McKay Const. Co. v. Ada County Bd. of County Com'rs

• Decision Date: 02 June 1978
• Docket Number: No. 12202,12202
• Citation: 580 P.2d 412,99 Idaho 235
• Parties: McKAY CONSTRUCTION COMPANY, an Idaho partnership, Appellant, v. ADA COUNTY BOARD OF COUNTY COMMISSIONERS, and Whitmore Transportation Service, Inc., an Idaho Corporation, Defendants-Respondents.
• Court: Idaho Supreme Court

Page 412

580 P.2d 412

99 Idaho 235

McKAY CONSTRUCTION COMPANY, an Idaho partnership, Appellant, v. ADA COUNTY BOARD OF COUNTY COMMISSIONERS, and Whitmore Transportation Service, Inc., an Idaho Corporation, Defendants-Respondents.

No. 12202.

Supreme Court of Idaho.

June 2, 1978.

Rehearing Denied July 17, 1978.

Vernon K. Smith, Jr., Boise, for appellant.

David H. Leroy, Ada County Pros. Atty., James E. Risch of Risch & Goss, Boise, for Ada County Com'rs.

Louis H. Cosho of Clemons, Cosho, Humphrey & Samuelson, Boise, for Whitmore Transp.

BAKES, Justice.

Appellant McKay Construction Company (hereinafter McKay) sought by this action to prevent respondent Whitmore Transportation Service, Inc., (hereinafter Whitmore) from performing a sanitary landfill contract awarded to Whitmore by respondent Ada County Board of County Commissioners (hereinafter county) after competitive bidding. McKay further sought to compel the county to award the contract to McKay as the lowest responsible bidder and to recover damages from the county for lost earnings. McKay asserted that relief should be granted because Whitmore failed to comply with statutory bonding and licensing requirements. The trial court dismissed McKay's petition. We reverse and remand the case for further proceedings.

I

In the fall of 1975 Ada County solicited bids for operation of the county's sanitary landfill site. The county provided a form for submitting bids that was drafted as an agreement between the county and the bidder. To bid, one merely filled in a blank indicating the monthly payment for which one would perform the sanitary landfill services and signed at the end. By executing the document, the county could contractually bind itself and the bidder of its choice to the terms set forth.

The standard bid document contained the following provision:

"5. PERFORMANCE BOND. Immediately upon the execution of this agreement the contractor shall furnish a Performance Bond for the faithful performance of this agreement, said bond to be executed by a surety company licensed by the State of Idaho and acceptable to the County and to be in an amount equal to one years payment from the County to the contract(or) and to be in effect during the term of this agreement."

Four companies submitted bids using the county's document. Whitmore had the lowest bid at $12,493 per month, and McKay submitted the next lowest bid at $18,160. On November 20, 1975, the county notified the unsuccessful bidders that it had awarded the contract to Whitmore.

The county signed the bid document on November 26. However, before the signing, the county and Whitmore amended paragraph 5 of the agreement to require that Whitmore "furnish a Performance Bond for the faithful performance of this agreement, said bond to be executed by a surety company licensed by the State of Idaho or in some other reasonable form and acceptable to the County." (Emphasis denotes language added to the standard bid document.)

Whitmore did not furnish a performance bond executed by a licensed surety company. Instead, Carl Whitmore, president of Whitmore, executed an "Indemnity Bond" under which Carl bound himself to indemnify Ada County against expenses or losses up to $150,000 incurred "in consequence of my (Carl's) failure to perform" the contract between the county and Whitmore. The agreement provided that in order to secure the promised indemnification, Carl had deposited time certificates aggregating $150,000 in local banks and that the certificates were endorsed as follows: "Payee may not negotiate the principal balance deposited herein without the written consent and endorsement of Ada County, Idaho." Carl did in fact deposit silver savings certificates amounting to $150,000 with Idaho First National Bank. ¹ and the bank notified the county commissioners that it would hold the certificates until the county advised it regarding disposition of the funds. In the meantime, the interest accruing on the time certificates was to be paid to Carl.

Whitmore did not hold a public works contractor's license when it bid for the sanitary landfill contract or when the county awarded and executed the contract. McKay, however, held a Class AAA public works contractor's license.

