NELLO L. TEER COMPANY
v.
NORTH CAROLINA STATE HIGHWAY COMMISSION.
No. 536.
Supreme Court of North Carolina.
July 23, 1965.*253 Nye, Winders & Mitchell, Durham, for plaintiff.
Atty. Gen. T. W. Bruton, Asst. Atty. Gen. Harrison Lewis, William W. Melvin, Trial Attorney, and Manning, Fulton & Skinner, Associate Counsel, Raleigh, for defendant.
BOBBITT, Justice.
Decision on this appeal requires construction of the statute under which Teer initiated this proceeding. This statute, while no longer a part of our statutory law, is applicable to the present litigation. It must be considered and construed in the context of well established legal principles stated below.
Absent waiver, the State is immune from suit. Smith v. Hefner, 235 N.C. 1, 6, 68 S.E.2d 783; Ferrell v. North Carolina State Highway Commission, 252 N.C. 830, 833, 115 S.E.2d 34. It is noted that the provisions of Section 9, Article IV, of the Constitution of North Carolina of 1868, relating to claims against the State, by virtue of the comprehensive amendment of Article IV in 1961 are now a part of Section 10, Subsection 1 of Article IV of the Constitution of North Carolina.
The Highway Commission is an unincorporated agency of the State. Except as provided in the Tort Claims Act, G.S. § 143-291 et seq., the Highway Commission is not subject to suit in tort. Schloss v. State Highway & Public Works Com., 230 N.C. 489, 492, 53 S.E.2d 517; Floyd v. North Carolina State Highway and Public Works Commission, 241 N.C. 461, 85 S.E.2d 703. Nor is the Highway Commission, unless otherwise provided by statute, subject to suit on contract or for breach thereof. Dalton v. State Highway and Public Works Com., 223 N.C. 406, 27 S.E.2d 1. Moreover, under our decisions, acts permitting suit, being "in derogation of the sovereign right of immunity," are to be "strictly construed." Floyd v. North Carolina State Highway and Public Works Commission, supra.
The basic rule is that the Highway Commission is not subject to suit except in the manner expressly provided by statute. Sherrill v. North Carolina State Highway Commission, 264 N.C. 643, 646, 142 S.E.2d 653, and cases cited; Ferrell v. North Carolina State Highway Commission, supra, and *254 cases cited. An exception to this basic rule is well established, to wit: Where private property is taken for a public purpose by a governmental agency having the power of eminent domain under circumstances such that no procedure provided by statute affords an applicable or adequate remedy, the owner, in the exercise of his constitutional rights, may maintain an action to obtain just compensation therefor. Sherrill v. North Carolina State Highway Commission, supra, and cases cited; Ferrell v. North Carolina State Highway Commission, supra, and cases cited.
G.S. § 136-28, at all times pertinent to decision herein, contained the following provision: "All contracts over one thousand dollars ($5,000.00) that the Commission may let for construction, or any other kinds of work necessary to carry out the provisions of this chapter, shall be let, after public advertising, under rules and regulations to be made and published by the State Highway Commission, to a responsible bidder, the right to reject any and all bids being reserved to the Commission; except that contracts for engineering or other kinds of professional or specialized services may be let after the taking and consideration of bids or proposals from not less than three responsible bidders without public advertisement." G.S. Vol. 3B, 1958 Replacement. It is noted that G.S. § 136-28 was amended in 1963 (S.L.1963, c. 525) by substituting "five thousand dollars ($5,000.00)" for "one thousand dollars." G.S. Vol. 3B, 1964 Replacement.
By the weight of authority, a statutory requirement for competitive bids constitutes "a jurisdictional prerequisite to the exercise of the power of a public corporation to enter into a contract." Fonder v. City of South Sioux Falls, 76 S.D. 31, 71 N.W.2d 618, 53 A.L.R. 2d 493, and cases cited.
This statement, supported by cited cases, appears in 135 A.L.R. 1266: "In general, but subject to certain limitations and exceptions which are considered in subsequent subdivisions of this annotation, statutes requiring the letting of public contracts to the lowest bidder are regarded as rendering invalid and unenforceable subsequent agreements to pay one to whom a public contract has been duly awarded additional compensation for extras or additional labor and materials not included in the original contract, at least where the additional compensation exceeds the amount for which public contracts may be made without competitive bidding."
