Arcon Const. Co., Inc. v. South Dakota Cement Plant, Nos. 14139

CourtSupreme Court of South Dakota
Writing for the CourtDUNN; FOSHEIM; FOSHEIM
Parties38 UCC Rep.Serv. 1481 ARCON CONSTRUCTION CO., INC., a Minnesota Corporation with its principal place of business at Mora, Minnesota, Plaintiff and Appellee, v. SOUTH DAKOTA CEMENT PLANT and South Dakota State Cement Plant Commission; Edwin Gaiser of Rapid City, Roger Prunty of Brookings, Al Sandvig of Aberdeen, Richard Sayre of Sioux Falls, Joe Simmons of Rapid City, Bill Stake of Lennox, and Tom Zeller of Rapid City, the duly appointed and acting Commission members; William Scanlon of Rapid City, individually, and as an employee, officer and agent of Plant and Commission; and Michael Holeton of Rapid City, individually and as an employee, officer and agent of the Plant and Commission, Defendants and Appellants.
Decision Date02 May 1984
Docket Number14147 and 14148,Nos. 14139,14140

Page 407

349 N.W.2d 407
38 UCC Rep.Serv. 1481
ARCON CONSTRUCTION CO., INC., a Minnesota Corporation with
its principal place of business at Mora,
Minnesota, Plaintiff and Appellee,
v.
SOUTH DAKOTA CEMENT PLANT and South Dakota State Cement
Plant Commission; Edwin Gaiser of Rapid City, Roger Prunty
of Brookings, Al Sandvig of Aberdeen, Richard Sayre of Sioux
Falls, Joe Simmons of Rapid City, Bill Stake of Lennox, and
Tom Zeller of Rapid City, the duly appointed and acting
Commission members; William Scanlon of Rapid City,
individually, and as an employee, officer and agent of Plant
and Commission; and Michael Holeton of Rapid City,
individually and as an employee, officer and agent of the
Plant and Commission, Defendants and Appellants.
Nos. 14139, 14140, 14147 and 14148.
Supreme Court of South Dakota.
Argued Oct. 25, 1983.
Decided May 2, 1984.

Page 409

Ronald G. Schmidt of Schmidt, Schroyer, Colwill & Zinter, Pierre, for plaintiff and appellee.

Tom Lehnert and Wayne F. Gilbert of Lehnert & Gilbert and Ronald W. Banks of Banks & Johnson, Rapid City, for defendants and appellants.

DUNN, Justice (on reassignment).

The South Dakota Cement Plant and the South Dakota Cement Plant Commission (referred to collectively as "the cement plant") appeal a judgment entered against them for their breach of two contracts for the sale of cement to Arcon Construction Co., Inc. (Arcon). We affirm in part, reverse in part, and remand.

The first contract at issue here involved the sale of cement to Arcon for a project on Interstate 29 north of Watertown, South Dakota. The other contract involved the sale of cement for Arcon's paving project on Highway 281 near Aberdeen, South Dakota. Both contracts called for the delivery of cement during construction year 1978. However, due to a severe cement shortage in 1978, the cement plant failed to deliver the cement as called for under the contracts. As a result, Arcon was not able to perform work on the projects until the 1979 and 1980 construction seasons.

Arcon commenced its action for breach of contract on April 17, 1980; the cement plant counterclaimed for damages caused by Arcon's failure to use certain amounts of cement which were delivered to Arcon. A jury trial began on October 6, 1982. After hearing the evidence and deliberating for eight days, the jury returned a verdict for Arcon in the amount of $1,175,974.00, and a verdict for the cement plant in the amount of $89,089.00 on its counterclaim.

Numerous issues are raised by the parties in this appeal, including the following: 1) Is Arcon's lawsuit barred by the principle of sovereign immunity? 2) Is Arcon's lawsuit barred by the running of the statute of limitations? 3) Did the trial court properly instruct the jury as to the cement plant's contractual and statutory defenses? 4) Did the trial court properly instruct the jury as to the proper measure of damages for contractor-owned idle equipment? 5) Did the trial court abuse its discretion when it taxed costs against the cement plant? 6) Is Arcon entitled to prejudgment

Page 410

interest on the damages awarded by the jury?
I

The threshold question in this appeal is whether the doctrine of sovereign immunity extends to the cement plant. Article III, section 27 of the South Dakota Constitution provides: "The Legislature shall direct by law in what manner and in what courts suits may be brought against the state." Accordingly, we have consistently held that it is the exclusive province of the legislature and not the courts to abrogate or limit the doctrine of sovereign immunity. In the absence of an express statutory waiver, we strictly adhere to this constitutionally mandated doctrine. Kringen v. Shea, 333 N.W.2d 445 (S.D.1983); Merrill v. Birhanzel, 310 N.W.2d 522 (S.D.1981); High-Grade Oil Co., Inc. v. Sommer, 295 N.W.2d 736 (S.D.1980); Arms v. Minnehaha County, 69 S.D. 164, 7 N.W.2d 722 (1943).

