Woodford v. Glenville State College Housing Corp.

• Decision Date: 23 March 1976
• Docket Number: No. 13600,13600
• Court: West Virginia Supreme Court
• Parties: Paul H. WOODFORD v. GLENVILLE STATE COLLEGE HOUSING CORP., et al.

Page 671

225 S.E.2d 671

159 W.Va. 442

Paul H. WOODFORD v. GLENVILLE STATE COLLEGE HOUSING CORP., et al.

No. 13600.

Supreme Court of Appeals of West Virginia.

March 23, 1976.

Dissenting Opinion May 6, 1976.

Syllabus by the Court

1. A private non-profit corporation chartered to construct and operate faculty and student housing at a State College, but which receives no funds from the State treasury and is limited in the fund available to discharge its liabilities to the assets of the corporation, is not an instrumentality of the State and does not enjoy sovereign immunity from suit under W.Va.Const., Art. VI, § 35.

2. Where plaintiff seeks recovery as a third party beneficiary under a contract to which he is not a party under W.Va.Code, 55--8--12(1923), it is necessary that plaintiff demonstrate that the contracting parties intended to confer a benefit upon the plaintiff by their contract.

3. The procedures available to materialmen by W.Va.Code, 38--2--1 Et seq. are wholly statutory, and consequently, one who would enforce a claim under the statutory lien procedures must substantially comply with all the applicable provisions of Chapter 38 of the Code.

Robert M. Harvey, Dunbar, for appellant.

John R. Haller, Weston, for appellee.

NEELY, Justice:

This case involves an attempt by the plaintiff, Paul H. Woodford, to recover payment for materials provided to a sub-contractor in the construction of a faculty and student housing facility on the Glenville State College campus. In April 1969 Centurion Corporation contracted with Glenville State College Housing Corporation for the construction of a living facility, which was to be known as 'Project B', upon property owned by the State Board of Education but leased to the defendant non-profit corporation. The defendant, Glenville State College Housing Corporation, (hereafter, Housing Corporation), was a non-profit corporation chartered in 1967 for the purpose of constructing housing on the Glenville State College campus. The corporation was authorized to borrow necessary funds, to issue securities of the corporation, and ultimately to convey any structures constructed in Glenville to the college.

Centurion Corporation then sub-contracted with a certain Mullins Building and Supply Company to do work on the project, and Mullins in turn purchased materials from the plaintiff which were used in Project B. Between April and November 1970 Centurion defaulted on the contract, having completed 85% Of the project, and assigned its rights under the contract to the co-defendant, Amer-Con, Inc. for completion of the remaining 15%.

The plaintiff sought payment from defendants, Amer-Con and Housing Corporation, for over $16,000 of material he had supplied to the project, and when payment was refused, he instituted this action on April 14, 1971 in the Circuit Court of Gilmer County. Plaintiff had delivered his materials under his contract with Mullins in April 1970, but while Centurion had paid Mullins in full on all accounts, Mullins had not paid plaintiff and plaintiff took no steps to perfect a lien against Project B.

When Centurion went bankrupt two other sub-contractors on the project filed liens against Project B, which were perfected and outstanding at the time that Amer-Con undertook to complete the project in the place of Centurion. In order for Amer-Con to receive payments which were due to Centurion for completed work which Housing Corporation was reluctant to pay because of the outstanding liens, Amer-Con and Housing Corporation entered into a contract by which Amer-Con agreed to pay outstanding claims against Project B. The contract between the two is as follows:

'AGREEMENT made this 30th day of November, 1970, in Glenville, West Virginia, between AMER-CON, INC. (hereinafter 'Contractor') and the GLENVILLE STATE COLLEGE HOUSING CORPORATION (hereinafter 'Corporation').

WHEREAS, Contractor, as successor to all the rights of Centurion Corporation, wishes to settle the claims arising out of a contract for ten (10) Faculty Housing Units known hereinafter as Project B between Centurion and Corporation, it is therefore agreed that:

(1) Corporation shall pay Contractor the amount of two hundred-Fifty thousand dollars ($250,000) plus any amounts expended over thirty thousand dollars ($30,000) to complete said Project 'B'.

(2) Contractor hereby agrees to be solely liable and to fully satisfy any and all claims which Cotz & Cirigliano, Inc., dba Western Concrete Company; Paul H. Woodford; and Home and Community Improvement Corporation, all of West Virginia, may have against said Project 'B'.

