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      "PYCO SUPPLY COMPANY, INC. v. AMERICAN CENTENNIAL INSURANCE COMPANY v. CAROLINA ROAD BUILDERS, INC., H. KEITH DUNCAN, CURTIS L. CLARK, PATTY D. CLARK, LEONARD SIMMONS and BETTY M. SIMMONS"
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      {
        "text": "GREENE, Judge.\nThis is an appeal from a summary judgment for plaintiff on a construction payment bond. The pleadings and affidavits before the trial court tended to show that, on or about 28 September 1982, the Town of Pilot Mountain, North Carolina let four contracts for the construction of water pipeline improvements. Carolina Road Builders, Inc. (hereinafter, \u201cCRB\u201d) won three of the four contracts. As required under N.C. Gen. Stat. Sec. 44A-25 et seq. (1984), CRB gave three payment bonds respectively covering each of the three water project contracts. American Centennial Insurance Company (hereinafter, \u201cAmerican\u201d or \u201cdefendant\u201d) executed all three payment bonds as surety for payment of labor and materials furnished in connection with CRB\u2019s three contracts. Each of the three payment bonds was separately numbered. Each bond covered one water project contract, which contracts were denominated \u201cWater Line Improvements Contracts\u201d and numbered \u201cOne,\u201d \u201cTwo,\u201d and \u201cFour,\u201d respectively.\nOn 2 November 1984, plaintiff brought suit against American on one of its bonds. In its original complaint, plaintiff alleged it had furnished certain materials to CRB between November 1982 and January 1984 \u201cin connection with a contract for construction and completion of water line improvements for the Town of Pilot Mountain, North Carolina.\u201d Plaintiff noted and attached to its original complaint a copy of \u201cWater Line Improvements Contract No. Two.\u201d It likewise attached the specific payment bond given by American in connection with Contract No. Two. American answered in part that plaintiffs action on this bond (hereinafter, \u201cBond No. Two\u201d) was barred by limitations since all work had ceased under Contract No. Two on 24 June 1983. American argued that Bond No. Two itself provided suit must commence within one year from the date work ceased. American subsequently moved for summary judgment.\nOn 24 October 1985, plaintiff moved to amend its original complaint. It alleged in part that Pilot Mountain had furnished it the incorrect bond and contract and that the materials for which it remained unpaid were furnished in connection with CRB\u2019s work under Contract No. Four. CRB\u2019s affidavit showed its work under Contract No. Four was completed on 7 March 1984, less than one year before plaintiffs original complaint, but more than one year before plaintiffs motion to amend its complaint. The trial court granted plaintiffs motion to amend its original complaint to state a claim under Bond No. Four and granted summary judgment for defendant on plaintiffs original action on Bond No. Two. Defendant\u2019s answer to plaintiffs amended complaint included a plea of statutory limitation under N.C. Gen. Stat. Sec. 44A-28(b). Both parties moved for summary judgment on plaintiffs amended complaint. The trial court granted summary judgment for plaintiff in the amount of $14,305.77. Defendant appeals.\nThe issues before this Court are: 1) whether the one-year period set forth by N.C. Gen. Stat. Sec. 44A-28(b) is a procedural statute of limitation or a substantive statute of repose; 2) whether plaintiffs amended complaint relates back to the date of plaintiffs original complaint under N.C.R. Civ. P. 15(c); and 3) whether plaintiffs amended complaint commenced action upon Bond No. Four within one year of \u201cfinal settlement\u201d under Section 44A-28(b).\nI\nWe note at the outset the trial court awarded damages against defendant in its summary judgment. Therefore, the trial court\u2019s judgment is final and appealable. Beck v. American Bankers Life Ass. Co., 36 N.C. App. 218, 243 S.E. 2d 414 (1978).\nWe first determine the correct limitation period. Bond No. Four provided:\nThat no suit or action shall be commenced hereunder by any claimant . . . after the expiration of one (1) year following the date on which Principal ceased work on said Contract, it being understood, however, that if any limitation embodied in the Bond is prohibited by any law controlling the construction hereof, such limitation shall be deemed to be amended so as to be equal to the minimum period of limitation permitted by such law. [Emphasis added.]