Contractors must be aware of statutory requirements for filing claims and lawsuits against state DOTs. The contractor’s failure to comply with the requirements may potentially expose the contractor to subcontractor liability and prevent recovery from the state DOT. This problem was recently evident in A.H. Beck Found. Co. v. Jones Bros., Inc., 603 S.E.2d 819 (N.C. 2004).
On Feb. 5, 1997, the North Carolina DOT (NCDOT) awarded Jones Brothers Inc. a contract to construct a new bridge on Highway 49 over the Yadkin River at Tuckertown Lake. Jones subsequently entered into a drilling and casings subcontract with A.H. Beck Foundation Co. Inc.
When Beck began drilling the slope-stabilization shafts, it immediately encountered hard, dense rock below the surface and advised Jones it would require additional compensation and a time extension. Jones submitted a claim to NCDOT on Beck’s behalf on Aug. 11, 1997. NCDOT denied the claim based on NCDOT’s specifications disclaiming the accuracy of subsurface conditions.
Beck continued to encounter dense rock at the drill sites and, as a result, was unable to finish the slope-stabilization portion of the work until April 17, 1998. Jones then submitted a claim from Beck, “Adjustment in Compensation,” to NCDOT, which denied the claim again.
“Equitable estoppel” is toppled
In April 2000, Beck filed a complaint against Jones requesting “at least” $7,973,528.14 in damages. Jones filed a third-party complaint against NCDOT, which was dismissed because Jones “had not yet exhausted the administrative remedies provided under N.C.G.S. § 136-29.”
On Oct. 19, 2001, NCDOT sent Jones a letter titled “Payment of Final Estimate” and attached a check for the final estimate warrant of $5,299.81 and a copy of Estimate 40 labeled “Contract Final Estimate.” Estimate 40 stated: “Amount Transferred To Trust Account This Estimate” was $149,420.58. Obviously, Jones did not recognize the payment was meant to be the final payment and, less than 60 days later, Jones e-mailed NCDOT asking about the final estimate and retainage.
On Jan. 8, 2002, more than 60 days after receipt of the October letter and Estimate 40, Jones sent NCDOT a verified claim for Beck in the amount of at least $7,973,528.14. NCDOT’s state highway administrator rejected the claim for failing to timely submit the verified claim under N.C.G.S. § 136-29, which requires claims to be submitted prior to 60 days after final payment. On April 29, 2002, Jones filed a second third-party complaint against NCDOT. NCDOT filed a motion to dismiss based on the claim being filed more than 60 days after final payment.
The trial court denied NCDOT’s motion to dismiss, concluding that “because a properly titled and executed final estimate was not received by [Jones], the time for [Jones] to file a verified claim under N.C.G.S. § 136-29 has not run.” The trial court also held that NCDOT’s failure to respond to Jones’ December e-mail gave rise to an “equitable estoppel” that tolled the statute of limitations. NCDOT appealed.
The appellate court reversed and granted NCDOT’s motion to dismiss on grounds that Jones failed to follow required statutory procedures to file a complaint against NCDOT. The appellate court concluded that Jones had received final payment in October and had failed to submit its claim in the time specified by N.C. Gen. Stat. § 136-29.
The appellate court also concluded NCDOT’s failure to respond to Jones’ December e-mail did not equitably toll the running of the statute of limitation. The court noted: “In order for equitable estoppel to bar application of the statute of limitations, a plaintiff must have been induced to delay filing of the action by the misrepresentations of the defendant.” NCDOT’s failure to respond to the e-mail was not an affirmative act or misrepresentation giving rise to an equitable defense.
I am sure many contractors resent that NCDOT got off on a technicality and that it knew Jones would never have purposely waived its claim. While that may seem unfair, the contractor bears the burden to know the state DOT’s claims statute requirements and comply with them.