Housing Authority of City of Bluefield v. E. T. Boggess, Architect, Inc.

• Decision Date: 05 April 1977
• Docket Number: No. 13661,13661
• Court: West Virginia Supreme Court
• Parties: The HOUSING AUTHORITY OF the CITY OF BLUEFIELD, West Virginia, a Public Corporation v. E. T. BOGGESS, ARCHITECT, INC., a corporation, et al.

Page 740

233 S.E.2d 740

160 W.Va. 303

The HOUSING AUTHORITY OF the CITY OF BLUEFIELD, West Virginia, a Public Corporation v. E. T. BOGGESS, ARCHITECT, INC., a corporation, et al.

No. 13661.

Supreme Court of Appeals of West Virginia.

April 5, 1977.

Syllabus by the Court

1. A party to a contract is a real party in interest within the meaning of W.Va.R.C.P. Rule 17 and can maintain suit on the contract in his own name.

2. Under Rule 17, W.Va.R.C.P. it is not a plaintiff's responsibility, under pain of dismissal, to bring in every party who might have a substantive law right against the defendant. It is sufficient Rule 17 compliance if the plaintiff has a substantive right to sue.

Fred O. Blue, Bluefield, for Bluefield Housing Authority.

Rex E. Lee, Asst. Atty. Gen., Washington, D. C., John A. Field, III, U. S. Atty., Charleston, W. Va., Stuart E. Schiffer and Kevin R. McCarthy, Dept. of Justice, Washington, D. C., for Secretary of Housing and Urban Development, intervenor-appellant.

Steptoe & Johnson, Edward W. Eardley, Charleston, for appellee.

HARSHBARGER, Justice.

This is an appeal from a dismissal order by the Circuit Court of Mercer County.

On March 26, 1964, the Housing Authority of the City of Bluefield, Mercer County, West Virginia entered into an Annual Contributions Contract with the Department of Housing and Urban Development, pursuant to the United States Housing Act of 1937, 42 U.S.C.A. § 1437 et seq., to provide for development and operation of two low rent housing projects.

On November 16, 1970, the Housing Authority contracted with the appellee, E. T. Boggess, an architect, to design the project and to supervise and inspect its construction. Problems arose during construction prompting HUD's suggestion in April or May of 1972 that the Authority dismiss Boggess. It declined to do so at that time because it did not believe that the suggested grounds for dismissal had been substantiated.

In subsequent correspondence, HUD wrote to the Authority questioning the competency of Boggess' performance and concluding that the Authority should immediately cancel the architect's contract. Boggess resigned December 22, 1972.

On July 19, 1974, the Authority filed a complaint against Boggess alleging negligence, fraud, breach of implied warranties, and breach of express warranties. Boggess moved to dismiss the complaint alleging that the Authority was not the proper party plaintiff because HUD was the real party in interest to the contract between the Authority and Boggess and because HUD was an indispensable party. An evidentiary hearing was held on October 28, 1974, for the purpose of determining the extent to which HUD exercised control over the Authority.

The very eminent trial court entered an order February 18, 1975, finding as fact that "complete relief cannot be accorded between the plaintiff and the defendant in this lawsuit in the absence of HUD being made a party hereto . . . (and) that HUD's nonjoinder is so prejudicial both to its rights and to those of the parties already joined, that the action cannot continue without HUD." The court ordered dismissal unless HUD came in within thirty days, finding HUD the real party in interest and an indispensable party; and with the passage of thirty days from February 18, HUD having not entered the suit, the dismissal was effective.

The appeal to this Court was granted November 17, 1975. On November 13, 1975, however, the Authority assigned to HUD all of its rights, title, interests, and remedies in the contract between the Authority and Boggess. Subsequently, on December 12, 1975, HUD moved this Court to intervene in the suit, grounding its motion on its new status as assignee. We granted that motion.

We are called upon to examine the trial court's findings that HUD was the real party in interest under Rule 17(a), W.Va.R.C.P., and a Rule 19, W.Va.R.C.P. indispensable party whose absence necessitated dismissal under Rule 12(b)(7), W.Va.R.C.P.

Rule 17(a), W.Va.R.C.P. provides:

Real party in interest. Every action shall be prosecuted in the name of the real party in interest; but an executor, administrator, guardian, trustee of an express trust, or any other fiduciary, or a party with whom or in whose name a contract has been made for the benefit of another, or a party authorized by law may sue in his own name without joining with him in the party for whose benefit the action is brought . . . .

