McMurphy v. State

McMurphy v. State (98-499); 171 Vt. 9; 757 A.2d 1043 

[Filed 02-Jun-2000]


       NOTICE:  This opinion is subject to motions for reargument under
  V.R.A.P. 40 as well as formal  revision before publication in the Vermont
  Reports.  Readers are requested to notify the Reporter of  Decisions,
  Vermont Supreme Court, 109 State Street, Montpelier, Vermont 05609-0801 of
  any  errors in order that corrections may be made before this opinion goes
  to press.


                                 No. 98-499


Bonnie McMurphy, et al	                         Supreme Court

                                                 On Appeal from
     v.	                                         Rutland Superior Court

State of Vermont and	                         September Term, 1999
Town of Rutland


Alden T. Bryan, J.

James W. Runcie of Ouimette & Runcie, Vergennes, for Plaintiffs-Appellants.

William H. Sorrell, Attorney General, and Cathy Nelligan Norman and Scott A. 
  Whitted, Assistant Attorneys General, Montpelier, for Defendant-Appellee 
  State of Vermont.

Joseph A. Farnham of McNeil, Leddy & Sheahan, Burlington, for 
  Defendant-Appellee Town of Rutland.


PRESENT:  Dooley, Morse, Johnson, Skoglund, JJ., and Gibson, J. (Ret.), 
          Specially Assigned


       MORSE, J.  In this wrongful death action following the death of their
  daughter in an  automobile accident, plaintiffs Bonnie McMurphy and James
  Hart appeal a summary judgment  ruling that defendants State of Vermont and
  Town of Rutland were immune from suit.  Plaintiffs  argue that, under the
  Tort Claims Act, the State waived its sovereign immunity, and, by
  purchasing  excess liability insurance, Rutland waived its municipal
  immunity up to $1,850,000.  Plaintiffs  argue, in the alternative, that
  Rutland is liable under the theory of breach of contract, a claim that is 
  not subject to immunity.  We affirm in part, reverse in part, and remand.

       Plaintiffs are parents of Shannah Hart, who died in a motor vehicle
  accident in Rutland on  December 7, 1995.  The accident occurred at the
  intersection of Town Highway No. 1 (Post Road)  and U.S. Route 7.  The
  deceased, heading southbound on Post Road, drove through the intersection 
  and collided with a pickup truck traveling northbound on Route 7.  The
  State designed 

 

  and built the intersection, completing the work in 1981.  At that time, the
  State contracted with  Rutland to assume responsibility for maintaining the
  intersection.

       Plaintiffs individually and McMurphy, as administratrix of her
  daughter's estate, sued,  claiming that the State failed to properly design
  and construct the intersection and Rutland failed to  adequately maintain
  it.  Post Road and Route 7 intersect at a relatively narrow angle.  Post
  Road's  southbound lane curves sharply to the right, so that its end point,
  which is marked by a stop sign,  forms a "T" with Route 7.  Traffic
  traveling northbound from Route 7 onto Post Road bypasses this  "T" via a
  one-way exit lane, which routes traffic directly from the northbound lane
  of Route 7 onto  Post Road's northbound lane.  Plaintiffs believed that
  those traveling southbound on Post Road may  easily mistake this one-way,
  northbound exit ramp as a two-way continuation of Post Road, rather  than
  follow Post Road's sharp turn to the right to its end.  They alleged that
  the intersection was  negligently designed, constructed, and maintained,
  particularly in that it lacked the necessary and  appropriate warning
  signage. 

       The superior court granted the State's motion for summary judgment,
  finding no issues of  material fact with regard to whether it negligently
  failed to comply with design standards.  The court  similarly granted
  Rutland's motion for summary judgment, concluding that the town was immune 
  from suit under the doctrine of municipal immunity and was not liable under
  a third-party beneficiary  theory for breach of its contract with the State
  to maintain the intersection.  This appeal followed.

                           I.  Sovereign Immunity

                                A.  The State

       "Sovereign immunity protects the state from suit unless immunity is
  expressly waived by  statute."  LaShay v. Department of Social &
  Rehabilitation Servs., 160 Vt. 60, 67, 625 A.2d 224, ___  (1993).  Under 12
  V.S.A. § 5601, the Tort Claims Act, Vermont has expressly waived immunity 
  from certain lawsuits: "The state of Vermont shall be liable for injury to
  persons or property or loss  of life caused by the negligent or wrongful
  act or omission of an employee of the 

 

  state while acting within the scope of employment . . . ."  12 V.S.A. §
  5601(a).  Subsection (e)(8) of  the Act, however, declares that waiver does
  not apply to "[a]ny claim arising from the selection of or  purposeful
  deviation from a particular set of standards for the planning and design of
  highways."  Id.  § 5601(e)(8).

