Rapp v. Salt Lake City, 13552

• Citation: 527 P.2d 651
• Decision Date: 22 October 1974
• Docket Number: No. 13552,13552
• Parties: John M. RAPP, dba Rapp Construction Company, Plaintiff and Appellant, v. SALT LAKE CITY, a municipal corporation, and Marriott Corporation, a corporation, Defendants and Respondents.
• Court: Supreme Court of Utah

Page 651

527 P.2d 651

John M. RAPP, dba Rapp Construction Company, Plaintiff and Appellant, v. SALT LAKE CITY, a municipal corporation, and Marriott Corporation, a corporation, Defendants and Respondents.

No. 13552.

Supreme Court of Utah.

Oct. 22, 1974.

Bryce E. Roe, of Roe & Fowler, Salt Lake City, for plaintiff-appellant.

Jack L. Crellin, Salt Lake City Atty., O. Wallace Earl, Deputy City Atty., Jean L. W. Barnard (for Marriott), of Van Cott, Bagley, Cornwall & McCarthy, Salt Lake City, for defendants-respondents.

CALLISTER, Chief Justice:

Plaintiff initiated this action to recover the expenses he incurred in preparing and submitting a bid to construct a building at the Salt Lake City International Airport. Defendant, Marriott, filed a motion to dismiss on the ground that plaintiff's pleading failed to state a claim upon which relief could be granted, Rule 12(b)(6), U.R.C.P.; the trial court granted this motion. Defendant Salt Lake City, following its responsive pleading, filed a motion for summary judgment, which the trial court granted. Plaintiff appeals therefrom.

On November 30, 1972, Salt Lake City entered into a lease and concession agreement with Airline Foods, Inc., a subsidiary of the Marriott Corporation, which guaranteed performance of the agreement. Airline Foods leased certain real property at the International Airport from Salt Lake City to operate an in-flight catering kitchen. The agreement provided that the City would construct, at its expense, a building in accordance with the plans and specifications prepared by the lessee (Airline Foods). The agreement specified that the City would pay for the cost of the project, provided that in the event the total sum exceeded $550,000, Airline Foods would promptly pay the City the excess. Another provision permitted Marriott Corporation, the guarantor of the agreement, the right to bid on all or any portion of the construction work.

In May, 1973, Salt Lake City, by means of a notice mailed to two contractor's associations and publication in a newspaper of general circulation, invited bids for the work of constructing the building at the airport for the in-flight kitchen. According to plaintiff's pleading, this invitation to bid was at the instance and request of Marriott Corporation, and that Salt Lake City by so inviting the bids represented and warranted to the bidders that the contract would be awarded on the basis of competitive bidding and that all would compete on an equal basis. Plaintiff, in reliance on such representation and warranty, incurred great expense and expended effort to prepare and submit a bid. Plaintiff's bid was in the amount of $648,888; the preliminary estimate by the City was $650,000. J.J.G. Construction Company, which plaintiff alleged was a wholly owned subsidiary of defendant Marriott, submitted a bid of $540,000. Plaintiff averred that the bid of J.J.G. was not based upon any estimated cost of construction but solely upon the contractual liability of Airline Foods under the lease. Plaintiff alleged that the City failed to disclose to the bidders that a competitive advantage had theretofore been granted to Marriott Corporation and its subsidiaries by virtue of the lease agreement.

On June 11, 1973, over the protest of plaintiff, the Board of Commissioners of the City approved the award of the contract to the lowest bidder J.J.G. Construction. Plaintiff alleged that the action of the City was not taken in good faith but for the purpose of creating an appearance of competition in the bidding. Plaintiff alleged that by virtue of the actions of defendants, he had been damaged in the amount of $6,488.88, the costs involved in preparation of the bid. Plaintiff alleged that this claim, arising out of the misrepresentation and breach of warranty, was duly presented to the City and was denied. Based on the foregoing, plaintiff demanded judgment against defendants, jointly and severally.

Salt Lake City pleaded that it was a municipality, that the activities alleged by plaintiff were engaged in by the City in the exercise and discharge of a governmental function, that the Governmental Immunity Act, Section 63--30--1 et seq., U.C.A.1953, as amended 1965, did not provide for waiver of immunity for damages sustained by misrepresentation and breach of warranty; and, therefore, the City was immune from suit.

On appeal, plaintiff contends that a municipality in advertising for bids warrants that the bids are sought in good faith and for a public purpose; and if the bidding procedure is tainted, the public body is liable for expenses incurred in preparing the bid. Plaintiff predicates his claim on a theory advanced and subsequently followed by the Court of Claims in Heyer Products Company v. United States. ¹ The court conceded that an advertisement for bids was a request for offers, and no contract resulted until an offer was accepted. Therefore, an unsuccessful bidder could not recover the profits he would have made under the contract, because he had no contract. The court was of the opinion that the government knew that considerable expense would be involved in complying with the invitation to bid and therefore implied a promise on its part to give fair and impartial consideration to the bids, confining its consideration solely to the interests of the government and not to the interest of some favorite bidder. If the government breaches this implied promise, the injured party is entitled to recover his expenses.

The court stated that if the facts as alleged by the plaintiff were true, the government had shamefully broken its implied promise, since it knew from the beginning that it intended to award the contract to a favored party. The court explained: ²

. . . The advertisement for bids was a sham, done only to appear to comply with the law, to clothe their apparently dishonest purpose with the habiliments of legality. If these allegations are true, they practiced a fraud on plaintiff and on all other innocent bidders. They induced them to spend their money to prepare their bids on the false representation that their bids would be honestly considered.

This implied contract has been broken, and plaintiff may maintain an action for damages for breach.

It goes without saying that not every unsuccessful bidder is entitled to recover the cost of putting in his bid. Recovery can be had in only those cases where it can be shown by clear and convincing proof that there has been a fraudulent inducment for bids, with the intention, before the bids were invited or later conceived, to disregard them all except the ones from bidders to one of whom it was intended to let the contract, whether he was the lowest responsible bidder or not. . .

Based on the foregoing, plaintiff contends that he had a collateral implied in fact contract, which was breached and that under Section 63--30--5, U.C.A.1953, as amended 1965, immunity from suit of all governmental entities is waived as to any contractual obligation. Plaintiff urges that in a bidding situation two distinct contracts are involved. Under the first contract, since the governmental entity might reject all bids, the solicitation of bids is not a...