Rifenburg Construction, Inc. v. Brier Creek Associates Ltd. Partnership

586 S.E.2d 812, 160 N.C. App. 626, 2003 N.C. App. LEXIS 1926

• Court: Court of Appeals of North Carolina
• Decided: October 21, 2003
• Docket: COA02-1391
• Status: Published

Opinions

TYSON, Judge.

The North Carolina Department of Transportation (“NCDOT”) appeals from an order denying its motion to dismiss, upon sovereign immunity grounds, Rifenburg Construction, Inc.’s (“plaintiff’) third cause of action.

I. Facts

Plaintiff is a New York corporation that is authorized to do business in North Carolina. Defendant Brier Creek Associates Limited Partnership (“Brier Creek”) is a Delaware limited liability corporation authorized to do business in North Carolina. Defendants RTP Assemblage Associates, LLC, Athena Airport Assemblage, LP, and Athena Airport Assemblage Corp are either general or limited partners of Brier Creek. NCDOT is an agency of the State of North Carolina.

Brier Creek owned a large tract of land located within Wake County, North Carolina and desired to construct a road across the property. This road was to extend from U.S. Highway 70 to Aviation Parkway and would be dedicated to the State of North Carolina as a public road. On 6 May 1998, NCDOT and Brier Creek entered into a construction agreement (“agreement”) pursuant to N.C. Gen. Stat. § 136-28.6. This statute authorizes NCDOT to participate in private engineering and construction contracts for roads that will be constructed by private developers and become part of the State’s highway system. Pursuant to the agreement, Brier Creek was to construct a four-lane divided roadway for travel between Aviation Parkway and U.S. Highway 70. The right-of-way for the roadway was to be conveyed to NCDOT prior to Brier Creek advertising for competitive bids to construct this project. The agreement provided that construction costs would be shared equally between Brier Creek and NCDOT. NCDOT was to approve Brier Creek’s awafd of the construction contract if NCDOT was to share in the costs. After completion of construction, the road would be absorbed into the State’s highway system and maintained by NCDOT.

On 12 April 1999, Brier Creek conveyed by deed the right-of-way for the road to NCDOT. On 17 June 1999, Brier Creek and plaintiff entered into a contract to construct the roadway. NCDOT concurred in the awarding of this contract. Plaintiff began work on the roadway, completed phase I, and was paid for its work. By 6 May 2001, plaintiff had completed phase II and the roadway was accepted by NCDOT as part of the State’s highway system. On 5 April 2001, the roadway was open for traffic. On 4 May 2001, NCDOT accepted maintenance of the roadway.

Plaintiff is still owed in excess of $1,056,915.76 for construction of the roadway. Brier Creek and its partners refused to pay plaintiff the money owed. Plaintiff filed a lien against the property upon which the road is located on 30 August 2001. On 2 November 2001, plaintiff filed a complaint alleging that NCDOT was liable to plaintiff for the amount owed. Plaintiff filed its verified claim on 23 January 2002, in accordance with the 1995 NCDOT Standard Specifications Section 107-25 and N.C. Gen. Stat. § 136-29. NCDOT denied plaintiff’s claim. The trial court denied NCDOT’s motion to dismiss. NCDOT appeals.

II. Issue

The sole issue is whether the trial court erred in denying NCDOT’s motion to dismiss pursuant to Rules 12(b)(1), (b)(2), (b)(6), and (h)(3) of the North Carolina Rules of Civil Procedure, based on the doctrine of sovereign immunity.

III. Sovereign Immunity

The defense of sovereign immunity is a matter of personal jurisdiction that falls under Rule 12(b)(2) of the North Carolina Rules of Civil Procedure. Zimmer v. N.C. Dep’t of Transp., 87 N.C. App. 132, 134, 360 S.E.2d 115, 116 (1987). In other cases, our courts have held sovereign immunity to also be a defense under Rule 12(b)(1) of the North Carolina Rules of Civil Procedure. Teachy v. Coble Dairies, Inc., 306 N.C. 324, 328, 293 S.E.2d 182, 184 (1982).

As a sovereign, the State is immune from suit absent its waiver of immunity. Guthrie v. State Ports Auth., 307 N.C. 522, 534, 299 S.E.2d 618, 625 (1983). “Sovereign immunity is a legal principle which states in its broadest terms that the sovereign will not be subject to any form of judicial action without its express consent.” Id. at 535, 299 S.E.2d at 625. The State is not subject to suit “unless by statute it has consented to be sued or has otherwise waived its immunity from suit.” Ferrell v. North Carolina State Highway Comm’n, 252 N.C. 830, 833, 115 S.E.2d 34, 37 (1960). Our Supreme Court has held:

It is axiomatic that the sovereign cannot be sued in its own courts or in any other without its consent and permission. Except in a limited class of cases the State is immune against any suit unless and until it has expressly consented to such action. . . . An action against a Commission or Board created by Statute as an agency of the State where the interest or rights of the State are directly affected is in fact an action against the State. The State is immune from suit unless and until it has expressly consented to be sued. It is for the General Assembly to determine when and under what circumstances the State may be sued.

