Court Opinion

ID: 2728361
Source: CourtListenerOpinion
Date Created: 2014-09-08 21:31:48.932639+00
Date Added: 2024-06-11T10:09:44.969008
License: Public Domain

NO. COA13-1240

                     NORTH CAROLINA COURT OF APPEALS

                              Filed: 3 June 2014

CAN AM SOUTH, LLC,
     Plaintiff,

    v.                                        Wake County
                                              No. 12 CVS 14873
THE STATE OF NORTH CAROLINA, THE
NORTH CAROLINA DEPARTMENT OF
HEALTH AND HUMAN SERVICES, and THE
NORTH CAROLINA DEPARTMENT OF
ADMINISTRATION,
     Defendants.

    Appeal   by    defendants       from    order    entered    8   May   2013   by

Senior Resident Judge Donald W. Stephens in Wake County Superior

Court.   Heard in the Court of Appeals 5 March 2014.

    Brooks, Pierce, McLendon, Humphrey & Leonard, L.L.P., by
    Walter L. Tippett, Jr. and S. Wilson Quick, for plaintiff-
    appellee.

    Attorney General Roy Cooper, by Special Deputy                        Attorney
    General Donald R. Teeter, Sr. and Assistant                           Attorney
    General G. Mark Teague, for defendants-appellants.

    HUNTER, Robert C., Judge.

    The   State     of     North   Carolina        (“the   State”),    the   North

Carolina Department of Health and Human Services (“DHHS”), and

the North Carolina Department of Administration (collectively

“defendants”)     appeal    from    an     order    denying    their   motion    to
                                            -2-
dismiss.      Can Am South, LLC (“plaintiff”) filed suit against

defendants    for    breach        of    contract    and   declaratory       judgment.

Defendants argue that the trial court erred by: (1) denying

defendants’        motion     to        dismiss     plaintiff’s      claim        for    a

declaratory judgment because defendants did not waive sovereign

immunity, or in the alternative, the complaint fails to allege

the     existence    of      an    actual     controversy;     and     (2)     denying

defendants’ motion to dismiss because defendants did not breach

any     contract     with     plaintiff,          thus   foreclosing      waiver        of

sovereign immunity.          Defendants also argue that the availability

of funds clause in the lease agreements is enforceable and its

enforcement does not constitute a breach of contract.

      After careful review, we dismiss the appeal in part and

affirm the trial court’s order denying defendants’ Rule 12(b)(2)

motion to dismiss on the ground of sovereign immunity.

                                        Background

      The facts of this case are undisputed.                       Plaintiff is a

limited    liability        company      existing    under   the   laws      of    North

Carolina but operating its principal place of business in New

York.     Plaintiff owns a converted commercial office and storage

facility in Raleigh, N.C., which it leased at varying times and

capacities to defendants.
                                            -3-
    Plaintiff entered into the first lease (“the DDS lease”)

with the State on 20 May 1999 for use by the Department of

Health    and   Human     Services,     Disability           Determination       Services

(“DDS”).        Plaintiff       and   the     State      entered      into   a   renewal

agreement,      the    effect    of   which       was   to   extend    the   DDS   lease

through 31 July 2019 and to include the so-called “availability

of funds clause.”        The availability of funds clause states:

            15. The parties to this lease agree and
            understand that the continuation of this
            Lease Agreement for the term period set
            forth herein, or any extension or renewal
            thereof, is dependent upon and subject to
            the      appropriation,      allocation      or
            availability of funds for this purpose to
            the agency of the Lessee responsible for
            payment of said rental. The parties to this
            lease also agree that in the event the
            agency    of   the   Lessee    or    that  body
            responsible for the appropriation of said
            funds, in its sole discretion, determines in
            view of its total local office operations
            that available funding for the payment of
            rents   is   insufficient   to    continue  the
            operation of its local office on the premise
            leased herein, it may choose to terminate
            the lease agreement set forth herein by
            giving   Lessor    written   notice    of  said
            termination, and the lease agreement shall
            terminate immediately without any further
            liability to Lessee.

