936 F.2d 1462 (4th Cir. 1991), 90-2449, Fayetteville Investors v. Commercial Builders, Inc.

Docket Nº:90-2449.
Citation:936 F.2d 1462
Party Name:FAYETTEVILLE INVESTORS, Plaintiff-Appellant, v. COMMERCIAL BUILDERS, INCORPORATED; American Casualty Company of Reading, Pennsylvania, Inc., Defendants-Appellees.
Case Date:June 28, 1991
Court:United States Courts of Appeals, Court of Appeals for the Fourth Circuit
 
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936 F.2d 1462 (4th Cir. 1991)

FAYETTEVILLE INVESTORS, Plaintiff-Appellant,

v.

COMMERCIAL BUILDERS, INCORPORATED; American Casualty

Company of Reading, Pennsylvania, Inc.,

Defendants-Appellees.

No. 90-2449.

United States Court of Appeals, Fourth Circuit

June 28, 1991

Argued March 4, 1991.

As Amended July 11, 1991.

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Marland Cornelius Reid, Reid, Lewis, Deese & Nance, Fayetteville, N.C., for plaintiff-appellant.

Margaret Cain Lumsden, Hunton & Williams, Raleigh, N.C., argued (Julius A. Rousseau, III, Hunton & Williams, Raleigh, N.C., Deborah L. Fletcher, Laura H. Hamilton, Hunton & Williams, Richmond, Va., on brief), for defendants-appellees.

Before WIDENER, Circuit Judge, CHAPMAN, Senior Circuit Judge, and HOFFMAN, Senior United States District Judge for the Eastern District of Virginia, sitting by designation.

WALTER E. HOFFMAN, Senior District Judge:

This action calls for consideration of the interplay of Rules 12(b)(6), 54, 56, 59 and 60 of the Federal Rules of Civil Procedure, and particularly the differing standards applied to motions under Rules 12(b)(6), 59 and 60. Appellant seeks review of the denial of a motion for reconsideration following the dismissal of its complaint for failure to state a claim. The complaint was dismissed when it was held to indicate that the cause of action was time-barred as to the surety. There was no "notice" conversion of the Rule 12(b)(6) motion into a motion for summary judgment under Rule 56.

FACTUAL AND PROCEDURAL HISTORY

This case arises out of a written construction contract between Fayetteville Investors, a North Carolina limited partnership (Fayetteville or "owner"), and Commercial Builders, Inc. (Commercial Builders or "contractor"), signed on April 24, 1985, to build a Quality Inn Hotel in Fayetteville, North Carolina at a cost of approximately $1.7 million. On the same date American Casualty Company of Reading, Pennsylvania (American Casualty or "surety") executed a performance bond in the same amount with Commercial Builders to guarantee the performance of the construction contract. By the terms of the contract, the construction was to be completed by November 24, 1985. The hotel opened for business on April 25, 1986, though there apparently remained serious problems with the building including: faulty caulking around the windows, excessive condensation in the rooms, defective sheetrock or improper hanging of good sheetrock in the hallways, problems with drainage around the structure, excessive "salting" of the brickwork, algae growths upon the brickwork, and problems with doors and light fixtures.

From May 1986 through October 1987, correspondence was carried on between the parties and their agents about these defects, with occasional corrective work being done on some of the problems during this period. Delays were encountered because of the Christmas 1986 holidays, a shortage of men or equipment of the contractor on the job site, correspondence delays, etc., though at all times during this period the contractor apparently indicated that it would make the necessary corrections or repairs. The contractor's superintendent visited the project in January 1987, and significant glass work was done by a sub-contractor after March 4, 1987. On or about October 27, 1987, Commercial Builders by phone indicated that it would do no further work without additional payment. 1 By letter dated November 23, 1987, Fayetteville

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Investors notified the contractor and the surety of its intention to thus declare the contractor in default, pursuant to the terms of the construction contract and the performance bond. After a short period in which a conference was attempted to be set up between the parties, as required by the performance bond, on February 26, 1988 the investor group declared the contractor in default. In a second notice, on March 21, 1988, Fayetteville demanded that the surety perform its obligations under the performance bond within 15 days. The verified complaint was filed on February 29, 1989, about one year later.

