County of Brunswick v. Lexon Ins. Co., 7:09-CV-60-BO

• Decision Date: 07 May 2010
• Docket Number: No. 7:09-CV-60-BO,7:09-CV-60-BO
• Court: U.S. District Court — Eastern District of North Carolina
• Parties: COUNTY OF BRUNSWICK, Plaintiff, v. LEXON INSURANCE COMPANY, Defendant.

710 F.Supp.2d 520

COUNTY OF BRUNSWICK, Plaintiff,

v.LEXON INSURANCE COMPANY, Defendant.

No. 7:09-CV-60-BO.

United States District Court,

E.D. North Carolina,

Southern Division.

May 7, 2010.

Charles C. Meeker, Matthew Hilton Mall, Parker, Poe, Adams & Bernstein, LLP, Raleigh, NC, for Plaintiff.

Matthew E. Cox, Smith, Currie & Hancock LLP, Charlotte, NC, for Defendant.

ORDER

TERRENCE W. BOYLE, District Judge.

This matter is before the Court on the County of Brunswick's Motion for Summary Judgment and Lexon Insurance Company's Motion for Summary Judgment and Motion for Reconsideration. For the reasons set forth herein, Plaintiff's Motion for Summary Judgment is GRANTED; Defendant's Motion for Summary Judgment is DENIED; and Defendant's Motion for Reconsideration is DENIED.

INTRODUCTION

Town & Country Developers ("Town & Country") obtained plat approval from the County of Brunswick ("the County") to develop the Avalon of the Carolinas subdivision in Brunswick County. As a condition of plat approval, Town & Country executed an Improvement Guarantee Agreement requiring completion of certain infrastructure improvements by April 1, 2009, and provided bonds securing completion. Defendant Lexon Insurance Company ("Lexon") issued the performance bonds numbered 1012878 and 1012879 ("the Bonds"). The Bonds were issued on May 11, 2006, and originally provided a financial guarantee of $5,658,743.44. After a portion of the improvements were completed, the amount of the Bonds was reduced to $3,584,875.44.

Town & Country failed to complete the improvements required by the Improvement Guarantee Agreement. In June of 2008, Jana Berg, the County attorney, sent a letter to both Town & Country and Lexon stating that work had stopped and warning that a default would be declared. In October, 2008, Town & Country's creditors foreclosed on the Avalon of the Carolinas subdivision, and the County formally declared a default. On April 1, 2009, the County Planning Board passed a resolution calling for Lexon to either complete performance or make payment to the County as called for by the Bonds. As of this date, Lexon has not attempted to complete performance.

The County brought this action to recover the proceeds of the Bonds on April 13, 2009. During the course of the instant litigation, Lexon filed a Motion to Stay arguing that the North Carolina Permit Extension Act extended the deadline for performance, a Motion for Joinder seeking to implead the current owners of the Avalon of the Carolinas subdivision, Town & Country, and James Bovino, the CEO of Town & Country, and a Motion for Protective Order seeking a stay of discovery. By an Order dated February 8, 2010, this Court denied Lexon's Motions. Lexon filed the instant Motion for Reconsideration of that Order on February 18, 2010. The County filed its Motion for Summary Judgment on January 8, 2010. Lexon filed its Motion for Summary Judgment on April 9, 2010. A hearing was held in Raleigh, North Carolina on April 16, 2010. The Motions are now ripe for ruling.