\nIn all cases of public construction for which a payment bond is required under N.C. Gen. Stat. Sec. 44A-26, the provisions of the \u201cModel Payment and Performance Bond Act,\u201d N.C. Gen. Stat. Sec. 44A-25 et seq., are conclusively presumed to be written into every such bond. N.C. Gen. Stat. Sec. 44A-30(b). Section 44A-30(a) of the Act states that no contract between a contracting body, contractor or surety may reduce the period of time for commencing action under Section 44A-28(b). Section 44A-28(b) provides:\nNo action on a payment bond shall be commenced after the expiration of the longer period of one year from the day on which the last of the labor was performed or material was furnished by the claimant, or one year from the day on which final settlement was made with the contractor. [Emphasis added.]\nThe contractual provisions of Bond No. Four seek to shorten the limitation period to the minimum allowed under Section 44A-28(b). Since the statute instead provides for the longer period, we disregard the contractual limits set out in Bond No. Four to the extent they would reduce the limitation period allowed under Section 44A-28(b).\nThe trial judge allowed plaintiff to amend its original complaint to allege a claim under Bond No. Four and relate the amendment back to the date of plaintiffs original pleading under N.C. Civ. P. 15(c). However, defendant contends commencing suit on Bond No. Four within the one-year period provided in Section 44A-28(b) is an absolute condition precedent to its alleged liability to plaintiff. Defendant therefore argues its liability on Bond No. Four had expired and could not be revived by plaintiffs procedural amendment. Plaintiff contends the limitation period merely limits plaintiffs remedy and is thus subject to Rule 15(c) as any other statute of limitation. In order to determine the propriety of the trial court\u2019s allowing the amendment\u2019s relation back, we first consider whether Section 44A-28(b) is a substantive statute of repose or merely a procedural statute of limitation.\nOur Supreme Court has recently discussed the distinction between statutes of repose and statutes of limitation:\nStatutes of limitation are generally seen as running from the time of injury, or discovery of the injury in cases where that is difficult to detect. They serve to limit the time within which an action may be commenced after the cause of action has accrued. Statutes of repose, on the other hand, create time limitations which are not measured from the date of injury. These time limitations often run from defendant\u2019s last act giving rise to the claim or from substantial completion of some service rendered by defendant.\nTrustees of Rowan Tech. College v. J. Hyatt Hammond Assoc., Inc., 313 N.C. 230, 234 n.3, 328 S.E. 2d 274, 276-77 n.3 (1985). In Black v. Littlejohn, 312 N.C. 626, 633, 325 S.E. 2d 469, 474-75 (1985), the Court stated:\nUnlike an ordinary statute of limitations which begins running upon accrual of the claim . . ., the period contained in the statute of repose begins when a specific event occurs, regardless of whether a cause of action has accrued or whether any injury has resulted. . . . Thus, the repose serves as an unyielding and absolute barrier that prevents a plaintiffs right of action even before his cause of action may accrue, which is generally recognized as the point in time when the elements necessary for a legal wrong coalesce. . . . The legislature\u2019s adoption of an outer limit or repose . . . clearly [has] the effect of granting the defendant an immunity to actions . . . after the applicable period of time has elapsed.\n(Citations omitted.)\nThe consequence of this distinction is that a statute of repose \u201cconstitutes a substantive definition of, rather than a procedural limitation on, rights.\u201d Lamb v. Wedgewood South Corp., 308 N.C. 419, 426, 302 S.E. 2d 868, 872 (1983). Commencement of suit within the allotted time is a \u201ccondition to the legal cognizability of [a] claim.\u201d Id. at 444, 302 S.E. 2d at 882. As the Court noted in Bolick v. American Barmag Corp., 306 N.C. 364, 370, 293 S.E. 2d 415, 420 (1982), \u201cThat the legislature has the authority to establish a condition precedent to what originally was a common law cause of action is beyond question.