{
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  "name": "CITY OF STATESVILLE, NORTH CAROLINA v. GILBERT ENGINEERING CO.",
  "name_abbreviation": "City of Statesville v. Gilbert Engineering Co.",
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    "judges": [
      "Judges Wells and Johnson concur."
    ],
    "parties": [
      "CITY OF STATESVILLE, NORTH CAROLINA v. GILBERT ENGINEERING CO."
    ],
    "opinions": [
      {
        "text": "BECTON, Judge.\nThis is an appeal pursuant to N.C. Gen. Stat. \u00a7 1-567.18 (1983) from an order granting plaintiffs motion to stay arbitration. We hold that the trial court correctly determined that regulations requiring mandatory arbitration did not apply, and we affirm.\nI\nPlaintiff, the City of Statesville (Statesville), obtained a grant in June 1976 from the United States Environmental Protection Agency (EPA) to construct improvements at a wastewater treatment plant. Statesville hired Peirson & Whitman, Inc. (P&W), a consulting firm, to prepare the extensive bid documents. EPA had promulgated regulations governing the content of the bid documents. 40 Fed. Reg. 58,602 et seq. (1975) (codified at 40 C.F.R. \u00a7 35.936 et seq. (1976)). One provision thereof, 40 C.F.R. \u00a7 35.938-4 (c)(6) (1976), required that EPA grantees physically include in their bid documents these governing regulations, 40 C.F.R. \u00a7\u00a7 35.936, 35.938, 35.939 (1976). At the time of the grant, a provision of these governing regulations, 40 C.F.R. \u00a7 35-938-8(a) (1976) provided that: \u201cEach construction contract must include the [federal] \u2018General Conditions\u2019 of the \u2018Contract Documents for Construction of Federally Assisted Water and Sewer Projects,\u2019 as revised\u201d (the federal \u201cGeneral Conditions\u201d). On 20 September 1976 EPA issued a \u201cclass deviation,\u201d an administrative variance which allowed optional inclusion of the federal \u201cGeneral Conditions.\u201d An EPA final rule dated 29 December 1976 and effective 1 February 1977 codified the option in a revised 40 C.F.R. \u00a7 35.938-8, by deleting 40 C.F.R. \u00a7 35.938-8(a) (1976), the mandatory inclusion provision. 41 Fed. Reg. 56,636 (1976) (codified at 40 C.F.R. \u00a7 35.938-8 (1977)). P&W had worked on federal contracts and preferred its own general conditions which allowed arbitration, if mutually acceptable, but contained no mandatory arbitration clause. P&W included its general provisions in the bid document, which later became the contract itself.\nBids opened in March 1977, and in July 1977 defendant Gilbert Engineering Co. (Gilbert) entered into a contract with Statesville. The contract document included the P&W conditions and the required regulations, but 40 C.F.R. \u00a7 35.938-8 appeared in its unrevised form, with the language requiring inclusion of the federal \u201cGeneral Conditions.\u201d Disputes arose almost immediately regarding extensions of time due to weather delays. Gilbert completed the work in 1981. In October 1982 Gilbert demanded arbitration of the still unresolved disputes. From the grant of Statesville\u2019s motion to stay arbitration, Gilbert appeals.\nThe trial court sat as the finder of fact and made extensive findings of fact and conclusions of law. The findings are binding on appeal if supported by the evidence, even though there may be evidence to the contrary; conclusions of law are, however, reviewable de novo on appeal. Humphries v. City of Jacksonville, 300 N.C. 186, 265 S.E. 2d 189 (1980).\nIt is clear that Statesville had the option to include its own general conditions. The class deviation, in September 1976, provided that the inclusion of the federal \u201cGeneral Conditions\u201d would be optional, at minimum, in contracts which had not already \u201cgone to bid.\u201d It is undisputed that the EPA final rule, effective 1 February 1977, codified the option and that the project did not go to bid until March 1977.\nII\nDid Statesville exercise its option? Although the federal regulations governing these contracts are lengthy, they did not direct how to exercise the option not to include the federal \u201cGeneral Conditions.\u201d Absent a stated procedure, the ordinary rules of contract formation apply.