AP Atlantic, Inc. v. Crescent University City Venture, LLC

2017 NCBC 59.

AP ATLANTIC, INC. d/b/a ADOLFSON & PETERSON CONSTRUCTION, Plaintiff, v. CRESCENT UNIVERSITY CITY VENTURE, LLC AND THE GUARANTEE COMPANY OF NORTH AMERICA USA; BB & M ARCHITECTURE, PLLC; SCA ENGINEERS, INC.; MADISON CONSTRUCTION GROUP, INC.; TRUSSWAY MANUFACTURING, INC.; and T. A. KAISER HEATING & AIR, INC., Defendants, v. SEARS CONTRACT, INC. and ARCH INSURANCE COMPANY, Third-Party Defendants.

MADISON CONSTRUCTION GROUP, INC., Third-Party Plaintiff, v. MANUEL BUILDING CONTRACTORS, LLC, Third-Party Defendant.

Nos. 15 CVS 14745, 16 CVS 14844

Superior Court of North Carolina, Mecklenburg

July 13, 2017

Teague Campbell Dennis & Gorham LLP, by Courtney C. Britt and Mindy Wudarsky, for Third-Party Defendant Arch Insurance Company.

Swindell & Bond, PLLC, by John D. Bond, III, and Bradley Arant Boult Cummings LLP, by Douglas L. Patin and Avery A Simmons, for Defendant Crescent University City Venture, LLC.

ORDER AND OPINION ON ARCH INSURANCE COMPANY'S MOTION FOR JUDGMENT ON THE PLEADINGS

Louis A. Bledsoe, III Special Superior Court Judge.

1. THIS MATTER is before the Court upon Third-Party Defendant Arch Insurance Company's ("Arch") Motion for Judgment on the Pleadings (the "Motion") in the above-captioned case.

2. Having considered the Motion, the parties' briefs in support of and in opposition to the Motion, and the arguments of counsel at the hearing on the Motion on May 31, 2017, the Court GRANTS Arch's Motion for Judgment on the Pleadings and dismisses Crescent's claim for breach of contract against Arch without prejudice.

I. FACTUAL BACKGROUND

3. The Court does not make findings of fact on motions to dismiss under Rule 12(c), but only recites those allegations in Crescent's and Arch's pleadings that are relevant and necessary to the Court's determination of the Motion.

4. This case arises out of multi-party litigation regarding the construction of a student housing apartment complex in Charlotte, North Carolina (the "Project"), and the alleged failure of the Project's floor truss system. (Crescent's Am. Countercl. ¶ 2.)

5. Crescent University City Venture, LLC ("Crescent") is the developer and owner of the Project. (Crescent's Am. Countercl. ¶ 2.) On or about December 19, 2012, Crescent executed a construction contract with "AP Atlantic dba Adolfson & Peterson Construction" ("AP Atlantic"), a subsidiary of Adolfson & Peterson, Inc. ("A&P"), to serve as the general contractor for the Project (the "Construction Contract"). (Crescent's Am. Countercl. ¶¶ 3, 9.)

6. Arch is an insurance company that is registered as an active insurance company with the North Carolina Department of Insurance. (Crescent's Am. Countercl. ¶ 1; Arch's Answer ¶ 1.)

7. Arch issued a commercial general liability policy-policy # 51PKG8919400 (the "Policy")-to A&P, with A&P and its subsidiaries, including AP Atlantic, as Named Insureds. (Crescent's Am. Countercl. ¶ 27; Arch's Answer ¶ 27, Ex. 1, 11, 50.) A&P provided Crescent with a certificate of liability insurance that listed Crescent as an additional insured on the Policy. (See Crescent's Am. Countercl. ¶ 27.) The Policy, which was attached to and relied upon in Arch's Answer, ^[1] specifically provides, in relevant part, as follows:

We^[2] will pay those sums that the insured^[3] becomes legally obligated to pay as damages because of "bodily injury" or "property damage"^[4] to which this insurance applies.

(Arch's Answer Ex. 1, 64.)

8. An endorsement modifying the commercial general liability coverage provided in the Policy was added for Owners, Lessees or Contractors, such as Crescent here (the "Endorsement"). (Arch's Answer Ex. 1, 95.) The Endorsement provides:

Section II - Who is An Insured is amended to include as an additional insured the person(s) or organization(s) shown in the Schedule, but only with respect to liability for "bodily injury", "property damage" or "personal and advertising injury" caused, in whole or part, by:

1. Your^[5] acts or omissions; or

2. The acts or omissions on those acting on your behalf;

in the performance of your ongoing operations for the additional insured(s) at the location(s) designated above.

(Arch's Answer Ex. 1, 95.)

9. The Schedule listed the Name(s) of Additional Insured Person(s) or Organizations as "ALL PARTIES WHERE AGREED TO BY A WRITTEN CONTRACT[, ]" which the parties do not dispute included Crescent. (Arch's Answer Ex. 1, 95.)

