217 N.C. App. 300
N.C. Ct. App.2011Background
- APAC-Atlantic, the prime contractor, obtained a payment bond from Liberty Mutual and Travelers for the Greensboro project.
- English subcontracted part of the grassing work to Southern Seeding; the subcontract included Note 15 equitable adjustment and Paragraph 7 no damages for delay.
- Note 15 guaranteed an equitable adjustment for increased costs if delays occurred beyond the July 1, 2007 completion date; Paragraph 7 restricted delays to compensation only if paid by Owner or third parties.
- The project extended to March 14, 2008 due to multiple supplemental agreements; Southern Seeding sought $194,941.39 for post-July 1, 2007 cost increases.
- English offered only $2,300 to settle, excluding post-1 July 2007 cost increases; plaintiff sued for breach of contract and for payment bond recovery.
- Trial court dismissed claims; on appeal, court held Note 15 and Paragraph 7 are distinct and must be interpreted together but not to negate Note 15.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Interpretation of Note 15 vs. Paragraph 7 | Note 15 supports equitable adjustment for post-July 2007 costs. | Paragraph 7 bars delay damages absent compensation from owner/third party and negates Note 15. | Paragraph 7 and Note 15 are distinct; Note 15 permits equitable adjustment notwithstanding Paragraph 7. |
| Whether plaintiff is entitled to an equitable adjustment under Note 15 | Equitable adjustment is available for market-driven post-2007 cost increases. | English had no remedy against APAC/NCDOT to obtain such adjustment. | Plaintiff is entitled to an equitable adjustment under Note 15; trial court erred. |
| Liability of the sureties on the payment bond | Bond covers damages due to English's breach affecting subcontractors. | Bond applies narrowly to labor/materials for the project; breach not within bond terms. | Sureties liable; payment bond intended for subcontractors and laborers, not limited to direct contract terms. |
Key Cases Cited
- Int'l Paper Co. v. Corporex Constructors, Inc., 96 N.C.App. 312 (1989) (contract interpreted as a whole; give effect to all provisions)
- APAC-Carolina, Inc. v. Greensboro-High Point Airport Auth., 110 N.C.App. 664 (1993) (distinguishes delay damages from unit price adjustments)
- Symons Corp. v. Ins. Co. of N. Am., 94 N.C.App. 541 (1989) (payment bond protections for subcontractors/materialmen)
- Beachcrete, Inc. v. Water St. Ctr. Assocs., L.L.C., 172 N.C.App. 156 (2005) (surety liable to subcontractor under payment bond)
- Interstate Equip. Co. v. Smith, 292 N.C. 592 (1977) (third-party beneficiary may sue on contractor's bond)
- Boatwright Distribution & Supply, Inc. v. N. State Mech., Inc., 2010 WL 3464837 (2010) (unpublished; cited for payment bond scope)