Opinion
No. 89-10787.
Decided October 19, 1989.
James R. Havens and Robert D. Erney, for plaintiff.
Anthony J. Celebrezze, Jr., Attorney General, and William J. McDonald, for the state.
On July 31, 1989, Kirk Williams Company, plaintiff herein, initiated suit against the state of Ohio for the alleged breach of a construction contract by several of the state's administrative agencies. One of these defendants, the Ohio Building Authority ("OBA"), filed a motion to dismiss on September 27, 1989, by which it asserted that this court is without jurisdiction to determine the matter as between plaintiff and OBA. For the reasons set forth below, this motion is found to be not well taken.
OBA has asserted that it is not amenable to suit in this court for any breach of contract cause of action. OBA premises its assertion upon R.C. 152.01(A), which states, in pertinent part, as follows:
"There is hereby created the Ohio building authority * * *. It may, in its own name, sue and be sued, enter into contracts, and perform all the powers and duties given to it by Chapter 152. of the Revised Code. * * *" (Emphasis added.)
This section, originally effective September 27, 1963, was part of the enabling legislation creating OBA. OBA asserts that the emphasized portion was a legislative waiver of sovereign immunity, allowing it to be sued for such matters as, inter alia, breach of contract. R.C. 2743.01 et seq., the Court of Claims Act, became effective January 1, 1975, and provides for the creation of this court. Jurisdiction is set forth in R.C. 2743.03(A)(1) as follows:
"There is hereby created a court of claims. The court of claims is a court of record and has exclusive, original jurisdiction of all civil actions against the state permitted by the waiver of immunity contained in section 2743.02 of the Revised Code * * *."
R.C. 2743.02(A)(1) states:
"The state hereby waives its immunity from liability and consents to be sued, and have its liability determined, in the court of claims created in this chapter * * *. To the extent that the state has previously consented to be sued, this chapter has no applicability." (Emphasis added.)
OBA asserts that since R.C. 152.01(A) allowed it to be sued prior to the enactment of the Court of Claims Act, then, according to R.C. 2743.02(A)(1), the Act is not applicable to it and this court is without power to adjudicate controversies in which OBA is a party. Other than the statutes referred to above, OBA has not provided supporting authority for its proposition, either by direct citation or indirectly, by reference to previous cases brought against it in other courts of this state.
Recently, the Ohio Supreme Court had occasion to consider the import of language similar to that here under consideration. In Schwarz v. Bd. of Trustees of Ohio State Univ. (1987), 31 Ohio St.3d 267, 31 OBR 493, 510 N.E.2d 808, the plaintiff brought various causes of action against a state university in the common pleas court. Upon defendant's motion, the trial court dismissed various causes of action on the grounds that they should have been brought in the Court of Claims. The court of appeals reversed. Upon appeal to the Supreme Court, the university asserted the very same argument as OBA has in the present case, premised upon virtually identical language set forth in R.C. 3335.03 as follows:
"The trustees and their successors in office shall be styled the `board of trustees of the Ohio state university,' with the right as such, of suing and being sued, of contracting and being contracted with, of making and using a common seal, and altering it at their pleasure." (Emphasis added.)
The Supreme Court expressly determined that the emphasized language above constituted authorization to sue the Ohio State University in contract, which authority antedated the waiver of sovereign immunity contained within the Court of Claims Act. The court concluded as follows:
"* * * Since R.C. 3335.03 predates the adoption of the Court of Claims Act (R.C. Chapter 2743), * * * we hold that pursuant to R.C. 3335.03 and 2743.02(A)(1), an action in contract may be brought against the Board of Trustees of the Ohio State University in the court of common pleas." Id. at 271, 31 OBR at 497, 510 N.E.2d at 811.
By its very definition, a contract cannot be made unless there is mutuality of the parties' ability to enforce the agreement. This has always been the applicable law. As the Supreme Court stated in State v. Executor of Buttles (1854), 3 Ohio St. 309, 319, the law applicable to contracts applies to the state:
"[The state can only contract] * * * upon the same terms, and subject to the same restrictions as a private individual. When she appears as a suitor in her courts, to enforce her rights of property, she comes shorn of her attributes of sovereignty, and as a body politic, capable of contracting, suing, and holding property, is subject to those rules of, justice and right, which, in her sovereign character, she has prescribed for the government of her people."
In Matheny v. Golden (1856), 5 Ohio St. 361, the county treasurer was sued in his official capacity as agent for the state, which was attempting to collect certain amounts as taxes. At issue was a contract between the state and certain individuals, by which the state had bargained away its right to tax the property of the plaintiffs. In upholding the contract against the state, the court stated that the power to enter into contracts was "one of the essential attributes of sovereignty. * * *" Id. at 365. Further, the court stated: "* * * Now, contracts are not contracts unless they are binding on the parties to them. * * *" Id. at 366.
