Kinsey Const. Co., Inc. v. South Carolina Dept. of Mental Health, 20830

• Decision Date: 06 December 1978
• Docket Number: No. 20830,20830
• Citation: 249 S.E.2d 900,272 S.C. 168
• Court: South Carolina Supreme Court
• Parties: KINSEY CONSTRUCTION COMPANY, INC., Respondent, v. SOUTH CAROLINA DEPARTMENT OF MENTAL HEALTH, Appellant. RELIANCE INSURANCE COMPANY, Respondent, v. SOUTH CAROLINA DEPARTMENT OF MENTAL HEALTH, Appellant.

Page 900

249 S.E.2d 900

272 S.C. 168

KINSEY CONSTRUCTION COMPANY, INC., Respondent, v. SOUTH CAROLINA DEPARTMENT OF MENTAL HEALTH, Appellant.

RELIANCE INSURANCE COMPANY, Respondent, v. SOUTH CAROLINA DEPARTMENT OF MENTAL HEALTH, Appellant.

No. 20830.

Supreme Court of South Carolina.

Dec. 6, 1978.

Atty. Gen. Daniel R. McLeod and Asst. Attys. Gen. A. Camden Lewis and Nathan Kaminski, Jr., Columbia, for appellant.

Michael H. Quinn, Columbia, for respondent.

PER CURIAM:

Plaintiffs-respondents, Kinsey Construction Company, Inc. (Kinsey) and Reliance Insurance Company (Reliance), instituted separate actions against the South Carolina Department of Mental Health (the Department), seeking recovery for an alleged breach of a building contract. The Department appeals from a lower court's order overruling their Department's demurrers to the breach of contract causes of actions. Since the issues involved are identical, the cases were consolidated for purposes of this appeal.

On November 6, 1972 the Department and Phillips Construction Company (Phillips) entered into a lump sum contract in the amount of $2,665,507.00 for the construction of an alcoholic and drug addiction center in Richland County, South Carolina. Subsequently, Reliance executed and delivered to the Department a performance bond and a labor and material bond. The contract was later assigned by Phillips to Kinsey, with the written consent of the Department. Kinsey remained the prime contractor until December 1974. Thereafter, in February 1975, Reliance and the Department by written memorandum, agreed that Reliance would undertake to complete the work, and Reliance nominated Kinsey to perform its obligations. These actions resulted by reason of the Department's refusal to accept the work of Kinsey as complete.

Two grounds of demurrer are at issue in this appeal. Initially the Department argues its demurrer should be sustained because as an agency of the State of South Carolina, it enjoys immunity from suits Ex contractu. Secondly, the Department asserts its demurrers should have been sustained on the ground that Article III, Section 30 of the South Carolina Constitution precludes suits in contracts for damages above the contract price.

With respect to the question of sovereign immunity this Court has often held that the State cannot be sued without its consent. See Lowry v. Commissioners of Sinking Fund, 25 S.C. 416, 1 S.E. 141; State v. Corbin,16 S.C. 533. Harris v. Fulp, 178 S.C. 332, 183 S.E. 158 further supports the proposition that sovereign immunity applies in actions Ex contractu. However, while we concur with the appellant's assertion that absent a waiver of immunity an individual cannot maintain an action against the State; we do not agree that a waiver of sovereign immunity can only be obtained from a self-executing provision of the Constitution or by express statutory enactment. 72 Am.Jur.2d, States, Territories, and Dependencies, Section 118, contains an apt statement of the principles controlling the case at bar.

. . . (W)here the legislature has by statute authorized the State to enter into certain contracts, the State, by entering such a contract, thereby consents to be sued if it breaches the contract to the damage of the other contracting party.

Thus, when a State secures to itself the benefits of a contract, it implicitly assumes the corresponding liabilities.

