The Ascot Corp., LLC v. I&R Waterproofing ( 2022 )

IN THE COURT OF APPEALS OF NORTH CAROLINA
2022-NCCOA-747
No. COA22-19
Filed 15 November 2022
Moore County, No. 19-CVS-998
THE ASCOT CORPORATION, LLC; and HERONSBROOK, LLC; Plaintiffs,
v.
I&R WATERPROOFING, INC., Defendant/Third-Party Plaintiff,
v.
TREMCO BARRIER SOLUTIONS, INC.; TANGLEWOOD LANDSCAPING, LLC;
and PEDRO PACHECO JIMENEZ; Third-Party Defendants.
Appeal by Defendant/Third-Party Plaintiff from orders entered 4 August 2021
by Judge James M. Webb in Moore County Superior Court. Heard in the Court of
Appeals 9 August 2022.
Bovis Kyle Burch & Medlin, LLC, by Matthew A. L. Anderson and Brian H.
Alligood, for Defendant/Third-Party Plaintiff-Appellant I&R Waterproofing,
Inc.
Oak City Law LLP, by M. Caroline Lindsey Trautman and Robert E. Fields,
III, for Third-Party Defendant-Appellee Tremco Barrier Solutions, Inc.
Hedrick Gardner Kincheloe & Garofalo LLP, by M. Duane Jones, David L.
Levy, and Matthew R. Lancaster, for Third-Party Defendant-Appellee
Tanglewood Landscape, LLC.
COLLINS, Judge.
¶1 Defendant/Third-Party Plaintiff I&R Waterproofing, Inc., appeals from orders
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dismissing its complaints against Third-Party Defendants Tremco Barrier Solutions,
Inc., and Tanglewood Landscape, LLC,1 for failure to state a claim under N.C. Gen.
Stat. § 1A-1 Rule 12(b)(6). The trial court properly dismissed I&R’s claims against
Tremco for breach of express warranty, indemnity, and contribution. However, I&R
sufficiently pled breach of implied warranty of merchantability against Tremco, and
sufficiently pled indemnity and contribution against Tanglewood, and the trial court
erred by dismissing those claims. We affirm in part and reverse in part, and remand
for further proceedings.
I. Procedural History and Factual Background
¶2 This appeal stems from a complaint filed by Ascot Corporation, LLC, and
Heronsbrook, LLC, (collectively, Plaintiffs) against I&R arising from alleged
residential construction defects causing water intrusion and resulting damage. In
March 2016, Ascot, a residential construction general contractor, contracted with I&R
to provide waterproofing services in the basement of a residence owned by
Heronsbrook. These services included installing a TUFF-N-DRI waterproofing
barrier system manufactured by Tremco. Ascot separately contracted with
Tanglewood to landscape the surrounding property.
1 I&R’s third-party complaint names “Tanglewood Landscaping, LLC” as the third-
party defendant. Tanglewood’s Motion to Dismiss asserts that “Tanglewood Landscape,
LLC” is the appropriate entity to be named in this action.
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¶3 In July 2016, Heronsbrook sold the property to Steve and Jennifer Stoops.2
Two years later, the Stoops discovered water intrusion in their basement that had
caused significant damage. During the following year, Ascot unsuccessfully
attempted to have I&R diagnose and repair the water intrusion. In May 2019, Ascot
independently resolved the water intrusion and repaired the damage to the
basement, incurring costs in excess of $50,000.
¶4 In August 2019, Plaintiffs filed a complaint against I&R, asserting claims for
breach of contract, breach of implied warranty of habitability and good workmanship,
negligence, and unfair and deceptive trade practices, and seeking to recover the costs
incurred for the repairs to the basement, treble damages, and attorneys’ fees. With
leave of court, I&R filed a third-party complaint pursuant to Rule 14(a) of the North
Carolina Rules of Civil Procedure, seeking “compensatory damages and/or
contribution” from Tremco and/or Tanglewood, in the event I&R was found liable to
Plaintiffs.3 I&R’s complaint asserted claims against Tremco for breach of express
warranty, breach of implied warranty of merchantability, negligence, and
contribution, and claims against Tanglewood for negligence and contribution.
¶5 Tremco moved to dismiss I&R’s complaint under Rule 12(b)(6). Tanglewood
2The Stoops are not parties to the present litigation.
3I&R also joined third-party defendant Pedro Pacheco Jimenez. The claims against
Jimenez are not at issue on this appeal.
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answered and moved to dismiss the complaint under Rule 12(b)(6). The trial court
heard the motions to dismiss and entered orders on 4 August 2021 dismissing all
claims against Tremco and Tanglewood with prejudice. The trial court certified the
orders for immediate review under N.C. Gen. Stat. § 1A-1 Rule 54(b). I&R appealed.
II. Discussion
A. Jurisdiction
¶6 I&R appeals from orders dismissing all claims against fewer than all parties.
A final judgment as to “one or more but fewer than all of the claims or parties” is
immediately appealable if the trial court certifies that “there is no just reason [to]
delay” the appeal. N.C. Gen. Stat. § 1A-1, Rule 54(b) (2021). Here, the trial court
properly certified the orders for immediate review under Rule 54(b). Accordingly,
this Court has jurisdiction.
B. Standard of Review
¶7 In ruling on a Rule 12(b)(6) motion to dismiss, “the allegations of the complaint
must be viewed as admitted, and on that basis the court must determine as a matter
of law whether the allegations state a claim for which relief may be granted.”
Stanback v. Stanback, 297 N.C. 181, 185, 254 S.E.2d 611, 615 (1979) (citation
omitted). “[T]he well-pleaded material allegations of the complaint are taken as
admitted; but conclusions of law or unwarranted deductions of fact are not admitted.”
