Gaston Cnty. Bd. of Educ. v. Shelco, LLC

877 S.E.2d 316

GASTON COUNTY BOARD OF EDUCATION, Plaintiff,

v.SHELCO, LLC, S&ME, Inc., 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.

No. COA21-618

Court of Appeals of North Carolina.

Filed August 16, 2022

Tharrington Smith, L.L.P., Raleigh, by Patricia Ryan Robinson, Rod Malone and Colin A. Shive for the Plaintiff-Appellant.

Hedrick Gardner Kincheloe & Garofalo LLP, Charlotte, by Gerald A. Stein, II, Tyler A. Stull and M. Duane Jones for Defendant-Appellant (Shelco).

Parker Poe Adams & Bernstein LLP, Raleigh, by Collier R. Marsh and Daniel K. Knight, for Defendant-Appellant (Boomerang).

Ragsdale Liggett PLLC, by Sandra Mitterling Schilder and Amie C. Sivon, Raleigh, for Defendant-Appellee (S&ME).

Rosenwood, Rose & Litwak, PLLC, by Nancy S. Litwak, Charlotte, 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:

¶ 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. 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 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 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.

¶ 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 added).

¶ 21 In Richland , the trial court granted a defendant's Rule 12(b)(6) motion but considered other...