\nStatesville\u2019s evidence showed that in a telephone conversation in late 1976, P&W notified the responsible EPA officials of Statesville\u2019s election to include its own general conditions. Moreover, the contract received EPA approval (there is no evidence of disapproval, and EPA apparently paid out the grant money), although the contract contains some forty pages of P&W\u2019s conditions. However, the unrevised version of 40 C.F.R. \u00a7 35.938:8, which required inclusion of the federal \u201cGeneral Conditions,\u201d had not been scratched out or changed by addendum. Either method would have been an acceptable way to indicate an election, according to testimony by an EPA grants specialist. We note, however, that the regulation which required inclusion of the EPA governing regulations, 40 C.F.R. \u00a7 35.938-4(c) (1976), does not allow on its face the non-inclusion of any of its separate provisions in the event of administrative amendments such as the class deviation. The provision in question requires the inclusion, not the incorporation by reference, of the federal \u201cGeneral Conditions.\u201d 40 C.F.R. \u00a7 35.938-8(a) (1976). Under the circumstances, this means physical inclusion, since the regulations themselves were already incorporated by reference elsewhere, 40 C.F.R. \u00a7 35.938-4(c)(5) (1976), with a separate requirement that they be \u201cincluded.\u201d 40 C.F.R. \u00a7 35.938-4(c)(6) (1976). Since the contract does not physically include the federal \u201cGeneral Conditions,\u201d the trial court could find that Statesville had properly opted to use its own conditions, and that the federal \u201cGeneral Conditions\u201d therefore were not part of the contract. Humphries v. City of Jacksonville.\nIII\nGilbert\u2019s own conduct clearly demonstrates its understanding that the federal \u201cGeneral Conditions\u201d are not applicable. Gilbert admitted reviewing the entire contract, including the P&W conditions. In a letter to Statesville dated December 1977, Gilbert relied exclusively on the provisions of the P&W conditions, when seeking an extension of contract time. In a letter dated August 1979, seeking an adjustment of the contract price, Gilbert relied instead on the federal \u201cSupplemental General Conditions,\u201d 41 Fed. Reg. 56,638 (1976) (codified at 40 C.F.R. \u00a7 35 Subpart E, App. C-2 (1977)), which were indeed a mandatory provision of the construction contract. See 40 C.F.R. \u00a7 35.938-8 (1977). The first evidence that Gilbert considered the federal \u201cGeneral Conditions\u201d applicable, other than Gilbert\u2019s oral testimony as to its subjective impressions, is the demand for arbitration filed late in 1982, over five years after the contract had been executed. It remains a fundamental principle of contract interpretation that the practical interpretation given a contract by the parties constitutes the best evidence of its meaning. See Peaseley v. Virginia Iron, Coal & Coke Co., 282 N.C. 585, 194 S.E. 2d 133 (1974). Gilbert\u2019s own conduct provided solid evidentiary support for the court\u2019s order.\nWe therefore conclude that the trial court properly found that the contract included the P&W conditions.\nIV\nGilbert next contends that under Statesville\u2019s own conditions the federal \u201cGeneral Conditions\u201d control whenever there is a conflict. We disagree.\nGilbert relies on the following language from the P&W Supplemental General Conditions: \u201cIn the event of conflict with other requirements of the Contract Documents, the following provisions must be complied with. . . .\u201d The 1976 unrevised version of 40 C.F.R. \u00a7 35.938-8, which required inclusion of the federal \u201cGeneral Conditions,\u201d is among the \u201cfollowing provisions\u201d of the P&W Supplemental General Conditions. As in part II, supra, in which we concluded that Statesville properly opted to substitute its own conditions for the federal \u201cGeneral Conditions\u201d by not physically including the federal \u201cGeneral Conditions\u201d in the contract, the physical inclusion of the federal \u201cGeneral Conditions\u201d would have been a prerequisite to Gilbert\u2019s success on this argument.\nV\nAssuming, arguendo, that Gilbert\u2019s interpretation of the P&W Supplemental Conditions in part IV, supra, were correct, it still renders Gilbert little aid. An elementary rule of contract interpretation is the law in force at the time the contract is executed controls. Town of Scotland Neck v. Western Sur. Co., 301 N.C. 331, 271 S.E. 2d 501 (1980). Gilbert relies on 40 C.F.R. \u00a7 35.938-8(b) (1976), which provides: \u201ceach construction contract must include the [federal] \u2018Supplemental General Conditions\u2019 set forth in Appendix C-2 to this subpart.\u201d The relevant amended version of Appendix C-2 was adopted effective 1 February 1977, before bidding opened. 