I've seen this issue in the past (as far back as Civil 3D 2010) and had not been able to figure out the cause until recently. A user contacted me the other day with this issue so I just had to figure it out.
The company created a project folder and a survey database to that folder, but when they attempted to create a new local database they would receive a box stating the survey database does not exist and could not be recreated and it looked like this:
Initially, I was unable to recreate the issue. I then attempted to recreate the issue with the exact same folder structure he had but on my local drive, guess what...I got the same error. After some testing, I was able to finally figure out that since the folder had an apostrophe in the name the error was being generated. We removed the apostrophe and all worked fine.