Opinion ID: 2608935
Heading Depth: 1
Heading Rank: 1

Heading: contractual liability statute of limitations.

Text: A. Governmental entities are granted immunity from actions based on contract, except actions based on a valid written contract. B. Every claim permitted by this section shall be forever barred unless brought within two years from the time of accrual. The title of Chapter 58 reads in part as follows: An Act Relating to the Liability of Government in the State of New Mexico; Granting Sovereign Immunity to the State, Local Public Bodies and Their Employees; Making Certain Exceptions to That Immunity;   . N.M. Laws 1976, ch. 58 (2d Session), at 159. Section 24 repealed a then existing section of the 1953 Compilation, NMSA 1953, Section 22-23-1 (Supp. 1975), reading: Actions not otherwise provided by law may be maintained and any judgment enforced against the state and any of its agencies when based on a written contract. The title of the act which established this section was: An Act Relinquishing the Sovereign Immunity of the State in Actions Based on Written Contracts. N.M. Laws 1963, ch. 152. From this bit of legislative history we believe that the purpose of Chapter 58 of the 1976 session laws was to reinstate the sovereign immunity which had been abolished by Hicks v. State , subject to certain exceptions. [1] The principal exception, of course, was the limited liability placed on the state for its torts, recovery for which could now be sought under the Tort Claims Act. Another exception was the acceptance of liability for claims based on valid written contracts. A governmental entity's liability under this exception, however, depends on the existence of a valid written contract, and it is undisputed that Hydro Conduit has no such contract with the State or the counties. Hydro Conduit forcefully argues, however, citing Methola v. County of Eddy, 95 N.M. 329, 622 P.2d 234 (1980), that statutes in derogation of the common law are strictly construed and that since the common law now recognizes no sovereign immunity, [2] the statute here (Section 37-1-23) grants such immunity to governmental entities only when a claim is based on contract. The claim here, the argument runs, is not based on contract, because liability for unjust enrichment is fundamentally different from liability grounded in either tort or contract; unjust enrichment provides a third, analytically distinct basis for liability, and a claim resting on this ground falls outside the statutory grant of immunity to claims based on contract. We have no disagreement with the scholarly view that restitution for unjust enrichment constitutes an independent basis for recovery in a civil-law action, analytically and historically distinct from the other two principal grounds for such liability, contract and tort. See 1 G. Palmer, The Law of Restitution § 1.1 at 1-2 (1978) (footnotes omitted): It has been traditional to regard tort and contract as the two principal sources of civil liability at common law   . There is another category that must be separated from all of these; this is liability based in unjust enrichment. In particularized from this has been a part of our law from an early time, but it has been slow to emerge as a general theory. In present American law, however, the idea of unjust enrichment has been generally accepted and widely applied. Restitution based upon unjust enrichment cuts across many branches of the law, including contract, tort, and fiduciary relationship, but it also occupies much territory that is its sole preserve. See also Restatement of the Law of Restitution § 1 (1937) (tort, contract and restitution are the three primary areas in the overall classification of the law); Comment, Restitution: Concept and Terms, 19 Hastings L.J. 1167, 1170 (1968) (the law should be given a tripartite classification of tort, contract and restitution); Corbin, Quasi-Contractual Obligations, 21 Yale L.J. 533 (1912) (jurists have long recognized obligations that do not fall within the classes of tort or contract). At the same time, the question before us is, what did the legislature intend by granting immunity to governmental entities for liability based on contract? We might assume that some legislators had an awareness of the scholarly division and tripartite classification of the law into tort, contract, and restitution categories; we can also assume with equal or greater confidence that others did not. No doubt some legislators, if they read the bill and thought about the problem, assumed that, as discussed below, actions based on contract included actions based on quasi-contracts or based on contracts implied in law. As we view the question before us, however, it is not whether there was a specific intention on the part of the legislature to grant immunity to governmental entities for claims based on unjust enrichment; the question rather is whether the basic purpose of the statute to reinstitute sovereign immunity extends to claims of the sort asserted here  i.e., a claim for restitution on the ground that the state will be unjustly enriched if restitution is not ordered. This type of claim carries many labels, some of which may be analytically or theoretically distinct from others, but all of them having common root, at least historically, in the concept of an action sounding in contract. See