Defendants      have    not     attempted         to    exercise   their     right     to

terminate the DDS lease pursuant to the availability of funds

clause.
                                            -4-
       On 6 November 2000, plaintiff and the State entered into

the second lease (“the ACTS lease”) for use by an administrative

unit    of    DHHS    known    as     Automation      Collections       and     Tracking

System(s)       (“ACTS”).          The   availability       of   funds       clause    was

included in the ACTS lease, and after renewal, the lease was set

to    run    through    28    February        2014.       However,     DHHS     notified

plaintiff on 12 May 2011 that the State was exercising its right

to terminate the ACTS lease pursuant to the availability of

funds clause, effective 30 June 2011.                  The State thus terminated

the ACTS lease on 30 June 2011, removed ACTS from the premises,

and stopped paying rent on the lease.

       On 2 April 2001, plaintiff and the State entered into the

third    lease    (“the      CSE    lease”)    for    use   by   the    Child      Support

Enforcement       (“CSE”)     division      of    DHHS.      The      CSE    lease    also

contained the availability of funds clause, and after renewal,

the lease was set to run through 31 August 2014.                            However, the

Department       of   Administration        notified      plaintiff     on    15    August

2011 that the State was exercising its right to terminate the

CSE     lease    pursuant      to     the     availability       of    funds       clause,

effective 31 October 2011.               A second termination letter was sent

26 September 2011 notifying plaintiff that the termination date

was revised to 30 September 2011.                 The State terminated the CSE
                                             -5-
lease on 30 September 2011, removed CSE from the premises, and

stopped paying rent on the lease.

    Plaintiff filed suit against defendants on 23 October 2012

claiming breach of both the ACTS and CSE leases and seeking

declaratory judgment prohibiting the State from terminating the

DDS lease under the availability of funds clause.                             Defendants

entered a motion to dismiss plaintiff’s complaint pursuant to

Rules     12(b)(1),   (2),        and     (6),      claiming      specifically         that

defendants’ sovereign immunity had not been waived in any way.

By order entered 8 May 2013, the trial court denied defendants’

motion to dismiss in its entirety.                       Defendants filed timely

notice of appeal.

                                  Motion to Dismiss

    Plaintiff      filed      a    motion      to     dismiss    this       appeal    on    7

January    2014.      We      must       first      determine        what    portion       of

defendants’    appeal,     if      any,      is     properly    before       us.      After

careful review, we allow in part and deny in part plaintiff’s

motion to dismiss.

    “Generally,       there       is    no    right    of     immediate      appeal    from

interlocutory orders and judgments.”                        Goldston v. Am. Motors

Corp., 326 N.C. 723, 725, 392 S.E.2d 735, 736 (1990).                                     “An

interlocutory      order   is      one       made    during    the    pendency       of    an
                                                  -6-
action, which does not dispose of the case, but leaves it for

further    action       by     the       trial       court     in   order     to   settle        and

determine the entire controversy.”                            Veazey v. City of Durham,

231 N.C. 357, 362, 57 S.E.2d 377, 381 (1950).                                 “Typically, the

denial of a motion to dismiss is not immediately appealable to

this Court because it is interlocutory in nature.”                                        Reid v.

Cole,    187    N.C.    App.       261,       263,      652    S.E.2d      718,    719    (2007).

However,       N.C.    Gen.    Stat.         §    1-277       (2013)      allows   a     party    to

immediately       appeal          an     order        that       either      (1)       affects     a

substantial right or (2) constitutes an adverse ruling as to

personal jurisdiction.

       Here,     defendants          moved       to     dismiss     plaintiff’s         cause    of

action pursuant to Rules 12(b)(1), (2), and (6) of the North

Carolina Rules of Civil Procedure.                         See N.C. Gen. Stat. § 1A-1,

Rule 12(b)(1) (2013) (lack of subject matter jurisdiction); N.C.

Gen.    Stat.    §     1A-1,       Rule       12(b)(2)        (2013)      (lack    of    personal

jurisdiction);         N.C.       Gen.       Stat.    §   1A-1,      Rule    12(b)(6)      (2013)

(failure to state a claim upon which relief can be granted).

Specifically, defendants moved to dismiss both of plaintiff’s

claims    under       Rules       12(b)(1)        and     (2),      but    notably      not   Rule

12(b)(6),       based        on        the       defense       of      sovereign        immunity.

Defendants moved to dismiss the claim for a declaratory judgment
                                          -7-
under Rule 12(b)(6) for failure of the complaint to adequately

plead an actual controversy.

