GUEST COLUMN
Are public payment bond rights assignable
under North Carolina law? Maybe.

By Brett Becker
Special to North Carolina Construction News
Contractors, like other busi-
nesses, often find it advantageous to
assign their accounts in exchange
for some other form of consideration
from the assignee. What is different
about a contractor’s accounts, as
compared to most other businesses,
is that the amounts owed might be
secured by payment bonds.

It should not be disputed that a
contractor can assign its accounts to
a third party so long as the proper
procedures are followed. However, if
the accounts relate to a project
where the contractor would have a
valid claim on a public payment
bond, can this right be assigned
along with the accounts?
Practically, the ability of a third
party purchaser to make a bond
claim would make the assignment of
accounts more lucrative for the as-
signee and would provide some bar-
gaining power for the contractor
who wants to assign the accounts.

However, once the accounts are as-
signed and the third party assignee
goes to make a claim on the bond
and enforce that claim in court, will a
court dismiss the action right off the
bat for lack of standing of this new
claimant? In North Carolina, maybe.

Under the plain terms of North
Carolina’s Little Miller Act, claimants
under payment bonds are discussed
in terms of those “who have per-
formed labor or furnished materials
in the prosecution of work required
by any contract” without any lan-
guage expanding this to “or their as-
signs.” A plain reading of North
Carolina’s Little Miller Act would sup-
port the argument that only those
[1] parties who actually worked on the
project would have standing to bring
an action on the payment bond.

But not so fast – it does not ap-
pear North Carolina courts have ad-
dressed the issue of assignability of
public payment bond claims and the
resulting standing of the assignee
under the Little Miller Act. If faced
with the question, North Carolina
courts should look to federal law in-
terpreting the federal Miller Act “on
which our corresponding state act is
modeled . . . .”
HSI NC, LLC v. Diversified Fire Pro-
tection of Wilmington, Inc., 169 N.C.

App. 767, 771-72, 611 S.E.2d 224,
227 (2005); McClure Estimating Co.

v. H.G. Reynolds Co., Inc., 136 N.C.

App. 176, 181, 523 S.E.2d 144, 147
(1999). And in doing so, the North Car-
olina courts should see that “as-
signees of the claims of persons
furnishing labor or material c(o)me
within the protection of the (federal
Miller Act).”
U.S. for Benefit and on Behalf of
Sherman v. Carter, 53 U.S. 210, 219,
77 S.Ct. 793, 798 (1957) (rejecting
surety’s argument that claimant had
not furnished labor or materials to the
project); see U.S. ex rel. Construc-
tors, Inc. v. Gulf Ins. Co., 313 F. Supp.

2d 593, 597 (E.D. Va. 2004) (approv-
ing of the decisions in Carter and rec-
ognizing the ability of a “valid
assignee [to] properly claim payment
under a Miller Act bond”). [1]
Furthermore, allowing an as-
signee to make a claim on a pay-
ment bond advances the very
purposes of North Carolina’s Little
Miller Act. A payment bond is in-
tended for the “protection of the per-
sons furnishing materials or
performing labor . . . .” N.C.G.S. §
44A-26. Payment bonds “were de-
signed for the protection of laborers
and materialmen and are to be con-
strued liberally for their benefit.”
Symons Corp. v. Ins. Co. or N. Am.,
94 N.C. App. 541, 544, 380 S.E.2d
550, 552 (1989). Under this context,
it is beneficial to allow assignability.

For example, without the ability to
assign payment bond claims, a con-
tractor in need of cash flow in order
to stay on and finish a project is less
likely to find funding through factor-
ing agreements. By ensuring credit
will be readily extendable to contrac-
tors, contractors may be less likely
to walk off of public projects before
substantial completion. This, in turn,
enhances the public’s interest to pre-
vent avoidable delays in a public con-
struction project and the contractors’
private interests as well. This is just
one way allowing assignability of
payment bond claims may be in both
the public’s interest and in contrac-
tors’ interests.

Therefore, while the question has
not been conclusively decided in
North Carolina, there are arguments
supporting the ability of contractors
to assign their payment bond claims
along with their accounts. Under-
standing this can be an effective
business tool for contractors.

Nexsen Pruet's Construction Group is
one of the leading construction practices
in the Carolinas. Our attorneys have expe-
rience in all areas of the construction in-
dustry and have worked throughout
North and South Carolina for many years.

