Austin v. Housing Authority of City of Hartford
| Decision Date | 18 April 1956 |
| Citation | 122 A.2d 399,143 Conn. 338 |
| Parties | Helen G. AUSTIN et al. v. The HOUSING AUTHORITY OF THE CITY OF HARTFORD et al. Supreme Court of Errors of Connecticut |
| Court | Connecticut Supreme Court |
Maxwell M. Merritt and J. Read Murphy, Hartford, for plaintiffs.
Frederick H. Wiggin, New Haven, with whom, on the brief, was John W. Barnett, New Haven, for defendant Firemen's Mut. Ins. Co.
Morris Apter, Hartford, for named defendant and others.
Before INGLIS, C. J., BALDWIN, WYNNE and DALY, JJ., and ALCORN, Superior Court Judge.
In this action the plaintiffs seek an injunction restraining the commissioners of the Hartford Housing Authority, hereinafter referred to as the defendants, and the housing authority itself from awarding any contract to, and making payments pursuant to any contract of fire and extended coverage insurance with, the Firemen's Mutual Insurance Company, hereinafter called Firemen's, and an injunction requiring the defendants to reject the bid of Firemen's as not being that of the lowest responsible bidder and directing them to award the contract to The Hartford County Mutual Fire Insurance Company, hereinafter referred to as The Hartford County. The case has been reserved for the advice of this court, and the following facts have been stipulated.
The plaintiffs are all taxpayers of the city of Hartford. In May, 1954, the housing authority publicly invited bids for the furnishing of fire and extended coverage insurance for various properties owned by it. This invitation directed that all bids should be submitted on a bid form which called for the bidder to state for each property to be insured three figures: '5 year deposit premium,' '5 year estimated dividend,' and '5 year net premium.' In the invitation the defendants reserved the right to reject any or all bids. On June 24, 1954, twelve bids submitted in response to the invitation were opened. One submitted by The Hartford County through an agent indicated that it would charge a fixed five-year gross premium of $86,997.45 and would pay no dividend, so that the net premium would be the same as the gross. Another, submitted by the Firemen's, stated that its five-year gross premium would be $114,567 and its estimated dividend $57,283.50, leaving as its five-year net premium $57,283.50. The bid of The Hartford County was the lowest of all the bids which made no deduction from gross premiums for dividends, but Firemen's bid had the lowest net premium. The 'dividend' in Firemen's bid is the return of the unused or unabsorbed premium and is estimated on the basis of the returns made to policyholders over a period of more than ten years previous to 1954. It would be payable to the housing authority at the end of the five-year term, but it might lawfully be more or less than the amount estimated depending upon the return actually voted by the directors of the company in the light of its experience. All bids submitted were based on furnishing insurance coverage under the Connecticut standard fire insurance policy, which permits a policy to be canceled by the insurer at any time upon refunding the excess of the paid premium over the earned premium. General Statutes, App.A, p. 3232.
Although on June 28, 1954, a temporary injunction was issued restraining the housing authority from awarding the contract to Firemen's, that injunction was later dissolved by stipulation, and the policy was issued to the housing authority by Firemen's. For more than ten years before May, 1954, Firemen's had returned to its policyholders having five-year contracts dividends of not less than 50 per cent, and this fact was known to the defendants when the contract was awarded to Firemen's. Both Firemen's and The Hartford County are mutual companies and are capably managed, financially sound and able to write the insurance in question. The housing authority and the defendants, in accepting the bid of Firemen's and awarding the contract to it, did so in good faith without fraud and in what they considered the best interests of the authority and the public.
The properties of the housing authority to be covered by the insurance were of two kinds. One portion consisted of so-called low rental housing, and the other of moderate rental housing. With reference to the first, the housing authority has a contract with the federal public housing administration by the terms of which the former is subsidized for losses incurred as a result of making housing available for persons of low income. This contract requires the housing authority to administer its affairs in accordance with regulations promulgated by the public housing administration. Certain of those regulations concern competitive bidding for fire and extended coverage insurance. They provide that in evaluating a bid made by a dividend-paying company as compared with one made by a fixed premium company, 'interest at not exceeding four per cent per annum for the policy period should be computed on the difference between the deposit premium of the dividend-paying company and the fixed premium of the fixed premium company and added to the anticipated net premium charged by the dividend-paying company.'
The moderate rental houses were constructed with funds in part borrowed from the state of Connecticut. The housing division of the public works department of the state of Connecticut promulgates regulations for the administration of moderate rental projects by local housing authorities. As amended on December 6, 1950, these regulations, in dealing with the award of insurance contracts, provided that with reference to bids with anticipated dividends the factors to be considered were whether the management of the company was sound and whether, on the basis of past dividend records, it seemed likely that the dividend record of the company would be maintained.
Although the stipulation for reservation sets forth fifteen questions upon which the advice of this court is sought, 1 in reality there are only three main issues: (1) Are fire and extended coverage policies of insurance within the purview of § 340c of the 1953 Cumulative Supplement to the General Statutes, so that the housing authority was required to invite bids for the awarding of contracts for the furnishing of such policies and to award the contracts to the lowest responsible bidder? (2) In awarding the contract to Firemen's, did the defendants comply with the statute? (3) Do the plaintiffs have a justiciable interest which gives them a standing to maintain this action?
The statute which controls the decision of this case is § 340c of the 1953 Cumulative Supplement, as amended, Cum.Sup.1955, § 440d. It defines the powers of municipal housing authorities. It contains this provision: There follows a provision permitting a waiver of the quoted requirement under certain circumstances, but that provision is not pertinent to this case.
The decision of the first two issues stated above requires the interpretation of § 340c. In the interpretation of any statute it is essential to bear in mind the purpose of its enactment. Cassidy v. Tait, 140 Conn. 156, 160, 98 A.2d 808. Such requirements as are contained in the statute in question 'are for the purpose of inviting competition, to guard against favoritism, improvidence, extravagance, fraud and corruption in the awarding of municipal contracts, and to secure the best work or supplies at the lowest price practicable, and 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.' 10 McQuillin, Municipal Corporations (3d Ed.) § 29.29.
Section 340c requires the taking of bids for contracts 'for purchases of personal property of every description.' This is very broad. It includes all kinds of personal property. The term 'personal property' embraces everything, not coming under the denomination of real estate, which is the subject of ownership and has an exchangeable value. Stanton v. Lewis, 26 Conn. 444, 449; 73 C.J.S., Property, § 8, p. 170. 'Insurance is a contract, and as such in legal contemplation is property * * *.' 1 Couch, Insurance, § 3; Frick v. Lewellyn, D.C., 298 F. 803, 808, affirmed, 268 U.S. 238, 45 S.Ct. 487, 69 L.Ed. 934. Not only does a contract of fire insurance come within the generally accepted definition of personal property but, when the purchase of the policy is to be with public funds, it is strictly in accord with the purpose of a lowest responsible bidder statute to require that the policy be purchased only from the lowest bidder. The opportunity to expend public money improvidently is as great in the purchase of a fire insurance policy as in the purchase of any other personal property. Accordingly, we conclude that the requirements of § 340c extend to the purchase of standard form policies of fire and extended coverage insurance.
The next question is whether the award of the contract for insurance to Firemen's was in violation of the statute. Under similar lowest responsible bidder statutes, it is well settled that when the products offered for sale by two or more unquestionably responsible bidders are substantially the same and the bids are made on the same basis, so that the differences in the bids can be measured mathematically, the authority awarding the contract...
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