1. Appeal and Error--appealability--sovereign immunity--
personal and subject matter jurisdiction
Defendant's assignment of error to the trial court's failure
to grant a Rule 12(b)(6) dismissal for lack of personal
jurisdiction on the grounds of sovereign immunity was immediately
appealable, while the denial of defendant's Rule 12(b)(6) motion
for dismissal for lack of subject matter jurisdiction on the
grounds of sovereign immunity was not immediately appealable.
2. Jurisdiction--personal--motion to dismiss--matters outside
pleadings
The trial court did not err when considering a motion to
dismiss for lack of personal jurisdiction due to sovereign
immunity by considering affidavits from defendant. The trial
court did not make findings because neither party requested them;
the Court of Appeals was therefore required to determine the
sufficiency of the evidence to support the trial court's presumed
finding that defendant waived its sovereign immunity either by
purchasing liability insurance or by entering a valid contract.
Although consideration of matters outside the pleadings converts
a Rule 12(b)(6) motion into a motion for summary judgment,
there is no a similar restriction on a motion to dismiss for lack
of jurisdiction under Rule 12(b)(2).
3. Counties--contract--preaudit certificate
The trial court did not have personal jurisdiction over
defendant county for a breach of contract claim regarding leased
computer equipment where plaintiff alleged that defendant waived
sovereign immunity by entering the lease agreement, but plaintiff
did not show that the preaudit certificate required by N.C.G.S. §
159-28(a) existed. There is no valid contract with a county
where a plaintiff fails to show that the requirements of
N.C.G.S. § 159-28(a) were met and defendant therefore did not
waive sovereign immunity on these grounds.
4. Counties--leased equipment--no preaudit certificate--no
recovery under quantum meruit or estoppel
A plaintiff in an action involving leased computer equipment
could not recover from a county under theories of quantum meruit
or estoppel where there was no valid contract. The preaudit
requirement of N.C.G.S. § 159-28(a) is a matter of public record
and parties contracting with a county are presumed to be aware of
the requirements.
5. Immunity--governmental--lease agreement--proprietary
activity
Defendant county was not entitled to governmental immunity
against a tort claim for negligent misrepresentation arising from
leased equipment because the activity was commercial or chiefly
for the advantage of the county.
Durham County Attorney S.C. Kitchen and Assistant Durham
County Attorney Curtis Massey for the defendant-appellant.
Poyner & Spruill, L.L.P., by Donald R. Teeter, for the
plaintiff-appellee.
WYNN, Judge.
This appeal arises from an arrangement for the lease of
certain computer equipment by the County of Durham from Data
General Corporation. According to the complaint, Data General and
certain officials of Durham County negotiated in early 1993 for the
lease of computer hardware and software. The final lease agreement
was reduced to a writing, dated 3 June 1993, and was signed by
representatives of both parties.
The lease agreement provided for annual lease payments during
its four-year term. The lease agreement also provided that, at the
expiration of the lease term, Durham County would have the option
to purchase the leased equipment. According to the complaint,
Durham County made the required annual payments during the term of
the lease, but failed to exercise the purchase option. The
complaint further alleged that Durham County kept and used the
leased equipment for close to two years following the expiration of
the lease term, without making any further payments to Data
General.
Data General filed suit on 29 July 1999, asserting causes ofaction for breach of contract, quantum meruit, e
stoppel, and
negligent misrepresentation. On 16 August 1999, Durham County
filed a motion to dismiss pursuant to N.C. Gen. Stat. § 1A-1, Rule
12(b)(1) and (2), asserting a lack of subject matter and personal
jurisdiction on grounds of sovereign immunity. Durham County also
filed several sworn affidavits in support of its motion to dismiss.
Following a hearing, Superior Court Judge Knox Jenkins entered an
order dated 20 November 1999 denying the motion. From that order,
Durham County appeals.
[1]Durham County asserts two assignments of error on appeal.
In its first assignment of error, Durham County contends that the
trial court erred in denying the motion to dismiss pursuant to Rule
12(b)(2) for lack of personal jurisdiction, as the evidence in
support of the motion demonstrated that Durham County did not waive
its sovereign immunity and no grounds for jurisdiction existed.
Durham County also assigns as error the trial court's denial of the
motion to dismiss pursuant to Rule 12(b)(1) for lack of subject
matter jurisdiction on grounds of sovereign immunity.
