Selective Ins. Co. of Am. v. Ohio Dept. of Rehab. & Corr.Selective Ins. Co. of Am. v. Ohio Dept. of Rehab. & Corr.
Alber Crafton, PSC, Lee M. Brewer and Justin D. Owen, for appellant.
Michael DeWine, Attorney General, James E. Rook and Kristin S. Boggs, for appellee.
APPEAL from the Court of Claims of Ohio
KLATT, J.
{¶ 1} Plaintiff-appellant, Selective Insurance Company of America (“Selective“), appeals a judgment of the Court of Claims of Ohio dismissing its suit against defendant-appellee, the Ohio Department of Rehabilitation and Correction (“ODRC“), for lack of subject matter jurisdiction. For the following reasons, we reverse and remand.
{¶ 2} In February 2007, DDC+, Inc. (“DDC“) submitted a bid to the state of Ohio to upgrade the generator at the Northeast Pre-Release Center. Prior to the bid submittal, DDC secured a bid guaranty and contract bond from Selective. The state accepted DDC‘s bid, and DDC entered into a contract with ODRC to serve as the principal contractor on the project.
{¶ 4} Pursuant to
{¶ 5} In addition to establishing a mechanic‘s lien on payments due DDC, Buckeye also filed a claim against the bond. In July 2008, Selective issued a $100,000 payment to Buckeye. Selective issued a subsequent payment of $27,466 to Buckeye in January 2009.
{¶ 6} On February 27, 2009, Buckeye filed suit against ODRC, DDC, Tudela, and Selective in the Franklin County Court of Common Pleas. Against DDC and Tudela, Buckeye alleged claims for breach of contract, violation of the Ohio Prompt Payment Act, fraud, and theft. Against Selective, Buckeye alleged a breach of contract claim for failure to pay its entire claim against the bond. Against ODRC, Buckeye sought recovery under
{¶ 7} Ultimately, Buckeye settled its claims against ODRC and Selective. In the resulting settlement agreement, ODRC agreed to pay Buckeye $24,111.85 in exchange for Buckeye‘s dismissal of its claims against ODRC. Selective agreed to pay Buckeye an additional $30,000. In return, Buckeye agreed to dismiss its claim against Selective and assign its claims against DDC and ODRC to Selective.
{¶ 9} After discovery, Selective and ODRC each filed motions for summary judgment on the other‘s claims. Instead of ruling on the merits of those motions, the trial court sua sponte dismissed the entire case for lack of subject matter jurisdiction. The trial court concluded that Selective‘s and ODRC‘s claims arose from Buckeye‘s efforts to enforce its mechanic‘s lien. Because subcontractors could sue the state to enforce mechanic‘s liens prior to the enactment of the Court of Claims Act, the trial court held that it lacked jurisdiction over the action. The trial court entered judgment dismissing the complaint, counterclaim, and third-party complaint on June 9, 2011.
{¶ 10} Selective now appeals the June 9, 2011 judgment, and it assigns the following errors:
- The Court of Claims erred in concluding, contrary to law, that Selective‘s action for money damages against an agency of the State is governed by Ohio‘s Mechanic‘s Lien statute codified in R.C. §1311.32.
- The Court of Claims erred in concluding, contrary to law, that prior to the enactment of R.C. §2743.02(A)(1) the State of Ohio consented to be sued for money damages arising from a public authority‘s failure to comply with R.C. §1311.28 in the common pleas court.
- The Court of Claims erred in dismissing, contrary to law, Selective‘s second cause of action against the State of Ohio for money damages, which is unrelated to Buckeye‘s assignment of its lien claim.
{¶ 11} By its first assignment of error, Selective argues that the trial court misconstrued its first claim, i.e., its claim for violation of
{¶ 12} Usually, to accomplish a public improvement project, a public authority contracts with a principal contractor alone. The principal contractor then contracts with subcontractors, material suppliers, and laborers for certain work and materials. To protect subcontractors, material suppliers, and laborers from a defaulting principal contractor,
{¶ 13} A subcontractor, material supplier, or laborer establishes a mechanic‘s lien by “serv[ing] the public authority an affidavit stating the amount due and unpaid for the labor and work performed and material furnished, when the last of the labor or work was performed and when the last of the material was furnished with all credits and setoffs thereon, and the post-office address of the claimant.”
[T]he public authority shall detain from the principal contractor or from the balance of the funds remaining in the contract with the principal contractor, an amount, up to the balance remaining in the contract, that does not in the aggregate exceed the claim or claims.
* * * The public authority shall place any detained funds in an escrow account as provided for under section 153.63 of the Revised Code, to be released at the times, in the amounts, and to the persons ordered by a court of competent jurisdiction or by agreement of the principal contractor and the subcontractor, material supplier, or laborer who filed the affidavit provided for in section 1311.26 of the Revised Code.
{¶ 14} Receipt of an affidavit of claim also triggers an obligation to serve the principal contractor with a copy of the affidavit and a notice that the principal contractor must notify the public authority whether it intends to dispute the claim within 20 days.
{¶ 15} The purpose of
{¶ 16} Pursuant to
The duty to pay to claimants the amounts and in the order of preference, as provided in sections 1311.29 and 1311.31 of the Revised Code, may be enforced by an action in the court of common pleas or the subcontractor, material supplier, or
laborer may, when the amounts are due, recover through the public authority in the court of common pleas the whole or a pro rata amount of the subcontractor‘s, material supplier‘s, or laborer‘s claim or estimate, not exceeding in any case the balance due to the principal contractor.
