Court Opinion

ID: 2729097
Source: CourtListenerOpinion
Date Created: 2014-09-08 21:38:57.018866+00
Date Added: 2024-06-11T15:45:16.816750
License: Public Domain

An unpublished opinion of the North Carolina Court of Appeals does not constitute
controlling legal authority. Citation is disfavored, but may be permitted in accordance
with the provisions of Rule 30(e)(3) of the North Carolina Rules of Appellate Procedure.

                                NO. COA13-662
                       NORTH CAROLINA COURT OF APPEALS

                             Filed: 18 February 2014

J.T. RUSSELL & SONS, INC.,
     Plaintiff/Counterclaim-
     Defendant,

       v.                                     Stanly County
                                              No. 08-CVS-1453
SILVER BIRCH POND, LLC,
     Defendant/Counterclaim-
     Plaintiff.

       Appeal by defendant from order entered 31 October 2012 by

Judge Theodore S. Royster, Jr. in Stanly County Superior Court.

Heard in the Court of Appeals 20 November 2013.

       Womble Carlyle Sandridge & Rice, LLP, by Brent F. Powell,
       John F. Morrow, Jr., and David R. Boaz, for plaintiff-
       appellee.

       James, McElroy & Diehl, P.A., by Preston O. Odom, III, and
       The Jonas Law Firm, P.L.L.C., by Peter C. Capece, for
       defendant-appellant.

       HUNTER, Robert C., Judge.

       Defendant-appellant        Silver     Birch    Pond,     L.L.C.     (“SBP”)

appeals the order entered 31 October 2012 denying SBP’s motion

to amend its counterclaim and granting plaintiff’s-appellee’s

J.T.    Russell    &   Sons,     Inc.’s    (“JTR’s”)      motion    for    summary
                                             -2-
judgment.       On appeal, SBP argues that the trial court: (1) erred

by resolving the issue of damages on summary judgment because

that ruling exceeded the scope of the appellate mandate; (2)

abused    its     discretion        in   denying    SBP’s    motion     to    amend    its

counterclaims;       and      (3)    erred    in     granting      JTR’s     motion    for

summary judgment.           After careful review,                 we: (1)    affirm the

order denying the motion to amend; and (2) reverse the order

granting summary judgment in favor of JTR because it violated

the mandate of this Court in J.T. Russell & Sons, Inc. v. Silver

Birch    Pond     L.L.C.,     __    N.C.    App.    __,    721     S.E.2d    699    (2011)

(“Silver Birch I”), and remand on the issue of damages.

                                         Background

       This case is before this Court for the second time after a

trial court has entered an order granting summary judgment for

JTR.     This Court’s prior opinion contains a detailed recitation

of the facts underlying this dispute.                     See Silver Birch I.          JTR

is an asphalt paving company.                 SBP is a North Carolina limited

liability company formed by Robert Johnson (“Mr. Johnson”) for

the     purpose     of     developing        Silver       Birch     Pond,    a     planned

residential subdivision, (“the subdivision”) in Lincoln County.

Although Mr. Johnson has built modular homes before, he has no

prior    experience      in    developing          subdivisions.        SBP      and   JTR
                                                    -3-
entered into a contract on 14 December 2007 whereby JTR agreed

to    pave    the     roadways       in       the    subdivision           for    $148,000      (“the

paving contract”).             The amount of the contract was increased

$4,870.96 based on a change order; consequently, the total price

of the contract was $152,870.96.

       JTR completed the work on 18 April 2008.                                     However, SBP

alleged      that     the    work       failed       to    comply      with      the   stone    base

requirements          in     the     paving          contract.              Specifically,        SBP

contended that, based on numerous stone base cores taken, the

stone base of the roads measured less than the eight inches

required by the paving contract.                           Consequently, SBP refused to

pay    the    $152,870.96          it     owed       pursuant         to   the    terms    of    the

contract.          JTR filed an action on 25 September 2008 against SBP

alleging breach of contract.                        On 3 December 2008, SBP filed an

answer and counterclaim against SBP, also alleging breach of the

paving contract.