At the outset, we note that the denial of a motion to dismiss
is interlocutory and ordinarily is not immediately appealable;
nonetheless, this Court has held that an appeal of a motion to
dismiss based on sovereign immunity presents a question of personal
jurisdiction rather than subject matter jurisdiction, and is
therefore immediately appealable. See N.C. Gen. Stat. § 1-277
(1996); Zimmer v. N.C. Dep't of Transp., 87 N.C. App. 132, 133-34,
360 S.E.2d 115, 116 (1987). On the other hand, the denial of a
motion to dismiss pursuant to Rule 12(b)(1) for lack of subject
matter jurisdiction is not immediately appealable. See N.C. Gen.Stat. § 1-277(a); Teachy v. Coble Dairies, Inc., 306 N.
C. 324, 293
S.E.2d 182 (1982). We therefore consider Durham County's first
assignment of error, but decline to consider the second assignment
of error, as it is not properly before us.
It is a fundamental rule that sovereign immunity renders this
state, including counties and municipal corporations herein, immune
from suit absent express consent to be sued or waiver of the right
of sovereign immunity. See Coastland Corp. v. N.C. Wildlife
Resources Comm'n, 134 N.C. App. 343, 346, 517 S.E.2d 661, 663
(1999); Great American Ins. Co. v. Gold, 254 N.C. 168, 118 S.E.2d
792 (1961); EEE-ZZZ Lay Drain Co. v. N.C. Dep't of Hum. Res., 108
N.C. App. 24, 422 S.E.2d 338 (1992). Furthermore, counties and
municipal corporations within this state enjoy governmental
immunity from suit for activities that are governmental, and not
proprietary, in nature. Robinson v. Nash County, 43 N.C. App. 33,
35, 257 S.E.2d 679, 680 (1979). Nonetheless, a governmental entity
may waive its governmental immunity, for instance, where the entity
purchases liability insurance. See EEE-ZZZ Lay Drain, 108 N.C.
App. at 27, 422 S.E.2d at 340. Additionally, where the entity
enters into a valid contract, the entity “implicitly consents to be
sued for damages on the contract in the event it breaches the
contract.” Smith v. State, 289 N.C. 303, 320, 222 S.E.2d 412, 424
(1976).
[2]We first consider the standards by which we must review
the record before us. In ruling on a motion, the trial court is
not required to make findings of fact absent a request by one of
the parties. Where no such request is made by either party, andthus no such findings are made by the trial court, “it will be
presumed that the judge, upon proper evidence, found facts
sufficient to support his ruling.” Cameron-Brown Co. v. Daves, 83
N.C. App. 281, 285, 350 S.E.2d 111, 114 (1986) (citing J.M.
Thompson Co. v. Doral Mfg. Co., 72 N.C. App. 419, 424, 324 S.E.2d
909, 912-13 (1985)); see Bruggeman v. Meditrust Acquisition Co.,
138 N.C. App. 612, __ S.E.2d __ (2000). Where such presumed
findings are supported by competent evidence, they are deemed
conclusive on appeal, despite the existence of evidence to the
contrary. Cameron Brown Co., 83 N.C. App. at 285, 350 S.E.2d at
114.
In the instant case, neither party requested the trial court
to make findings of fact, and the trial court made no such
findings. We must therefore determine the sufficiency of the
evidence to support the trial court's presumed findings. Id. In
the absence of an express waiver of sovereign immunity by Durham
County, we must determine whether there was sufficient evidence to
support the presumed finding by the trial court that the county
waived its sovereign immunity as to Data General's contract claims
either by the purchase of liability insurance or by entering a
valid contract.
Other than the unverified complaint, the record on appeal
contains the following sources of evidence submitted by Durham
County pertaining to the presence or lack of personal jurisdiction:
(1) Sworn affidavit of Catherine C. Whisenhunt, the Risk Manager
for Durham County; (2) Sworn affidavit of Sandra Phillips, the
Purchasing Director for Durham County; (3) Sworn affidavit of GarryUmstead, the Clerk to the Board of Commissioners of Durham County;
(4) Sworn affidavit of Perry Dixon, the Information Technology
Director for Durham County; (5) Official Minutes of the Board of
Commissioners for Durham County for 14 September 1992, pertaining
to the prospective lease between Durham County and Data General;
and (6) Data General's response to Durham County's request for a
written statement of monetary relief sought.
“Where unverified allegations in the complaint meet
plaintiff's 'initial burden of proving the existence of
jurisdiction . . . and defendant[s] . . . d[o] not contradict
plaintiff's allegations [],' such allegations are accepted as true
and deemed controlling.” Inspirational Network, Inc. v. Combs, 131
N.C. App. 231, 235, 506 S.E.2d 754, 758 (1998) (quoting Bush v.
BASF Wyandotte Corp., 64 N.C. App. 41, 45, 306 S.E.2d 562, 565
(1983)). However, to the extent the defendant offers evidence to
counter the plaintiff's allegations, those allegations may no
longer be accepted as controlling, and the plaintiff can no longer
rest on such allegations in the complaint. See Bruggeman, 138 N.C.