       Had defendants moved to dismiss based on the defense of

sovereign immunity pursuant to Rule 12(b)(6), we would be bound

by    the   longstanding     rule    that       the   denial   of   such   a   motion

affects a substantial right and is immediately appealable under

section 1-277(a).         See Green v. Kearney, 203 N.C. App. 260, 266,

690   S.E.2d    755,   761   (2010).        However,       defendants’     sovereign

immunity defense is premised on a lack of either subject matter

jurisdiction under Rule 12(b)(1) or personal jurisdiction under

Rule 12(b)(2).         A denial of a Rule 12(b)(1) motion based on

sovereign      immunity    does     not   affect       a   substantial     right   is

therefore      not   immediately     appealable        under   section     1-277(a).

See Meherrin Indian Tribe v. Lewis, 197 N.C. App. 380, 385, 677

S.E.2d 203, 207 (2009); Horne v. Town of Blowing Rock, __ N.C.

App. __, __, 732 S.E.2d 614, 616 (2012).                   Thus, discussion as to

whether sovereign immunity raises the question of subject matter

or personal jurisdiction under Rules 12(b)(1) and 12(b)(2) is

necessary to analyze whether defendants may immediately appeal

pursuant to section 1-277(b).

       Initially, our Supreme Court held in Love v. Moore, 305

N.C. 575, 581, 291 S.E.2d 141, 146 (1982), that immediate appeal
                                      -8-
under section 1-277(b) is limited to adverse rulings on “minimum

contacts”       questions,    not    issues    of   personal       jurisdiction

generally.        However,    shortly over two months after the               Love

decision    was    entered,    the   Supreme   Court    in    Teachy    v.   Coble

Dairies, Inc., 306 N.C. 324, 327-28, 293 S.E.2d 182, 184 (1982),

hinted     at    the   possibility     of   sovereign        immunity    defenses

triggering immediate appeal under section 1-277(b).                     The Court

noted that:

            A viable argument may be propounded that the
            State, as a party, is claiming by the
            doctrine of sovereign immunity that the
            particular forum of the State courts has no
            jurisdiction over the State's person. On the
            other    hand,      the     doctrine      may    be
            characterized as an objection that the State
            courts have no jurisdiction to hear the
            particular subject matter of [the] claims
            against the State.        Although the federal
            courts    have     tended     to    minimize    the
            importance of the designation of a sovereign
            immunity defense as either a Rule 12(b)(1)
            motion regarding subject matter jurisdiction
            or   a   Rule     12(b)(2)     motion     regarding
            jurisdiction      over      the     person,     the
            distinction    becomes       crucial    in    North
            Carolina because G.S. 1-277(b) allows the
            immediate appeal of a denial of a Rule
            12(b)(2) motion but not the immediate appeal
            of a denial of a Rule 12(b)(1) motion. The
            determination of this issue is not essential
            to this Court's authority to decide the
            instant case, however, because the case is
            before us on discretionary review under G.S.
            7A-31,   and    we    elect    to    exercise   our
            supervisory    authority      to   determine    the
            underlying issues. . . . Therefore, we do
                                     -9-
            not determine whether sovereign immunity is
            a question of subject matter jurisdiction or
            whether the denial of a motion to dismiss on
            grounds of sovereign immunity is immediately
            appealable.

The Supreme Court has yet to offer further guidance on this

distinction.

       However, apparently beginning with Sides v. Hospital, 22

N.C. App. 117, 205 S.E.2d 784 (1974), mod. on other grounds, 287

N.C. 14, 213 S.E.2d 297 (1975), this Court has consistently held

that: (1) the defense of sovereign immunity presents a question

of personal, not subject matter, jurisdiction, and (2) denial of

Rule    12(b)(2)   motions    premised     on    sovereign     immunity     are

sufficient to trigger immediate appeal under section 1-277(b).

See    Stahl-Rider,   Inc.   v.   State,   48   N.C.   App.   380,   383,   269

S.E.2d 217, 219 (1980) (citing Sides for the proposition that

“an immediate appeal lies under G.S. 1-277(b) from the trial

court's refusal to dismiss a suit against the State on grounds

of governmental immunity”); Zimmer v. N.C. Dep't of Transp., 87

N.C. App. 132, 133–34, 360 S.E.2d 115, 116-17 (1987) (noting

that the Teachy Court cited Sides and Stahl-Rider, Inc., but did

not expressly overturn them, and holding that the trial court’s

denial of a Rule 12(b)(2) motion premised on sovereign immunity

was immediately appealable under section 1-277(b) pursuant to
                                            -10-
those rulings); Data Gen. Corp. v. Cnty. of Durham, 143 N.C.