The cement plant is clearly an arm of the state. Article XIII, section 10 of the South Dakota Constitution declares that the manufacture, distribution, and sale of cement and cement products is a function of state government. Not only is such activity for a public purpose, Eakin v. South Dakota State Cement Commission, 44 S.D. 268, 183 N.W. 651 (1921); In re Opinion of the Judges, 43 S.D. 648, 180 N.W. 957 (1920), but, when this cause of action arose in 1978, SDCL 5-17-2.1 specifically provided: "The state cement commission and the state cement plant under its control shall comprise a principal department of state government." * It follows that in pursuing its cement plant operation, the state retains its sovereign status.

Even though the cement plant is an arm of the state, Arcon argues that the legislature has waived immunity for suits arising out of cement plant contracts, especially those within the scope of the Uniform Commercial Code (UCC), SDCL title 57A. The trial court reached a waiver of immunity conclusion under a non-UCC theory based on statutory construction and constitutional interpretation. We do not reach all the waiver of immunity considerations noted by the trial court. We do find, however, for the following reasons, that when the legislature enacted the UCC it expressly waived sovereign immunity for the cement plant whenever the cement plant enters into contracts for the sale of goods.

First, all transactions in goods clearly fall within the provisions of UCC-Sales. SDCL 57A-2-102. The contracts which formed the basis for this lawsuit involved the sale of cement. Cement is "goods" under UCC-Sales. SDCL 57A-2-105(1). Consequently, the type of transaction engaged in between Arcon and the cement plant is governed by the UCC.

Second, the UCC provisions expressly apply to the state. In its general definitions, the UCC defines "organization" to include "government or governmental subdivision or agency." SDCL 57A-1-201(28). Because it is a governmental agency, the cement plant is an organization within the meaning of the UCC. As an organization, the cement plant is a "person" under SDCL 57A-1-201(30), and, as a "person who sells or contracts to sell goods," it is a "seller" within the context of UCC-Sales. SDCL 57A-2-103(1)(d). See Northern Helex Company v. United States, 455 F.2d 546 (Ct.Cl.1972), which applied UCC provisions to a sales contract between the federal government and a private company; and Shea-Kaiser-Lockheed-Healy v. Dept. of W. & P., Etc., 73 Cal.App.3d 679, 140 Cal.Rptr. 884 (1977), which held that a municipal water department was subject to the UCC in a sales transaction.

Third, the UCC grants a buyer specific rights and remedies against a breaching seller, and these rights include lawsuits.

Page 411

When, prior to the first delivery, the cement plant informed Arcon that it would not be able to deliver the contracted fifteen carloads of cement per day, Arcon, as an aggrieved party whose contract had been substantially impaired in value, was empowered by SDCL 57A-2-610 to resort to any of the enumerated remedies for anticipatory repudiation. SDCL 57A-1-106(2) expressly permits an action to pursue these remedies: "Any right or obligation declared by this title is enforceable by action unless the provision declaring its specifies a different and limited effect." The word "right" includes remedies. SDCL 57A-1-201(36). Therefore, Arcon was entitled to maintain an action against the cement plant to enforce UCC-Sales remedies which became available upon breach of the contracts.

Even though, by legislative enactment of the UCC, the people have waived cement plant contract immunity, suit is still potentially obstructed by article XI, section 9 of the South Dakota Constitution, which provides, in part: "No indebtedness shall be incurred or money expended by the state, and no warrant shall be drawn upon the state treasurer except in pursuance of an appropriation for the specific purpose first made." Based upon this section, we have concluded that unless an appropriation has been made for the specific purpose of a lawsuit, a court is without jurisdiction to render judgment. See G.H. Lindekugel & Sons, Inc. v. South Dakota St. Hy. C., 87 S.D. 32, 202 N.W.2d 125 (1972); Griffis v. State, 68 S.D. 360, 2 N.W.2d 666 (1942).

