Hoffman v. City of Muscatine

• Court: Iowa Supreme Court
• Writing for the Court: EVANS, J.
• Citation: Hoffman v. City of Muscatine, 212 Iowa 867, 232 N.W. 430 (Iowa 1930)
• Decision Date: 26 September 1930
• Docket Number: 39941
• Parties: F. H. HOFFMAN et al., Appellants, v. CITY OF MUSCATINE et al., Appellees

232 N.W. 430

212 Iowa 867

F. H. HOFFMAN et al., Appellants, v. CITY OF MUSCATINE et al., Appellees

No. 39941

Supreme Court of Iowa, Des Moines

September 26, 1930

REHEARING DENIED JUNE 20, 1931.

Appeal from Muscatine District Court.--C. L. ELY, Judge.

Suit to enjoin the performance of a paving contract brought by thirty property owners against the City of Muscatine and against the bidding contractor, Warren Brothers Company. There was a decree dismissing the petition and the plaintiffs have appealed.

Affirmed.

Stipp Perry, Bannister, Starzinger & Little, Nichols, Tipton & Tipton, and G. Allbee, for appellants.

Head Crafts & Wallace, Kelly, Shuttleworth & McManus, Hanley & Hanley, Frank Drake, C. H. Fishburn, City Attorney, for appellees.

EVANS, J. MORLING, C. J., and FAVILLE, DE GRAFF, and WAGNER, JJ., concur. GRIMM, J., STEVENS, ALBERT, and KINDIG, JJ., (dissenting).

OPINION

EVANS, J.

The petition predicates a charge of fraud mainly upon the fact that the bidding contractor, Warren Brothers Company, was the patentee of the paving mixture, which was to be used in the performance of the contract. Preliminary to a more detailed statement, the salient facts of the case may be stated very briefly.

The City Council of Muscatine proposed to resurface certain defective pavement and established two districts for that purpose. By regular procedure, including notice to bidders, it announced a letting on June 28, 1927. Pursuant to statute the council selected four kinds of material upon which it invited bids: viz., Lake Asphalt; Oil Asphalt; Amesite and Bitulithic. The latter was a patented process of mixture. Warren Brothers Company was the patentee. Prior to June 28, the City procured from the patentee a written offer fixing the price at which it would furnish the patented mixture to any contractor at $ 1.34 per square yard. At the letting on June 28, there were several bidders. There was only one bid upon the Bitulithic. That was made by the Central Engineering Company at $ 1.35 per square yard. The same Company made another bid upon other of the specified materials. The bid of this Company upon the Bitulithic was the lowest bid and it was accepted by the City Council. Thereupon the Central Engineering Company defaulted and refused to enter into contract. Thereupon the City Council readvertised for bids and fixed August 16, for the date of the letting. On such date twelve bids were filed other than the one in controversy here. All these bids were based upon materials other than the Bitulithic. The offer of the patentee on file was renewed, but no bids were predicated thereon. The patentee presented a bid of $ 1.35, which was the former bid of the Central Engineering Company at the first letting. This was the lowest bid made upon any material and it was again accepted by the City Council and later fully performed by the patentee.

This suit was brought before the performance of the contract; but no temporary injunction was asked. The performance was complete before the case was brought on for trial. These plaintiffs all filed objections to their assessments pursuant to the statute, and such objections were pending at the time of the trial of this suit. The trial court dismissed the injunction proceeding without prejudice to the right of the plaintiffs under their objections before the City Council. The petition herein alleged many irregularities in the procedure followed by the City Council. At the trial, the plaintiff put in evidence the entire record of the procedure and all the documentary evidence pertaining thereto. These claims of irregularity have been abandoned on this appeal and the evidence introduced in the court below in support of the same has not been included in appellant's abstract, here. The question presented to us now is whether the patentee was guilty of fraud in the method of presenting its bid and obtaining the contract.

We proceed therefore to a more detailed consideration of the allegations and of the evidence on the question of fraud.

I. The petition is lengthy and comprises twenty paragraphs and nineteen printed pages. The first twelve paragraphs may be ignored as relating to irregularities not now pressed. The allegations of fraud are contained in paragraphs 13, 14 and 15. The allegations of paragraphs 13 and 14 are substantially repeated in paragraph 15, and we set forth such paragraph 15 as presenting the charge of fraud made in the petition.