(3) Corporation shall pay Contractor with tax-exempt bonds which shall be issued as soon as possible. Corporation shall have the right to seek its own means of financing such bonds. In addition, Corporation shall have the right to call upon Contractor to use Contractor's best efforts to find a means to finance said bonds. In all events, Corporation shall have the duty to be liable for said financing costs, if any.

The plaintiff brought this action against Amer-Con and the Housing Corporation as a third party beneficiary of Paragraph 2 of the contract quoted above. Upon an agreed set of facts the Circuit Court of Gilmer County awarded judgment to the plaintiff. We are compelled to reverse.

I

The plaintiff, Woodford, alleges that he did not perfect a lien against Project B according to the statutory lien procedure provided by W.Va.Code, 38--2--1 Et seq., because the Housing Corporation was an instrumentality of the State and therefore enjoyed immunity from legal actions by virtue of W.Va.Const., Art. VI, § 35. We disagree with plaintiff's assumption and allegation. This Court has dealt with the issue of the applicability of sovereign immunity to myriad forms of State instrumentalities throughout the Twentieth Century. Due to the seemingly limitless variety of situations in which the issue has arisen and will continue to arise, this Court has never attempted to establish any definitive set of rules to apply to all situations. However, certain general criteria for the application of the doctrine of sovereign immunity in this type of situation may be gleaned from the comparatively recent cases of Hope Natural Gas Co. v. West Virginia Turnpike Commission, 143 W.Va. 913, 105 S.E.2d 630 (1958), and Morgantown v. Ducker, 153 W.Va. 121, 168 S.E.2d 298 (1969) as well as numerous others cited in the footnotes. The Housing Corporation meets none of these criteria.

For example, the Housing Corporation was not created or granted authority to perform any function on behalf of the State by specific enactment of the Legislature. ¹ This is the preeminent criterion established by Morgantown v. Ducker, supra, where the following language appears at 153 W.Va. p. 127, 168 S.E.2d p. 302:

'This Court has held in numerous cases that proceedings against boards and commissions, created by the Legislature as agencies of the State are suits against the State within the meaning of Article VI, Section 35 of the Constitution of West Virginia, even though the State is not named as a party in such proceeding.'

Funds for the operation of the Housing Corporation were not appropriated by the Legislature. ² There was no mandate that revenues received and income produced by the Housing Corporation must or would be paid into the State Treasury rather than expended on its own behalf, ³ and monies available to the Housing Corporation to pay off its debts were not obtainable from a State source. ⁴ On the contrary, the Housing Corporation was a private, non-profit, corporation with no call upon the State treasury and it was not subject to State control in any way. Its revenues were limited to contributions, income from rent payments from prospective faculty and students, and from borrowed funds. Most importantly, it was not in any regard liable to creditors for amounts in excess of its assets.

In defense of plaintiff's position that the Housing Corporation was a public corporation and arm of the State, plaintiff maintains that the State Board of Education was not entitled to lease land to which it held title to a private corporation, and cites for that proposition W.Va.Code, 5A--5--1 (1965) which provides:

'Notwithstanding any other provision of this Code, no department, agency or institution of State government shall lease, or offer to lease, as lessee, any grounds, buildings, office or other space except in accordance with this article: Provided, that the provisions of this article except as to office space shall not apply in any respect whatever to the State road commissioner or commission.'

We find that the cited statute merely prohibits a State agency from being a lessee, but not from being a lessor. The case of Madachy v. Huntington Horse Show Association, 119 W.Va. 54, 192 S.E. 128 (1937) stands for the proposition that a State agency may lease and for a public purpose, or to avoid loss of revenue from idle land which is not immediately needed for a public purpose. In addition, it would appear that Chapter 12, Section 7, Acts of the Legislature 1957 ⁵ provides for a liberal construction of enabling legislation to permit revenue bond financing of State dormitories under corporate structures similar to the one in question. Consequently, we hold that the Board of Education had authority to lease public land to a private corporation for a charitable purpose, that the Housing Corporation had a valid leasehold, and that Project B was amenable to lien proceedings by which the plaintiff could have perfected his claim against the project.

II

Plaintiff asserted below that he was a third party beneficiary of the contract; however, under prior cases interpreting W.Va.Code, 55--8--12 (1923), this Court has held that in order for a contract concerning a third party to give rise to an independent cause of action in the third party, it must have been made for the third party's sole benefit. Ison v. Daniel Crisp Corp., ...