Sutton v. Duke, 277 N.C. 94, 98, 176 S.E.2d 161, 163 (1970) (quotation marks and
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citation omitted). Additionally, “when ruling on a Rule 12(b)(6) motion, a court may
properly consider documents which are the subject of a plaintiff’s complaint and to
which the complaint specifically refers even though they are presented by the
defendant.” Oberlin Cap., L.P. v. Slavin, 147 N.C. App. 52, 60, 554 S.E.2d 840, 847
(2001) (citation omitted).
¶8 Dismissal under Rule 12(b)(6) is proper only in the following circumstances:
“(1) the complaint on its face reveals that no law supports the plaintiff’s claim; (2) the
complaint on its face reveals the absence of facts sufficient to make a good claim; or
(3) the complaint discloses some fact that necessarily defeats the plaintiff’s claim.”
Wood v. Guilford Cnty., 355 N.C. 161, 166, 558 S.E.2d 490, 494 (2002) (citation
omitted). We review de novo a trial court’s order allowing a motion to dismiss for
failure to state a claim pursuant to Rule 12(b)(6). Cheryl Lloyd Humphrey Land Inv.
Co., v. Resco Prods., Inc., 377 N.C. 384, 2021-NCSC-56, ¶ 8 (citation omitted).
C. Claims Against Tremco
1. Breach of Express Warranty
¶9 I&R first argues that its complaint states a valid claim for relief against
Tremco for breach of express warranty. Specifically, I&R argues that it states a valid
claim against Tremco for breach of Tremco’s 30-Year TUFF-N-DRI Basement
Waterproofing Warranty.
¶ 10 An express warranty is created when a seller makes “any affirmation of fact or
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promise . . . which relates to the goods and becomes part of the basis of the bargain.”
N.C. Gen. Stat. § 25-2-313(1)(a) (2021). To state a claim for breach of express
warranty, a plaintiff must allege (1) that an express warranty was made as to a fact
or promise relating to the goods, (2) that the warranty was relied upon by the plaintiff
in making his decision to purchase, and (3) that this express warranty was breached
by the defendant. Harbor Point Homeowners’ Ass’n v. DJF Enters., Inc., 206 N.C.
App. 152, 162, 697 S.E.2d 439, 447 (2010) (citation omitted). “A warranty, express or
implied, is contractual in nature.” Wyatt v. N.C. Equip. Co., 253 N.C. 355, 358, 117
S.E.2d 21, 24 (1960). “As a contract being interpreted, the terms of an express
warranty are therefore construed in accordance with their plain meaning[.]” Hills
Mach. Co., LLC v. Pea Creek Mine, LLC, 265 N.C. App. 408, 416, 828 S.E.2d 709, 715
(2019) (quotation marks and citation omitted). “An issue of contract interpretation is
a question of law reviewed de novo.” D.W.H. Painting Co. v. D.W. Ward Constr. Co.,
174 N.C. App. 327, 330, 620 S.E.2d 887, 890 (2005) (citation omitted).
¶ 11 In its complaint for breach of an express warranty, I&R alleges the following:
7. In March 2016, I&R contracted with Plaintiff The Ascot
Corporation, LLC to install a waterproofing membrane
barrier system at an existing residential construction site
located at 590 Heronsbrook Drive, Whispering Pines,
North Carolina (the “Property”).
8. On or about March 10, 2016, I&R completed the
installation of the waterproofing membrane barrier
system, which consisted of the TUFF-N-DRI HS membrane
product, the Warm-N-Dri® foundation board, and a
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DrainStar® Strip Drain (collectively the “Tremco Barrier
System”).
9. Upon information and belief, the Tremco Barrier System
installed at the Property by I&R was produced, designed,
manufactured, assembled, inspected, and sold by
Third-Party Defendant Tremco.
10. The Tremco Barrier System installed by I&R was sold
with a written 30-year limited warranty, pursuant to
which Tremco expressly warranted that the Tremco
Barrier System would, under normal use and service, keep
the vertical surface of the Property’s foundation wall “free
of water leakage or seepage” throughout the warranty
period.”
11. I&R is a “Tremco Barrier Solutions Contractor” as that
phrase is used in Tremco’s written 30-year limited
warranty.
....
14. Upon information and belief, Tremco has been notified
of the alleged excess water penetration described in
Plaintiffs’ Complaint, but has refused to honor the terms of
its written 30-year limited warranty.
15. If Plaintiffs should recover damages based on the
alleged excess water penetration described in Plaintiffs’
Complaint, such recovery will be a proximate result of
Tremco’s breach of its express written warranty.
16. As a direct and proximate result of Tremco’s breach of
its express warranty, I&R is entitled to receive from
Tremco any amounts awarded to Plaintiffs against I&R
with respect to claims arising from I&R’s installation of the
Tremco Barrier System during construction of the
residence on the Property.
¶ 12 Attached as Exhibit A to Tremco’s motion to dismiss was the warranty
referenced in I&R’s complaint. The warranty states:
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This Warranty is From:
This limited warranty (“Warranty”) is provided by Tremco
Barrier Solutions, Inc. (“TBS”) . . . .
This Warranty is To:
You if you are a consumer purchaser (“Buyer”) of (1) a new
single family detached residence, or (2) a multi-family unit
with separate unit ownership, or (3) a multi-family
residence with single ownership which has had TUFF-N-
DRI System . . . applied to the building’s foundation walls.
....
Limitations and Exceptions:
....
B. This Warranty does not apply and TBS has no
responsibility for Leakage resulting from:
....
