Nat Harrison Assoc., Inc. v. NORTH CAROLINA STATE PA

Annotate this Case

185 S.E.2d 793 (1972)

280 N.C. 251


No. 127.

Supreme Court of North Carolina.

January 14, 1972.

*796 Broughton, Broughton, McConnell & Boxley, by John D. McConnell, Jr., and J. Melville Broughton, Jr., Raleigh, for plaintiff appellant and plaintiff appellee.

Atty. Gen. Robert Morgan, Asst. Atty Gen. Eugene A. Smith, and Staff Attorney Rafford E. Jones, Raleigh, for defendant appellant and defendant appellee.

MOORE, Justice.


Plaintiff contends that the trial court erred in granting summary judgment in favor of defendant on the second and third counts in the complaint. Plaintiff alleged in the second count that plaintiff had anticipated profits on the four contracts of $497,025, but due to delays caused by defendant and other contractors, it realized profits of only $111,401.66. In this count plaintiff sought to recover the lost profits of $297,427.44. The third count in the complaint alleged that since December of 1968, when the $178,746 final payment was retained by defendant, the German mark had been revalued, requiring the plaintiff to pay a German supplier an additional $6,435 which would not have been necessary if this retainage had been timely released. On this count plaintiff sought to recover the $6,435. Summary judgment for defendant was granted on these two counts under the provision of Rule 56(c) of the Rules of Civil Procedure. G.S. § 1A-1.

Rule 56(c) provides:

". . . The judgment sought shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that any party is entitled to a judgment is a matter of law. . . ."

This rule provides for the disposition of cases where there is no genuine issue of fact, and its purpose is to eliminate formal trials where only questions of law are involved. Where the pleadings or proof disclose that no cause of action or defense exists, a summary judgment may be granted. Kessing v. National Mortgage Corp., 278 N.C. 523, 180 S.E.2d 823 (1971); 2 McIntosh, N.C. Practice and Procedure § 1660.5 (2d Ed., Phillips' Supp.1970); 3 Barron and Holtzoff, Federal Practice and Procedure § 1234 (Wright Ed., 1958).

Procedurally, the question in the present case is: Assuming the facts alleged in the second and third counts in the complaint to be true, was the defendant entitled to summary judgment as a matter of law? We think so.

Plaintiff brought its suit under G.S. § 143-135.3, which provides:

"Upon completion of any contract for construction or repair work awarded by any State board to any contractor, under the provisions of this article, should the contractor fail to receive such settlement as he claims to be entitled to under terms of his contract, he may, within 60 days from the time of receiving written notice as to the disposition to be made of his claim, submit to the Director of the Department of Administration a written and verified claim for such amount as he deems himself entitled to under the terms of said contract, setting forth the facts upon which said claim is based. In addition, the claimant, either in person or through counsel, may appear before the Director of the Department of Administration and present any additional facts and arguments in support of his claim. Within 90 days from the receipt of the said written claim, the Director of *797 the Department of Administration shall make an investigation of the claim and may allow all or any part or may deny said claim and shall have the authority to reach a compromise agreement with the contractor and shall notify the contractor in writing of his decision.

"As to such portion of the claim which may be denied by the Director of the Department of Administration, the contractor may, within six months from receipt of the decision, institute a civil action for such sum as he claims to be entitled to under said contract by the filing of a verified complaint and issuance of summons in the Superior Court of Wake County or in the superior court of any county wherein the work under said contract was performed. The procedure shall be the same as in all civil actions except as herein and as hereinafter set out.

"All issues of law and fact and every other issue shall be tried by judge, without jury; provided that the matter may be referred in the instances and in the manner provided for in article 20 of chapter 1 of the General Statutes." (Emphasis added.)

The North Carolina State Ports Authority, defendant in this action, was created by Article 22 of Chapter 143 of the General Statutes, and is an instrumentality and agency of the State, created and empowered to accomplish a public purpose. G.S. § 143-217; Webb v. Port Commission of Morehead City, 205 N.C. 663, 172 S.E. 377 (1934).

In Great American Insurance Co. v. Gold, Commissioner of Insurance, 254 N.C. 168, 172, 118 S.E.2d 792, 795 (1961), Justice Clifton Moore stated for the Court:

"`. . . An action against a Commission or Board created by Statute as an agency of the State where the interest or rights of the State are directly affected is in fact an action against the State.' Prudential Insurance Co. of America v. Powell, supra [217 N.C. 495, 8 S.E.2d 619, 621]. The State is immune from suit unless and until it has expressly consented to be sued. It is for the General Assembly to determine when and under what circumstances the State may be sued. When statutory provision has been made for an action against the State, the procedure prescribed by statute must be followed, and the remedies thus afforded are exclusive. The right to sue the State is a conditional right, and the terms prescribed by the Legislature are conditions precedent to the institution of the action. Kirkpatrick v. Currie [Comr. of Revenue], 250 N.C. 213, 108 S.E.2d 209; Duke v. Shaw [Comr. of Revenue], 247 N.C. 236, 100 S.E.2d 506; Prudential Insurance Co. v. Powell, supra; Rotan v. State, supra [195 N.C. 291, 141 S.E. 733]."