       The trial court ruled that the State was entitled to judgment as a
  matter of law based on  sovereign immunity preserved under subsection
  (e)(8). (FN1)  Plaintiffs challenge that ruling,  arguing that the statute
  does not shelter the State from suits alleging that it negligently failed
  to  comply with a given set of design standards.  We agree.	

       When we interpret a statute, "our obligation is to effectuate the
  intent of the Legislature."   Brennan v. Town of Colchester, ___ Vt. ___,
  ___ 730 A.2d 601, 603 (1999).  Our first step is to look  at the statute's
  language with the presumption that the Legislature intended the plain,
  ordinary  meaning of the language.  See id.  We presume that language is
  inserted advisedly and that the  Legislature did not intend to create
  surplusage.  See Payea v. Howard Bank, 164 Vt. 106, 107, 663 A.2d 937, 938
  (1995).  We also consider the reason and spirit behind the statute as well
  as its effects  and consequences.  See In re P.S., 167 Vt. 63, 70, 702 A.2d 98, 102 (1997).

       As noted, under subsection (e)(8), the State is immune from "[a]ny
  claim arising from the  selection of or purposeful deviation from a
  particular set of standards for the planning and design of  highways."  12
  V.S.A. § 5601(e)(8).  This language plainly and ordinarily means that the
  State is  immune from claims arising from the State's choice of highway
  design standards or its conscious  decision to depart from the requirements
  of chosen standards.  To construe the statute as providing  the State with
  comprehensive immunity for highway design would require overlooking this
  clear and  deliberate language.  Such a construction would also render the
  word "purposeful" surplusage.   The  Legislature would not have specified
  "purposeful deviation" if it intended to retain immunity for an 
  unintentional deviation as well.

 

       We believe that the Legislature did not intend to retain sovereign
  immunity from every claim  alleging negligent highway design.  Whereas
  subsection (e)(8) shelters the State from liability for all  of its
  deliberate design decisions, allowing it to design highways in the manner
  that it sees fit, the  statute preserves liability in circumstances where
  the State has unintentionally failed to comply with  the chosen design
  standards.  Thus, if a plaintiff can prove that the State intended to
  comply with  certain standards, but failed to do so, the State would be
  liable for any injury caused if the plaintiff  can also prove that the
  noncompliance was negligence.

       One source for the standards used in the design of the intersection at
  issue here was the  United States Department of Transportation Federal
  Highway Administration's Manual on Uniform  Traffic Control Devices
  (MUTCD).  MUTCD sets national standards and guidelines for the use of 
  traffic control signs, signals, and markings.  Vermont adopted MUTCD
  effective March 1973.  See  23 V.S.A. § 1025.  The Vermont Agency of
  Transportation drafted the design plans for this  intersection in 1976 and
  1977 following the standards set forth in MUTCD.  In support of its motion 
  for summary judgment, the State submitted the affidavit of an Agency
  employee, who declared: "In  choosing the signs to use and their
  approximate location[,] I followed the [MUTCD]."   Thus, the  State
  admittedly designed the intersection with the intention to follow, rather
  than purposefully  depart from, the manual's standards.

       To survive summary judgment, however, plaintiffs must raise a material
  issue of fact as to  whether the State actually complied with MUTCD's
  requirements and, if not, that the State was  negligent in failing to do
  so.  See V.R.C.P. 56(e) (once motion for summary judgment is made and 
  supported, nonmoving party "must set forth specific facts showing that
  there is a genuine issue for  trial" to survive motion); Lussier v. Truax,
  161 Vt. 611, 612, 643 A.2d 843, 844 (1993) (mem.).  We  hold that
  plaintiffs did raise such issues of fact.

       In order to determine if there exists a material issue of fact as to
  whether the State complied  with the standards set forth in MUTCD, we look
  at the manual itself.  In explaining the purpose of  traffic signs, MUTCD
  provides:

 

          The purpose of traffic control devices and warrants for their 
     use is . . . to provide such guidance and warnings as are needed to 
     insure the safe and in[]formed operation of individual elements of the 
     traffic stream.
          Traffic control devices are used to direct and assist vehicle 
     operators in the guidance and navigation tasks required to traverse 
     safely any facility open to public travel.

