Lead Opinion
(on reassignment).
[¶ 1.] This is а taxpayer challenge to the legality of certain change orders executed by the City of Brookings on its Agri-Plex project. The circuit court granted summary judgment to the taxpayer, ruling that the change orders were void for violating statutory competitive bidding requirements. The court ordered the contractor to refund all amounts paid on the invalid change orders, resulting in a forfeiture of $548,001. We conclude that whether the change orders were void depends on whether they were “necessitated by circumstances not reasonably foreseeable at the time the underlying contract was let”
A.
Background
[¶ 2.] In August 1997, the City of Brookings devised plans to build the Brookings Agri-Plex. It was to consist of an exhibition structure with an attached building for county offices and a separate agricultural research building. To fulfill this plan, business leaders аnd community officials formed various project committees. John Mills, owner of Mills Construction, Inc., chaired the designing and planning committee. This committee was responsible for estimating the approximate cost of the project and developing a project package to fit within the proposed budget. Brookings then advertised for bids.
[¶ 3.] Several bids were submitted, including one from Mills Construction. John Mills resigned from the planning committee when his company submitted its bid. As the Mills bid was $635,000 lower than the next lowest bid, Brookings awarded Mills the construction contract in September 1997. The contract called for the south parking lot to be graveled. For the research building, only 5,000 square feet would be finished. The contract called for no other improvements to the remаining 25,000 square feet. Project planners were actively searching for long-term tenants and anticipated that interior improvements would eventually be needed to accommodate these tenants. Planners also expected that the south parking lot would be paved when funds became available.
[¶ 4.] After the contract was awarded and the construction began, Brookings issued a series of twelve change orders. Change order # 1, dated October 22, 1997, stated, “YOU ARE DIRECTED TO MAKE THE FOLLOWING CHANGES IN THE CONTRACT.” Issued by the architect, it instructed Mills to pave the south parking lot at an increased cost of $107,000.
[¶ 5.] Both John Mills and his project manager, Scott Lardy, inquired about the propriety of accomplishing these improvements by change order. City attorney Alan Glover, whose law partner, Eric Rasmussen, represented Mills, opined that a negotiated change order, without public bidding, was permissible since the changes were precipitated by unforeseen circumstances necessary to the completion of the project. In a later affidavit, Lardy stated that Mills Construction relied on Glover’s
[¶ 6.] In an audit report dated October 16, 1998, the State Auditor concluded that the change orders were unlawful. Bozied then sought to enjoin Brookings from paying Mills until a judicial determination regarding the legality of the change orders could be obtained. In response, the City adopted Ordinance 25-98, allowing Brook-ings to proceed even if the change orders were later judicially declared unlawful and void under SDCL 5-18-19. Noting that most of the contract money had already been expended, the circuit court denied Bozied’s motion for a preliminary injunction in a letter decision dated December 23,1998. The parties then moved for summary judgment. Following a hearing, the court granted summary judgment to Bo-zied.
[¶ 7.] The court ruled as a matter of law that the major portion of change order # 1 and all of change order # 12 violated SDCL ch. 5-18. It also concluded that Brookings City Ordinance 25-98 was invalid, as a violation of the South Dakota Constitution and established law. The court held that the defense of equitable estoppel was unavailable to Mills and ordered the company to refund amounts paid under the two unlawful change orders. Lastly, the court awarded Bozied $21,018.64 in attorney fees and expenses. Mills and Brookings appeal.
B.
Summary Judgment Standard
[¶ 8.] Under our familiar standard for reviewing summary judgments, we decide оnly whether genuine issues of material fact existed and whether the law was correctly applied. Harms v. Northland Ford Dealers,
C.
City Ordinance — Home Rule
.[7-10] [¶ 9.] After Bozied sought to enjoin work on the change orders, the Brookings City Council passed Ordinance 25-98. In relevant part, the ordinance provides:
A. That in the event a contract, or any part thereof, is declared void pursuant to the provisions of SDCL 5-18-19 in a court of competent jurisdiction and there is no finding of fraud, corruption, collusion, or graft on the part of the contracting parties, then payment under said contract shall be made in the following manner, to-wit
1. If the terms of the contract were otherwise complied with, then the amount originally agreed to be paid shall be paid so long as it is deemed to be reasonable under*269 the circumstances, and the City has received fair value for the services rendered.