App. at 615-16, __ S.E.2d at __. The plaintiff may nonetheless
satisfy the burden of establishing a prima facie basis for personal
jurisdiction “if some form of evidence in the record supports the
exercise of personal jurisdiction.” Id. at 616, __ S.E.2d at __.
That is, we must “look to the uncontroverted allegations in the
complaint and the uncontroverted facts” asserted by Durham County
for evidence supporting the trial court's presumed findings. Id.
We reject the initial contention by Data General that, as a
general matter, the sworn affidavits submitted by Durham Countyshould not have been considered by the trial court in ruling on
Durham County's motion, and should not be considered by this Court
in reviewing the trial court's denial of that motion. Rule 12(b)
provides that a motion to dismiss for failure to state a claim
under Rule 12(b)(6) “shall be treated as one for summary judgment
and disposed of as provided in Rule 56” where the trial court
considers matters outside the pleadings in ruling on the motion.
N.C. Gen. Stat. § 1A-1, Rule 12(b). Rule 12(b) imposes no similar
requirement or restriction upon the trial court in considering
matters outside the pleadings in ruling on a motion to dismiss
pursuant to Rule 12(b)(2) for lack of personal jurisdiction, and we
decline to do so.
[3]The complaint alleges that, by entering the lease
agreement with Data General, Durham County waived any sovereign
immunity it may have enjoyed and consented to being sued for
damages in the event it breached the lease agreement. See Smith,
289 N.C. at 320, 222 S.E.2d at 424. Durham County contends on
appeal that the materials submitted in support of its motion to
dismiss establish that the lease agreement was not a valid contract
enforceable against Durham County, and that Durham County did not,
therefore, consent to be sued for breach of such contract.
In Smith, 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 320, 222 S.E.2d at 423-24 (Emphasis added.)
That is, in the absence of a valid contract, a state entity may not
be subjected to contractual liability. See id. at 310, 222 S.E.2dat 417 (citing 72 Am. Jur. 2d States, Etc. § 88 (1974)
).
“N.C. Gen. Stat. § 159-28(a) sets forth the requirements and
obligations that must be met before a county may incur contractual
obligations.” Cincinnati Thermal Spray, Inc. v. Pender County, 101
N.C. App. 405, 407, 399 S.E.2d 758, 759 (1991); N.C. Gen. Stat. §
159-28 (1994). N.C. Gen. Stat. § 159-28(a) requires in part that
for any county obligation “evidenced by a contract or agreement
requiring the payment of money . . . for supplies and materials,”
such contract or agreement “shall include on its face a certificate
stating that the instrument has been preaudited to assure
compliance with this subsection.” N.C. Gen. Stat. § 159-28(a).
The statute further provides a form certificate with which the
required preaudit certificate must substantially conform, and
states that “[a]n obligation incurred in violation of this
subsection is invalid and may not be enforced.” Id. Where a
plaintiff fails to show that the requirements of N.C. Gen. Stat. §
159-28(a) have been met, there is no valid contract, and any claim
by plaintiff based upon such contract must fail. See Cincinnati
Thermal Spray, 101 N.C. App. at 408, 399 S.E.2d at 759.
In the instant case, Data General has failed to make a showing
that the required preaudit certificate exists, and none is
evidenced in the record. Furthermore, Durham County has argued
that no such certificate exists. As there is insufficient evidence
in the record that the requirements of N.C. Gen. Stat. § 159-28(a)
have been met, we conclude that no valid contract was formed
between Data General and Durham County, and Durham County therefore
has not waived its sovereign immunity to be sued (and Data General
may not maintain a suit) for contract damages. See id.; L & SLeasing, Inc. v. City of Winston-Salem, 122 N.C. App. 619, 622-23,
471 S.E.2d 118, 121 (1996). The trial court was therefore without
personal jurisdiction over Durham County with respect to Data
General's first claim for breach of contract. Zimmer, 87 N.C. App.
at 133-34, 360 S.E.2d at 116.
[4]We next consider whether Durham County is entitled to
governmental immunity with respect to Data General's claims based
on quantum meruit and estoppel. Quantum meruit operates as an
equitable remedy based upon a quasi contract or a contract implied
in law, such that a party may recover for the reasonable value of
materials and services rendered in order to prevent unjust
enrichment. See Potter v. Homestead Preservation Ass'n, 330 N.C.