  Federal Highway Administration, U.S. Dept. of Trans., Manual on Uniform
  Traffic Control Devices  1A-1 (1988).  The manual also states that, in
  order to be effective, traffic signs should meet the  following basic
  requirements: (1) fulfill a need; (2) command the attention and respect of
  operators;  (3) convey a clear, simple meaning; and (4) give operators
  adequate time for response.  See id.    Furthermore, with regard to warning
  signs, the manual dictates that such signs "should provide  adequate time
  for the driver to perceive, identify, decide, and perform any necessary
  maneuver."  Id.  2C-3.

       In their supporting memoranda, plaintiffs submitted the affidavit of
  their expert, who stated  that, under the manual, the State should have
  placed signage warning those traveling southbound on  Post Road of the
  intersection's sharp curve to the right.  He also contended that one
  particular sign  that faced these travelers - a "Stop Ahead" sign bearing a
  straight arrow - was directly contradictory  to the layout of the
  intersection.  Plaintiffs' expert calls into question whether the signage,
  or lack  thereof, conveyed to southbound drivers a clear, simple
  understanding of the intersection's layout and  provided adequate time for
  them to perceive, identify, decide, and perform the necessary  maneuvering
  required to safely navigate the intersection.  We find, therefore, that
  plaintiffs have  established that there is a material issue of fact
  concerning the State's compliance with the principles  of MUTCD, and
  whether any noncompliance was negligence.  Thus, the court erred in
  granting  summary judgment to the State.

                             B.  Town of Rutland

       Plaintiffs next contend that the doctrine of sovereign immunity does
  not protect Rutland from  suit.  "Traditionally, courts have held
  municipalities liable only where the negligent act arises out of  a duty
  that is proprietary in nature as opposed to governmental."  Hillerby v.
  Town 

 

  of Colchester, 167 Vt. 270, 272, 706 A.2d 446, 447 (1997).  Municipalities
  may, however, waive  immunity by purchasing liability insurance.  See 29
  V.S.A. § 1403.  Plaintiffs do not argue that  Rutland's maintenance of the
  intersection is proprietary; (FN2) rather, plaintiffs contend that Rutland 
  has waived immunity to the extent that it has purchased excess liability
  insurance, also referred to as  "reinsurance."  

       A municipal corporation may, in the name of a municipality, contract
  with an insurance  company to secure all forms of liability insurance.  See
  24 V.S.A. § 1092.  When a municipal  corporation purchases a liability
  insurance policy under § 1092, "it waives its sovereign immunity  from
  liability to the extent of the coverage of the policy and consents to be
  sued."  29 V.S.A. § 1403.  The Legislature, however, has specifically
  authorized municipalities to enter into intermunicipal  agreements for
  liability insurance purposes, see 24 V.S.A. § 4942, participation in which
  does not  constitute a waiver of immunity, see id. § 4946.  The statute
  specifically provides that:

     two or more municipalities may form an association under the laws of 
     this state to develop and administer an intermunicipal risk 
     management program, having as its purposes reducing the risk of its 
     members; safety engineering; distributing, sharing and pooling risks; 
     acquiring insurance, excess loss insurance, or reinsurance; and 
     processing, paying, and defending claims against the member of such 
     association.

  Id. § 4942 (emphasis added).  Furthermore, such "[p]articipation by a
  municipality in an agreement  or association established hereunder shall
  not create joint and several liability as a result of any act or  omission
  of any other municipality or association, nor shall such participation
  constitute a waiver of  sovereign immunity under 29 V.S.A. § 1403." Id. §
  4946 (emphasis added).

 

       Rutland was a member of the Property and Casualty Intermunicipal Fund
  (PACIF), which is  managed by the Vermont League of Cities and Towns
  (VLCT).  Through its VLCT PACIF  membership, Rutland had liability coverage
  in the amount of $2,000,000, the first $150,000 of which  was derived from
  PACIF funds.  Commercial carriers, with which VLCT PACIF contracted, 
  provided the excess or reinsurance.  Although plaintiffs concede that the
  first $150,000 of Rutland's  coverage does not constitute a waiver of
  immunity under § 1403, they argue that immunity is waived  to the extent of
  the reinsurance.  In other words, according to plaintiffs, the reinsurance
  provided by  commercial carriers is not the same type of "self-insurance"
  as that derived from VLCT PACIF  funds, the latter being the only type of
  insurance the Legislature exempted from effectuating waiver  under § 1403. 
  Therefore, plaintiffs argue that Rutland has waived immunity to the extent
  of  $1,850,000 for any claim in excess of $150,000.

