Members Interior Const., Inc. v. Leader Const. Co., Inc.

• Decision Date: 15 October 1996
• Docket Number: No. COA95-1279,COA95-1279
• Citation: 476 S.E.2d 399,124 N.C.App. 121
• Court: North Carolina Court of Appeals
• Parties: MEMBERS INTERIOR CONSTRUCTION, INC., Plaintiff-Appellant, v. LEADER CONSTRUCTION COMPANY, INCORPORATED, Hartford Fire Insurance Company, Defendant-Appellee/Cross-Appellant.

Page 399

476 S.E.2d 399

124 N.C.App. 121

MEMBERS INTERIOR CONSTRUCTION, INC., Plaintiff-Appellant, v. LEADER CONSTRUCTION COMPANY, INCORPORATED, Hartford Fire Insurance Company, Defendant-Appellee/Cross-Appellant.

No. COA95-1279.

Court of Appeals of North Carolina.

Oct. 15, 1996.

Eisele & Ashburn, P.A. by Douglas G. Eisele, Statesville, for plaintiff-appellant.

Ogletree, Deakins, Nash, Smoak and Stewart, L.L.P. by C. Hamilton Jarrett and Robin

Adams Anderson, Raleigh, for defendant-appellee/cross-appellant.

MARK D. MARTIN, Judge.

On 10 March 1992 the Iredell-Statesville Board of Education (Board) executed a contract with Leader Construction (Leader) for the construction of East Iredell Middle School (project). On the same day Leader and Hartford Fire Insurance (Hartford) executed a labor and material payment bond (bond). On 2 June 1992 Leader subcontracted out a portion of the project to Members Interior Construction (Members). The original subcontract price was $225,000. Leader subsequently issued three change orders which increased the subcontract price to $271,075.

On 12 October 1993 Members filed a proof of claim with Hartford alleging Leader was $68,350 in arrears to Members. By letter dated 29 October 1993, Hartford contacted Leader regarding Members' claim. The 29 October letter stated, in pertinent part:

Hartford calls upon Leader ... to pay any undisputed amount to Members ... within 5 (five) days of the date of this letter. Should Leader contend that the entire amount claimed or any portion of it is disputed, Leader should provide sufficient documentation of the amount disputed by Leader to The Hartford within 5 (five) calendar days.

Leader's failure to pay any undisputed amount within five calendar days and/or Leader's failure to provide sufficient documentation to The Hartford of the amount disputed by Leader ... shall constitute an acknowledgement [by] Leader that the amount claimed is valid ... and authorization by Leader to The Hartford to pay the amount claimed.

On 1 December 1993 Members admitted overstating its arrearages by $1000 leaving an actual claim of $67,350. On the same day Hartford notified Members that only $16,845.75 of the claimed $67,350 was presently owed because certain work had not yet been accepted by the architect, the original contract was not entirely completed, and certain areas were improperly constructed. The 1 December letter also noted that further funds would be released after Hartford received "written certification from the architect that the three change orders are complete and acceptable and the additional work on the original contract is complete."

On 1 December 1993 Members instituted the present action alleging Leader's nonpayment breached the subcontract and Hartford was liable for Leader's debt under the bond. On 26 August 1994 Hartford offered Members $49,817.50 as payment of the undisputed portion of Leader's debt "without prejudice to Members' rights to further prosecute its claim against Hartford." On 11 May 1995 Hartford made an offer of judgment, pursuant to N.C.R. Civ. P. 68, for $64,000 plus allowable costs. Members rejected both settlement offers. On 31 May 1995 the trial court entered a jury verdict awarding Members $59,150 plus accrued interest of $3,599.15.

Noting the total award was less than the Rule 68 offer of judgment, the trial court further ordered that the $62,749.15 award "be subject to a set off in the amount of said defendant's costs incurred after making said Offer of Judgment as may be awarded by the Court and shall be subject to an award, if any, of said defendant's attorney's fees pursuant to N.C.G.S. § 44A-35." The trial court, by order filed 26 June 1995, subsequently denied Hartford's motion for costs and attorneys fees.

PLAINTIFF'S APPEAL

On appeal Members contends the trial court erred by: (1) denying Members' motion to amend its pleadings; (2) excluding testimony on whether Hartford reasonably investigated Members' claim; (3) dismissing Members' claim of Unfair and Deceptive Trade Practices, N.C. Gen.Stat. § 75-1, et seq.; (4) failing to calculate interest on the full amount of the verdict from 19 October 1993; and (5) signing an erroneous judgment.

I.

We first consider whether the trial court erred by denying Members' motion to amend its complaint at the close of its case-in-chief pursuant to N.C.R. Civ. P. 15(b), to allege a violation of N.C. Gen.Stat. § 58-63-15(11) (1994).

