Terry's Floor Fashions v. Crown General, COA06-738.

Decision Date19 June 2007
Docket NumberNo. COA06-738.,COA06-738.
Citation645 S.E.2d 810
CourtNorth Carolina Court of Appeals
PartiesTERRY'S FLOOR FASHIONS, INC., Plaintiff, v. CROWN GENERAL CONTRACTORS, INC and Jerry Shumate Alvis, Defendants.

Ragsdale Liggett PLLC, by Walter L. Tippett, Jr. and Caroline Barbee, Raleigh, for plaintiff-appellee.

Young Moore and Henderson, P.A., by David M. Duke and Shannon S. Frankel, Raleigh, for defendant-appellant.

STROUD, Judge.

This case concerns enforcement of a subcontractor's subrogation lien on real property. The dispositive questions before this Court are (1) whether the trial court's finding that the property owner owed a gross payment deficiency to the general contractor was supported by competent evidence; (2) whether the trial court's entry of judgment against the property owner in favor of the subcontractor pursuant to N.C. Gen.Stat. § 1A-1, Rule 52(a) (2005) following a bench trial is inconsistent with the trial court's entry of default judgment against the general contractor in favor of the property owner; and (3) whether the trial court abused its discretion by awarding the subcontractor $17,000.00 in attorneys' fees based upon a finding that the property owner "unreasonably refused to fully resolve the matter" out of court. We conclude that the trial court's findings of fact are supported by competent evidence, that the Rule 52(a) and default judgments are not inconsistent with one another, and that the trial court did not abuse its discretion by awarding attorneys fees. Accordingly, we affirm the trial court's entry of judgment against the property owner.

I. Background

On or about 25 July 2002, defendant property owner Jerry Shumate Alvis [defendant Alvis] contracted with defendant general contractor Crown General Contractors, Inc. [defendant Crown] to complete an "interior [f]it-up" of an office suite owned by defendant Alvis for use as a dental office [hereinafter Prime Contract]. The Prime Contract price was $195,296.00, which was to be paid by defendant Alvis in monthly installments upon certification of defendant Crown's progress by project architect Dick Tilley, who worked for Millennium Architecture, P.A., and who "administer[ed] the construction phase of the [fit-up] as a representative for [defendant] Alvis." The Prime Contract provided that the "[f]it-up" would be substantially completed within one hundred calendar days of commencement of the project, and expressly stated that "[t]ime is of the essence."

On 22 August 2002, defendant Crown contracted with plaintiff subcontractor Terry's Floor Fashions, Inc. to install flooring and baseboard moldings in the dental office [hereinafter Subcontract]. The original Subcontract price for materials and installation was $4,765.00; however, defendant Crown later approved change orders that increased the contract price to $7,921.00.

On 3 September 2002, defendant Crown sent a letter to defendant Alvis describing several structural problems with the office suite, including water ponding under the building slab and lack of drainage grading to move water away from the building. In the letter, defendant Crown proposed ideas to correct the problem and requested "a quick response to our joint problem" from defendant Alvis. On 1 November 2002, defendant Crown sent a second letter to defendant Alvis concerning "[r]e-occuring moisture problems at new Duraleigh office" for the purpose of "document[ing] the situation and mak[ing] all parties aware."

On 5 November 2002, the substantial completion deadline under the Prime Contract, defendant Crown sent a third letter to defendant Alvis stating that it was unable to complete the project on time, "[d]ue to previously documented un-answered issues." The letter further provided that defendant Crown would "be able to produce a schedule for completion after the floor moisture issue is addressed."

On 19 November 2002, defendant Crown sent a letter to Tilley discussing the floor moisture issue and requesting defendant Alvis' decision as to how defendant Crown should proceed. The letter provided:

Enclosed please find a letter from Terry's Floor Fashions regarding the moisture problem in the slab at this job site. There is no solution within [Terry's] letter and Crown has no solution either. The building moisture problem was a pre-existing condition and the choice of how to deal with this is solely up to . . . Dr. Alvis or his advisors. If the building developer cannot remedy the moisture problem the only remaining choice would be to consider the next best way of dealing with this. The suggestions shown in the attached letter could be considered a last resort. Crown will not warrant the flooring unless . . . [Terry's] is willing to warrant it.