2. In the event the conditions described in paragraph 1 above are not established, then the amount paid shall be derived on the equitable basis of quantum meruit.
3. In the event there is found to be fraud, collusion, corruption or graft, on the part of the contracting parties, in addition to any other сivil or criminal penalties, no payments shall be made to the contractor and any payments previously made shall be recouped from the contractor.
B. The remedies set forth herein shall not be applicable if an action for preliminary and permanent injunction is initiated in a court of competent jurisdiction, seeking to enjoin performance of the alleged unlawful contract within ten (10) days following publication of the City’s approval of said contract.
[¶ 10.] This ordinance, in sum, allows the City to honor void contracts, overriding SDCL 5-18-19. The City believes it is empowered to enact such an ordinance because it holds a home rule charter, authorized by the South Dakota Constitution in Article IX § 2. This provision states in part:
A chartered governmental unit may exercise any legislative power or perform any function not denied by its charter, the Constitution or the general laws of the state. The charter may provide for any form of executive, legislative and administrative structure which shall be of superior authority to statute, provided that the legislative body so established be chosen by popular election and that the administrative proceedings be subject to judicial review.
Powers and functions of home rule units shall be construed liberally.
[¶ 11.] Although the power granted to home rule cities may be great, it is not absolute. The South Dakota Legislature limited home rule powers when it enacted SDCL 6-12-5:
Neither charter nor ordinances adopted thereunder may set standards and requirеments which are lower or less stringent than those imposed by state law, but they may set standards and requirements which are higher or more stringent than those imposed by state law, unless a state law provides otherwise.
The City’s ordinance is less stringent than state law. Under South Dakota law, parties cannot be paid under void contracts. Not even the Legislature can enact statutes allowing such payments. The South Dakota Constitution Article XII § 3 provides:
The Legislature shall never grant any extra compensation to any public officer, employee, agent or contractor after the services shall have been rendered or the contract entered into, nor authorize the payment of any claims or part thereof created against the state, under any agreement or contract made without express authority of law, and all such unauthorized agreements or contracts shall be null and void; nor shall the compensation of any public officer be increased or diminished during his term of office: provided, however, that the Legislature may make appropriations for expenditures incurred in suppressing insurrection or repelling invasion. (Emphasis added.)
[¶ 12.] South Dakota courts have consistently held that void public contracts cannot be later cured or ratified. Norbeck & Nicholson Co. v. State,
D.
“Circumstances Not Reasonably Foreseeable”
[¶ 13.] Mills argues that it was legitimate to accomplish the paving and tenant improvements by change order instead of advertising for bids. The question is governed by SDCL 5-18-18.3:
Any amendment or change order to an existing construction contract need not be bid if the contract contains unit prices for the same type or class of work, or the change or extra work is necessitated by circumstances not reasonably foreseeable at the time the underlying contract was let and the change or extra work is necessary to the completion of the project. (Emphasis added).2
Mills contends that the language “reasonably foreseeable” raises a factual question to be resolved by a jury, not by a court on summary judgment.
[¶ 14.] In most instances, foreseeability is a question of fact. E.P. v. Riley,
[¶ 15.] Likewise, the fact finder must decide whether the improvements were “necessary” to complete the project. Mills argues that to accommodate the newly arrived tenants, it was necessary to pave the parking lot and conform the office space to
E.