11. Application of the TUFF-N-DRI System by a
contractor other than a TBS Contractor.
¶ 13 I&R did not allege that the warranty was relied upon in making its decision to
purchase the TUFF-N-DRI System. See Harbor Point, 206 N.C. App. at 162, 697
S.E.2d at 447 (citation omitted); cf. Ford Motor Credit Co. v. McBride, 257 N.C. App.
590, 596, 811 S.E.2d 640, 646 (2018) (defendants’ allegations were sufficient to state
a claim for breach of express warranty where defendants alleged, inter alia, “that
they relied on this express warranty when purchasing the vehicle and would not have
purchased it had [the] agents not represented to them that the vehicle was in ‘good
working order and fit to transport’ them both”). Furthermore, the terms of the
warranty, construed in accordance with their plain meaning, indicate that the
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warranty does not extend to, and thus is not enforceable by, I&R. According to the
terms, the warranty extends to the “consumer purchaser” of a new residence or unit
in which the TUFF-N-DRI System has been applied to the building’s foundation
walls. As I&R did not allege that it is a “consumer purchaser” of a qualifying
residence or unit, I&R did not allege that the warranty extends to I&R.
¶ 14 I&R argues that its allegation that it “is a ‘Tremco Barrier Solutions
Contractor’ as that phrase is used in Tremco’s written 30-year limited warranty” is
sufficient to allege the warranty extends to I&R. This argument belies the plain
meaning of warranty’s terms. The phrase “TBS contractor,” as used in paragraph 11
under Limitations and Exceptions, is a requirement that the TUFF-N-DRI System
be installed by a TBS contractor for a consumer purchaser to be entitled to the
warranty’s protection; the phrase does not extend the warranty to I&R.
¶ 15 Citing Sharrard, McGee & Co., P.A. v. Suz’s Software, Inc., 100 N.C. App. 428,
432, 396 S.E.2d 815, 817 (1990), I&R argues that it “need not even have purchased
the Tremco Barrier System itself to recover for Tremco’s breach of its express
warranty, because North Carolina law does not restrict an action for breach of an
express warranty to parties in privity of contract.” I&R’s reliance on Sharrard is
misplaced.
¶ 16 In Sharrard, this Court addressed whether plaintiff had been assigned its
right to sue defendant. 100 N.C. App. at 429, 396 S.E.2d at 816. Plaintiff accounting
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firm negotiated the purchase of a software system from defendant software company
for plaintiff’s client, Guilford Plumbing Supply, Inc. (“GPS”). Id. at 430, 396 S.E.2d
at 816. During the negotiations, defendant wrote a letter to plaintiff, specifically
referencing GPS and guaranteeing defendant’s programming with full return and
refund privileges should the programming not perform as warranted. Id. at 432-33,
396 S.E.2d at 818. Defendant also made several oral guarantees to plaintiff and GPS,
and provided GPS employees an instruction manual. Id. at 430, 396 S.E.2d at 816.
Shortly after installation, the software system proved defective. Id. at 430, 396
S.E.2d at 816-17. When defendant refused plaintiff’s refund demand, plaintiff filed
suit. Id.¶ 17 On appeal, this Court analyzed whether GPS had a legally cognizable claim to
assign to plaintiff. Rejecting defendant’s argument that privity must have existed
between it and GPS before GPS would have any right to sue defendant for breach of
express warranty, this Court stated, “[p]rivity is not required when the theory is
breach of an express warranty.” Id. at 432, 396 S.E.2d at 817 (citing Kinlaw v. Long
Mfg. N.C., Inc., 298 N.C. 494, 259 S.E.2d 552 (1979)). The Court further explained
that “[t]he absence of contractual privity no longer bars a direct claim by an ultimate
purchaser against the manufacturer for breach of the manufacturer’s express
warranty which is directed to the purchaser.” Id. (citation omitted). Accordingly, for
plaintiff to show that GPS had a legally cognizable claim to assign, plaintiff had only
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to show that the warranty was “addressed to the ultimate consumer or user.” Id. at
433, 396 S.E.2d at 818 (quoting Wyatt, 253 N.C. at 359, 117 S.E.2d at 24).
¶ 18 Because defendant’s letter was intended to warrant its products to GPS and it
was reasonable for GPS to rely upon defendant’s representations, this Court affirmed
the trial court’s conclusion that an express warranty existed between GPS and
defendant. Id. Because GPS had a valid claim for breach of express warranty that it
could assert by itself, plaintiff, as assignee, was entitled to assert its claim against
defendant. Id.¶ 19 In this case, the warranty at issue was addressed to the “consumer purchaser”
of a new residence or unit in which the TUFF-N-DRI System had been applied to the
building’s foundation walls – the ultimate consumers or users. Under Sharrard, the
Stoops, as the ultimate consumers, could have a breach of express warranty claim
against Tremco to assign. Unlike Sharrard, however, I&R did not assert a claim
assigned to it by the Stoops. As I&R did not assert an assigned claim, and the express
warranty does not extend to, and thus is not enforceable by, I&R, the trial court did
not err by dismissing the breach of express warranty claim.
2. Breach of Implied Warranty of Merchantability
¶ 20 I&R next argues its complaint states a valid claim for relief against Tremco for
breach of implied warranty of merchantability.
¶ 21 “Unless excluded or modified (G.S. 25-2-316), a warranty that the goods shall
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be merchantable is implied in a contract for sale if the seller is a merchant with
respect to goods of that kind.” N.C. Gen. Stat. § 25-2-314(1) (2021). To state a claim
for breach of implied warranty of merchantability, a plaintiff must allege
(1) that the goods bought and sold were subject to an
implied warranty of merchantability, (2) that the goods did
not comply with the warranty in that the goods were
defective at the time of sale, (3) that [plaintiff’s] injury was
due to the defective nature of the goods, and (4) that
damages were suffered as a result.
