Posted by: Patricia Salkin | January 9, 2015

NC Appeal Court Holds Statute of Limitations Does Not Apply to Enforcement of Subdivision Performance Bonds

The Town of Black Mountain and the County of Buncombe sought to enforce a series of subdivision performance bonds. From March 2005 through February 2007, two surety companies (the defendants) entered into four subdivision performance bonds related to the development of two residential subdivisions that were, at the time, located within the County’s subdivision jurisdiction. The County conditioned the approval of the two projects on the developers obtaining those performance bonds, which named the County (and not the Town) as obligee. The property was annexed into the Town, and after a period of time, the developers abandoned the project. In 2012, the Town contacted the defendants to seek “consent to an assignment of the bonds to the Town.” Defendants refused, however the the County assigned the bonds to the Town despite defendants’ lack of consent. The Town then attempted to request payment from the defendants on the subdivision performance bonds, and they refused.

Defendants argued that neither the Town nor the County had standing to bring suit. Specifically, defendants contended that once the Town annexed the property covered by the bonds, the bonds were extinguished, leaving no rights for the County to assign. The court disagreed, finding nothing in the law or within the agreements themselves indicating that assignment of the bonds from the County to the Town was impermissible or without legal effect. In addition, the court found that plaintiffs were engaged in a governmental function and were therefore exempt from the otherwise applicable statute of limitation.

Town of Black Mountain v. Lexon Ins. Co., 2014 WL 7124838 (NC App. 12/16/2014)

The opinion can be accessed at:,d.eXY

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