{
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  "name": "PET, INC. v. THE UNIVERSITY OF NORTH CAROLINA, CARL L. MANUEL AND LYNGLAS ENTERPRISES, LTD.",
  "name_abbreviation": "Pet, Inc. v. University of North Carolina",
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    "judges": [
      "Judges HILL and BRASWELL concur."
    ],
    "parties": [
      "PET, INC. v. THE UNIVERSITY OF NORTH CAROLINA, CARL L. MANUEL AND LYNGLAS ENTERPRISES, LTD."
    ],
    "opinions": [
      {
        "text": "BECTON, Judge.\nThis case deals with the liability of the defendant, the University of North Carolina (UNC), for milk supplied by the plaintiff, Pet, Inc. (Pet), to the federally-funded Summer Food Service Program for Children (SFSPC), sponsored in Greensboro by UNC\u2019s constituent institution, North Carolina Agricultural and Technical State University (A&T).\nIn 1976, the federal government funded a Summer Food Service Program for Children, 42 U.S.C. Sec. 1761 (Supp. 1984), as established by the National School Lunch Act, 42 U.S.C. Secs. 1751-1763 (1973 & Supp. 1984). The program is administered by the U.S. Department of Agriculture (USDA) for the purpose of providing nutritional help, based on need, to school-aged children during the summer months. The USDA distributes the operating funds to state agencies, which in turn reimburse the local sponsors for the meals served. The regulations, promulgated by the USDA to govern the administration of the entire program and in effect at the time these events occurred, are codified at 7 C.F.R. Secs. 225.1 - .18 (1978).\nIn June 1977, A&T signed an agreement with the North Carolina Department of Public Instruction (DPI) (the state agency in charge of reimbursement) to participate in the SFSPC as a sponsor. As a sponsor, A&T had the option to contract with a \u201c \u2018food service management company\u2019 ... to manage, or to prepare, or to deliver, or to serve, or any combination, thereof, unitized meals, with or without milk.\u201d 7 C.F.R. Secs. 225.2(m) and - .11 (1978). A&T contracted with Lynglas Enterprises, Ltd. through Carl L. Manuel, Treasurer, to prepare and deliver meals including milk to the designated locations from 13 June 1977 to 19 August 1977. Manuel contracted with Pet to supply the required milk.\nPet instituted this action against UNC, Lynglas and Manuel after Manuel/Lynglas failed to pay the $18,557.76 due for the milk supplied. Pet obtained a default judgment against Lynglas and took a voluntary dismissal without prejudice against Manuel, pursuant to Rule 41(a)(1) of the North Carolina Rules of Civil Procedure.\nThe action comes before this Court on the remaining two parties\u2019 cross-motions for summary judgment. From the order granting UNC\u2019s motion and denying Pet\u2019s motion, Pet appeals.\nI\nSummary judgment is appropriate once a party establishes that (1) there is no genuine issue of fact, and (2) it is entitled to judgment as a matter of law. N.C. Gen. Stat. Sec. 1A-1, Rule 56(c) (1983); Johnson v. Phoenix Mut. Life Ins. Co., 300 N.C. 247, 266 S.E. 2d 610 (1980). On appeal, Pet contends that the trial court erred in granting summary judgment in favor of UNC, because UNC failed to establish that it was entitled to judgment as a matter of law. Pet relies on three alternate legal theories to establish UNC\u2019s liability: (1) A&T\u2019s non-delegable administrative and financial responsibility for the entire program, as provided by the federal statutory and regulatory scheme; (2) Manuel\u2019s express or implied authority to act as A&T\u2019s agent in negotiations with Pet; and (3) Manuel\u2019s apparent authority to act as A&T\u2019s agent. We are not persuaded by Pet\u2019s arguments. After reviewing the pleadings, answers to interrogatories, and other discovery materials, we conclude that the trial court did not err in granting summary judgment in favor of UNC.\nII\nBy signing the agreement to participate as a sponsor in the SFSPC, A&T agreed to comply with the regulations promulgated by the USDA, as codified at 7 C.F.R. Sec. 225.1 - .18 (1978), as well as with any USDA handbooks issued under the above regulations. 7 C.F.R. Sec. 225.9(1) (1978). Pet mistakenly relies on the federal regulations to establish A&T\u2019s liability, as the sponsor, to Pet, a subcontractor. In fact, the regulations only govern the relationship between the sponsor and the state agency.\nThe regulations, included in the plaintiffs brief, and the 1977 edition of the USDA SFSPC Sponsor Handbook, Defendant\u2019s Exhibit 1, delineate A&T\u2019s complete financial responsibility for program operations. A sponsor is not eligible to participate in the program unless it:\nDemonstrates financial and administrative capability for Program operations and accepts final financial and administrative responsibility for total Program operations at all sites at which it proposes to conduct a food service; . . .