App.    97,       99–100,   545    S.E.2d    243,    245–46   (2001)     (relying    on

Zimmer for the same proposition); Meherrin Indian Tribe, 197

N.C. App. at 385, 677 S.E.2d at 207 (relying on Data Gen. Corp.

for the same proposition).

       Pursuant to this line of precedent, we enter the following

disposition as to plaintiff’s motion to dismiss.                           First, we

dismiss defendants’ appeal from the trial court’s order denying

their Rule 12(b)(6) motion to dismiss based on the argument that

plaintiff failed to adequately plead an actual controversy in

the declaratory judgment claim; denial of this motion involves

neither       a    substantial     right     under    section   1-277(a)       nor   an

adverse   ruling       as     to   personal    jurisdiction     under     section    1-

277(b), and thus is not immediately appealable.                     See N.C. Gen.

Stat. § 1-277.          Second, we dismiss defendants’ appeal from the

trial court’s order denying their Rule 12(b)(1) motion based on

the defense of sovereign immunity.                  As the Meherrin Indian Tribe

Court   held,       orders     denying     Rule    12(b)(1)   motions     to   dismiss

based    on       sovereign    immunity      are     not   immediately    appealable

because they neither affect a substantial right nor constitute

an adverse ruling as to personal jurisdiction.                    Meherrin Indian

Tribe, 197 N.C. App. at 384, 677 S.E.2d at 207.                          However, we
                                      -11-
allow defendants’ appeal from the trial court’s order denying

their    Rule    12(b)(2)    motion   to     dismiss    based   on   sovereign

immunity.       As has been held consistently by this Court, denial

of   a   Rule    12(b)(2)    motion    premised    on    sovereign   immunity

constitutes an adverse ruling on personal jurisdiction and is

therefore immediately appealable under section 1-277(b).                   See

id.; Data Gen. Corp., 143 N.C. App. at 99–100, 545 S.E.2d at

245–46; Zimmer, 87 N.C. App. at 133–34, 360 S.E.2d at, 116;

Stahl-Rider, Inc., 48 N.C. App. at 383, 269 S.E.2d at 219.

     In sum, we will consider only one issue on appeal: whether

the trial court properly denied defendants’ Rule 12(b)(2) motion

to dismiss on the ground of sovereign immunity.

                                  Discussion

                            I. Sovereign Immunity

     Defendants argue that they did not expressly or impliedly

waive their sovereign immunity and the trial court therefore

erred by denying their motion to dismiss both the breach of

contract    claim    and    the   claim    for   declaratory    relief.     We

disagree.

     The doctrine of sovereign immunity is well-settled in North

Carolina:

            It   is    an   established  principle  of
            jurisprudence, resting on grounds of sound
                                       -12-
             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. 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.

Welch Contracting, Inc. v. N.C. Dep't of Transp., 175 N.C. App.

45,    51,   622    S.E.2d      691,   695     (2005)     (citations         omitted).

Sovereign immunity is not merely a defense to a cause of action;

it is a bar to actions that requires a plaintiff to establish a

waiver of immunity.           Arrington v. Martinez, 215 N.C. 252, 263,

716    S.E.2d    410,   417     (2011).       Thus,     the        trial   court   must

determine “whether the complaint specifically alleges a waiver

of    governmental      immunity.      Absent     such        an    allegation,      the

complaint fails to state a cause of action.”                        Sanders v. State

Pers. Comm’n, 183 N.C. App. 15, 19, 644 S.E.2d 10, 13 (2007)

(internal       quotation     marks    omitted).          However,         “[p]recise

language     alleging    that    the   State    has     waived       the   defense    of

sovereign immunity is not necessary, but, rather, the complaint

need only contain sufficient allegations to provide a reasonable

forecast of waiver.”          Richmond Cnty. Bd. of Educ. v. Cowell, __

N.C. App. __, __, 739 S.E.2d 566, 569 (2013) (citations and

internal quotation marks omitted).
                                     -13-
    The seminal case on waiver of sovereign immunity in the

context of contractual disputes is Smith v. State, 289 N.C. 303,

222 S.E.2d 412 (1976).         In Smith, the North Carolina Supreme

Court articulated five considerations which moved the Court to

recognize   an    implied   waiver   of     sovereign   immunity   where   the

State enters into a valid contract with a private party:

            (1) To deny the party who has performed his
            obligation under a contract the right to sue
            the state when it defaults is to take his
            property without compensation and thus to
            deny him due process; (2) To hold that the
            state may arbitrarily avoid its obligation
            under a contract after having induced the
            other party to change his position or to
            expend time and money in the performance of
            his obligations, or in preparing to perform
            them, would be judicial sanction of the
            highest type of governmental tyranny; (3) To
            attribute to the General Assembly the intent
            to retain to the state the right, should
            expedience seem to make it desirable, to
            breach its obligation at the expense of its
            citizens imputes to that body “bad faith and
            shoddiness”    foreign   to   a   democratic
            government; (4) A citizen's petition to the
            legislature for relief from the state's
            breach of contract is an unsatisfactory and
            frequently a totally inadequate remedy for
            an injured party; and (5) The courts are a
            proper forum in which claims against the
            state may be presented and decided upon
            known principles.

Id. at 320, 222 S.E.2d at 423.            Based on these considerations,

the Smith Court held that “whenever the State of North Carolina,

through   its    authorized   officers      and   agencies,   enters   into   a
                                          -14-
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.                   “Thus, . . . in causes of

action on contract . . . the doctrine of sovereign immunity will

not be a defense to the State.”                 Id. at 320, 222 S.E.2d at 424.

      In    order      to     analyze    the     trial     court’s    order    denying

defendants’ Rule 12(b)(2) motion to dismiss based on sovereign

immunity     here,       we     must     consider:        (1)     whether     plaintiff

sufficiently       pleaded      that     defendants       waived     their    sovereign

immunity;    and     (2)      whether    defendants       expressly     or    impliedly

waived sovereign immunity.

      First, we hold that plaintiff sufficiently pleaded waiver

of   defendants’       sovereign        immunity.         The   requirement     that   a

plaintiff specifically allege waiver of governmental immunity

“does not . . . mandate that a complaint use any particular

language.”       Fabrikant v. Currituck Cnty., 174 N.C. App. 30, 38,

621 S.E.2d 19, 25 (2005).               Rather, “consistent with the concept

of notice pleading, a complaint need only allege facts that, if

taken as true, are sufficient to establish a waiver by the State

of   sovereign      immunity.”          Id.       Here,    plaintiff     specifically

pleaded    in    its     complaint       that    “[t]he     defense     of    sovereign

immunity    is     not      applicable     to    any     claims    alleged     herein.”
                                          -15-
Furthermore,        plaintiffs       pleaded       with       particularity        the

circumstances surrounding their entry into three facially valid

contracts with defendants, which, as will be discussed below,

amount to “facts, if taken as true, [that] are sufficient to

establish a waiver by the State of sovereign immunity.”                       Id. at

38, 621 S.E.2d at 25.

      Next, we conclude that defendants impliedly waived their

sovereign immunity by entering into the lease agreements with

plaintiff.        Defendants argue that because they did not breach

either the ACTS or the CSE lease agreements, and because there

is   no   proof    that    they    will   breach   the      DDS   lease,    plaintiff

cannot    establish       waiver     of    sovereign      immunity.1         However,

defendants    cite    to    no    authority,     and   we    find   none,    for   the

proposition that waiver of sovereign immunity is contingent on

breach of contract.          This Court has consistently held that we

are not to consider the merits of a claim when addressing the

1
  For example, defendants assert that: “In order to overcome the
bar of sovereign immunity and establish an implied waiver of
Defendants’ immunity to suit, the Plaintiff is required to plead
with sufficient certitude that Defendants did indeed breach the
lease contracts.” Regarding the DDS lease, defendants contend:
“Plaintiff has not alleged that the State has breached the DDS
lease in any manner and also has not alleged a sufficient
factual basis to find that there is a likelihood the State will
breach the DDS lease.       Therefore, sovereign immunity bars
Plaintiff’s claim for declaratory relief and the trial court
erred in denying Defendants’ motion to dismiss.”
                                         -16-
applicability of sovereign immunity as a potential defense to

liability.       See Archer v. Rockingham Cnty., 144 N.C. App. 550,

558 548 S.E.2d 788, 793 (2001) (noting that, when considering

the applicability of sovereign immunity as a defense to breach

of a governmental employment contract, “[this Court is] not now

concerned with the merits of plaintiff’s contract action. . . .

whether   plaintiffs        are   ultimately      entitled       to    relief       [is    a]

question[] not properly before us”); see also Smith, 289 N.C. at

322, 222 S.E.2d at 424 (“We are not now concerned with the

merits of the controversy. . . .                We have no knowledge, opinion,

or    notion   as    to    what   the    true    facts    are.         These    must       be

established at the trial.               Today we decide only that plaintiff

is not to be denied his day in court because his contract was

with the State.”).

