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NO. COA02-973
NORTH CAROLINA COURT OF APPEALS
Filed:                                                                       4 November  2003
BATTLE RIDGE COMPANIES,
Plaintiff,
v.
NORTH CAROLINA DEPARTMENT OF TRANSPORTATION,
Defendant.
Appeal by plaintiff from judgment entered 21 December 2001 by
Judge Orlando F. Hudson, Jr. in Wake County Superior Court.   Heard
in the Court of Appeals  10 June  2003.
Smith,  Currie  &  Hancock,  L.L.P.,  by  Harry  R.  Bivens,  for
plaintiff-appellant.
Attorney  General  Roy  Cooper,  by  Assistant  Attorney  General
Joseph E. Herrin, for defendant-appellee.
HUDSON, Judge.
On                                                                           24  September                    1994,  plaintiff  Battle  Ridge  Companies
(“Battle  Ridge”)  and  defendant  North  Carolina  Department  of
Transportation entered into a written contract whereby Battle Ridge
was  to  perform  construction  work  consisting  of  widening  and
relocating  a  portion  of  U.S.  Highway                                    421  from  east  of  the  Blue
Ridge  Parkway  to  east  of  state  road  1361  near  Deep  Gap,  Watauga
County, North Carolina  (“the Project”).
Battle Ridge completed work on the project on 20 August 1997.
Battle Ridge was assessed liquidated damages, totaling $233,850.00,
as a result of the untimely project completion.   Upon completion of
the  project,  Battle  Ridge  sought  remission  of  the  assessed
liquidated   damages   as   well   as   additional   compensation   of




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$2,457,591.61  by  filing  a  verified  claim  with  the  State  Highway
Administrator.     The  State  Highway  Administrator  denied  Battle
Ridge’s claim in its entirety.
                                                                               On                                             7  August                                                                                                                                1999,  Battle  Ridge  filed  a  complaint  in  the
                                                                                                                                                                                            superior  court  in  Wake  County  bringing  forth  five  claims  for
                                                                                                                                                                                            relief.   Under each claim for relief, Battle Ridge alleged a breach
                                                                                                                                                                                            of  contract  under  the  terms  of  the  contract  and,  alternatively,
                                                                                                                              breach  of  an  implied  warranty  of  the  contract.    On                                                                                                                                                               30  November
                                                                                                                                                                                            2001,  the  Department  moved  to  dismiss  the  complaint  pursuant  to
                                                                               North  Carolina  Rules  of  Civil  Procedure                                                                                                                                                                                                                 12(b)(1),   12(b)(2),
12(b)(6),  and                                                                                                                                                                                                                                                         12(h)(3),  arguing  that  sovereign  immunity  bars
                                                                                                                                                                                            plaintiff’s  action.    The  matter  was  heard  before  Judge  Orlando
Hudson,  Jr.  on                                                                                                                                                                            7  December                                                                2001,  and  on                                        17  December               2001,  Judge
                                                                                                                                                                                            Hudson  dismissed  Battle  Ridge’s  complaint  on  those  grounds.
Plaintiff appeals.
Analysis
Our courts have held that the defense of sovereign immunity is
a Rule  12(b)(1) defense.    Teachy v. Coble Dairies, Inc.,  306 N.C.
324,  328,  293  S.E.2d  182,  184  (1982).    Our  courts  have  also  held
that  the  defense  of  sovereign  immunity  is  a  matter  of  personal
jurisdiction  that  would  fall  under  Rule  12(b)(2).    See  Zimmer  v.
                                                                                                                              North  Carolina  Dept.  of  Transp.,                          87  N.C.  App.                                                             132,                                                  133-34,        360
S.E.2d                                                                         115,                                           116                                                           (1987).    Here,  the  Department  moved  to  dismiss
plaintiff’s  complaint  based  upon  sovereign  immunity  under  Rules
12(b)(1),  12(b)(2) and  12(b)(6).
It  is  an  established  principle  of  jurisprudence,  resting  on