\n7 C.F.R. Sec. 225.9(a)(1) (1978). The non-delegable nature of A&T\u2019s financial responsibility is demonstrated unambiguously in the procurement provisions of the regulations, as codified at 7 C.F.R. Sec. 225.15 (1978). Although A&T has the authority to procure goods and services for use in the Program by contracting with \u201cresponsible contractors\u201d who may subcontract with other contractors, 7 C.F.R. Sec. 225.15(a)(3)(v) and (a)(4) (1978), A&T remains\nthe responsible authority without recourse to the State agency regarding the settlement and satisfaction of all contractual and administrative issues arising out of procurements entered into under the Program. This includes disputes, claims, protests of award, source evaluation or other matters of contractual nature.\n7 C.F.R. Sec. 225.15(a)(6) (1978).\nHowever, A&T as the sponsor, only bears the \u201ccontractual responsibilities arising under its contracts.\u201d Id. (Emphasis added.) The sponsor\u2019s acceptance of \u201cfinal financial and administrative responsibility for total Program operations,\u201d 7 C.F.R. Sec. 225.9(a)(1) (1978), and the non-delegable nature of that financial responsibility, as described in the USDA Handbook, supra, at 3, refer only to the sponsor\u2019s potential reimbursement for operation costs by the State agency. In other words, if A&T commits itself contractually to costs which are not properly reimbursable by the state agency under the federal regulations, and is, nevertheless, reimbursed and pays its contractors, it still remains liable to the state agency for the improperly reimbursed costs.\nThus, the federal regulations do not expand A&T\u2019s common-law contractual liability to encompass liability to subcontractors. The bidding provisions in the USDA Handbook, supra, reflect this clearly. Although sponsors may accept bids from vendors who will have \u201cto secure certain food items [including milk] from commodity distributors,\u201d they cannot accept a vendor who will in turn subcontract the \u201cmeal assembly functions.\u201d Id. at 39. The rationale given is: \u201c[subcontracting places the company immediately responsible for the quality and supply of meals beyond the direct contractual control of the sponsoring organization.\u201d Id. Pet, as a subcontractor in privity of contract only with Lynglas, has no remedy against UNC under the federal regulations cited.\nIll\nBased on the \u201cmagnitude of detail specified in the contract\u201d between A&T and Lynglas and the degree of control A&T thereby exercised in its relationship with Lynglas, Pet contends that Lynglas acted as A&T\u2019s agent in its dealings with Pet, rendering UNC liable on Pet\u2019s claim. We find that Lynglas had no express or implied authority to serve as A&T\u2019s agent.\nPursuant to 7 C.F.R. Sec. 225.5(d) (1978), each state agency, in this case, the DPI, must develop a \u201cstandard form of contract for use by sponsors and food service management companies.\u201d The USDA further requires that the sponsor/food service management company contract include, at minimum, the following provisions:\n(1) The sponsor shall provide the food service management company with a list of approved food service sites and shall update the list as needed;\n(2) The food service management company shall maintain such records (supported by invoices, receipts, or other evidence) as the sponsor will need to meet its responsibilities under this part, and shall report thereon to the sponsor promptly at the end of each month, at a minimum;\n(3) The food service management company shall have State or local health certification for the facility in which it proposes to prepare meals for use in the Program and it shall ensure that all health and sanitation requirements are met at all times;\n(4) The books and records of the food service management company pertaining to the sponsor\u2019s food service operation shall be available for a period of 3 years from the date of receipt of final payment under their contract with the sponsor for inspection and audit by representatives of the State agency, of the Department, and of the United States General Accounting Office at any reasonable time and place;\n(5) Unitized meals shall be delivered in accordance with a delivery schedule prescribed in the contract;\n(6) Increases and decreases in the number of meal orders may be made by the sponsor, as needed, within a period of prior notice mutually agreed upon;\n(7) No payment shall be made for meals that do not meet nutritional requirements, are spoiled or unwholesome at time of delivery, or do not otherwise meet the requirements of the contract;\n(8) All meals shall meet the requirements of Sec. 225.10; [portion, size, meal composition]\n(9) Nonperformance shall subject the food service management company to specified sanctions.