\u201d\nUnder Rowan and Black, the primary characteristic of statutes of repose is that they commence and ensue independent of the accrual of plaintiff s cause of action. The one-year period in Section 44A-28(b) commences either upon the date labor or materials are last furnished or upon the date of final settlement between the contracting body and the contractor. As the limitation period commences either upon plaintiffs \u201clast act\u201d or upon \u201cfinal settlement\u201d between third parties, the limitation period clearly runs irrespective of plaintiffs legal injury. That the limitation period under Section 44A-28(b) runs from the last day materials are furnished or upon final settlement comports with the Rowan court\u2019s characterization of statutes of repose as running \u201cfrom defendant\u2019s last act giving rise to the claim or from substantial completion of some service rendered by defendant.\u201d 313 N.C. at 234 n.3, 328 S.E. 2d at 276-77 n.3.\nSimilarly, it is often said a statute of limitation may not commence until plaintiff is entitled to sue on the cause of action. E.g., Raftery v. Wm. C. Vick Constr. Co., 291 N.C. 180, 193, 230 S.E. 2d 405, 412 (1976) (Branch, C.J., concurring). In contrast, the one-year period under Section 44A-28(b) commences at least 90 days before plaintiff is entitled to bring suit under Section 44A-27. N.C. Gen. Stat. Sec. 44A-27 (claimant may not bring suit before expiration of 90 days after last day on which claimant furnished labor or materials).\nFor these reasons, we hold the one-year limitation set forth in Section 44A-28(b) constitutes a statute of repose, compliance with which is condition precedent to American\u2019s liability to plaintiff. We acknowledge some federal courts have construed 40 U.S.C. Sec. 270b(b), the federal counterpart to our Section 44A-28(b), to be an ordinary statute of limitation rather than a condition precedent. E.g., Security Ins. Co. v. U.S. ex rel Haydis, 338 F. 2d 444, 449 (9th Cir. 1964). Other federal courts have deemed the same provision a condition precedent or statute of repose. E.g., U.S. ex rel. Harvey Gulf Int. Marine, Inc. v. Maryland Cas. Co., 573 F. 2d 245, 247 (5th Cir. 1978) (citing cases). The Harvey Gulf line of cases is more persuasive in light of our Supreme Court\u2019s decisions in Rowan, Lamb and Bolick.\nII\nGiven our construction of Section 44A-28(b) as condition precedent to American\u2019s liability, American\u2019s liability to plaintiff accordingly ceased one year after either of the two starting dates provided by the statute. While an ordinary statute of limitation limits a plaintiffs remedy, statutes of repose limit liability; accordingly, once defendant\u2019s liability terminated, plaintiffs amendment could not revive that liability, irrespective of any \u201crelation back\u201d under N.C.R. Civ. P. 15(c). The legislature\u2019s adoption of an outer limit or repose of one year clearly grants sureties immunity to payment bond actions after the applicable period has elapsed. See Black, 312 N.C. at 633, 325 S.E. 2d at 475. Those courts construing the federal counterpart as condition precedent have likewise not allowed an amendment to relate back under F.R. Civ. P. 15. E.g., U.S. ex rel Flynn\u2019s Camden Elec. Supply Co. v. Home Indemnity Ins. Co., 246 F. Supp. 27, 30 (E.D. Pa. 1965).\nPlaintiffs action on Bond No. Two was dismissed by summary judgment. Plaintiffs motion to amend its action to allow recovery under Bond No. Four was filed 24 October 1985. CRB\u2019s undisputed affidavit stated that all work under Contract No. Four ceased on 7 March 1984. Insofar as the period of repose commenced upon the date work under Contract No. Four ceased, plaintiffs action on Bond No. Four was absolutely barred by repose after 7 March 1985. Once plaintiffs claim was so barred, it could not be revived by the relation back of any subsequent amendment.\nIll\nSince the period of repose under Section 44A-28(b) might also commence upon Pilot Mountain\u2019s \u201cfinal settlement\u201d with CRB, we must determine when \u201cfinal settlement\u201d occurred in order to determine the \u201clonger\u201d limitation period. If \u201cfinal settlement\u201d had occurred less than one year before plaintiffs motion to amend on 24 October 1985, then the statute had not expired and summary judgment for plaintiff would be appropriate. Conversely, if the pleadings and affidavits show without contradiction that more than one year had passed, then summary judgment should have been granted for defendant. See Cellu Products Co. v. G.T.E. Product Corp., 81 N.C. App. 474, 477, 344 S.E. 2d 566, 568 (1986).