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.
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...