Debcon, Inc. v. City of Glasgow

• Decision Date: 23 July 2001
• Docket Number: No. 99-542.,99-542.
• Citation: 2001 MT 124,28 P.3d 478,305 Mont. 391
• Parties: DEBCON, INC., Plaintiff and Appellant, v. CITY OF GLASGOW and Delta Engineering, Inc., Defendants and Respondents.
• Court: Montana Supreme Court

28 P.3d 478

2001 MT 124

305 Mont. 391

DEBCON, INC., Plaintiff and Appellant, v. CITY OF GLASGOW and Delta Engineering, Inc., Defendants and Respondents.

No. 99-542.

Supreme Court of Montana.

Submitted on Briefs July 20, 2000.

Decided July 23, 2001.

Torger Oaas, Lewistown, MT, For Appellant.

William Conklin, Conklin, Nybo, LeVeque & Lanning, Great Falls, MT, For Respondent.

Justice JAMES C. NELSON delivered the Opinion of the Court.

¶ 1 Appellant Debcon, Inc. (Debcon), appeals the Order entered by the Seventeenth Judicial District Court, Valley County, that granted summary judgment in favor of Respondents City of Glasgow and Delta Engineering, Inc. (hereinafter the City and Delta, respectively), and denied Debcon's motion for partial summary judgment and motion to amend its complaint.

¶ 2 We affirm.

¶ 3 Debcon raises two broad issues, which we have recast as follows:

1. In granting summary judgment in favor of Delta, did the District Court correctly conclude that Delta owed no duty of care to Debcon in fulfilling its contractual obligation to the City to make recommendations concerning the lowest responsible bid?

2. Did the District Court correctly conclude that as a matter of law Debcon could not assert a bad faith claim against Delta, and therefore the denial of Debcon's motion to amend its complaint was proper?

FACTUAL AND PROCEDURAL BACKGROUND

¶ 4 In January of 1997, the City contracted with Delta, a Great Falls engineering firm, to prepare plans, specifications, and bid documents for a municipal improvement project known as the Combined Sewer Separation Project, Phase I, Southside (hereinafter the Project). Delta also agreed to perform design engineering, construction inspection, and administration work on the Project.

¶ 5 Under Article 1, section 3.0, of the contract, Delta agreed to perform "bidding phase services." This included providing "award recommendations." Delta also agreed to "attend the bid opening" and "review bid results." Thus, Delta produced for dissemination a document entitled "Contract Documents and Specifications for Southside Stormwater Collection System, Glasgow, MT" in June of 1997.

¶ 6 Under section 1.1, the bid specification document provided that the "right is reserved to reject any or all bids, to waive any defect or informality in any bid therein, and to accept the bid or bids which the Council feels is in the best interest of the City." Under section 1.2, instruction number 11, the document provided that "[t]he Contract will be awarded to the lowest responsible Bidder" and the lowest responsible Bidder "shall be the Contractor whose Bid is the lowest for each individual Bid Schedule." Under instruction 11(c), however, the document provided once again that the "Owner," meaning the City, reserved "the right to reject any or all Bids or to waive any informality or technicality in any Bids received." The instructions further provided that the "Contract will be awarded in conformance with the laws of the State of Montana."

¶ 7 Under instruction 11(e), the document provided:

The Owner may make such investigations as it deems necessary to determine the ability of the Bidder to perform the work, and the Bidder shall furnish to the Owner all such information and data for this purpose as the Owner may request. The Owner reserves the right to reject any Bid if the evidence submitted by, or investigation of, such Bidder fails to satisfy the Owner that such Bidder is properly qualified to carry out the obligations of the Agreement and complete the work contemplated therein. The ability of a Bidder to obtain a Performance Bond and/or Bid Bond shall not be regarded as the sole test of such Bidder's competency or responsibility.

The bid sheet that Debcon filled out and submitted likewise included the provision that "Bidder understands that the Owner reserves the right to reject any or all bids and to waive any informalities in the bidding."

¶ 8 Bids were accepted and opened on the same day, July 7, 1997. The Appellant Debcon's bid of $1,486,504 was by far the lowest. Debcon is a Montana corporation located in Lewistown, Montana. The undisputed facts show that Debcon's bid was 15 percent lower than the other six bids, and that the other bids were within one percent of each other, and were consistent with Delta's pre-bid estimate of $1,765,561.

¶ 9 According to an affidavit submitted by John Juras, a Delta employee and licensed professional engineer, two mathematical errors were discovered in Debcon's bid, both in excess of $100,000. It is undisputed that once corrected, Debcon's bid—$1,554,945—was still lower than the closest bid. According to Juras, who was assigned as project engineer for the project, "[t]hese two very large mathematical errors increased my concern about the advisability of accepting Debcon's bid." Juras further attested that because Delta's contract called for him to provide a contract award recommendation, "I made some telephone calls to learn what I could about Debcon, Inc."