The attached letter from plaintiff to defendant Crown stated that plaintiff would "not warrant any product glued directly to the substrate per manufacturer requirements" due to "off the scale" moisture readings in the concrete pad and would install the flooring only "if warranty is voided and signed by the owner." Thereafter, Tilley contacted the developer of the office suite who installed a concealed drain with inlets into the concrete pad. The developer also re-graded the lot and "waterproofed" the building's exterior. Subsequent moisture testing completed by an independent contractor at defendant Alvis' request resulted in an acceptable moisture reading. Upon receiving notice of the normal moisture reading, plaintiff installed the flooring.1

Plaintiff completed the flooring installation on or about 12 December 2002. Shortly thereafter, defendant Crown advised Tilley that it would not be able to complete the project. At that time, defendant Alvis had paid $172,094.00 pursuant to four previous payment applications certified by Tilley. On 30 December 2002, Tilley certified defendant Crown's fifth payment application for $10,752.00, which showed that defendant Crown had substantially completed all work under the Prime Contract except installation of appliances. The payment application also listed the balance of the contract price as $12,450.00, which included a $2,827.00 allowance for appliances and $9,623.00 for retainage.

Defendant Alvis never remitted the fifth payment. Instead, defendant Alvis, through Tilley, sought a sixth and final payment application from defendant Crown, showing a $0.00 balance. Notes made by Tilley following a meeting between himself and Robert O. Mitchell, who was defendant Crown's president, state, "If Apps. are zeroed out as Bal. Due = 0.00, no liens can be filed against client." (Emphasis added.)

Immediately thereafter, defendant Crown sent a letter to Tilley. The letter stated that defendant Crown had been "paid in full for all services rendered" as of the letter date, 14 January 2003. It further stated,

[w]e will not be able to complete the project unless you are willing to pay the subs and suppliers directly for the remainder of the project. We will stay on record as your General Contractor and provide all necessary supervisory and project management support as required by yourself to complete the job.

The project architect forwarded defendant Crown's letter to defendant Alvis, but included a notation that defendant Crown "has not sent a Final [Payment] Application showing a $0.00 balance as he indicated he would."

Neither defendant Crown nor defendant Alvis has paid plaintiff for the flooring installation; however, defendant Alvis opened a dental practice in the office on 23 December 2002, seven days before Tilley certified defendant Crown's fifth payment application for work completed as of 24 December 2002. On 1 April 2003, plaintiff filed a subcontractor's lien on defendant Alvis' dental office in the amount of $7,921.00 (the Subcontract price) pursuant to Chapter 44A of the North Carolina General Statutes, claiming "a right of subrogation to the lien held by the general contractor [defendant Crown] on the real property."2

On 6 June 2003, plaintiff filed a civil action in District Court, Wake County pursuant to N.C. Gen.Stat. § 44A-13 to enforce the lien. In its verified complaint plaintiff also alleged claims against defendant Crown for breach of contract, against defendant Alvis for unfair and deceptive trade practices, and against both defendants for quantum meruit. Finally, plaintiff sought recovery of attorneys fees pursuant to N.C. Gen.Stat. § 44A-35, alleging that defendant Alvis "unreasonably refused to fully resolve the matters which constitute the basis of the Lien part of this Complaint."

Defendant Alvis filed an answer, motion, counterclaim, and cross-claim on 8 August 2003. As an initial matter, defendant Alvis alleged that the counterclaims and cross-claims stated in his pleading raised the amount in controversy beyond $10,000.00; thus, defendant Alvis moved that the dispute be transferred to superior court. This motion was subsequently denied by Superior Court Judge Narley L. Cashwell on 27 October 2003. Defendant Alvis then asserted two counterclaims against plaintiff for negligence and breach of contract and also asserted cross-claims against defendant Crown.

Defendant Crown did not answer either plaintiff's complaint or defendant Alvis' cross-claims. On 22 August 2003, plaintiff moved for entry of default against defendant Crown, which the Clerk of Court issued that same day. On or about 17 October 2003, Judge Jane P. Gray entered the default judgment against defendant Crown in the amount of $7,921.00 plus costs, interest, and reasonable attorneys fees.

Plaintiff filed a reply to defendant Alvis' counterclaims on 7 October 2003, denying the allegations contained therein and affirmatively raising six defenses: absence of consideration, breach of contract, unclean...

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