       Beginning 7 September 2010, the case was tried by a jury in

Stanly       County    Superior          Court.            On   10     September,       the     jury

returned       a    verdict        finding          that    SBP      had    not    breached      the

contract      and     that    JTR       had    breached         the    contract.          The   jury

awarded SBP $370,765.82 in damages.                         JTR appealed.
                                              -4-
       On appeal, JTR argued, inter alia, that the trial court

erred by denying its motion for a directed verdict and that the

jury’s   award        of    damages     was   contrary       to   law    and   should   be

vacated.    Silver Birch I, __ N.C. App. at __, 721 S.E.2d at 702-

704.     On the first issue, this Court concluded that because

several of the core samples provided more than a scintilla of

evidence that JTR failed to comply with the stone base terms of

the    paving    contract,       the       trial     court    properly    denied   JTR’s

motion for a directed verdict.                      Id. at __, 721 S.E.2d at 703-

704.

       On the second issue of damages, JTR failed to preserve the

issue for appellate review; however, the Court invoked Rule 2 to

address the issue.             Id. at __, 721 S.E.2d at 704.                   The Court

noted that SBP was seeking three types of damages: (1) direct

damages measured as the reasonable costs to SBP of labor and

materials necessary to correct the asphalt paving services to

bring it into conformity with the requirements of the paving

contract;       (2)        incidental      damages      based     on     the   costs    of

engineering      tests       done     by   the      North    Carolina    Department     of

Transportation; and (3) consequential damages which consisted of

the interest payments SBP made on a development loan and the

lost profits on two lot sales.                      Id. at __, 721 S.E.2d at 704.
                                       -5-
After    comparing    the    jury    instructions        with    the   evidence     at

trial,    this    Court   concluded    that        “[SBP’s]     evidence     did   not

support     the    full     amount    of     the       jury’s    verdict.”         Id.

Specifically, with regard to the direct damages, i.e., the “cost

to fix” damages, the Court held that the direct evidence at

trial only supported an award of $139,560.                    Id.    For incidental

damages, the evidence only supported an award of $6,502.82 paid

to a consultant for testing on the asphalt roads.                       Id. at __,

721 S.E.2d at 704-705.            With regard to SBP’s interest payments

on the loan, the evidence presented at trial supported an award

of $72,017.29, as established by testimony by a loan officer

handling SBP’s loan.        Id.

    In sum, the Court concluded that the evidence supported an

award     “considerably      less”    than       the    jury’s      verdict.       Id.

Therefore, it vacated the damages award and remanded for a new

trial on the issue of damages.             Id.

The Motion to Amend SBP’s Counterclaims on Remand

    On remand, the trial court reopened discovery.                         After the

discovery period was complete, on 17 October 2012, SBP moved to

amend its counterclaims to request additional damages incurred,

arguing that its “damages ha[d] changed significantly from the

original trial in this matter.”               SBP drastically increased its
                                       -6-
claim for lost profit damages and interest payments damages with

these new damages falling into three basic types: lost profits,

“homebuilder premiums,” and interest payments.                        First, instead

of only claiming lost profits based on the lost sales on two of

the lots, SBP claimed lost profits for all 39 lots because, as

Mr. Johnson averred, the bank foreclosed on the subdivision.

Thus, SBP lost any and all potential revenues from selling lots

in the subdivision.           Second, SBP now claimed damages for lost

“homebuilder premiums.”           Mr. Johnson alleged that he was also

the   principal     of   Willow    Brook     Homes,     Inc.,     a    company    that

constructs modular homes.           Since the subdivision was a “closed

development,” each time someone purchased a lot from SBP, he

would be required to purchase a modular home for that lot from

Willow Brook.      To pay off SBP’s loan quicker, Willow Brook would

pay   SBP   a   “homebuilder      premium”    each     time   a   sale    was    made—

$20,000 for the first 10 lots, $15,000 for the next 10, $10,000

for the next 10, and $5,000 for the last dwellings sold.                           The

total   new     amount   of   requested      damages    for     lost    profits    was

$1,137,906.       Third, SBP requested additional damages for the

interest payments made to the bank of $75,033.64.                       Finally, SBP

now claimed an additional amount of $6,205.82 for additional
                                         -7-
engineering fees to inspect the defective work (this on top of

the original damages of $6,502.02).

       In total, on remand, SBP sought to amend its counterclaim

to request over $1.2 million in damages.

