V. S. DiCarlo Const. Co., Inc. v. State

• Decision Date: 17 July 1972
• Docket Number: No. 56142,No. 1,56142,1
• Citation: V. S. DiCarlo Const. Co., Inc. v. State, 485 S.W.2d 52 (Mo. 1972)
• Parties: V. S. DiCARLO CONSTRUCTION COMPANY, INCORPORATED, Appellant v. STATE of Missouri, Respondent
• Court: Missouri Supreme Court

Page 52

485 S.W.2d 52

V. S. DiCARLO CONSTRUCTION COMPANY, INCORPORATED, Appellant v. STATE of Missouri, Respondent.

No. 56142.

Supreme Court of Missouri, Division No. 1.

July 17, 1972.

Motion for Rehearing or to Transfer to Court En Banc Denied

Oct. 9, 1972.

Richard W. Miller, George, T. O'Laughlin and Miller & O'Laughlin, Kansas City, for appellant.

John C. Danforth, Atty Gen., Louren R. Wood, Asst. Atty. Gen., Jefferson City, for respondent.

FINCH, Chief Justice.

The question presented by this appeal is whether contract rights of a private citizen under a validly executed contract with the State may be asserted and established in a judicial proceeding.

We have jurisdiction because the State of Missouri is a party and more than $30,000 is involved. At the time this appeal was taken, those facts placed jurisdiction of the appeal in this Court. Article V, § 3, Constitution of Missouri, 1945, V.A.M.S. § 477.040, V.A.M.S.

The trial court sustained a motion to dismiss filed by the State. The parties agree that the only ground urged in support of such action was that sovereign immunity of the State prevented the maintenance of said suit and that the court dismissed the petition on that basis. We reverse and remand.

The pleadings disclose that the General Assembly passed and the Governor signed an Act appropriating money to the Division of Planning and Construction for construction of a building for the Adjutant General and Emergency Operation Center in Jefferson City, Missouri. (§ 9.040, C.C.S.H.B. No. 9, an Act of the 74th General Assembly, 1967.) ¹ Thereafter, the State prepared plans and specifications and advertised for bids. Plaintiff was the low bidder and subsequently a contract between plaintiff and the State was approved by the Board of Public Buildings and executed on behalf of the State by the Director of the Division of Planning and Construction. Chap. 8, V.A.M.S.

Plaintiff's petition consists of six counts. Count I seeks recovery for extra compensation for rock excavation above the elevation at which the specifications stated rock would commence. This count seeks to recover at the unit price specified in the contract for extra rock excavation. Count II asserts an alternative ground of recovery for the same rock excavation. Count III complains of wrongful assessment of liquidated damages and seeks recovery of the balance of the contract price due but for assessment of liquidated damages. Count IV seeks recovery for extra work which plaintiff was required to perform but which it says was not its obligation under the contract. Count V seeks recovery for the cost of some repairs resulting from acts by other contractors employed by the State. Count VI seeks recovery for extra expense caused by a change in sequence of the work directed by the State.

For the purposes of this appeal, the petition alleges sufficient facts to state a cause of action, but we do not reach or consider on this appeal the merits of any of plaintiff's contentions. Those questions will be considered on remand by the trial court. Our decision is limited to the single issue of whether the doctrine of sovereign immunity denies to plaintiff in this case the opportunity to have such contract claims against the State heard and adjudicated.

As the brief filed on behalf of the State observes, 'The courts of this State have consistently held that the State may not be sued without its consent.' Kleban v. Morris 363 Mo. 7, 247 S.W.2d 832, 836. ² However, plaintiff does not attack the doctrine of sovereign immunity as such or ask that we discard it. Instead, its position is that the doctrine does not bar suit in this instance because the State has consented to be sued by entering into a validly authorized contract with plaintiff. ³ It is plaintiff's position that when the General Assembly appropriated funds for the requested office building for the Adjutant General, it impliedly waived the sovereign immunity of the State and consented that the State might be sued in connection with questions arising in the performance of that contract.

Is the plaintiff's analysis of the effect of legislative approval of the contract for erection of the Adjutant General's building sound? Can it properly be said that by this action the General Assembly consented that the State should be bound by the terms of the construction contract and that it might be sued for any breach thereof? We answer these questions in the affirmative. Our conclusion is based on the assumption that the General Assembly did not intend a contract completely lacking in mutuality--one obligating the contractor to live up to its promises but imposing no binding obligation or responsibility on the State. It is based on the conclusion that when the State enters into a validly authorized contract, it lays aside whatever privilege of sovereign immunity it otherwise possesses and binds itself to performance, just as any private citizen would do by so contracting.