41 Fed. Reg. 56,638 (codified at 40 C.F.R. \u00a7 35 Subpart E, App. C-2 (1977)). The preamble to Appendix C-2 expressly states that \u201c[i]n case of any conflict between the standard [federal] \u2018General Conditions,\u2019 if elected to be used by a grantee, and Appendix C-2, Appendix C-2 provisions govern.\u201d 41 Fed. Reg. 56,635. Pursuant to Appendix C-2, arbitration is voluntary; the parties must \u201cmutually agree\u201d to arbitrate. 40 C.F.R. \u00a7 35 Subpart E, App. C-2 cl. 7. This conflicts directly with the mandatory arbitration provision in federal \u201cGeneral Conditions\u201d and, therefore, the Appendix C-2 voluntary arbitration provision would govern. Gilbert attempts to circumvent this result by arguing that Statesville is bound by the law in force in July, 1976, at the time of the EPA grant. There is no authority for such a rule; to the contrary, the regulations themselves clearly differentiate the EPA grant agreements with the municipalities from the contracts the municipalities enter into with private firms. See 40 C.F.R. \u00a7 35.936-1 (1976). We are persuaded that the law in force at the time Gilbert executed the contract, not at the time of the original grant, controls.\nVI\nWe therefore conclude that the evidence supports the findings of fact, and the findings support the conclusions of law. The order appealed from is\nAffirmed.\nJudges Wells and Johnson concur.",
        "type": "majority",
        "author": "BECTON, Judge."
      }
    ],
    "attorneys": [
      "Smith, Currie & Hancock, by Thomas E. Abernathy, IV and Neal J. Sweeney, and Raymer, Lewis, Eisele, Patterson & Ashburn, by Douglas G. Eisele, for defendant appellant.",
      "Brooks, Pierce, McLendon, Humphrey & Leonard, by George W. House, Michael D. Meeker and Charles C. Green, Jr., for plaintiff appellee."
    ],
    "corrections": "",
    "head_matter": "CITY OF STATESVILLE, NORTH CAROLINA v. GILBERT ENGINEERING CO.\nNo. 8322SC676\n(Filed 5 June 1984)\n1. Arbitration and Award \u00a7 1\u2014 city\u2019s, not federal\u2019s, conditions on arbitration controlling\nIn an action evolving from a grant obtained by the City of Statesville from the United States Environmental Protection Agency to construct improvements at a wastewater treatment plant where a contract was entered into with defendant to make the improvements, the City of Statesville\u2019s own general conditions dealing with arbitration controlled since the federal \u201cGeneral Conditions\u201d stated in the federal regulations had not been specifically included, and since the EPA had been notified of the City of Statesville\u2019s election to include its own general conditions and the EPA had not expressed disapproval. Further, defendant\u2019s own conduct demonstrated its understanding that the federal \u201cGeneral Conditions\u201d were not applicable since defendant had relied exclusively on the provisions of the City of Statesville\u2019s consulting firm\u2019s conditions when seeking extensions of time on the contract. Therefore, where the City of Statesville\u2019s general conditions allowed arbitration, if mutually acceptable, but contained no mandatory arbitration clause, the trial court correctly determined that federal regulations requiring mandatory arbitration did not apply. G.S. 1-567.18.\n2. Arbitration and Award \u00a71\u2014 federal conditions on arbitration not physically part of contract \u2014 not controlling\nIn an action on a contract evolving from an environmental protection agency grant to plaintiff where plaintiff opted to substitute its own conditions for the federal \u201cGeneral Conditions\u201d by not physically including the federal \u201cGeneral Conditions\u201d in the contract, there was no merit to defendant\u2019s contention that the federal \u201cGeneral Conditions\u201d concerning arbitration controlled where there was a conflict with plaintiffs own conditions. Further, the federal law in force at the time the contract was executed stated that arbitration was voluntary and that the parties must \u201cmutually agree\u201d to arbitrate.\nAppeal by defendant from Russell G. Walker, Jr., Judge. Order entered 24 January 1983 in Superior Court, IREDELL County. Heard in the Court of Appeals 11 April 1984.\nSmith, Currie & Hancock, by Thomas E. Abernathy, IV and Neal J. Sweeney, and Raymer, Lewis, Eisele, Patterson & Ashburn, by Douglas G. Eisele, for defendant appellant.\nBrooks, Pierce, McLendon, Humphrey & Leonard, by George W. House, Michael D. Meeker and Charles C. Green, Jr., for plaintiff appellee."
  },
  "file_name": "0676-01",
  "first_page_order": 708,
  "last_page_order": 713
}
