contends that the one-year limitations period is void as a violation of N.C. Gen. Stat. §
58-3-35 which prohibits insurers from limiting the time in which suit may be commenced to less
than the period prescribed by law, insurance and suretyship are not synonyms; and (6) although
plaintiff argues that the one-year limitations period contained in the payment bond is not a
limitations period for filing suit, the pertinent provision explicitly limited the time in which
plaintiff could file suit under the payment bond and plaintiff's own stipulation acknowledged that
this was a one-year contractual limitations period.
Scott T. Slusser, for plaintiff-appellant.
Parker Poe Adams & Bernstein, LLP, by Brian D. Darer and Farah
Rodenberger, for defendant-appellee, American Home Assurance
Company.
STEELMAN, Judge.
Water Street Center Associates, L.L.C. (Water Street) is the
owner of the Water Street Center, Wilmington (the Project), which
is a private construction project consisting of offices and
condominiums. Miller Building Company (Miller) was general
contractor on the project. On 15 December 1999, Miller gave to
Water Street a payment bond on the project in the amount of
$8,269,954.00. American Home Assurance Company (defendant) was the
surety on this bond. By the terms of the bond, Miller agreed to
pay “all lawful claims of sub-contractors, materialmen or laborers
for labor performed or materials furnished directly to the
principal in performance of said contract.” The payment bond also
contained the following provision:
No suit or action shall be commenced hereunder
by any claimant: (a) After the expiration of
one (1) year following the date on which
Principal ceased work on said Contract, it
being understood, however, that if any
limitation embodied in this bond is prohibited
by any law controlling the construction hereof
such limitation shall be deemed to be amended
to as to be equal to the minimum period of
limitation permitted by such law.
Plaintiff is a North Carolina corporation in the business of
commercial concrete construction. On 18 April 2000, Miller entered
into an agreement with plaintiff as a subcontractor, whereby
plaintiff agreed to furnish labor for the installation of pile cap
foundations at the project. Plaintiff's total contract price for
this work was $358,818.44. Plaintiff completed all work required
of it pursuant to contract and was paid by Miller for all the workexcept $35,881.77 representing a ten percent (10%) retainage of the
total contract price. This retainage was due upon unqualified
written acceptance and full and final payment by Water Street to
Miller.
Miller allegedly received final payment, from Water Street, in
the amount of $25,289.39 on or about 11 December 2001. On 30
August 2002, plaintiff filed suit against Miller in a separate
action for money owed on the project. This was approximately nine
months after the alleged final payment to Miller by Water Street.
On 2 September 2003, the Superior Court of New Hanover County
entered judgment against Miller for monies owed under the
subcontract agreement.
Plaintiff filed this suit against defendant and Water Street
on 28 May 2003. Plaintiff first learned of the existence of the
payment bond immediately prior to filing this action. Plaintiff's
complaint sought to recover $35,881.77 from Water Street under
theories of breach of contract and unjust enrichment. It also
sought to collect from defendant the same amount under the
provisions of the payment bond. On 26 June 2003, plaintiff
voluntarily dismissed its claims against Water Street. By order
filed 2 March 2004, the trial court denied plaintiff's motion for
summary judgment and granted defendant's motion for judgment on the
pleadings, dismissing plaintiff's action. The trial court
specifically held that the basis of this ruling was the one year
contractual limitations period contained in the payment bond. From
this order, plaintiff appeals. In its first argument, plaintiff contends that the trial court
erred in granting defendant's motion to dismiss pursuant to Rule
12(c) of the North Carolina Rules of Civil Procedure. We disagree.
Plaintiff first argues that the court improperly considered a
document that was attached to defendant's answer. The document in
question was Miller's final request for payment to Water Street
Center and was specifically referred to in defendant's answer on
four separate occasions. The court properly considered that
document to be a part of the pleadings in ruling upon defendant's
motion to dismiss pursuant to Rule 12(c). Minor v. Minor, 70 N.C.
App. 76, 78, 318 S.E.2d 865, 867 (1984).
Plaintiff next argues that there are contradictory allegations
in the pleadings as to when the one year limitations period set
forth in the payment bond commenced.
Judge Henry's order contains the following language: “The
parties stipulated that Plaintiff failed to file this action prior
to the expiration of the one (1) year contractual limitations
period contained within the Payment Bond.” Plaintiff did not
assign this statement in the order as error in the record, and does
not argue that it did not enter into the stipulation, or that it
was somehow invalid, in its brief. Plaintiff has lost the right to
contest this issue. N.C. R. App. P. Rule 10(c)(1);
Bledsoe v.