Such a view was expressed by the Supreme Court of Delaware in George & Lynch, Inc. v. Delaware, Del., 197 A.2d 734, 736, when it said:

'By 17 Del.C. § 132(b)(9), the State Highway Department is authorized to 'make and enter into any or all contracts, agreements or stipulations.' It must be assumed that the General Assembly, in granting to the State Highway Department the power to contract, intended that it should have power to enter into only valid contracts. A valid contract is one which has mutuality of obligation and remedy between the parties to it. 1 Williston on Contracts (3rd Ed.) § 1. It follows, therefore, that in authorizing the State Highway Department to enter into valid contracts the General Assembly has necessarily waived the State's immunity to suit for breach by the State of that contract.'

Cases from other states have expressed like views. In Ace Flying Service, Inc. v. Colorado Department of Agriculture, 136 Colo. 19, 314 P.2d 278, 280, the court said:

'All contracts entered into by the State of Colorado or by any of the Departments in its behalf, are required to be awarded, pursuant to statute, to the lowest responsible bidder. Once entered into they are binding upon the state as well as upon the other contracting party. To hold that the state may enter into a contract by which the other party is compelled to expend large sums in acquiring material, machinery and personnel to enable it to perform its obligation, and then arbitrarily repudiate the contract relegating the injured party to the doubtful remedy of appealing to the legislature for justice in the form of a bill for relief, would be to sanction the highest type of governmental tyranny.

'The applicable principle is that when a state enters into authorized contractual relations it thereby waives immunity from suit.'

In Regents of University System of Georgia v. Blanton, 49 Ga.App. 602, 176 S.E. 673, 675, the court said:

'A state or any of its departments entering into contracts lays aside its attributes of sovereignty, and binds itself substantially as one of its citizens does when he enters into a contract, and, in general, its contracts are interpreted as the contracts of individuals are, and are controlled by the same laws. Ohio Life Ins. & Trust Co. v. Debolt, 16 How. 416 (57 U.S. 416), 14 L.Ed. 997; notes, 42 L.R.A. (N.S.) 117. Where there is an act of the state Legislature authorizing a contract by a state department, the courts have power to enforce the contract against the state. Carr v. State (ex rel. Coetlosquet), 127 Ind. 204, 26 N.E. 778, 11 L.R.A. 370, 22 Am.St.Rep. 624, and notes.'

In the case of Carr v. State ex rel. Coetlosquet, supra, cited in the Georgia case, the court expressed the rule thus, 26 N.E. l.c. 779:

'In entering into the contract it laid aside its attributes as a sovereign, and bound itself substantially as one of its citizens does when he enters into a contract. Its contracts are interpreted as the contracts of individuals are, and the law which measures individual rights and responsibilities measures, with few exceptions, those of a state whenever it enters into an ordinary business contract. * * * The principle that a state, in entering into a contract, binds itself substantially as an individual does under similar circumstances, necessarily carries with it the inseparable and subsidiary rule that it abrogates the power to annul or impair its own contract. It cannot be true that a state is bound by a contract, and yet be true that it has power to cast off its obligation and break its faith, since that would invoke the manifest contradition that a state is bound and yet not bound by its obligation. * * *'

In Todd v. Board of Educational Lands and Funds, 154 Neb. 606, 48 N.W.2d 706, 710, the court said:

'This is true of a lease made by the state. It, by entering into a contract, abandons its attributes of sovereignty and binds itself, to the extent of its power to contract, substantially as an individual does when he makes a contract. The state may not impair any of the substantial rights secured by its contract to a citizen with whom it contracts. * * *' ⁴

We interpret the act of appropriating money for this construction contract as consenting to suit thereon, if necessary, because to do otherwise would be to assume bad faith on the part of the General Assembly. The Supreme Court of Delaware expressed this very well in the case of George & Lynch, Inc. v. Delaware, supra, 197 A.2d l.c. 736, when it said:

'Any other conclusion would ascribe to the General Assembly an intent to profit the State at the expense of its citizens. We are unwilling to assume that the General Assembly intended the State to mislead its citizens into expending large sums to carry out their obligation to the State and, at the same time, deny to them the right to hold the State accountable for its breach of its obligations. To state the proposition is to demonstrate its injustice; indeed, so unjust is it that it might amount to the...