New Bern Riverfront Development, LLC et al v. Humphrey Heating and Air Conditioning, Inc. et al

UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF NORTH CAROLINA
RALEIGH DIVISION
IN RE:
NEW BERN RIVERFRONT DEVELOPMENT,
LLC,
DEBTOR.
NEW BERN RIVERFRONT DEVELOPMENT,
LLC,
Plaintiff
v.
WEAVER COOKE CONSTRUCTION, LLC;
TRAVELERS CASUALTY AND SURETY
COMPANY OF AMERICA; JDAVIS
ARCHITECTS, PLLC; FLUHRER REED, PA; and
NATIONAL ERECTORS REBAR, INC. f/k/a
NATIONAL REINFORCING SYSTEMS INC.,
Defendants
and
WEAVER COOKE CONSTRUCTION, LLC and
TRAVELERS CASUALTY AND SURETY
COMPANY OF AMERICA,
Defendants, Counterclaimants and
Crossclaimants,
v.
CASE NO.
09-10340-8-JRL
CHAPTER 11
ADVERSARY
PROCEEDING NO.
10-00023-8-JRL
SO ORDERED.
SIGNED this 05 day of October, 2011.
________________________________________
J. Rich Leonard
United States Bankruptcy Judge
____________________________________________________________
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JDAVIS ARCHITECTS, PLLC; FLUHRER REED
PA; SKYSAIL OWNERS ASSOCIATION, INC.;
WACHOVIA BANK, NATIONAL ASSOCIATION
and WELLS FARGO & COMPANY f/d/b/a
WACHOVIA CORPORATION,
Crossclaim Defendants.
and
NATIONAL ERECTORS REBAR, INC.,
Defendant, Counterclaimant, Crossclaimant,
and Third-Party Plaintiff,
v.
ROBERT ARMSTRONG, JR., ROBERT P.
ARMSTRONG, JR., INC., SUMMIT DESIGN
GROUP, INC., JMW CONCRETE
CONTRACTORS, and JOHNSON’S MODERN
ELECTRIC COMPANY, INC.,
Third-Party Defendants.
and
JDAVIS ARCHITECTS, PLLC,
Third-Party Plaintiff,
v.
MCKIM & CREED, P.A.,
Third-Party Defendant.
ORDER
This matter came before the court on JDavis Architects, PLLC and Fluhrer Reed, PA’s
motions to dismiss cross-claims of defendant National Erector Rebar, Inc. and on third-party
defendant JMW Concrete Contractors’ motion to dismiss the third-party complaint asserted
against it by National Erector Rebar, Inc. Counsel have agreed that the motions may be decided
without further hearing.
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The plaintiff, New Bern Riverfront Development, LLC (“NBRD”) initiated this
adversary proceeding against various defendants including National Erectors Rebar, Inc.
(“National”), JDavis Architects, PLLC, (“JDavis”), Fluhrer Reed, PA (“Fluhrer”), and Weaver
Cooke Construction, LLC, (“Weaver Cooke”). Among its many claims, NBRD asserted claims
against National for professional negligence and common law negligence. National filed a
motion to dismiss the claims of NBRD against it. In addition, National brought cross-claims
against defendants JDavis and Fluhrer, and a third-party complaint against JMW Concrete
Contractors (“JMW”), asserting that these parties were liable to National for contribution and
indemnity. 	In response, JDavis, Fluhrer, and JMW moved to dismiss the respective claims
asserted against them. The ruling on these subsequent motions to dismiss was reserved until
after the court considered National’s motion to dismiss the claims of NBRD, which the court
denied on May 24, 2011.
Background
NBRD owned real property in Craven County, North Carolina, and developed it into the
SkySail Luxury Condominiums (“the project”). Weaver Cooke, the general contractor for the
project, hired National as a subcontractor to design and construct a post-tensioning concrete
system (“the PT system”), which is a series of cables embedded in concrete structures integrated
into the project to provide support. NBRD directly contracted with JDavis as architect, who was
responsible for designing the rest of the project’s structural elements besides the PT system. The
structural engineering for most of the structure was performed by Fluhrer pursuant to a contract
with JDavis. JDavis oversaw the manner in which the PT system connected with the rest of the
components of the project. JMW was a subcontractor on the project that contracted with Weaver
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1 Negligence was the sole basis for National’s claims against JMW.