"Persons dealing with the public agency are presumed to know the law with respect to the requirement of competitive bidding and act at their peril." Miller v. McKinnon, 20 Cal. 2d 83, 124 P.2d 34, 140 A.L.R. 570, and cases cited; 49 Am.Jur., States, Territories, and Dependencies § 86; 81 C.J.S. States § 113, pp. 1087-1088. This includes knowledge that the officials and agents of the public agency may not waive the sovereign right of immunity or act in violation of statutory requirements. 19 Am. Jur., Estoppel, § 166.
This Court has held a purported public contract not made in conformity with the (similar) requirements of G.S. § 143-129 is void, but that performance and acceptance of construction work imposes an obligation to pay the reasonable and just value of the work done and materials furnished. Even so, such recovery excludes profits and such reasonable and just value cannot exceed actual cost. Hawkins v. Town of Dallas, 229 N.C. 561, 50 S.E.2d 561, and cases cited. Compare Lexington Insulation Co. v. Davidson County, 243 N.C. 252, 90 S.E.2d 496, and see 35 N.C.L.R. 188, 239.
After compliance with requirements of G.S. § 136-28, the contract of July 8, 1958, for Project No. 8.13438, was awarded to Teer. Teer's work was interrupted and delayed on account of another contractor's failure to perform properly the contract (Project No. 8.13437) covering rough grading, drainage and shoulder work. Teer performed extensive extra work to remedy these deficiencies, such work being prerequisite *255 to the performance of Teer's contract. The fact now emphasized is that Teer, well within the prescribed number of working days, completed on October 14, 1960, the work called for in its written contract of July 8, 1958.
Whether such deficiencies were of such character and magnitude as to constitute sufficient ground for rescission by Teer of its contract with the Highway Commission need not be determined. Suffice to say, Teer made no attempt to rescind but performed the extra (remedial) work as directed by the Highway Commission's engineers in addition to that required to perform its contract of July 8, 1958.
Pertinent provisions of the Standard Specifications for Roads and Structures, published October 1, 1952 by the Highway Commission, include the following:
"4.4 EXTRA WORK. The contractor shall perform unforeseen work, for which there is no price included in the contract whenever it is deemed necessary or desirable in order to complete fully the work as contemplated, and such extra work shall be performed in accordance with the specifications and as directed; provided, however, that before any extra work is started a supplemental agreement shall be entered into, or a written extra work order issued by the Engineer to do the work.
"If it is possible to agree upon equitable prices, the contractor and Commission shall enter into a supplemental agreement to cover any and all the extra work necessary.
"When such prices cannot be agreed upon, then the work will be paid for on Force Account basis as described in Section 9.4. The contractor shall perform extra work whenever it is deemed necessary or desirable, and such work shall be done in accordance with the requirements of these specifications as directed by the Engineer."
Section 9.4 relates to the authorization of extra and force account work, provides in detail for the keeping of records in connection therewith and provides specifically for the compensation to be paid therefor. Generally, in respect of work done by force account, Section 9.4 provides for the payment of all specified costs plus 10% of the actual costs of labor and materials.
As indicated in our preliminary statement, with reference to the extensive undercutting and replacement in the subgrade of the roadway and of the shoulders, the Highway Commission contends it was agreed that this remedial work was to be done by Teer at the rates shown in the estimates while Teer contends payment on this basis was made and received subject to the definite agreement that final determination and adjustment for this required remedial work would be made upon completion of Teer's contract. In this connection, it is noted that this extensive remedial work, according to Teer's contention and as evidenced by payments to Teer based on estimates, greatly exceeded the $1,000.00 established by G.S. 136-28 as the amount determinative of the necessity for public advertisement for bids and competitive bidding.
The statute under which Teer initiated this proceeding (G.S. 136-29, G.S. Vol. 3B, 1958 Replacement) is quoted in full below.