Motions to amend are governed by the provisions of N.C.R. Civ. P. 15. N.C. Gen.Stat. § 1A-1, Rule 15 (1990). Generally, Rule 15 is to be construed liberally to allow amendments where the defense will not be materially prejudiced. Mauney v. Morris, 316 N.C. 67, 72, 340 S.E.2d 397, 400 (1986). Nevertheless, a motion to amend is addressed to the sound discretion of the trial court and denial of such a motion will not be disturbed on appeal absent a clear showing the trial court abused its discretion. North River Ins. Co. v. Young, 117 N.C.App. 663, 670, 453 S.E.2d 205, 210 (1995). Reasons justifying denial of a motion to amend include (a) undue delay, (b) undue prejudice, and (c) futility of amendment. Martin v. Hare, 78 N.C.App. 358, 361, 337 S.E.2d 632, 634 (1985).

When, as here, evidence is introduced without objection, a Rule 15(b) motion should be granted only if the parties understand the evidence is aimed at an issue not expressly pleaded. See J.M. Westall & Co. v. Windswept View of Asheville, 97 N.C.App. 71, 76, 387 S.E.2d 67, 69-70, disc. review denied, 327 N.C. 139, 394 S.E.2d 175 (1990). Where the evidence which supports an unpleaded issue also tends to support an issue properly raised by the pleadings, however, failure to object does not amount to implied consent to try the unpleaded issue. Tyson v. Ciba-Geigy Corp., 82 N.C.App. 626, 630, 347 S.E.2d 473, 476 (1986).

In the present case, Members moved to amend its complaint, pursuant to Rule 15(b), to state a claim for violation of section 58-63-15(11). Members argues the trial court erred by denying this motion because Hartford understood, and consented to, Members developing its section 58-63-15(11) claim. Specifically, Members contends Hartford understood Members was adducing evidence to support its section 58-63-15(11) claim because Members filed a written motion to amend its complaint alleging a violation of that section prior to trial.

Because Members failed to cause its pre-trial motion to amend to be heard, however, Hartford could have justifiably concluded Members abandoned this issue. Further, the allegedly extraneous evidence introduced by Members at trial also supports operational facts alleged in Members' complaint. It follows, therefore, that we cannot say Hartford understood the alleged extraneous evidence was aimed at establishing a violation of section 58-63-15(11) rather than proving an issue actually raised by the pleadings. Accordingly, under J.M. Westall & Co. and Tyson, we conclude the trial court did not err in denying Members' Rule 15(b) motion.

II.

We next consider Members' allegation the trial court erred by failing to award interest on the full amount of the verdict from 19 October 1993.

In breach of contract actions, N.C. Gen.Stat. § 24-5 authorizes the award of pre-judgment interest on damages from the date of the breach at the contract rate, or the legal rate if the parties have not agreed upon an interest rate. N.C. Gen.Stat. § 24-5 (1991). See also N.C. Gen.Stat. § 24-1 (1991) (legal rate is eight percent). " 'Interest is the compensation allowed by law, or fixed by the parties, for the use, or forbearance, or detention of money.' " Thompson-Arthur Paving Co. v. Lincoln Battleground Assoc., 95 N.C.App. 270, 282, 382 S.E.2d 817, 824 (1989) (quoting Parker v. Lippard, 87 N.C.App. 43, 49, 359 S.E.2d 492, 496, modified in part on reh'g, 87 N.C.App. 487, 361 S.E.2d 395 (1987)). See also Craftique, Inc. v. Stevens and Co., Inc., 321 N.C. 564, 568, 364 S.E.2d 129, 132 (1988) (interest compensates recovering party "for retention of the principal of the debt"). Put simply, "interest ... means compensation allowed by law as additional damages for the lost use of money during the time between the accrual of the claim and the date of the judgment." 22 AM.JUR.2D Damages § 648 (1988) (emphasis added). See also Baxley v. Nationwide Mutual Ins. Co., 334 N.C. 1, 9, 430 S.E.2d 895, 900 (1993); Ledford v. Nationwide Mut. Ins. Co., 118 N.C.App. 44, 49-50, 453 S.E.2d 866, 868-869 (1995).

Although the accrual of interest is tolled when defendant makes a "valid tender of payment for the full amount [of plaintiff's claim], plus interest to date," Thompson-Arthur Paving Co., 95 N.C.App. at 282, 382 S.E.2d at 824, we recognize Hartford's unconditional payment offers are, by definition, not tender offers as tender offers are made in full and final settlement of a claim, see id., Ingold v. Phoenix Assurance Co., 230 N.C. 142, 147-148, 52 S.E.2d 366, 369-370 (1949). Rather, the instant situation presents the novel issue of whether interest should be tolled when a defendant offers to pay the aggrieved party undisputed portions of the alleged debt without prejudice to the aggrieved party's rights to further prosecute its claim against the defendant.

The trial court, here, awarded Members $59,150.00 in damages, plus accrued interest of $3,599.15, for a total judgment of $62,749.15. In calculating the accrued interest, the trial court followed Hartford's proposed computation method by decreasing the amount of principal being taxed with interest on 1 December 1993 and again on 26 August 1994 to account for the unconditional payment offers made by Hartford on those dates--$16,845.75 on 1 December 1993; and $49,817.50 on 26 August 1994.

Hartford contends the trial court's interest computation is proper because it is unreasonable to refuse unconditional payment offers. Further, Hartford maintains that reversing the trial court's interest award would remove any...