365 Pa. 190 | Pa. | 1950
Lead Opinion
Opinion by
This matter is before us on separate appeals by the respective plaintiffs and on cross appeals by the Commonwealth acting by its administrative and fiscal officers named as defendants. The appellant plaintiffs complain of the lower court’s refusal of their prayers for an injunction to restrain the defendants from entering into or acceding to any contracts for the furnishing and applying of bituminous materials in the maintenance and repair of State highways (for a specified period) other than as awarded to the plaintiffs and five other successful bidders by the Secretary of Property and Supplies on or about March 1, 1950; the plaintiffs
The questions involved relate in the main to the legal effect of the learned chancellor’s supportable findings which received the approval of the court en banc and the legal conclusions properly to be drawn therefrom. The following is the factual situation giving- rise to the controversy.
On January 18, 1950, the Department of Property and Supplies, acting as the purchasing agent for the Department of Highways,
The plaintiffs, as well as a number of other contractors, submitted bids pursuant to the “Invitation”. The one plaintiff, McIntosh Road Materials Co. (hereinafter referred to as McIntosh Company or McIntosh), submitted bids under Schedules 2 and 3; the other plaintiff, Dosch-King Company, Inc. (hereinafter referred to as Dosch-King), submitted bids only under Schedule 3.
The bids were opened as stipulated by the proposal at 10, A. M. January 30, 1950; and, on March 1, 1950, which was within the thirty-day period during which the bids were to “remain firm”, the plaintiffs were severally notified by telegram from the Assistant Director of Purchases (Highways) in the Department of Property and Supplies that awards had been made to them on portions of their bids. The telegrams concluded with “Letter follows.” On March 2, 1950, the Secretary of Property and Supplies, acting by the Assistant Director of Purchases (Highways), sent each of the plaintiffs a letter stating that “Tentative award of contract . . . has been made to your company for furnishing and applying bituminous materials as listed on the attached schedule.” The letter further stated that “This award is in accordance with your bid submitted on Proposal-Index Number H-4619, bid opening date January 30, 1950”, and that “This tentative award is subject to your compliance with the provisions of the proposal form which require that you submit a performance bond and a labor and material bond, each in an amount equal to 50% of
In the letters of March 2,1950, from the Department of Property and Supplies to the plaintiffs, the Secretary expressly engaged to forward to them later a copy of the release to the Field Offices of the Department of Highways which would “show all awards made on bids received on Proposal-Index Number H-4619”; and, on March 3,1950, the Department of Property and Supplies did send to each of the plaintiffs a copy of such release in the form of a letter from its Assistant Director of Purchases (Highways) addressed to “All Bureaus, Sections, Units, Sub-Units, District Engineers and Maintenance Superintendents” of the Highway Department. The letter specifically declared that “Contracts, for furnishing and applying bituminous materials for the period April 1, 1950, to March 31, 1951, have been awarded to: [seven named companies]” whereof the plaintiffs were two (Emphasis supplied). The letter further disclosed that all of the contracts had been awarded on the basis of bids under Schedule 3 which, as will be recalled, was the schedule that required the contractor both to furnish the materials and to apply them at the bid price without any liability whatsoever to the Commonwealth for car service, track storage, truck transport layover charges or demurrage.
The total amount of the contract for material and work so awarded to McIntosh Company was $885,313, and to Dosch-King, $444,459. On March 3, 1950, the day following the Department’s letter to the plaintiffs confirming the award of contracts to them, the DoschKing Company forwarded to the Department of Property and Supplies its tv/o bonds, each in the appropriate amount of $222,229.50 with responsible corporate surety; and on March 7, 1950, McIntosh Company likewise for
Inasmuch as performance by the contractors under the awards of March 1st, as confirmed by the Secretary’s letter of March 2, 1950, could be required from April 1, 1950, onward under a $50-a-day penalty for a contractor’s delay in performing, the plaintiffs as awardees of contracts at once set about to prepare themselves for timely performance. The learned chancellor, acting for the court en banc in disposing of McIntosh’s exceptions, found that McIntosh “purchased four additional distributor trucks at a cost of approximately $50,000, which trucks were delivered to [it] on or about March 28,1950. . . . [and McIntosh also] entered into written contracts with Atlantic Refining Company, dated March 3, 1950, for a total of 4,745,000 gallons of bituminous materials [out of its total requirement of 6,605,000 gallons under its award] to be applied pursuant to the award. In addition, [McIntosh] called its men back to work and hired twelve additional employees to get ready to perform the contract on April 1, 1950.” The chancellor also found, and the court below approved, that the Dosch-King Company likewise “made preparation for furnishing and supplying the materials included in the awards made to [it] as listed upon the schedule accompanying the letter of March 2, 1950 .... [DoschKing also] entered into contracts with Standard Oil Company of New Jersey and Riley Tan & Chemical Company for bituminous materials to be applied pursuant to the award.”