Through filing an action under
{¶ 17} Here, Buckeye enforced its mechanic‘s lien through an action in the Franklin County Court of Common Pleas against ODRC. Ultimately, Buckeye recovered from ODRC the $24,111.85 yet to be paid DDC when Buckeye filed its action. In the instant action filed in the Court of Claims of Ohio, Selective seeks a different remedy. Selective alleged in its amended complaint that “[p]ursant to R.C. 1311.28, upon its receipt of the Affidavit of Claim, [O]DRC was required to detain from DDC or from the balance of funds remaining in the Contract, an amount sufficient to cover a properly filed claim. [O]DRC failed to do so.” First Amended Complaint, at ¶ 19. Selective further alleged that “[t]o the extent that [O]DRC failed to adhere to its duties under R.C. §1311.28 and retain funds remaining in DDC‘s contract up to Buckeye‘s properly filed claim,” ODRC damaged Buckeye. Id. at ¶ 24. As Buckeye‘s assignee and subrogee, Selective demanded monetary damages from ODRC for its violation of
{¶ 18} Given the allegations in Selective‘s complaint, we conclude that the trial court erred in characterizing Selective‘s claim. Selective is pursuing a claim for failure to comply with
{¶ 19} By its second assignment of error, Selective argues that the trial court erred in concluding that it lacked subject matter jurisdiction over Selective‘s claim for violation of
{¶ 21} Prior to the enactment of the Court of Claims Act, the mechanic‘s lien statutes applied to the state. Poenisch at 703, citing State ex rel. Nixon v. Merrell, 126 Ohio St. 239 (1933). Thus, sovereign immunity did not prevent a subcontractor with a mechanic‘s lien from pursuing an action in mandamus to attain funds the state withheld from a principal contractor. Nixon at 246-47. The state, as the stakeholder of the fund, was a necessary party to the action. Id. at 244. Because such an action existed before January 1, 1975, a court of common pleas—not the Court of Claims—has jurisdiction over actions against the state for enforcement of a mechanic‘s lien. Poenisch at 703; Basic Constr.
{¶ 22} In the case at bar, Selective is not attempting to enforce Buckeye‘s mechanic‘s lien. Instead of seeking recovery from a fund held by the state, Selective is seeking money damages for the state‘s failure to retain contract payments following its receipt of Buckeye‘s affidavit of claim. The foregoing rule of law, therefore, does not apply.
{¶ 23} The Court of Claims has exclusive jurisdiction over civil actions against the state for money damages that sound in law. Measles v. Indus. Comm., 128 Ohio St.3d 458, 2011-Ohio-1523, ¶ 7; Boggs v. State, 8 Ohio St.3d 15, 17 (1983). Consequently, an action seeking money damages for the state‘s negligent failure to preserve a fund on which
{¶ 24} To persuade this court otherwise, ODRC argues that “[t]he question * * * is not whether the State of Ohio consented to be sued for money damages arising from its failure to comply with
{¶ 25} In this case, the relevant question for determining whether Selective‘s claim belongs in a court of common pleas or the Court of Claims is whether “the state ha[d] previously consented to be sued” on Selective‘s claim.
{¶ 26} Additionally, ODRC argues that the trial court lacked jurisdiction over Selective‘s cause of action because Selective acquired it through subrogation, and such
{¶ 27} Pursuant to
R.C. 2743.02(D) mandates that medical benefits [the subrogor] received from [the insurer] must be deducted from the amount due her from the state. She could not transfer to [the insurer], by way of subrogation, a right to recover damages representing incurred medical expenses that she herself did not possess pursuant to R.C. 2743.02(D).
{¶ 28} Contrary to ODRC‘s assertion, Community Insurance does not stand for the blanket proposition that subrogation claims against the state are not cognizable in the Court of Claims. Meigs Local School Dist. Bd. of Edn. v. Riverside Masonry, L.L.C., 10th Dist. No. 04AP-482, 2005-Ohio-2332, ¶ 16. Rather, Community Insurance holds that
{¶ 29} We reject each of ODRC‘s arguments and conclude that the trial court had jurisdiction over Selective‘s claim for violation of
{¶ 31} After a review of the record, we concur with ODRC that Selective has “repeatedly tweaked” the legal basis for its second claim. Appellee brief, at 8. Before this court, Selective contends that its claim is premised on an alleged breach of the construction contract, as well as the common-law duty an obligee owes a surety to protect the collateral. Whether Selective proceeds under either or both of these theories, it has alleged a legal claim for money damages. As we stated above, the Court of Claims has exclusive jurisdiction over civil actions against the state for money damages that sound in law. Measles at ¶ 7; Boggs at 17. We conclude, therefore, that the trial court had jurisdiction over Selective‘s second claim.
{¶ 32} Although ODRC presents this court with multiple arguments, all of them address why Selective‘s second claim should fail on its merits. As none of these arguments address the actual question before this court—whether the trial court had jurisdiction—we will not consider them. Because the trial court possessed jurisdiction to adjudicate Selective‘s second claim, we sustain Selective‘s third assignment of error.
{¶ 33} For the following reasons, we sustain Selective‘s three assignments of error, and we reverse the judgment of the Court of Claims of Ohio and remand this matter to that court for further proceedings consistent with law and this decision.
Judgment reversed; cause remanded.
FRENCH and TYACK, JJ., concur.