Brett Becker is an associate in Nexsen
Pruet’s Greensboro office and may be
reached at 336.387.5150 or
bbecker@nexsenpruet.com. In Gulf Ins. Co., the court ultimately determined an actual assignment had not occurred and there was no viable claim because the
subcontractors, who alleged assignee claimed it was subrogated to, were not owed any payments. 313 F. Supp. 2d at 598.

14 — Summer 2018 — The North Carolina Construction News



PROJECTS AND OPPORTUNITIES
Work begins on Strawberry
Hill redevelopment project
in Charlotte
MPV Properties says that it
started construction on a redevelop-
ment for its Strawberry Hill shopping
center in South Charlotte.

and the Sam's Quick Shop bar and
beer store.

While the sale hasn't been offi-
cially completed, Wilmorite submit-
ted the plans to the Durham
City-County Planning Department in
June. The existing structures on the
site will be demolished.

Sam's owner John Boy owns the
site, consisting of four separate
parcels. HHHunt starts construction
work on $43 million
community be completed by Labor Day.

The Herald-Sun says the center
will also see a host of new leases in-
cluding a craft store, a brewery, a
coffee shop and a bakery.

Redevelopment will also include
the planting of trees in the parking
lot and along the sidewalks for more
shade. A local real estate group, which
includes Russ Jones and Henry
Ward, partners with Loden Properties
in Raleigh, bought the shopping cen-
ter for $3.45 million in 2016.

Trinity Capital to build new
office building in Charlotte
The newly-renovated plaza will in-
clude a water feature, repaved walk-
ways, and modern architectural
finishes, according to the developer.

When complete, the center will in-
clude a new 24,000 sq.ft. The Fresh
Market, and about 17,000 sq.ft. of
new shop space at the corner of
Providence Rd. and Sardis Rd.

Marsh Properties is the owner/de-
veloper of Strawberry Hill. The firm
manages the leasing and the center,
with Steve Vermillion as the develop-
ment consultant.

Developer plans 80 unit
apartment project near
Duke University's East
Campus Wilmorite Construction, based in
Rochester, NY, has proposed turning
a property on Erwin Rd. near Duke
University's East Campus into a
seven-story, 80 unit apartment build-
ing, the News & Observer reports.

The developer says is has reached
a purchase agreement for the 1.2-
acre property with an overall ap-
praised value of $999,910, based on
Durham County records.

The site currently has a car wash
HHHunt has started work on Ab-
berly Solaire, an apartment commu-
nity in Garner.

The development marks the com-
pany’s fifth in North Carolina and
third in the Triangle region.

Located at 1030 Element Circle,
the $43 million community will in-
clude 282 one and two-bedroom
units. Interior features will include
granite countertops, oversized gar-
den tubs and stainless steel appli-
ances, says MHN.

HHHunt owns and manages more
than 7,750 apartment communities
across Maryland, North Carolina,
South Carolina and Virginia. The
company currently has more than
890 units in its development pipeline
in North Carolina and Virginia
The 24-acre site is expected to
open in the summer of 2019.

Raleigh shopping center to
get new lease on life
Raleigh's Gateway Plaza could be
looking a lot different come this fall.

Construction will begin this month
on the building’s facade and land-
scaping, as well as the replacement
of its large parking lot, which could
Trinity Capital Advisors started
construction in June on Toringdon 7,
a 198,195 sq. ft. office building in
Charlotte. ReBusinessOnline reported that
the eight-story building will be the
seventh and final office building
within Toringdon Office Park, which
is located immediately off Interstate
485. The building will feature column-
free floor plans, floor-to-ceiling win-
dows and a parking ratio of four
spaces per 1,000 sq. ft.

The building is designed by archi-
tecture firm Gensler. Brasfield & Gor-
rie is the project’s general contractor,
while D&A Wolverine is the civil engi-
neer. Trinity Capital expects to com-
plete construction of the building in
summer 2019.

Kessler Collection breaks
ground on a new hotel in
downtown Charlotte.

The Grand Bohemian is a 16-story
hotel being built on West Trade and
Church streets.

The 254-room hotel features 32
suites, a spa, indoor and outdoor
event spaces, an open kitchen
restaurant concept and lounge with
sidewalk and park seating, as well as
a rooftop bar providing views of
Charlotte. Construction is expected to be
completed in 2020. The project will
cost $110 million.

The North Carolina Construction News — Summer 2018 — 15