       Plaintiffs' argument is defeated by a plain reading of the statutory
  scheme.  A waiver of a  municipality's immunity under § 1403 occurs when a
  municipal corporation itself purchases liability  insurance.  Such waiver
  does not occur when insurance or reinsurance is acquired through 
  participation in an intermunicipal insurance agreement such as VLCT PACIF. 
  It is the manner by  which the insurance is obtained, not the commercial
  nature of the provider, that is determinative of  waiver.  Since Rutland
  obtained its liability coverage through membership in VLCT PACIF, it did 
  not waive its immunity from plaintiffs' suit.

                     II.  Third-Party Beneficiary Claim

       Plaintiffs claim that Rutland is liable under a breach-of-contract
  theory, which is not barred  by municipal tort immunity.  Specifically,
  plaintiffs assert that Rutland breached its contractual  agreement with the
  State to maintain the intersection, and that this breach caused or
  contributed to  the cause of their daughter's death.  

       In order to sue on the contract between the State and Rutland,
  plaintiffs must establish that  their daughter was a third-party
  beneficiary to the contract rather than an incidental beneficiary.  See 
  Restatement (Second) of Contracts § 315 (1979) ("An incidental beneficiary
  acquires by virtue 

 

  of the promise no right against the promisor or the promisee.").  The
  determination of whether a  party may be classified as a third-party
  beneficiary, as opposed to an incidental beneficiary, is based  on the
  original contracting parties' intention.  See Morrisville Lumber Co. v.
  Okcuoglu, 148 Vt. 180,  184, 531 A.2d 887, 890 (1987).  

       We find no intention on the part of either the State or Rutland to
  directly benefit third parties  or to confer a private cause of action. 
  The contract at issue reads:

     Whereas, the [the State and Rutland] . . . mutually agree that the 
     maintenance and repair of Town Highways should be under the 
     control of the Town, pursuant to Title 19, V.S.A., Chapter 9, § 931.  It 
     is further understood and agreed that the giving over of said 
     maintenance and repair is in the best public interest.

  Through this contract, neither defendant intended to confer upon private
  parties a cause of action for  negligent maintenance of the intersection. 
  Rather, the object of the contract was to pass to Rutland  the
  responsibility of maintaining the intersection in accordance with the
  policy that towns should  control their town highways, as illustrated in 19
  V.S.A. § 931, recodified at 19 V.S.A. § 310 ("A  town shall keep its . . .
  highways and bridges in good and sufficient repair during all seasons of
  the  year.").

       We believe, furthermore, that the language "best public interest"
  reflected an intention to  provide the most effective, convenient, and
  economical method of highway maintenance to the  benefit of the State,
  Rutland, and the public at large.  See, e.g., Matternes v. City of
  Winston-Salem,  209 S.E.2d 481, 489 (N.C. 1974) (where city assumed
  responsibility for dangerous condition in  street under contract with
  state, "the intention of the parties in making this contract was none other 
  than to provide the most convenient and economical method for doing the
  necessary maintenance  work").  Obviously, the public benefits from
  properly maintained highways; however, the most  effective, convenient, and
  economical method of doing so is not for their direct benefit, but for
  their  incidental benefit.  See, e.g., Estate of Jiggetts v. City of
  Gastonia, 497 S.E.2d 287, 291 (N.C. 1998)  ("To maintain a suit for breach
  of contract on a third-party beneficiary theory, plaintiffs must allege  .
  . . 'that the contract was entered into for [their] 

 

  direct, and not incidental, benefit.'"(quoting Metric Constructors, Inc. v.
  Industrial Risk Insurers, 401 S.E.2d 126, 129 (1991) (alteration in
  original)).  There was no intention manifested in the language  of the
  contract that either the State or Rutland intended to confer a private
  cause of action.   Therefore, plaintiffs' daughter was not a third-party
  beneficiary to the contract.

       Plaintiffs attempt to avoid the intent-to-benefit analysis by citing
  the Restatement of  Contracts, which provides:

          [A] promisor who contracts with a government or 
     governmental agency to do an act for or render a service to the public 
     is not subject to contractual liability to a member of the public for 
     consequential damages resulting from performance or failure to 
     perform unless
          . . . .
     (b) the promisee is subject to liability to the member of the 
     public for the damages and a direct action against the promisor is 
     consistent with the terms of the contract and with the policy of the 
     law authorizing the contract and prescribing remedies for its breach.

  Restatement (Second) of Contracts § 313(2).  Plaintiffs argue that, had the
  State retained  responsibility for maintaining the intersection, it would
  have been liable for its failure to do so.  See  Peters v. State, 161 Vt.
  582, 583-84, 636 A.2d 340, 341-42 (1993) (mem.) (under private/analog test 
  of Tort Claims Act, State waived immunity from suit alleging negligent
  placement of highway  warning signs).  Thus, according to plaintiffs, under
  § 313(2)(b), Rutland, the promisee, is subject to  liability for negligent
  maintenance the same as the State, the promisor.

