N.C. Court of Appeals: Limitations Period Does Not Apply to Local Government Enforcement of Subdivision Performance Bonds
At various points between May 2005 and February 2007, the property related to the bonds was annexed into the Town.
The developers eventually folded.
In 2012, the Town contacted the defendant sureties and asked if they would "consent to an assignment of the bonds to the Town". Defendant sureties refused consent.
Later in 2012, the County assigned, and the Town accepted assignment of, the bonds despite defendant sureties' lack of consent. The Town then submitted notice of its claims to defendant sureties, and defendant sureties refused payment on the subdivision performance bonds.
The trial court entered summary judgment in favor of the Town and the County, and the defendant sureties appealed.
The Court held as follows: (1) the annexation of land "that is the subject of a private contract between the county and a private citizen" does not "nullif[y] the contract", and the Court refuses defendant sureties' efforts to read Stillings v. City of Woinston-Salem, 311 N.C. 689 (1984) to that degree; (2) the bonds, themselves, do not at all indicate that assignment from the County to the Town was impermissible or without legal effect; (3) the three-year statute of limitations at NCGS 1-52 does not apply to subdivision performance bonds entered into pursuant to NCGS 153A-331, because that is a governmental activity and so the Town is protected under the doctrine of nullum tempus occurrit regi, relying on Rowan County Bd. of Educ. v. U.S. Gypsum Co., 87 N.C. App. 106 (1987) and Rowan County Bd. of Educ. v. U.S. Gypsum Co., 332 N.C. 1 (1992).
The defendant sureties are not entitled to a "windfall", the Court opines, a result which any other analysis would create. The Town will get its funds to complete the subdivision improvements initally promised to the County.
We take special note of the statute of limitations portion of the ruling, which could open the door in North Carolina to a number of suits on unclaimed performance bonds entered into before the real estate development climate turned "south" in 2009. Time is not, as the Court sees it, of the essence to the local government in enforcing certain of these obligations.
Mike Thelen practices in Womble, Carlyle's Real Estate Litigation and Land Use practice group. He regularly represents a wide variety of clients, from local governments to businesses, in land use and land development matters in both state and federal venues throughout North Carolina.