{
  "id": 8552541,
  "name": "CAROLINA BUILDERS CORPORATION v. AAA DRY WALL, INC.; DWC CONTRACTORS, INC.; and THE HOUSING AUTHORITY OF THE CITY OF RALEIGH",
  "name_abbreviation": "Carolina Builders Corp. v. AAA Dry Wall, Inc.",
  "decision_date": "1979-11-06",
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    "judges": [
      "Judges CLARK and MARTIN (Harry C.) concur."
    ],
    "parties": [
      "CAROLINA BUILDERS CORPORATION v. AAA DRY WALL, INC.; DWC CONTRACTORS, INC.; and THE HOUSING AUTHORITY OF THE CITY OF RALEIGH"
    ],
    "opinions": [
      {
        "text": "HEDRICK, Judge.\nPlaintiff assigns as error the order dismissing, pursuant to Rule 12(b)(6), G.S. \u00a7 1A-1, both its claims for relief. The sufficiency of a claim to withstand a motion to dismiss is tested by its success or failure in setting out a state of facts which, when liberally considered, would entitle plaintiff to some relief. If it appears to a certainty that no state of facts which could be proved in support of the claim would so entitle plaintiff, the complaint should be dismissed. 2A Moore\u2019s Federal Practice \u00a7 12.08 (1979). Accord, Sutton v. Duke, 277 N.C. 94, 176 S.E. 2d 161 (1970); see also Kelly v. Briles, 35 N.C. App. 714, 242 S.E. 2d 883 (1978). Reviewing the instant case in light of this standard, we find, for the following reasons, that the plaintiff has failed to demonstrate any conceivable factual basis to support either of its claims and, therefore, the complaint was properly dismissed.\nPlaintiff has argued, first, that it was a \u201cthird-party beneficiary\u201d of the \u201cTurnkey\u201d contract between the Housing Authority and DWG, and, as such, that it is entitled to recover from both these parties for their breach in failing to require AAA to obtain a payment bond. Relying upon the New York case of Strong v. American Fence Construction Co., 245 N.Y. 48, 156 N.E. 92 (1927), plaintiff bases this argument upon its conviction that the bond requirement was written into this contract for the direct benefit of this plaintiff. Although we find plaintiff\u2019s position persuasive, we must reject its argument since we are convinced, to the contrary, that plaintiff was a \u201cmere incidental beneficiary\u201d of the contract between the Housing Authority and DWC. 3 Strong\u2019s N.C. Index 3d, Contracts \u00a7 14 (1976).\nThe primary premise behind third-party beneficiary law is simply stated: if two parties enter into a contract with the intention, express or implied, of benefitting a third party, such party may maintain an action to enforce the contract, and may recover for its breach, even though the third party is not a party to the contract. Strong\u2019s N.C. Index, supra; see also 4 Corbin, Contracts \u00a7 774 (1951). Application of the principle, however, is not so simple. Thus, to aid analysis of a given factual situation, these third parties have been described as being either donee or creditor beneficiaries, and, \u201cit is possible to say that the only third parties who have legal rights are the donees and the creditors of the pro-misee.\u201d Corbin, supra at \u00a7 779C. Accord, Vogel v. Reed Supply Co., 277 N.C. 119, 177 S.E. 2d 273 (1970). Little, if any, discussion is merited in pointing out that plaintiff could not prevail as a \u201cdonee\u201d beneficiary since, in order to so qualify, the promisee (here the Housing Authority) must express an intention and purpose \u201cto confer a benefit upon [the third party] as a gift in the shape of the promised performance.\u201d Corbin, supra at \u00a7 774. [Emphasis added.] Even plaintiff does not contend that such was the case here.\nOn the other hand, for plaintiff to qualify as a \u201ccreditor\u201d beneficiary, it must appear that the promisee has contemplated \u201cthe present or future existence of a duty or liability to a third party and [has entered] into the contract with the expressed intent that the performance contracted for is to satisfy and discharge that duty or liability. . . .