       We are not persuaded by plaintiffs' reliance on the Restatement. 
  First, the comment to § 313  states the general rule that individual
  members of the public are incidental beneficiaries of  government
  contracts:

     Government contracts often benefit the public, but individual 
     members of the public are treated as incidental beneficiaries unless a 
     different intention is manifested.  In case of doubt, a promise to do an 
     act for or render a service to the public does not have the effect of a 
     promise to pay consequential damages to individual members of the 
     public unless the conditions of Subsection (2)(b) are met.

  Restatement (Second) of Contracts § 313 cmt. a.  This is not a case of
  doubt.  As stated above, we  find no intention in the contract to treat
  individuals as other than incidental beneficiaries.

 

       Second, § 313 deals primarily with contracts between municipalities
  and government  contractors or public service corporations, not contracts
  between state and local governments.  See,  e.g., 13 R. Lord, Williston on
  Contracts § 37:33, at 214-15 (4th ed. 2000) (discussing § 113 under 
  heading "Members of Public as Third Party Beneficiaries of Contracts
  Between Public Service  Corporation and Municipality," and referring to §
  113 cmt. a as referring to "contracts of the kind  under discussion").  
  Nevertheless, plaintiffs urge us to accept an illustration to § 313 as
  dispositive  of the issue of Rutland's waiver of immunity:

     A, a municipality, owes a duty to the public to keep its streets in 
     repair.  B, a street railway company, contracts to keep a portion of 
     these streets in repair but fails to do so.  C, a member of the public, is 
     injured thereby.  He may bring actions against A and B and can 
     recover judgment against each of them.

  Restatement (Second) of Contracts § 313 illus. 5.  Although Rutland, as
  promisee, was in a position  analogous to that of a corporation, the
  contract at issue here was one between two governments,  which, as we
  discuss below, implicates governmental immunity considerations not
  applicable to a  contract between a municipality and a corporation.

       The Vermont Legislature treats state and local governments differently
  with respect to  immunity.  See Hillerby, 167 Vt. at 273-74, 706 A.2d  at
  447.  Under the Tort Claims Act, which  applies solely to state waiver of
  tort immunity, see id. at 274, 706 A.2d  at 448, whether the state has 
  waived immunity for a given cause of action is determined by the
  private-analog test, see id. at 272,  706 A.2d  at 447.  See also 12 V.S.A.
  § 5601(a) (state is "liable for injury . . . caused by the negligent  or
  wrongful act or omission of an employee of the state while acting within
  the scope of  employment, under the same circumstances, in the same manner
  and to the same extent as a private  person would be liable to the
  claimant").  Waiver of municipal immunity, by contrast, is determined  by
  the governmental/proprietary distinction.  See Hillerby, 167 Vt. at 272,
  706 A.2d  at 447.  We  would undermine the distinction between state and
  municipal immunity if we allowed plaintiffs'  interpretation of § 313 to
  control our analysis.  This Court has acknowledged that "the abrogation and 
  replacement of the distinction are matters for the Legislature, not the
  courts." 

 

  Hillerby, 167 Vt. at 272, 706 A.2d  at 446.  Therefore, municipal immunity
  prevails, and the court  properly rejected plaintiffs' contract theory on
  summary judgment.

       Affirmed in part, reversed in part, and remanded.	



                                       FOR THE COURT:
                                       

                                       ______________________________________
                                       Associate Justice



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                                  Footnotes


FN1.  Although plaintiffs' complaint alleged that the State was negligent in
  both its design and  construction of the intersection, the latter issue
  does not appear in their appellate briefs.  Therefore,  we deal solely with
  the issue of design immunity.
  
FN2.  This Court has long held that the maintenance of highways is a
  governmental function.  See  Town of South Burlington v. American Fidelity
  Co., 125 Vt. 348, 350, 215 A.2d 508, 510 (1965)  ("towns are protected from
  liability for insufficiencies in streets"); Lemieux v. City of St. Albans, 
  112 Vt. 512, 515, 28 A.2d 373, 375 (1942), overruled on other grounds by
  Marshall v. Town of  Brattleboro, 121 Vt. 417, 425, 160 A.2d 762, 767
  (1960) (cities and towns are not liable for damages  resulting from defects
  in highways); see also Gretkowski v. City of Burlington, 50 F. Supp. 2d 292, 
  294, 296 (D. Vt.) aff'd, 181 F.3d 82 (2d Cir. 1999) (noting that this Court
  "has affirmed the notion  that maintenance of streets and sidewalks is a
  governmental function").