"§ 136-29. Settlement of controversies between Commission and awardees of contracts. Upon the completion of any contract awarded by the State Highway Commission to any contractor. if the contractor fails to receive such settlement as he claims to be entitled to under his contract, he may, within sixty days from the time of receiving his final estimate, file with the State Highway Engineer a claim for such amount as he deems himself entitled to under the said contract; and the State Highway Engineer shall, within thirty days from the receipt of the said claim, pass upon the same and notify the contractor in writing of his decision. If the contractor desires to do so, he may, within thirty days from the receipt of the said decision of the State Highway *256 Engineer, appeal in writing to the State Highway Commission. Upon receipt of said appeal the chairman of the State Highway Commission shall promptly appoint some competent person, and the claimant shall likewise select a competent person, and these two shall elect a third such person, the three of whom shall constitute a board of review, and shall promptly set a time and place for the hearing. The committee or the claimant shall have power and authority to summon persons and papers and the committee shall make a complete investigation of all matters relating to the said appeal and the contract and the work out of which it grows, and determine all matters at issue in a fair and equitable manner according to their best judgment. The decision of the said committee shall be final and any amount which they may award the said contractor will be a valid claim against the State Highway Commission; provided, however, an appeal may be had from the decision of the said committee to the Superior Court of Wake County under the same terms, conditions and procedure as appeals from the Industrial Commission, as provided in § 97-86. The provisions of this section shall be deemed to enter into and form a part of every contract entered into between the State Highway Commission and any contractor, and no provision in said contracts shall be valid that are in conflict herewith." (Our italics.)
A primary question for determination is whether the committee (board of review) authorized by the statute, referred to hereafter as the Board of Review, has the status of a board of arbitration or that of a judicial or quasi-judicial body.
It is noted that the statutory procedure is available when the contractor has completed his contract with the Highway Commission and fails to receive "such settlement as he claims to be entitled to under his contract." (Our italics.) The statute assumes a valid contract is subsisting. The procedure is to resolve any controversy as to what (additional) amount, if any, the contractor is entitled to recover under its terms.
The manner of selection of the persons to serve on the Board of Review is in accord with a traditional method for the selection of arbitrators. Each interested party is authorized to select a member. No qualifications or limitations with reference to the persons so selected are prescribed. Presumably, it was contemplated that each party would select a person it anticipated would be favorably inclined to it and its position; and that the third person, selected by joint vote of the two original appointees, would occupy a key role in deciding the controversy. Too, the statute provides that "the committee shall make a complete investigation of all matters relating to the said appeal and the contract and the work out of which it grows, and determine all matters at issue in a fair and equitable manner according to their best judgment."
Based largely on the provisions referred to in the preceding paragraph, Teer contends the status of the Board of Review is that of an arbitration board. Its brief states its position as follows: "As is true with arbitration boards, the hearings before the Board of Review are extra-judicial proceedings and the Board members are not bound by the rules of procedure and evidence which prevail in a court of law; [Calvine] Cotton Mills v. Textile Workers Union, 238 N.C. 719, 79 S.E.2d 181. The Board members are not required to determine the controversy according to law; Poe & Sons, Inc. v. University, 248 N.C. 617, 104 S.E.2d 189, but rather may decide according to their own opinions of equity and conscience, and are not restricted to precedents and positive rules of either law or equity. Lusk v. Clayton, 70 N.C. 184; Robbins v. Killebrew, et al., 95 N.C. 19."
Notwithstanding provisions which, standing alone, are consistent with arbitration, the true status and function of the Board of Review, in our opinion, is clarified by the following provision: "The decision of *257 the said committee shall be final and any amount which they may award the said contractor will be a valid claim against the State Highway Commission; provided, however, an appeal may be had from the decision of the said committee to the Superior Court of Wake County under the same terms, conditions and procedure as appeals from the Industrial Commission, as provided in § 97-86." (Our italics.)
The Industrial Commission, with reference to contested claims for compensation, "is constituted a special or limited tribunal, and is invested with certain judicial functions, and possesses the powers and incidents of a court, within the provisions of the act and necessary to determine the rights and liabilities of employees and employers." Hanks v. Southern Public Utilities Co., 210 N.C. 312, 319, 186 S.E. 252, 257. The Industrial Commission is required to hear the parties (evidence), determine the dispute in a summary manner and file its award, "together with a statement of the findings of fact, rulings of law, and other matters pertinent to the questions at issue." G.S. § 97-84, G.S. § 97-85.