In Nello L. Teer Co. v. North Carolina State Highway Commission, 265 N.C. 1, 143 S.E.2d 247 (1965), Justice Bobbitt (now Chief Justice), speaking of G.S. § 136-29 (a statute almost identical to G.S. § 143-135.3), which permits suits on highway construction claims against the State Highway Commission, said: "The quoted statute, which assumes a valid contract is subsisting, provides for recovery `under the said contract.' In our view, recovery, if any, `under the said contract' must be based on the terms and provisions thereof." And the Court then continued: "Even so, recovery, if any, must be within the terms and framework of the provisions of the contract of July 8, 1958 and not otherwise."

In the present case, the trial judge correctly found that there was no provision in the contracts for recovery of damages for delays or for losses by reason of the devaluation of the German mark. Under the provisions of G.S. § 143-135.3, the plaintiff is only entitled to recover "such settlement as he claims to be entitled to under terms of his contract" and since plaintiff's claims as set out in the second and third counts of its complaint did not arise under the terms of its contracts, the court *798 properly entered summary judgment on these two counts.


Defendant contends the trial court committed prejudicial error in failing to allow defendant's motion to dismiss. At the beginning of the trial, defendant moved to dismiss this action under Rule 12(b) (6) of the Rules of Civil Procedure on the ground that the plaintiff had not complied with the conditions of the contracts and the pertinent statutes so as to be entitled to bring this action. At the close of plaintiff's evidence, the defendant moved to dismiss for failure to establish a cause of action. At the close of all the evidence, defendant moved to dismiss under Rule 41(b) of the Rules of Civil Procedure. Each motion was denied, and defendant excepted.

Defendant contends that the four contracts involved in this case were not completed within the meaning of G.S. § 143-135.3 so as to enable plaintiff to proceed with the filing of its claim before the Director of the Department of Administration. This contention is based first upon Section 29.00 of the Special Conditions of each contract, which is as follows:

"29.00 AS-BUILT DRAWINGS. As the work progresses, each Contractor shall keep a complete record of any and all variations between actual project installations and contract drawing and specification requirements. Upon completion of project one set of drawings shall be marked in red to show all such variations and these drawings shall be forwarded to Architect-Engineer."

It is also based on Section 1.08 of the Technical Specifications in Contract No. 3, which provides:

"1.08 RECORD DRAWINGS. Upon completion of the work the contractor shall furnish to the engineer original or reproducible tracings of a complete set of drawings and calculations of the facility, as built, and furnish in book form 8 copies of instructions for operation, maintenance and lists of spare parts. These books are to include all descriptive material, parts list, drawings covering all items of electrical equipment and mechanical units, and instructions prepared by the manufacturers covering the proper methods of adjusting, lubricating and otherwise maintaining each item."

The trial court found as a fact that these drawings were not furnished and accepted by the defendant until on or about 1 March 1971. This claim was filed with the Director of the Department of Administration on 16 February 1970, over a year before the plaintiff furnished the "as-built" drawings, and this action was instituted on 9 July 1970, some eight months before the plaintiff had completed a material part of its contract by furnishing these drawings. It is apparent that the plaintiff filed its claim with the Director of the Department of Administration and also instituted this action before it had completed these provisions of its contracts. The "as-built" drawings were very important to defendant. During the course of construction numerous changes were made in the contract drawings and specifications, and the amended drawings were necessary for future use in repairs or other changes. The court erred in not dismissing this action because of the failure of plaintiff to complete its contracts by the timely filing of these "as-built" drawings, as it was required to do by G.S. § 143-135.3.

The next contention of the defendant presents an even more serious question. The Special Conditions of each contract provide:

"16.00 CONTRACTOR'S AFFIDAVIT. The final payment of retained amount due the Contractor on account of the contract shall not become due until the Contractor has furnished to the Owner through the A-E an affidavit signed, sworn, and notarized to the effect that all payments for materials, *799 services, or any other reason in connection with his contract have been satisfied and that no claims or liens exist against the Contractor in connection with this contract. In the event that the Contractor cannot obtain similar affidavits from subcontractors to protect the Contractor and the Owner from possible liens or claims against the subcontractor, the Contractor shall state in his affidavit that no claims or liens exist against any subcontractor to the best of his (the Contractor's) knowledge, and if any appear afterwards, the Contractor shall save the Owner harmless on account thereof."