       Furthermore, all applicable caselaw leads us to conclude

that the State waives its sovereign immunity when it enters into

a contract with a private party, not when it engages in conduct

that may or may not constitute a breach.                  See Smith, 289 N.C. at

320,    222    S.E.2d     at    423-24   (“[W]henever       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
                                         -17-
contract.”) (emphasis added); Ferrell v. Dep’t of Transp., 334

N.C. 650, 654, 435 S.E.2d 309, 312 (1993) (“[V]arious policy

considerations compel the conclusion that when the State enters

into a contract through its authorized officers and agencies, it

implicitly consents to suit for damages if it breaches                                 that

contract.”)      (emphasis      added).         It   is    plain    to   us    that    the

phrases    “in   the    event    it    breaches      the    contract”     and    “if    it

breaches that contract” in the cases above refer to the events

that would typically trigger a suit against the State.                          They do

not mean that the State only waives its sovereign immunity “in

the event it breaches the contract” and “if it breaches that

contract.”       To    hold     otherwise   would         require   a    plaintiff      to

definitively establish its entire cause of action against the

State   in   its      complaint       without    the      opportunity     to     conduct

discovery, a result that was clearly unintended by the Smith

Court     when   it    adopted     the    doctrine         of   implied       waiver    of

sovereign immunity in this context.                  See Smith, 289 N.C. at 320,

222 S.E.2d at 423 (noting that the same policy considerations it

identified as the basis for its holding are used in other states

to hold that “a state implicitly consents to be sued upon any

valid contract into which it enters”) (emphasis added).
                                               -18-
       Defendants also cite Petroleum Traders Corp. v. State, 190

N.C.    App.     542,    546-47,      660      S.E.2d      662,    664     (2008)     for    the

proposition that they did not waive sovereign immunity                                      as a

defense to plaintiff’s claim for a declaratory judgment.                                      We

disagree.        This argument was previously addressed in                             ACC v.

University of Maryland, __ N.C. App. __, __, 751 S.E.2d 612, 621

(2013), where this Court held that Smith’s recognition of waiver

in     “causes     of    action       on       contract”      includes           actions     for

declaratory       relief       seeking          to       ascertain       the      rights     and

obligations owed under a contract with the State.                                The ACC Court

distinguished Petroleum Traders Corp. on the ground that the

plaintiff in that case sought “a declaration that a statutorily

authorized       bidding      fee    .     .    .     violated     the      North     Carolina

Constitution,”          not   a     request         to    ascertain        the     rights    and

obligations owed by the parties to a contract.                              Id. at __, 751

S.E.2d at 620.          Because plaintiff here is seeking to ascertain

the rights and obligations of the parties to the DDS lease and

is not asking for a declaration as to a potential constitutional

breach,    this    case       is    more    comparable        to     ACC    than     Petroleum

Traders Corp.           Therefore the holding in ACC that “declaratory

relief actions are a ‘cause of action on contract’ sufficient to
                                         -19-
waive the State’s sovereign immunity” is binding and applicable

here.

      Because      it   is   undisputed       that    plaintiff       and   defendants

entered into three facially valid lease agreements, we hold that

defendants impliedly waived their sovereign immunity from suit

as    to   those    contracts.          We    further     conclude      that    it    is

inappropriate to consider the merits of plaintiff’s claims at

this time, because such arguments are unnecessary to determine

the   dispositive       issues    on    appeal,      namely,    whether     defendants

waived sovereign immunity.

                                       Conclusion

      For the foregoing reasons, we allow plaintiff’s motion to

dismiss    the     appeal    as   to    defendants’      Rule    12(b)(1)      and   (6)

motions,    but     allow    immediate       appeal    from     the   order    denying

defendants’ Rule 12(b)(2) motion to dismiss on the ground of

sovereign     immunity.       Because        plaintiff     sufficiently        alleged

waiver of sovereign immunity in its complaint and defendants

impliedly waived sovereign immunity by entering into the lease

agreements with plaintiff, we affirm the trial court’s order

denying defendants’ motion.

      AFFIRMED IN PART; DISMISSED IN PART.
                         -20-
Judges GEER and McCULLOUGH concur.