DeWitt v. Eveready Battery Co., 355 N.C. 672, 683, 565 S.E.2d 140, 147 (2002)
(quotation marks and citation omitted). “A product defect may be shown by evidence
a specific defect existed in a product. Additionally, when a plaintiff does not produce
evidence of a specific defect, a product defect may be inferred from evidence the
product was put to its ordinary use and the product malfunctioned.” Id. at 684, 565
S.E.2d at 147 (citation omitted).
¶ 22 I&R’s complaint for breach of implied warranty of merchantability alleges:
17. I&R hereby incorporates and re-alleges the allegations
set forth above, and incorporates and re-alleges the
allegations of the Plaintiffs’ Complaint and I&R’s Amended
Answer and Affirmative Defenses thereto to the extent not
inconsistent herewith.
18. The Tremco Barrier System sold by Tremco, and
purchased and installed at the Property by I&R, was
subject to an implied warranty of merchantability,
whereby Tremco warranted that the Tremco Barrier
System was of merchantable quality and reasonably fit for
the purpose for which it was intended.
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19. I&R put the Tremco Barrier System to its ordinary use
by installing it on the foundation walls of the Property in a
workmanlike manner, in accordance with all product
directions and instructions provided by Tremco, and in
compliance with all laws, ordinances, rules, regulations,
and requirements of all governing authorities having
jurisdiction over construction of the residence on the
Property.
20. If the allegations set forth in the Complaint of excess
water penetration in the foundation walls of the residence
on the Property are true, then the Tremco Barrier System
malfunctioned after being put to its ordinary use.
21. Accordingly, if Plaintiff should recover damages based
on the alleged excess water penetration described in
Plaintiffs’ Complaint, such recovery will be due to the
defective nature of the Tremco Barrier System, and a
proximate result of Tremco’s breach of the implied
warranty of merchantability.
22. As a direct and proximate result of Tremco’s breach of
the implied warranty of merchantability, I&R is entitled to
receive from Tremco any amounts awarded to Plaintiffs
against I&R with respect to claims arising from I&R’s
installation of the Tremco Barrier System during
construction of the residence on the Property.
¶ 23 These allegations are sufficient to state a claim for breach of implied warranty
of merchantability. I&R alleges that the Tremco Barrier System sold by Tremco and
purchased by I&R was subject to an implied warranty of merchantability, satisfying
the first element of the claim. I&R also alleges it put the Tremco Barrier System to
its ordinary use by installing it on the foundation walls in a workmanlike manner, in
accordance with all directions and rules, and that assuming excess water penetrated
the foundation walls, the Tremco Barrier System malfunctioned, satisfying the
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second element of the claim. I&R further alleges that Plaintiffs’ recovery of damages
from I&R for excess water penetration would be due to the defective nature of the
Tremco Barrier System and that as a direct and proximate result of Tremco’s breach
of the implied warranty of merchantability, I&R is entitled to receive from Tremco
any amounts awarded to Plaintiffs against I&R for the defective Tremco Barrier
System. These allegations satisfy the third and fourth elements of the claim.
¶ 24 Tremco argues that “I&R fails to allege anywhere in its pleading that a defect
existed in a Tremco product at the time of sale, or what defect existed.” However, I&R
need not have alleged a specific defect in the Tremco Barrier System. Under what has
been referred to as the “malfunction theory” and the “indeterminate defect theory,”
DeWitt, 355 N.C. at 686, 565 S.E.2d at 149, a defect may be inferred from evidence that
the Tremco Barrier System was put to its ordinary use and subsequently malfunctioned.
I&R’s allegations are sufficient to allege a product defect under this theory.
¶ 25 Tremco further argues that I&R’s allegation that “if the allegations set forth in
Plaintiffs’ complaint are true, then the Tremco Barrier System malfunctioned after being
put to its ordinary use” is a conclusory statement that fails to establish a necessary
element of a claim for breach of implied warranty of merchantability. We disagree.
¶ 26 Plaintiffs made various allegations in their complaint that water penetrated the
foundation walls where I&R had applied water proofing; I&R incorporates those
allegations into its compliant. I&R further alleges that the Tremco Barrier System was
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put to its ordinary use when I&R correctly installed it on the foundation walls. I&R thus
alleges that if water penetrated the foundation walls, the Tremco Barrier System
malfunctioned. Any duty to produce “adequate circumstantial evidence of a defect”
does not arise until later stages of the proceedings, and I&R’s allegations at this initial
pleading stage are sufficient to allege a product defect at the time of sale. See Coastal
Leasing Corp. v. O’Neal, 103 N.C. App. 230, 237, 405 S.E.2d 208, 213 (1991) (allegations
in the crossclaim were sufficient to raise the inference that any defects in the equipment
existed at the time of sale).
¶ 27 Tremco further argues that I&R’s breach of express warranty and breach of
implied warranty of merchantability claims should be dismissed as they are not
proper impleader claims under Rule 14. We disagree.
¶ 28 Before Rule 14 was enacted in 1967, North Carolina lacked an adequate
procedural rule governing third-party practice. Accordingly, North Carolina courts
constructed a set of judicial rules for impleading by drawing upon statutes which
suggested impleader was appropriate peripherally or in a specific situation,
including: N.C Gen. Stat. § 1-73, which authorized the court to join parties who were
necessary for a “complete determination of the controversy”; N.C. Gen. Stat. § 1-222,
which provided that judgments may determine “the ultimate rights of the parties on
each side, as between themselves”; and N.C. Gen. Stat. § 1-240, which allowed joinder
of third-parties who were joint tortfeasors. See, e.g., Davis v. Radford, 233 N.C. 283,
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287-89, 63 S.E.2d 822, 826-27 (1951) (contemplating third-party practice prior to Rule
14’s enactment); Moore v. Massengill, 227 N.C. 244, 245-46, 41 S.E.2d 655, 656 (1947)
(interpreting § 1-73).