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Cooke to perform concrete work on the project.
After completion of the design and construction of the PT system, the system failed in
three separate sections. The failure caused the surrounding concrete to fracture and the
reinforcing steel cables to be displaced. The fracturing and displacement caused concrete debris
to fall from above onto the deck of the parking garage of the project. NBRD’s lawsuit is based,
among other things, on the damage done by the failure of the PT system. NBRD asserted a
negligence claim against National on the grounds of professional negligence and common law
negligence. National brought cross-claims for contribution and indemnity against defendants
JDavis and Fluhrer and third-party defendant JMW, based on their negligence and negligent
misrepresentations.1 JDavis, Fluhrer, and JMW moved to dismiss the claims of National for
contribution and indemnity.
Discussion
National’s claims for contribution and indemnity are pled in the alternative. The claims
for contribution are governed by N.C. Gen. Stat. § 1B-1(a), which provides a right to
contribution “where two or more persons become jointly or severally liable in tort for the same
injury.” National seeks indemnity only under an implied-in-law theory, which is “a common law
right to indemnification for a passively negligent tort-feasor from an actively negligent tort-
feasor, for injuries caused to third parties.” Kaleel Builders, Inc. v. Ashby, 161 N.C. App. 34,
41, 587 S.E.2d 470, 475 (2003). JDavis, Fluhrer, and JMW (collectively “movants”) move to
dismiss the claims for failure to state a claim upon which relief can be granted pursuant to Rule
12(b)(6) of the Federal Rules of Civil Procedure (made applicable to adversary proceedings by
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Federal Rule of Bankruptcy Procedure 7012).
A. Underlying injury sounding in tort
In support of their motions to dismiss the claims of National, the movants share the same
core argument. They contend that because National can only be found liable for breach of
contract, there is no underlying tort injury, and therefore, the tort theories of contribution and
implied-in-law indemnity do not apply. It is undisputed that “both implied-in-law indemnity and
contribution require an underlying tort injury.” CBP Resources, Inc. V. SGS Control Serv., Inc.,
394 F.Supp.2d 733, 741 (M.D.N.C. 2005) (citing Kaleel Builders, 161 N.C. App. at 41, 587
S.E.2d at 475; Holland v. Edgerton, 85 N.C. App. 567, 571, 355 S.E.2d 514, 517 (1987)).
Furthermore, National agreed that NBRD failed to state a claim against it for negligence, and
moved the court to dismiss the claims. However, National contended that so long as the
underlying negligence claims asserted against it remain, it may rightfully pursue claims for
contribution and implied-in-law indemnity based upon those allegations. Because of the
dependant nature of the claims at issue, the court’s ruling on National’s motion to dismiss
NBRD’s claim for negligence was outcome determinative as to the movants’ motions to dismiss
the claims of National for contribution and implied-in-law indemnity.
On May 24, 2011, the court found that NBRD sufficiently pled a claim for negligence
against National on two separate grounds—professional negligence and common law negligence.
In light of the court’s ruling, it is clear that the movants’ argument fails. Because the claims of
NBRD subject National to potential tort liability, it may rightfully base claims for contribution
and implied-in-law indemnity based upon those allegations.
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2 The movants’ central argument was that National failed to state a claim for implied-in-
law indemnity or contribution because there was not an “underlying tort,” which has already
been addressed above. Notably, this was the movants’ sole argument against National’s claim
for contribution.
3 As mentioned above, negligent misrepresentation was not a basis for National’s claims
against JMW.