¶ 10 According to Juras's affidavit, he learned that Debcon might be "over-extended" with other projects and that the company may be difficult to work with and "quick to file lawsuits." Other sources of information—i.e., other parties that had dealt with Debcon in the past—offered for the most part neutral feedback. Additionally, Juras stated that he was concerned that the low bid price might lead to the contractor "losing money, cutting corners, and other problems." Juras also attested to his observations concerning Debcon's vice president, who apparently filled out the bid documents just moments before submitting them, and did not ask any questions at a bidders conference held in June, which led Juras to believe that Debcon was "inadequately prepared."

¶ 11 Consequently, Juras on behalf of Delta recommended to the Glasgow City Council that Debcon's bid was not in its best interest, and that it should accept the next lowest bid. The City Council, in turn, issued Resolution No. 1553, which listed the seven submitted bids. The bid attributed to Debcon was the uncorrected bid of $1,486,504. The Resolution provided that "the mistakes in Debcon's bid are deemed to be material" and "the Engineer has recommended that the contract be awarded to Northern Line Layers, Inc. as the lowest responsible bid." The Resolution resolved that "the bid of Debcon, Inc. is rejected because it contains errors which are both significant and material."

¶ 12 Debcon brought suit against the City and Delta on December 4, 1997, alleging negligence in the award of the construction contract. On May 7, 1999, Debcon sought to amend its complaint. Again, Debcon claimed that the City and Delta had negligently failed to follow "their own bid specifications." Debcon further claimed, under a second count, that Delta's recommendations to the City included misrepresentations. Apparently, Count II was a claim that Delta acted in bad faith in the "circumstances surrounding the rejection of Debcon's low bid."

¶ 13 Delta moved for summary judgment on May 5, 1999. In part, Delta claimed that it owed no duty of care to Debcon, as a stranger to the contract between Delta and the City, regarding any of its recommendations. Debcon moved for summary judgment on May 17.

¶ 14 Following a hearing, the District Court determined, as a matter of law, that Debcon lacked standing to assert a duty of care owed to it by the City.

¶ 15 The District Court then concluded that Debcon's negligence claim against Delta must fail as a matter of law as well. The court ruled that "[a]n essential element for asserting negligence as a claim of relief is existence of a duty flowing from the alleged wrongdoer to the claimant." The court determined that Delta owed no duty of care to Debcon under the circumstances. "Delta is an independent project engineer whose obligations are by contract with [the City of Glasgow]."

¶ 16 Further, the court observed that, under this Court's decision in Jim's Excavating Serv., Inc. v. HKM Assoc. (1994), 265 Mont. 494, 878 P.2d 248, where this Court relied on Restatement (Second) of Torts § 552, there was no allegation that Delta's recommendations to the City contained false information concerning Debcon. The court further observed that Debcon had not alleged that Delta knew or should have foreseen that its actions would be relied upon by Debcon. Thus, the court concluded that the duty of care established in Jim's Excavating concerning project engineers' obligations to third parties did not apply in this case.

¶ 17 Finally, the court determined that because Debcon's amended complaint asserting bad faith asserted "no special relationship" between itself and Delta, "there can be no bad faith claim against Delta."

¶ 18 Debcon appeals from that part of the order that granted summary judgment in favor of Delta. Debcon does not appeal the summary judgment granted in favor of the City.

STANDARD OF REVIEW

¶ 19 This Court reviews an order granting summary judgment de novo, using the same Rule 56, M.R.Civ.P., criteria applied by the district court. See Spinler v. Allen, 1999 MT 160, ¶ 14, 295 Mont. 139,

¶ 14, 983 P.2d 348, ¶ 14. This Court looks to the pleadings, depositions, answers to interrogatories, admissions on file, and affidavits to determine the existence or nonexistence of a genuine issue of material fact. See Erker v. Kester, 1999 MT 231, ¶ 17, 296 Mont. 123, ¶ 17, 988 P.2d 1221, ¶ 17.

¶ 20 When we review a district court's conclusions of law, our standard of review is plenary and we must determine whether the court's conclusions are correct as a matter of law. See Lane v. Farmers Union Ins., 1999 MT 252, ¶ 15, 296 Mont. 267,

¶ 15, 989 P.2d 309, ¶ 15 (citation omitted).

¶ 21 Ordinarily, summary judgment is not granted in causes grounded in negligence claims due to the requisite finding that no material facts remain in dispute. See Dillard v. Doe (1992), 251 Mont. 379, 382, 824 P.2d 1016, 1018

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