N.C. Court Of Appeals: Limitations Period Does Not Apply To Local Government Enforcement Of Subdivision Performance Bonds

A post-Great Recession treat, the North Carolina Court of Appeals affirmed today a ruling that the Town of Black Mountain is entitled to enforce subdivision performance bonds originally in the name of Buncombe County, after the Town annexed the land to which the performance bonds applied.

Facts

From March 2005 through February 2007, defendant sureties entered into four subdivision performance bonds related to the development of two residential subdivisions that were, at the time, located within the County's subdivision jurisdiction. County approval of the two projects was conditioned on the developers obtaining those performance bonds, which named the County (and not the Town) as obligee.

At various points between May 2005 and February 2007, the property related to the bonds was annexed into the Town.

The developers eventually folded.

In 2012, the Town contacted the defendant sureties and asked if they would "consent to an assignment of the bonds to the Town". Defendant sureties refused consent.

Later in 2012, the County assigned, and the Town accepted assignment of, the bonds despite defendant sureties' lack of consent. The Town then submitted notice of its claims to defendant sureties, and defendant sureties refused payment on the subdivision performance bonds.

Trial Court

The Town and the County brought a breach of contract suit together "because they anticipated that defendants would challenge standing if either party sued separately". As a result, according to the Court, their claims were "pled in the alternative".

The trial court entered summary judgment in favor of the Town and the County, and the defendant sureties appealed.

Appellate Decision

In Town of Black Mountain v. Lexon Ins. Co., No. COA14-740 (Dec. 16, 2014), the Court of Appeals affirmed.

The Court held as follows: (1) the annexation of land "that is the subject of a private contract between the county and a private citizen" does not "nullif[y] the contract", and the Court refuses defendant sureties'...