On March 29, 1950 (just two days before the beginning of the contract term), the Secretary of Property
The reason assigned by the Deputy in his letters of March 29th for the proposed “new awards” was that, as against making awards to the lowest bidders under Schedule 3 exclusively, “a still lower combination of bids was available if Schedules ‘1’ and ‘2’ were considered along with Schedule ‘3’ and the lowest combinations picked from one or the other Schedules.” As proof thereof, the Department’s letter of March 29th set out that, while the total amount of the awards made March 1, 1950, was $2,115,875, the total amount of the proposed “new awards” arrived at by taking Schedules 1, 2 and 3 in combination was $2,397,309 or a putative saving to the Commonwealth of $18,566. The calculation did not reckon, however, with the possibly heavy contingent liability attaching to the Commonwealth if bids under Schedules 1 and 2 were infused with the bids under Schedule 3.
The Secretary’s attempted revision of the awards of March 1, 1950, was inspired by the expressed dissatisfaction of the President of the Lake Asphalt & Petroleum Company of Pennsylvania (hereinafter referred to as Lake Asphalt), one of the prior unsuccessful bidders, who claimed that his company was low bidder. At trial, the Deputy Secretary testified that, on March 28, 1950,
The effect of the proposed “new awards” of. March 29th upon the plaintiffs, if carried out, would have been to reduce the total amount of McIntosh’s contract from $885,313 to $315,715 and Dosch-King’s, from $444,459 to $288,578. The only one of the original successful bidders whose award was not diminished (or eliminated) by the Secretary’s attempted action of March 29th was Allegheny Asphalt and Paving Company which had a March 1st contract award for $659,362 worth of materials and work on its bids under Schedule 3. The Department’s letter of March 29th purported to make a similar award. Allegheny Asphalt is a present intervenor.
It was upon averments based on the facts as above set forth, or to which reference has been made, that the plaintiffs promptly filed the instant suits and, in their bills of complaint, sought to enjoin and restrain (a) the Secretary of Property and Supplies from entering into any contract with anyone other than the plaintiffs for the furnishing and applying of the highway materials included in the awards made to them on March 1, 1950, (b) the Secretary of Highways from ordering or requisitioning from anyone except the plaintiffs the furnishing of materials and the performance of the work included
The defendants jointly answered, substantially admitting all the material averments of the bills of complaint. As to the averment that “. . . the attempted cancellation of prior awards and substitution of new and different awards,- instead of effecting a saving to the Commonwealth . . . would in fact result in a net increase in cost to the Commonwealth of many thousands of dollars”, the defendants concessively answered that “the making of an award as proposed on March 29,1950, may result in an increase in cost in supervising, inspecting, making payments to or otherwse dealing with the larger number of contractors involved.” The defendants further alleged that “. . . the amount of any additional cost would depend upon many conditions, such as efficiency and promptness of particular contractors, weather conditions and many other factors which cannot now be determined or estimated, and . . . that they have no personal knowledge, and have made due inquiry and can obtain none as to whether the proposed award will result in a net increase in cost to the Commonwealth . . . .” The chancellor found in such regard that, “In prior years there had been demurrage paid by the Commonwealth under contracts covering the same type of materials as herein specified, the amount of which demurrage was charged according to the contract provisions and the awards therein made”, but also found that “There
Following a hearing on the merits of both suits, the learned chancellor made findings of fact and conclusions of law and entered an identical decree nisi in each suit to all of which the respective plaintiffs and the defendants filed exceptions. After argument of the matter on the pleadings and testimony before the court en banc, the chancellor entered orders disposing of the exceptions, filed an adjudication and entered a final decree (applicable to both suits) from which these appeals were taken. As already indicated, the decree on appeal (a) declared illegal, null and void “the contract awards, referred to in the letter of the Department of Property and Supplies and dated on or about March 29,1950, the same being the awards made to eleven bidders subsequent to the prior awards of March 2, 1950, to seven bidders . . .” and enjoined and restrained “the defendants . . . from entering into any contracts on the basis of such awards dated March 29, 1950, or otherwise recognizing or giving any effect thereto, or from paying out any public funds in connection therewith” and further (b) invalidated “the prior awards dated March 2,1950,” and “declared [them] to have no force and effect” and enjoined and restrained the defendants “from entering into any contracts on the basis of said awards of March 2, 1950, or from giving any force and effect thereto, or from paying out any public funds in connection therewith.”