¶ 29 As the original Comment to Rule 14 notes, “none of these statutes dealt directly
with (1) the grounds for impleading (except § 1-240, dealing narrowly with
contribution between joint tort-feasors); (2) the procedure by which a third-party
plaintiff impleads a third-party defendant; or (3) the kinds of claims that may, after
impleader is accomplished, be asserted[.]” N.C. Gen. Stat. § 1A-1, R. 14, cmt. (2021).
Nevertheless, the courts developed procedures for impleading within this statutory
framework, and the basic rule which evolved permitted impleading only when the
claim by the third-party plaintiff was for: “(1) contribution against an alleged joint
tort-feasor under § 1-240, or (2) indemnification, but only when the indemnification
right arose as a matter of law, and not by express or implied contract.” Id.
¶ 30 In contrast to North Carolina’s approach at the time, Rule 14 of the Federal
Rules of Civil Procedure was adopted in 1937 to govern third-party practice in federal
court. Federal Rule 14 provided a “direct and plain statement of the substantive test
for impleading,” prescribed “clearly and concisely the procedure for impleading where
the right exists,” and concluded with a clear statement “of the various claims which
may, after a third-party defendant is impleaded, be asserted by the various parties[.]”
Id.
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¶ 31 Thirty years after federal Rule 14’s adoption, North Carolina enacted Rule 14
of our North Carolina Rules of Civil Procedure which mirrors the federal rule. See
An Act to Amend the Laws Relating to Civil Procedure, 1967 N.C. Sess. Laws 1274(enacting the Rules of Civil Procedure and repealing, among others, §§ 1-73 and
1-222).4 North Carolina Rule 14 provides, in relevant part,
At any time after commencement of the action a defendant,
as a third-party plaintiff, may cause a summons and
complaint to be served upon a person not a party to the
action who is or may be liable to him for all or part of the
plaintiff ’s claim against him.
N.C. Gen. Stat. § 1A-1, R. 14(a) (2021). While this language gives the right to implead
for contribution and indemnification based in tort as had judicially evolved under
North Carolina practice, this language does not limit the right to implead to solely
those situations. For example, like the federal rule, North Carolina Rule 14 allows
impleading for indemnification where the right to be indemnified has arisen out of
contract. See id. (expressly contemplating assignees and third-party beneficiaries of
contracts); see also Brogle v. S.C. Elec. & Gas Co., 509 F.2d 1216, 1217 n.1 (4th Cir.
1975) (noting that impleading a party for contractual indemnity is covered by Rule
14).
4The Uniform Contribution Among Tort-Feasors Act, passed the same week as the
Act to Amend the Laws Relating to Civil Procedure, repealed § 1-240. An Act to Provide for
Contribution Among Joint Tortfeasors and Joint Obligors, § 2, 1967 N.C. Sess. Laws 1091,
1093.
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¶ 32 As with federal Rule 14, “[t]he purpose of [North Carolina] Rule 14 is to
promote judicial efficiency and the convenience of parties by eliminating circuity of
action.” Heath v. Bd. of Comm’rs, 292 N.C. 369, 376, 233 S.E.2d 889, 893 (1977).
When the rights of all three parties center upon a common
factual setting, economies of time and expense can be
achieved by combining the suits into one action. Doing so
eliminates duplication in the presentation of evidence and
increases the likelihood that consistent results will be
reached when multiple claims turn upon identical or
similar proof. Additionally, the third-party practice
procedure is advantageous in that a potentially damaging
time lag between a judgment against defendant in one
action and a judgment in his favor against the party
ultimately liable in a subsequent action will be avoided. In
short, Rule 14 is intended to provide a mechanism for
disposing of multiple claims arising from a single set of
facts in one action expeditiously and economically.
Id. (quoting 6 Charles Allen Wright & Arthur R. Miller, Federal Practice & Procedure
§1442 (1971)); see also Am. Exp. Lines, Inc. v. Revel, 262 F.2d 122, 124-25 (4th Cir.
1958).
¶ 33 At the heart of Rule 14 is the notion that the third-party complaint must be
derivative of the original claim. “If the original defendant is not liable to the original
plaintiff, the third-party defendant is not liable to the original defendant.” Jones v.
Collins, 58 N.C. App. 753, 756, 294 S.E.2d 384, 385 (1982). Thus, “[a] claim which is
independent of the defendant’s possible liability to the plaintiff cannot be the basis of
impleader under Rule 14.” Spearman v. Pender Cnty. Bd. of Educ., 175 N.C. App.
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410, 412, 623 S.E.2d 331, 333 (2006) (quotation marks and citations omitted); see also
Horn v. Daniel, 315 F.2d 471, 474 (10th Cir. 1962) (“[Rule 14] does not permit the
joinder of actions of persons who may have a claim against the defendant
independently of the plaintiff’s claim.”). “The crucial characteristic of a Rule 14 claim
is that defendant is attempting to transfer to the third-party defendant the liability
asserted against defendant by the original plaintiff.” 6 Charles Allen Wright &
Arthur R. Miller, Federal Practice & Procedure § 1446 (3d ed. 2010). Nevertheless,
“[t]he third party claim need not be based on the same theory as the main claim.” Id.