JTR’s Motion for Summary Judgment

       On   17    October    2012,    JTR      moved   for    summary       judgment.

Specifically, JTR argued the lost profits damages and damages

related to the interest payments SBP made to the bank on its

loan     were     not      reasonably     foreseeable         and     were     overly

speculative.

The Hearing

       Both matters came on for hearing on 29 October 2012 before

Judge    Royster,    Jr.      After     hearing    from   both      parties,       Judge

Royster, Jr. noted that the Court of Appeals “vacated the jury’s

award of $371,000 and sent it back for retrial on [the] damage

issue.      The     Court    of   Appeals      affirmed      the    fact    that    the

defendant is entitled to damages.                 So the trial is basically

just on the amount of damages.”                With regard to SBP’s motion to

amend, the trial court denied it for two reasons.                          First, the

trial court concluded that it should be denied because it was

filed over four years after the initial counterclaim was filed.
                                        -8-
Second,      it   should   be    denied       due    to    the     speculative         and

unforeseeable nature of the newly requested damages.

      The trial court granted JTR’s motion for summary judgment.

Specifically, the trial court found that interest payments on

the loan would be a “normal cost of doing business” and would

not be foreseeable.           Moreover, the trial court determined that

the lost profit damages were too speculative.                       Thus, the trial

court   concluded     that     SBP    failed    to    “produce         a    forecast   of

evidence that would demonstrate specific facts as opposed to

allegations . . . . to show that they have at least a prima

facie case to be tried.”          By doing so, the trial court dismissed

SBP’s claims; however, since JTR did not challenge SBP’s claims

for damages based on the cost it incurred for engineering tests

in its summary judgment motion, these claims were to be dealt

with at trial.

      SBP    appealed.        After    filing   its       notice    of      appeal,    SBP

voluntarily       dismissed     its    claims       for    the     engineering        test

damages.

                                      Arguments

      SBP argues that the trial court erred in denying its motion

to   amend    its   counterclaim.        Specifically,           SBP       contends   that
                                              -9-
because a “post-appeal occurrence [] significantly altered what

damages

[it]    can    recover        from     JTR,”        the     trial     court      abused    its

discretion in denying it.               We disagree.

       “A motion to amend is addressed to the discretion of the

court, and its decision thereon is not subject to review except

in case of manifest abuse.”                   Calloway v. Motor Co., 281 N.C.

496, 501, 189 S.E.2d 484, 488 (1972).                              “If the trial court

articulates a clear reason for denying the motion to amend, then

our review ends.          Acceptable reasons for which a motion to amend

may    be   denied      are    undue    delay,       bad     faith,    dilatory        motive,

repeated      failure     to     cure       deficiencies,          undue    prejudice      and

futility      of    the   amendment.”           NationsBank          of    N.C.,    N.A.    v.

Baines,     116    N.C.   App.       263,    268,     447    S.E.2d       812,   815   (1994)

(internal quotation marks omitted).

       Here,      the   record    indicates         that     the    trial     court    denied

SBP’s motion to amend based on undue delay and futility.                               During

arguments, the trial court focused a great deal not only on the

length of time that had elapsed between the initial paving work,

approximately four years, but also on the foreseeability and the

speculative nature of these new damages.                            If either of these
                                           -10-
grounds exist, the trial court did not abuse its discretion in

denying SBP’s motion to amend.

       Given     the    substantial      amount     of       time     that    had     elapsed

between the filing of SBP’s counterclaims and the motion to

amend,    the    trial    court’s     denial      of    the    motion        to    amend   was

manifestly       supported       by   reason.            SBP     filed        its    initial

counterclaim in December 2008.                    The first trial occurred in

2010.      After       this   Court   reversed         and    remanded       the     judgment

awarding damages to SBP back to the trial court in December

2011, SBP still did not move to amend its counterclaim until

October 2012, almost four years after the initial counterclaims

were filed and almost one year after remand.                          Moreover, we find

that     SBP’s    reasoning       behind    the        delay     is    not        compelling.

Therefore,       the    trial    court   did      not    abuse      its   discretion        in

denying the motion to amend.

       Next,     SBP    argues    that   the      trial      court     erred       since   its

action violated the appellate mandate.                    We agree.

