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1. Appeal and Error_appealability--interlocutory order_explanation of substantial right
When an appeal is from an order which is final as to one party, but not all, and the trial court
has certified the matter under N.C.G.S. § 1A-1, Rule 54(b), the Court of Appeals must review the
issue, as here. However, when the appeal is from an interlocutory rather than final order as to any
party, the appellant must include an explanation of why the case affects a substantial right, even if
the trial court has certified that there is no just reason for delay. N.C. Rules of Appellate Procedure,
Rule 28(b)(4) (2004).
2. Construction Claims_school project--surety in receivership_no civil remedy for failure
to maintain bond
The Orange County Board of Education could not be civilly liable to a subcontractor on a
school construction project for failure to provide an adequate payment bond for the life of the project
where the surety was placed in receivership. The bond requirement of N.C.G.S. § 44A-26 is for life
of the project, but the remedy is criminal rather than civil. The trial court correctly granted the
Board's motion for dismissal for failure to state a claim upon which relief could be granted.
3. Construction Claims; Sureties--surety contract_for the benefit of laborers and
subcontractors
The trial court incorrectly granted a Rule 12(b)(6) dismissal for the general contractor on a
school construction project where the surety was placed in receivership and a subcontractor brought
an action for not maintaining the required bond. Pursuant to N.C.G.S. § 44A-26(a)(2), as amended,
the bond requirement is clearly and explicitly for the direct benefit of laborers and subcontractors
such as plaintiff.
4. Trials_motion for reconsideration_plaintiff's argument considered_no abuse of
discretion
The trial court did not abuse its discretion by denying a motion for reconsideration in an
action by a subcontractor arising from the insolvency of a surety. The court's order indicated that
it considered plaintiff's argument and concluded that equal protection and due process did not apply.
5. Construction Claims_failure of surety_materialman's lien against board of education
and contractor_equitable liens
A materialman's lien does not apply to public bodies or public buildings and the trial court
did not err by dismissing a subcontractor's claim that it had a lien on funds in the hands the Board
of Education at the time it learned that the surety was insolvent. However, the court erred by
dismissing the claim against the general contractor, which is not a public body. The trial court also
did not err by dismissing plaintiff's claim for an equitable lien, which is available only when a party
has no adequate remedy at law. Plaintiff has other claims pending.
6. Construction Claims_failure of surety_quantum meruit claims by subcontractor
A subcontractor did not have a claim in quantum meruit against the Board of Education for
not maintaining the statutorily required bond after a surety became insolvent. Under the statute,
there is no civil remedy against the Board. However, plaintiff alleged a prima facie case for recovery
in quantum meruit against the general contractor and the trial court should not have granted a Rule
12 (b)(6) dismissal of the claim.
7. Trials_dismissal for failure to prosecute_denied_settlement discussions and document
gathering
The trial court did not abuse its discretion by denying defendants' motions to dismiss for
failure to prosecute where plaintiff filed the action in March of 2002 and subsequently obtained ten
alias and pluries summonses between the original filing and October of 2003. The court considered
that plaintiff was engaged in settlement discussions and document gathering, and did not abuse its
discretion by not dismissing plaintiff's case.
Appeal by plaintiff from order entered 3 September 2004 by
Judge John R. Jolly, Jr., in the Superior Court in Orange County.
Heard in the Court of Appeals 1 December 2005.
Sands, Anderson, Marks & Miller, by Celie B. Richardson,
Elaine R. Jordan and Dailey J. Derr, for plaintiff-appellant.
Safran Law Offices, by M. Anne Runheim, for defendant-appellee
Mecklenburg Utilities, Inc.
Cheshire & Parker, by D. Michael Parker, for defendant-
appellee Orange County Board of Education.
HUDSON, Judge.
On 30 August 2004, the trial court dismissed plaintiff's tort,
contract, and equity claims against defendants MecklenburgUtilities, Inc., (Mecklenburg) and the Orange County Board of
Education (the Board), with prejudice. Plaintiff appeals. We
affirm in part and reverse in part and remand.