Wholly apart from the question of the continuing validity and effect of the award of March 1, 1950, which we shall consider hereinafter, the portion of the decree which declares the purported contract awards by the Secretary of Property and Supplies on March 29th to be illegal, null and void is so manifestly correct as not to admit of any doubt.
In the Harris case, supra, it was discovered, upon the opening of bids for millions of dollars worth of municipal work, that the $825,000 bid-security check of the lowest responsible bidder was about $12,500 short of the required percentage under applicable ordinance. Apparently, the relatively small deficiency in the security deposit was due to the bidder’s inadvertent oversight of one contract item. The bidder was at once given per
Even had the security checks of the unsuccessful bidders, under the March 1st award, still been in the hands of the Secretary of Property and Supplies on March 29th, the purported award of contracts on the latter date would have been no less invalid. As already stated, the chancellor found, and the evidence supports the finding, that “The Department of Property and Supplies privately negotiated with six prior unsuccessful bidders for the purpose of making the award referred to
It is to be noted that the learned chancellor stated in his adjudication that there was nothing to support a conclusion that the Secretary did not act in good faith and that the record indicates that the negotiating with unsuccessful bidders was done in good faith by the Department. As much may be readily accepted and is not here questioned. Nonetheless, the chancellor overruled the defendants’ exceptions as to the disqualifying private negotiations. What the Secretary’s motive was is quite immaterial. The consequent award would have been equally invalid had the original award been lawfully nullified.
So much disposes of the Commonwealth’s appeals. The purported award of March 29th was wholly abortive and no award of any contract can be predicated thereon. The intervenor’s rights, as well as the plaintiffs’, whatever they may be, must therefore rest upon the award of March 1, 1950. That brings us to a consideration of the current legal status of that award.
The court based its ultimate action with respect to the March 1st awards on the attempted recall thereof
The Secretary’s bona fide exercise of his discretion by his award of March 1st rendered his power in such regard functus officii. His discretion was at an end: Pearlman v. Pittsburgh, 304 Pa. 24, 29, 155 A. 118; see also United States v. Purcell Envelope Company, 249 U. S. 313, 318. In Williams v. City of Stockton, 195 Cal. 743, 235 P. 986, the plaintiff was awarded by ordinance a contract for certain public work. The ordinance directed the Mayor to sign a written contract which he failed to do prior to the expiration of his term; and a new administration revoked the award by subsequent ordinance. In holding that the plaintiff had become vested with a right to have the contract signed, the Supreme Court of California aptly quoted from Section 143 of Donnelly on the Law of Public Contracts as follows: “When an award has once been made the public body has no discre
Contrary to the defendants’ contention, the award was not tentative so far as any continuation of permissible discretion in the Secretary was concerned. It was tentative only in the sense that the plaintiffs’ deposit of the required performance and material bonds was a prerequisite to the finality of the awards made to them. When the plaintiffs filed such bonds, which they did promptly, and the bonds were approved by the Department of Justice, as they duly were, the plaintiffs were thereupon as effectually bound contractually as if the signed formal instruments had been delivered. Nor is any legal defect to be imputed to the action of the Secretary of Property and Supplies because he acted in the matter of the contract awards by his Deputy or by the Department’s Assistant Director of Purchases (Highways). Section 206 of The Administrative Code (71 PS §66) expressly authorizes any department head to act “either personally, by deputy, or by the duly authorized agent or employe of the department. . . .” The authority of the Deputy and of the Assistant Director of Purchases has nowhere been denied or questioned in this proceeding. Their competency to act in the premises is conceded by the defendants; and their acts in such connection
In ascribing to the Secretary of Property and Supplies power in the circumstances to recall his award of contracts of March 1st, the court below was apparently motivated by an assumption that the award had not been made to “the lowest responsible bidder.” Such an assumption is not borne out by the record either factually or legally. Incidentally, no one assailed the award of March 1st, directly, as being invalid on the ground that it was not made to the lowest responsible bidder. Indeed, no such issue was litigated below. But, it becomes material here because of the dispositive action taken by the court below with respect thereto. “The lowest responsible bidder” is not ipso facto the one whose bid is the lowest dollar. In Hiorth v. Chester City, 282 Pa. 387, 388, 127 A. 836, the bill seeking to enjoin the award of a municipal contract contained no allegation of fraud or misconduct on the part of the defendant city’s officials, the sole reason alleged in support of the relief sought being that the awardee was not “the lowest responsible bidder” and, therefore, not entitled to receive the contract under the provisions of a relevant statute. We there said that “We have held on numerous occasions that ‘lowest responsible bidder’ does not necessarily mean the bidder whose offer to do the work is the lowest. In the recent case of Hibbs et al. v. Arensberg et al., 276 Pa. 24-29, we said, ‘The term “lowest responsible bidder” does not mean the lowest bidder in dollars; nor does it mean the board may capriciously select the highest bidder regardless of responsibility or cost. What the law requires is the exercise of a sound discretion.’ ” See, also, Brener v. Philadelphia, 305 Pa. 182, 186, 157 A. 466; Kratz v. Allentown, 304 Pa. 51, 54, 155 A. 116; and Wilson v. New Castle City, 301 Pa. 358, 364-365, 152 A. 102.
