Foley Const. Co. v. Ward

• Decision Date: 25 October 1963
• Citation: 375 S.W.2d 392
• Parties: FOLEY CONSTRUCTION COMPANY, a Corporation, et al., Appellants, v. Henry WARD, Commissioner of the Department of Highways, etc., et al., Appellees.
• Court: United States State Supreme Court — District of Kentucky

Page 392

375 S.W.2d 392

FOLEY CONSTRUCTION COMPANY, a Corporation, et al., Appellants, v. Henry WARD, Commissioner of the Department of Highways etc., et al., Appellees.

Court of Appeals of Kentucky.

Oct. 25, 1963.

Rehearing Denied March 6, 1964.

Robin Griffin, Miller, Griffin & Marks, Lexington, for appellants.

Donald Moloney, Lexington, John B. Breckinridge, Atty. Gen., William A. Lamkin, Jr., Asst. Atty. Gen., James J. Shannon, Jr., Frankfort, for appellees.

MONTGOMERY, Judge.

The decisive question is: May the Department of Highways, an agency of the state, defeat an action for damages for breach of a contract by the plea of sovereign immunity?

Foley Construction Company, a corporation, and Harry D. Foley, doing business as Foley Construction Company, sued Henry Ward, Commissioner, and the Department of Highways of the Commonwealth of Kentucky for $1,197,046.33 as damages for the breach of a contract to construct 3.585 miles of grade and drain work on Interstate Highway 75 in Covington. The bid price of the contract was $5,695,881, all of which has been paid except $1,000. This sum has been withheld by the Department pending a release under the contract. Interest is claimed on both amounts sought. An appeal has been taken from a judgment in favor of the Department. The Department has cross-appealed from the ruling denying it the defense of sovereign immunity. Other questions are presented but are not decided.

The doctrine of sovereign immunity has always been embodied in the common law of the United States and of the individual states. The original concept often stated as 'The king can do no wrong' arose out of the feudal dogma of divine right of kings and their infallibility. The authority of the king was considered absolute.

Redress for injuries from the crown suffered by a subject was sought by petition to the king. The petition was granted as a matter of grace. If the petition was properly presented, the usual way was for the king to endorse or underwrite 'foit droit fait al partie' (let right be done to the party). 1 Blackstone's Commentaries, Page 203. In all cases it appears that some endorsement or order of the king himself was necessary to warrant further proceeding.

Originally, claims for money if successfully presented were satisfied from the king's personal funds. Later, as the king became dependent on the ordinary support of the government, it became necessary for Parliament to provide funds for the redress of such wrongs or payment of the claim. Thus arose the present principle in which the assent of the Legislature is required in order to sue the state. Chisholm Ex'r v. Georgia, 2 Dall. 419, 2 U.S. 419, 1 L.Ed. 440.

Immunity from suit is a sovereign right of the state. Sovereign rights are deemed essential to the existence of the state. The right of eminent domain, that is, the right of the sovereignty to use property of its members for the public good or necessity, is another sovereign right. Gilmer v. Limepoint, 18 Cal. 229. Sovereign rights are the supreme, absolute power to govern, which are possessed and exercised by both the United States and the individual states.

The right of sovereign immunity in Kentucky has existed from the beginning of the Commonwealth. Article VIII, Section 4, 1792 Kentucky Constitution provides: 'The legislature shall direct by law in what manner and what courts suits may be brought against the Commonwealth.' With minor variations this principle has been embodied in each of the succeeding Constitutions. Article VI, Section 6, 1799 Kentucky Constitution; Article VIII, Section 6, 1850 Kentucky Constitution; and Section 231, 1891 Kentucky Constitution.

Deitzman, J., stated the purpose of the provision to be:

'The reason for exempting a municipality or sovereign from damages for injuries inflicted in the performance of its governmental functions is one of public policy to protect public funds and public property. Taxes are raised for certain specific governmental purposes, and, if they could be diverted to the payment of damage claims, the more important work of government, which every municipality or sovereign must perform, regardless of its other relations, would be seriously impaired, if not totally destroyed. The reason for the exemption is sound and unobjectionable.'

Taylor v. Westerfield, 233 Ky. 619, 26 S.W.2d 557, 69 A.L.R. 482.

