Please ensure Javascript is enabled for purposes of website accessibility
Home / Opinion Digests / Contract / Contract – Payment Bond – Subcontractors – Interest

Contract – Payment Bond – Subcontractors – Interest

Boatwright Distribution & Supply, Inc. v. North State Mechanical Inc.  (Lawyers Weekly No. 10-16-0888, 7 pp.) (Rick Elmore, J.) Appealed from Wake County Superior Court (Paul C. Ridgeway, J.) N.C. App. Unpub.

Holding: The third-tier subcontractor was a proper claimant under the terms of a payment bond secured by the first-tier subcontractor. Therefore, its claims against the insurer and first-tier subcontractor were proper even though the third-tier subcontractor’s contract was with the second-tier subcontractor, and even though it was thus alleged that no privity of contract existed between the first and third-tier subcontractors.

We affirm the trial court’s order holding defendants liable to plaintiff for $97,882.

Facts

A first-tier subcontractor and insurer issued a subcontractor’s payment bond assuring payment to persons supplying labor and/or materials for a project.

Boatwright was a third-tier subcontractor. The defendants were the first-tier subcontractor and insurer.

Boatwright delivered goods to the second tier subcontractor pursuant to a contract with it. It later sued to recover amounts it claimed were owed for delivery of the goods.

The trial court found the insurer and first-tier subcontractors jointly and severally liable to Boatwright for the amount owed plus interest.

The insurer and first-tier subcontractors appealed.

Analysis

When reviewing a judgment from a bench trial, the standard of review is whether there is competent evidence to support the trial court’s findings of fact and whether the findings support the conclusions of law and ensuing judgment.

The insurer and first-tier subcontractor argued that the trial court committed reversible error by finding that sufficient evidence existed in support of Boatwright’s right to recover against them because no privity of contract existed between Boatwright and the first-tier subcontractor.

The parties stipulated that Boatwright was a proper claimant under the terms of the first-tier subcontractor’s payment bond.

Boatwright and the second-tier subcontractor had a contract in which Boatwright agreed to supply it with necessary materials to complete its portion of the subcontract.

The first-tier subcontractor admitted in its answer that it subcontracted out the insulation work to the second-tier subcontractor, thus making it its subcontractor.

The first-tier subcontractor was called the principal in the payment agreement. It failed to adequately dispute, and indeed for the most part admitted, that Boatwright was a claimant as defined by the payment agreement. There was competent evidence to support the trial court’s findings of fact in that regard.

The first-tier subcontractor also argued that Boatwright was estopped, by virtue of its conduct, from recovering from it. Boatwright should have notified the first-tier contractor of the problem.

But the first-tier subcontractor had the means to acquire knowledge of the facts in question. It must have known that the second-tier subcontractor was behind on payments to the third-tier subcontractor or, through some fault of its own, failed to look into the matter.

Therefore it cannot succeed on the estoppels claim.

Lastly the insurer and first-tier subcontractor argued that the trial court committed reversible error by finding that Boatwright was entitled to recover prejudgment interest at the contract rate of 18 percent per annum.

In order to receive prejudgment interest on recoveries stemming from a breach of contract involving a payment bond, it must be shown that the amount of damages can be ascertained from the contract.

The uncontested findings of fact establish that Boatwright had a contract with the second-tier subcontractor which required the payment of interest at the rate of 18 percent per annum.

Boatwright had a right to recover under the payment bond, thus satisfying the requirements to receive prejudgment interest on recoveries stemming from a breach of contract involving a payment bond.

Affirmed.


Leave a Reply

Your email address will not be published. Required fields are marked *

*