Court Opinion

ID: 215211
Source: CourtListenerOpinion
Date Created: 2011-04-21 19:22:08+00
Date Added: 2024-06-11T17:28:23.178727
License: Public Domain

UNPUBLISHED

                  UNITED STATES COURT OF APPEALS
                      FOR THE FOURTH CIRCUIT

                            No. 10-1613

COUNTY OF BRUNSWICK,

                Plaintiff – Appellee,

           v.

LEXON INSURANCE COMPANY,

                Defendant – Appellant.

Appeal from the United States District Court for the Eastern
District of North Carolina, at Wilmington. Terrence W. Boyle,
District Judge. (7:09-cv-00060-BO)

Argued:   March 22, 2011                  Decided:   April 21, 2011

Before SHEDD and DUNCAN, Circuit Judges, and HAMILTON, Senior
Circuit Judge.

Affirmed by unpublished per curiam opinion.

Matthew Elliott Cox, SMITH, CURRIE & HANCOCK, LLP, Charlotte,
North Carolina, for Appellant.    Matthew Hilton Mall, Charles
Carpenter Meeker, PARKER, POE, ADAMS & BERNSTEIN, LLP, Raleigh,
North Carolina, for Appellee.

Unpublished opinions are not binding precedent in this circuit.
PER CURIAM:

      Lexon    Insurance       Company   (“Lexon”)       appeals      the   district

court’s order granting summary judgment in favor of the County

of Brunswick (“the County”).             For the reasons set forth below,

we affirm.

                                         I.

      We view the evidence in the light most favorable to Lexon,

the non-moving party.           Laber v. Harvey, 438 F.3d 404, 415 (4th

Cir. 2006) (en banc).           On May 10, 2006, the County gave Town &

Country Developers (“TCD”) approval to develop the Avalon of the

Carolinas     subdivision       (“Avalon”).       As    a     condition     of   that

approval, TCD executed an Improvement Guarantee Agreement with

the   County       requiring     completion      of    certain     infrastructure

improvements by April 1, 2009.                Additionally, TCD acquired two

performance     bonds    (“the    Bonds”)     from    Lexon    that    provided    an

initial financial guarantee of $5,658,743.44.                    After completion

of a certain portion of the improvements, the Bonds provided a

guarantee of $3,584,875.44.

      On June 17, 2008, the County sent a letter to TCD and Lexon

stating     that     progress     was    not     being      made      on    Avalon’s

infrastructure improvements and that if work did not resume by

the end of the month, the County would declare TCD in default.

On    October       7,   2008,      creditors         foreclosed      on     Avalon.

Subsequently, the County sent a formal notice of default to TCD

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on October 22, 2008.          On April 1, 2009, when performance of the

infrastructure improvements were due to be completed, the County

passed a resolution calling upon Lexon to either complete the

infrastructure improvements or make a payment to the County as

called for in the Bonds.

      When    Lexon   refused      to   make   such    a    payment,    the    County

brought this action to recover the amount due under the Bonds.

The   district   court    granted       the    County’s     motion     for    summary

judgment because the performance secured by the Bonds had not

been completed, and Lexon asserted that it could not complete

performance.     Therefore, the court entered judgment in favor of

the County in the amount due under the Bonds, $3,584,875.44,

plus interest.

                                        II.

      Summary    judgment     is    appropriate       “if   the   pleadings,      the

discovery and disclosure materials on file, and any affidavits

show that there is no genuine issue as to any material fact and

that the movant is entitled to judgment as a matter of law.”

Fed. R. Civ. P. 56(c). If the nonmoving party “fails to make a

showing   sufficient     to    establish       the   existence    of    an    element

essential to that party’s case,” the moving party is entitled to

summary judgment.        Celotex Corp. v. Catrett, 477 U.S. 317, 322

(1986).      We review the district court's order granting summary

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judgment de novo. Jennings v. Univ. of N.C., 482 F.3d 686, 694

(4th Cir. 2007) (en banc).

                                       A.

