American Structures, Inc. v. Mayor of Baltimore

³⁵⁸ Singley, J., delivered the opinion of the Court. This case presents the issue whether a municipality, here the City of Baltimore (the City), may interpose the defense of sovereign immunity in an action in contract. We granted certiorari after the case had been docketed but before it was argued in the Court of Special Appeals. In May, 1974, the City entered into a contract with American Structures, Inc. (the Contractor) for the construction of a storm drain outfall, in accordance with the specifications prepared by the Maryland State Highway Administration (the Highway Administration).

Work commenced in September, 1974, and thereafter the Contractor encountered subsurface conditions which allegedly differed substantially from those contemplated by the contract documents. Apparently in reliance on a provision of contract documents which required the giving of prompt notice should conditions be identified which increased the character of the work to be performed under the contract, the Contractor, in January, 1975, notified the City that it was confronted with such a situation. The City apparently directed the Contractor to proceed with the work. When negotiations looking toward an adjustment of the contract price proved inconclusive, in September, 1975, the Contractor brought a declaratory judgment action in the Circuit Court of Baltimore City against the City and the Highway Administration, which had as its purpose the construction of the contract provisions.

Both defendants interposed the defense of sovereign immunity, the City by a motion to dismiss, and the State by a motion raising preliminary objection. From an order dismissing the action, the Contractor has appealed. While the application of the doctrine of sovereign immunity in the United States has been roundly criticized, see Godwin v. County Comm’rs of St. Mary’s County, 256 Md. 326, 330-34 , 260 A. 2d 295, 297-98 (1970); Clarke, Municipal Responsibility in Tort in Maryland, 3 Md.L.Rev. 159 (1939); Borchard, Government Liability in Tort, 34 Yale L.J. 1 , 2 (1924); W. Prosser, Law of Torts, Chapter 26, § 131, 975-87 ³⁵⁹ (4th ed. 1971), it has survived, in one form or another, in some jurisdictions. 1 In Maryland, the rule of our cases is clear. If an action is brought for a money judgment in contract or in tort against the State or an agency of the State without the State’s consent, actual or implied, it must be defended on the ground of sovereign immunity, which cannot be waived unless funds have been appropriated for the purpose or the agency can provide funds by taxation, Calvert Associates Limited Partnership v. Department of Employment & Social Services, 277 Md. 372 , 357 A. 2d 839 (1976); Charles Brohawm & Bros. v. Board of Trustees of Chesapeake College, 269 Md. 164 , 304 A. 2d 819 (1973); Jekofsky v. State Roads Comm’n, 264 Md. 471 , 287 A. 2d 40 (1972); University of Maryland v. Maas, 173 Md. 554, 559 , 197 A. 123, 125 (1938); Dunne v. State, 162 Md. 274 , 159 A. 751 (1932); State v. Baltimore & Ohio R.R., 34 Md. 344 (1871), aff'd, 21 Wall. 456 (1875). 2 See also Central Collection Unit v. Atlantic Container Line, Ltd., 277 Md. 626 , 356 A. 2d 555 (1976).

As regards counties and municipalities, however, the rule is different. Lake Roland Elevated Ry. v. Baltimore, 77 Md. 352, 370-72, 381 , 26 A. 510, 512-13, 516 (1893) and Rittenhouse v. Baltimore, 25 Md. 336, 346-48 (1866), are authority for the proposition that while a municipality may abrogate its responsibility under a contract entered into in performance of a governmental function if dictated by