Our conclusion that the State may impliedly waive its sovereign immunity and consent to be sued for alleged breaches of its contractual responsibilities finds support in the case of Chesterfield County v. State Highway Department, 181 S.C. 323, 187 S.E. 548. There, Chesterfield County brought an action in the original jurisdiction of this Court seeking a Writ of Mandamus compelling the State Treasurer to turn over certain bonds purchased from Chesterfield County pursuant to a contract with the State. The question presented was whether mandamus was appropriate under the circumstances. Although the Court concluded Chesterfield County possessed an adequate remedy at law and denied its petition, the county was granted a rehearing. In affirming the right of Chesterfield County to litigate the questions of law this Court concluded:

The statutes of the state (Code 1932, Section 5937 et seq.) authorize the county and the highway commission to enter into what are called reimbursement agreements, of the nature of that made between Chesterfield County and the highway commission. In other words, the parties are authorized to enter into a contract. It is true that the statutes which authorize the making of the contract do not in express language confer upon either contracting party the power to sue the other for breach of contract. But the right is one of necessary implication; it is a common-law right. (Emphasis added).

Section 5874, Code 1932, authorizes the highway commission to purchase gasoline and fuel. Suppose contracts for such purchases are made by the commission and it refuses or neglects to pay for the articles purchased. Will it be contended that it cannot be sued to enforce the contract of purchase except by consent of the state? We hold that the authority given to make the contract carries with it, by necessary implication, the authority to enforce the contract by an action at law. Chesterfield County, supra at 329, 187 S.E. at 550. (Emphasis added).

In accordance with our decision in Chesterfield, supra, we hold that wherever the State of South Carolina pursuant to statutory authority enters into a valid contract, the State implicitly consents to be sued and waives its sovereign immunity to the extent of its contractual obligations. To hold otherwise would be to endorse an obvious contradiction, for it cannot be true that the State is empowered to contract with individuals and yet retains the power to avoid its obligations. Neither the State nor its citizens can be bound, yet not bound, by a single contract.

Appellant contends, however, that Section 2-9-10 of the 1976 Code of Laws provides the exclusive remedy available to respondents. This section is as follows:

All claims for the payment for services rendered or supplies furnished to the State shall be presented to the State Budget and Control Board by petition, fully setting forth the facts upon which such claim is based, together with such evidence thereof as the Board may require. The petition shall be filed with the chairman of the Board at least twenty days prior to the convening of the General Assembly.

The foregoing statute was adopted pursuant to Article 17, Section 2, which states:

The General Assembly may direct, by law, in what manner claims against the State may be established and adjusted.

The argument of appellant, that Code Section 2-9-10 places exclusive jurisdiction in the State Budget and Control Board of the present action or claim, overlooks the provisions of Article 5, Section 7 of the State Constitution which places general jurisdiction in civil and criminal cases in the circuit court in the following language:

The Circuit Court shall be a general trial court with original jurisdiction in civil and criminal cases, except those cases in which exclusive jurisdiction shall be given to inferior courts, . . . .

While there is serious question whether Article 17, Section 2 of the Constitution authorizes the General Assembly to remove jurisdiction of suits against the State from the jurisdiction of the circuit court as provided by Article 5, Section 7, this issue need not now be resolved for the General Assembly by Code Section 15-77-50 has clearly expressed its intent that the jurisdiction of civil actions against the State be placed in the circuit courts. This section states in pertinent part:

The circuit courts of this State are hereby vested with jurisdiction to hear and determine all questions, actions and controversies, . . . , affecting boards, commissions and agencies of this State, and officials of the State in their official capacities in the circuit where such question, action or controversy shall arise.

This section was construed in Harrison v. S. C. Tax Commission, 261 S.C. 302, 199 S.E.2d 763, as recognizing jurisdiction in the circuit court and providing for venue in cases in which the sovereign immunity doctrine is inapplicable.

The circuit court, therefore, clearly has jurisdiction to determine the present action.

Applying our conclusion to the case at bar we note that the General Assembly created the Department of Mental Health in 1964 and vested it with jurisdiction over the State's alcohol and drug addiction facilities. See Sections 44-9-10, 44-9-20 Code of Laws of South Carolina 1976. The governing board of the...