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B. National’s Claim for implied-in-law indemnity
The movants also share the contention that National has failed to sufficiently state a
claim for implied-in-law indemnity.2 The North Carolina Supreme Court has described implied-
in-law indemnity as a situation in which “two persons are jointly liable in respect to a tort, one
being liable because he is the actual wrongdoer, and the other by reason of constructive or
technical fault imposed by law, the latter, if blameless as between himself and his cotortfeasor,
ordinarily will be allowed to recover full indemnity over against the actual wrongdoer.” Hayes
v. City of Wilmington, 243 N.C. 525, 543, 91 S.E.2d 673, 686 (1956). Stated more simply,
implied-in-law indemnity “arises from an underlying tort, where a passive tort-feasor pays the
judgment owed by an active tort-feasor to the injured third party.” 	Kaleel Builders, 161 N.C.
App. at 39, 587 S.E.2d at 474.
National has pled that in the event that it is held liable for any alleged damages, then it is
entitled to recover the same from the movants based on their negligence and negligent
misrepresentations.3 In this respect, National makes specific allegations as to each movant’s
active negligence with respect to work performed on the project and contends that such
negligence is the cause of damages allegedly arising from the underlying tort. Viewing the
claims in the light most favorable to the non-movant, the claims for implied-in-law indemnity are
sufficiently pled against the movants such that they survive the motions to dismiss at this phase
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of the proceeding.
C. JMW’s reliance on the completed and accepted work doctrine
In addition to the arguments shared with the other movants, JMW contends that
National’s claims based on JMW’s alleged negligence should be dismissed pursuant to the
completed and accepted work doctrine. JMW argues that because its concrete work on the
project was completed and accepted by Weaver Cooke, the third-party complaints against JMW
should be dismissed. The court finds that JMW’s argument lacks merit. The completed and
accepted work doctrine establishes “the general rule that an independent contractor is not liable
for injuries to third parties occurring after the contractor has completed the work and it has been
accepted by the owner.” Price v. Johnston Cotton Co., 226 N.C. 758, 759, 40 S.E.2d 344, 344
(1946) (emphasis added) (citations omitted); see Nifong v. C.C. Mangum, Inc., 121 N.C. App.
767, 768–69, 468 S.E.2d 463, 465 (1996) (explaining the completed work doctrine and its
exceptions as applied in North Carolina). JMW contends that Weaver Cooke, the general
contractor for the project, accepted its completed work. However, because NBRD is the owner
of the project—not Weaver Cooke—JMW’s reliance on the completed work doctrine is
misplaced.
D. JMW’s motion to dismiss the third-party complaint filed in state court for insufficient
service of process
JMW also contends that it never received adequate service of process, and therefore,
National’s third-party complaint should be dismissed. On March 30, 2009, NBRD filed its first
complaint in Wake County Superior Court, naming National, among others, as defendant. On
September 10, 2009, National filed a third-party complaint, naming JMW as a third-party
defendant. It is undisputed that JMW is a sole proprietorship owned by Mr. Jerry Holyfield, Jr.
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4 Alias and pluries summons are governed by Rule 4(d) of the North Carolina Rules of
Civil Procedure, which states:
When any defendant in a civil action is not served within the time allowed for
service, the action may be continued in existence as to such defendant [if] . . . [t]he
plaintiff [sues out] an alias or pluries summons returnable in the same manner as the
original process. Such alias or pluries summons may be sued out at any time within
90 days after the date of issue of the last preceding summons in the chain of
summonses or within 90 days of the last prior endorsement.
N.C. R. Civ. P. 4(d).
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(“Mr. Holyfield”), and as such, JMW must be served pursuant to Rule 4(j)(1) of the North
Carolina Rules of Civil Procedure. On September 11, 2009, National attempted service by
mailing a copy of the third-complaint and summons to the address of JMW Concrete
Contractors, Inc., an entity that purchased the assets of JMW in August 2009. Because process
was not properly served on Mr. Holyfield or his registered agent, the attempted service of
process did not comply with Rule 4(j)(1). See Park v. Sleepy Creek Turkeys, Inc., 60 N.C. App.
545, 548, 299 S.E.2d 670, 671–72 (1983); Hall v. Lassiter, 44 N.C. App. 23, 25, 260 S.E.2d.