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grounds of sound public policy, that a state may not be sued in its
own  courts  or  elsewhere  unless  it  has  consented  by  statute  to  be
sued  or  has  otherwise  waived  its  immunity  from  suit.  Smith  v.
Hefner,  235 N.C.  1,  6, 68 S.E.  2d  783, 787  (1951).   By application
of this principle, a subordinate division of the state or an agency
exercising statutory governmental functions may be sued only when
and  as  authorized  by  statute.    Id.    Waiver  of  sovereign  immunity
may  not  be  lightly  inferred  and  statutes  waiving  this  immunity,
being  in  derogation  of  the  sovereign  right  to  immunity,  must  be
strictly  construed.    Guthrie  v.  State  Ports  Authority,  307  N.C.
522,  537-38,  299 S.E.  2d  618,  627  (1983).
In  Smith  v.  State,  289  N.C.  303,  222  S.E.2d  412  (1976),  our
Supreme  Court  held  that  whenever  the  State  of  North  Carolina,
through its authorized officers and agencies, enters into a valid
contract, the state implicitly consents to be sued for damages on
the  contract  in  the  event  it  breaches  the  contract.    Id.  at  310,
222 S.E.2d at  418.
Moreover,  the  General  Assembly  enacted  N.C.  Gen.  Stat.                  §
136-29  to  provide  a  statutory  ground  that  allows  a  contractor  to
bring  suit  against  the  Department  of  Transportation.    See  In  re
Huyck Corp. v. Mangum, Inc., 309 N.C. 788, 790-91, 309 S.E. 2d 183,
185-86  (1983).    That  statute,  which  by  its  mandate  is  a  part  of
every   contract   for   State   highway   construction   between   the
Department of Transportation and a contractor, provides as follows:
(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




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contract  may  submit  a  verified  written  claim
to  the  State  Highway  Administrator  for  the
amount  the  contractor  claims  is  due.     The
claim shall be submitted within  60 days after
the  contractor  receives  his  final  statement
from   the   Department   and   shall   state   the
factual basis for the claim.
The  State  Highway  Administrator  shall
investigate  a  submitted  claim  within  90  days
of  receiving  the  claim  or  within  any  longer
time  period  agreed  to  by  the  State  Highway
Administrator    and    the    contractor.    The
contractor may appear before the State Highway
Administrator,  either  in  person  or  through
counsel,  to  present  facts  and  arguments  in
support   of   his   claim.   The   State   Highway
Administrator  may  allow,  deny,  or  compromise
the  claim,  in  whole  or  in  part.  The  State
Highway    Administrator    shall    give    the
contractor  a  written  statement  of  the  State
Highway   Administrator's   decision   on   the
contractor's claim.
(b) A contractor who is dissatisfied with the
State Highway Administrator's decision on the
contractor's  claim  may  commence  a  contested
                                                       case  on  the  claim  under  Chapter            150B  of  the
                                                       General Statutes. The contested case shall be
commenced  within                                                                                      60  days  of  receiving  the
State                                                  Highway                                         Administrator's                written
statement of the decision.
(c)  As  to  any  portion  of  a  claim  that  is
denied by the State Highway Administrator, the
contractor may, in lieu of the procedures set
forth  in  subsection                                  (b)  of  this  section,
within  six  months  of  receipt  of  the  State
Highway    Administrator's    final    decision,
institute a civil action for the sum he claims
to be entitled to under the contract by filing
a  verified  complaint  and  the  issuance  of  a
summons  in  the  Superior  Court  of  Wake  County
or  in  the  superior  court  of  any  county  where
the work under the contract was performed. The
procedure  shall  be  the  same  as  in  all  civil
actions except that all issues shall be tried
by the judge, without a jury.
(d)  The  provisions  of  this  section  shall  be
part  of  every  contract  for  State  highway
construction    between    the    Department    of




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Transportation and a contractor.    A provision
in a contract that conflicts with this section
is invalid.
G.S.  §  136-29  (2001).    We believe this statute clearly waives the
Department’s sovereign immunity.    Thus, if Battle Ridge has fully
complied  with  the  terms  of  G.S.                                          §             136-29,  and  the  claims  arise
“under the contract,” then the court’s dismissal was improper.
In Teer Co. v. Highway Commission,  265 N.C.  1, 143 S.E.2d  247
(1965),  a  contractor  who  performed  work  under  contract  with  the
State  Highway  Commission  (now  the  Department  of  Transportation),
filed suit under G.S. § 136-29 seeking additional compensation from
the  Commission  after  the  completion  of  the  subject  work  of  the
contract.   In deciding whether the contractor was entitled to seek
such additional compensation, our Supreme Court, referring to G.S.
§  136-29,  noted  that  “recovery,  if  any,  must  be  within  the  terms
and  framework  of  the  provisions  of  the  contract                        .  and  not
otherwise.”   Id. at 16, 143 S.E.2d at 258.   In a later appeal, this
Court dismissed the contractor’s quantum meruit claims because they
did not arise under the terms and framework of the contract.   Teer
Co. v. Highway Comm.,  4 N.C. App.  126,  166 S.E.2d  705  (1969).
In Davidson and Jones, Inc. v. N. C. Dept. of Administration,
315   N.C.                                                                    144,          337   S.E.2d                       463   (1985),   our   Supreme   Court,
interpreting  a  provision  of  Chapter  143  of  our  General  Statutes
with nearly identical language to G.S.  §  136-29, noted    that:
We  interpret  the  statute  as  requiring  simply
that  the  contractor's  claim  arise  out  of  a
breach  of  the  contract  or  some  provision
thereof  so  as  to  entitle  the  contractor  to
some relief.