In 2000, the Board entered a contract with Mecklenburg for
grading services for construction of a new high school. Under the
contract, Mecklenburg would furnish the payment bond required by
state law; Mecklenburg procured a payment bond from Amwest Surety
Insurance Company (the surety). Mecklenburg, the general
contractor, sub-contracted with Tharpe's Excavating, Inc.,
(Tharpe's), with Jeffrey W. Tharpe as guarantor, for a portion of
the grading work. In turn, Tharpe's rented equipment from
plaintiff, James River Equipment. Tharpe's failed to pay over
$500,000 owed to plaintiff and, in April 2001, plaintiff gave
notice of non-payment to the Board, Mecklenburg, and the surety.
In June 2001, the surety gave notice to the Board and Mecklenburg
that it was insolvent and had been placed in receivership.
Mecklenburg did not furnish a replacement bond.
In 2002, plaintiff brought this suit against the Board,
Mecklenburg, Tharpe's and Tharpe. Plaintiff's complaint sets forth
the following counts: Count I claims breach of the contract between
Tharpe's and plaintiff; Count II seeks recovery from Tharpe as
guarantor of plaintiff's contract with Tharpe's; Count III claims
a lien on funds held by the Board and Mecklenburg at the time they
learned the surety was insolvent; Count IV is a claim of quantummeruit against all defendants; Count V seeks an equitable lien
against the Board and Mecklenburg to prevent unjust enrichment;
Count VI claims breach of a contract between the Board and
Mecklenburg; Count VII against the Board claims breach of warranty;
and Count VIII against the Board claims negligence for failure to
retain funds. Plaintiff later amended the complaint to add equal
protection and due process claims against the Board. Upon motions
to dismiss by defendants Mecklenburg and the Board, the trial court
dismissed all claims against the Board and Mecklenburg pursuant to
Rule 12(b)(6). The trial court also found no just reason for delay
of appellate review of the dismissed claims and thus certified the
case for appeal pursuant to Rule 54(b). The court did not dismiss
the counts against Tharpe's and Tharpe for breach of contract and
guaranty, which were still pending in superior court at the filing
of this appeal.
Orders which do not dispose of the action as to all parties
are treated as interlocutory.
Cunningham v. Brown, 51 N.C. App. 264,
267, 276 S.E.2d 718, 722 (1981). Ordinarily, there is no right of
appeal from an interlocutory order, but interlocutory orders may be
appealed in two instances: (1) if the order is final as to some but
not all of the claims or parties and the trial court certifies there
is no just reason to delay the appeal pursuant to N.C.R. Civ. P.
54(b) or (2) if the trial court's decision deprives the appellant of
a substantial right which would be lost absent immediate review. CBP Resources, Inc. v. Mountaire Farms, Inc., 134 N.C. App. 169, 171,
517 S.E.2d 151, 153 (1999) (internal quotation marks omitted); N.C.
Gen. Stat.
§ 1A-1, Rule 54(b)(2001); N.C. Gen. Stat. § 1-277(a)
(2001); N.C. Gen. Stat. § 7A-27(c) (2001).
[1] In its brief, James River has included a statement of
grounds for appellate review, as required by Rule 28(b)(4). N.C. R.
App. P. 28(b)(4) (2004). When the Supreme Court amended Rule 28(b)
in 2001, it added subsection 4, which reads in its entirety as
follows:
Such statement shall include citation of the
statute or statutes permitting appellate review.
When an appeal is based on Rule 54(b) of the Rules
of Civil Procedure, the statement shall show that
there has been a final judgment as to one or more
but fewer than all of the claims or parties and
that there has been a certification by the trial
court that there is no just reason for delay. When
an appeal is interlocutory, the statement must
contain sufficient facts and argument to support
appellate review on the ground that the challenged
order affects a substantial right.
Id. We read this rule as requiring that, when an appeal is from anorder which is final as to one party, but not all, and where the
trial court has certified the matter under Rule 54(b), we must review
the issue. This interpretation is consistent with the Supreme
Court's previous holding that where the trial court issued a Rule
54(b) certification on a final judgment as to one or more party but
not all, this Court is required to review the case. DKH Corp. v.
Rankin-Patterson Oil Co., Inc., 348 N.C. 583, 585, 500 S.E.2d 666,
668 (1998). Although that decision preceded, and thus did not
specifically address, the change in appellate Rule 28(b)(4) issued by
the Supreme Court, we conclude that the change in the rule does not
alter the binding effect of DKH.
However, we note that when an appeal is from an interlocutory,
not final, order as to any party (e.g., one which disposes of some
but not all claims against that party), the appellant must include anexplanation of why the case affects a substantial right, even if the
trial court has certified that there is no just reason for delay.
