United States Fidelity & Guaranty Co. v. City of Raleigh

WELLS, Judge. Plaintiff appeals the entry of summary judgment against it, contending that it was entitled to judgment as a matter of law. Defendant asserts that its action was fully justified by that provision of the open bidding procedure statute, N.C. Gen. Stat. § 143-129 (Cum. Supp. 1988), which authorizes rejecting bonds issued by surety companies in certain situations. [161] The . . . governing board, in contracts involving a political subdivision of the State, may reject the bonds of any surety company against which there is pending any unsettled claim or complaint made by a . . . governing board of any political subdivision of the State arising out of any contract under which State funds, in contracts with the State, or funds of political subdivisions of the State, in contracts with such political subdivision, were expended, provided such claim or complaint has been pending more than 180 days. Id. This provision allows a municipality to reject a licensed surety company’s bid if it fails to settle a pending claim against it within 180 days. It operates to prevent a licensed surety company from engaging in the business it is otherwise authorized to participate in under the laws of this State, N.C. Gen. Stat. §§ 55-17, 55-140 (1982), and therefore is punitive in nature. Punitive statutes must be strictly construed. Jones v. Georgia-Pacific Corp., 15 N.C. App. 515, 190 S.E. 2d 422 (1972). Strict construction requires that “[everything not clearly within the scope of the language ... be excluded from the operation of the [statute], taking the words in their natural and ordinary meaning.” City of Sanford v. Dandy Signs, Inc., 62 N.C. App. 568, 303 S.E. 2d 228 (1983) (citing Harrison v. Guilford County, 218 N.C. 718, 12 S.E. 2d 269 (1940)). Applying these principles, defendant’s authorization to reject a surety company’s bonds exists only if it has made a claim against that company which is currently pending, and which has been pending more than 180 days. Defendant contends that its claim against plaintiff for NewKor’s alleged breach of contract qualifies as a “claim” under the statute. Although the dispute was settled, defendant argues that plaintiff reactivated its initial claim by repudiating the settlement agreement. A narrow construction of the statute does not support this interpretation. The statute contains no provision for reviving claims after settlement, and no language suggests that a surety company’s subsequent action against a municipality arising from their settlement constitutes a claim against the surety. Defendant cannot invoke this provision to justify its blanket refusal to accept plaintiff’s bonds. We hold that the trial court erred in granting defendant’s motion for summary judgment and remand for the entry of an [162] order granting summary judgment for plaintiff to the effect that defendant cannot use the NewKor contract dispute as a basis under the statute to reject plaintiff’s bid bonds. Reversed and remanded. Judges BECTON and JOHNSON concur.