Specific findings of fact by the Industrial Commission, covering the crucial questions of fact upon which the plaintiff's right to compensation depends, are required. Guest v. Brenner Iron & Metal Co., 241 N.C. 448, 451, 85 S.E.2d 596, and cases cited. Its findings of fact, except jurisdictional findings (Askew v. Leonard Tire Co., 264 N.C. 168, 141 S.E.2d 280), are conclusive on appeal if supported by competent evidence. G.S. § 97-86; Penland v. Bird Coal Co., 246 N.C. 26, 97 S.E.2d 432, and cases cited. However, when it appears that the Industrial Commission has found the facts under a misapprehension of the applicable law, the cause will be remanded for findings of fact by the Industrial Commission upon consideration of the evidence in its true legal light. McGill v. Town of Lumberton, 215 N.C. 752, 3 S.E.2d 324, and cases cited therein, and numerous subsequent decisions. (See Shepard's North Carolina Citations, 215 N.C. 752, headnote 3.) The Industrial Commission is vested with the judicial function and the authority and duty to determine whether, under the established facts and applicable law, the plaintiff has a compensable claim.
In our view, an appeal from the Board of Review to the Superior Court of Wake County "under the same terms, conditions and procedure as appeals from the Industrial Commission, as provided in § 97-86" presupposes that the Board of Review has performed judicial functions comparable to those vested in the Industrial Commission. Hence, we are of opinion, and so hold, that the statute contemplates that the Board of Review, in the exercise of judicial functions and authority, shall, based on findings of fact, determine what (additional) amount, if any, the contractor is entitled to recover as a matter of legal right "under the said contract." When considered in context, the provision that the Board of Review shall "determine all matters at issue in a fair and equitable manner according to their best judgment" is not inconsistent with the exercise of said judicial functions and authority. We cannot accept the view that the General Assembly intended a contractor's claim against the Highway Commission should be determined otherwise than in accordance with their respective legal rights.
The only prior case in which the quoted statute was considered by this Court is Ballenger Paving Co. v. North Carolina State Highway Commission, 258 N.C. 691, 129 S.E.2d 245. There a contractor initiated a proceeding under said statute to recover from the Highway Commission an (additional) amount allegedly due under a paving contract. Specifically, the controversy was whether the Highway Commission had wrongfully withheld $2,900.00 as liquidated damages on account of the contractor's failure to complete the project within the prescribed number of working days. While the precise question was not raised, the decision and opinion clearly *258 reflect the view, in full accord with that stated herein, that the controversy was determinable in accordance with the respective legal rights of the parties and not otherwise.
The quoted statute, which assumes a valid contract is subsisting, provides for recovery "under the said contract." In our view, recovery, if any, "under the said contract" must be based on the terms and provisions thereof.
The Board of Review, in accordance with Teer's contention, did not relate its decision to Teer's right, if any, to recover "under the said contract." It made no distinction between the work covered originally by the contract and the extra (remedial) work performed by Teer. It devised a formula covering Teer's entire operations (without regard to contract provisions) which, in its judgment, would give Teer an "appropriate financial return." In short, it did not exercise the judicial functions and authority vested in it by the statute. Clearly, it did not consider it was required to do so but that its function was comparable to that ordinarily performed by a board of arbitration.
It appearing upon the face of the record that the Board of Review acted under misapprehension of the applicable law, Judge Martin, based on the Highway Commission's exceptions, should have vacated all findings of fact, conclusions and the decision and remanded the proceeding to the Board of Review for further hearing and consideration in a manner consistent with applicable legal principles as stated herein.
As noted in our preliminary statement, when the Board of Review convened March 27, 1963, the Highway Commission moved to dismiss Teer's claim. Its motion(s) was based on the contention that the statute (former G.S. § 136-29) waived immunity only in respect of a claim to recover under a valid contract, and that the claim on which this proceeding is based (submitted by Teer on November 4, 1961) is not such a claim. The Board of Review overruled the Highway Commission's said motion(s) and Judge Martin overruled the Highway Commission's exceptions to said rulings.
If technical rules as to pleadings were applicable, there would be much force in the Highway Commission's said contention. However, Teer submitted its claim for additional compensation in apt time ("within sixty days from the time of receiving his final estimate"); and the Chairman of the Highway Commission, referring to the claim so filed, referred specifically to the procedure authorized by (former) G.S. § 136-29 as the appropriate procedure for determination of Teer's claim. The statute contained no provision as to pleadings. It provided simply for the filing of a claim.
Under the circumstances, we are of opinion, and so hold, that Teer, in further hearings before the Board of Review, should be permitted to offer evidence tending to establish the amount, if any, to which it is entitled for work done and materials furnished in categories set forth in its claim of November 4, 1961. Even so, recovery, if any, must be within the terms and framework of the provisions of the contract of July 8, 1958 and not otherwise. Questions analogous to nonsuit will be for consideration (initially by the Board of Review) after Teer has had opportunity to offer such evidence.