Nothing has been shown that even suggests the slightest impeachment of the discretion exercised by the Secretary in making that award. It was made to the low bidders under Schedule 3 whereby liability for contingent charges, such as car service, demurrage and the like, was upon the contractors and not upon the Commonwealth. The claimed saving in the estimated costs of the materials and work by combining bids under Schedules 1 and 2 with Schedule 3-was but $18,566, whereas in 1948 the Secretary rejected bids under similar Schedules 1 and 2 which were $30,000 lower than a bid under Schedule 3 for which the contract was awarded because the demurrage and other possible costs to the Comm on - wealth involved in buying the materials and having the work done under Schedules 1 and 2 would not be present under Schedule 3. The acceptance of the bids under
Where bids for public work are invited and received in the alternative, there is a presumption, in the absence of fraud or collusion, that the public officials charged with the duty of awarding a contract thereunder acted in good faith and in the best interests of the governmental agency in making the award: see Wilson v. New Castle City, supra; and Parker v. Philadelphia, 220 Pa. 208, 212, 69 A. 670. Nor will such an award be set aside except upon clear proof of abuse of discretion by the officials who made it: Wilson v. New Castle City, supra; and Hibbs v. Arensberg, supra. Here, there is no proof, let alone clear proof, of any such abuse of discretion in the making of the March 1st award.
In the circumstances here obtaining, approval by the Governor, the Auditor General and the State Treasurer of the March 1st award (as distinguished from the formal contracts) is necessarily to be presumed. We are not now considering Subsection (c) of Section 2403 of The Administrative Code, as amended by the Act of July 5,1947, P. L. 1349, upon which the defendants rely, but Section 2409 (71 PS §639) which provides that “All contracts awarded shall be severally void unless first approved by the Governor, the Auditor General, and the State Treasurer. . .” (Emphasis supplied). The Attorney General in his brief for the defendants correctly interprets Section 2409 to mean that, —“This requirement is made expressly applicable to contracts cawarded’ and they must be ‘first approved’, that is, before a contract is awarded.” The Section is not reasonably susceptible of any other construction. It will be borne in mind that there is no statutory requirement that the of
It is the defendants’ contention that the Governor’s approval of the formal contracts, as distinguished from the award thereof, is now essential to the contracts’ validity by reason of the requirement of Subsection (c) of Section 2403 of The Administrative Code, as amended by the Act of July 5,1947, P. L. 1349 (71 PS §633 Pkt. Part), which empowers the Department of Property and Supplies, —“(c) To enter into contracts with the lowest responsible bidder for the purchase of all other furniture, materials or supplies requested by the Legislative, and other departments of the State Government, except as otherwise provided by this act. All such contracts shall be approved by the Governor, and signed on behalf of the Commonwealth by the Secretary of Property and Supplies, who shall also, with the approval of the Department of Justice, prescribe rules and regulations for the submission of bids, awards, forms of contracts and other matter related thereto.”
No point is to be served by detailing further the respective contentions of counsel in this connection. It is sufficient to say that the question of statutory construction here involved is by no means free from doubt. But, the learned court below accepted the Attorney General’s view and held that Subsection (c) of Section 2403 pertained to all contracts awarded by the Department of Property and Supplies and we are disposed to do the same. It follows, therefore, that in addition to the Governor’s approval of contract awards pursuant to Section 2409 of The Administrative Code, his approval of the formal contracts is now required by virtue of Subsection (c) of Section 2403, as amended. Any seeming anomaly in the requirement of the added approval is the direct result of the 1947 enactment of Subsection (c) which was a piecemeal amendment of a comprehensive Code apparently without regard for the intent and scheme of the whole. Such approval, however, just as in the case of an award, need not be in writing. There is no statutory requirement that the Governor evidence his approval of either the award or the contract in writing although his signature at the place provided therefor on the contract form affords a facile and desirable means of supplying direct proof of his approval of such contract.