\nSince there are no reported decisions construing Section 44A-28(b), there is no local guidance on the term \u201cfinal settlement\u201d in this context; however, the term has had a long history under federal law. The seminal U.S. Supreme Court decision is Illinois Surety Co. v. U.S., 240 U.S. 214 (1916). See also Redevelopment Auth. of Philadelphia v. Fidelity and Deposit Co. of Md., 665 F. 2d 470, 473-76 (3rd Cir. 1981) (discussing Illinois Surety). In Illinois Surety, the Supreme Court distinguished \u201cfinal settlement\u201d from \u201cfinal payment\u201d with respect to commencing suit on surety bonds. The Court held that final settlement occurred when, so far as the government was concerned, the amount which it was bound to pay was administratively fixed by the proper authority. 240 U.S. at 221; see also, Redevelopment Auth., 665 F. 2d at 474 (final settlement is \u201cministerial\u201d act by authorized person). The date of the final settlement does not depend upon the contractor\u2019s agreement and must be clear, readily ascertainable and occur at a definite time. Illinois Surety, 240 U.S. at 221.\nThe evidence in the record relevant to \u201cfinal settlement\u201d is meager. The affidavit of CRB\u2019s president states that, \u201cfinal payment on Contract No. Four was received on March 19, 1984.\u201d Plaintiffs credit manager states by affidavit that \u201cfinal approval of the work being done on Contract No. Four was not made by the engineers until March 7, 1984, [sic] from the project engineers employed by the Town of Pilot Mountain to supervise the water works construction . . . .\u201d Cf. Redevelopment Auth., 665 F. 2d at 475 (contracts and documents designated architect to \u201cfinally settle\u201d the project). Whether typographical error or not, the record reflects the trial court\u2019s finding that work was not completed under Contract No. Four until 27 March 1984 (despite CRB\u2019s undisputed affidavit that such work was completed 7 March 1984).\nThe critical fact is when the Town of Pilot Mountain made the administrative determination of the amount it was bound to pay CRB. N.C.R. Civ. P. 56(c) provides that summary judgment will be granted \u201cif the pleadings . . . together with the affidavits, if any, show that there is no genuine issue as to any material fact and that any party is entitled to a judgment as a matter of law.\u201d The date of \u201cfinal settlement\u201d is a material element of plaintiffs claim.\nBased on the pleadings and affidavits before us, we conclude a disputed material fact issue remains as to the date of \u201cfinal settlement.\u201d While plaintiffs credit manager states project engineers \u201capproved\u201d the disputed work, there is no evidence in the record of the project engineers\u2019 \u201cministerial\u201d authority to reach \u201cfinal settlement\u201d with CRB. Since \u201cfinal payment\u201d logically follows \u201cfinal settlement,\u201d it is arguable CRB\u2019s affidavit of \u201cfinal payment\u201d requires finding \u201cfinal settlement\u201d had already occurred. However, Pilot Mountain\u2019s retainage of funds casts doubt on whether its 19 March 1984 payment was intended to be a genuinely \u201cfinal\u201d payment. We note also that, if the trial court\u2019s finding that work ended on 27 March 1984 is correct, then final settlement presumably occurred no earlier than that date. The purpose of employing \u201cfinal settlement\u201d as a yardstick is that it provides a definite time, fixed by public record and readily ascertainable, after which subcontractors must bring suit. See Redevelopment Auth., 665 F. 2d at 476. Section 44A-28(b) expressly commences on one of two specific \u201cdays.\u201d We cannot readily ascertain from the record the specific \u201cday\u201d anyone with administrative authority from Pilot Mountain fixed the amount Pilot Mountain was bound to pay CRB; indeed, we cannot determine from the record whether final settlement has occurred at all. Accordingly, the disputed material issue of \u201cfinal settlement\u201d precluded summary judgment for either party.\nIV\nWe therefore reverse summary judgment for plaintiff and remand this matter to the trial court for proceedings consistent with this opinion.\nReversed and remanded.\nJudge Johnson concurs.\nChief Judge Hedrick dissents.",
        "type": "majority",
        "author": "GREENE, Judge."
