Hsi v. Diversified Fire

• Citation: 611 S.E.2d 224
• Decision Date: 19 April 2005
• Docket Number: No. COA04-678.,COA04-678.
• Court: United States State Supreme Court of North Carolina
• Parties: HSI NORTH CAROLINA, LLC, d/b/a Hughes Supply, Inc., Plaintiff, v. DIVERSIFIED FIRE PROTECTION OF WILMINGTON, INC., John W. Wheeler, III, N.C. Monroe Construction Company, and Travelers Casualty & Surety Company of America, Defendants.

Page 224

611 S.E.2d 224

HSI NORTH CAROLINA, LLC, d/b/a Hughes Supply, Inc., Plaintiff, v. DIVERSIFIED FIRE PROTECTION OF WILMINGTON, INC., John W. Wheeler, III, N.C. Monroe Construction Company, and Travelers Casualty & Surety Company of America, Defendants.

No. COA04-678.

Court of Appeals of North Carolina.

April 19, 2005.

Appeal by defendants N.C. Monroe Construction Company and Travelers Casualty & Surety Company of America from an order entered 15 December 2003 by Judge Jay D. Hockenbury in New Hanover County Superior Court. Heard in the Court of Appeals 27 January 2005.

Vann & Sheridan, L.L.P., by James W. Sprouse, Jr. and James R. Vann, Raleigh, for plaintiff-appellee.

Brooks, Pierce, McLendon, Humphrey & Leonard, L.L.P., by Michael D. Meeker, Clinton R. Pinyan, and Caroline R. Heil, Greensboro, for defendant-appellants N.C. Monroe Construction Company and Travelers Casualty & Surety Company of America.

HUNTER, Judge.

N.C. Monroe Construction Company ("defendant-Monroe"), Travelers Casualty & Surety Company of America ("defendant-Travelers"), and Diversified Fire Protection of Wilmington, Inc. ("defendant-Diversified") appeal from an order entered 15 December 2003 granting summary judgment to HSI North Carolina, LLC ("plaintiff") and denying summary judgment to defendants.

The issues in this case are whether the trial court erred in: (1) granting summary judgment to plaintiff and denying summary judgment to defendants as a matter of law, (2) finding plaintiff was entitled as a matter of law to the awarded damages, (3) failing to find plaintiff's claim was barred by equitable estoppel, (4) rejecting defendants' defense of accord and satisfaction, and (5) denying defendants' motion for continuance. As we find no error, we affirm the trial court's decision.

On 10 June 2001, defendant-Monroe entered into a prime contract with the North Carolina State Ports Authority for the Transit Shed T-6 Expansion Project ("Port Project"). The Port Project was bonded, as required by N.C. Gen.Stat. § 44A-26 (2003), by defendant-Travelers. Defendant-Monroe subcontracted with defendant-Diversified to install a fire protection system for the Port Project. Defendant-Diversified assigned the project to another corporation also owned by the owner of defendant-Diversified ("Wilmington"), for performance of the fire protection installation. Wilmington, after approval of a credit application, purchased materials needed for the project from plaintiff beginning 4 September 2001 and continuing until 10 January 2002. Plaintiff was not paid by Wilmington for the materials. On 15 March 2002, within 120 days of last furnishing materials, plaintiff gave written notice to defendant-Monroe of the payment bond claim as required by N.C. Gen.Stat. § 44A-27(b) (2003).

Plaintiff brought suit against defendants to recover payment for materials used in the Port Project. After a period of discovery, both parties moved for summary judgment. On 15 December 2003, the trial court granted summary judgment in plaintiff's favor, awarded damages in the amount of $91,676.09 plus interest, and denied defendants' motion for summary judgment. Defendants appeal from this order.

I.

Defendants first contend the trial court erred in granting summary judgment to plaintiff and denying summary judgment to defendants as a matter of law. Defendants argue the definition of subcontractor in N.C. Gen.Stat. § 44A-25(6) (2003), which governs the relevant act, does not encompass a second-tier subcontractor, and therefore plaintiff, who contracted with a second-tier subcontractor, has no claim under the statute.

N.C. Gen.Stat. §§ 44A-25-35 (2003) control payment and performance bonds for state construction contracts. For the purposes of this Act, commonly known as the Little Miller Act, the term subcontractor is defined in § 44A-25(6) as "any person who has contracted to furnish labor or materials to, or who has performed labor for, a contractor or another subcontractor in connection with a construction contract." Id. Under § 44A-27(b), the statute specifies that:

Any claimant who has a direct contractual relationship with any subcontractor but has no contractual relationship, express or implied, with the contractor may bring an action on the payment bond only if he has given written notice to the contractor within 120 days from the date on which the claimant performed the last of the labor or furnished the last of the materials for which he claims payment[.]

