Wilson v. Lord-Young Engineering Co.

OPINION OP THE COURT BY

ROBERTSON, C. J.

This is an-appeal from a decree of a circuit judge, sitting iu equity, whereby the respondeuts were perpetually enjoined from performing, or partaking in the performance of, a certain contract for the construction of a public road in the City and County of Honolulu. The contract was awarded to the respondent, Lord-Young Engineering Oo.,‘ Limited, by the respondents Campbell, Eern, Adams, Petrie and Dwight, acting as a commission appointed pursuant to section 5, Act 166 of the Laws of 1911. The complainant, who was an unsuccessful bidder for the contract, brought this suit as a taxpayer alleging that he and not the Lord-Young Engineering Co. was the lowest responsible bidder. The statute (Act 62 of the Laws of 1909, as amended by Act 41 of the Laws of 1911,) provides that, with certain exceptions, no expenditure of public money where the sum to be expended shall be one thousand dollars or more shah be made except under contract let after public advertisement *89 for sealed tenders, and that all such contracts shall be made with the lowest responsible bidder after publication for not less than ten days of such call for tenders. The complainant’s contentions were that the commission, in determining who was the “lowest responsible bidder” w'as charged with the duty of granting a hearing before arriving at a conclusion, and was required to make a fair and reasonably thorough investigation of the facts before making a decision; also that the specifications accompanying the call for bids were fatally uncertain in not stating a time in which the contract must be completed. The circuit judge, without passing on the question of the validity of the specifications, based his decree on the point that the decision in favor of the Lord-Young Engineering Co. was of no validity for the reason that in determining the question before it the commission had acted in secret and without granting an open hearing before making an award.

Additional facts are to be found stated in the opinion of Mr. Justice Perry wherein also are contained our reasons for holding that the specifications upon which the bidders based their tenders were so indefinite and uncertain in respect to the time within which the contract was to be performed as to prevent real competition between the bidders, and that a valid contract could not be founded on them. That ground alone is enough to require the affirmance of the decree, but in view of the importance of the case because of the fact that public contracts are constantly being let by officers acting under the statute here involved we deem it our duty to express our views with reference to the procedure followed by the commission in considering the bids and awarding the contract in question.

The trial judge found as a fact that the complainant was the lowest responsible bidder and the finding was fully supported by the evidence. That alone would not, howfever, be conclusive of the complainant’s right to the relief sought because if upon a fair and impartial public hearing the commission had found up *90 on any substantial evidence that the complainant was not a responsible bidder, though the lowest, that finding, though erroneous, would not be disturbed by the court in the absence of a showing of fraud, or collusion, or arbitrary action amounting to fraud.' It is admitted that the consideration and determination of the question of the complainant’s responsibility was done, not at. an open meeting of the commission, but behind closed doors. But it is .argued that if in fact the investigation w.as fair, impartial, and sufficiently thorough, the decision ought not to be disturbed for the reason alone that the meetings were not open to the public. Assuming, without deciding, that the point is well taken, and conceding that there was no evidence that any improper motive influenced the action of the commission, yet the récord shows that the investigation made was not conducted with that fairness, impartiality and thoroughness which should characterize proceedings of a judicial or quasi-judicial nature. At the meeting of the commission, at which ■ the bids were opened a general discussion was had in the course of which the statement was made that Wilson had failed to fulfil certain contracts which had been awarded him at previous times, but no action with reference to awarding a contract was taken. At the next meeting, .after further discussion, the chairman was directed to investigate and report as to the responsibility as contractors of the three lowest bidders. At the third meeting the chairman made a verbal report, the substance of which, after the meeting, Was reduced to writing, and appears in the minutes of the proceedings of the commission as follows:

“The Loan Fund Commission,

City and County oe Honolulu.

Gentlemen :

At a meeting of'this Commission held on September 29th, 1911, I was authorized and directed to investigate the responsibility as contractors of Mr. Theo. Bauman, the Lord-Young Engineering Company, Limited, and Mr. John H. Wilson.

I beg to malee the following report:

*91 I have found no record of irresponsibility on the part of Theo. Bauman as a contractor. I am informed by credible business men that his record is good.

So far as I can learn the Lord-Young Engineering Company,Limited, also has a good record for responsibility as contractors, as an instance of which it is stated that although they are reported to be losing on one of their operations by contract, namely the Hilo Breakwater, now under way, they are continuing to perform their obligations in good faith. Our engineer, Mr. Gere, has a criticism of Mr. Young’s attitude toward the Queen Street paving proposition for the City and County Government, but I did not understand Mir. Gere to question the responsibility of the firm as contractors.

I am informed that Mr. J. H. Wilson has failed to complete two contracts which he has undertaken, one for the County of Kauai, and one for the Territory. I have sent a wireless message to the Vice-Chairman of the Kauai Board of Supervisors, asking for information bearing on the Kauai contract. I am informed that the County of Kauai was not put to additional expense by the failure of Mr. Wilson to complete his contract. I understand Mr. Wilson claimed that certain machinery used by him was not delivering the guaranteed amount of material and that, therefore, he could not perform the work as rapidly as he had expected to be able to do. I understand also that the County Government of Kauai caused an engineer to be sent to them from Honolulu and that after certain repairs were made to- the machinery it was found to- have the capacity of delivering a greater' amount of material than was required. • T understand further that the Kauai authorities claimed the machinery had not been properly operated by the contractor. T would state that I am informed that the machinery used by Mr. Wilson on the Kauai contract under question is a duplicate of the plant which the Supervisors of the City and County of Honolulu will lend to this Commission for use on Section No. 1 of the Oahu Belt Road, the-bids for the construction of which are now being considered by this commission.

