City of South Portland v. State

476 A.2d 690, 1984 Me. LEXIS 683
CourtSupreme Judicial Court of Maine
DecidedApril 30, 1984
StatusPublished
Cited by8 cases

This text of 476 A.2d 690 (City of South Portland v. State) is published on Counsel Stack Legal Research, covering Supreme Judicial Court of Maine primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
City of South Portland v. State, 476 A.2d 690, 1984 Me. LEXIS 683 (Me. 1984).

Opinion

McKUSICK, Chief Justice.

This action is one in the nature of a suit for accounting malpractice, brought by the City of South Portland against the State of Maine and various officials and other employees of the State Department of Audit. On appeal, the City contends that the Superior Court (Cumberland County) erred by dismissing its complaint, under M.R.Civ.P. 12(b)(6), for failure to state a claim upon which relief could be granted. We deny the City’s appeal.

Prior to July 22, 1976, the State Department of Audit, pursuant to 30 M.R.S.A. § 5253 (1978), 1 performed a so-called pos- *692 taudit of the City’s accounts for the year 1975. That audit failed to discover an incipient embezzlement scheme set up by the City’s finance director, Donald K. Turner. In a five-count complaint founded on theories of contract, tort, and section 1983, 2 the City seeks to recover compensatory damages from both defendant State and its accounting employees in an amount equal to the $289,300.00 that Mr. Turner embezzled from it subsequent to the postaudit, plus the $3,691.29 that the City, pursuant to 30 M.R.S.A. § 5253(4), paid the State as “the expense of its postaudit” for 1975. Under two of the counts, the City also demands punitive damages in the amount of $500,000.

I. The Allegations of the City’s Complaint

In examining the City’s complaint to determine whether it states any claim upon which relief can be granted, we must assume that all of the City’s factual allegations are true. See Haskell v. Phinney, 460 A.2d 1354, 1359 (Me.1983). In its complaint filed in June 1982, the City alleges the following facts. Mr. Turner, the City’s finance director from July 1974 to December 1976, exercised complete control over the City’s finances, including the authority to open and close bank accounts in the City’s name and to endorse checks in its behalf. In August 1975, Mr. Turner in his official capacity received a United States Treasury check payable to the City in the amount of $289,300, representing a federal reimbursement grant to the City for construction of a waste water treatment facility. Mr. Turner, without ever recording the receipt of the federal funds, invested them in the City’s name at Northern National Bank in Presque Isle. Then in early 1976 he made arrangements for the State Department of Audit to perform the postaudit of the City’s accounts for the year ended December 31, 1975. On July 22, 1976, the State Auditor issued his final report of the audit that his Department had conducted in accordance with 30 M.R.S.A. § 5253. That State audit failed to discover and report the existence of the $289,300 fund owned by the City, which on both December 31, 1975, and July 22, 1976, remained invested in the City’s name at the Presque Isle bank. Nor did the State audit discover or report the previous account receivable in discharge of which the City had received the $289,300 check from the United States Treasury. Subsequent to receiving the final audit report of July 22, 1976, Mr. Turner converted to his own use and benefit the City’s investment of $289,300 at the Presque Isle bank, along with the interest earned on it.

The City of South Portland asserts liability in five counts against all of the defendants. The first three counts, which seek to recover as compensatory damages the $289,300 embezzled by Finance Director Turner and the $3,691.29 paid by the City for its 1975 audit, are based on the following legal theories:

Count I. Contract: Breach of an agreement, express or implied, to perform the audit with the skill commonly possessed by members of the accounting and auditing profession in good standing.

Count II. Negligence: Breach of duty owed to the City to perform the audit with the skill commonly possessed by members of the accounting and auditing profession in good standing.

Count III. Reckless Misrepresentation of the Status of the City’s Accounts. 3

*693 The fourth count seeks to recover the $3,691.29 paid to the State for the 1975 audit on a legal theory of unjust enrichment. Finally, by Count V the City seeks, under 42 U.S.C. § 1983, to recover the same sums sought under Counts I-IY, along with attorneys’ fees and costs. The City claims that the deficiencies in the State audit, performed under the color of state law, subjected the City to the deprivation of rights secured to it by the Federal Water Pollution Control Act and the United States Constitution.

We agree with the Superior Court that the City of South Portland’s complaint does not assert any claim upon which it is entitled to legal relief. To the extent, however, that the Superior Court rejected the claims set forth in the first four counts on the doctrine of sovereign immunity, we have no occasion to reach the question whether the Superior Court correctly applied that doctrine to the case at bar. That is so, because the City’s state law claims are in any event foreclosed by a fair reading of the legislature’s intent as expressed in 30 M.R.S.A. § 5253.

II. The Contract, Tort, Reckeless Misrepresentation, and Unjust Enrichment Claims

In order to determine whether the four counts of the City’s complaint that assert claims under state law survive a 12(b)(6) motion to dismiss, we must determine the legislature’s intent in enacting what is now 30 M.R.S.A. § 5253. The following statement of the justices of the Supreme Judicial Court in Opinion of the Justices, 133 Me. 532, 535, 178 A. 613, 615 (1935), has direct relevance to our interpretation of section 5253: See also Baxter v. Waterville Sewerage District, 146 Me. 211, 79 A.2d 585 (1951); 2 E. McQuillan, Municipal Corporations § 4.03 (3d ed. 1979). “Being a creature of statute, [a city or town has] only such powers as [are] conferred by statute expressly or by necessary implication.” Phillips Village Corp. v. Phillips Water Co., 104 Me. 103, 106, 71 A. 474, 475 (1908). See also State v. Rand, 366 A.2d 183, 189 (Me.1976). Section 5253 is searched in vain for any express grant to a municipality of the right to sue the State or its auditors for loss it incurs because of shortcomings in an audit done by the State Department of Audit. Nor can such a right be fairly inferred from the language and history of section 5253. On the contrary, the clear implication of both the statutory language and the statutory history is that the Maine legislature never intended to give a municipality a cause of action against the State and its employees for accounting malpractice.

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Bluebook (online)
476 A.2d 690, 1984 Me. LEXIS 683, Counsel Stack Legal Research, https://law.counselstack.com/opinion/city-of-south-portland-v-state-me-1984.