¶ 34 Here, I&R alleges that its harm, an essential element of its breach of implied
warranty of merchantability claim, depends on the outcome of Plaintiffs’ case against
them. Additionally, Plaintiffs’ claim forms the basis of I&R’s complaint – the facts
and circumstances that give rise to Plaintiffs’ complaint are the same facts and
circumstances that form I&R’s breach of implied warranty of merchantability claim.
Thus, I&R’s claim is derivative of Plaintiffs’ claim and properly impleaded under Rule
14.
¶ 35 Because I&R has pled facts sufficient to state a claim for breach of implied
warranty of merchantability, and the claim is derivative of Plaintiffs’ claims against
I&R, the trial court improperly dismissed the claim.
3. Negligence (Common Law Indemnity)
¶ 36 I&R next argues that its complaint states a valid claim for relief against
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Tremco for negligence.
¶ 37 We note that I&R has alleged common law indemnity in the form of indemnity
implied-in-law, as opposed to merely negligence. In North Carolina, a party’s rights
to indemnity can rest on “equitable concepts arising from the tort theory of indemnity,
often referred to as a contract implied-in-law.” Kaleel Builders, Inc. v. Ashby, 161
N.C. App. 34, 38, 587 S.E.2d 470, 474 (2003) (citations omitted). “[I]ndemnity
implied-in-law arises from an underlying tort, where a passive tort-feasor pays the
judgment owed by an active tort-feasor to the injured third party.” Id. at 39, 587
S.E.2d at 474. Therefore, “to successfully assert a right to indemnity based on a
contract implied-in-law, a party must [sufficiently allege] each of the elements of an
underlying tort such as negligence.” Schenkel & Shultz, Inc. v. Hermon F. Fox &
Assocs., 180 N.C. App. 257, 268, 636 S.E.2d 835, 843 (2006).
¶ 38 “To state a claim for common law negligence, a plaintiff must allege: (1) a legal
duty; (2) a breach thereof; and (3) injury proximately caused by the breach.” Fussell
v. N.C. Farm Bureau Mut. Ins. Co., 364 N.C. 222, 226, 695 S.E.2d 437, 440 (2010)
(citation omitted). “The mere fact that a pleader alleges that an act is one of
negligence does not make it so.” Stamey v. Rutherfordton Elec. Membership Corp.,
247 N.C. 640, 646, 101 S.E.2d 814, 819 (1958). “An allegation of negligence must be
sufficiently specific to give information of the particular acts complained of; a general
allegation without such particularity does not set out the nature of plaintiff’s demand
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sufficiently to enable the defendant to prepare his defense.” Id. at 645, 101 S.E.2d at
818 (citation omitted).
¶ 39 In its third-party complaint, I&R alleges:
23. I&R hereby incorporates and re-alleges the allegations
set forth above, and incorporates and re-alleges the
allegations of the Plaintiffs’ Complaint and I&R’s Amended
Answer and Affirmative Defenses thereto to the extent not
inconsistent herewith.
24. Tremco had a duty to produce, design, manufacture,
assemble, and inspect the Tremco Barrier System installed
at the Property in the manner of a reasonably prudent
manufacturer of the same or similar goods, under the same
or similar circumstances, and in accordance with all laws,
ordinances, rules, regulations, and requirements of all
governing authorities having jurisdiction over construction
of the Property.
25. If the allegations set forth in the Complaint of excess
water penetration in the foundation walls of the residence
on the Property are true, then Tremco was negligent in the
production, design, manufacture, assembly, and/or
inspection of the Tremco Barrier System, and in breach of
its duties to I&R.
26. The negligence of Tremco supersedes any alleged
negligence or fault of I&R (which negligence or fault is
denied).
27. Any fault or negligence by I&R (which negligence or
fault is denied) was passive and secondary in light of the
primary and active fault or negligence of Tremco.
28. As a direct and proximate result of the negligence of
Tremco, I&R is involved in litigation in which it faces
liability for Tremco’s own negligence, and I&R has incurred
costs and expenses in order to defend and protect its
interests.
29. Based on the foregoing, I&R seeks and is entitled to
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recover damages from Tremco for any amounts that I&R
may be found liable to Plaintiffs in this action as a result
of Tremco’ s negligence.
¶ 40 The allegations set forth in I&R’s complaint, including all incorporated
allegations, fail to allege facts sufficiently specific to give information of the particular
acts complained of. I&R’s general allegation that “Tremco was negligent in the
production, design, manufacture, assembly, and/or inspection of the Tremco Barrier
System, and in breach of its duties to I&R” was not sufficiently specific and thus does
not set out the nature of I&R’s demand sufficiently to enable Tremco to prepare its
defense. See id.¶ 41 Because I&R has not sufficiently alleged each of the elements of negligence,
I&R has failed to state a claim for common law indemnity and the claim was properly
dismissed.
4. Contribution
¶ 42 I&R argues that its complaint states a valid claim for contribution against
Tremco.
¶ 43 Contribution is a statutory right of relief in North Carolina governed by the
Uniform Contribution Among Tort-Feasors Act, N.C. Gen. Stat. § 1B-1. The Act
provides, “where two or more persons become jointly or severally liable in tort for the
same injury to person or property or for the same wrongful death, there is a right of
contribution among them even though judgment has not been recovered against all
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or any of them.” N.C. Gen. Stat. § 1B-1(a) (2021). “Under this statute, there is no
right to contribution from one who is not a joint tort-feasor.” Kaleel Builders, 161
N.C. App. at 43, 587 S.E.2d at 477. Joint tortfeasors are parties whose negligent or
wrongful acts are united in time or circumstance such that the two acts concur to
cause a single injury to a third party. State Farm Mut. Auto. Ins. Co. v. Holland, 324
N.C. 466, 470, 380 S.E.2d 100, 103 (1989) (citation omitted). Thus, in order to join a
third-party for the purpose of contribution, one must allege that the third-party
committed negligent or wrongful acts. See id. at 474-76, 380 S.E.2d at 105-06 (holding
that a third-party who was not negligent could not be jointly liable for the purpose of
contribution).
