Nello L. Teer Co. v. North Carolina State Highway Commission

• Decision Date: 23 July 1965
• Docket Number: No. 536,536
• Citation: 265 N.C. 1,143 S.E.2d 247
• Parties: NELLO L. TEER COMPANY v. NORTH CAROLINA STATE HIGHWAY COMMISSION.
• Court: North Carolina Supreme Court

Page 247

143 S.E.2d 247

265 N.C. 1

NELLO L. TEER COMPANY v. NORTH CAROLINA STATE HIGHWAY COMMISSION.

No. 536.

Supreme Court of North Carolina.

July 23, 1965.

Nye, Winders & Mitchell, Durham, for plaintiff.

Atty. Gen. T. W. Bruton, Asst. Atty. Gen. Harrison Lewis, William W. Melvin, Trial Attorney, and Manning, Fulton & Skinner, Associate Counsel, Raleigh, for defendant.

BOBBITT, Justice.

Decision on this appeal requires construction of the statute under which Teer initiated this proceeding. This statute, while no longer a part of our statutory law, is applicable to the present litigation. It must be considered and construed in the context of well established legal principles stated below.

Absent waiver, the State is immune from suit. Smith v. Hefner, 235 N.C. 1, 6, 68 S.E.2d 783; Ferrell v. North Carolina State Highway Commission, 252 N.C. 830, 833, 115 S.E.2d 34. It is noted that the provisions of Section 9, Article IV, of the Constitution of North Carolina of 1868, relating to claims against the State, by virtue of the comprehensive amendment of Article IV in 1961 are now a part of Section 10, Subsection 1 of Article IV of the Constitution of North Carolina.

The Highway Commission is an unincorporated agency of the State. Except as provided in the Tort Claims Act, G.S. § 143-291 et seq., the Highway Commission is not subject to suit in tort. Schloss v. State Highway & Public Works Com., 230 N.C. 489, 492, 53 S.E.2d 517; Floyd v. North Carolina State Highway and Public Works Commission, 241 N.C. 461, 85 S.E.2d 703. Nor is the Highway Commission, unless otherwise provided by statute, subject to suit on contract or for breach thereof. Dalton v. State Highway and Public Works Com., 223 N.C. 406, 27 S.E.2d 1. Moreover, under our decisions, acts permitting suit, being 'in derogation of the sovereign right of immunity,' are to be 'strictly construed.' Floyd v. North Carolina State Highway and Public Works Commission, supra.

The basic rule is that the Highway Commission is not subject to suit except in the manner expressly provided by statute. Sherrill v. North Carolina State Highway Commission, 264 N.C. 643, 646, 142 S.E.2d 653, and cases cited; Ferrell v. North Carolina State Highway Commission, supra, and cases cited. An exception to this basic rule is well established, to wit: Where private property is taken for a public purpose by a governmental agency having the power of eminent domain under circumstances such that no procedure provided by statute affords an applicable or adequate remedy, the owner, in the exercise of his constitutional rights, may maintain an action to obtain just compensation therefor. Sherrill v. North Carolina State Highway Commission, supra, and cases cited; Ferrell v. North Carolina State Highway Commission, supra, and cases cited.

G.S. § 136-28, at all times pertinent to decision herein, contained the following provision: 'All contracts over one thousand dollars ($5,000.00) that the Commission may let for construction, or any other kinds of work necessary to carry out the provisions of this chapter, shall be let, after public advertising, under rules and regulations to be made and published by the State Highway Commission, to a responsible bidder, the right to reject any and all bids being reserved to the Commission; except that contracts for engineering or other kinds of professional or specialized services may be let after the taking and consideration of bids or proposals from not less than three responsible bidders without public advertisement.' G.S. Vol. 3B, 1958 Replacement. It is noted that G.S. § 136-28 was amended in 1963 (S.L.1963, c. 525) by substituting 'five thousand dollars ($5,000.00)' for 'one thousand dollars.' G.S. Vol. 3B, 1964 Replacement.

By the weight of authority, a statutory requirement for competitive bids constitutes 'a jurisdictional prerequisite to the exercise of the power of a public corporation to enter into a contract.' Fonder v. City of South Sioux Falls, 76 S.D. 31, 71 N.W.2d 618, 53 A.L.R.2d 493, and cases cited.

This statement, supported by cited cases, appears in 135 A.L.R. 1266: 'In general, but subject to certain limitations and exceptions which are considered in subsequent subdivisions of this annotation, statutes requiring the letting of public contracts to the lowest bidder are regarded as rendering invalid and unenforceable subsequent agreements to pay one to whom a public contract has been duly awarded additional compensation for extras or additional labor and materials not included in the original contract, at least where the additional compensation exceeds the amount for which public contracts may be made without competitive bidding.'