       It is well-established that an appellate mandate

               is binding upon the trial court and must be
               strictly   followed   without    variation   or
               departure.    No judgment other than that
               directed or permitted by the appellate court
               may be entered.    We have held judgments of
               Superior [C]ourt which were inconsistent and
               at variance with, contrary to, and modified,
               corrected,   altered    or    reversed    prior
                                           -11-
               mandates of the Supreme Court . . . to be
               unauthorized and void.

Lea Co. v. N.C. Bd. of Transp., 323 N.C. 697, 699, 374 S.E.2d

866,     868    (1989)        (internal      quotation        marks       and   citations

omitted).       Thus, the issue is whether the trial court violated

the Silver Birch I mandate.

       In Silver Birch I, this Court addressed two issues.                          First,

the    Court    noted    that       the   trial     court    properly      denied   JTR’s

motion for a directed verdict and submitted the issue to the

jury,    noting     that      SBP    “provided       more    than     a    scintilla   of

evidence regarding [JTR’s] failure to comply with one of the

terms of the paving contract.”                     Id. at __, 721 S.E.2d at 703.

Second, the Court held that the amount of damages awarded by the

jury exceeded what the evidence would support.                            Id. at __, 721

S.E.2d    at    705.     Noting       that    the    amount    of     damages    was   not

supported by the evidence,                this Court vacated the award and

remanded for a new trial “on the issue of damages.”                              Id.    On

remand, this Court also provided the trial court a formula with

which to measure SBP’s direct damages.                  Id.

       While we acknowledge that a directive from an appellate

court     “[does]       not     render       the     Rules    of      Civil     Procedure

inapplicable” on remand, see Britt v. Allen, 37 N.C. App. 732,

733, 247 S.E.2d 17, 18 (1978), here, the trial court’s dismissal
                                           -12-
of SBP’s claims by summary judgment is directly contrary to this

Court’s directive in Silver Birch I to hold a new trial on the

issue of damages because this Court found that SBP was entitled

to certain damages, even though the jury’s award exceeded the

evidence.       In fact, the Court even provided the trial court

with a formula on how to measure the direct damages.                     Id. at __,

721 S.E.2d at 705.          Thus, when the trial court foreclosed on the

possibility    of     SBP    recovering       any    lost   profit   and    interest

payments damages, it violated this Court’s determination that

the evidence supported an award of damages, both of which were

clearly articulated in this Court’s opinion.

       We find our Court’s decision in Metts v. Piver, 102 N.C.

App.   98,   101,   401     S.E.2d   407,     409    (1991),     instructive.      In

Metts, the plaintiff filed a medical malpractice action against

the defendants, and the defendants moved for summary judgment.

Id. at       at 99, 401 S.E.2d at 408.                 The trial court granted

summary judgment, and the plaintiff appealed.                      Id.     On appeal

the first time, this Court reversed the order granting summary

judgment in favor of the defendant, concluding that there was a

genuine issue of material fact as to whether the defendants were

negligent.      Id.         On   remand,    the     defendants   again     moved   for

summary judgment, and the trial court granted the motion.                          Id.
                                           -13-
On    appeal      the   second    time,    this   Court        found    that    the    trial

court’s “ruling on the existence of a genuine issue of material

fact [on remand] is directly contrary to our earlier holding.”

Id. at 100, 401 S.E.2d at 408.                    Thus, the Court reversed the

order and remanded for trial.               Id. at 101, 401 S.E.2d at 409.

       Similarly, here, since this Court ordered a new trial on

the    issue      of    damages   and     provided    a    formula      with        which   to

measure those damages, the trial court’s conclusion that there

was no issue of material fact with regard to SBP’s claim for

lost profit damages and damages based on interest payments SBP

made on its loan conflicted with this Court’s decision in Silver

Birch    I    that      the   evidence    supported       an    award    of    direct       and

consequential damages.             Although this Court concluded that the

amount       of   damages      awarded     exceeded       the    amount        of    damages

supported by the evidence in Silver Birch I, it affirmed that

SBP was entitled to some lost profit damages, damages based on

SBP’s interest payments,             and direct       damages.1          Moreover, the

trial court reiterated this point at the hearing on JTR’s motion

1
  In addition, this Court held that SBP was entitled to $6,502.82
in incidental damages based on payments SBP made to a consultant
to test the roads.     Silver Birch I, __ N.C. App. at __, 721
S.E.2d at 704-705. However, after the trial court granted JTR’s
motion for summary judgment, SBP voluntarily dismissed its claim
for incidental damages.    Therefore, we need not discuss these
damages on appeal.
                                       -14-
for summary judgment when it noted that: “The Court of Appeals

affirmed the fact that the defendant is entitled to damages.”