      },
      {
        "text": "Chief Judge HEDRICK\ndissenting.\nIn my opinion, the trial court did not err in allowing plaintiff to amend its complaint to omit the specific reference to Bond No. AB0018710A, and I vote to affirm summary judgment for plaintiff. G.S. 1A-1, Rule 15(c) allows the matter pleaded in the amendment to relate back so as to affirmatively disclose that plaintiffs claim is not barred by any statute of limitations or repose. The record discloses there are no genuine issues of material fact and the record does not disclose any insurmountable bar to plaintiffs claim. I vote to affirm.",
        "type": "dissent",
        "author": "Chief Judge HEDRICK"
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    "attorneys": [
      "Nichols, Caffrey, Hill, Evans & Murrelle, by William L. Stocks and B. Danforfh Morton, for defendant-appellant.",
      "Weinstein & Sturges, P.A., by Hugh B. Campbell, Jr., and Michel C. Daisley, for plaintiff-appellee."
    ],
    "corrections": "",
    "head_matter": "PYCO SUPPLY COMPANY, INC. v. AMERICAN CENTENNIAL INSURANCE COMPANY v. CAROLINA ROAD BUILDERS, INC., H. KEITH DUNCAN, CURTIS L. CLARK, PATTY D. CLARK, LEONARD SIMMONS and BETTY M. SIMMONS\nNo. 8617SC684\n(Filed 7 April 1987)\n1. Limitation of Actions \u00a7 1; Principal and Surety 8 9.1\u2014 statutory limitation period-reduction by contract not permitted\nTo the extent that provisions in a construction bond would reduce the limitation period allowed under N.C.G.S. \u00a7 44A-28(b), they are disregarded.\n2. Limitation of Actions 8 4.3; Principal and Surety 8 9.1\u2014 construction payment bond \u2014statute of repose\nThe one-year limitation on construction payment bonds set forth in N.C.G.S. \u00a7 44A-28(b) constitutes a statute of repose, compliance with which is a condition precedent to defendant insurer\u2019s liability to plaintiff.\n3. Limitation of Actions 8 12.4; Principal and Surety 8 9.1\u2014 liability terminated \u2014 amendment of pleadings \u2014no relation back \u2014liability not revived\nWhere, pursuant to N.C.G.S. \u00a7 44A-28(b), the applicable statute of repose, defendant\u2019s liability on a construction payment bond terminated on 7 March 1985, one year after all work under the contract ceased, plaintiffs motion to amend its action to allow recovery, filed on 24 October 1985, could not revive defendant\u2019s liability, irrespective of any \u201crelation back\u201d under N.C.G.S. \u00a7 1A-1, Rule 15(c).\n4. Limitation of Actions 8 4.3; Principal and Surety 8 9.1\u2014 contract \u2014issue as to date of \u201cfinal settlement\u201d \u2014 commencement of period of repose in question\nWhere a genuine issue of material fact existed as to the date of \u201cfinal settlement\u201d between a contracting town and a contractor, and it therefore could not be determined when the period of repose commenced, summary judgment for either party was inappropriate.\nChief Judge Hedrick dissenting.\nAppeal by defendant American Centennial Insurance Company from Rousseau, Judge. Judgment entered 6 March 1986 in Superior Court, SURRY County. Heard in the Court of Appeals 5 January 1987.\nNichols, Caffrey, Hill, Evans & Murrelle, by William L. Stocks and B. Danforfh Morton, for defendant-appellant.\nWeinstein & Sturges, P.A., by Hugh B. Campbell, Jr., and Michel C. Daisley, for plaintiff-appellee."
  },
  "file_name": "0114-01",
  "first_page_order": 142,
  "last_page_order": 150
}
