Blue Fox Bar, Inc. v. City of Yankton

• Decision Date: 08 June 1988
• Docket Number: Nos. 15721,15739,s. 15721
• Citation: 424 N.W.2d 915
• Parties: BLUE FOX BAR, INC., Plaintiff and Appellant, v. CITY OF YANKTON, Defendant and Appellee.
• Court: South Dakota Supreme Court

Page 915

424 N.W.2d 915

BLUE FOX BAR, INC., Plaintiff and Appellant, v. CITY OF YANKTON, Defendant and Appellee.

Nos. 15721, 15739.

Supreme Court of South Dakota.

Argued Oct. 5, 1987.

Decided June 8, 1988.

Jerry L. Pollard of Light Law Offices, Yankton, for plaintiff and appellant.

Steven M. Johnson of Brady, Kabeiseman, Reade & Johnson, Yankton, for defendant and appellee.

GERKEN, Circuit Judge.

Blue Fox Bar, Inc. (Blue Fox) appeals from the trial court's judgment for the City of Yankton and from the court's denial of Blue Fox's motion for a new trial. The City of Yankton has filed a notice of review from the trial court's order denying the city's motion for summary judgment. We affirm.

FACTS

In 1967, City of Yankton, pursuant to its plans and specifications, had a lift station designed and constructed on the east side of Yankton. Originally, this lift station served a small area of Yankton, but by 1984, it served the whole area east and northeast of Yankton and an area outside the Yankton city limits.

In 1978 and 1980 this lift station underwent certain modifications. In 1978 an alarm circuit was added to the lift station. This alarm circuit was tied into the lab at the sewage treatment plant and enabled the lift station to be monitored in case a problem developed. In 1980 the sewer line from the Human Services Center was re-routed through this lift station and a third pump was added to handle the increased volume of sewage.

In 1979 Blue Fox purchased the Super 8 Motel. Although outside the city limits, the Super 8 Motel was provided water and sewer services by the City of Yankton. Water rates for those outside the city limits were double the rates of those paid by residents of Yankton. Sewer rates were the same. The hookup by the Super 8 to the city sewer system was authorized by the Yankton city commission. The Super 8 Motel was serviced by the lift station located on the east side of Yankton.

On September 5, 1984, sewage backed up in the basement of the Super 8 Motel. Originally believing that the problem was caused by blockage within the motel, one of Blue Fox's employees attempted to remedy the situation. When his attempts to rectify the situation failed, a plumber was called. The plumber established that the source of the problem was outside the motel and notified the city. It was discovered that the lift station which serviced the Super 8 was not operating. The cause of the problem was electrical in nature; a breaker to the control panel was either in the "off" or "tripped" position. Without power to the control panel, the alarm system, which was added in 1978, failed to work. Once the circuit breaker was turned to the "on" position, the system functioned properly.

Blue Fox started this action to recover damages sustained by the Super 8 Motel as a result of the sewage backup. In its complaint, Blue Fox alleged causes of action in negligence, strict liability, and breach of contract. The City of Yankton moved for summary judgment alleging that it was immune from such suit because of the doctrine of sovereign immunity. The trial court denied the motion finding that the complaint stated a cause of action upon which relief could be granted. The case was tried before a jury in January 1987. At the close of the City of Yankton's evidence, the trial court dismissed Blue Fox's cause of action in contract and strict liability. The jury found for the City of Yankton on the claim of negligence. The court denied Blue Fox's motion for a new trial.

On appeal, Blue Fox asserts that the trial court erred by dismissing its causes of action in contract and strict liability, by refusing to instruct the jury on the doctrine of res ipsa loquitur, and by refusing its motion for a new trial. In its notice of review the City of Yankton contends that the trial court's refusal to grant summary judgment was improper. We address this issue first due to its possible effect on Blue Fox's appeal.

DECISION

DOES THE DOCTRINE OF SOVEREIGN IMMUNITY PRECLUDE BLUE FOX

FROM MAINTAINING A CAUSE OF ACTION AGAINST THE

CITY OF YANKTON?

UNDER THE FACTS AND CIRCUMSTANCES OF THIS CASE, WE HOLD THAT

IT DOES NOT.

Sovereign immunity is the principle that the state cannot be sued unless it has given its consent or has otherwise waived its immunity. City of Rapid City v. Boland, 271 N.W.2d 60, 64 (S.D.1978); Cuka v. State, 80 S.D. 232, 122 N.W.2d 83, 85 (1963). When acting within its governmental powers, a municipal corporation is acting as an agent for the state and partakes in its sovereignty in respect to its immunity. City of Rapid City v. Boland, Id.; Conway v. Humbert, 82 S.D. 317, 145 N.W.2d 524, 526 (1966). However, a municipality is liable in the same manner as an individual or corporation for torts in its corporate or proprietary capacity. Sioux Falls Construction Co. v. City of Sioux Falls, 297 N.W.2d 454, 457 (S.D.1980); Bucholz v. City of Sioux Falls, 77 S.D. 322, 91 N.W.2d 606, 608 (1958).

