Court Opinion

ID: 9657931
Source: CourtListenerOpinion
Date Created: 2023-08-23 20:41:32.945895+00
Date Added: 2024-06-11T18:13:49.650839
License: Public Domain

TEIGEN, Chief Justice
(dissenting).
I dissent.
I do not agree that it is necessary to interpret Section 24-02-26, N.D.C.C., which provides for compulsory arbitration of controversies between the commissioner and the prime contractor, to include a subcontractor of the prime contractor to make it constitutional. If the reasoning of the majority on this question is correct, then it would seem that the same construction should be given to Section 32-12-02, N.D.C.C., which authorizes actions against the State on claims arising upon a contract. However, the majority state to the contrary and adopt this reason as a further cause for extending the arbitration statute to include subcontractors.
The majority premise their decision on the theory that a subcontractor must be entitled to recourse against the commissioner, which indicates that some contractual relationship or privity exists between the subcontractor and the commissioner. I fail to see such relationship. The parties to the prime contract are the commissioner and the prime contractor. The parties to the subcontract consist of the prime contractor and the subcontractor. There is no privity or contractual relationship between the subcontractor and the commissioner. It is my opinion that the majority have erred in making this implication. There is no provision by statute, which I have been able to find, that creates a contractual relationship between the commissioner and the subcontractor of the commissioner’s prime contractor. In the absence of statute the *440holdings of the courts on this question appear unanimously to be that where a governmental unit enters into a prime contract for construction work, it has no contractual relationship with the subcontractor that will support an action by the subcontractor against the governmental unit for breach of contract. See Road Improvement Dist. No. 1 of Conway County v. Mobley Construction Co., 171 Ark. 585, 286 S.W. 878, 48 A.L.R. 456; City of Dallas v. Shortall, 131 Tex. 368, 114 S.W.2d 536; Commonwealth of Kentucky, Department of Highways v. L. G. Wasson Coal Mining Corporation (Ky.), 358 S.W.2d 347.
It has also been held that consent of the governmental unit to the subletting by the prime contractor does not render the governmental unit liable to the subcontractor. Road Improvement Dist. No. 1 of Conway County v. Mobley Construction Co., supra; Jordan Company v. Adkins, 105 Ga.App. 157, 123 S.E.2d 731. In my research I have found no cases which have held to the contrary.
That no privity of contract exists between the owner and the contractor’s subcontractors is well-established law. Numerous cases may be found in West’s Digest System under the title, “Contracts”, Baker v. J. W. McMurry Contracting Co., 282 Mo. 685, 223 S.W. 45; McGinnis v. Milhollin, 64 Ga.App. 462, 13 S.E.2d 591; Pittman Construction Company v. Housing Authority of New Orleans (La.App.), 169 So.2d 122, cert. denied, 247 La. 344, 170 So.2d 865.
For the reasons aforesaid, it appears to me that we have two classes of persons in the separate contracts. First is the one who contracts with the commissioner and the other is the one who contracts with a private entity. The State must look to its prime contractor for satisfactory performance of the contract whether the work be performed by the prime contractor or its subcontractor. On the other hand, the subcontractor must look to the prime contractor for the enforcement of its contract, and the prime contractor may have a cause against the subcontractor for breach of the subcontract.
“Statutes in some jurisdictions provide for the arbitration of disputes in certain classes of cases, and such statutes have been upheld against various objections on constitutional matters. Universality in application is not required of such statutes, and there is no unconstitutional discrimination by making the statute applicable only to certain classes, or exempting other classes from its operation, provided the classification is based on reasonable grounds and the law applies equally to all within the class.” 5 Am. Jur.2d, Arbitration and Award, Sec. 8, page 525.
The statute interpreted in this case reads as follows:
“All controversies arising out of any contract for the construction or repair of highways entered into by the commissioner shall be submitted to arbitration as provided in this chapter, if the parties cannot agree. Any person who voluntarily enters into a contract for the construction or repair of highways shall be considered as having agreed to arbitration of all controversies arising out of such contract. Three persons shall compose the arbitration board, one of whom shall be appointed by each of the parties and the two thus appointed shall name a third.” Section 24-02-26, N.D.C.C.