DISCUSSION

I. Lexon's Motion for Reconsideration

Lexon does not submit that any change has occurred in the relevant facts or controlling law in the time since this Court's prior Order denying Lexon's Motion to Stay, Motion for Joinder, and Motion Protective Order. Rather, Lexon requests that this Court reconsider the denial of Lexon's Motions Lexon first requests that this Court reconsider the prior ruling that the North Carolina Permit Extension Act does not extend the deadline for Lexon to either pay or complete performance. Lexon is correct to note that anticipatory repudiation by Town & Country by itself does not operate to hold Lexon in breach of the bonds. Indeed, in the mine run case, the anticipatory repudiation by the principal triggers the surety's obligation to either complete the principal's performance obligations or pay a sum set forth in the bond. But here, Lexon itself submits that performance of the underlying obligations secured by the bonds has been rendered impossible by the foreclosure sale of the Avalon of the Carolinas subdivision. For this reason, Lexon is not entitled to the Stay afforded by the Permit Extension Act. The Permit Extension Act states that "It is the purpose of this act to prevent the wholesale abandonment of already approved projects." As explained in this Court's prior Order, the purpose of the permit extension act would not be served by staying this matter. Rather, because Lexon submits that it can not complete performance, a stay of this matter would merely delay the date that payment inevitably becomes due. As such, the course most likely to prevent the wholesale abandonment of the project is to compel payment to the County.

Lexon also requests that this Court reconsider the prior ruling denying the joinder of the current owners of the Avalon of the Carolinas subdivision. Lexon is correct to note that the cooperation of the new owners would be required to complete these improvements because any unauthorized improvement to the land would constitute a trespass. But this fact alone does not grant Lexon any rights as against the new owners. Lexon's suggestion that the new owners owe any obligation to Lexon is unavailing. As explained in this Court's prior Order, the current owners were not parties to the bonds or the underlying Development Agreement. And the County's plat approval for the subdivision does not compel the current owners to allow Lexon to enter their property. As such, the joinder of the current owners would be futile because Lexon has no claim against the current owners that this Court could enforce. It should also be noted that the record reveals no attempt by Lexon to reach an accommodation with the current owners in order to complete performance.

Finally, Lexon requests that this Court reconsider its denial of Lexon's motion to implead Town & Country and James Bovino, the CEO of Town & Country. But as explained in this Court's prior Order, these are not necessary parties and their joinder would serve to add unnecessary delay and expense in this matter. Therefore, for the above stated reasons and the reasons set forth in this Court's prior Order, Lexon's Motion for Reconsideration is DENIED.

II. The Cross-Motions for Summary Judgment

A district court should grant summary judgment where there are no genuine issues of material fact for trial. Fed.R.Civ.P. 56(c); see Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The moving party has the initial burden of establishing the lack of a genuine issue as to any material fact, and if that burden is met, the party opposing the motion must "go beyond the pleadings" and come forward with evidence of a genuine factual dispute. Celotex, 477 U.S. at 324, 106 S.Ct. 2548. The court must view the facts and the inferences drawn from the facts in the light most favorable to the nonmoving party, Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587-88, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986), however, conclusory allegations andunsupported speculation are not sufficient to defeat a motion for summary judgment. Cf. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Felty v. Graves-Humphreys Co., 818 F.2d 1126, 1128 (4th Cir.1987). Rule 56(c) requires the court to enter summary judgment if the party opposing the motion "fails to make a showing sufficient to establish the existence of an element essential to that party's case and on which that party will bear the burden of proof at trial." Celotex, 477 U.S. at 322, 106 S.Ct. 2548.

Lexon's Motion for Summary Judgment argues that Lexon must be excused from any liability on the Bonds because the County materially altered the bonded risks by strategically waiting to declare a default until the foreclosure sale of the Avalon of the Carolinas subdivision. In support, Lexon cites St. Paul Fire & Marine Ins. Co. v. City of Green River, Wyo. 93 F.Supp.2d 1170 (D.Wyo.2000) and Hunt Construction Group, Inc. v. National Wrecking Corp., 542 F.Supp.2d 87 (D.D.C.2008) for the proposition that a surety is relieved of liability where the obligee deprives the surety of the option to complete the bonded performance.

In Hunt Construction, the District Court for the District of Columbia succinctly set forth the relevant facts and the Court's reasoning as follows:

Hunt sat on its hands and let NWC finish the excavation on its own. Hunt thereafter sat on its hands and failed to declare NWC in default until mid-summer 2004, when NWC was long-since off site. Hunt even then sat

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