County of Wilkes, 135 N.C. App. 124, 125, 519 S.E.2d 316, 317
(1999).
Plaintiff next argues that the one year limitations period
contained in the payment bond is unenforceable. Plaintiffacknowledges that there is no case law in North Carolina supporting
this proposition, but urges this Court to liberally construe the
payment bond to protect its interests.
The payment bond was given by Miller as principal and
defendant as surety to Water Street to insure that lawful claims of
sub-contractors, materialmen, or laborers for labor performed on
the project were paid. The payment bond expressly states that it
was for “the benefit of any subcontractor, materialman or laborer.”
Thus, although plaintiff was not a party to the payment bond, its
express terms allow it to institute an action against the surety if
it is not paid by the contractor. However, those same terms which
give the plaintiff the right to seek payment from the surety, place
explicit limitations upon this right. The payment bond
specifically provides: “No suit or action shall be commenced
hereunder by any claimant a) after the expiration of one (1) year
following the date on which Principal ceases work on said
contract....” Plaintiff, seeking the benefit of the payment bond,
must also accept its burdens. See RGK, Inc. v. United States
Fidelity & Guaranty Co., 292 N.C. 668, 684-85, 235 S.E.2d 234, 244
(1977).
Plaintiff then contends that its claims against Miller are
controlled by a three year statute of limitations and that this
should control over the provisions of the payment bond. This
argument is specious. Defendant's obligations to plaintiff are
specifically limited by the terms and conditions of the payment
bond, which provide for a one year period to present claims. Byits own stipulation, plaintiff did not present its claim in a
timely manner.
Plaintiff further argues that insurance contracts are to be
construed in favor of the insured and against the insurer. A
payment bond is a contract of suretyship, not insurance. Plaintiff
is a third-party beneficiary of the payment bond, not an insured.
Further, rules of construction are used to interpret ambiguities in
contracts. They are not used to rewrite provisions to fit the
needs of a litigant. Where a provision in an agreement (such as
the limitations provision) is clear and unambiguous on its face,
there is no need to apply rules of construction. Jones v. Palace
Realty Co., 226 N.C. 303, 305, 37 S.E.2d 906, 907 (1946); North
Carolina Farm Bureau Mut. Ins. Co. v. Mizell, 138 N.C. App. 530,
532, 530 S.E.2d 93, 95 (2000).
Plaintiff next argues that the one year limitations period is
void as a violation of N.C. Gen. Stat. § 58-3-35 (2004). This
statute prohibits insurers from limiting the time in which suit may
be commenced to less than the period prescribed by law. Again,
insurance and suretyship are not synonyms. “'While insurance
contracts are in many respects similar to surety contracts, there
is a very wide difference between them.' 44 C.J.S. Insurance § 1,
p. 473. The statutory provisions that control and regulate
insurance in this state are contained in Chapter 58 of the General
Statutes entitled: 'Insurance'; those that regulate suretyship in
Chapter 26 entitled 'Suretyship.'” Henry Angelo & Sons, Inc. v.Property Dev. Corp., 63 N.C. App. 569, 574, 306 S.E.2d 162, 166
(1983).
Finally, plaintiff argues that the one year limitations period
contained in the payment bond is not a limitations period for
filing suit, citing the case of MCI Constructors, Inc. v. Hazen &
Sawyer, P.C., 310 F. Supp. 2d 754 (M.D.N.C., 2004), aff'd in part,
rev'd in part on other grounds, 125 Fed. Appx. 471 (4th Cir. 2005).
In MCI, there was a provision in a performance bond stating
“bond must be valid until one year after the date of issuance of
the Certificate of Completion.” The District court held that this
constituted a period for making demand on the performance bond, not
a limitations period. The language of the payment bond in the
instant case is completely different from that discussed in MCI.
Here, the bond explicitly states: “No suit or action shall be
commenced hereunder.” This provision explicitly limited the time
in which plaintiff could file suit under the payment bond.
Further, plaintiff's own stipulation acknowledged that this was a
“one (1) year contractual limitations period.”
We find all of plaintiff's arguments to be without merit, and
affirm the trial court's dismissal of plaintiff's action.
AFFIRMED.
Judges WYNN and HUDSON concur.
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