Governmental immunity is not a defense to a claim against the state for contractual liability arising out of either governmental or proprietary operations. Zynda v. Michigan Aeronautics Commission, 372 Mich. 285, 125 N.W.2d 858, 860 (1964); Department of Parks and Recreation v. West-A-Rama, Inc., 35 Cal.App.3d 786, 111 Cal.Rptr. 197, 202 (1973). Such contractual obligations would be deemed a waiver of any immunity. Therefore, the trial court properly determined at the time of the motion for summary judgment, that Blue Fox's cause of action in contract sufficiently stated a claim upon which relief could be granted.

The trial court determined that the City of Yankton was operating in a corporate or proprietary function by constructing and maintaining a sewer system, and, therefore, a cause of action existed in tort against the City of Yankton. This court, in citing to the case of State v. Board of Commissioners, 53 S.D. 609, 222 N.W. 583 (1928), has previously stated:

Municipal Corporations enjoy their immunity from liability for torts only in so far as they partake of the state's immunity, and only in the exercise of those governmental powers and duties imposed upon them as representing the state. In the exercise of those administrative powers conferred upon, or permitted to them solely for their own benefit in their corporate capacity, whether performed for gain or not and whether of the nature of a business enterprise or not, they are neither sovereign nor immune. They are only sovereign and only immune in so far as they represent the state. They have no sovereignty of their own, they are in no sense sovereign per se.

Oien v. City of Sioux Falls, 393 N.W.2d 286, 291 (S.D.1986). It is well established that it is the nature of the duty performed which determines liability. Conway v. Humbert, supra at 527; Bucholz v. City of Sioux Falls, supra at 610. In constructing and maintaining a sewer system, the City of Yankton was acting pursuant to SDCL 9-48-2. ^* This statute does not create, or impose, any duties upon the City of Yankton. In Jerauld County v. Saint Paul-Mercury Indemnity Co., 76 S.D. 1, 71 N.W.2d 571 (1955), this court considered whether the operation of a county hospital was a proprietary or governmental function. In establishing that such activity was governmental, the court stated:

SDC Supp. 50.0101 makes it the duty of the county to relieve and support all poor and indigent persons having a lawful poor relief settlement therein. In this general duty is included, among other things, the specific duty to provide hospitalization, medical care and treatment. In the acceptance of the duty the county has no choice. (citations omitted)

71 N.W.2d at 574.

In the present case, the City of Yankton had no duty to construct or maintain a sewer system either within the municipality or outside its corporate limits. However, by undertaking the construction and maintenance of a sewer system, the city acted in a proprietary capacity and, therefore, may be held liable in tort for wrongs committed in its exercise of this function.

II.

DID THE TRIAL COURT ERR WHEN IT DISMISSED PLAINTIFF'S CAUSE

OF ACTION IN CONTRACT?

WE HOLD THAT IT DID NOT.

Blue Fox claims that the Yankton city commission's ratification of an agreement to provide sewer and water service to the Super 8 Motel at a stated rate created an implied contract between the parties. At the trial, the only evidence offered to show the existence of such a contract was a brief bit of testimony by Eugene Hoag, the Director of Public Works in Yankton. Hoag's testimony merely revealed that the City agreed to provide sewer and water services to the Super 8, and that the Super 8 would pay a sewer rate the same as the residents of Yankton. For the water service, however, the Super 8 would pay double the rate which residents paid. No further terms of the alleged contract were ever provided. The trial court held that the city commission's ratification of the agreement to provide water and sewer service at a specified rate was merely because of the cost of providing that service and was at the request of the Super 8. It did not constitute a contract.

It is well established that a municipal corporation has only such powers as those granted to it by the constitution or statutes of this state, or such as incidental thereto. Schryver v. Schirmer, 84 S.D. 352, 171 N.W.2d 634, 635 (1969); City of Watertown v. Meseberg, 82 S.D. 250, 144 N.W.2d 42, 44 (1966). Blue Fox has indicated in its brief that, pursuant to SDCL 9-48-32, the City of Yankton had the power to enter into a contract regarding sewer service. SDCL 9-48-32 provides:

A municipality wherein sewage treatment or septic plant is maintained shall have power to contract for the privilege of connecting to said plant for the purpose of treating or disposing of private sewage or industrial waste originating within the municipality or within one mile of the corporate limits, provided said plant has capacity over the requirements of the...