■ I quote the following from a published report of the Superintendent of Public Works, now incorporated in the public records, under the title

*92 'Loan Appropriations.

Completion and Extension of Sewerage, Honolulu.

A contract was made July 5th, 1899, with J. H. Wilson under the firm name of Wilson & Whitehouse, for the construction of the Outfall Sewer, the same to be completed July 1st, 1900, but his progress'was so slow that at the expiration of the time specified little had been accomplished beyond laying that part of the Outfall which consists of vitrified pipe, a length of 1500 feet in shallow water, and his methods were so manifestly inadequate for the carrying out of the work, that on September 10th, the contract was taken awiay and the work continued by the Government. The completion of his contract would have entitled him to receive a total amount of something in excess of $28,000. The actual payment made to him under the contract amounted to $6,656.60.’

I am informed that since the last above mentioned contract Mr. Wilson has performed satisfactory work by contract on Maui, and also that under the last Board of Supervisors he completed the Kahana beach contract on this island to the satisfaction of the Supervisors.

Nespectfullv submitted,

Andrew Adams.

Honolulu, October 3rd, 1911.”

In addition to what is contained in the written report it appears that the chairman stated that he had been told by W. E. Nowell, who was superintendent of public works at the time of the letting of the outfall sewer contract, that Wilson’s bid for the work was ridiculously low and his methods were all wrong, but that he did not blame Wilson as he thought no man could have done the work for the amount of the bid. The chairman also stated that he was informed that Wilson’s bondsmen on that contract had lost about twTenty-one hundred dollars which Wilson had never made good; that in connection with the road contract on the island of Kauai the Hawaiian Sugar Oompany had lost four hundred dollars; and that the manager of the company’s plantation had stated that he did not care to have any further business connection with Wilson. It was not explained *93 how the Hawaiian 'Sugar Company became concerned with Wilson in the contract referred, to, nor how1 the loss was incurred. The chairman further reported that Mr. Gere, the county engineer, said that that part of the Kauai road which was built by Wilson was known as the best part of the road; and he quoted Mr. Gere as saying of Wilson that “He was a very good man, he could do the work if you keep after him, but you had to keep after him all the time to get the work done.” Two members of the commission expressed their opinions to the effect that they did not regard Wilson as a responsible bidder. Another member took the opposite view, urged the fact that Wilson had satisfactorily executed several road building contracts and suggested that Wilson be given a hearing. At the conclusion of the discussion the commission decided by a vote of four to one to award the contract, to the Lord-Young Engineering Company as the lowest responsible bidder.

The testimony given by the chairman of the commission before the circuit judge shows that in making the investigation he did not have in mind Wilson’s financial responsibility nor his ability and skill to do the work. He seems to have regarded those qualifications as being conceded. He testified that his inquiries were directed solely to the question whether Wilson was “the type of man who stood from under when he got into a hole,” or Would “live up to his contracts whether pinched or not.”

The evidence shows that the principal charges made against Wilson — and the only charges which need be referred to hei’e— were his failure to complete the work under the outfall sewer contract and the Kauai road contract. With reference to those matters neither the commission or its chairman made any attempt to get from Wilson any statement as to why he failed to carry out his contracts. No opportunity was given. Wilson to present his side of the case though he was available and, appar *94 ently, anxious to explain. At the hearing in the court below Wilson testified in. explanation as to why he had not fulfilled those two contracts and adduced testimony of disinterested witnesses as to his skill, ability and experience as a builder of roads, as well as to his business integrity, and if an opportunity had been given him to present the evidence to the commissioners it would probably have sufficed to convince them of Wilson’s responsibility. The commission’s investigation was not a thorough one. Its action was arbitrary and unfair because it was done in secret and was based on what amounted to no more than an exparte hearing at which no opportunity was offered for an explanation or a showing of any kind to be made by or on behalf of the lowest bidder in the interest of the taxpayers. Chippewa Bridge Co. v. Durand, 122 Wis. 85; State v. Commissioners, 39 Oh. St. 188, 192; Faist v. Hoboken, 12 N. J. L. 361; Jacobson v. Elizabeth, 64 Atl. (N. J.) 609.

B. B. Anderson (Kinney, Prosser, Anderson & Marx on the brief) for complainant.

In considering tenders for public contracts under a statute providing for the letting of contracts to the lowest responsible bidders, the awarding officers have a wide discretion. But that, discretion must be exercised fairly, honestly and judicially. The phrase “responsible bidder’’ means one who is not only financially responsible, but who is possessed of the judgment, skill, ability, capacity and integrity requisite and necessary to perform the contract according to its terms. The duty of such officers in considering and determining those matters is an important and responsible one, and one upon the performance of which the taxpayers have the right to insist. The refusal.to award a contract to the lowest bidder can be justified only when it has been made to appear ujion a proper hearing and investigation that he is not a responsible bidder. 2 Dillon, Mun. Corp. (5th ed.) Sec. 811.

The decree appealed from is affirmed.

E. W. Sutton, E'eputy Attorney General (Alexander Lindsay, Jr., Attorney General, with him on the brief), for respondents Oahu Loan Fund Commissioners.