"Paragraph 15.

"The defendant Warren Brothers Company has been engaged in the business of selling its patented pavement to cities and towns in the State of Iowa for many years; that it has a regular and long established method of conducting its business with the cities and towns and contractors in the State of Iowa that its said method of conducting its business is well known among contractors and others with whom it has dealt during its operations in the State of Iowa; that its said method of conducting its business with the cities and towns in the State of Iowa is as follows, to wit:

"When a municipality advertises for bids for the construction of paving, including Warrenite Bitulithic in the types of paving on which bids will be considered, Warren Brothers Company files with the clerk of the municipality its 'filed agreement' or offer. Said 'filed agreement' provides:

"That Warren Brothers Company as owners of patents on Warrenite Bitulithic pavement, offers to furnish to the municipality or to any contractor to whom the municipality may award a contract for the construction of such pavement, the following:

"1. The right to use said patents.

"2. The Warrenite Bitulithic mixtures for the wearing surface, delivered hot to contractor.

"3. Daily examination of paving materials at Warren Brothers laboratory in Massachusetts.

"Said 'filed agreement' then names a definite price per square yard of finished pavement for which Warren Brothers Company will furnish the foregoing to any contractor to whom the municipality awards a contract.

"But in truth and in fact the filing of said offer by Warren Brothers Company is fraudulent in its purpose and is designed, intended and used by said Warren Brothers Company to prevent competition in the laying of Warrenite Bitulithic paving. At all lettings said Warren Brothers Company have a favored bidder who is not required to pay the price per square yard named in the 'filed agreement' but pays merely a small amount per yard for royalty, the going price for the last several years to favored contractors in the State of Iowa being twenty-five cents a square yard in lieu of the price named in the 'filed agreement.'

"That said Warren Brothers Company carried out the same method of procedure in connection with the paving improvement at Muscatine involved in this case, and it filed its said customary 'filed agreement' as alleged in Paragraph 13 hereof.

"That under said defendant's method of conducting its business in Iowa and in the proceedings and matters heretofore referred to in this petition, the said fraudulent interference with and prevention of competition in bidding on Warrenite Bitulithic paving is concealed under the provision in said 'filed agreement' which provides as follows:

"'It is understood that Warren Brothers Company reserves the right to employ the facilities of the successful bidder or of others to produce such mixtures under the supervision of Warren Brothers Company.'

"Warren Brothers do not have and never have had in Iowa the machinery and equipment required to prepare the Warrenite Bitulithic roadway mixtures for the wearing surface. When a contractor favored by Warren Brothers Company is awarded a contract by a municipality, Warren Brothers Company makes a contract with such contractor under which the contractor agrees to perform the work which Warren Brothers Company agrees in its 'filed agreement' to do in preparing the roadway mixtures; and the consideration running from Warren Brothers Company to such contractor for said services in preparing the roadway mixtures is such that it amounts to a very large rebate from the price named in the 'filed agreement' and amounts generally to a mere royalty of twenty-five cents a yard to be paid by the contractor to Warren Brothers Company.

"That said method of conducting its business by Warren Brothers Company prevents any competition among bidders for the laying of Warrenite Bitulithic paving and is a fraud on the municipality which receives bids on Warrenite Bitulithic paving, and on the property owners who are required to pay for said paving. That by reason of Warren Brothers' said method of conducting its business, a valid and legal contract cannot be made by a municipality for the construction of Warrenite-Bitulithic paving.

"That under the proceedings referred to in the petition, bids were first received by the defendant City of Muscatine on or about June 28, 1927. At said bidding the contractor whom Warren Brothers Company desired to protect from competition was not the low bidder and Warren Brothers Company declined to give to the contractor who was low bidder the terms which it customarily gives to its favored bidders but insisted that said contractor who was low bidder must pay the price named by Warren Brothers Company in their said 'filed agreement', being the one referred to in Paragraph 13 hereof. Said filed price was so high that it was cheaper for said low bidder to forfeit to the City his certified bidder's checks aggregating one thousand dollars than to sign contracts with the City for the construction of the improvements bid upon and described in the petition that said low bidder did forfeit his said certified bidder's checks and declined to enter into contracts with the City for the construction of...