\n7 C.F.R. Sec. 225.11(b) (1978).\nThe solicitation/contract into which A&T and Lynglas entered, defendant\u2019s Exhibit 4, incorporated the above provisions as well as provisions specifying the individual meal packaging, the meal preparation time prior to delivery, the food quality, the menu cycle, and A&T\u2019s \u201cright to suggest menu changes within [Lynglas\u2019] stipulated food cost periodically throughout the contract period.\u201d Further, the contract provided that A&T had the right to delete sites on twenty-four hour notice to Lynglas. Id. at 7. If Lynglas failed \u201cto comply with any of the requirements in this contract or schedule,\u201d A&T had the right to cancel the contract after giving Lynglas written notice of \u201cspecific instances of non-compliance.\u201d Id. at 9. These additional provisions were either part of the standard contract developed by the DPI pursuant to 7 C.F.R. Sec. 225.5(d) (1978) or added by A&T and approved by the DPI under 7 C.F.R. Sec. 225.11(c) (1978).\nIn its brief Pet states: \u201cThe detail of the contract (i.e., the fact that the manner as well as the result of the work was under A&T\u2019s control) and the termination provisions point inescapably to an agency relationship even under State law.\u201d We disagree.\nRelying on case law distinguishing between an employer-employee relationship and an employer-independent contractor relationship, Pet attempts to establish an agency relationship between A&T and Lynglas. Askew v. Leonard Tire Co., 264 N.C. 168, 141 S.E. 2d 280 (1965); Cooper v. Asheville Citizen-Times Publishing Co., Inc., 258 N.C. 578, 129 S.E. 2d 107 (1963); Hayes v. Bd. of Trustees of Eton College, 224 N.C. 11, 29 S.E. 2d 137 (1944). Pet focuses on one of the factors considered in Hayes: Whether the person employed (d) \u201cis not subject to discharge because he adopts one method of doing the work rather than another.\u201d 224 N.C. at 16, 29 S.E. 2d at 140. Admittedly the A&T/Lynglas contract included basic provisions on the manner of performance, for example: container size, time of preparation and delivery and the icing of the milk. However, these provisions directly related to the result. In a letter, dated 26 June 1977 to Manuel from the director of the Summer Lunch Program, Defendant\u2019s Exhibit 8A, it is clear that Lynglas\u2019 failure to comply with the container and time requirements had resulted in delays and spoiled food. The provisions were guidelines to insure uniform results \u2014 edible meals. Given the perishable nature of the commodity, the Summer Lunch Program operated, as a matter of course, under severe time constraints and health standards, which infused the contract. The degree of specificity in the contract resembles the detailed building specifications in construction contracts. We are unwilling to find that these necessary guidelines transformed Lynglas into an employee/agent of A&T.\nWe now alternatively analyze the evidence before us in light of the principal elements of an agency relationship, the grant of authority to the agent to act for the principal. Branch Banking and Trust Co. v. Creasy, 301 N.C. 44, 269 S.E. 2d 117 (1980). A detailed contract with arguably harsh termination provisions does not, in and of itself, dictate an agency relationship. The element of control is not the crucial issue here. Rather, we are concerned with evidence of Lynglas\u2019 express or implied authority to represent and act for A&T in negotiations with third parties. Lancaster\u2019s Stock Yards, Inc. v. Williams, 37 N.C. App. 698, 246 S.E. 2d 823, disc. rev. denied, 295 N.C. 738, 248 S.E. 2d 863 (1978).\nThere is no evidence before us to support a grant of express or implied authority; In the A&T/Lynglas contract, Lynglas, as a \u201ccontractor,\u201d simply agreed to supply A&T with complete meals including milk. The contract provided: \u201cThe Vendor [Lynglas] is responsible for the performance of any subcontractor with whom he may arrange for the fulfillment of this contract.\u201d Defendant\u2019s Exhibit 4 at 6. Although Lynglas had the leeway to purchase milk from a \u201ccommodity distributor,\u201d it had no express or implied authority to act as A&T\u2019s agent in that purchase.