The first sentence of this section defines the contracts which are made subject to arbitration when controversies arise. It restricts the arbitration requirement to those contracts for the construction and repair of highways which are entered into by the commissioner. The second sentence binds the one contracting with the commissioner to arbitrate controversies arising out of such contracts by making this provision a part of the agreement between them. Thus the first sentence defines a contract and the second sentence makes those who enter into such contracts bound, by agree*441ment, to arbitrate all controversies arising out of such contracts. The statutes on arbitration become a part of the contract. The language is precise. The wording of Section 24-02-26, which defines the contracts that are subject to arbitration, leaves no room for doubt. Only contracts entered into with the commissioner require arbitration when controversies arise. The parties to subcontracts with the prime contractor are not bound by the statute and may enter into such contractual agreement with the prime contractor as is allowed any contracting party. They may contract to arbitrate disputes if they so desire.
Where the language of a statute is clear, certain, and unambiguous, the only duty of the court is to give effect to the legislative intent expressed therein and, if such statute does not violate some provision of our Constitution, the court must give effect to the law. Brenna v. Hjelle (N.D.), 161 N.W.2d 356; Asbury Hospital v. Cass County, 72 N.D. 359, 7 N.W.2d 438.
The majority determined that if Section 24-02-26, N.D.C.C., and related statutes, does not include the subcontractor as well as the prime contractor, it violates the “equal privileges and immunities clause” of the State Constitution (Sec. 20) and the “equal protection clause” of the Federal Constitution (Article 14). As long as the law operates alike on all members of a class, including all persons similarly situated, it is not in violation of those sections. Classification must be based upon such differences in situations or purposes between the persons included in the class and those excluded therefrom as fairly and naturally suggests the propriety of, and necessity for, different or exclusive legislation. The State Constitution and the Fourteenth Amendment to the Federal Constitution do not prohibit or prevent classification provided such classification is reasonable for the purpose of the legislation, is based upon proper and justifiable distinctions considering the purpose of the law, is not clearly arbitrary, and is not a subterfuge to shield one class or divert another, or to impress unlawfully in its administration. F. W. Woolworth Co. v. Gray, 77 N.D. 757, 46 N.W.2d 295; Melland v. Johanneson (N.D.), 160 N.W.2d 107. However, as long as the law operates alike on all members of a class, including all persons similarly situated, it is not in violation of those sections. State for Benefit of Workmen’s Compensation Fund v. E. W. Wylie Co., 79 N.D. 471, 58 N.W.2d 76.
The majority said that they could conceive of no reasonable basis upon which the prime contractor could be classified differently from the subcontractor. I think there is a very cogent basis. It is elementary that one may not sue the State unless the State has given its permission. The State has given such permission in actions arising upon contract. Section 32-12-02, N.D.C.C. It appears the majority agree. One who contracts with the commissioner contracts with the State as the commissioner is authorized, by statute, to enter into road construction and repair contracts on behalf of the State. Section 24-02-03(5), N.D.C.C. Thus, in the absence of the compulsory arbitration statute, one who contracts with the State for the construction or reconstruction of a highway, could bring action under Section 32-12-02 were it not for the provision contained in Section 24-02-26, N.D.C.C., under consideration in this case. It provides that all controversies arising out of any contract for the construction or repair of highways, entered into by the commissioner, shall be submitted to arbitration. This statute is mandatory. Section 24-02-31, N.D.C.C., provides that the arbitrators shall determine all controversies between the parties growing out of the contract. Section 24-02-28, N.D.C.C., provides that the submission of a controversy to arbitration must provide for the entry of judgment upon the award by the district court. In this manner the claim of a prime contractor, under a contract with the commissioner, is settled by arbitration as a substitute for the prime contractor’s right to bring action under Section 32-12-02, N.D. C.C. The subcontractor is not in the same *442position. He has no contract with the commissioner or the State and, therefore, is not of the same class as the prime contractor. The purpose of the arbitration statute is to eliminate actions against the commissioner and provides that controversies must be settled by arbitration. This is a reasonable classification and reasonably necessary to effect the purpose for the construction and repair of the State highway system from moneys appropriated for the Department of State Highways by the State or received from other sources, such as Federal grants. For the reasons aforesaid, I believe that the arbitration statutes need not be given the strained construction given them by the majority, and that the language of the statute is clear, certain, and unambiguous and open to but one reasonable construction, and that we must interpret the statute as it reads. In my opinion, it requires arbitration only as to those controversies arising out of any contract for the construction or repair of highways entered into by the commissioner. The commissioner did not enter into the subcontracts in question and, therefore, the subcontractor is in no position to demand arbitration between it and the commissioner, or the prime contractor, under authority of the statute.