The plaintiff has not furnished such affidavits, and the trial court, although holding that the failure to furnish affidavits was not so material as to prevent plaintiff from proceeding with this action, did hold that plaintiff would not be entitled to final payment under each of its contracts until such time as the affidavits were furnished. The final judgment provided that the plaintiff have and recover certain money of the defendant ". . . said award being contingent upon the furnishing by plaintiff to defendant of a contractor's affidavit for Contracts Nos. 1, 2, 3, and 7." Section 14.00 of the Special Conditions of each contract states:

"(c) Final payment will not be made until certificates of the A-E and such State Agencies having jurisdiction have been duly issued as required by State Laws. (G.S. 133-1.1)."

G.S. § 133-1.1 provides that the Architect-Engineer must furnish to the owner a certificate that the contractor has fulfilled all obligations of the contract, and further provides:

"(f) Neither the designer nor the contractor involved shall receive his final payment until the required certificate of compliance shall have been received by the awarding authority."

G.S. § 133-4 makes failure to comply with the provisions of this chapter a misdemeanor.

The Architect-Engineer has not and cannot furnish defendant a certificate in this case as required by G.S. § 133-1.1 since the contractor has failed to furnish the affidavits to the effect that all payments for materials, services, or any other reason in connection with these contracts have been satisfied and that no claims or liens exist against the contractor in connection with these contracts. Plaintiff is unable to furnish these affidavits due to the fact that Krupp International, one of its subcontractors under these contracts, claims plaintiff still owes it the sum of approximately $150,000. Defendant has been put on notice of this claim by Krupp International, and should defendant pay plaintiff the final amount due under the contracts before the claim between plaintiff and Krupp International is settled, Krupp International would have a claim against the defendant for the amount of that indebtedness. For the Architect-Engineer to furnish defendant a certificate that plaintiff has fulfilled all obligations under its contracts before the plaintiff has settled with Krupp International would be a violation of G.S. § 133-4, and if defendant paid plaintiff before receiving the certificate of compliance from the Architect-Engineer, defendant would be violating G.S. § 133-1.1. The plaintiff's failure to complete its obligation under the terms of its contracts prohibits the plaintiff from seeking the relief provided under G.S. § 143-135.3.

"The rights of the contractor are fixed by the contract and by the law in force at the time of its execution, and, where the contract prescribes the procedure to be followed to obtain payment, it has been held that compliance therewith is a condition precedent to the enforcement of the liability of the state. There can be no recovery against the state on a contract not performed according to its terms." 81 C.J.S. States § 124a, pp. 1115-1116.

*800 It is stated in 43 Am.Jur., Public Works and Contracts § 71, p. 813:

"In the performance of a contract for public work differences frequently arise between the contractor and public authorities, and for the purpose of avoiding litigation or delay most such contracts contain stipulations which require the work to be done under the supervision of an architect, engineer, building superintendent, or other public officer or employee who is given authority to determine questions relating to the execution of the work; such stipulations usually restrict the making of payments to the contractor except upon the designated officer's certificate that the work has been properly performed. . . . Under such provisions the procurance of the prescribed certificate is a condition precedent to the right of the contractor to be paid for his work and therefore to sue for money alleged due him, in the absence of any showing of fraud or mistake as ground for the refusal of payment.. . ."

See also 3A Corbin on Contracts § 650, p. 115; Nello L. Teer Co. v. North Carolina State Highway Commission, supra; Great American Insurance Co. v. Gold, Commissioner of Insurance, supra.

Plaintiff must furnish the affidavits required by the contracts before it can file claim with the Director of the Department of Administration or file suit thereon. Since it has not done so, its contracts have not been completed as required by G.S. § 143-135.3, and the action should be dismissed. The court erred in overruling defendant's motion to dismiss, and the judgment entered by Judge Clark for plaintiff must be reversed. For this reason, we do not deem it necessary to consider whether or not the judgment entered by Judge Clark was void as a conditional judgment, nor do we need to consider the other assignments of error brought forward by defendant.

The judgment for plaintiff is reversed without prejudice to plaintiff to file a new claim with the Director of the Department of Administration within one year upon compliance with the requirements of G.S. § 143-135.3 and in accordance with this opinion.

On plaintiff's appeal: Affirmed.

On defendant's appeal: Reversed.