Kentucky Constitution Section 230 complements Section 231. It contains prohibitions against withdrawal of money from the State Treasury and against the diversion of highway money from the purposes intended. In this regard both sections are intended to promote an orderly system for the disposition of public money.

The immunity of the sovereign from suit has long been recognized. In Tate v. Salmon, 79 Ky. 540, 3 Ky.Law Rep. 359, Lewis, C. J., wrote:

'It has been repeatedly decided by this court that, in the absence of a law authorizing it, the state cannot be made a party-defendant or garnishee, and is not suable in her own courts; 'that parties will not be allowed to evade this inhibition by ignoring the state in their suits, and proceeding directly against the public officer having the custody of the moneys sought to be reached.' (Divine v. Harvie, 7 [T.B.] Mon. , 440; Tracy v. Hornbuckle, 8 Bush, 336; Rodman v. Musselman, 12 Bush, 336.)'

Originally, the right to sue the state was obtained by a joint resolution enacted by the Legislature. Commonwealth v. Haly, 106 Ky. 716, 51 S.W. 430, 21 Ky.Law Rep. 666; Commonwealth v. Lyon, 24 Ky.Law Rep. 1747, 72 S.W. 323; Carroll v. Bosworth, 151 Ky. 337, 151 S.W. 916. Later the Legislature by a series of enactments provided the Board of Claims as the means by which certain claims against the state might be prosecuted. Throughout the litigation involving this method of procedure, the doctrine of sovereign immunity has been recognized. The Board of Claims method so provided was recognized as a legislative waiver of the right of sovereign immunity. See Morrison v. Department of Highways, Ky., 252 S.W.2d 426; Bach v. Bach, Ky., 288 S.W.2d 52; Commonwealth v. McCoun, Ky., 313 S.W.2d 585. In the Bach case, Sims, J., said:

'Under Sec. 231 of the Kentucky Constitution, no one can sue the State without its consent, which is usually given by a joint resolution of the General Assembly. Carr v. Jefferson County, 275 Ky. 685, 122 S.W.2d 482.'

While appellants point to V. T. C. Lines, Incorporated, v. City of Harlan, Ky., 313 S.W.2d 573, as an expression of the discontent of the 'majority of the court' with the rule, there is little significance in such claim. In Commonwealth v. McCoun, Ky., 313 S.W.2d 585, sovereign immunity and legislative waiver of the doctrine were exhaustively considered shortly after the V. T. C. Lines case. Nowhere in the lengthy majority and minority opinions in the McCoun case is there to be found any suggestion that the sovereign immunity of the state should be removed except by legislative enactment. Petitions for rehearing were considered in both cases and denied the same day, June 20, 1958.

The doctrine has remained sacred and inviolate until recently. Appellants rely mainly on Watkins, Consulting Engineer v. Department of Highways, Ky., 290 S.W.2d 28, and Derby Road Building Company v. Commonwealth, Ky., 317 S.W.2d 891, as affording a breach in the doctrine. Humphreys v. J. B. Michael Company, Ky., 341 S.W.2d 229, is also cited.

It should be remembered that appellants have been paid the bid price of the contract, $5,695,881, except $1,000. By this suit they seek to recover damages for an alleged breach of the contract. The redress they seek arises from the failure of employees and/or officials of the Department to perform properly their duly authorized statutory duties. Typical of the omissions and delinquencies was the premature issuance of a work order by the then Commissioner or someone for whose failure he was responsible.

In this respect the present case is distinguishable from the Watkins case. At issue in the Watkins case was the question whether an arbitration agreement could be enforced to determine the amount of compensation to be paid an engineering firm for its services which were made necessary by added specifications under a contract with the Department. Such claim was for compensation for services performed pursuant to the contract rather than by reason of any breach of a contract.

While recognizing the immunity of the state from suit in the Watkins case, it was decided that the claim should be sustained as arising out of the performance of a legal contract under proper statutory authority. Appellants do not contend that there is any direct statutory authority to pay damages for breach of a contract.

After having sustained the arbitration agreement to determine the amount of the claim, the Court in the Watkins case, in what amounts to dictum, suggested that the agreement might be sustained on the basis of mutuality of contractual obligation. An authorization to sue or be sued was implied from the statute which authorized the Department to enter into a...