On November 26, 1975, McKay petitioned for an alternative writ of prohibition and for alternative writs of mandate. Alleging Whitmore's failure to provide a performance bond executed by a licensed surety and lack of a public works contractor's license, McKay prayed that Whitmore and Ada County be ordered to show cause why they should not be prohibited from proceeding further under the contract awarded to Whitmore and why that contract should not be declared null and void since Whitmore was not the lowest responsible bidder. McKay also asked that the county be ordered to show cause why the contract should not be awarded to McKay as the lowest responsible bidder.

The trial court issued a memorandum decision ruling that McKay's petition should be dismissed. The court concluded that the indemnity bond satisfied statutory requirements and that the county had discretion to accept it as a performance bond. While suggesting that operating a sanitary landfill did not necessarily require a public works construction license, the court indicated that it need not decide that question since the statutory sanctions provided in I.C. § 53-1920 for contracting without a license did not include a declaration of the contract's invalidity. However, the court subsequently approved formal "Findings of Fact and Conclusions of Law" stating that a public works contractor's license was not required to operate a sanitary landfill.

McKay then filed a "Supplemental Petition and Complaint." McKay alleged that by failing to require Whitmore to furnish the performance bond described in the notice and instructions to bidders, the county had given Whitmore an unfair advantage. McKay sought damages for lost earnings and attorney fees. The court dismissed the supplemental petition and complaint on the ground that it alleged no cause of action.

McKay appeals from the dismissal of its original petition and its supplemental petition and complaint. Although McKay makes numerous assignments of error, we need only consider the propriety of the trial court's conclusions regarding the statutory bonding and licensing requirements.

II

McKay contends that the county was obliged under I.C. § 54-1926 to require that Whitmore furnish a performance bond executed by a surety authorized to do business in Idaho. We agree.

I.C. § 54-1926 ² provides that "(b)efore any contract for the construction, alteration or repair of any public building or public work or improvement . . . is awarded to any person, he shall furnish . . . bonds" for "faithful performance of the contract" and "protection of persons supplying labor or materials to the contractor." The statute further mandates that "(e)ach bond shall be executed by a surety company or companies duly authorized to do business in this state."

In our view, the statutory bonding requirement applies to the sanitary landfill or solid waste disposal system for the operation of which the county solicited bids. First, we consider the construction and operation of a solid waste disposal system to be a "public work or improvement" within the meaning of I.C. § 54-1926. ³ However, even if, as the dissent apparently assumes, the definition of "public work or improvement" were not broad enough to conclude a solid waste disposal system, there is a clear legislative pronouncement that leads to the same result. The legislature, in its wisdom, has declared in I.C. § 31-4402 ⁴ that a solid waste disposal system is "a public building within the definition of chapter 10, title 31, Idaho Code." Ada County's sanitary landfill is a solid waste disposal system and is therefore a public building within the meaning of I.C. § 31-1001. ⁵ That statute provides that "the contract for the erection of any such (public) buildings must be let . . . to the lowest bidder who will give security for the completion of any contract he may make respecting the same." The nature of the security that a contractor engaged in the construction of a public building must give is set forth in I.C. § 54-1926. Thus, one who contracts to construct a public building within the meaning of I.C. § 31-1001 must give security in the form of bonds executed by one or more surety companies authorized to do business in Idaho. Ada County's Sanitary Landfill is such a public building by virtue of I.C. § 31-4402, and the county therefore could not properly award the contract until Whitmore furnished such a bond.

Whitmore and the county argue that the indemnity bond that Whitmore furnished constituted adequate security. While we entertain considerable doubt respecting the protection afforded by the indemnity bond, ⁶ that question is not here. I.C. § 54-1926 requires a bond executed by a surety authorized to do business in Idaho, and the county was not at liberty to waive that requirement in favor of some alternative form of security. Cf. Nielsen & Co. v. Cassia & Twin Falls County School Dist., 96 Idaho 763, 536 P.2d 1113 (1975) (school board could not waive statutory requirement that bid for public works project name properly licensed electrical and mechanical subcontractors).

III

McKay also asserts that Whitmore was not eligible to bid on or receive the county's sanitary landfill contract because Whitmore did not have a public works contractor's license as required by I.C. § 54-1902. Again, we agree.

It is unlawful under I.C. § 54-1902 ⁷ for any person not particularly exempted "to engage in the business or act in the capacity of a public works contractor within this state without first obtaining and having a license therefor." A "public works contractor" is defined in subsection (b) of I.C. § 54-1901 ⁸ as "any person who, in any capacity, undertakes to, or offers to undertake to, or purports to...