Void Contracts — Remedies
[¶ 16.] This brings us to the crux of our case, to what Justice Henderson once called that “gnawing, aching question of conscience.” Carr Co. v. City of Sioux Falls,
[¶ 17.] This Court has held that “under the proрer circumstances” taxpayers may institute actions on behalf of themselves and other taxpayers to recover funds paid to a contractor under a void or illegal contract. Sioux Falls Taxpayers Ass’n v. City of Sioux Falls,
[¶ 18.] Bozied seeks to recover money the contractor previously received. As the circuit court recognized when it denied Bozied’s motion for a preliminary injunction, “most of the moneys have already been expended.” Imposing a forfeiture of over a half-milliоn dollars on a contractor is a harsh and perhaps devastating consequence. In denying any relief to contractors in cases of this sort, we have held steadfastly to the notion that “[c]ontrac-tors who do business with public entities do so at their peril. They are charged with the duty to be familiar with the statutory requirements and to adhere to them.” Carr,
[¶ 19.] Typically, when a contract is within a city’s power to enter, but the contract is lаter declared void for violating some statutory requirement, a contractor who performs in good faith will end up suffering all the adverse consequences, while the public entity unjustly receives all the benefits from the contractor’s perfor-
[¶ 20.] Several courts faced with this situatiоn have allowed a contractor to retain funds already paid but not to recover additional funds. Elview Construction Co., Inc. v. North Scott Comm. School Dist.,
[¶21.] This principle of leaving the parties where they stand is well illustrated in the case of Ellefson v. Smith,
[¶ 22.] Leaving the parties as we find them is consistent with our longstanding jurisprudence. In Hoiten v. City of Canistota,
[¶ 23.] A contractor who fully performs a contract of this character and then reсeives payment should not be compelled to refund the money. See Tobin,
[¶ 24.] This Court has emphasized on numerous occasions that the law “abhors a forfeiture.” BankWest v. Gro-seclose,
[¶ 25.] To say that the taxpayers here are the ones truly aggrieved is to embrace a pious fable. The City was lawfully going to incur this expense or something close to it in any event. That had already been decided. Another contractor would have completed the improvements at issue had Mills not finished the job. In the end, what loss would the taxpayers have suf
[¶ 26.] On the other hand, whether these change orders were occasioned by fraud, undue influence, or collusion remains to be decided in trial. Bozied suggests impropriety in the contractual relationship between the City and Mills:
Mills chaired the local committee charged with designing the project, [allowing him] a distinct advantage over all other potential contractors.... Mills and the City were represented by the same Brookings law firm. After Bozied brought this lawsuit to correct the wrongdoing, the same Brookings law firm drafted a new city ordinance to evade and circumvent the competitive bidding laws and protect its client, Mills.
These are serious charges, especially the ones against the law firm in purportedly advising both sides in this controversy. But these are still only allegations, not proofs. They are for the fact finder to resolve.
[¶ 27.] The circuit court awarded Bo-zied attorney’s fees and expenses citing SDCL 15-17-45. This statute allows reimbursement in a taxpayer action to recover funds misappropriated by a governing body or public official, “in the event of a recovery by [the] plaintiff.” Because we reverse the circuit court’s monetary judgment, we also reverse the award of attorney’s fees.
F.
Conclusion
[¶ 28.] We affirm the circuit court’s ruling that Brookings City Ordinance 25-98 was unconstitutional and invalid. We also affirm the court’s decision that equitable remedies are unavailable when a public contract is void for violating statutory competitive bidding requirements. However, whether the change orders violated SDCL 5-18-18.3 is a question of fact. We reverse summary judgment for Bozied on that issue. In the event the change orders are found to violate this statute, the contractor may nonetheless retain all payments received in thе absence of proof of fraud, collusion, or undue influence. If the statute was not violated, then of course the contractor is entitled to any unpaid amounts, subject to the terms of the contract.
[¶ 29.] Affirmed in part, reversed in part, and remanded for trial.
Notes
. According to evidence elicited in the summary judgment hearing, Brookings decided to pave the parking lot when more funds became available because the Mills Construction bid was lower than anticipated.
. This statute was amended in 2001, but we apply the pre-amendment version.
. The record does not reflect that any party asked for a jury trial. SDCL 15 — 6—38(b) and (d). Thus, as the record now stands, the trier of fact would be the cirсuit court.
.The contract did not contain unit prices; therefore, that portion of SDCL 5-18-18.3 is inapplicable.