569, 578, 412 S.E.2d 1, 7 (1992). In Whitfield v. Gilchrist, 348
N.C. 39, 497 S.E.2d 412 (1998), our Supreme Court declined to imply
a contract in law in derogation of sovereign immunity to allow a
party to recover under a theory of quantum meruit, and we decline
to do so here. See id. at 43, 497 S.E.2d at 415 (holding that a
plaintiff may proceed with a claim against the State for breach of
contract only where the State implicitly waives its sovereign
immunity by “expressly entering into a valid contract through an
agent of the State expressly authorized by law to enter into such
contract”).
On this same basis, we conclude that Data General may not
defeat a claim of sovereign or governmental immunity upon a theory
of estoppel. The complaint asserts that Durham County should be
“estopped to deny the legality of the” lease agreement, and that
“the County had the sole responsibility to determine that itsactions were in compliance with” North Carolina law. On both
related points, we disagree.
We have concluded, supra, that the lease agreement entered
between the parties was not a valid contract sufficient to bind
Durham County as it failed to comply with the statutory
requirements in N.C. Gen. Stat. § 159-28(a). Data General may not
recover under an equitable theory such as estoppel for breach of
contract where Durham County has not expressly entered a valid
contract. See id. Furthermore, parties dealing with governmental
organizations are charged with notice of all limitations upon the
organizations' authority, as the scope of such authority is a
matter of public record. L & S Leasing, 122 N.C. App. at 622, 471
S.E.2d at 120. Likewise, the preaudit certificate requirement is
a matter of public record, N.C. Gen. Stat. § 159-28(a), and parties
contracting with a county within this state are presumed to be
aware of, and may not rely upon estoppel to circumvent, such
requirements. See, e.g., id. (holding that a party may not rely
upon an estoppel defense against a governmental entity to support
a breach of contract claim based upon an assertion of apparent
authority of the agent signing the alleged contract on behalf of
the entity); Nello L. Teer Co. v. N.C. State Highway Comm'n, 265
N.C. 1, 10, 143 S.E.2d 247, 254 (1965) (parties dealing with public
entities are presumed to know the law applicable to such agencies,
including that the officials and agents of such entities may not
waive the entity's sovereign immunity or act in violation of
statutory requirements, and such parties act at their peril)
(citations omitted). As Durham County enjoys immunity with respect
to these claims, the trial court was therefore without personaljurisdiction over Durham County as to Data General's claims based
on quantum meruit and estoppel.
[5]Durham County next contends that it did not waive its
sovereign immunity with respect to Data General's tort claim for
negligent misrepresentation by purchasing liability insurance. As
previously noted, counties within this State enjoy governmental
immunity from suit for the performance of governmental functions.
Robinson, 43 N.C. App. at 35, 257 S.E.2d at 680; Messick v. Catawba
County, 110 N.C. App. 707, 714, 431 S.E.2d 489, 493, disc. review
denied, 334 N.C. 621, 435 S.E.2d 336 (1993). However, counties do
not enjoy governmental immunity when they are performing
ministerial or proprietary functions. Messick, 110 N.C. App. at
714, 431 S.E.2d at 493; Herring ex rel. Marshall v. Winston-
Salem/Forsyth County Bd. of Educ., 137 N.C. App. 680, 683, 529
S.E.2d 458, 461, disc. review denied, 352 N.C. 673, __ S.E.2d __
(2000). The test for distinguishing between governmental and
proprietary functions was stated in Britt v. City of Wilmington,
236 N.C. 446, 73 S.E.2d 289 (1952) as follows:
If the undertaking of the municipality is one
in which only a governmental agency could
engage, it is governmental in nature. It is
proprietary and “private” when any
corporation, individual, or group of
individuals could do the same thing.
Id. at 451, 73 S.E.2d at 293; see Herring, 137 N.C. App. at 683,
529 S.E.2d at 461.
In the instant case, Data General asserts claims against
Durham County for negligent misrepresentation arising out of
representations made by or on behalf of Durham County in enteringthe lease agreement with Data General. Based on the test
articulated above, we conclude that this activity is proprietary
rather than governmental in nature, as it was “commercial or
chiefly for the private advantage” of the county. Britt, 236 N.C.
at 450, 73 S.E.2d at 293. As such, the county is not entitled to
governmental immunity from tort claims arising out of the
performance of this activity.
In summation, as there was no valid contract between the
parties, the trial court was without personal jurisdiction over
Durham County with respect to Data General's claims for breach of
contract, quantum meruit and estoppel. However, Durham County has
no governmental immunity for tort claims arising out of its
performance of proprietary, rather than governmental, functions,
and the trial court therefore has personal jurisdiction over Durham
County with respect to Data General's tort claim for negligent
misrepresentation. Accordingly, the trial court's 19 November 1999
order denying Durham County's Rule 12(b)(2) motion to dismiss for
lack of personal jurisdiction is,
Reversed in part, affirmed and remanded in part.
Judges McGEE and THOMAS concur.
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