Gaston Cty. Bd. of Educ. v. Shelco ( 2022 )

IN THE COURT OF APPEALS OF NORTH CAROLINA
2022-NCCOA-550
No. COA21-618
Filed 16 August 2022
Gaston County, No. 20-CVS-3924
GASTON COUNTY BOARD OF EDUCATION, Plaintiff,
v.
SHELCO, LLC, S&ME, INC., LLC; BOOMERANG DESIGN, P.A. (F/K/A MBAJ
ARCHITECTURE, INC.), AND CAMPCO ENGINEERING, INC., Defendants /
Crossclaim and Third-Party Plaintiff,
v.
HOOPAUGH GRADING COMPANY, LLC; HART WALL AND PAVER SYSTEMS,
INC.; WORLDWIDE ENGINEERING, INC.; AND LINCOLN HARRIS, LLC, Third-
Party Defendants.
Appeal by Plaintiff and appeal by two of the Defendants, both from an order
entered 13 May 2021 by Judge Athena F. Brooks in Gaston County Superior Court.
Heard in the Court of Appeals 24 May 2022.
Tharrington Smith, L.L.P., by Patricia Ryan Robinson, Rod Malone and Colin
A. Shive for the Plaintiff-Appellant.
Hedrick Gardner Kincheloe & Garofalo LLP, by Gerald A. Stein, II, Tyler A.
Stull and M. Duane Jones for Defendant-Appellant (Shelco).
Parker Poe Adams & Bernstein LLP, by Collier R. Marsh and Daniel K. Knight,
for Defendant-Appellant (Boomerang).
Ragsdale Liggett PLLC, by Sandra Mitterling Schilder and Amie C. Sivon, for
Defendant-Appellee (S&ME).
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2022-NCCOA-550
Opinion of the Court
Rosenwood, Rose & Litwak, PLLC by Nancy S. Litwak and Carl J. Burchette
for Defendant-Appellee (Campco).
DILLON, Judge.
¶1 The four Defendants each moved to dismiss Plaintiff’s claims based on the
applicable statute of repose. The trial court granted the motions to dismiss filed by
two of the Defendants. Plaintiff appeals from those portions of the order.
¶2 The trial court, however, denied the motions to dismiss filed by the other two
Defendants. These two Defendants appeal from those portions of the order.
¶3 In its order, the trial court also allowed in part and denied in part Plaintiff’s
motion to amend its complaint to allege the existence of an agreement to toll the
statute of repose for 18 months.
I. Background
¶4 Plaintiff, a county board of education, filed this action against four companies
who worked on the development of a public high school. This appeal concerns
primarily the motions to dismiss filed by Defendants pursuant to Rule 12(b)(6) of our
Rules of Civil Procedure. Accordingly, for our review, we must accept the allegations
pleaded in Plaintiff’s complaint as true. See Arnesen v. Rivers Edge, 368 N.C. 440,
441, 781 S.E.2d 1, 3 (2015). Our review is therefore confined to the allegations in the
complaint, which include the following:
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Opinion of the Court
¶5 Sometime prior to 2009, Plaintiff announced plans to develop a new public high
school (“the Project”). To that end, Plaintiff entered separate contracts with three of
the Defendants: Shelco, LLC, (“Contractor”); S&ME, Inc. (“Engineer”); and
Boomerang Designs, P.A., (“Architect”). Architect entered a contract with the fourth
Defendant, Campco Engineering, Inc., (“Subcontractor”).
¶6 The Project included, in part, the construction of reinforced soil slopes and
retaining walls (collectively the “Retaining Walls”) around the proposed high school’s
athletic complex. Around 2011, construction of the Retaining Walls was completed.
In 2012, Plaintiff became aware that portions of the Retaining Walls had cracked.
¶7 On 15 May 2013, Plaintiff, Contractor, and Architect “signed a certificate of
substantial completion” for the entire Project. By signing the certificate, Contractor
and Architect represented that the Project (including the Retaining Walls) was
essentially completed. Engineer and Subcontractor did not sign the certificate.
¶8 In the fall of 2018, Plaintiff, along with Contractor, Engineer, Architect and
Subcontractor (along with some third-party defendants) executed a tolling agreement
(the “Tolling Agreement”) at Plaintiff’s request with a stated effective date of 1 March
2019 until 15 September 2020.
¶9 Then in November 2020, Plaintiff filed suit against all four Defendants,
alleging that the Retaining Walls were defective. Defendants answered and moved
to dismiss pursuant to Rule 12(b)(6), based in part on the six-year statute of repose.
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Plaintiff then moved to amend its complaint to allege that all parties had entered the
Tolling Agreement, effective 1 March 2019 to 15 September 2020.
