State v. P.G. Miron Const. Co., Inc.

• Decision Date: 19 November 1992
• Docket Number: No. 92-0841,92-0841
• Citation: 498 N.W.2d 889,175 Wis.2d 476
• Parties: , 82 Ed. Law Rep. 233 STATE of Wisconsin, Plaintiff-Appellant, v. P.G. MIRON CONSTRUCTION COMPANY, INC., Defendant-Respondent. d . Oral Argument
• Court: Wisconsin Court of Appeals

Page 889

498 N.W.2d 889

175 Wis.2d 476, 82 Ed. Law Rep. 233

STATE of Wisconsin, Plaintiff-Appellant, v. P.G. MIRON CONSTRUCTION COMPANY, INC., Defendant-Respondent.^d

No. 92-0841.

Court of Appeals of Wisconsin.

Oral Argument Nov. 19, 1992.

Opinion Released March 25, 1993.

Opinion Filed March 25, 1993.

March 25, 1993.

Before EICH, C.J., GARTZKE, P.J., and DYKMAN, J.

EICH, Chief Judge.

The State of Wisconsin appeals from a declaratory judgment requiring it to submit to arbitration of a monetary dispute arising under a state building contract. The contract contained an arbitration clause, and the issue is whether the state has, by statute, expressly subjected itself to arbitration of such disputes. We conclude that it has not and therefore reverse the judgment.

In 1987, the state, acting through the Department of Administration (DOA), contracted with Flad & Associates of Wisconsin, Inc., for architectural and engineering services in connection with a construction project on the University of Wisconsin campus. The DOA also hired the P.G. Miron Construction Company as general contractor for the project. Its contract with Miron contained a clause providing for binding arbitration of all disputes that might arise with respect to the terms of the agreement.

Miron subcontracted with Phoenix Steel to furnish and erect the steel shell of the building. During construction, a dispute arose over certain steel connections furnished by Phoenix which Flad claimed were improperly designed. Phoenix denied any responsibility for the defects but, in an effort to go forward with the project without further delay, Flad and Phoenix agreed to correct the problem and put off determining who would pay the added costs until all work was completed.

The project was completed in 1989, and Miron sought reimbursement from the state for additional costs it claimed to have incurred as a result of the dispute with Phoenix. The DOA denied the request, informing Miron that, in its opinion, sec. 16.855(11), Stats., ¹ applied and that Miron should pursue its claim against Flad, as the party at "fault."

Miron then invoked the arbitration clause of the contract and filed a demand for arbitration with the American Arbitration Association, naming the state as the sole respondent. After determining that an arbitrable issue existed, the association selected a panel of arbitrators to hear the dispute and a preliminary hearing was scheduled.

The state objected to the panel's jurisdiction, arguing that Miron's claims could not be made against the state and that the panel was precluded by state law from proceeding with the arbitration. Because the state's challenge to the panel's jurisdiction raised questions of state sovereignty and required constitutional and statutory interpretation, the arbitrators elected not to rule on the issue and the proceedings were suspended while the state sought a declaratory judgment on its rights in circuit court.

The trial court rejected the state's sovereign immunity arguments and ruled that it was required to submit to arbitration under the terms of the Miron contract. Judgment was entered accordingly and the state appeals. The issue is one of law, which we consider de novo. See Raby v. Moe, 153 Wis.2d 101, 109, 450 N.W.2d 452, 455 (1990).

The Wisconsin Arbitration Act, ch. 788, Stats., governs the implementation and execution of arbitration procedures in Wisconsin. It generally provides for the enforcement of arbitration clauses in contracts, governs the selection of, and hearings before, arbitrators and provides for judicial review and enforcement of arbitration awards. Section 788.01 states in pertinent part:

A provision in any written contract to settle by arbitration a controversy thereafter arising out of such contract, or out of the refusal to perform the whole or any part thereof, or an agreement in writing between two or more persons to submit to arbitration any controversy existing between them at the time of the agreement to submit, shall be valid, irrevocable and enforceable save upon such grounds as exist at law or in equity for the revocation of any contract.... (Emphasis added

The DOA/Miron contract contains a clause providing a two-step procedure of resolving claims and disputes. The matter is first reviewed by a DOA administrator and then: "... [i]f any claim, dispute or other matter remains unresolved after such review by the Administrator, arbitration may be initiated by either party to the dispute.... The demand for arbitration shall be filed in writing with the Division Administrator."

Pointing first to sec. 788.01, Stats., Miron argues that the state must be considered a "person" within the meaning of the statute and thus bound by the provisions of the Arbitration Act. The state responds that general principles of sovereign immunity render the act's provisions inapplicable to its activities.

It is a basic concept in the law that the state, as the sovereign, may only be sued upon its consent. Lister v. Bd. of Regents, 72 Wis.2d 282, 291, 240 N.W.2d 610, 617 (1976). In the words of art. IV, sec. 27, of the Wisconsin Constitution: "The legislature shall direct by law in what manner and in what courts suits may be brought against the state." It is equally well established that the state's consent to suit may not be implied: it must be "clear and express." See Fiala v. Voight, 93 Wis.2d 337, 342-43, 286 N.W.2d 824, 827 (1980).

The state has, of course, generally "consented" to suit in secs. 16.007 and 775.01, Stats., through the creation of a two-step procedure for processing and resolving claims. Under the former section, claims are presented first to the state claims board which, after hearing, files its recommendation to grant or deny the claim to the legislature. Then, sec. 775.01 expressly authorizes the claimant to "commence an action against the state" upon the legislature's disallowance of the claim.

We disagree with Miron's assertion that the state has similarly subjected itself to arbitration (and judicial enforcement of arbitration awards) in sec. 788.01, Stats. A basic rule of statutory construction is that statutes of general application do not apply to the state unless the legislature has so stated in explicit terms. "It is universally held ... that ... statutes [of general application] do not apply to the state unless the state is explicitly included by appropriate language." State ex rel. Dep't of Pub. Instruction v. DILHR, 68 Wis.2d 677, 681, 229 N.W.2d 591, 594 (1975) (quoting State ex rel. Martin v. Reis, 230 Wis. 683, 687, 284 N.W. 580, 582 (1939)). It is a "presumptive" rule, exempting the state from general statutes that can be read as applicable to both the government and private parties alike, Town of Janesville v. Rock County, 153 Wis.2d 538, 542, 451 N.W.2d 436, 437 (Ct.App.1989), and it derives from the presumption that the "legislature does not intend to deprive the [state] of any prerogatives, rights, or property unless it expresses its intention to do so in explicit terms...." State v. City of Milwaukee, 145 Wis. 131, 135, 129 N.W. 1101, 1102 (1911) (emphasis added).

Chapter 788, Stats., is an act of general application outlining the use of arbitration procedures as an...