. In Sioux Falls Taxpayers, the Sioux Falls Water Commissioner permitted a contractor to engage in certain repairs, which exceeded the amount provided in the competitive bidding law. Id. at 94-95,
. Many courts recognize two types of ultra vires contracts: (1) contracts ultra vires in the absolute sense because a government authority had no power at all to enter into them; and (2) contracts that a government authority was empowered to enter, but failed to execute in a lawful manner. See, e.g., Edwards v. City of Renton,
. The court in Elview noted: "[b]y allowing the recovery back of payments made to a contractor, the court is asked to take affirmative action and through the court’s action, one party, [the City] would be allowed to receive both the benefits of performance and the money.” Id. at 144.
. South Dakota cases dealing with violations of the competitive bidding laws have primarily been actions by contractors. See Hoiten,
Dissenting Opinion
(dissenting).
[¶ 32.] I respectfully dissent from the majority’s holding on its decision to remand for a trial on the issue of foreseeability (section D), and on the holding regarding remedies under a void contract (Section E). I agree with and concur on the majority’s holding regarding the unconstitutionality of the city ordinance (section C). I address only sections D and E.
Circumstances Not Reasonably Foreseeable
[¶ 33.] Did the trial court err in holding the use of change orders violated SDCL 5-18-18.3?
[¶ 34.] This Court’s review of summary judgments is indeed familiar. Summary judgment is authorized “if the pleadings, depositions, answers to interrogatories,
[¶ 35.] In this case, after both sides had conducted their written discovery, each side made separate motions for summary judgment. A hearing was held on these motions. At the conсlusion of the hearing, Mills asked for leave of court to amend its answer to include the issue of equitable estoppel, which the court granted. The memorandum decision entered by the court included the issue of equitable estoppel.
[¶ 36.] The issue of “foreseeability” is the only fact Mills claims is disputed. While generally “foreseeability” is a fact question, I believe that under the record of this case that “foreseeability” is clearly a matter of law for the court to determine. It can be determined by considering the evidence in the record in light of the statute and the contract between the parties; the construction of the statute and the contract are questions of law that may be determined by a court on summary judgment. See Auto-Owners Ins. Co. v. Hansen Hous. Inc.,
[¶ 37.] SDCL 5-18-18.3 then provided: Any amеndment or change order to an existing construction contract need not be bid if ... the change or extra work is necessitated by circumstances not reasonably foreseeable at the time the underlying contract was let and the change or extra work is necessary to the completion of the project.
(emphasis added). The circuit court focused on this statute when deciding whether the change orders should have been let out for bids. Mills contends SDCL 5 — 18— 18.3 should be interpreted to include unexpected opportunities and not just unexpected difficulties. That argument is antithetical to the plain meaning of the statute. This statute’s parameters for change orders are clear and unambiguous.
[¶ 38.] City and Mills argue an exception should be made for “unexpected opportunities” that may arise. City contends that because the project bid from Mills came in far below projected cost, City should be able to use the money not spent on the initial bid to enhance the project by change orders. The enhancements included paving the south parking lot (change order # 1) and making tenant improvements (change order # 12). Neither of these changes were “necessary” to the completion of the project that was let out on bid.
[¶ 39.] The term “necessary” does not equate with the term “opportunity.” The statute makes an exemption provision for necessary items, but specifically provides in SDCL 5-18-3 for changes to the project that may be defined as opportunities.
[¶ 40.] Mills testified by affidavit to the fact that the changes were foreseeable to the project planners and architects. It stated that “[a]s initially conceived, the research building was intended to house tenants, and the south parking lot was intended to be paved.” These two changes were not part of the project that was let out for bid. Yet, they were foreseeable changes that would be made in the future. Neither change was necessary to the completion of the project.
[¶ 41.] It also is not unforeseeable that a bid might come in lower than anticipated. The anticipated cost of the Agri-plex building was based upon the average cost of similar projects. This average cost means that some cost estimates will be higher and others will be lower. It is clearly foreseen and anticipated that a bid may come in that is below the average or anticipated cost.
