Appeal by the State of North Carolina under G.S. 30(2) from the decision of the Court of Appeals, reported in
Sharp, Chief Justice.*fn1 Justice Brock did not participate in the consideration or decision of this case.
This is the second time this case has come before this Court for review. Smith v. State, 289 N.C. 303, 222 S.E.2d 412 (1976). Plaintiff's original complaint was filed 24 July 1973 in Burke County Superior Court. Defendants moved to dismiss the action pursuant to G.S. 1A-1, Rule 12(b) on the grounds that sovereign immunity barred the suit against the State and also against the individual defendants acting in their official capacities. The trial judge denied the motion and defendants appealed. We held that the doctrine of sovereign immunity was not a bar to an action against the State for breach of a duly authorized State contract, but noted that any judgment would be uncollectible in the absence of a legislative appropriation. In our first decision we carefully pointed out that we were expressing no opinion as to the merits of the controversy between Dr. Smith and the State. 289 N.C. at 322, 222 S.E.2d at 424.
The merits of that dispute are now before us. Plaintiff's amended complaint was filed 6 May 1976. As his first claim for relief plaintiff alleges that the State of North Carolina breached his contract of employment by dismissing him without cause or authority. As damages he asks for the balance of the salary to which he would have been entitled under the contract. In his second
claim for relief plaintiff alleges that the individual defendants -- David Flaherty, N. P. Zarzar, and Trevor Williams -- caused him to be discharged in a manner "designed to embarrass and humiliate him" and which defamed him in his profession. He also alleged that these defendants knew it would be "impossible for the plaintiff to obtain other employment of [a] comparable nature" because of his age and physical condition. Finally, plaintiff alleges that the actions of defendant Flaherty were "motivated by malicious and corrupt intent" thus entitling him to punitive damages.
At the conclusion of plaintiff's evidence the trial judge allowed motions (1) by defendants James Holshouser and Ralph Scott for judgment on the pleadings under Rule 12(c) and (2) by all other defendants for a directed verdict under Rule 50(a). He also denied plaintiff's motion for summary judgment, which, along with defendants' motion for summary judgment, had been filed and heard at length prior to trial. The facts disclosed by the deposition and exhibits which the court considered on these motions do not differ materially from the evidence plaintiff adduced at trial. Plaintiff took no exceptions to the dismissal of his action against Holshouser and Scott. His appeal to the Court of Appeals was from the trial court's denial of his motion for summary judgment and its grant of a directed verdict in favor of the other defendants.
The Court of Appeals concluded that only the State Board of Mental Health had the authority to dismiss plaintiff from his job. Because all the evidence showed that plaintiff was discharged by the Secretary of Human Resources and not by the Board of Mental Health, the Court held that the trial judge should have allowed plaintiff's motion for summary judgment against the State. Plaintiff's exception to the allowance of a directed verdict in favor of the individual defendants was deemed abandoned for failure to argue the assignment of error on appeal. Smith v. State, 36 N.C. App. 307, 244 S.E.2d 161 (1978).
The State's right to a directed verdict at the close of plaintiff's evidence turns on two questions of law: (1) Was the Secretary of the Department of Human Resources authorized by statute to dismiss plaintiff and (2) did cause to dismiss plaintiff exist as a matter of law? The trial court's entry of a directed verdict
for the State can be sustained only if the answer to both of these questions is YES. If a directed verdict in the State's favor was proper, it follows that the trial court was also correct in denying plaintiff's motion for summary judgment since the evidence he presented at trial tended to show substantially the same facts disclosed by the depositions the court considered at the hearing upon the motions for summary judgment.
Plaintiff was employed by the State in 1970 pursuant to G.S. 122-25 (repealed by 1973 N.C. Sess. Laws ch. 467, § 133), which authorized the Commissioner of Mental Health to appoint a medical superintendent for each State hospital for a term of six years. Under G.S. 122-1.1, also in effect at that time, the State Board of Mental Health by and with the approval of the Governor could terminate "for cause" the services of any employee appointed for a specific length of time.
We consider first plaintiff's contention that even if there was cause for his dismissal, it was improper because he was discharged by the Secretary of Human Resources.
As part of a reorganization of State government in 1971, the State Board of Mental Health was transferred to the Department of Human Resources. The vehicle for this change was the Executive Organization Act of 1971 which incorporated the Board of Mental Health into the Department of Human Resources by means of a "type II transfer." The relevant statute reads as follows:
§ 143A-6. Types of transfers. -- (a) Under this Chapter, a type I transfer means the transferring of all or part of an existing agency to a principal department established by this Chapter. When all or part of an agency is transferred to a principal department under a type I transfer, its statutory authority, powers, duties, and functions, records, personnel, property, unexpended balances of appropriations, allocations or other funds, including the functions of budgeting and purchasing, are transferred to the principal department.
When any agency, or part thereof, is transferred by a type I transfer to a principal department under the provisions of this Chapter, all its prescribed powers, duties, and functions, including but not limited to rule making, regulation,
licensing, and promulgation of rules, rates, regulations, and standards, and the rendering of findings, orders, and adjudications are transferred to the head of the principal department into which the agency, or part thereof, has been transferred.
(b) Under this Chapter, a type II transfer means the transferring intact of an existing agency, or part thereof, to a principal department established by this Chapter. When any agency, or part thereof, is transferred to a principal department under a type II transfer, that agency, or part thereof, shall be administered under the direction and supervision of that principal department, but shall exercise all its prescribed statutory powers independently of the head of the principal department, except that under a type II transfer the management functions of any transferred agency, or part thereof, shall be performed under the direction and supervision of the head of the principal department.
(c) Whenever the term "management functions" is used it shall mean planning, organizing, staffing, directing, coordinating, reporting and budgeting.
Plaintiff argues that this statute leaves untouched the power of the State Board of Mental Health to fire employees hired for a term, and points out that the statute makes no specific mention of the power to dismiss. The State contends that the power to fire a disobedient employee is implicit in the meaning of the term "management functions" as used in G.S. 143A-6, and notes that the Secretary is explicitly given control over "staffing." The Court of Appeals attempted to strike a balance between these two positions. As it interpreted G.S. 143A-6(b), the State Board of Mental Health kept all of its statutory powers after the transfer, including hiring and firing, and the Secretary of Human Resources was only given the power to supervise the Board's exercise of those functions. Smith v. State, 36 N.C. App. at 310-11, 244 S.E.2d at 163.
We reject the Court of Appeals' construction as being inconsistent with both the language and purpose of the statute. When an agency is transferred to a new department by a "type II transfer," G.S. 143A-6(b) provides that the management functions ...