Gridley v. Engelhart

• Decision Date: 14 July 1982
• Docket Number: No. 13604,13604
• Citation: 322 N.W.2d 3
• Parties: John N. GRIDLEY, Jr., Petitioner and Appellant, v. Tim ENGELHART, Commissioner of the Bureau of Administration of the State of South Dakota, and James Brinkman, Director of Purchasing and Printing for the Bureau of Administration of the State of South Dakota, Appellees, and Compass Insurance Company, Intervenor and Appellee.
• Court: South Dakota Supreme Court

Page 3

322 N.W.2d 3

John N. GRIDLEY, Jr., Petitioner and Appellant, v. Tim ENGELHART, Commissioner of the Bureau of Administration of the State of South Dakota, and James Brinkman, Director of Purchasing and Printing for the Bureau of Administration of the State of South Dakota, Appellees and Compass Insurance Company, Intervenor and Appellee.

No. 13604.

Supreme Court of South Dakota.

Argued April 28, 1982.

Decided July 14, 1982.

John N. Gridley, III, Sioux Falls, for petitioner and appellant.

Jeffrey P. Hallem, Asst. Atty. Gen., Pierre, for appellees Engelhart and Brinkman; Mark V. Meierhenry, Atty. Gen., Pierre, on the brief.

Charles M. Thompson of May, Adam, Gerdes & Thompson, Pierre, for intervenor and appellee.

HALL, Circuit Judge.

This is an appeal from a judgment of the trial court quashing alternative writs of mandamus and prohibition which had been issued against the appellees, and further denying appellant's application for peremptory writs of mandamus and prohibition. We affirm.

The appellant is a resident and taxpayer of the State of South Dakota. He is also a licensed insurance agent for Western Casualty and Surety Company (Western). Appellee Engelhart is the Commissioner of the Bureau of Administration of the State of South Dakota and is authorized by statute to purchase public liability insurance. Appellee Brinkman is the Director of the Division of Purchasing and Printing of the Bureau of Administration of the State of South Dakota. Intervenor, Compass Insurance Company (Compass), is a wholly owned subsidiary of American Druggist Insurance Company and was the successful bidder in the sale of liability insurance to the State of South Dakota.

On or about June 24, 1981, appellees began the process of soliciting new insurance contracts for the State of South Dakota. The State was interested in obtaining comprehensive general liability insurance and comprehensive automobile liability insurance. At the time the decision was made to solicit new insurance contracts, the State's automobile fleet was insured through Western, while Compass insured the State of South Dakota under the terms of a general comprehensive liability insurance policy. Appellee Brinkman prepared specifications and bid proposal forms so that the State could solicit bids for the purchase of insurance. These specifications were reviewed by the Director of the Division of Insurance of the State of South Dakota.

On July 15 and 16, 1981, notice of the fact that the State was soliciting bids for liability insurance was published in the "Sioux Falls Argus Leader" and the "Rapid City Journal." After the July 15 notice was published, two insurance agencies located in Pierre, South Dakota, obtained the specifications and bid proposals personally from the appellees' offices. Additionally, on July 16, 1981, the specifications and bid proposal forms were mailed from Pierre, South Dakota, to all known South Dakota insurance agencies, including the appellant's.

On August 20, 1981, bids pertaining to the comprehensive general liability insurance policy and the comprehensive automobile liability insurance policy were opened and reviewed by the appropriate state officials. Compass was the only bidder on the comprehensive general liability policy and the lowest of several bidders on the automobile fleet liability policy. Compass was awarded the contracts on both policies.

On August 28, 1981, appellant requested, and the circuit court issued, alternative writs of mandamus and prohibition against appellees, thus preventing the execution of the contracts.

Subsequent to the trial court's granting of the alternative writs of prohibition and mandamus, a "cut-through policy" was offered to the State, in which American Druggist Insurance Company, Compass' parent company, would insure the State of South Dakota for any losses if Compass became insolvent or unable to meet the State's claims for losses.

After conducting an evidentiary hearing, the trial court quashed the alternative writs of mandamus and prohibition and denied the issuance of peremptory writs of mandamus and prohibition.

