Phipps Products Corp. v. Massachusetts Bay Transp. Authority

• Decision Date: 07 December 1982
• Citation: 387 Mass. 687,443 N.E.2d 115
• Parties: PHIPPS PRODUCTS CORP. v. MASSACHUSETTS BAY TRANSPORTATION AUTHORITY.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 115

443 N.E.2d 115

387 Mass. 687

PHIPPS PRODUCTS CORP. v. MASSACHUSETTS BAY TRANSPORTATION AUTHORITY.

Supreme Judicial Court of Massachusetts,

Suffolk.

Argued Sept. 13, 1982.

Decided Dec. 7, 1982.

Albert E. Good, Boston, for defendant.

Gerald Gillerman, Boston (Steven M. Sayers, Boston, with him), for plaintiff.

Before HENNESSEY, C.J., and WILKINS, ABRAMS and NOLAN, JJ.

WILKINS, Justice.

The defendant Massachusetts Bay Transportation Authority (MBTA) declined to carry out its expressed obligation to sell premises at 500 The Arborway in Boston to the plaintiff Phipps Products Corp. (Phipps). That obligation was set forth in a purchase and sale agreement, dated May 18, 1978, between the MBTA and Phipps. The MBTA refused to transfer the property on the ground that it had not complied with the bidding requirements of G.L. c. 161A, § 5(b ), concerning the sale of MBTA real estate. Summary judgment was entered for the MBTA on Phipps's complaint for specific performance of the agreement to sell the property. We agree that the MBTA did not comply with the bidding statute and that, although the undisputed facts show that the MBTA turned to its own failure to comply with G.L. c. 161A, § 5(b ), to avoid the sale, the MBTA is not barred by principles of estoppel, or otherwise, from relying on the omission.

We set forth the undisputed material facts, derived from depositions and documents presented in support of Phipps's motion for summary judgment. The Arborway building, built in 1962, had been used as the administrative building of the Metropolitan Transit Authority, the predecessor of the MBTA. In 1977, the MBTA concluded that its administrative offices should be consolidated in downtown Boston and that the Arborway property should be sold. The MBTA sought bids on the property and engaged Carpenter & Company, Inc. (Carpenter), as broker for the purpose of selling the property. Carpenter conducted an active advertising campaign. Advertisements were placed in various publications, and an advertisement, a typical legal notice, was published for three successive weeks in the Boston Globe. Bids were to be filed by April 15, 1977, and the successful bidder announced on April 30, 1977. Interest in the property was slight; only one bid (at $100,000) was received by April 15, and it was rejected.

The MBTA decided to continue to market the property. Other brokers were given an opportunity to sell the property. Major real estate brokers were advised that the property was available. The MBTA continued to have a known, active interest in disposing of the property.

On May 8, 1978, more than one year after the deadline for the receipt of bids pursuant to MBTA's notice, Carpenter delivered an offer from Phipps to purchase the Arborway property for $525,000. On May 10, 1978, the MBTA directors voted to accept Phipps's offer in principle and to authorize the chairman of the MBTA to negotiate the terms of a purchase and sale agreement. The chairman gave the MBTA advisory board notice of the proposed sale, as required by § 5(b ). The advisory board made no objection to the sale.

On May 18, 1978, the MBTA and Phipps executed an agreement for the sale of the Arborway property to Phipps for $525,000 cash, with a deposit of $25,000. The MBTA directors ratified the agreement. The agreement provided that the MBTA "will comply with all the provisions of Section 5 of Chapter 161A of the Massachusetts General Laws." No further advertisement of the sale was placed in any newspaper, nor were further bids sought. Four extensions for completion of the transaction were agreed to, one of which Phipps sought and was granted on Phipps's making a further payment of $10,000. The date finally set for the closing was March 5, 1979.

On January 29, 1979, Robert L. Foster took office as chairman and chief executive officer of the MBTA. He concluded that the MBTA should, if legally possible, reverse its decision to abandon the Arborway property. He asked the MBTA's general counsel, who had approved the purchase and sale agreement and the extensions, to determine whether there was any basis for declining to carry out the agreement to sell the property. The MBTA's general counsel advised Foster that, because it did not strictly adhere to public bidding requirements, the MBTA would probably have no problem in retaining ownership of the building. On March 5, 1979, Phipps tendered a certified check for $490,000, but the MBTA refused to convey the property by quitclaim deed on the ground that the conveyance would be invalid because of the MBTA's noncompliance with § 5(b ).