The situation thus arrived at is that the award of contracts by the Secretary of Property and Supplies on March 1, 1950, to the plaintiffs and to the intervenor, inter alia, was valid when made and continues so to be, wholly unaffected by the effort of the Deputy Secretary of Property and Supplies on March 29, 1950, to set it aside, the Deputy Secretary’s action in such regard being void and of no effect. Consequently, the March 1st
Accordingly, so much of the decree entered by the court below as declared the attempted award of contracts of March 29, 1950, illegal, null and void and enjoined effectuation thereof is affirmed. The remainder of the decree is reversed. The bills are reinstated and it is hereby ordered and decreed (1) that the Secretary of Property and Supplies sign, on behalf of the Commonwealth, the contracts awarded by him on March 1, 1950, to the plaintiffs, to the intervenor and to others, (2) that the Auditor General and State Treasurer evidence their approval of the award by signing the contracts at the places provided therefor and (3) that the Secretary of Property and Supplies then submit said contracts, as so executed, to the Governor, as in the ordinary course, for his approval; the costs on all appeals to be paid by the defendants.
See Section 2403, Subsection .(e), of The Administrative Code (Act of April 9, 1929, P. L. 177, as amended, 71 PS' §633).
Dissenting Opinion
Dissenting Opinion by
While I concur with the majority in holding that the attempt to award contracts on March 29, 1950, was a
It is a fundamental rule of law that contracts executed with a state government, contrary to the mandatory provisions of a statute, are invalid and unenforceable. The authority of the Commonwealth to contract must be exercised in the manner provided in the statute conferring it: Carpenter v. Yeadon Boro., 208 Pa. 396, 57 A. 837. “he who deals with a municipality [or the state] must recognize that it can contract only upon such terms as the legislature has seen fit to prescribe”: Commonwealth v. Jones, 283 Pa. 582, 586, 129 A. 635; Coyle v. Pittsburgh, 344 Pa. 426, 25 A. 2d 707.
We are here concerned with the interpretation of section 2403 (c) and section 2409 of The Administrative Code, Act of April 9, 1929, P. L. 177, as amended. Section 2403 (c)
In the instant case, plaintiffs, have failed to produce any evidence of a contract signed by the Secretary of Property and Supplies. They rely upon a letter, dated March 2, 1950, signed by the Assistant Director of Purchases on behalf of that officer, informing them that a “tentative award of contract” had been made to them and further that “upon receipt of the bonds and approval of the bonds by the Department of Justice, final award will be made . . .” which they contend, and the majority agrees, was a sufficient acceptance to constitute a binding contract. That letter was not intended to create, nor could it create, any such obligations, inasmuch as the provisions of The Administrative Code had not been
Conceding that a contract must be approved by the three named officials of the Commonwealth and that it nowhere appears in this record that such approval was obtained, nevertheless the majority holds that a presumption arises that such approval was actually secured. It bases such presumption on the theory that a public official, such as the Secretary of Property and Supplies, complied with the Code, and would not have written his letter of March 2, without obtaining such approval. The majority has fallen into error in this regard also, for obviously no presumption could possibly arise under the circumstances here presented. This Court said, in Hill v. Alexander, 338 Pa. 26, 32, 11 A. 2d 884: “It is true that honesty of purpose and good faith in the performance of acts in their official capacity will be assumed by the courts on the part of persons holding responsible public positions, until the contrary clearly appears . . . , but manifestly this principle cannot aid appellants’ case, for no amount of good faith and honesty of purpose on the part of the commissioners can render effective action which is abortive for failure to comply with the manda
Realizing that Section 2403 (c), requiring that a written contract be executed by the Secretary of Property and Supplies and approved by the Governor, has not been satisfied, the majority seeks to create an artificial distinction under the Code, between contract awards and formal contracts, where none in fact exists. This leads to the ridiculous proposition that the Governor must approve an already binding obligation that he has previously approved. This Court should not conclude that the Legislature intended such an absurd result. The untenability of the majority’s position in this connection is further emphasized by the order which it has entered. It has directed the Secretary of Property and Supplies to submit the executed contracts to the Governor for his approval. If he refuses to approve, as he has the legal right to do, appellants are then in the unenviable position of having a valid contract which is unenforceable in law.
Since no contract came into existence between the Commonwealth and appellant companies without the approval of the Governor, the Auditor General and the State Treasurer, the Secretary of Property and Supplies had the right to inform appellants, under the facts presented, that their bids had been rejected. Therefore, since no contracts exists between the Commonwealth and appellant companies and the 30-day period, during which bids were to remain firm, has long since passed,
I would therefore affirm the decree of the learned court below.
As amended by tbe Act of July 5, 1947, P. L. 1349, §2.