There is often confusion about the office of Rule 17. As Judge Craven wrote in Virginia Electric & Power Co. v. Westinghouse Electric Corp., 485 F.2d 78, 83 (4th Cir. 1973), cert. denied, 415 U.S. 935, 94 S.Ct. 1450, 39 L.Ed.2d 493 (1974), although federal Rule 17 "Intended to expand the class of those who may sue to include persons having an equitable or beneficial interest, the rule is unfortunately susceptible to efforts to prevent prosecution of claims . . . ."

The efforts usually involve defense protestations, as here, that the suing plaintiff has no substantive rights against the defendant and therefore is not the real party in interest. Sometimes defendants attempt to paint a real party in interest picture by showing that defendant has defenses against the absentee or that defendant may have to withstand another lawsuit by the absent party.

We believe the Authority has substantive law rights to sue Boggess.

The contract upon which Boggess was sued was entered into between Boggess and the Authority. HUD was not a party to it although under the terms of HUD's agreement with the Authority HUD exercised considerable supervision over the construction of the project as well as over Boggess' performance under his contract with the Authority. HUD also furnished all the project funds.

The thrust of defendant's position in the trial court and the theory upon which he prevailed in persuading the court to grant the motion to dismiss was that although there was no contractual privity between HUD and Boggess, HUD's control over and participation in the Bluefield project was so pervasive as to make HUD the only real party in interest to enforce all rights and claims arising under the Bluefield-Boggess contract.

The broad question presented . . . is whether the United States, by structuring the transactions through which it builds low income housing so as to avoid formal contractual privity with third parties, has thus permanently extricated itself from responsibility for its project in spite of its total control over it and total financing of it. Will this Court allow the superficial and unilaterally contrived contractual form of this project to supercede and control the real substance of what has occurred? Brief for defendant at 13.

An examination of the Annual Contributions Contract shows that the Authority has considerable rights and obligations. Among the Authority's responsibilities is the duty to prosecute diligently the completion of the project; to comply with federal anti-discrimination law; to acquire project sites; to maintain appropriate records; to relocate people displaced by the projects; to maintain the project in good order, repair and condition; to enforce all its contract rights under contracts with third parties; and to administer the project after completion.

This brief survey of the Annual Contributions Contract is offered simply to support our belief that the scope of obligations and duties created by it contemplates very real local input from the planning stage through construction and continuing to its ultimate completion and operation. We note the special emphasis placed on the Authority's duty to pursue, prosecute and enforce its contractual rights against third parties.

42 U.S.C.A. § 1437 states, in relevant part:

It is the policy of the United States . . . to assist the several States and their political subdivisions to remedy the unsafe and unsanitary housing conditions and the acute shortage of decent, safe, and sanitary dwellings for families of low income and, consistent with the objectives of this chapter, to vest in local public housing agencies the maximum amount of responsibility in the administration of their housing programs. . . .

In addition to our own judgment about the contract, we have abundant authority for the principle that local housing authorities are viable legal entities for the purpose of suing and being sued.

In Thorpe v. Housing Authority of the City of Durham, 393 U.S. 268, 89 S.Ct. 518, 21 L.Ed.2d 474 (1969), the Court upheld a HUD directive which was attacked by the Housing Authority as limiting Congress' express policy of "vest(ing) in the local public housing agencies the maximum amount of responsibility in the administration of the low-rent housing program". HUD's capacity to make the directive and the directive's validity were sustained. The Court proceeded on the implicit premise that the Housing Authority was endowed with characteristics rendering it something considerably greater than a mere conduit in effecting HUD's goals. See also Housing Authority of the City of Omaha v. United States Housing Authority, 468 F.2d 1 (8th Cir. 1972), cert. denied 410 U.S. 927, 93 S.Ct. 1360, 35 L.Ed.2d 588 (1973).

Frequently contracts are drafted pursuant to standards and regulations required by the United States and subject to approval by the United States. The elements of federal financing, supervision and control are not sufficient to strip the contracting parties of their rights and obligations under their contracts. These elements do not relegate local authorities to mere "agents" of the United States nor transform local projects into federal projects. See Mason-Rust v. Laborer's Local 42, 435 F.2d 939 (8th Cir. 1970); U. S. ex rel. Miller v. Mattingly Bridge Co., 344 F.Supp. 459 (W.D.Ky.1972); U. S. ex rel. Hutto Concrete Co. v. Magna Building Corp., 305 F.Supp. 1244 (D.Ga.1969); U. S. ex rel. Nobles Insulation Co. v. Magna Building Corp., 305 F.Supp. 1246 (S.D.Ga.1969); D. R. Smalley &...