¶ 44 Here, as discussed above, I&R has failed to sufficiently allege against Tremco
each of the elements of negligence. Without sufficiently alleging that Tremco
committed a tort, I&R cannot allege that Tremco is a joint tortfeasor. See id.Accordingly, I&R’s complaint on its face reveals the absence of facts sufficient to state
a claim for contribution against Tremco, and its claim for contribution was properly
dismissed.
D. Claims against Tanglewood
1. Negligence (Common Law Indemnity)
¶ 45 I&R argues that its complaint states a valid claim for negligence against
Tanglewood.
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¶ 46 As against Tremco, I&R has alleged against Tanglewood common law
indemnity in the form of indemnity implied-in-law, as opposed to merely negligence.
“North Carolina recognizes an implied-in-law right to indemnity when a passive
party is made liable for an active party’s tortious conduct flowing to and injuring a
third party.” Kaleel Builders, 161 N.C. App. at 46, 587 S.E.2d at 478 (citation
omitted). “[T]o successfully assert a right to indemnity based on a contract implied-
in-law, a party must [sufficiently allege] each of the elements of an underlying tort
such as negligence.” Schenkel, 180 N.C. App. at 268, 636 S.E.2d at 843. A party must
also allege that primary and secondary liability for the underlying tort exists between
the parties. See Kaleel Builders, 161 N.C. App. at 41, 587 S.E.2d at 475 (citation
omitted).
¶ 47 The underlying tort alleged here is negligence. To state a claim for negligence,
a plaintiff must allege “(1) a legal duty, (2) a breach thereof, and (3) injury
proximately caused by the breach.” Fussell, 364 N.C. at 226, 695 S.E.2d at 440(citation omitted).
¶ 48 First, I&R alleges that “Tanglewood subcontracted with The Ascot
Corporation, LLC to perform all landscaping work required during construction of
the Property” and “had a duty to perform its work on the Property in the manner of
a reasonably prudent landscaping contractor under the same or similar
circumstances, and in accordance with all laws, ordinances, rules, regulations, and
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requirements of all governing authorities having jurisdiction over construction of the
Property.” These allegations satisfactorily allege a legal duty owed. See id. (citation
omitted); Pinnix v. Toomey, 242 N.C. 358, 362, 87 S.E.2d 893, 897 (1955) (“[A] duty
may arise specifically by mandate of statute, or it may arise generally by operation of
law under application of the basic rule of the common law which imposes on every
person engaged in the prosecution of any undertaking an obligation to use due
care[.]”).
¶ 49 Second, I&R alleges that Tanglewood “failed to incorporate a trench drain or
swale during construction of the residence on the Property, as would have been
required to achieve a 5 percent drop in grading within the first 10 feet of the
residence, in violation of Section R401.3 of the North Carolina Residential Code”;
“failed to properly connect or attach the drainpipes to the strip drain component of
the Tremco Barrier System, and failed to install a drainpipe of sufficient length and
location to discharge excess water to daylight, in violation of Section R405 of the
North Carolina Residential Code”; and “breached its duty perform its work on the
Property in the manner of a reasonably prudent landscaping contractor under the
same or similar circumstances, and in accordance with all laws, ordinances, rules,
regulations, and requirements of all governing authorities having jurisdiction over
construction of the Property.” These allegations satisfactorily allege a breach of the
duty of care. See Fussell, 364 N.C. at 226, 695 S.E.2d at 440; Moore v. Moore, 268
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N.C. 110, 112-13, 150 S.E.2d 75, 77 (1966) (“The breach of duty may be by negligent
act or a negligent failure to act.”); see also, e.g., Becker v. Graber Builders, Inc., 149
N.C. App. 787, 793, 561 S.E.2d 905, 910 (2002) (plaintiff sufficiently alleged breach
by alleging defendants negligently failed to construct septic system in compliance
with applicable building code).
¶ 50 Third, I&R alleges that “[a]s a direct and proximate result of the negligence of
Tanglewood, I&R is involved in litigation in which it faces liability for work performed
by Tanglewood, and I&R has incurred costs and expenses in order to defend and
protect its interests.” In sum, I&R sufficiently states a claim for negligence against
Tanglewood.
¶ 51 Furthermore, I&R alleges that “[a]ny fault or negligence by I&R . . . was
passive and secondary in light of the primary and active fault or negligence of
Tanglewood[,]” and that it “seeks and is entitled to recover damages from Tanglewood
for any amounts that I&R may be found liable to Plaintiffs in this action as a result
of Tanglewood’s negligence.” These allegations satisfactorily allege a right to
indemnity, should I&R be found liable to Plaintiffs. See Kaleel Builders, 162 N.C.
App. at 41, 587 S.E.2d at 475 (citation omitted).
¶ 52 Tanglewood argues that the trial court correctly dismissed I&R’s indemnity
claim because there is no underlying tort. Specifically, Tanglewood argues that
“Plaintiffs’ viable claims against I&R sound in contract” so “any tort claim against
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I&R must fail as a matter of law pursuant to the economic loss rule.” However,
Plaintiffs sued I&R for negligence and the record contains no order dismissing
Plaintiffs’ negligence claim. Furthermore, I&R asserts in its brief that its motion to
dismiss Plaintiffs’ negligence claim was denied, and Plaintiffs do not assert
otherwise. Tanglewood essentially asks this Court to decide the viability of Plaintiffs’
pending negligence claim against I&R, an issue that is not properly before us.