10. Crescent alleges that AP Atlantic breached the Construction Contract by failing to achieve substantial completion of the Project by the dates required under that contract, as altered by various change orders. Crescent contends that AP Atlantic's alleged breach entitles it to liquidated damages equal to AP Atlantic's full fee as defined by the Construction Contract. (Crescent's Am. Countercl. ¶¶ 35-36, 49.)

11. Crescent additionally alleges that AP Atlantic materially breached the Construction Contract by refusing and failing to repair the Project's allegedly defective and damaged floor truss system and refusing to reimburse Crescent for the cost of the repairs to the floor truss system. (Crescent's Am. Countercl. ¶ 89.) More specifically, Crescent alleges that as a result of A&P's, AP Atlantic's, and their subcontractors' negligence and improper performance, the Project's truss system failed, which resulted in costs, losses, and damages to Crescent that Crescent was obligated to repair (the "Resulting Damage"). (Crescent's Am. Countercl. ¶ 94.) Crescent alleges that such Resulting Damage constitutes a covered "occurrence" resulting in "property damage" as defined by the Policy (the "Claim"). (Crescent's Am. Countercl. ¶ 95; Arch's Answer ¶ 95, Ex. 1.)

12. On June 2, 2015, Crescent provided notice of its Claim arising from the Resulting Damage by letter to A&P, AP Atlantic, and Arch's representative, Willis of Minnesota, Inc. ("Willis"). (Crescent's Am. Countercl. ¶ 96.) Willis acknowledged receipt of the Claim and assigned an adjuster and claim number to the Claim. (Crescent's Am. Countercl. ¶ 97.) Crescent alleges that Arch has breached the Policy by not responding to the notice or providing coverage for Crescent's Claim. (Crescent's Am. Countercl. ¶ 99.)

II. PROCEDURAL BACKGROUND

13. On August 5, 2015, AP Atlantic filed this action against Crescent and The Guarantee Company of North America USA, alleging claims arising out of the Project for (i) breach of the Construction Contract, (ii) suit on bond/enforcement of a claim of lien on real property, (iii) priority and, in the alternative, enforcement of the claim of lien, and (iv) in the alternative, quantum meruit. AP Atlantic subsequently filed an amended complaint on November 20, 2015, alleging various alternative claims against the subcontractor defendants for either breach of contract or negligence.

14. On January 29, 2016, Crescent filed its Answer to the Amended Complaint and asserted a counterclaim against AP Atlantic for breach of the Construction Contract. At the time Crescent filed its counterclaim, Crescent was the plaintiff in a related federal court litigation against AP Atlantic and Arch (the "Federal Court Action").

15. On April 14, 2016, the above-captioned case was designated a complex business case under Rules 2.1 and 2.2 of the General Rules of Practice for the Superior and District Courts and assigned to the undersigned. Thereafter, the parties in this action and in the Federal Court Action agreed to attempt to consolidate the two actions into one forum. Pursuant to that agreement, Crescent voluntarily dismissed the Federal Court Action and, on August 19, 2016, filed a substantially similar action against AP Atlantic in Mecklenburg County Superior Court captioned Crescent University City Venture, LLC v. Adolfson & Peterson, Inc, 2016-CVS-14844 (the "Crescent Action"). The Crescent Action was designated as a mandatory complex business case pursuant to N.C. Gen. Stat. 7A-45.4(b) and assigned to the undersigned by Order of Chief Business Court Judge James L. Gale on August 22, 2016.

16. Shortly thereafter, Crescent moved for consolidation of the above-captioned case and the Crescent Action. On October 10, 2016, the Court consolidated the two actions and designated the above-captioned case as the "Lead Action" for all purposes (the "Consolidation Order").

17. Before the Court entered the Consolidation Order, Crescent moved to amend its counterclaim against AP Atlantic to add Arch as a party to assert a claim against Arch for breach of contract. The claim against Arch for breach of contract had also been asserted by Crescent against Arch in the Federal Court Action.

18. AP Atlantic objected to Crescent's proposed amendment on grounds of undue prejudice and futility. The Court rejected both of AP Atlantic's assertions and, on January 13, 2017, entered an Order granting Crescent's Motion to Amend under N.C. R. Civ. P. 15. The Court concluded that Crescent's allegations were "sufficient to state a claim for breach of contract, and AP Atlantic's attachment of two pages of the Policy to its response brief does not convince the Court that Crescent's proposed counterclaim would be clearly futile." (Order Mot. Am. Countercl. to Add Additional Countercl. Def. 4.)

19. On January 19, 2017, Crescent filed its Answer and Amended Counterclaim, asserting claims against AP Atlantic and Arch, each for breach of contract (as to Arch, the "Claim Against Arch").

20. On March 27, 2017, Arch filed its responsive pleading to the Answer and Amended Counterclaim and moved for judgment on the pleadings under N.C. R. Civ. P. 12(c) seeking dismissal of the Claim Against Arch. Arch attached and incorporated into its responsive pleading the entire Policy.^[6]

21. After full briefing, the Court held a hearing on the Motion on May 31, 2017, at...