Id.

Our Supreme Court has held that:

"In resolving issues of statutory construction, we look first to the language of the statute itself." It is a well-established rule of statutory construction that " `[w]here the language of a statute is clear and unambiguous, there is no room for judicial construction[,] and the courts must give [the statute] its plain and definite meaning, and are without power to interpolate, or superimpose, provisions and limitations not contained therein.'"

Walker v. Bd. of Trustees of the N.C. Local Gov't. Emp. Ret. Sys., 348 N.C. 63, 65-66, 499 S.E.2d 429, 430-31 (1998) (citations omitted). Here, the language is clear and unambiguous. The legislature has specifically defined the term in question, subcontractor, to include both individuals who have contracted to provide materials directly to the contractor, as well as those who have contracted with subcontractors, sometimes referred to as first- and second-tier subcontractors, under the construction contract. The language of § 44A-27, further, specifically provides that a claimant who has a direct contractual relationship with any subcontractor may bring an action on the payment bond. Id. By its plain language, therefore, the statutory definition includes first and second-tier subcontractors to the construction contract.

Here, plaintiff contracted to furnish materials to Wilmington, a second-tier subcontractor, who had subcontracted with defendant-Diversified, a first-tier subcontractor, to install the fire protection system under defendant-Diversified's contract with defendant-Monroe, the prime contractor. Under the statutory definition in § 44A-25(6), defendant-Diversified qualifies as a subcontractor, that is a party who had contracted to perform labor for a contractor, defendant-Monroe, in connection with a construction contract. Likewise, Wilmington also qualifies as a subcontractor, that is a party who had contracted to perform labor for a subcontractor, defendant-Diversified, in connection with a construction contract.¹ Plaintiff, therefore, under the plain language of the statute, is a claimant with a direct contractual relationship with a subcontractor, but with no contractual relationship, express or implied, with the contractor. Thus, under the terms of § 44A-27(b), plaintiff is entitled to bring an action on the payment bond if notice to the contractor is given within the requisite 120 days.

Defendants contend that as our courts have not previously interpreted this provision of the Little Miller Act, federal precedent must control. Such is not the case. Our courts have previously noted that guidance can be obtained from federal interpretations of the Miller Act, on which our corresponding state act is modeled, but have not held such interpretations to be binding. Syro Steel Co. v. Hubbell Highway Signs, Inc., 108 N.C.App. 529, 534, 424 S.E.2d 208, 211 (1993). Further, in this case, such federal precedent would be of no use. Unlike the federal Miller Act, which provides no definition of subcontractor, Clifford F. MacEvoy Co. v. United States, 322 U.S. 102, 108, 64 S.Ct. 890, 88 L.Ed. 1163, 1168 (1944), as noted supra, our state statute specifically defines subcontractor in the context of the statute. N.C. Gen.Stat. § 44A-25(6).

As plaintiff has a statutory right to seek payment from defendants under N.C. Gen.Stat. § 44A-27, we therefore find the trial court did not err in denying defendants' motion for summary judgment as a matter of law.

II.

In related assignments of error, defendants contend that the trial court erred in failing to find that estoppel barred plaintiff's claim for both failure to mitigate damages and falsification of information, and that, therefore, the trial court erred in finding plaintiff was entitled as a matter of law to the awarded damages. We disagree.

Defendants first argue plaintiff had a duty to mitigate damages, and that in failing to notify defendant-Monroe immediately as to Wilmington's failure to pay, plaintiff is barred from recovery of the unpaid debt.

As our courts have not yet addressed the issue of whether a claimant under a payment bond has a duty to mitigate damages through notification prior to the statutory requirements of § 44A-27, we look to interpretations of the parallel federal statute for guidance. See McClure Estimating Co. v. H.G. Reynolds Co., 136 N.C.App. 176, 181, 523 S.E.2d 144, 147 (1999). In United States v. Greene Electrical Serv. of Long Island, Inc., 379 F.2d 207, 210 (2d Cir.1967), similar to the facts of the instant case, the plaintiff supplied materials to a subcontractor, who had falsified proof of payment to the contractor under a government contract. Id. The plaintiff timely notified the contractor of its claim as required by statute. Id. The defendant alleged that the plaintiff was estopped from collecting the debt due to its failure to notify the defendant of the lack of payment from the subcontractor when the issue had first arisen. Id. The Greene Court held that to estop the plaintiff "under these circumstances from asserting its claim for payment would destroy the effectiveness of the statutory scheme by imposing an additional, judicially-created requirement on claimants." Greene, 379 F.2d at 210.

Such an argument is persuasive to this Court. Our legislature has instituted specific time limitations for notification to provide certainty for all parties as to claims for payments upon a payment bond. To require other, less definite...