\u201d Corbin, supra at \u00a7 787. Without doubt, had a bond been obtained in the case at bar, plaintiff would have been a creditor beneficiary of the promise given by the surety to the general contractor (promisee), DWC, and would have been entitled to maintain an action against and recover from the surety (promisor). Id. at \u00a7\u00a7 798-803; 10 Strong\u2019s N.C. Index 3d, Principal and Surety, \u00a7\u00a7 9, 9.1 (1977); RGK, Inc. v. United States Fidelity & Guaranty Co., 292 N.C. 668, 235 S.E. 2d 234 (1977). A different question is presented, however, when the \u201cpromise\u201d alleged to ensure such a result is merely a bald contractual provision that such a surety undertaking be secured. In other words, the performance of the contract between the Housing Authority and DWC was to be rendered exclusively in fulfillment of DWC\u2019s obligations to the Housing Authority. Moreover, DWC\u2019s performance could take place in full without plaintiff\u2019s receiving any benefit whatsoever. See Corbin, supra at \u00a7 779D. Nothing in the record before us suggests that the promisee-Housing Authority exacted from DWC the promise to obtain bonds with the expressed intent to directly benefit third parties such as plaintiff. Contrarily, any benefit derived therefrom would necessarily accrue indirectly, that is, through the subsequent undertaking of the general contractor when it either purchased bonds itself from a surety or contracted with its subcontractors to do so. We hold that the plaintiff herein was a mere incidental beneficiary of the contract at issue and, therefore, could not recover for its breach. Thus, the trial court properly dismissed plaintiff\u2019s claim predicated on this theory.\nBy way of a second claim for relief, plaintiff argues that it is entitled to recover directly from both the Housing Authority and DWC by virtue of former G.S. \u00a7 44-14 (repealed by N.C. Session Laws, c. 1194, s. 6, 1973, effective 1 September 1974) which provided materially as follows:\nEvery county, city, town or other municipal corporation which lets a contract for the building, repairing or altering any building, public road, or street, shall require the contractor for such work ... to execute bond with one or more solvent sureties before beginning any work under said contract, payable to said county, city, town or other municipal corporation, and conditioned for the payment of all labor done on and material and supplies furnished for the said work under a contract or agreement made directly with the principal contractor or subcontractor. ... If the official of the said county, city, town or other municipal corporation, whose duty it is to take said bond, fails to require the said bond herein provided to be given, he is guilty of a misdemeanor.\nSince laborers and material furnishers can acquire no liens on public construction projects, Griffin Manufacturing Co. v. Bray, 193 N.C. 350, 137 S.E. 151 (1927); Robinson Manufacturing Co. v. Blaylock, 192 N.C. 407, 135 S.E. 136 (1926), the purpose of the statute was to give such laborers and materialmen \u201ca substantial equivalent to the lien given laborers and materialmen engaged in private construction. The surety on the bond [was], for practical purposes, the substitute for the lien.\u201d American Bridge Division United States Steel Corp. v. Brinkley, 255 N.C. 162, 164, 120 S.E. 2d 529, 531 (1961). Plaintiff advances an appealing argument that, because the statute\u2019s intended purpose was to protect laborers and material suppliers on public works projects, Owsley v. Henderson, 228 N.C. 224, 45 S.E. 2d 263 (1947), then \u201cour courts should permit recovery by a material supplier injured\u201d when the municipal corporation violates the statute by failing to enforce the contractor to obtain the requisite bonds. [Our emphasis.] However attractive the argument, we feel bound by the decisions of our Supreme Court holding that no civil liability attaches to either the municipal corporation or its officers for their failure to take the bond. Noland Co. v. Board of Trustees of Southern Pines School, 190 N.C. 250, 129 S.E. 577 (1925); Warner v. Halyburton, 187 N.C. 414, 121 S.E. 756 (1924). The sole remedy is prescribed by the statute itself: \u201cIf the official . . . whose duty it is to take said bond, fails to require the said bond herein provided to be given, he is guilty of a misdemeanor.