Charles L. Harney, Inc. v. Durkee

• Decision Date: 16 November 1951
• Docket Number: No. 15058,15058
• Citation: 107 Cal.App.2d 570,237 P.2d 561,31 A.L.R.2d 457
• Court: California Court of Appeals Court of Appeals
• Parties: , 31 A.L.R.2d 457 CHARLES L. HARNEY, Inc. v. DURKEE, Director of Public Works. Civ.

Page 561

237 P.2d 561

107 Cal.App.2d 570, 31 A.L.R.2d 457

CHARLES L. HARNEY, Inc. v. DURKEE, Director of Public Works.

Civ. No. 15058.

District Court of Appeal, First District, Division 1, California.

Nov. 16, 1951.

Hearing Denied Jan. 15, 1952.

Robert E. Reed, Holloway Jones, Jack Howard, Norris J. Burke, Sacramento (Lewis L. Fenton, Sacramento, of counsel), for appellant.

Gardiner Johnson, Thomas E. Stanton, Jr., San Francisco, for respondent.

PETERS, Presiding Justice.

By this proceeding Charles L. Harney, Inc., hereafter referred to as Harney Co., low bidder on a public improvement under the supervision of the department of public works, seeks to compel the director of that department, by writ of mandate, to award the contract to it after the director had rejected all bids and issued a call for new bids. The trial court determined that the director, in rejecting all bids, had acted arbitrarily and capriciously and had abused the discretion vested in him by law. It ordered the director to award the questioned contract to Harney Co., and enjoined the re-advertisement for new bids. The director appeals.

It should be noted that during the periods here involved Charles Purcell was director of public works and Frank B. Durkee was deputy director of the department. Purcell was ill and Durkee was acting as director. Purcell has since died, Durkee has been appointed director, and has been properly substituted as appellant in this case.

The record discloses the following: On March 16, 1951, pursuant to the terms of the State Contract Act, Gov. Code, §§ 14250 to 14424, the state advertised for bids for the construction of a section of the Bayshore Freeway in San Francisco. Prior to publication of this call for bids the state highway department, pursuant to law, § 14270, Gov.Code, ¹ had prepared, and the director had approved, § 14271, Gov.Code, ² plans, specifications and estimates of cost for the project. The approved estimate was in the amount of $1,231,000. Three competent, reputable and approved construction firms submitted bids. The bids were opened April 11, 1951. It was then discovered that Harney Co., the respondent on this appeal, was the low bidder. Its bid was $1,446,641.45. This is $215,641.45 or 17.47 per cent in excess of the department's estimate of cost.

The contract here involved was a 'unit basis' contract. In such cases the director is not prohibited by law from awarding the contract to a bidder whose bid exceeds the estimate. ³ The director is required to 'award the contracts to the lowest responsible bidders,' Gov.Code, § 14330, except that, 'If the director deems the acceptance of the lowest responsible bid or bids is not for the best interests of the State, he may reject all bids and proceed by day's labor or advertise for other bids * * *.' Gov.Code, § 14335.

When the department discovered that the lowest bid exceeded the estimate by 17.47 per cent, the district engineer of the San Francisco office directed his staff to review the situation. Harney Co. was directed to present of the engineers all of its work sheets and data upon which its bid was predicated. Checks were made with the other two bidders to make sure that bona fide competitive conditions had prevailed. As a result of these studies, and upon a review of the original estimate, the engineers concluded that their original estimate had been in error in several material respects. These engineers also were of the opinion that Harney Co.'s bid was fair and reasonable and as low as could be expected. Under date of April 17, 1951, J. H. Skeggs, assistant state highway engineer, by letter, recommended to George T. McCoy, state highway engineer, that the contract be awarded to respondent as the lowest responsible bidder. In this letter Skeggs stated that upon re-examination of the original estimate 'it is felt that' the prices of ten major items and thirty-five minor items 'were estimated too low.' The letter points out that costs are increasing and that respondent's bid, in the opinion of the engineers, is 'as low as could be expected at this time, or anticipated if the project were readvertised.'

