NO. COA02-1391
NORTH CAROLINA COURT OF APPEALS
Filed:
21 October 2003
RIFENBURG CONSTRUCTION, INC.,
Plaintiff,
v.
Wake County
No. 01 CVS 13549
BRIER CREEK ASSOCIATES LIMITED
PARTNERSHIP, NORTH CAROLINA
DEPARTMENT OF TRANSPORTATION,
RTP ASSEMBLAGE ASSOCIATES,
LLC; ATHENA AIRPORT
ASSEMBLAGE, LP; AND ATHENA
AIRPORT ASSEMBLAGE CORP,
Defendants.
Appeal
Transportation
by
defendant
from
order
North
entered
Carolina
17
May
Stanback in Wake County Superior Court.
2002
Department
by
Judge
of
Leon
Heard in the Court of
Appeals 16 September 2003.
Safran Law Offices, by Victor A. Anderson, Jr. and Bonnor E.
Hudson, III, for plaintiff-appellee.
Attorney General Roy Cooper, by Assistant Attorney General
Joseph E. Herrin, for defendant-appellant North Carolina
Department of Transportation.
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
-2business in North Carolina.
Defendant Brier Creek Associates
Limited Partnership (“Brier Creek”) is a Delaware limited liability
corporation
Defendants
authorized
RTP
to
Assemblage
do
business
Associates,
in
LLC,
North
Carolina.
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 award 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.
-3On 12 April 1999, Brier Creek conveyed by deed the right-ofway for the road to NCDOT.
On 17 June 1999, Brier Creek and
plaintiff entered into a contract to construct the roadway.
concurred in the awarding of this contract.
NCDOT
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.
April 2001, the roadway was open for traffic.
On 5
On 4 May 2001, NCDOT
accepted maintenance of the roadway.
Plaintiff
is
still
owed
construction of the roadway.
in
excess
of
$1,056,915.76
for
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.
NCDOT’s motion to dismiss.
The trial court denied
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
-4jurisdiction 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, 172-173,
118 S.E.2d 792, 795 (1961) (quoting Prudential Ins. Co. of America
-5v. 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.
320,
222
S.E.2d
412,
423-424
Smith v. State, 289 N.C. 303,
(1976).
The
State
“implicitly
consents to be sued for damages on the contract in the event it
breaches the contract.”
A.
Id.
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.
of the contract.
NCDOT merely concurs in the award
While both NCDOT and the developer share in the
construction costs, the developer is responsible for and manages
the
project.
accordance
with
Construction
the
State’s
is
required
standards
to
for
be
road
completed
in
construction.
Agreements between developers and NCDOT are memorialized in a
“Construction Agreement.”
Here, the contract between Brier Creek and plaintiff was not
-6let 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,
423-424 (1976)) (internal citations omitted).
entered into between NCDOT and plaintiff.
No contract was
NCDOT did not waive its
sovereign immunity as to plaintiff.
B.
Joint Venture between NCDOT and Brier Creek
-7N.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
-8in the statute refers to a joint venture being created when NCDOT
enters into this agreement.
into the statute.
We will not read this interpretation
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
-9showing 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.
insure
the
safety
of
the
beneficiaries of the road.
traveling
public
Those standards
-
the
ultimate
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
construction of the roadway.
and
NCDOT
were
We disagree.
“partners”
in
the
-10As 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
-11waive 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.
applies.
Brier Creek is the appropriate party to whom this statute
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.
-12NO.
COA02-1391
NORTH CAROLINA COURT OF APPEALS
FILED:
21 October 2003
RIFENBURG CONSTRUCTION, INC.
Plaintiff
v.
Wake County
No. 01 CVS 13549
BRIER CREEK ASSOCIATES LIMITED
PARTNERSHIP, NORTH CAROLINA
DEPARTMENT OF TRANSPORTATION,
RTP ASSEMBLAGE ASSOCIATES,
LLC; ATHENA AIRPORT
ASSEMBLAGE, LP; AND ATHENA
AIRPORT ASSEMBLAGE CORP.
Defendants
WYNN, Judge dissenting.
In this appeal, Rifenburg Construction alleges that the North
Carolina
Department
contract
with
Brier
of
Transportation
Creek
which
partnership with Brier Creek.
(NCDOT)
formed
a
entered
joint
into
venture
a
or
As such, Rifenburg Construction
argues that “once the partnership or joint venture was formed, then
NCDOT became liable for the wrongful acts of its partner or joint
venturer,
Brier
Creek,
committed
in
the
ordinary
course
of
business.” I agree with Rifenburg Construction and the trial judge
in this case; accordingly, I dissent from the majority opinion.
Chapter 136 of our General Statutes authorizes NCDOT to enter
into construction contracts by either (1) contracting directly with
-13-13road construction contractors under N.C. Gen. Stat. § 136-28.1, or
by (2) contracting with developers to jointly build roads under
N.C. Gen. Stat. § 136-28.6.1
It appears undisputed that in this
case, NCDOT entered into a contract with the developer, Brier
Creek, under N.C. Gen. Stat. § 136-28.6.
