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 11 day of August, 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 the motion of third-party defendant McKim &
Creed, P.A. to dismiss the third-party complaint asserted against it by JDavis Architects, PLLC.
A hearing was held on August 10, 2011, in Raleigh, North Carolina.
The third-party complaint at issue relates to the primary litigation initiated by the debtor,
New Bern Riverfront Development, LLC, (“NBRD”) against various defendants including
JDavis Architects, PLLC, (“JDavis”) and Weaver Cooke Construction, LLC, (“Weaver Cooke”).
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NBRD owned real property in Craven County, North Carolina, and developed it into the SkySail
Luxury Condominiums (“the project”), which is the subject of this adversary proceeding.
Weaver Cooke, the general contractor for the project, filed a crossclaim against JDavis. NBRD
and Weaver Cooke’s claims against JDavis prompted JDavis to file the instant third-party
complaint against McKim & Creed, P.A., (“McKim”).
BACKGROUND
NBRD contracted directly with JDavis to serve as the licensed architect on the project.
JDavis was charged with designing most of the project’s structural elements except for the post-
tensioning concrete system (“PT system”). The general contractor, Weaver Cooke, was
responsible for hiring a subcontractor to design and construct the PT system, which is a series of
cables embedded in concrete structures integrated into the project to provide support. JDavis
was responsible for overseeing and designing the manner in which the PT system connected with
other structural elements of the project such as the vertical walls adjoining the PT system.
JDavis hired McKim to provide professional surveying and civil engineering services for the
project overall.
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. NBRD’s lawsuit is based, among other things, on the
damage done by the failure of the PT system. NBRD asserted claims for breach of contract
against Weaver Cooke and JDavis. In response, Weaver Cooke asserted crossclaims for
negligence and negligent misrepresentation against JDavis. The claims prompted JDavis to file a
third-party complaint against McKim for negligence, implied-in-law indemnity, and
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1The contract includes a clause labeled as “Indemnification” which provides a right of
indemnification to McKim for damage caused by JDavis.
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contribution. To the extent that JDavis is found liable for any damages suffered by NBRD
and/or Weaver Cooke, JDavis asserts such damages were caused by McKim’s deviations from
its duties of care. JDavis moved to amend its original third-party complaint to add claims of
breach of contract and express contractual indemnity. On April 29, 2011, the court granted
JDavis’ motion, specifying that the allowed amendment did not prohibit McKim from
subsequently moving to dismiss the original and added claims.
DISCUSSION
Turning to the claim for express indemnification, the court finds the claim is properly
alleged. The contract signed by the parties has indemnification clauses that can plausibly be
interpreted as running to both parties. 1 Ambiguities in contracts are construed against the party
who drafted them—here, McKim. Jones v. Palace Realty Co., 226 N.C. 303, 305-06 (1946).
The contract between JDavis and McKim includes a clause entitled “Liability” which states
“[McKim] agrees to compensate [JDavis] for loss, damage, injury or liability arising directly and
exclusively from the negligent acts or omissions of [McKim] . . . but only to the extent that the
same is actually covered and paid under the foregoing policies of insurance.” Although the
clause is labeled as a liability clause, the contract also includes a “paragraph headings” clause
which states that the headings shall not affect the meaning or interpretation of the agreement.
Therefore, construing the “Liability” clause against McKim, JDavis has sufficiently stated a
claim for express indemnity at this phase of the pleadings.
As to the breach of contract claim, JDavis has sufficiently alleged that McKim failed to
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2For a more detailed discussion, see the court’s May 24, 2011 order (DE #169) denying
the motion to dismiss filed by National Erectors Rebar, Inc., against NBRD at 8-11.
3Rule 12(b)(6) is made applicable to adversary proceedings by Federal Rule of
Bankruptcy Procedure 7012.
4Claims of contribution and indemnity are based on the plaintiff’s ability to assert a tort-
based claim, here negligence, against the defendant on the theory that the defendant was either a
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perform its duties as required by the contract, one of which requires McKim to perform in a
manner consistent with that degree of care and skill ordinarily exercised by members of the same
profession. Finally, as to the remaining three claims—negligence, implied-in-law indemnity,
and contribution—JDavis has also sufficiently stated these tort-based claims. North Carolina
law provides a general rule that a breach of contract does not give rise to a tort action between
the contracting parties. N.C. State Ports Authority v. Lloyd A. Fry Roofing Co., 294 N.C. 73, 81
(N.C. 1978) rejected in part on other grounds by Trs. Of Rowan Tech. Coll. v. J. Hyatt
Hammond Assocs., Inc., 313 N.C. 230 (1985); See also Moore v. Coachmen Industries, Inc., 129
N.C. App. 389, 401 (1998). There are certain exceptions to this rule,2 and JDavis argues an
additional rule allows claims based on negligence to be asserted against McKim. The North
Carolina Court of Appeals has held that “[a]n engineer may be held liable in tort for breach of
professional duty, even if its work is pursuant to a contract with the injured party and the injury
suffered is to property which is the subject matter of the contract.” PVC, Inc. v. McKim &
Creed, P.A., 188 N.C. App. 632 (2008) (citations omitted). JDavis’ complaint asserts that
McKim is an engineer that is held to this professional duty of care and that McKim breached this
duty causing the injury at issue. Therefore, for purposes of a motion to dismiss pursuant to Rule
12(b)(6) 3 of the Federal Rules of Civil Procedure, JDavis has properly asserted claims of
negligence, contribution and indemnity. 4
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joint tortfeasor or an active tortfeasor in relation to the plaintiff’s role in an injury caused to a
third party. See Kaleel Builders, Inc. v. Ashby, 161 N.C. App. 34, 45-47 (2003) (discussing
generally the requirement of a tortious injury as well as a joint-tortfeasor relationship for a claim
of contribution and active-passive tortfeasor relationship for a claim of indemnification).
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Based on the foregoing, the third-party defendant’s motion to dismiss the third-party
plaintiff’s complaint is DENIED.
“END OF DOCUMENT”
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