Article

Note: As a result of a dispute related to payment for work on the construction of four residential buildings, Subcontractor, McClure Lumber Co., filed liens, known as "mechanics' liens," against the properties, which encumbered their titles. In order to sell two of the properties, Owners, Vernon Nash and Robert Helms, and General Contractor, Helmsman Construction, Inc., caused two standby LCs in the amount of US$30,000 each to be issued in favor of Title Insurance Company, First American Title Insurance Company, which then insured title to the properties; LCs to be drawn in the event that the liens were not removed.

Subsequently, the parties entered into a mediated settlement agreement whose terms required payments to be made in installments and corresponding release of the liens and the LCs. Alleging that Contractor had breached the settlement agreement by delays in making payments, Subcontractor refused to release the first lien and instructed the title insurance company not to release the LC corresponding to the first lien, and sued to enforce the settlement agreement.

Following a trial, Mecklenburg County Superior Court, Diaz J., entered an order denying enforcement of the settlement agreement and issued a decree excusing Contractor from any further payment due to Subcontractor's material breach of the settlement agreement in refusing to release the LC and the lien. On appeal, the Court of Appeals of North Carolina, affirmed in an opinion by Elmore, J.

The appellate court concluded that there was evidence to support the trial court's conclusion that the installments were paid in a timely manner. Accordingly, the appellate court affirmed the trial court's conclusion that the action of the Subcontractor in refusing to release the lien and standby LC itself constituted a material breach of the settlement agreement which was to be treated as an enforceable contract under the applicable law.

[JEB/fkd]

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