FRIZZELL CONST. CO. v. FIRST CITIZENS BANK & TRUST, CO., 89-369-CIV-5-BR.

• Decision Date: 12 February 1991
• Docket Number: No. 89-369-CIV-5-BR.,89-369-CIV-5-BR.
• Citation: 759 F. Supp. 286
• Parties: FRIZZELL CONSTRUCTION COMPANY, INC., Plaintiff, v. FIRST CITIZENS BANK & TRUST COMPANY, as Trustee under an Indenture of Mortgage and Deed of Trust dated November 1, 1984, Defendant and Third-Party Plaintiff, v. HERITAGE LIVING CENTERS, INC.; Charles F. Blackburn; Robert J. Blackburn; George T. Blackburn; Joanne J. Randall; C. Donald Stone; J.R. Randall; Robert M. Buchanan, Jr., Lyle D. Knirk, Third-Party Defendants.
• Court: U.S. District Court — Eastern District of North Carolina

759 F. Supp. 286

FRIZZELL CONSTRUCTION COMPANY, INC., Plaintiff,
v.
FIRST CITIZENS BANK & TRUST COMPANY, as Trustee under an Indenture of Mortgage and Deed of Trust dated November 1, 1984, Defendant and Third-Party Plaintiff,
v.
HERITAGE LIVING CENTERS, INC.; Charles F. Blackburn; Robert J. Blackburn; George T. Blackburn; Joanne J. Randall; C. Donald Stone; J.R. Randall; Robert M. Buchanan, Jr., Lyle D. Knirk, Third-Party Defendants.

No. 89-369-CIV-5-BR.

United States District Court, E.D. North Carolina, Raleigh Division.

February 12, 1991.

759 F. Supp. 287

J. Anthony Penry, Petree, Stockton & Robinson, Raleigh, N.C., for Frizzel Const. Co.

David William Long, Raleigh, N.C., for First Citizens Bank & Trust.

George Templeton Blackburn, II, Henderson, N.C., pro se and for third party defendants.

ORDER

BRITT, District Judge.

This matter is before the court on numerous post-trial motions. Plaintiff moves the court for judgment notwithstanding the verdict (JNOV) pursuant to Rule 50(b) of the Federal Rules of Civil Procedure on the issue of breach of contract. Defendant moves for JNOV on the issue of breach of

759 F. Supp. 288

fiduciary duty or in the alternative a new trial pursuant to Rule 59(a) of the Federal Rules of Civil Procedure. The defendant also moves in the alternative for a new trial or a remittitur on the basis that the damages awarded to plaintiff are excessive. The third-party defendants make the same motions as defendant. In addition to these motions, the court will also consider defendant's objection to the bill of costs filed by plaintiff. The motions have been fully briefed and are now ripe for ruling

I. FACTS

The trial of this case began on 11 September 1990 in Raleigh, North Carolina and the jury returned its verdict on 14 September 1990. The evidence adduced at trial tended to show as follows: On 4 December 1984, plaintiff Frizzell Construction Company, Inc. (hereafter "Frizzell") entered into a construction contract with Berne Retirement Village Limited Partnership (hereafter "the partnership") for the construction of Berne Retirement Village (hereafter "the project"), a living facility for the elderly in New Bern, North Carolina. Heritage Living Centers, Inc., a third-party defendant, is the general partner of the partnership. The partnership leased land on which to construct the project from New Bern Health Development Corporation (hereafter "the corporation"), a corporation formed for the purpose of owning the land which was leased to the partnership.

Bonds were issued to raise money for the project. In accordance with the terms of the Indenture of Mortgage (hereafter "Indenture"), proceeds from the sale of bonds were placed in trust with defendant First Citizens Bank and Trust Company (hereafter "First Citizens"). First Citizens is the trustee under the Indenture and Deed of Trust dated 1 November 1984 by and between the corporation as issuer of the bond and First Citizens as trustee. Pursuant to the express requirements of the Indenture, First Citizens created six trust accounts into which it credited the bond proceeds. One of the trust accounts known as the Project Fund contained money to be used for the actual construction of the project. The Indenture provided that money could not be finally disbursed from the Project Fund until First Citizens received a certificate of completion from the project architect. The certificate of completion would constitute a certification by the architect that the project was complete and that there existed no further claims or liens or other costs that might be payable from the Project Fund.

The contract between Frizzell and the partnership for construction of the project included a provision stating that the partnership agreed to furnish a letter from the lender for a commitment of funds. To comply with the condition in the contract, First Citizens provided Frizzell with a letter dated 10 December 1984 which provides:

We have the funds on hand committed to Berne Retirement Village Limited Partnership for the construction of Berne Retirement Village at the above location. The commitment includes funds to cover your contract dated December 3, 1984, in the amount of $3,598,000.00 with Berne Retirement Village Limited Partnership.

On 16 April 1986, the project architect submitted to Willard Simms, the First Citizens employee in charge of the trust, a certificate of "substantial" completion which had attached approximately ten pages of punch list items. On 7 July 1986, after consulting with Charles Blackburn, counsel for the partnership and also a limited partner, Simms transferred $216,260.96 from the Project Fund to the Debt Service Reserve Fund. The amount transferred represented the total in excess of the $269,978 of approved requisitions and change orders payable to Frizzell.

During the course of construction, a dispute arose between Frizzell and the partnership regarding the completion of the work, the quality of the work, and the amount due Frizzell for the construction including change orders. On 30 May 1986, Frizzell wrote Charles Blackburn a letter and advised him that a mechanics' lien was being filed against the...