\u201d Thus, only by way of indictment of the officials of the Housing Authority whose responsibility it was to follow the statutory mandate may an action predicated on G.S. \u00a7 44-14 be maintained. Warner v. Halyburton, supra. Although we must agree with plaintiff\u2019s assertion that the remedy thereby afforded \u201cwould accomplish nothing toward compensating an unpaid materialman on an unbonded job\u201d, we must hold that plaintiff failed to state a claim for relief in its second cause of action. Furthermore, we point out that plaintiff was obligated to protect itself by determining, in advance of opening an account with AAA, whether the required bonds had, in fact, been given. See Noland Co. v. Board of Trustees of Southern Pines School, supra. All plaintiff had to do to avoid its present predicament was to demand to see the bond upon which it alleges it relied.\nWe hold that the trial court correctly dismissed the plaintiff\u2019s claims against the Housing Authority and DWC.\nAffirmed.\nJudges CLARK and MARTIN (Harry C.) concur.",
        "type": "majority",
        "author": "HEDRICK, Judge."
      }
    ],
    "attorneys": [
      "Joslin, Culbertson, Sedberry & Houck, by William Joslin, for plaintiff appellant.",
      "Nance, Collier, Singleton, Kirkman & Herndon, by Rudolph G. Singleton, Jr., for defendant appellee DWC Contractors, Inc.",
      "Allen, Steed & Allen, by Thomas W. Steed, Jr., for defendant appellee Housing Authority of the City of Raleigh."
    ],
    "corrections": "",
    "head_matter": "CAROLINA BUILDERS CORPORATION v. AAA DRY WALL, INC.; DWC CONTRACTORS, INC.; and THE HOUSING AUTHORITY OF THE CITY OF RALEIGH\nNo. 7910SC115\n(Filed 6 November 1979)\n1. Contracts \u00a7 14.2\u2014 contract requiring bonds \u2014plaintiff as incidental beneficiary \u2014 no recovery under contract\nIn an action to recover the cost of building materials from a subcontractor where plaintiff alleged that a contract between defendant housing authority and defendant general contractor required the general contractor to guarantee the faithful performance of its contract with the housing authority by first obtaining from each of its subcontractors a performance bond and labor and materials payment bond covering its work on the project, plaintiff was not entitled to recover from the housing authority or the general contractor for their breach in failing to require defendant subcontractor to obtain a payment bond since plaintiff was a mere incidental beneficiary and not a third party beneficiary of defendants\u2019 contract.\n2. Principal and Surety \u00a7 9.1\u2014 public housing authority \u2014 failure to take bond \u2014 material supplier\u2019s remedy\nNo civil liability attaches to either a municipal corporation or its officers for failure to provide a labor and material payment bond; therefore only by way of indictment of the officials of defendant housing authority whose responsibility it was to follow the statutory mandate could an action predicated on G.S. 44-14 be maintained, and consequently plaintiff failed to state a claim for relief in its action against defendant housing authority and defendant general contractor alleging that it was entitled to recover directly from them by virtue of the statute.\nAPPEAL by plaintiff from Godwin, Judge. Judgment entered 9 October 1978 in Superior Court, WAKE County. Heard in the Court of Appeals on 27 September 1979.\nThis suit involves the alleged failure of a subcontractor to pay its material supplier. In its complaint plaintiff, a building supply company, claimed that it \u201copened an account\u201d on 1 August 1974 with the defendant AAA Drywall, Inc. (AAA), whereby plaintiff was to sell sheetrock to AAA to be used in a \u201clow-rent public housing project\u201d for which AAA had subcontracted to erect the \u201cdry wall\u201d (or sheetrock) for the general contractor, defendant DWC Contractors, Inc., (DWC). The account provided that plaintiff would sell the building materials on credit and bill AAA at the end of each month. AAA agreed to pay the bill within ten days \u201cto earn a discount\u201d or at least within thirty days to avoid carrying charges. Plaintiff alleged that it agreed to these terms \u201cupon assurances given by an officer and agent of AAA that . . . this project was a \u2018bonded job\u2019 . . . .