Under that agreement,
Brier Creek advertised for bids and awarded the road construction
contract to Rifenburg Construction. While NCDOT argues that it was
not an express party to that contract, a Rule 12(b) dismissal of
this case is precluded because the facts are sufficient to find
that the N.C. Gen. Stat. § 136-28.6 contract between NCDOT and
Brier Creek created a joint venture or partnership.
It is well established that a joint venture exists when (1)
parties combine their property, money, efforts, skill or knowledge
in a common undertaking (2) for the benefit of the parties in which
(3) each has a right in some measure to direct the conduct of the
other.
Pike v. Wachovia Bank & Trust Co., 274 N.C. 1, 161 S.E.2d
453 (1968).
Here, under their contract authorized by N.C. Gen.
Stat. § 136-28.6, NCDOT and Brier Creek combined money, property,
efforts,
skill,
construction)
and
for
knowledge
the
benefit
to
a
common
of
both
undertaking
parties.
Brier
(road
Creek
benefitted by having a road built with the help of State funds
through its property, and NCDOT benefitted by having a public road
1
The majority correctly recognizes that the Supreme Court of
North Carolina has held that the State of North Carolina waives
sovereign immunity when it enters into a contract authorized by
law. Smith v. State, 289 N.C. 303, 222 S.E.2d 412 (1976).
-14-14built with monetary assistance from the developer.2 Thus, elements
one and two are established.
The last element under Pike – “each has a right in some
measure to direct the conduct of the other” – presents the focal
issue in the case.
I disagree with the majority’s conclusion that
NCDOT did not have some measure of direct control because NCDOT’s
“involvement amounted to unilateral approval of the quality of work
performed by Brier Creek” and NCDOT “merely concurred in the
selection because public monies were being used to partially fund
the project.”
Instead, the record shows that under the N.C. Gen.
Stat. § 136-28.6 agreement, NCDOT had the right to review and
approve payment applications, review and approve design of the
project, and review and approve construction of the project.
Coupled with its ability to control the contract funds, NCDOT by
reviewing and approving the applications, design and construction
most assuredly had the “right in some measure to direct the conduct
of” Brier Creek.
Likewise, Brier Creek had the “right in some
measure to direct the conduct of” NCDOT by controlling the cost of
the project.
The record shows that the N.C. Gen. Stat. § 136-28.6
contract required NCDOT to pay half of the legitimate costs of the
project.
It follows that Brier Creek was able to obligate NCDOT to
pay additional sums by how it planned, supervised, and constructed
the project.
Some direction of NCDOT is evident in Brier Creek’s
ability to obligate NCDOT to pay a certain amount of money for the
2
The record shows that NCDOT and Brier Creek shared equally
the $7,200,000 estimated cost of constructing the road.
-15-15project.
A joint venture is a type of partnership and it is governed by
substantially the same rules as a partnership.
161 S.E.2d 453 (1968).
Pike, 274 N.C. 1,
Each partner in a partnership is jointly
and severally liable to third parties for the acts and obligations
of the partners.
N.C. Gen. Stat. § 59-45, Hardy & Newsome, Inc. v.
Whedbee, 244 N.C. 682, 94 S.E.2d 837 (1956).
Thus, I would uphold
the trial court’s denial of NCDOT’s motion to dismiss this action
on sovereign immunity grounds.
Moreover, I disagree with the
majority’s contention that remedies available under N.C. Gen. Stat.
§ 139-29 are available only to those contractors who have directly
entered into agreements with NCDOT under the provisions of N.C.
Gen. Stat. § 139-28.1.
The language of the statute applies it to
“A contractor who has completed a contract with the Department of
Transportation. . . .”
N.C. Gen. Stat. § 139-29(a).
Plaintiff is
a contractor and completed the contractual duties it owed the joint
venture that included NCDOT.
There is nothing in the statute or
case law that indicates that this language would exclude a joint
venture.
In conclusion, the majority opinion allows NCDOT to make a
contract with a developer under N.C. Gen. Stat. § 136-28.6 and reap
the benefits that it could have under a contract with a road
contractor under N.C. Gen. Stat. § 136-28.1 with complete immunity
from liability for any breach of the construction contract.
Thus,
while NCDOT controls the developer, oversees the project, attains
land for a new road free of cost, benefits from the developers
-16-16contribution of costs, tailors the project to meet its desires, and
reaps substantial benefits from the construction, the majority
nonetheless holds that under the doctrine of sovereign immunity,
NCDOT should be completely absolved from any liability for a breach
of the construction contract that arises under its G.S. 136-28.6
contract with the developer, Brier Creek.
In short, the majority
allows NCDOT to use sovereign immunity as a “shield” to escape
contractual duties and responsibilities while it enjoys at half the
cost, the benefits it would gain by contracting directly with the
road contractor under G.S. 136-28.1.
Since I do not believe this
to have been the legislative intent, I respectfully, dissent.