On June 1, 1989, the trial court dismissed the action as barred as against the surety by the terms of the performance bond, which required that any such action be brought within two years. The court's dismissal was pursuant to a motion to dismiss filed by the surety. The court's ruling was premised upon the fact that the plaintiff's complaint had alleged that "the Contractor abandoned the project in June, 1986 and never completed construction," and the suit, not being filed until February 28, 1989, was thus apparently time-barred. This issue was contested by Fayetteville on various state law grounds including whether parties by contract could validly agree to a limitation period shorter than the statutory limitations period. It is agreed that at the hearing on the motion to dismiss there was no discussion of facts and that the issue argued was solely one of law.

Fayetteville appealed the dismissal of its complaint to this Court but, before the appeal was heard, American Casualty filed, in the district court, a motion for attorney's fees under Rule 11. American Casualty sought the sanctions based upon the plaintiff's filing of a facially time-barred complaint. Following the surety's motion for sanctions, the plaintiff, for the first time, attempted to introduce evidence of the correspondence and repair work done between June 1986 to November 1987. Such evidence would go to show that the contractor had not "abandoned" the site in June 1986, as alleged in the complaint, and that work actually continued which would bring the suit within the time period. A ruling on sanctions was deferred pending appeal.

Subsequently, by an order entered January 12, 1990, the appeal was dismissed by the United States Court of Appeals for the Fourth Circuit as not having been taken from a final order. In the order this Court stated:

Nothing we have said in this order, nor action we have taken by way of this order, will prevent the plaintiff from having the merits of its position ascertained upon a subsequent appeal. Neither should anything said or done here prevent the district court from the consideration on the merits of any further papers, or motions for reconsideration, or the like, which may be filed in this case in the district court.

Following the attempted first appeal, the plaintiff then filed a Motion for Reconsideration with the trial court on January 26, 1990 which sought to have the court reconsider its earlier dismissal of the complaint as against the surety. The grounds for reconsideration were the newly proffered evidence which would show that, despite the language in plaintiffs' complaint to the effect that contractor had "abandoned" work in June 1986, repair or corrective work in fact continued and default should not be held to have occurred until such was declared by the investor's group in February 1988. Such would bring the filing of this action within the contractual limitation period of two years.

With regard to the Motion for Reconsideration, the district court sought explanations from Fayetteville's counsel as to why the new evidence indicating later work, which brought the action within the limitation period, had not been presented prior to that time. Finding no such satisfactory explanations, the court treated the Motion for Reconsideration as a motion under Rule 54 concerning relief from orders which adjudicate fewer than all the claims in the action (the complaint was not dismissed as to the contractor 2 ). To this motion the

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district court applied Rule 60 standards, and hence, finding no excusable neglect, denied plaintiff's Motion for Reconsideration.

Plaintiff is now again before this court appealing the original dismissal of the complaint and the subsequent denial of reconsideration of the same dismissal in light of the proffered evidence tending to indicate a timely-brought suit.

ANALYSIS OF PERFORMANCE BOND

Attached to the complaint "and incorporated herein by reference" are copies of the construction contract and the performance bond. We assume then, as did the district court, that the exhibits to the complaint are a part of the complaint which was subject to the motion to dismiss under Rule 12(b)(6) as filed by the surety. Rule 10(c), Fed.R.Civ.P. Since Rule 9(f) provides that allegations of time and place are material "for the purpose of testing the sufficiency of a pleading," 2A Moore's Federal Practice, p 12.10 at 12-85, we conclude that the district court could consider the provisions of the contract and the terms of the performance bond in determining whether the complaint, on its face, demonstrates as a certainty that the claim is barred by the applicable limitation period. Indeed, in the event of conflict between the bare allegations of the complaint and any exhibit attached pursuant to Rule 10(c), Fed.R.Civ.P., the exhibit prevails. 2A Moore's Federal Practice, p 10.06, p. 10-24.

In its order of June 1, 1989, the district court quoted from paragraph 9 of the performance bond, which states that any action on the bond "shall be instituted within two years after Contractor Default or within two years after the Contractor ceased working, or within two years after the Surety refuses or fails to perform its obligation under this Bond, whichever occurs first." The district court properly noted that plaintiff advanced two arguments: (1) that since plaintiff was not a party to the performance contract (same being between the contractor and the surety), the plaintiff was not bound by the contractually imposed limitation period, and (2) that the claim for relief did not accrue "until the plaintiff complied with the numerous technical requirements of the performance bond."

The district court...

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