On July 19, 1979, Phipps filed a complaint seeking specific performance of the purchase and sale agreement. Summary judgment for the MBTA followed, and Phipps has appealed. We granted Phipps's application for direct appellate review.

1. The MBTA did not fully comply with the requirements of G.L. c. 161A, § 5(b ), with respect to the proposed sale to Phipps. That section, which is set forth in full in the margin, ¹ requires that timely notice of any sale be sent to the advisory board. That was done as to the proposed sale to Phipps. Section 5(b ) also requires that any sale of real estate be advertised in an appropriate newspaper for at least once a week for three successive weeks. Such a series of advertisements was published in 1977. It could be argued that the MBTA's active marketing of the Arborway property after the bidding period ended in April, 1977, gave continuing validity to the initial advertisements so as to warrant the conclusion that the purposes of the advertising requirements of § 5(b ) had been fulfilled. If, however, as we conclude, new bids were required in order to sell the property to Phipps, new advertisements were also necessary. The third requirement of § 5(b )--that the property "be sold to the highest bidder"--was not met. That requirement by inference imposes a date by which bids will be received, opened, and considered. Although procedures to be followed are not stated as fully in § 5(b ) as in certain other public bidding statutes, ² the concept of a deadline for the receipt of bids is inherent in § 5(b ) because only by such a process can the MBTA determine with certainty who the highest bidder is.

Section 5(b ) grants the MBTA no authority to dispense with the requirement that it sell to the highest bidder, if it sells at all. This conclusion is reinforced by a 1966 amendment of § 5(b ) that eliminated the MBTA's authority under § 5(b ) to sell to other than the highest bidder where it found that "sound reasons in the public interest require otherwise." Compare G.L. c. 161A, § 5(b ), as appearing in St.1966, c. 636, with G.L. c. 161A, § 5(b ), inserted by St.1964, c. 563, § 18: Even under § 5(b ) before its 1966 amendment, a bidding procedure had to be followed.

The fact that Phipps's private offer to purchase the Arborway property was the best offer the MBTA received following a yearlong, comprehensive selling effort does not satisfy the requirement that there be bids. Nor did the bidding process undertaken in 1977 fulfil the bidding requirements as applied to the 1978 proposed sale to Phipps. The 1977 bidding process had been concluded more than one year before Phipps submitted its offer.

2. We come then to the consequences of the MBTA's failure to comply with the bidding requirements of § 5(b ). For the moment, we put aside the question whether, in the circumstances, the MBTA may properly assert its own failure to comply with the statute. Here, we are concerned with what the Legislature intended to result from any failure to comply with § 5(b ). Section 5(b ) does not explicitly state that a failure to comply with its requirements renders void an agreement to sell MBTA real estate.

The general rule in this Commonwealth is that failure to adhere to statutory bidding requirements makes void a contract entered into without such compliance. Statutory bidding procedures are designed to prevent favoritism, to secure honest methods of letting contracts in the public interest, to obtain the most favorable price, and to treat all persons equally. See Datatrol Inc. v. State Purchasing Agent, 379 Mass. 679, 696-697, 400 N.E.2d 1218 (1980); Interstate Eng'g Corp. v. Fitchburg, 367 Mass. 751, 757-758, 329 N.E.2d 128 (1975); Morse v. Boston, 253 Mass. 247, 252, 148 N.E. 813 (1925). To effectuate these purposes, as the opinions just cited show, contracts made in violation of bidding requirements have generally been held to be unenforceable. See Adalian Bros. v. Boston, 323 Mass. 629, 631-632, 84 N.E.2d 35 (1949); Burt v. Municipal Council of Taunton, 272 Mass. 130, 133-134, 172 N.E. 230 (1930), S.C., 275 Mass. 535, 542-543, 176 N.E. 511 (1931); Safford v. Lowell, 255 Mass. 220, 227, 151 N.E. 111 (1926); Bowditch v. Superintendent of Streets of Boston, 168 Mass. 239, 243, 46 N.E. 1026 (1897). This court has required strict adherence to bidding requirements even where no harm to the public authority was shown (Bowditch v. Superintendent of Streets of Boston, supra at 244, 46 N.E. 1026); where the violation benefited the public (Grande & Son v. School...