'Persons dealing with the public agency are presumed to know the law with respect to the requiremet of competitive bidding and act at their peril.' Miller v. McKinnon, 20 Cal.2d 83, 124 P.2d 34, 140 A.L.R. 570, and cases cited; 49 Am.Jur., States, Territories, and Dependencies § 86; 81 C.J.S. States § 113, pp. 1087-1088. This includes knowledge that the officials and agents of the public agency may not waive the sovereign right of immunity or act in violation of statutory requirements. 19 Am.Jur., Estoppel, § 166.

This Court has held a purported public contract not made in conformity with the (similar) requirements of G.S. § 143-129 is void, but that performance and acceptance of construction work imposes an obligation to pay the reasonable and just value of the work done and materials furnished. Even so, such recovery excludes profits and such reasonable and just value cannot exceed actual cost. Hawkins v. Town of Dallas, 229 N.C. 561, 50 S.E.2d 561, and cases cited. Compare Lexington Insulation Co. v. Davidson County, 243 N.C. 252, 90 S.E.2d 496, and see 35 N.C.L.R. 188, 239.

After compliance with requirements of G.S. § 136-28, the contract of July 8, 1958, for Project No. 8.13438, was awarded to Teer. Teer's work was interrupted and delayed on account of another contractor's failure to perform properly the contract (Project No. 8.13437) covering rough grading, drainage and shoulder work. Teer performed extensive extra work to remedy these deficiencies, such work being prerequisite to the performance of Teer's contract. The fact now emphasized is that Teer, well within the prescribed number of working days, completed on October 14, 1960, the work called for in its written contract of July 8, 1958.

Whether such deficiencies were of such character and magnitude as to constitute sufficient ground for rescission by Teer of its contract with the Highway Commission need not be determined. Suffice to say, Teer made no attempt to rescind but performed the extra (remedial) work as directed by the Highway Commission's engineers in addition to that required to perform its contract of July 8, 1958.

Pertinent provisions of the Standard Specifications for Roads and Structures, published October 1, 1952 by the Highway Commission, include the following:

'4.4 EXTRA WORK. The contractor shall perform unforeseen work, for which there is no price included in the contract whenever it is deemed necessary or desirable in order to complete fully the work as contemplated, and such extra work shall be performed in accordance with the specifications and as directed; provided, however, that before any extra work is started a supplemental agreement shall be entered into, or a written extra work order issued by the Engineer to do the work.

'If it is possible to agree upon equitable prices, the contractor and Commission shall enter into a supplemental agreement to cover any and all the extra work necessary.

'When such prices cannot be agreed upon, then the work will be paid for on Force Account basis as described in Section 9.4. The contractor shall perform extra work whenever it is deemed necessary or desirable, and such work shall be done in accordance with the requirements of these specifications as directed by the Engineer.'

Section 9.4 relates to the authorization of extra and force account work, provides in detail for the keeping of records in connection therewith and provides specifically for the compensation to be paid therefor. Generally, in respect of work done by force account, Section 9.4 provides for the payment of all specified costs plus 10% of the actual costs of labor and materials.

As indicated in our preliminary statement, with reference to the extensive undercutting and replacement in the subgrade of the roadway and of the shoulders, the Highway Commission contends it was agreed that this remedial work was to be done by Teer at the rates shown in the estimates while Teer contends payment on this basis was made and received subject to the definite agreement that final determination and adjustment for this required remedial work would be made upon completion of Teer's contract. In this connection, it is noted that this extensive remedial work, according to Teer's contention and as evidenced by payments to Teer based on estimates, greatly exceeded the $1,000.00 established by G.S. 136-28 as the maount determinative of the necessity for public advertisement for bids and competitive bidding.

The statute under which Teer initiated this proceeding (G.S. 136-29, G.S. Vol. 3B, 1958 Replacement) is quoted in full below.

's 136-29. Settlement of controversies between Commission and awardees of contracts.--Upon the completion of any contract awarded by the State Highway Commission to any contractor, if the contractor fails to receive such settlement as he claims to be entitled to under his contract, he may, within sixty days from the time of receiving his final estimate, file with the State Highway Engineer a claim for such amount as he deems himself entitled to under the said contract; and the State Highway Engineer shall, within thirty days from the receipt of the said claim, pass upon the same and notify the contractor in writing of his decision. If the contractor desires to do so, he may,...