155, 157 (1979). On November 19, 2009, National obtained an alias and pluries summons as to
various third-party defendants, including JMW, which kept National’s action against JMW in
existence even though process had not yet been properly served.4 The state court proceeding
was stayed on November 30, 2009 pursuant to NBRD’s filing for bankruptcy, and on December
16, 2009, NBRD filed a notice of removal.
When a case has been removed in which a “defendant[] has not been served with process
or in which the service has not been perfected prior to removal, or in which process [was]
defective, such process or service may be completed or new process issued in the same manner
as in cases originally filed in such district court.” 28 U.S.C. § 1448. However, § 1448 cannot
revive an action that was subject to dismissal prior to removal. See Maxwell v. Nat’l Gypsum
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Co., 2003 U.S. Dist. LEXIS 7367, at *1–2 (M.D.N.C. 2003) (explaining that because “the time
period during which Plaintiff could serve the summons, have the time for its service extended
through endorsement, or seek issuance of an alias or pluries summons ended,” the case could not
be revived by § 1448). As applied to the case at hand, even though JMW was not served prior to
removal, National had taken appropriate steps in causing an alias and pluries summons to be
issued prior to removal, thereby preserving its action against JMW and retaining the ability to
serve JMW via federal process.
Rule 4(m) of the Federal Rules of Civil Procedure governs the time limit for service of
process in a federal proceeding:
If a defendant is not served within 120 days after the complaint is filed, the court —
on motion or on its own after notice to the plaintiff — must dismiss the action
without prejudice against that defendant or order that service be made within a
specified time. But if the plaintiff shows good cause for the failure, the court must
extend the time for service for an appropriate period. . . .
Fed. R. Civ. P. 4(m). In a removal action where § 1448 service is available, the 120-day
service period commences on the date of removal. Motsinger v. Flynt, 119 F.R.D. 373, 376
(M.D.N.C. 1988). In this case, the state court action was removed on December 19, 2009,
and therefore, National was required to serve JMW in the following 120 days or before April
19, 2010. It is undisputed that National failed to serve JMW within this period.
However, even though the Rule 4(m) service period has run, the court must consider
whether there was good cause for National’s failure to serve JMW within the service period.
In regard to this question, the court finds two events particularly relevant. First, on March
11, 2010— over a month before the 120-day service period had run—all parties appeared
before this court for a status conference at which the status of the pleadings was among the
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issues discussed. At the conference, counsel for National called attention to the fact that not
all parties had responded to the third-party claims asserted in the state court proceedings.
NBRD made clear that it intended to move the court to amend its pleadings. Accordingly,
all parties agreed not to stand on the state court pleadings, but instead, to use the amended
pleadings as the basis for the lawsuit. Therefore after the conference, National did not make
efforts to remedy the defects in service of the state court action because it believed that
service of the state court pleadings would be futile.
The second complicating factor was the death of Mr. Holyfield. In accordance with
the discussions at the status conference, NBRD filed a motion to amend on March 19, 2010,
and on May 4, 2010, the court granted the motion. 	On May 6, 2010, NBRD filed its
amended complaint. Mr. Holyfield, the owner and sole proprietor of JMW, died on May 20,
2010. In response to the claims of NBRD and the cross-claims of Weaver Cooke, National
filed the third-party complaint against multiple parties, including JMW. National caused a
summons to be issued to JMW on July 8, 2010. 	However, counsel for JMW refused to
accept service and the estate file for decedent Jerry Holyfield was not opened until August
23, 2010. Once National became aware that the estate file was open, it promptly caused a
summons to be re-issued and served on the administrator of the estate of Mr. Holyfield.
Based of the foregoing, the court finds that while National undoubtedly ran afoul
of Rule 4(m) by not properly serving JMW for well over 200 days after removal, good
cause has been shown for this failure. Accordingly, the court extends the service period
until such time that service on JMW was completed.
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Conclusion
Based on the foregoing, the movants’ motions to dismiss National’s claims for
contribution and indemnity are DENIED.
END OF DOCUMENT
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