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Id. at  149,  337 S.E.2d at  466.    Thus, our Supreme Court held that
the contractor, who like the plaintiff here was seeking additional
compensation  for  duration-related  costs  incurred  as  the  direct
result of an unexpected overrun exceeding 400 percent in the amount
of  rock  to  be  excavated  under  a  construction  contract  with  the
state  department  of  administration,  had  a  remedy  for  breach  of
contract  even  in  the  absence  of  a  specific  contractual  term
allowing  such  relief.    Id.    While  we  recognize  that  Chapter  143
specifically   excludes   applicability   to   the   Department   of
Transportation in the construction of roads, we can see no reason
why the interpretation of the phrase “under the contract” should or
would be any different under the two statutes.
Turning to Battle Ridge’s claims for breach of warranty, this
Court has previously held that where a contractor has complied with
plans and specifications prepared by the owner, the contractor will
not  be  liable  for  consequences  in  defects  in  those  plans  and
specifications.   See Gilbert Engineering Co. v. City of Asheville,
74 N.C. App. 350, 362-63, 328 S.E.2d 849, 857, disc. review denied,
314 N.C. 329, 333 S.E.2d 485 (1985).   Indeed, we have held that the
plans and specifications constitute “positive representations upon
which  [a  contractor  is]  justified  in  relying.”    Lowder,  Inc.  v.
Highway  Comm.,  26  N.C.  App.  622,  638,  217  S.E.2d  682,  692,  cert.
denied, 288 N.C. 393, 218 S.E.2d 467 (1975).   In Lowder, therefore,
we recognized that “a contracting agency which furnishes inaccurate
information  as  a  basis  for  bids  may  be  liable  on  a  breach  of
warranty theory,”   and that “[i]t is simply unfair to bar recovery




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to contractors who are misled by inaccurate plans and submit bids
lower  than  they  might  otherwise  have  submitted.”    Id.  at  638-39,
217 S.E.2d at 693.   Thus, a claim for relief based upon a breach of
an  implied  warranty  of  plans  and  specifications  arises  under  the
contract  and,  if  sufficiently  pled,  will  withstand  a                    12(b)(6)
motion to dismiss on grounds of immunity.
In ruling on a motion to dismiss brought under Rule 12(b)(6),
“[t]he question for the court is whether, as a matter of law, the
allegations  of  the  complaint,  treated  as  true,  are  sufficient  to
state  a  claim  upon  which  relief  may  be  granted  under  some  legal
theory, whether properly labeled or not.”   Harris v. NCNB, 85 N.C.
App.                                                                           669,                             670,   355  S.E.2d   838,   840   (1987).   Additionally,   “a
complaint  should  not  be  dismissed  for  insufficiency  unless  it
appears  to  a  certainty  that  plaintiff  is  entitled  to  no  relief
under  any  state  of  facts  which  could  be  proved  in  support  of  the
claim.”    Id. at  671,  355 S.E.2d at  840  (citations omitted).
Applying   that   standard   here,   we   find   that   plaintiff’s
complaint expressly brings forth five claims for relief.    Count I
of  each  claim  alleges  that  Battle  Ridge  is  entitled  to  an
adjustment in compensation either under an  “extra work” theory or
under a Department-caused work delay theory.   Alternatively, Count
II of each claim alleges breach of an implied warranty of plans and
specifications for which Battle Ridge is entitled to compensation.
Based upon Teer, Lowder, and Davidson, we hold these claims to be
cognizable  causes  of  action  under  North  Carolina  law,  which  were
sufficiently  plead  to  withstand  a                                          12(b)(6)  motion  to  dismiss.




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Thus,  we  reverse  the  superior  court  and  remand  for  further
proceedings.
Reversed and remanded.
Judges WYNN and CALABRIA concur.

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