\u201d Accordingly, plaintiff supplied sheetrock and, prior to 12 December 1974, was paid by AAA for all materials supplied. However, \u201c[f]rom that date through February 25, 1975, [plaintiff] sold building materials for use on said project having a price of $7309.30 without receiving any payments. ...\u201d Carrying charges on that sum, contends plaintiff, have brought the total amount due it to $8,601.48 as of 1 January 1976.\nUpon repeated requests to AAA to pay the account and AAA\u2019s continuing failure to do so, plaintiff \u201cnotified . . . DWC, and the defendant, Housing Authority, [of the City of Raleigh] to have said account balance paid by their bonding companies. . . .\u201d It was plaintiff\u2019s understanding, and plaintiff so alleged, that the defendant Housing Authority, having acquired through the power of eminent domain certain real property within the City of Raleigh, entered into a contract with the defendant DWC to construct 80 low-rent housing units for which plaintiff was providing the sheetrock. The Housing Authority would own and lease the units, but, in order to get them built, it conveyed the land to DWC under a \u201cTurnkey Contract\u201d whose terms provided that DWC would build the units according to plans and specifications prepared by the Housing Authority, and that, upon completing the units, DWC would reconvey the tract to the Authority. Plaintiff alleged that it \u201cis informed and believes that the Turnkey Contract . . . required DWC to guarantee the faithful performance of its contract with Housing Authority by first obtaining from each of its subcontractors a Performance Bond and Labor and Material Payment Bond covering its work on said project.\u201d Moreover, the contract entered into between DWC and AAA stipulated that \u201cAAA would provide DWC with a . . . Labor and Material Payment Bond guaranteeing that all materials and building supplies delivered to said subcontractor . . . would be paid in full . . . .\u201d Yet, when plaintiff notified these defendants of AAA\u2019s failure to pay for materials supplied it, they informed plaintiff \u201cfor the first time that there had been no such bond written for this project, and that [plaintiff] would have to look solely to AAA for payment.\u201d\nPlaintiff asserted as a first cause of action that it was a \u201cthird party beneficiary\u201d of the contract between DWC and the Housing Authority; that it was entitled to rely on that contract\u2019s provisions requiring payment bonds when it sold building materials on credit to AAA; and that both DWC and the Housing Authority were liable on its claim for their respective breaches in failing to enforce the contractual provisions. Alternatively, and as a second cause of action, plaintiff claimed that the Housing Authority, in neglecting to require DWC to provide a labor and material payment bond, thereby violated the statutory mandates of then-controlling G.S. \u00a7 44-14, and was thus rendered civilly liable for plaintiff\u2019s losses.\nAlthough plaintiff names AAA as a defendant in this suit, the record does not disclose what, if anything, has transpired as to that defendant since the action was commenced. Both DWC and the Housing Authority, however, filed answers, contending that plaintiff had failed, with respect to both causes of action, to state a claim for which relief could be granted. The trial judge agreed and, on 9 October 1978 entered orders dismissing both claims for relief as set out in the complaint. From judgment entered thereon, plaintiff appealed.\nJoslin, Culbertson, Sedberry & Houck, by William Joslin, for plaintiff appellant.\nNance, Collier, Singleton, Kirkman & Herndon, by Rudolph G. Singleton, Jr., for defendant appellee DWC Contractors, Inc.\nAllen, Steed & Allen, by Thomas W. Steed, Jr., for defendant appellee Housing Authority of the City of Raleigh."
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