[¶ 42.] “It is settled law in South Dakota that a party to a lawsuit cannot claim the benefit of a version of relevant facts more favorable to his own contentions than he has given in his own testimony.” Connelly v. Sherwood,
[¶ 43.] It was undisputed at the time of the hearing on the motion for summary judgment, that these change orders were foreseeable at the time of the project issu-anee, not necessary to the project’s completion, and involved an expense above twenty-five thousand dollars. SDCL 5-18-18.3. These change orders are in direct violation of SDCL 5-18-19
Void Contracts — Remedies
[¶ 44.] Did the trial court err in rejecting the defense of equitable estop-pel?
[¶ 45.] The circuit court concluded that equitable remedies, in particular the defense of equitable estoppel, was unаvailable to Mills because the change orders were void. This decision follows a long line of jurisprudence from this court. See Norbeck & Nicholson Co. v. State,
[¶ 46.] The majority has determined that the denial of equitable remedies now applies to both sides of a void public contract; that when a contract is determined to be void, the court leaves the parties as they find them. The majority reconciles the past decisions with this one by reasoning that never before has a contractor completely forfeited the entire price of the changes ordered. Also noted is the fact
[¶ 47.] This Court previously ruled that because the contract entered into is against public policy and in violation of law, City must be permitted to recover into the public treasury funds paid out to the contractor. See Sioux Falls Taxpayers Ass’n v. City of Sioux Falls,
[¶ 48.] Because Brookings taxpayers are not in pari delicto, or equally at fault, with city officials and Mills, it mandates recovеry of consideration already paid. The taxpayers, specifically Bozied, gave notice at city council meetings that they believed the actions of City and Mills were illegal. That recognition by the taxpayers does not make them a party to the illegal contract and therefore they should recover those payments made illegally. “The allegation that City and its residents were not harmed but rather profited because of the illegal contract is completely irrelevant.” Himrich v. Carpenter,
[¶49.] While it is commonly said that the law abhors a forfeiture, I must point out that the relief from a forfeiture is still equitable in nature. And therefore, under the majority’s holding that equitable defenses are not allowed with void contracts, the circuit court should be in a position to disallow any relief from forfeiture if the contract is determined to be void. Helm Bros., Inc. v. Trauger,
[¶ 50.] Mills’ July 2, 1998 letter to the Agri-plex board confirms Mills was aware of the legal requirements of bidding public contracts and the ramifications of the change orders. From the wording of this letter, it appears Mills attempted to influence the board to execute a change order instead of letting bids on the changes.
The provisions of statutes, charters аnd ordinances requiring competitive bidding in the letting of municipal contracts are for the purpose of inviting competition, to guard against favoritism, improvidence, extravagance, fraud and corruption, and to secure the best work or supplies at the lowest price practicable, and they are enacted for the benefit of property holders and taxpayers, and not for the benefit or enrichment of bidders, and should be so construed and administered as to accomplish such purpose fairly and reasonably with sole reference to the public interest. These provisions are strictly construed by the courts, and will not be extended beyond their reasonable purpose. Competitive bidding provisions must be read in the light of the reason for their enactment[.]
10 McQuillan, Municipal Corporations (3rd rev. ed. 1999) § 29.29 at 364 (footnotes omitted).
[¶ 51.] With these notes of disagreement from the majority’s opinion, I respectfully give my dissent on those two issues.
[¶ 52.] VON WALD, Circuit Judge, for SAJBERS, Justice, disqualified.
. SDCL 5-18-3 provided in 1997: "If the governing body of any public corporation intends to enter into a contract for the construction of a public improvement which involves the expenditure of twenty-five thousand dollars or more or a contract for the purchase of materials, supplies, or equipment which involves the expenditure of fifteen thousand dollars or more, the governing body of the public corporation shall advertise for bids for the project....”
. SDCL 5-18-19 provides: "It shall be unlawful for any public corporatiоn or its officers to enter into any contract in violation of the terms of this chapter or chapter 5-21, and any such contract entered into shall be null and void and of no force and effect."
. In its letter, Mills urged the Board to act quickly on a number of change orders to avoid time delays and added expense. It urged a change order approach, stating, “You may certainly delay action on these items to include them with your total package approach but that delay will cost extra. Because of the interruption in our work, we will need an answer (signed Change Order) on these items by July 10 to avoid having to add additional $ to cover our extended overhead expense estimated at $825.00 per day for our portion alone.”