¶ 10 After a hearing on all motions, the trial court entered its order (1) allowing
Subcontractor’s and Engineer’s respective Rule 12(b)(6) motions to dismiss based on
the statute of repose (and dismissing Plaintiff’s motion to amend as to its claims
against Subcontractor and Engineer, as moot); and (2) denying Contractor’s and
Architect’s respective Rule 12(b)(6) motions to dismiss based on the statute of repose
(allowing Plaintiff’s motion to amend its complaint as to its claims against Contractor
and Architect). The trial court reasoned that the May 2013 certificate executed by
Plaintiff, Contractor, and Architect, paired with the Tolling Agreement, placed
Plaintiff’s claims against Contractor and Architect within the 6-year statute of
repose. However, since Engineer and Subcontractor did not sign the 2013 certificate,
the Tolling Agreement would not place Plaintiff’s claims against them within the
statute of repose.
¶ 11 Plaintiff appealed the Rule 12(b)(6) dismissals and denial of its motion to
amend its complaint regarding its claims against Engineer and Subcontractor.
Contractor and Architect appealed the denial of Rule 12(b)(6) motions on Plaintiff’s
claims against them.
II. Appellate Jurisdiction
¶ 12 This appeal is from an interlocutory order, as that order did not entirely
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dispose of the case. Stanford v. Paris, 364 N.C. 306, 311, 698 S.E.2d 37, 40 (2010).
Appeals from interlocutory orders are only allowed in limited circumstances. Id. at
311, 698 S.E.2d at 40. Rule 54(b) of our Rules of Civil Procedure allows an immediate
appeal from an interlocutory order from any part of an order which constitutes a “final
judgment as to one or more but fewer that all the claims or parties[,]” so long as the
trial court in its judgment determines “there is no just reason for delay” in taking the
appeal. N.C. Gen. Stat. § 1A-1, Rule 54(b).
¶ 13 Here, the trial court’s order constitutes a final judgment with respect to
Subcontractor and Engineer, as the order dismisses all claims against these
Defendants with prejudice. Additionally, the trial court certified its order dismissing
these claims for immediate review under Rule 54(b), determining “there was no just
reason for delay.” Accordingly, we have jurisdiction to consider Plaintiff’s appeal of
the portion of the trial court’s order allowing Subcontractor’s and Engineer’s
respective motions to dismiss and mooting its motion to amend with respect to these
Defendants.
¶ 14 However, there has been no final judgment with respect to Plaintiff’s claims
against Contractor and Architect. Rule 54(b), therefore, does not provide an avenue
for immediate review of the portion of the trial court’s order denying these
Defendants’ respective motions to dismiss. Further, we have held that an adverse
determination regarding a defendant’s statute of repose defense does not affect a
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substantial right. Lee v. Baxter, 147 N.C. App. 517, 520, 556 S.E.2d 36, 38 (2001).
Accordingly, we dismiss these Defendants’ appeals.
III. Analysis
¶ 15 We now address the merits of Plaintiff’s appeal concerning the trial court’s
dismissal of its claims against Subcontractor and Engineer. We review Rule 12(b)(6)
dismissals de novo. Arnesen. 368 N.C. at 448, 781 S.E.2d at 8.
¶ 16 In its ruling, the trial court relied on the six-year statute of repose found in
N.C. Gen. Stat. § 1-50(a)(5)(a) (2017) in deciding to grant dismissal as to Defendants
Engineer and Subcontractor. This statute of repose provides that “[n]o action to
recover damages based upon or arising out of the defective or unsafe condition of an
improvement to real property shall be brought more than six years from the later of
[1] the specific last act or omission of the defendant giving rise to
the cause of action or
[2] substantial completion of the improvement . . . or specified
area or portion thereof (in accordance with the contract[.]”
Id. (emphasis added).
¶ 17 It is Plaintiff who “has the burden of proving that a statute of repose does not
defeat the claim.” Head v. Gould Killian, 371 N.C. 2, 11, 812 S.E.2d 831, 838 (2018)
(emphasis added). Accordingly, Plaintiff would have the burden at a Rule 56
summary judgment hearing to provide evidence that (s)he filed her claim within the
applicable statute of repose. See Id. at 12, 812 S.E.2d at 839.
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¶ 18 However, as explained below, based on our jurisprudence, a plaintiff has no
burden at the pleading stage to allege facts showing that its complaint was filed
within the applicable statute of repose. That is, it is generally inappropriate to grant
a defendant’s Rule 12(b)(6) motion to dismiss a complaint merely because it failed to
allege facts showing that it was filed within the applicable statute of repose. A Rule
12(b)(6) dismissal based on the statute of repose would only be appropriate if the
complaint otherwise alleges facts conclusively showing that it was not filed within
the applicable statute of repose. And, here, since Plaintiff did not allege both the
dates when any Defendant performed its last “specific last act” and the “substantial
completion of the improvement,” dismissal here was inappropriate.