Great American Ins. Co. v. Comm’r of Ins., 254 N.C. 168, 172-73, 118 S.E.2d 792, 795 (1961) (quoting Prudential Ins. Co. of America v. Powell, 217 N.C. 495, 8 S.E.2d 619, 621 (1940)) (internal citations omitted). Sovereign immunity can be waived when the State enters into a valid contract. Smith v. State, 289 N.C. 303, 320, 222 S.E.2d 412, 423-24 (1976). The State “implicitly consents to be sued for damages on the contract in the event it breaches the contract.” Id.

A. Contract between NCDOT and Plaintiff

N.C. Gen. Stat. § 136-18(1) (2001) gives NCDOT the authority to enter into contracts for the construction of highways. N.C. Gen. Stat. § 136-28.1 (2001) sets forth NCDOT’s contract letting procedures. N.C. Gen. Stat. § 136-28.6 (2001) allows NCDOT to participate in private engineering and construction agreements for roads constructed by private developers that will become part of the State’s highway system upon completion. The General Assembly limited NCDOT’s involvement in private agreements under N.C. Gen. Stat. § 136-28.6. This statute requires the developer, not NCDOT, to let the contract. NCDOT agrees to share in the costs of the project conditioned upon the right-of-way to the roadway being provided without cost to NCDOT. NCDOT merely concurs in the award of the contract. While both NCDOT and the developer share in the construction costs, the developer is responsible for and manages the project. Construction is required to be completed in accordance with the State’s standards for road construction. Agreements between developers and NCDOT are memorialized in a “Construction Agreement.”

Here, the contract between Brier Creek and plaintiff was not let pursuant to N.C. Gen. Stat. § 136-28.1. Rather, the contract at issue was a “Construction Agreement” under N.C. Gen. Stat. § 136-28.6. NCDOT did not advertise for the construction of the roadway or solicit bids as required by N.C. Gen. Stat. § 136-28.1. NCDOT did not award the contract to plaintiff or give notice of the award to plaintiff. Because public monies partially funded the construction of the roadway, NCDOT concurred in the award to plaintiff by Brier Creek pursuant to N.C. Gen. Stat. § 136-28.6. Plaintiff’s own actions indicate that plaintiff was aware that it was entering into a contract with Brier Creek, not NCDOT.

Our Supreme Court has held:

We will not imply a contract in law in derogation of sovereign immunity. ... We emphasized, however, that “[t]he State is liable only upon contracts authorized by law. When it enters into a contract it does so voluntarily and authorizes its liability. Consistent •with the reasoning of Smith, we will not first imply a contract in law where none exists in fact, then use that implication to support the further implication that the State has intentionally waived its sovereign immunity and consented to be sued for damages for breach of the contract it never entered in fact. Only when the State has implicitly waived sovereign immunity by expressly entering into a valid contract. . . may a plaintiff proceed with a claim against the State upon the State’s breach.

Whitfield v. Gilchrist, 348 N.C. 39, 42-43, 497 S.E.2d 412, 415 (1998) (quoting Smith v. State, 289 N.C. 303, 320, 222 S.E.2d 412, 423-24 (1976)) (internal citations omitted). No contract was entered into between NCDOT and plaintiff. NCDOT did not waive its sovereign immunity as to plaintiff.

B. Joint Venture between NCDOT and Brier Creek

N.C. Gen. Stat. § 136-28.6 (2001) specifically authorizes NCDOT to participate in private engineering and construction agreements for roads constructed by private developers that become part of the State’s highway system upon completion. Plaintiff contends that when NCDOT entered into the agreement with Brier Creek, pursuant to N.C. Gen. Stat. § 136-28.6, it waived its sovereign immunity and formed a joint venture with Brier Creek. Plaintiff argues that once the joint venture was formed NCDOT became liable for the wrongful acts of its joint venturer. We disagree.

NCDOT entered into an agreement with Brier Creek to share costs for a roadway constructed on Brier Creek’s property. In return for partial funding pursuant to the statute, Brier Creek granted NCDOT a right-of-way to the roadway without cost. Brier Creek advertised and solicited bids from contractors to construct this roadway. Brier Creek selected plaintiff from the bidders. NCDOT merely concurred in the selection because public monies were being used to partially fund the project. Although NCDOT personnel may have interacted with plaintiff’s employees, NCDOT dealt solely with Brier Creek pursuant to the agreement. NCDOT had no direct connection with, ties to, nor entered into any contract with plaintiff.

NCDOT did not waive its sovereign immunity with respect to plaintiff. NCDOT entered into an agreement with Brier Creek pursuant to N.C. Gen. Stat. § 136-28.6 and waived its sovereign immunity with respect to Brier Creek, not plaintiff. No language in the statute refers to a joint venture being created when NCDOT enters into this agreement. We will not read this interpretation into the statute. When a state agency, such as NCDOT, enters into an agreement with a developer, who then alone enters into a contract with a contractor, the state agency waives its sovereign immunity only to the original party to their agreement not to others. Otherwise, if an agency of the State provides money for a project, the State would be deemed to be a joint venturer and would have waived sovereign immunity with all parties with any connection to the contract. We do not interpret this to be the General Assembly’s intent in creating this statute.