       First,   Lexon     argues    that       the    district    court    erred    in

granting summary judgment in favor of the County because Lexon

is excused from liability on the Bonds.                  Lexon asserts that the

County had a duty to declare TCD in default, and the County’s

failure to make that declaration prior to Avalon’s foreclosure

materially altered Lexon’s bonded risk, thus excusing it from

liability.      We find that Lexon’s argument fails on both prongs

of its analysis.

       First, the County did not have an obligation to declare TCD

in default.        Under North Carolina law, which the parties agree

controls, “a public performance bond is a contract, governed by

the law of contracts.         Parties entering into public performance

bond are free to contract for any terms they so desire.”                           Town

of     Pineville     v.   Atkinson/Dyer/Watson,          Architects       P.A.,     442
S.E.2d 73,   74   (N.C.   App.   1994).           Therefore,   the     contractual

terms of the Bonds are controlling, and the Bonds do not require

the County to make a declaration of default. See J.A. 12, 19.

       Second, the County’s decision to declare TCD in default

only    after   Avalon’s     foreclosure        did    not    prevent     Lexon    from

completing TCD’s performance obligations.                    As the district court

noted, TCD’s conduct, not the County’s conduct, deprived Lexon

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of    the    option       to    complete         performance,       because      TCD       allowed

Avalon to fall into foreclosure.                        See, Hunt Constr. Group, Inc.

v.    Nat’l     Wrecking        Corp.,     542     F.     Supp.    2d     87    (D.D.C.         2008)

(relieving          a     surety      of         liability        where        the     obligee’s

unreasonable conduct deprived surety of its contractual option

to complete performance).                  Furthermore, Avalon’s foreclosure did

not materially alter Lexon’s contractual risk.                             Foreclosure is a

risk that Lexon freely could contract and exact premiums for in

bonding TCD’s performance.                  See Interstate Equip. Co. v. Smith,

234 S.E.2d 599,       601   (N.C.       1977)     (“[I]n       entering       into       the

contract the surety is chargeable with notice . . . [of all]

factors to be considered in determining the risk, and upon which

the surety fixes the premiums exacted for executing the bond.”)

(internal citations omitted).

                                                  B.

        Lexon      also    argues         that     this     action      should        be    stayed

pursuant      to    North       Carolina’s         Permit    Extension          Act    of       2009.

However, the Permit Extension Act specifically does not apply to

bond obligations.               See 2010 N.C. Sess. Laws 177 Section 5(8)

(“This      act    shall       not   be    construed       or     implemented         to    .    .   .

[m]odify any person’s obligations or impair the rights of any

party       under       contract,         including         bond     or        other       similar

undertaking.”).                 Therefore,             Lexon’s     argument           that        its

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obligations under the Bonds should be extended fails because the

Permit Extension Act, on its face, is inapplicable to the Bonds.

                                         C.

     In its final argument, Lexon maintains that the district

court   erred    in   awarding    prejudgment         interest      to   the   County.

Lexon   did     not   raise   this     issue       before   the     district    court.

“[I]ssues raised for the first time on appeal generally will not

be considered . . . [except] in very limited circumstances, such

as where refusal to consider the newly-raised issue would be

plain   error    or   would   result    in     a    fundamental      miscarriage   of

justice.”       Muth v. United States, 1 F.3d 246, 250 (4th Cir.

1993) (internal citations omitted).                  We find that the district

court   did     not   plainly    err   in     relying       on    controlling    North

Carolina law to award prejudgment interest.                      See N.C. Gen. Stat.

Ann. § 24-5 (“In an action for breach of contract, except an

action on a penal bond, the amount awarded on the contract bears

interest from the date of breach.”); Interstate Equip. Co., 234
S.E.2d at 601 (charging surety with prejudgment interest because

“[t]he trend in North Carolina is . . . toward allowing interest

in almost all cases involving breach of contract, and where the

amount of damages can be ascertained from the contract, interest

is allowed from the date of the breach”).

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                              III.

     For the foregoing reasons, we affirm the order granting

summary judgment in favor of the County.

                                                    AFFIRMED

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