Note, supra, 19 Hastings L.J. at 1167-68 (1968) (one form of restitution, fashioned by English common-law courts, indebitatus assumpsit, came to mirror contract causes of action). We have recognized that an action in quantum meruit is different from an action on an alleged contract, but the case in which this difference was acknowledged illustrates how closely the two concepts are related. In State v. Fireman's Fund Indemnity Co., 67 N.M., 360, 364, 355 P.2d 291, 294 (1960), we quoted from Restatement of the Law of Contracts § 5 comment (a) (1932), as follows: Contracts are often spoken of as express or implied. The distinction involves, however, no difference in legal effect, but lies merely in the mode of manifesting assent. Implied contracts must be distinguished from quasi-contracts, which also have often been called implied contracts, or contracts implied in law. Quasi-contracts, unlike true contracts, are not based on the apparent intention of the parties to undertake the performances in question, nor are they promises. They are obligations created by law for reasons of justice. Such obligations were ordinarily enforced at common law in the same form of action (assumpsit) that was appropriate to true contract, and some confusion with reference to the nature of quasi-contracts has been caused thereby. See also Albuquerque Nat'l Bank v. Albuquerque Ranch Estates, Inc., 99 N.M. 95, 102, 654 P.2d 548, 555 (1982) (availability of equity to prevent unjust enrichment); Allsup v. Space, 69 N.M. 353, 362, 367 P.2d 531, 537 (1961) (equitable nature of claim for restitution based on unjust enrichment). As stated by the Supreme Court of Tennessee in a case allowing a claim for unjust enrichment to proceed against an owner of property benefited by a contractor who supplied labor and materials for its improvement: Actions brought upon theories of unjust enrichment, quasi contract, contract implied in law, and quantum meruit are essentially the same. Courts frequently employ the various terminology interchangeably to describe that class of implied obligations where, on the basis of justice and equity, the law will impose a contractual relationship between parties, regardless of their assent thereto. Paschall's, Inc. v. Dozier, 219 Tenn. 45, 53-54, 407 S.W.2d 150, 154 (1966) (emphasis added). From all of this we conclude that, even though an action for unjust enrichment is not based on contract in a strict theoretical sense, it is so closely related to an action which is so based that the immunity statute here, Section 37-1-23, should be construed to extend immunity to an unjust enrichment claim as well as to a claim founded on a true, but unwritten, contract. [3] In so construing our statute, we refer once again to its purpose, which we have found was to reinstate sovereign immunity as to this type of claim. See Tijerina v. Baker, 78 N.M. 770, 775, 438 P.2d 514, 519 (1968) (statutes should be construed according to purpose for which enacted); Pittsburgh & Midway Coal Min. Co. v. Revenue Div., 99 N.M. 545, 559, 660 P.2d 1027, 1041 (Ct. App.), cert. quashed, 99 N.M. 644, 662 P.2d 645 (1983) (court's duty is to find interpretation most harmonious with statutory scheme and general purpose manifested by legislature). Our conclusion that the statute here should be construed to bar a claim against the State in unjust enrichment is buttressed by decisions from other states, in which, admittedly, the distinction between implied in law contracts (i.e., relationships giving rise to a claim for unjust enrichment) and implied in fact contracts (i.e., true contracts, based on parties' mutual assent as manifested by their conduct) is not always carefully observed. See, e.g., Mass Transit Admin. v. Granite Constr. Co., 57 Md. App. 766, 471 A.2d 1121 (1984); Morgenroth & Assocs., Inc. v. Town of Tilton, 121 N.H. 511, 431 A.2d 770 (1981); Madrid Lumber Co. v. Boone County, 255 Iowa 380, 121 N.W.2d 523 (1963). In each of these cases the claim for unjust enrichment was barred on sovereign immunity grounds. The policy served by such a refusal to permit liability is to protect the public purse and to require that parties seeking recovery from the state for benefits conferred on it have valid written contracts, which presumably will have been carefully negotiated under procedures like those set out in our Procurement Code, NMSA 1978, Sections 13-1-28 to -199 (Repl.Pamp. 1988 & Supp. 1989). In most cases the party furnishing goods or services is protected by statutes like the Little Miller Act, which permits suits against the state as well as the general contractor and its bonding companies. See State ex rel. Electric Supply Co. v. Kitchens Constr., Inc., 106 N.M. 753, 755, 750 P.2d 114, 116 (1988) (Little Miller Act was enacted to protect suppliers of materials under any subcontract involving state construction project). Where no such relief is available, as in the instant case, the legislature has decreed that the risk of loss must fall, perhaps as a cost of doing business, on the contractor or subcontractor who undertakes performance of a contract on a state project, rather than on the taxpayers who presumably have already paid all or most of the costs of the project. The district court correctly dismissed Hydro Conduit's complaint, and its order is affirmed. IT IS SO ORDERED. SOSA, C.J., and RANSOM, J., concur.