¶ 19 In 1994, our Supreme Court reiterated its long-standing rule that “[a] statute
of limitations or repose defense may be raised by way of a motion to dismiss if it
appears on the face of the complaint that such a statute bars the claim.” Hargett v.
Holland, 337 N.C. 651, 653, 447 S.E.2d 784, 786 (1994) (citations omitted).
¶ 20 Three years later in 1997, our Supreme Court adopted an opinion in a dissent
from our Court explaining that a Rule 12(b)(6) dismissal is inappropriate where based
on a plaintiff’s simple failure to plead facts showing that its complaint was filed
within the statute of repose. Specifically, the Supreme Court reversed the opinion
from our Court “[f]or the reasons stated in the dissenting opinion by Judge Greene[.]”
Richland Run v. CHC Durham, 346 N.C. 170, 484 S.E.2d 527 (1997) (emphasis
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added).
¶ 21 In Richland, the trial court granted a defendant’s Rule 12(b)(6) motion but
considered other evidence concerning some of the defendant’s arguments. The trial
court made two holdings. First, the trial court held that the complaint itself failed to
allege facts showing it had been filed within the statute of repose. Second, the trial
court, considering evidence outside the complaint, determined that the complaint
should be dismissed on an alternate basis unrelated to the statute of repose. Our
Court affirmed both holdings. Judge Greene, however, dissented.
¶ 22 Judge Greene reasoned that the complaint should not have been dismissed “on
the basis that the plaintiff failed to specifically plead compliance with the applicable
statute of repose [being G.S. 1-50(a)(5)].” Richland Run v. CHC Durham, 123 N.C.
App. 345, 352, 473 S.E.2d 649, 654 (1996) (J. Greene dissenting). Judge Greene
explained that, while a plaintiff has the burden to prove compliance with the statute
of repose, there is no requirement that a plaintiff plead facts in the complaint showing
that its claim was filed within the statute of repose:
Our courts have repeatedly held that the plaintiff has the
burden of proving the condition precedent that its cause of
action is brought within the applicable statute of repose. I
do not read Rule 9(c) [regarding the pleading of conditions
precedent] as requiring the pleading of conditions
precedent.
Id.¶ 23 ¶We note that, as our Supreme Court has explained, statutes of limitations and
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statutes of repose are different: where statutes of limitations “are clearly procedural,
affecting the remedy directly and not the right to recover[,] [t]he statute of repose . .
. acts as a condition precedent to the action itself[.]” Boudreau v. Baughman, 322
N.C. 331, 340, 368 S.E.2d 849, 857 (1988). Indeed, Rule 8 of our Rules of Civil
Procedure recognizes that a failure to file within the applicable statute of limitations
is an affirmative defense which must be pleaded. Failing to file within the applicable
statute of repose, however, is not listed as an affirmative defense in Rule 8 but rather
is considered a “condition precedent” under Rule 9(c).1
¶ 24 In any event, Judge Greene further held that the trial court should not have
dismissed the complaint based on the court’s alternate reason which was unrelated
to the statute of repose. Richland, 123 N.C. App. at 353, 473 S.E.2d at 654.
¶ 25 We conclude that both holdings by Judge Greene were necessary to support his
dissent. Since dismissal would have been proper under either theory advanced by
the defendants and relied upon by the trial court, Judge Greene had to disagree on
both points to reach his conclusion that the trial court’s order should be reversed.
1 Judge Greene also noted that “even if Rule 9(c) is construed to require pleading a
condition precedent, [I conclude that the complaint’s] allegations sufficiently comply with
Rule 9.” Id. at 353, 473 S.E.2d at 654. This reason is clearly dicta, as he expressly determined
that Rule 9(c) did not require pleading facts to show that the complaint was filed within the
statute of repose.
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Therefore, our Supreme Court necessarily adopted both of Judge Greene’s reasons in
reversing our Court’s decision.2
¶ 26 Here, Plaintiff did not allege any date when substantial completion occurred.
Therefore, a 12(b)(6) dismissal was inappropriate.
¶ 27 “Substantial completion” is defined as “that degree of completion of a project,
improvement or specified area or portion thereof (in accordance with the contract . . .
) upon attainment of which the owner can use the same for the purpose for which it
was intended. The date of substantial completion may be established by written
agreement.” N.C. Gen. Stat.§ 1-50(a)5.c. (emphasis added).
