Elview Const. Co., Inc. v. North Scott Community School Dist.

• Citation: 373 N.W.2d 138
• Decision Date: 21 August 1985
• Docket Number: No. 84-1776,84-1776
• Parties: 27 Ed. Law Rep. 314 ELVIEW CONSTRUCTION CO., INC.; Master Builders of Iowa, Inc.; Richard A. Hampe; and Quad City Builders Association, Appellants, v. NORTH SCOTT COMMUNITY SCHOOL DISTRICT; Dean Bassett, James Bell, Rex Masterson, Jane Miles, Robert Medd, Ned Mohr and James Tank, as the Board of Directors of the North Scott Community School District, Eldridge, Iowa; Arno (Barney) Ewoldt; and Gary Ewoldt Construction, Inc., Appellees.
• Court: United States State Supreme Court of Iowa

Page 138

373 N.W.2d 138

27 Ed. Law Rep. 314

ELVIEW CONSTRUCTION CO., INC.; Master Builders of Iowa, Inc.; Richard A. Hampe; and Quad City Builders Association, Appellants, v. NORTH SCOTT COMMUNITY SCHOOL DISTRICT; Dean Bassett, James Bell, Rex Masterson, Jane Miles, Robert Medd, Ned Mohr and James Tank, as the Board of Directors of the North Scott Community School District, Eldridge, Iowa; Arno (Barney) Ewoldt; and Gary Ewoldt Construction, Inc., Appellees.

No. 84-1776.

Supreme Court of Iowa.

Aug. 21, 1985.

Albert L. Harvey and Robert C. Rouwenhorst of Davis, Grace, Harvey, Horvath, Gonnerman & Rouwenhorst, Des Moines, for appellants.

Kenneth L. Keith and Joni L. Keith of Dull, Keith & Beaver, Ottumwa, and Donald H. Sitz of Lane & Waterman, Davenport, for appellees School Dist. and Bd.

Jack D. Darland and John T. Flynn of Wells, Brubaker, de Silva, Flynn & Darland, P.C., Davenport, for appellees Ewoldts.

Considered by REYNOLDSON, C.J., and UHLENHOPP, HARRIS, McGIVERIN, and SCHULTZ, JJ.

McGIVERIN, Justice.

Plaintiffs Elview Construction Co., Inc., (Elview) and its principal owner, Richard A. Hampe, and other plaintiffs appeal from a district court ruling which, after trial, dismissed their petition in equity. The case involves several questions concerning the award of construction and material contracts on a public improvement by defendant North Scott Community School District and its board of directors. Defendant Arno (Barney) Ewoldt was the supervisor of the construction project and defendant Gary Ewoldt Construction, Inc., was a contractor of a portion of the work. After consideration of the issues presented, we affirm.

This case arose in April 1983 when the North Scott Community School District decided to build an addition to an existing school. Pursuant to Iowa Code section 23.2 (1983), dealing with public improvement contracts, the board adopted proposed plans and contract forms and set a time for a public hearing on the matter. Notice of the hearing was given by publication. There were no objections to the proposed project raised at this hearing held on April 26, 1983. See Iowa Code § 23.3.

The board decided to split the project into individual contracts, according to the type of work to be done. There were twenty-six contracts making up the general project or improvement. Bids were solicited for a general contract for the entire project and in the alternative for each of the twenty-six individual contracts. After the bids were in, the board decided it would be most economical to accept the bids on the individual contracts, according to the lowest bidder on each one, rather than accepting one general contract bid for the project as a whole. Defendant Arno Ewoldt was hired as a construction manager to supervise the project and to keep the job flowing in a smooth manner.

There were no bids received on seven of the twenty-six individual contracts so the board informally solicited price quotations for those contracts and awarded purchase orders on them after the normal bidding process had been completed. On another contract known as "J" for metal doors and frames for the building, Elview had the only bid, but it was rejected because the price was too high. That contract then was informally split by the school board into separate parts and each portion was awarded to the company which had submitted the lowest quotation for the material and work. Defendant Gary Ewoldt Construction, Inc., did carpentry work on a portion of the project. These are the contracts at issue here.

This equity action was brought by Richard Hampe, a taxpayer, Elview, which had unsuccessfully submitted a bid on the general contract and on several of the individual contracts, the Master Builders of Iowa, Inc., and the Quad City Builders Association. Plaintiffs contended that the school board's actions violated the competitive bidding statutes. Plaintiffs say the board should have requested new bids and given notice and opportunity for hearing to the public as provided by Iowa Code sections 23.18 and 23.2. Because of those alleged violations, plaintiffs argue that the contracts formed as a result of the school board's illegal actions are void. In addition, plaintiffs argue that the contracts were void because performance bonds were not provided to the school district by some of the contractors.

The school addition project was completed by October 1983. All money has been paid for the materials and labor. There have been no complaints about the project.