\nIV\nAlternatively, Pet asserts that the language in an agreement between Pet and Manuel, a Lynglas officer, to provide Manuel with two refrigerated milk trucks, Plaintiffs Exhibit 8, establishes Manuel\u2019s apparent authority to act as A&T\u2019s agent. Apparent authority \u201cis that authority which the principal has held the agent out as possessing or which he has permitted the agent to represent that he possesses. . . .\u201d Zimmerman v. Hogg & Allen, 286 N.C. 24, 31, 209 S.E. 2d 795, 799 (1974).\nPlaintiff\u2019s Exhibit 8 reads, in pertinent part, as follows:\nWhereas, the Party of the First Part has already agreed to supply milk to the Party of the Second Part as its agent pursuant to the North Carolina A&T State University and the Summer Lunch Program. . . .\nWhereas, the Party of the Second Part has already agreed, as agent of the sponsor of said program to pay for the delivery of said milk. [Emphasis added.]\nPet is attempting to prove Lynglas\u2019 apparent authority solely through Manuel\u2019s out-of-court declarations. As a general rule, evidence of an alleged agent\u2019s out-of-court declarations is inadmissible to establish the agency relationship,\nunless (1) the fact of agency appears from other evidence, and also unless it be made to appear by other evidence that the making of such statement or declaration was (2) within the authority of the agent or, (3) as to persons dealing with the agent, within the apparent authority of the agent.\nHanover Co. v. Twisdale, 42 N.C. App. 472, 476, 256 S.E. 2d 840, 843 (1979) (quoting Commercial Solvents, Inc. v. Johnson, 235 N.C. 237, 241, 69 S.E. 2d 716, 719 (1952)). Pet has provided no other evidence to establish \u201cthe fact of agency.\u201d We, therefore, cannot permit Pet to establish the agency relationship based on the alleged agent\u2019s statements.\nV\nIn summary, the trial court did not err in granting summary judgment in favor of UNC. None of Pet\u2019s theories discussed above create a genuine issue of fact.\nAffirmed.\nJudges HILL and BRASWELL concur.",
        "type": "majority",
        "author": "BECTON, Judge."
      }
    ],
    "attorneys": [
      "Boone, Higgins, Chastain & Cone, by Robert C. Cone, for plaintiff appellant.",
      "Attorney General Edmisten, by Associate Attorney General Thomas J. Ziko, for defendant appellee."
    ],
    "corrections": "",
    "head_matter": "PET, INC. v. THE UNIVERSITY OF NORTH CAROLINA, CARL L. MANUEL AND LYNGLAS ENTERPRISES, LTD.\nNo. 8318SC1092\n(Filed 28 December 1984)\n1. Sales \u00a7 1.1; Principal and Agent \u00a7 4\u2014 federal regulations \u2014alleged principal to be financially responsible \u2014 not applicable to subcontractor\nSummary judgment was properly granted for defendant in an action by a subcontractor for monies due under a contract to supply milk to defendant\u2019s contractor from a federally funded Summer Food Service Program for Children for which defendant served as a local sponsor. Federal regulations delineating defendant\u2019s complete financial responsibility for program operations governed only the relationship between defendant and the state agency responsible for reimbursing defendant, and did not expand defendant\u2019s common law contractual liability to encompass liability to contractors with whom defendant had no privity.\n2. Sales \u00a7 1.1; Principal and Agent \u00a7 4\u2014 detailed contract provisions \u2014 no grant of authority \u2014 no agency\nSummary judgment was properly granted for defendant in an action by a subcontractor to recover monies due under a contract to supply milk to defendant\u2019s contractor under a federally funded summer lunch program. There was no evidence of an express or implied grant of authority and detailed provisions of the contract between the defendant and the contractor regarding the manner of performance were guidelines to insure results which did not transform the contractor into an agent of the defendant.\n3. Principal and Agent 8 4.2\u2014 out of court statements of alleged agent \u2014 inadmissible\nIn an action by a subcontractor against the local sponsor of a summer lunch program, statements by the contractor that it had agreed as an agent of the defendant to pay for delivery of milk did not create a genuine issue of fact as to agency. Evidence of an alleged agent\u2019s out of court declarations is inadmissible to establish agency without other evidence to establish the fact of agency.\nAppeal by plaintiff from Hamilton H. Hobgood, Judge. Judgment entered 6 June 1983 in Superior Court, GUILFORD County. Heard in the Court of Appeals 22 August 1984.\nBoone, Higgins, Chastain & Cone, by Robert C. Cone, for plaintiff appellant.\nAttorney General Edmisten, by Associate Attorney General Thomas J. Ziko, for defendant appellee."
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