Under date of April 24, 1951, McCoy wrote an interdepartmental communication to the director in which he, too, recommended that Harney Co.'s bid be accepted. In this communication McCoy stated that the 'original estimate was too low and very definitely in error'; that 'the original estimate was definitely in error. The low bid is believed to be reasonable, and we feel certain that a lower bid would not be secured through re-advertisement.' The letter also called attention to the fact that the appropriate federal agency (federal funds were involved) concurred in the recommendation that the contract be awarded to respondent.

On the morning of April 27, 1951, Durkee, as acting director, rejected all bids and directed that steps be taken to have the work re-advertised for new bids. On the afternoon of the same day the state highway engineer presented to Durkee a new or revised estimate of the cost of the project, showing a total estimate $37,479.30 in excess of respondent's bid. On April 28, 1951, Durkee approved the new estimate and directed that the project be re-advertised for new bids.

On May 3, 1951, Harney Co. filed this petition for a writ of mandate, requesting that the director be ordered to award the contract to it, and be compelled to discontinue proceedings for the re-advertisement for new bids. In the meantime, proceedings for receiving new bids continued and three new sealed bids were received, one from Harney Co., one from one of the other of the original bidders, and one from a new bidder. Before these bids were opened the trial court enjoined further proceedings on such re-advertisement until the mandate case could be decided on its merits. Thereafter, a trial was had of the issues presented in the mandate proceeding. After such trial the court entered its judgment directing that the peremptory writ of mandate issue commanding the director to award the contract to respondent. It is from this judgment that this appeal is taken.

The trial court found that Durkee, in rejecting the bids 'refused to make any independent determination as to the best interests of the State of California, or to consider and weigh the above-described evidence, facts, reports and recommendations available to him. He concluded that as a matter of law he could not consider or weigh any revised estimates of cost, and could not legally approve the award of the contract to petitioner, in view of the amount by which petitioner's bid exceeded the original approved estimates of cost. Therefore, he considered that it was not his duty under the law even to consider and weigh such evidence, facts, reports and recommendations in reaching a determination as to the best interests of the State. Believing this, he failed and refused even to consider said revised estimates or said reports and recommendations.' The court also found that the action of Durkee in rejecting all bids 'was not for the best interests of the State of California, and was arbitrary, capricious and an abuse of discretion'; that at the time he rejected all bids Durkee 'was in possession of facts of his own knowledge, and had available to him information, from which the only reasonable conclusion that could be drawn was that the acceptance of Petitioner's proposal and bid was for the best interests of the State of California.' The main question on this appeal is the correctness of these findings in view of the record and the law.

At the inception of these proceedings, by demurrer and other means, the State contended that the trial court had no power to review the actions of the director; that his actions were executive in nature and not subject to review by the courts, except perhaps for fraud. Admittedly, no fraud on the part of the director was charged or found to exists. After being overruled on these contentions, the State answered contending that there had been no abuse of discretion on the part of the director. In support of this defense Durkee, called as a witness for Harney Co., and as its witness, testified at some length as to the factors that motivated him in rejecting the bids. He testified that he studied the problem as to whether to accept or reject respondent's bid for two days; that he received McCoy's report on the bids and his recommendation to accept the Harney bid; that he knew the amount of the original estimate and that respondent's bid exceeded it by 17.47 per cent; that he knew that his staff admitted that the original estimate was materially in error; that he knew, as was customary, that a revised estimate was being prepared, and knew that it would be substantially higher than the original estimate; that he conferred with one of the engineers and sought and received advice from his attorney; that he was particularly troubled because the low bid was in excess of the original estimate, and because his staff admitted that the original estimate was in error in most material respects; that under such circumstances he determined to reject all bids because: 'The statute requires that the estimate be made by the Department before a contract is entered into. We do not estimate our projects after you get the bids; and what the State Highway Engineer was doing in substance, in the communication which he presented to me * * * was making an estimate after the bids were in. We don't do business--that isn't our usual procedure, it isn't the procedure provided for by the Contract Act.' He also testified that, in his opinion, 'the Director is entitled, in considering any bid on a project such as this--or any other state highway project, or any other work that the Department is doing--he's entitled to a yardstick which is based upon an accurate estimate, so he can tell whether or not the bid ought to be approved. And we didn't have it in this case.'

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