Based upon the principle of mutuality and the federal and state constitutional prohibitions against making laws impairing the obligations of contracts, the state of Ohio has always been amenable to suit to enforce obligations which it has freely and lawfully entered into. Typically, contract actions against state agency defendants were resolved by either of two methods, neither of which involved an abrogation of sovereign immunity. An early method was by an original action, brought in mandamus, in prohibition, or in quo warranto. Such action was usually brought against the head of the contracting agency, or an elected official to whom the agency was responsible, seeking an order from the court which would require that such officer act or forbear to act in compliance with the specific terms of a particular contract. This method was generally useful when the legislature had appropriated the money to the contract and the proper certificate of appropriation had been issued.
One who contracted with the state also had the remedy of presenting his claim to the Sundry Claims Board. This board was a nonjudicial committee created by the legislature in 1917. See 107 Ohio Laws 532; G.C. 270-6; former R.C. 127.11. It was authorized to receive claims against the state of Ohio "for the payment of which no monies have been appropriated." G.C. 270-6. The board had no authority to issue payments of more than one thousand dollars. (See 129 Ohio Laws 451.) If the board concluded that a claimant was entitled to more than that amount, then the legislature had to specifically appropriate that amount. However, the legislature could refuse to do so.
A contract was not a legal one unless a certificate was issued demonstrating that the funds had been appropriated by the legislature for that purpose. If money was appropriated, then an original action was available to test the official's obligation to pay it. Consequently, the Sundry Claims Board usually considered claims involving cost overruns on a project due to unforeseeable necessity or extras ordered by the contracting agency. See, e.g., In re Carl Meyers Co. (Aug. 15, 1950), Sundry Claims Bd. No. 7525, unreported; In re Peirce Constr. Co. (May 14, 1951), Sundry Claims Bd. No. 8027, unreported. However, the board also considered cases in which the state, by its actions, caused the contractor to suffer losses not within the contemplation of the contract. See, e.g., In re Fenton Constr. Co. (May 14, 1951), Sundry Claims Bd. No. 8095, unreported.
As previously mentioned, neither of the above actions involved abrogation of sovereign immunity. The question remains whether individuals who contracted with the state had a cause of action for breach of contract in the courts of common pleas. Although no case comes readily to mind in which such issue was discussed, the question need not be answered in order to resolve the present motion.
OBA rests its argument upon R.C. 152.01(A), as set forth above, and the implicit assumption that its enabling legislation created an independent grant of authority to perform all of its functions. A review of the remainder of R.C. Chapter 152 indicates that this is not entirely correct. While OBA is empowered to "construct, reconstruct, * * * improve, alter, enlarge, maintain, repair, and operate buildings, facilities, and other properties * * *," R.C. 152.08(A)(2), it is required to do so in compliance with other sections of the Revised Code. For example, the general rule for public improvements, subject to specific exceptions, requires the following as set forth in R.C. 152.18:
"In all other cases of public improvements or public buildings financed by the authority, the construction, reconstruction, improvement, enlargement, alteration, repair, * * * by or for the state or any department, board, bureau, commission, authority, or other body or officer of the state shall be the responsibility of the department of administrative services, division of public works, and shall be undertaken by the department in compliance with Chapter 153. of the Revised Code."
The exceptions enumerated must also comply with R.C. 153.01 to 153.20. See R.C. 152.26. Of course, R.C. Chapter 153 applies, by its terms, as follows:
" Every department, board, bureau, commission, body, or person charged with the duty of awarding or entering into contracts for the erection, alteration, or repair of any building in the state, by the state, and every person designated by such department, board, bureau, commission, or body to act for it, and charged with the duty and empowered to award and enter into such contracts * * * shall * * * award the * * * work * * * separately * * *." (Emphasis added.) R.C. 153.03.
Turning now to R.C. 153.12, it is observed that the statute applies most generally as follows:
"(A) With respect to award of any contract for the construction, reconstruction, improvement, enlargement, alteration, repair, * * * made by the state, or any county township, municipal corporation, * * * or other political subdivision, or any public board, commission, authority, instrumentality * * * or that is authorized by state law, the award * * * shall be made within sixty days * * *." (Emphasis added.)
Subsection (B) of R.C. 153.12 sets forth the applicable law for the resolution of the motion under consideration. It provides that:
"In the event of a dispute between the state and a contractor concerning the terms of a public improvement contract let by the state or concerning a breach of the contract and after administrative remedies provided for in such contract between the state and the contractor are exhausted, the contractor may bring an action to the court of claims in accordance with Chapter 2743. of the Revised Code. * * *" (Emphasis added.)
By the plain meaning of the statute, any conflict between the state of Ohio and a contractor which involves any public improvement, construction, etc. may be resolved by trial in the Court of Claims in accordance with R.C. 153.12. The legislature has expressly granted this court jurisdiction in such actions. Accordingly, OBA's motion to dismiss must be DENIED.
Reporter's Note: Following the signing of a settlement agreement this cause was dismissed with prejudice on July 5, 1990.
RUSSELL LEACH, J., retired, of the Franklin County Municipal Court, sitting by assignment.