¶ 53 In sum, Plaintiffs have sued I&R for negligence, and I&R has sufficiently
alleged that Tanglewood is derivatively liable should Plaintiffs’ claim succeed.
Because I&R has stated a claim for indemnity against Tanglewood, the trial court
erred by dismissing the claim.
2. Contribution
¶ 54 Finally, I&R argues that its complaint states a valid claim for contribution
against Tanglewood.
¶ 55 “[W]here two or more persons become jointly or severally liable in tort for the
same injury to person or property[,] . . . there is a right of contribution among
them . . . .” N.C. Gen. Stat. § 1B-1(a). To join a third-party for the purpose of
contribution, one must allege that the third-party committed negligent or wrongful
acts, and that those negligent or wrongful acts were “united in time or circumstance
such that the two acts . . . cause[d] a single injury.” Holland, 324 N.C. at 470, 380
S.E.2d at 102-03 (citation omitted).
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¶ 56 Here, I&R sufficiently alleges Tanglewood’s negligence. Additionally, I&R
alleges that it is liable with Tanglewood as joint tortfeasors to Plaintiffs:
To the extent I&R is subject to liability and damages of any
kind, including without limitation direct, indirect, special,
general, resulting, consequential, or punitive damages, as
well as any costs, expenses, and/or attorney’s fees, as a
result of any act or omission of Tanglewood, I&R is entitled
to seek contribution from Tanglewood pursuant to the
North Carolina Uniform Contribution Among Joint
Tortfeasors Act and/or other applicable law. Accordingly,
I&R expressly reserves the right to seek contribution from
Tanglewood.
¶ 57 Tanglewood argues that it cannot be a joint tortfeasor because Plaintiffs do not
have a viable tort claim against either I&R or Tanglewood, due to the economic loss
rule. Tanglewood again asks this Court to determine the viability of Plaintiffs’
pending negligence claim against I&R, an issue not properly before us. Furthermore,
based on the pleadings before us, the economic loss rule would not bar Plaintiffs from
claiming negligence against Tanglewood.
¶ 58 “[T]he economic loss doctrine ‘prohibits recovery for economic loss in tort.’”
Land v. Tall House Bldg. Co., 165 N.C. App. 880, 884, 602 S.E.2d 1, 4 (2004) (quoting
Moore v. Coachmen Industries, Inc., 129 N.C. App. 389, 401, 499 S.E.2d 772, 780
(1998)). “Instead, such claims are governed by contract law[.] The courts have
construed the term ‘economic losses’ to include damage to the product itself.” Id.(quotation marks and citations omitted). The economic loss doctrine does not apply
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where “[t]he injury, proximately caused by the promisor’s negligent, or willful, act or
omission in the performance of his contract, was to property of the promisee other
than the property which was the subject of the contract[.]” N.C. State Ports Auth. v.
Lloyd A. Fry Roofing Co., 294 N.C. 73, 82, 240 S.E.2d 345, 350 (1978) (citing Firemen’s
Mut. Ins. Co. v. High Point Sprinkler Co., 266 N.C. 134, 146 S.E.2d 53 (1966)
(economic loss rule did not apply where contracted-for sprinkler system damaged
promisee’s merchandise); Jewell v. Price, 264 N.C. 459, 142 S.E.2d 1 (1965) (economic
loss rule did not apply where contracted-for furnace burned promisee’s house)) (other
citations omitted).
¶ 59 Here, I&R alleges that “Tanglewood subcontracted with The Ascot
Corporation, LLC to perform all landscaping work required during construction of
the Property.” I&R further alleges that Tanglewood negligently performed its
landscaping work.
¶ 60 In Plaintiffs’ complaint against I&R, Plaintiffs alleged damages
including, but not limited to, repair and remediation costs
regarding carpet, personal property of the Stoops, the
repair and remediation of foundation wall waterproofing
systems, the repair and remediation of wall studs,
sheetrock, and electrical fixtures[,] remediation of mold
associated with the water penetration and the installation
of initial French drains and other drainage devices. In
addition, Ascot incurred expenses associated with the
Stoops inability to occupy and enjoy their basement for an
extended period of time.”
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¶ 61 The damages alleged by Plaintiffs relate to the Stoops’ personal property and
residence, not the landscaping. Because the injury here was to property “other than
the property which was the subject of the contract” between Ascot and Tanglewood,
the economic loss rule would not bar a negligence claim by Plaintiffs against
Tanglewood. Ports Auth., 294 N.C. at 82, 240 S.E.2d at 350.
¶ 62 Because I&R has stated a claim for contribution against Tanglewood, the trial
court erred by dismissing the claim.
III. Conclusion
¶ 63 For the reasons set forth above, I&R has failed to state legally sufficient claims
against Tremco for breach of express warranty, indemnity, and contribution. These
claims were properly dismissed. However, I&R has stated a legally sufficient claim
against Tremco for breach of implied warranty of merchantability. I&R has also
stated legally sufficient claims against Tanglewood for indemnity and contribution.
Accordingly, the trial court’s order dismissing I&R’s claims against Tremco is
affirmed in part and reversed in part, and the trial court’s order dismissing I&R’s
claims against Tanglewood is reversed. The matter is remanded for further
proceedings.
AFFIRMED IN PART; REVERSED IN PART AND REMANDED.
Chief Judge STROUD and Judge ARROWOOD concur.