[T]he trial court's determination that there is no just reason for
delay of appeal, while accorded deference, cannot bind the appellate
courts because ruling on the interlocutory nature of appeals is
properly a matter for the appellate division, not the trial court.
Anderson v. Atlantic Cas. Ins. Co., 134 N.C. App. 724, 726, 518
S.E.2d 786, 788 (1999) (internal citations and quotation marks
omitted). The trial court cannot by certification make its decree
immediately appealable if it is not a final judgment. Id. (internal
citation, ellipses and quotation marks omitted). Here, because the
appeal is final as to the Board and Mecklenburg and the trial court
certified the appeal, we conclude that we must review plaintiff's
appeal on the merits. [2] Plaintiff first argues that the trial court erred in
dismissing its claim in Count VI of its complaint, that the Board and
Mecklenburg breached their contractual and statutory duty to provide
an adequate bond throughout the life of a project. We review the
trial court's grant of a 12(b)(6) motion to dismiss de novo. Grant
Constr. Co. v. McRae, 146 N.C. App. 370, 373, 553 S.E.2d 89, 91
(2001). [T]he question for the court is whether, as a matter of
law, the allegations of the complaint, treated as true, are
sufficient to state a claim upon which relief may be granted under
some legal theory. Id. (internal citation omitted). In reviewing
a 12(b)(6) dismissal, we are only concerned with the adequacy of the
pleadings, see, e.g., Henry v. Deen, 310 N.C. 75, 86, 310 S.E.2d 326,
334 (1983), which we must construe liberally. Governor's Club Inc.
v. Governors Club Ltd. P'ship, 152 N.C. App. 240, 246, 567 S.E.2d781, 786 (2002), aff'd, 357 N.C. 46, 577 S.E.2d 620 (2003).
N.C. Gen. Stat. §§ 44A-25 through 44A-35 (2003), commonly known
as the Little Miller Act (the Act), governs payment and performance
bonds for state construction contracts. Section 44A-26, entitled
Bonds Required, states in pertinent part that,
(a) When the total amount of construction
contracts awarded for any one project exceeds
three hundred thousand dollars ($ 300,000), a
performance and payment bond as set forth in (1)
and (2) is required by the contracting body from
any contractor or construction manager at risk
with a contract more than fifty thousand dollars
($ 50,000).
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(2) A payment bond in the amount of one hundred
percent (100%) of the construction contract
amount, conditioned upon the prompt payment for
all labor or materials for which a contractor or
subcontractor is liable. The payment bond shall
be solely for the protection of the persons
furnishing materials or performing labor for
which a contractor, subcontractor, or
construction manager at risk is liable.
(b) The performance bond and the payment bond
shall be executed by one or more surety
companies legally authorized to do business in
the State of North Carolina and shall becomeeffective upon the awarding of the construction
contract.
Id. (emphasis addded). Defendants do not dispute that they were
required to provide a bond, but assert that they complied with the
Act when they secured a surety that became effective upon the
awarding of the construction contract. However, the statute is
silent regarding whether the bond is required for the life of the
project and this issue is one of first impression.
Pursuant to fundamental principles of statutory construction, we
must first seek to discern the intent of the legislature, and in
seeking to ascertain the legislative intent, the statutory language
should be construed in context. See Powell v. State Employees'
Retirement System, 3 N.C. App. 39, 41, 164 S.E.2d 80, 81 (1968). In
addition, we give consideration to the effect of possible
interpretations of the statute, since a construction that leads to
an anomalous or illogical result probably was not intended by the
legislature. Domestic Elec. Service Inc. v. City of Rocky Mount, 20
N.C. App. 347, 348, 201 S.E.2d 508, 509, aff'd, 285 N.C. 135, 203
S.E.2d 838 (1974). In construing a statute, we presume that the
legislature acted with care and deliberation. State v. Benton, 276
N.C. 641, 658, 174 S.E.2d 793, 804 (1970). Here, the statute
explicitly states that [t]he payment bond shall be solely for the
protection of the persons furnishing materials or performing labor
for which a contractor, subcontractor, or construction manager atrisk is liable. N.C. Gen. Stat. § 44A-26. Our Courts have noted
that such statutes provide a surety bond to provide the functional
equivalent of a materialmen's lien, which is available to those
engaged in private construction, but not in public construction
projects. Carolina Builders Corporation v. AAA Dry Wall, Inc., 43
N.C. App. 444, 448, 259 S.E.2d 364, 367 (1979). Furthermore, we note
that the payment bond form included in N.C. Gen. Stat. § 44A-33(b),
provides language indicating that the bond shall remain in full
force and virtue. Id. We conclude that the bond requirement of
N.C. Gen. Stat. § 44A-26 extends throughout the life of the project;
to hold otherwise would fail to afford the protection which the
statute explicitly seeks to provide and would lead[] to an anomalous
or illogical result probably [] not intended by the legislature.