Were the statute interpreted to hold that a joint venture was created to waive sovereign immunity for plaintiff, we would hold that plaintiff failed to establish the elements of a joint venture. A joint venture exists when there is: “(1) an agreement, express or implied, to carry out a single business venture with joint sharing of profits, and (2) an equal right of control of the means employed to carry out the venture.” Rhoney v. Fele, 134 N.C. App. 614, 620, 518 S.E.2d 536, 541 (1999) (quoting Edwards v. Bank, 39 N.C. App. 261, 275, 250 S.E.2d 651, 661 (1979)). In Cheape v. Town of Chapel Hill, our Supreme Court discussed joint ventures and stated:

A joint venture is an association of persons with intent, by way of contract, express or implied to engage in and carry out a single business adventure for joint profit, for which purpose they combine their efforts, property, money, skill, and knowledge, but without creating a partnership in the legal or technical sense of the term. . . . Facts showing the joining of funds, property, or labor, in a common purpose to attain a result for the benefit of the parties in which each has a right in some measure to direct the conduct of the other through a necessary fiduciary relation, will justify a finding that a joint adventure exists.

320 N.C. 549, 561, 359 S.E.2d 792, 799 (1987) (quoting Pike v. Wachovia Bank & Trust Co., 274 N.C. 1, 8-9, 161 S.E.2d 453, 460 (1968)). Our Supreme Court has further held that a joint venture does not exist where each party to an agreement cannot direct the conduct of the other. Pike, 274 N.C. at 10, 161 S.E.2d at 461.

Brier Creek had control of the day-to-day management and progress of the project. All work was required to be completed in accordance with NCDOT’s Standard Specifications for Roads and Structures and was subject to NCDOT’s approval. Those standards insure the safety of the traveling public — the ultimate beneficiaries of the road. As NCDOT maintained approval over the conformity of the work with its standards, Brier Creek had no right to control NCDOT. NCDOT’s involvement and approval insured that the roadway was constructed in accordance with the terms of the agreement and to the State’s standards. This involvement amounted to unilateral approval of the quality of work performed by Brier Creek. No joint venture existed. NCDOT did not waive sovereign immunity as to plaintiff.

C. Partnership between NCDOT and Brier Creek

Plaintiff contends that it is entitled to recover against NCDOT because Brier Creek and NCDOT were “partners” in the construction of the roadway. We disagree.

As stated above regarding a joint venture, no language in the statute refers to a partnership being created when NCDOT entered into this type of agreement with Brier Creek. Were this the case, anytime an agency of the State provided money for a project the State would be deemed to be a partner and sovereign immunity would be waived to all parties with any connection to the agreement. Nothing shows this interpretation to be the General Assembly’s intent in creating this statute. We will not write this interpretation into the statute.

Were the statute interpreted to hold that a partnership is created, we would hold that the elements of a partnership are not met in this case.

N.C. Gen. Stat. § 59-36 (2001) states:

(a) A partnership is an association of two or more persons to carry on as co-owners a business for profit, (b) But any association formed under any other statute of this State, or any statute adopted by authority, other than the authority of this State, is not a partnership under this Article . . . .”

Nothing in the agreement entered into between NCDOT and Brier Creek or other evidence indicates that the parties entered into any agreement as co-owners of any business for profit or that they were established under this statute. This agreement was established pursuant to N.C. Gen. Stat. § 136-28.6 and is not deemed a partnership under N.C. Gen. Stat. § 59-36(b). NCDOT was simply engaged in an agreement, pursuant to statute, to obtain a road for use by the traveling public as part of the State’s highway system. NCDOT did not enter into a partnership with Brier Creek and did not waive its sovereign immunity as to plaintiff.

D. Application of N.C. Gen. Stat. § 136-29

Plaintiff contends that N.C. Gen. Stat. § 136-29 allows them to sue NCDOT because NCDOT is liable as a joint venturer or partner to Brier Creek. We have already held that NCDOT was neither a joint venturer nor a partner to Brier Creek and has not waived its sovereign immunity as to plaintiff.

N.C. Gen. Stat. § 136-29 (2001) states:

(a) A contractor who has completed, a contract with the Department of Transportation to construct a State highway and who has not received the amount he claims is due under the contract may submit a verified written claim to the State Highway Administrator....

(emphasis supplied). The remedies available under this statute are applicable to a contractor who has “completed a contract” with NCDOT under the provisions of N.C. Gen. Stat. § 136-28.1. Plaintiff neither entered into nor completed any contract with NCDOT. Brier Creek is the appropriate party to whom this statute applies. Plaintiff’s argument fails.

IV. Conclusion

The North Carolina General Assembly determines the manner in which the State is to be sued. We hold that sovereign immunity bars plaintiff’s suit against NCDOT. The order of the trial court is reversed and remanded to the trial court to enter an order dismissing with prejudice on sovereign immunity grounds plaintiff’s claims against NCDOT.

Reversed and Remanded.

Judge LEVINSON concurs. Judge WYNN dissents.