However, article XI of the South Dakota Constitution must be interpreted in light of article XIII, sections 10 and 11, which authorize the state to engage in the cement business. Article XIII, section 11 provides: "The state may pledge such cement plants and all of the accessories thereto, and may pledge the credit of the state, to provide funds for the purposes enumerated in § 10 of this article, any provision in this Constitution to the contrary notwithstanding." (emphasis added). Except for subject matter, article XIII, section 11 is identical to article XIII, section 13, which authorized the state to fund its electric power enterprises by pledge of those assets. In the case of In re Opinion of the Judges, 43 S.D. 635, 177 N.W. 812 (1920), we recognized the supremacy of the electric power funding provision over conflicting constitutional provisions. We stated:

It is our opinion that by the provisions of this section the people of the state intended to take the provisions of article 13, § 12, out from the operation of any other section of the Constitution, including the debt limit of one-half of one per cent. The adoption of said section 13 was a setting apart of this form of internal improvement from the provisions regulating internal improvements generally. To hold otherwise would render the language of said section 13 practically meaningless ... The clear purpose of article 13, § 13--else there was no purpose--was to give the Legislature a free hand in carrying out the provisions of article 13, § 12, unhampered by any other provision of the Constitution. [Emphasis added]

Id. at 643-644, 177 N.W. at 814-815.

Applying the foregoing rationale to the parallel constitutional provisions authorizing the creation of the...

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39 practice notes
  • Clouse ex rel. Clouse v. State, No. CV-99-0023-PR.
    • United States
    • Supreme Court of Arizona
    • February 1, 2001
    ...from suit is a sovereign right subject to waiver only by legislative determination); Arcon Constr. Co. v. South Dakota Cement Plant, 349 N.W.2d 407, 410 (S.D. 1984) ("[W]e have consistently held that it is the exclusive province of the legislature and not the courts to. abrogate or limit th......
  • City of Sioux Falls v. Kelley, Nos. 17871
    • United States
    • South Dakota Supreme Court
    • March 31, 1994
    ...interest is not to be awarded if the damages are uncertain until determined by the trier of fact. Arcon Const. Co. v. S.D. Cement Plant, 349 N.W.2d 407, 416 (S.D.1984). "Thus, the test for awarding interest is not whether liability was clear, but whether (assuming liability) the damages wer......
  • South Dakota Bldg. Authority v. Geiger-Berger Associates, P.C., GEIGER-BERGER
    • United States
    • Supreme Court of South Dakota
    • December 4, 1987
    ...interest is not to be awarded if the damages are uncertain until determined by the trier of fact. Arcon Constr. Co. v. S.D. Cement Plant, 349 N.W.2d 407, 416 (S.D.1984). "Thus, the test for awarding interest is not whether liability was clear, but whether (assuming liability) the damages we......
  • Clouse v. State, Dept. of Public Safety, No. CV-99-0023-PR.
    • United States
    • Supreme Court of Arizona
    • October 17, 2000
    ...from suit is a sovereign right subject to waiver only by legislative determination); Arcon Constr. Co. v. South Dakota Cement Plant, 349 N.W.2d 407, 410 (S.D. 1984) ("[W]e have consistently held that it is the exclusive province of the legislature and not the courts to abrogate or limit the......
  • Request a trial to view additional results
39 cases
  • Clouse ex rel. Clouse v. State, No. CV-99-0023-PR.
    • United States
    • Supreme Court of Arizona
    • February 1, 2001
    ...from suit is a sovereign right subject to waiver only by legislative determination); Arcon Constr. Co. v. South Dakota Cement Plant, 349 N.W.2d 407, 410 (S.D. 1984) ("[W]e have consistently held that it is the exclusive province of the legislature and not the courts to. abrogate or limit th......
  • City of Sioux Falls v. Kelley, Nos. 17871
    • United States
    • South Dakota Supreme Court
    • March 31, 1994
    ...interest is not to be awarded if the damages are uncertain until determined by the trier of fact. Arcon Const. Co. v. S.D. Cement Plant, 349 N.W.2d 407, 416 (S.D.1984). "Thus, the test for awarding interest is not whether liability was clear, but whether (assuming liability) the damages wer......
  • South Dakota Bldg. Authority v. Geiger-Berger Associates, P.C., GEIGER-BERGER
    • United States
    • Supreme Court of South Dakota
    • December 4, 1987
    ...interest is not to be awarded if the damages are uncertain until determined by the trier of fact. Arcon Constr. Co. v. S.D. Cement Plant, 349 N.W.2d 407, 416 (S.D.1984). "Thus, the test for awarding interest is not whether liability was clear, but whether (assuming liability) the damages we......
  • Clouse v. State, Dept. of Public Safety, No. CV-99-0023-PR.
    • United States
    • Supreme Court of Arizona
    • October 17, 2000
    ...from suit is a sovereign right subject to waiver only by legislative determination); Arcon Constr. Co. v. South Dakota Cement Plant, 349 N.W.2d 407, 410 (S.D. 1984) ("[W]e have consistently held that it is the exclusive province of the legislature and not the courts to abrogate or limit the......
  • Request a trial to view additional results

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