Thus, as in Metts, we reverse the trial court’s order granting

summary judgment and remand for trial on the issue of damages.2

     Next, we will determine what damages SBP will be entitled

to on remand.      In the original trial, the trial court instructed

the jury that the direct damages were “the reasonable cost to

[SBP] of labor and materials necessary to correct the asphalt

paving     services       to   bring     it     into    conformity     with     the

requirements of the contract.”            Silver Birch I, __ N.C. App. at

__, 721 S.E.2d at 704.           This Court specifically found that the

evidence    at   trial     supported     an   award    of   $139,560   in   direct

damages—$124,250 to repair the subdivision asphalt, $11,310 to

repair   and     reseed    the   sides    of    the    roads,   and    $4,000    in

additional engineering costs.             Id.    Since “the cost of repairs

required to bring the property into compliance with the warranty

or contract” is a proper method of measuring damages for defects

in construction contracts, Warfield v. Hicks, 91 N.C. App. 1,

11, 370 S.E.2d 689, 695 (1988), SBP is entitled to $139,560 in

direct “cost to fix” damages.             However, given that SBP has not

2
  Since we are reversing the trial court’s order granting summary
judgment, we need not address SBP’s final argument regarding the
merits of summary judgment.
                                -15-
paid JTR for its work on the contract, Silver Birch I, __ N.C.

App. at __, 721 S.E.2d at 705, these damages must be offset by

the value of the work performed by JTR for SBP so that SBP does

not receive a windfall recovery.       See id.    Therefore, SBP would

owe   JTR   $13,310.96—the   amount    of   the   contract   price   of

$152,870.96 less the amount of the “cost to fix” direct damages

of $139,560.    Under this measure of damages, SBP will get the

work it contracted for and will pay the price it contracted for,

$152,870.96.

      Furthermore, SBP would be entitled to the lost profits on

two of the lots and damages based on the interest payments SBP

made on its loan.    “[L]ost profits damages are usually defined

as lost net profits[.]”      Stan D. Bowles Distrib. Co. v. Pabst

Brewing Co., 80 N.C. App. 588, 597, 343 S.E.2d 543, 548 (1986).

Accordingly, the jury must determine what SBP’s net profit on

each of the two lost lot sales would be measured in accordance

with this opinion.     Furthermore, as stated by this Court in

Silver Birch I, SBP is entitled to damages based on the interest

payments SBP made to the bank on its loan.         The Silver Birch I

Court held that the amount of the interest payments supported by

the evidence was $72,017.29.     Silver Birch I, __ N.C. App. at
                                  -16-
__, 721 S.E.2d at 705.         Thus, any damages must include the

$72,017.29 for the interest payments SBP made.

                               Conclusion

    In summary, we affirm the trial court’s order denying SBP’s

motion to amend its counterclaims on the basis of undue delay.

However, we reverse the order granting summary judgment in favor

of JTR and remand on the issue of damages in accordance with

this opinion.    The trial court must award $72,017.29 to SBP, the

amount of interest payments that SBP made on its loan to the

bank.   Second, with regard to the cost to fix damages, while SBP

is entitled to $139,560, the amount it would cost to fix the

roads which was established by the evidence in the original

trial, this amount must be offset by the value of the work

performed by JTR based on the contract price since SBP has not

paid anything to JTR for its work.          Accordingly, JTR would be

entitled   to   $13,310.96—the    amount     of    the    contract    price,

$152,870.96,    less   the   amount   of   the    “cost   to   fix”   direct

damages, $139,560.      Finally, the lost profit damages for two

lots is a question for the jury to determine in accordance with

this opinion.

    AFFIRMED IN PART; REVERSED IN PART; REMANDED ON THE ISSUE
    OF DAMAGES.
                         -17-

Judges CALABRIA and HUNTER, JR., ROBERT N. concur.

Report per Rule 30(e).