Domestic Elec. Service, 20 N.C. App. at 348, 201 S.E.2d at 509.
Although we conclude that N.C. Gen. Stat. § 44A-26 requires that
the contracting body and the general contractor provide a payment
bond for the life of the project, we also conclude that plaintiff
here has no civil remedy against the Board for this alleged violation
of the duty to maintain a bond. N.C. Gen. Stat. § 44A-32 provides
that [e]ach contracting body shall designate an official thereof to
require the bonds described by this Article. If the official so
designated shall fail to require said bond, he shall be guilty of a
Class 1 misdemeanor. Id. The North Carolina Supreme Court has held
that as against a government contracting body, criminal indictment is the only remedy
prescribed by the statute, and we must declare
the law as we find it. The Legislature alone may
change it, if it is thought to be inadequate.
Plaintiff's rights and remedies against the
defendant board and its members are statutory,
and the courts are not at liberty to extend a
penal statute, or one of this kind, beyond the
clear meaning of its terms. The legislative
intent must be the controlling spirit in the
construction and application of statutes of this
nature.
Noland Company, Inc., v. Board of Trustees of Southern Pines School,
190 N.C. 250, 255, 129 S.E.2d 577, 579 (1925) (internal citation and
quotation marks omitted). In 1979, this Court again held that the
statute provides the sole remedy against a government entity for
failure to provide the statutorily required bond: misdemeanor
prosecution of the designated official responsible for securing the
bond. Carolina Builders, 43 N.C. App. at 449, 259 S.E.2d at 368.
Although the Little Miller Act was revised by the legislature in
1973, 1993, and 1994, the legislature has not amended the substance
of this provision. Accordingly, we conclude that the Board cannot be
civilly liable to plaintiff for the failure to provide an adequate
payment bond for the life of the project.
[3] In claim VI of its complaint, plaintiff also argues that
Mecklenburg is liable for failure to provide an adequate bond for the
life of the project. Plaintiff was not a party to the contract
between the Board and Mecklenburg, and thus seeks recovery as a
third-party beneficiary. [A] third party beneficiary to anagreement may properly maintain an action for its breach, where the
agreement is made for the third party's direct benefit and the
benefit accruing to him is not merely incidental. Woolard v.
Davenport, 166 N.C. App. 129, 136, 601 S.E.2d 319, 324 (2004). In
Carolina Builders, this Court held that a plaintiff could not recover
from the general contractor for failure to secure the statutory bond
because it was a mere incidental beneficiary, to the contract
between the governmental body and the general contractor. 43 N.C.
App. at 447, 259 S.E.2d at 366. In so holding, the Court reasoned
that, [n]othing in the record before us suggests that the
[governmental body] exacted from [the general contractor] the promise
to obtain bonds with the expressed intent to directly benefit third
parties such as plaintiff. Id. at 448, 259 S.E.2d at 367. However,
Carolina Builders, involved an earlier version of the statute, N.C.
Gen. Stat. § 44-14 (1973), which simply required public bodies
[t]o execute bond with one or more solvent sureties
before beginning any work under said contract,
payable to said county, city, town or other municipal
corporation, and conditioned on payment of all labor
done on and material and supplies furnished for said
work under a contract or agreement made directly with
the principal contractor or subcontractor.
Id. As the Act has since been amended, we conclude that we are not
bound by Carolina Builders on this issue. Pursuant to N.C. Gen.
Stat. § 44A-26(a)(2), as amended in 1973, the statutory bond
requirement of the contract between the Board and Mecklenburg is
clearly and explicitly for the direct benefit of laborers andsubcontractors such as plaintiff. Thus, the allegations in count VI
are sufficient to state a claim on this basis, and we reverse the
trial court's dismissal of this claim as to Mecklenburg.
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