Plaintiffs' equity suit was filed on September 6, 1983, challenging the contracts as being void. After trial, the district court ruled that neither Master Builders of Iowa, Inc., nor Quad City Builders Association had standing to raise this cause of action. Although those plaintiffs joined in the notice of appeal, they have made no claim and stated no authority for relief from the court's ruling as to them in appellants' brief. Therefore, we dismiss the appeal as to plaintiffs Master Builders of Iowa, Inc., and Quad City Builders Association. Cf. Iowa R.App.P. 14(a)(3).

The district court found that Elview, as an unsuccessful bidder, lacked standing to bring the action and that neither Elview nor Hampe had followed the appropriate method for administrative appeal to the state appeal board concerning the questioned contracts as provided in Iowa Code chapter 23 nor had they sought certiorari relief. See Iowa R.Civ.P. 306-19. Finally, the court concluded that the case was moot because the questioned contracts have been performed to the satisfaction of the contracting parties. Accordingly, the action was dismissed.

This appeal by plaintiffs followed, assigning numerous errors. However, under the view we take of this case, we find it unnecessary to address all of them. The controlling issues raised by plaintiffs Elview and Hampe which we address are: 1) whether plaintiff Elview, an unsuccessful bidder on the project, lacked standing to maintain this action; 2) whether contracts made in violation of Iowa Code chapter 573, requiring performance bonds to be placed on public improvements, are void; and 3) the relief available to plaintiffs concerning allegedly void contracts that have been satisfactorily completed and on which all sums due have been paid to the contractors by the school board.

The scope of our review is de novo. Iowa R.App.P. 4.

I. Standing of the parties. The court dismissed the case as to Elview Construction on the basis of lack of standing to bring the petition in equity. In its amended petition, Elview challenged the alleged bidding irregularities, the alleged bonding irregularities and the division of the contract for the school addition into twenty-six parts. Elview asserts its standing by virtue of its role as an unsuccessful bidder on the entire project and on one individual contract, and as a taxpayer.

In order to have standing, a plaintiff must allege a sufficient personal stake in the outcome of a controversy to insure that the dispute is presented in a concrete adversary context. Baker v. Carr, 369 U.S. 186, 204, 82 S.Ct. 691, 703, 7 L.Ed.2d 663, 678 (1962); Iowa Civil Liberties Union v. Critelli, 244 N.W.2d 564, 567 (Iowa 1976).

The general rule governing a challenge to bidding procedures is that an unsuccessful bidder lacks standing to bring a suit challenging their legality. 64 Am.Jur.2d Public Works and Contracts § 86 (1972). In Perkens v. Lukens Steel Co., 310 U.S. 113, 127, 60 S.Ct. 869, 876, 84 L.Ed. 1108, 1115 (1940), the Supreme Court, when referring to the Public Contracts Act, 41 U.S.C. § 35 (1938), stated:

That Act does not depart from but instead embodies the traditional principle of leaving purchases necessary to the operation of our Government to administration by the executive branch of Government, with adequate range of discretion free from vexatious and dilatory restraints at the suits of prospective or potential sellers. It was not intended to be a bestowal of litigable rights upon those desirous of selling to the government....

Iowa law is in accord with this general rule. Mortland v. Poweshiek County, 156 Iowa 720, 723, 137 N.W. 1009, 1010 (1912); Dickinson v. City of Des Moines, 347 N.W.2d 436, 440-41 (Iowa Ct.App.1984).

Further, as this court, in Istari Construction, Inc. v. City of Muscatine, 330 N.W.2d 798, 800 (Iowa 1983), pointed out, the purpose of competitive bidding statutes is to protect the public "to secure by competition among bidders, the best results at the lowest price, and to forestall fraud, favoritism and corruption in the making of contracts." Such statutes were enacted for the benefit of the taxpayers, not the bidders.

For these reasons, we conclude that Elview lacked standing as an unsuccessful bidder to bring this action.

Plaintiffs Richard Hampe and Elview also seek to challenge the school board's actions because of their status as taxpayers of the district. Substantial evidence indicates they are such taxpayers. Iowa law grants standing to a taxpayer to test the legality of a contract made by a school district. Poor v. Incorporated Town of Duncombe, 231 Iowa 907, 911, 2 N.W.2d 294, 297 (1942). Therefore, we must consider their claims in view of the rights and remedies accorded a taxpayer of the school district under Iowa law.

II. Effect of the lack of performance bonds. Plaintiffs argue that, because performance bonds required by Iowa Code sections 573.2 and 573.3 (1983) for the work were not posted by contractors on some of the contracts, those questioned contracts are void. No cases are cited to support this proposition. Plaintiffs' basic argument seems to be, "What if something had gone wrong with the project?" It certainly was wrong for the board not to obtain performance bonds on each of the contracts; the board took an unnecessary risk. If the contractors had defaulted on performance or defects appeared in the work, the school board, as the representatives of the district taxpayers, would...