It is noted that the decision of the Board of Review, as appears from the excerpt quoted in our preliminary statement, is not related to or in accord with the claim submitted by Teer on November 4, 1961.
It is noted further: The Highway Commission challenges the decision of the Board of Review on the ground that Mr. Dopler, the appointee of Teer, had certain *259 conversations with and made certain inquiries of representatives of Teer when the Board of Review was not in session. We have reviewed the record fully bearing upon this matter. Originally, it appears, Mr. Dopler was under the impression it was appropriate for members of the Board to make any investigation or inquiry that might be of assistance in rendering a decision they deemed fair and equitable. After the matter was called to his attention, he limited his consideration to evidence offered before the Board of Review. In short, the evidence in the record before us is not deemed sufficient to disqualify Mr. Dopler from further service as a member of the Board of Review.
The foregoing applies to matters involved in what the Board of Review referred to as "General Award to the Teer Company," that is, questions raised by the Highway Commission's appeal.
With reference to Teer's appeal, we confine consideration to Teer's exception to the portion of Judge Martin's judgment which provided "that the Nello L. Teer Company have and recover nothing of the State Highway Commission for the benefit of the Brown Paving Company on the matters arising in this proceeding."
The record discloses that Teer attached to its letter of July 27, 1959 to Brown Paving Company a purchase order for "157,700 Tons Bituminous Concrete Base Course (Modified)" and for "51,800 Tons Bituminous Concrete Surface Course"; and, when accepted by Brown Paving Company, unit prices of "$5.12 per ton" and "$5.87 per ton," respectively, were stipulated. It was also provided: "All asphaltic concrete stone requirements will be purchased from Nello L. Teer Company at the following rates: * * *." It is noted that this order, which refers specifically to "Project 8.13438; I-95-2(10)55," covers the two biggest items of Teer's contract of July 8, 1958 with the Highway Commission. The evidence is unclear as to Teer's settlement with Brown Paving Company. Nothing indicates Brown Paving Company on November 4, 1961 or thereafter had asserted a claim against Teer in connection with work on the subject project. For reasons stated below, further discussion of references in the record to Brown Paving Company is unnecessary.
The final estimate ($19,916.86) was paid by the Highway Commission to Teer on September 13, 1961. The statute fixes "sixty days from the time of receiving his final estimate" as the time within which the contractor may file a claim for additional compensation under the contract. Assuming, without deciding, Teer's right under said statute to assert a claim "for the benefit of the Brown Paving Company," we are of opinion, and so hold, that the statute required that such claim be asserted (filed) within sixty days from September 13, 1961. Consequently, apart from the merits, if any, of Brown Paving Company's claim, and apart from the question as to Teer's right, if any, to assert (file) such claim, any claim Brown Paving Company may have had is barred for failure to assert (file) it within the time prescribed by statute. While the judgment of Judge Martin is vacated, as stated below, his ruling that Teer was not entitled to recover "for the benefit of the Brown Paving Company" was correct.
In this Court, Teer moved to dismiss the Highway Commission's statement of case on appeal for failure to comply with Rule 19(4), Rules of Practice in the Supreme Court, 254 N.C. 783, 800. The Highway Commission set out the major portion of the evidence offered by Teer under direct examination in question and answer form. It asserts this was necessary to show its objections to this evidence as the basis for its contention there was no competent evidence to support designated findings of fact, citing Maley v. Thomasville Furniture Co., 214 N.C. 589, 200 S.E. 438. Since *260 decision on this appeal is based on matters appearing on the face of the record, determination as to whether the Highway Commission's said statement of case on appeal violates Rule 19(4) is academic. However, its status has been considered in taxing the costs incident to this appeal.
The costs on this appeal are taxed as follows: Each party shall pay the entire costs of its briefs. Each party shall pay the entire costs of printing its statement of case on appeal. All other costs incident to the appeal shall be taxed one-half against Teer and one-half against the Highway Commission.
For the reasons stated, the judgment of Judge Martin is vacated and the cause is remanded to the superior court for the entry of a judgment (1) vacating the decision of the Board of Review, including all findings and conclusions stated therein, and (2) remanding the proceeding to the Board of Review for further proceedings not inconsistent with this opinion.
Error and remanded.