Middlesex Const. Corp. v. State ex rel. State Art Museum Bldg. Com'n, 575PA82

• Decision Date: 08 February 1983
• Docket Number: No. 575PA82,575PA82
• Citation: 307 N.C. 569,299 S.E.2d 640
• Parties: MIDDLESEX CONSTRUCTION CORPORATION v. The STATE of North Carolina ex rel. STATE ART MUSEUM BUILDING COMMISSION.
• Court: North Carolina Supreme Court

Page 640

299 S.E.2d 640

307 N.C. 569

MIDDLESEX CONSTRUCTION CORPORATION v. The STATE of North Carolina ex rel. STATE ART MUSEUM BUILDING COMMISSION.

No. 575PA82.

Supreme Court of North Carolina.

Feb. 8, 1983.

Sanford, Adams, McCullough & Beard by J. Allen Adams, E.D. Gaskins, Jr., William George Pappas, and Nancy H. Hemphill, Raleigh, for plaintiff-appellee.

Rufus L. Edmisten, Atty. Gen. by T. Buie Costen, Sp. Deputy Atty. Gen., Raleigh, for defendant-appellant.

MEYER, Justice.

At issue is whether the trial court erred in denying defendant's motions to dismiss. The resolution of this issue involves the interpretation of and the interaction between a statutory provision, G.S. § 143-135.3, and the judicial prescript enunciated in Smith v. State, 289 N.C. 303, 222 S.E.2d 412.

In Smith, this Court wrote:

We hold, therefore, that whenever the State of North Carolina, through its authorized officers and agencies, enters into a valid contract, the State implicitly consents to be sued for damages on the contract in the event it breaches the contract.

Id. at 320, 222 S.E.2d at 423-24.

In its apparent holding that the defense of sovereign immunity was no longer available to the State in any action for breach of a duly authorized State contract, Smith was a landmark decision in the jurisprudence of our State. However, as recognized in Smith, the State had, through various legislative enactments prior to that decision, waived its immunity and had expressly consented to be sued on its contracts. See G.S. § 136-29(b) (highway construction contracts); G.S. § 115-142(n) (teacher employment contracts) (now repealed). Also referred to in Smith as an "important" contractual situation in which the Legislature had already consented to suits against the State is G.S. § 143-135.3, authorizing "civil actions on claims arising out of completed contracts for construction or repair work awarded by any state board." Id. at 321, 222 S.E.2d at 424 (emphasis added).

G.S. § 143-135.3, which was amended in 1981, provides as follows:

§ 143-135.3. Procedure for settling controversies arising from contracts; civil actions on disallowed claims.

When a claim arises prior to the completion of any contract for construction or repair work awarded by any State board to any contractor under the provisions of this Article, the contractor may submit his claim in writing to the Division of State Construction for decision. Upon completion of any contract for construction or repair work awarded by any State board to any contractor, under the provisions of this Article, should the contractor fail to receive such settlement as he claims to be entitled to under terms of his contract, he may, within 60 days from the time of receiving written notice as to the disposition to be made of his claim, submit to the Secretary of Administration a written and verified claim for such amount as he deems himself entitled to under the terms of said contract, setting forth the facts upon which said claim is based. In addition, the claimant, either in person or through counsel, may appear before the Secretary of Administration and present any additional facts and arguments in support of his claim. Within 90 days from the receipt of the said written claim, the Secretary of Administration shall make an investigation of the claim and may allow all or any part or may deny said claim and shall have the authority to reach a compromise agreement with the contractor and shall notify the contractor in writing of his decision.

As to such portion of a claim which may be denied by the Secretary of Administration, the contractor may, within six months from receipt of the decision, institute a civil action for such sum as he claims to be entitled to under said contract by the filing of a verified complaint and issuance of summons in the Superior Court of Wake County or in the superior court of any county wherein the work under said contract was performed. The procedure shall be the same as in all civil actions except as herein and as hereinafter set out.

All issues of law and fact and every other issue shall be tried by the judge, without jury; provided that the matter may be referred in the instances and in the manner provided for in Article 20 of Chapter 1 of the General Statutes.

The submission of the claim to the Secretary of Administration within the time set out in this section and the filing of an action in the superior court within the time set out in this section shall be a condition precedent to bringing an action under this section and shall not be a statute of limitations.

The provisions of this section shall be deemed to enter into and form a part of every contract entered into between any board of the State and any contractor, and no provision in said contracts shall be valid that is in conflict herewith.

The word "board" as used in this section shall mean the State of North Carolina or any board, bureau, commission, institution, or other agency of the State, as distinguished from a board or governing body of a subdivision of the State. "A contract for construction or repair work," as used in this section, is defined as any contract for the construction of buildings and appurtenances thereto, including, but not by way of limitation, utilities, plumbing, heating, electrical, air conditioning, elevator, excavation, grading, paving, roofing, masonry work, tile work and painting, and repair work as well as any contract for the construction of airport runways, taxiways and parking aprons, sewer and water mains, power lines, docks, wharves, dams, drainage canals, telephone lines, streets, site preparation, parking areas and other types of construction on which the Department of Administration enters into contracts.

"Contractor" as used in this section includes any person, firm, association or corporation which has contracted with a State board for architectural, engineering or other professional services in connection with construction or repair work as well as those persons who have contracted to perform such construction or repair work.

N.C.Gen.Stat. § 143-135.3 (Supp.1981) (emphasis added).

Apart from the introductory sentence, the present version of the statute is identical to that which was in effect at the time the Smith case was decided. Its language could not be clearer: although a contractor may ultimately file an action in Superior Court, the exhaustion of administrative remedies as provided in G.S. § 143-135.3 is a condition precedent to such action, and the provisions become a part of every contract entered into between the State and the contractor. ¹

The threshold question, then, is whether by its holding, Smith was intended to affect or nullify these prior statutory provisions which permit an aggrieved party, after exhausting certain administrative remedies, to institute a civil contract action in ...