¶ 28 The question before us is whether Plaintiff alleged an act, along with the date
the act was performed, which would constitute “substantial completion” as
contemplated under Section 1-50(a)5.c. Defendants argue that the completion of the
Retaining Walls, which Plaintiff alleged occurred in 2011, constituted the act of
substantial completion. Defendants essentially argue that we need not look to when
the entire improvement, e.g., the Project, was substantially completed. Rather, we
are to look to when the “specified area or portion thereof,” i.e., the Retaining Walls,
2 Even if either holding could have supported Judge Greene’s resolution of the case,
both holdings would still be binding. As our Supreme Court has recognized, “where a case
actually presents two or more points, any one of which is sufficient to support [a] decision,
but the reviewing Court decides all points, the decision becomes a precedent in respect to
every point decided[.]” Hayes v. Wilmington, 243 N.C. 525, 537, 91 S.E.2d 673, 682 (1956).
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were substantially completed.
¶ 29 Neither party cites a North Carolina case which provides a clear guide on how
to interpret the definition of “substantial completion” for a project that has several
components. The plain language of the statute suggests that the date of substantial
completion occurs with respect to a particular contractor when the part of the
improvement the contractor was hired to provide services for has reached “a degree
of completion” where “the owner can use the same for the purpose for which it was
intended.” Id. For instance, when an owner contracts with a company to build the
foundation of a house, the statute of repose begins when the foundation is completed
such that the owner can contract with someone else to build the frame, etc. The entire
house need not be complete for the statute of repose to run against the contractor
hired to build the foundation. Of course, if one contractor is hired to build the entire
house, then the statute of repose to sue the contractor for laying a bad foundation
would not start until the entire house was completed, as the contractor contracted to
build the entire house. This interpretation was followed by the Supreme Court of
South Carolina considering a statute – S.C. Code Ann. § 15-3-630 – which provides a
definition of “substantial completion” identical to the definition found in Section 1-
50(a)5.c. See Lawrence v. General Panel, 425 S.C. 398, 822 S.E.2d 800 (2019).
¶ 30 Turning to the complaint at issue, Plaintiff alleged that it entered a contract
with Defendant Engineer “to provide geotechnical engineering service for the
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Project.” There is no allegation that Engineer was hired just to perform services for
the Retaining Wall only. Further, there is no allegation when the entire Project was
substantially completed. Finally, there is no allegation that the date was “established
by written agreement” between Plaintiff and Engineer. N.C. Gen. Stat. § 1-50(a)5.c.
That is, though Plaintiff alleges it had executed a “certificate of substantial
agreement” with Contractor and Architect on 15 May 2013, there is no allegation that
Engineer was a party to that “certificate,” much less that by signing the certificate
Plaintiff was agreeing that the project was substantially completed as of 15 May 2013.
Accordingly, we hold that the trial court erred in granting Engineer’s Rule 12(b)(6)
motion to dismiss.
¶ 31 Regarding the claims against the Subcontractor, Plaintiff merely alleged that
Subcontractor “was the civil engineering subcontractor to Architect[,]” without any
allegation that Subcontractor was hired to work on the Retaining Wall alone.
Additionally, Subcontractor was not a party to the certificate of substantial
completion discussed in the preceding paragraph. Plaintiff entered into a contract
with Architect “to provide architectural [and other] services for the ‘Project.’”
Accordingly, we hold that the trial court erred in granting Subcontractor’s Rule
12(b)(6) motion, based on the statute of repose. 3
3 Because Defendants failed to raise any other ground for dismissal, we express no
opinion as to whether they would be entitled to dismissal on some other ground.
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¶ 32 Finally, we vacate the trial court’s dismissal of Plaintiff’s motion to amend its
complaint against Engineer and Subcontractor. The trial court so ruled based on its
conclusion that the motion was moot, based on its erroneous grant of Engineer’s and
Subcontractor’s respective motions to dismiss. On remand, the trial court should
exercise its discretion on Plaintiff’s motion. We note, though, even if Plaintiff’s
motion is denied, all parties are free to offer evidence concerning this agreement at a
hearing on a motion for summary judgment.
III. Conclusion
¶ 33 We reverse the trial court’s grant of Engineer’s and Subcontractor’s respective
motions to dismiss under Rule 12(b)(6) based on the statute of repose. We vacate the
trial court’s dismissal of Plaintiff’s motion to amend with respect to Engineer and
Subcontractor. We dismiss the appeals of Contractor and Architect for lack of
appellate jurisdiction.
REVERSED IN PART, VACATED IN PART, DISMISSED IN PART &
REMANDED.
Chief Judge STROUD and Judge GRIFFIN concur.