Carolina Builders Corp. v. New Amsterdam Casualty Co.

73 S.E.2d 155 (1952) 236 N.C. 513

CAROLINA BUILDERS CORP.
v.
NEW AMSTERDAM CAS. CO.

No. 454.

Supreme Court of North Carolina.

November 19, 1952.

Harris, Poe & Cheshire, Raleigh, for plaintiff appellee.

Bickett & Banks, Raleigh, for defendant appellant.

BARNHILL, Justice.

While the bond in question grants laborers and materialmen the right to maintain an action against defendant, this does not change the status of defendant as a surety and make it a principal debtor. To entitle a materialman to recover from the surety on a performance bond, he must allege and prove a debt due by the contractor for material furnished him for use in the performance of his contract with the owner.

The liability of the surety does not rest solely upon the terms of its bond. It grows out of and is dependent upon the terms of the contract executed by its principal. If there has been no default by the principal, there can be no enforceable debt against the surety.

The obligation of the bond is to be read in the light of the contract it is given to secure. The extent of the engagement entered into by the surety is to be measured by the terms of the principal's agreement. Of necessity, therefore, to determine the surety's liability to third persons on its bond given for their benefit and to secure the faithful performance of a building contract as it relates to them, the contract and the bond must be construed together. Pearson v. Simon, 207 N.C. 351, 177 S.E. 124; Ideal Brick Co. v. Gentry, 191 N.C. 636, 132 S.E. 800; Robinson Mfg. Co. v. Blaylock, 192 N.C. 407, 135 S.E. 136; Dixon v. Horne, 180 N.C. 585, 105 S.E. 270; McCausland & Co. v. R. A. Brown Construction Co., 172 N.C. 708, 90 S.E. 1010.

The plaintiff does not plead the contract between Benfield and Harris nor does it set forth in its complaint the material terms thereof. It is true the complaint contains the allegation that the defendant executed its bond "reciting" certain facts in respect to a supposed contract between Benfield and Harris. But this will not suffice. The complaint must make it appear that Benfield, by virtue of his contract with Harris, is now indebted to it and the terms of the contract must be pleaded, certainly to the extent necessary to enable the court to determine that, upon the facts alleged, such indebtedness does exist so as to render defendant liable for the payment thereof. These allegations are essential to the cause of action plaintiff seeks to enforce.

Only a part of the bond itself on which plaintiff relies is by reference made a part of the complaint. The builders contract is a material part thereof. This contract is not attached either as such or as a part of the performance bond.

Moreover, so far as the complaint discloses, the owner still has on hand a sufficient part of the contract price to satisfy the claim of plaintiff. There is no allegation that any part thereof has been paid by the owner to the contractor or expended by him in the completion of the building project. It is alleged that the creditors—not the owner—completed the erection of the buildings after Benfield's default, and that the proceeds derived from the sale of the property were consumed, not by the cost incurred in the completion of the contract but in the payment of a prior mortgage. What part of plaintiff's claim, if any, was incurred in the completion of Benfield's contract is not made to appear.

Furthermore, plaintiff's right to recover is subject to the owner's priority. What is that priority? Is it of such nature as to foreclose plaintiff's action? The court can answer only upon a consideration of both contracts. Hence it is essential that plaintiff plead both contracts as a part of its cause of action.

The rule of liberal construction does not require or permit us to read into the complaint allegations which are not there.

For the reasons stated we are of the opinion the complaint fails to state a cause of action. Therefore, the cause will be remanded to the end that plaintiff may move to amend as provided by G.S. § 1-131. Upon its failure so to do within the time allowed by statute, the cause will be dismissed.

Reversed.