The trial court found as a matter of law that SDCL 5-23-2 ¹ must be interpreted in such a manner so as to include a requirement that insurance be purchased through competitive bidding. This portion of the judgment is questioned by appellees in their argument in which they dispute the trial court's conclusion of law on this matter and now attempt to argue that: (1) the State, when purchasing insurance, is not required to comply with the competitive bidding provisions of SDCL ch. 5-23; and (2) insurance is a professional service contract exempted from mandatory competitive bidding provisions. The appellees, having failed to comply with SDCL 15-26A- 22, ² have waived their right to appeal on this issue, and thus the matter is not properly before the court. Consequently, the trial court's conclusion of law on this issue becomes the law of the case. Orr v. Kneip, 287 N.W.2d 480 (S.D.1979); St. John's First Lutheran Church v. Storsteen, 77 S.D. 33, 84 N.W.2d 725 (1957); First Nat. Bank v. Cranmer, 42 S.D. 404, 175 N.W. 881 (1920).

The first question we must deal with is the issue of whether or not the notice that was published in the "Sioux Falls Argus Leader" and the "Rapid City Journal" announcing that the State was accepting bids for liability insurance was defective in that it failed to strictly comply with SDCL 5-23-10. ³ Appellant contends that the entire bid letting process is void and unenforceable pursuant to SDCL 5-23-33 ⁴ in that the State did not include in its notice the statutory language of SDCL 5-23-10 that "blank schedules and specifications in detail for bids may be obtained from the bureau of administration."

While the appellant contends that the notice published in the two newspapers was improper in that it failed to indicate where persons interested in submitting an insurance bid might obtain blank schedules and specifications, it is clear from the record that the appellant, as well as approximately two hundred fifty other insurance agents, received copies of the bid proposals and specifications. Further, the published notice specifically stated in bold capital letters that "THE DIRECTOR OF PURCHASING & PRINTING WILL OPEN IN HIS OFFICE AT PIERRE, SOUTH DAKOTA BIDS ON THE FOLLOWING ...." This information, while not in strict compliance with the statutory language, would put prospective bidders on notice as to where they might obtain additional desired data. There is no showing in this record that anyone, including the appellant, was in any manner restricted or prevented from submitting a bid on these contracts. While there may have been a technical defect in the publication of notice, such deficiency, under the facts of this case, will not invalidate the execution of any subsequent contract. The intent of the legislature in requiring such notice was to give all interested persons an adequate opportunity to obtain the necessary information and allow them to submit a bid. The appellees, while strictly not in compliance with the statute, did carry out the intent of the legislature, and substantially complied with the statute. A technical defect in a notice of advertisement will not serve to invalidate a contract where there has been substantial compliance with such statute. Cf. Blood v. Spring Creek Number 12, Common School Dist., 78 S.D. 580, 105 N.W.2d 545 (1960). See also Bud Johnson Const. Co. v. Metro. Tran. Com'n, 272 N.W.2d 31 (Minn.1978); Nielsen v. City of Saint Paul, 252 Minn. 12, 88 N.W.2d 853 (1958); Royal v. City of Des Moines, 195 Iowa 23, 191 N.W. 377 (1923); 64 Am.Jur.2d Public Works and Contracts Secs. 17, 50 (1972); 10 McQuillin, Municipal Corporations Sec. 29.65 (3d ed. 1981).

The appellant next contends that the State's specifications were so indefinite and imprecise as not to afford a reasonable basis upon which the competitive bid letting process could take place.

Bid specifications as they pertain to public contracts must be sufficiently definite and precise so as to afford a basis for bids and they must be free of restrictions, the effect of which would stifle competition. Such specifications must be sufficiently detailed upon all essential elements so as to afford a basis for full and fair competitive bidding upon a common standard. Parks v. City of Pocatello, 91 Idaho 241, 419 P.2d 683 (1966); Duffy v. Village of Princeton, 240 Minn. 9, 60 N.W.2d 27 (1953); Ricketson v. City of Milwaukee, 105 Wis. 591, 81 N.W. 864 (1900); 64 Am.Jur.2d Public Works and Contracts Sec. 51 (1972).

In reviewing this matter, we are mindful of the fact that...