Rayco Construction Company, Inc. v. Vorsanger

• Decision Date: 22 July 1975
• Docket Number: No. LR-75-C-74.,LR-75-C-74.
• Citation: 397 F. Supp. 1105
• Parties: RAYCO CONSTRUCTION COMPANY, INC., Plaintiff, v. Fred S. VORSANGER et al., Defendants.
• Court: U.S. District Court — Eastern District of Arkansas

397 F. Supp. 1105

RAYCO CONSTRUCTION COMPANY, INC., Plaintiff, v. Fred S. VORSANGER et al., Defendants.

No. LR-75-C-74.

United States District Court, E. D. Arkansas, W. D.

July 22, 1975.

COPYRIGHT MATERIAL OMITTED

James M. McHaney, Owens, McHaney & McHaney, Little Rock, Ark., for plaintiff.

Jim Guy Tucker, Atty. Gen., State of Arkansas, Lonnie A. Powers, Deputy Atty. Gen., Sam I. Bratton, Jr., Asst. Atty. Gen., Little Rock, Ark., for defendants.

Before HENLEY, Circuit Judge, and HARRIS and WILLIAMS, District Judges.

PER CURIAM.

This suit in equity which has been heard by a District Court of three judges as provided by 28 U.S.C. § 2281 was brought by Rayco Construction Company, Inc., an Oklahoma corporation, against Fred S. Vorsanger, Vice President for Fiscal Affairs of the University of Arkansas and Secretary of the Board of Trustees of that institution, and against the Chairman and other members of the Board. The plaintiff attacked on federal constitutional and other grounds the validity of Arkansas Act 264 of 1961, Ark.Stats.Ann. § 14-622 et seq., which gives a 3% bidding preference to bidders on public contracts in this State who fall within the terms of the statute. Plaintiffs sought to have the statute declared unconstitutional and also sought to have the defendants required to let to plaintiff a contract for the construction of a new building for the College of Business Administration on the campus of the University at Fayetteville, which contract had been let to Brennan-Boyd Construction Company of Fayetteville.¹ The defendants denied that plaintiff was entitled to any relief and prayed that the complaint be dismissed.

The cause was submitted to the Court on the pleadings, a stipulation as to certain facts, depositions, memorandum briefs and oral argument. The argument was heard on June 16 of the current year, and the Court went into conference immediately after the conclusion of the arguments.

In the course of the conference the members of the Court agreed that the "abstention doctrine" which had become involved in the case to some extent should not be applied, that the plaintiff had standing to sue, that Act 264 is unconstitutional, and that defendants should be enjoined from enforcing or complying with it in the future and from proceeding further under the contract with Brennan-Boyd. However, the Court was not willing to order that the contract for the construction of the Business Administration Building be awarded to plaintiff on the basis of its original bid; rather, the Court was of the opinion that the contract should be re-advertised within sixty days, and that bids received from bidders, including plaintiff and Brennan-Boyd, should be considered without reference to Act 264.

The findings and conclusions of the Court were incorporated in a Decree which was filed on June 23, 1975 with the Court reserving the right to file an opinion setting out its views. We now do so.

Act 264 of 1961 is applicable to all contracts for public improvements, the value of which is in excess of $10,000.00.² Section 1 of the Act provides that in awarding contracts to which the statute is applicable "bids of contractors who have satisfactorily performed prior public contracts, and who have paid state and county taxes within the state for not less than two successive years immediately prior to submitting a bid, on a plant and equipment such as is ordinarily required for performance of the contract for which the bid is submitted, or on other real or personal property in the state equivalent in value to such plant, shall be deemed a better bid than the bid of a competing contractor who has not paid such taxes, whenever the bid of the competing contractor is less than three percent (3%) lower, and the contractor making a bid as provided by this act which is deemed the better bid, shall be awarded the contract."

Section 2 of the Act prohibits the award of subcontracts to subcontractors who have not paid taxes as required by the Act.

Section 3 makes the Act inapplicable to certain federal-aid contracts.

Section 4 provides that an officer of the state or political subdivision thereof or a person acting under or for such officers, or a contractor or subcontractor of the state or political subdivision, or any other person, violating the provisions of the Act is guilty of a misdemeanor and punishable for each offense by a fine of not less than $50.00 nor more than $1,000.00 or by imprisonment for not more than six months, or both.

Section 5 is a standard repealing clause.

Section 6 is the "emergency clause" and it reads as follows:

"Whereas, preferences have been granted to Arkansas residents selling commodities to the State and the political subdivisions thereof; and whereas, passage of this Act will aid in the collection of the sales tax and use tax, and this Act being necessary to preserve the public peace, health and safety, an emergency is hereby declared to exist and this act shall be in full force and effect immediately after its passage and approval."³

The statute has never been construed by the Supreme Court of Arkansas nor has that Court ever passed upon its constitutional validity under either the Constitution of the United States or that of Arkansas.

The facts in the case are substantially undisputed. Plaintiff corporation is the immediate business successor of a partnership of the same name made up of R. C. Cunningham II and Charles M. Miller, and Mr. Cunningham and Mr. Miller own all of the stock in the corporation. In late 1974 the University advertised for bids on the contract here involved, and bids were submitted by plaintiff, Brennan-Boyd, and other contractors. The bid of Brennan-Boyd was $4,219,000; the bid of plaintiff was $4,116,000.00, which was within 3% of the Brennan-Boyd bid. At the time of the submission of the bids plaintiff corporation had never paid any property taxes in Arkansas and had not qualified to do business in Arkansas as a foreign corporation. It did have an Arkansas public contractor's license.

We find from the evidence that Mr. Cunningham and Mr. Miller are experienced building contractors and have done a great deal of construction work both in Oklahoma and in Arkansas; however, the work done in Arkansas has not involved any public contracts. There is no question, and we find, that the corporate plaintiff in 1974 was well qualified and fully competent to build the Business Administration Building in a satisfactory manner.

After the bids that were submitted had been opened and examined, Brennan-Boyd claimed the 3% preference prescribed by Act 264. Another Arkansas contractor also claimed the preference, but its over-all bid was somewhat higher than that of Brennan-Boyd.

After ascertaining from the State Department of Finance and Administration that granting the preference to Brennan-Boyd would not violate Section 3 of the Act, the preference was granted, and the contract was awarded to the contractor just mentioned. In early March a formal contract was prepared and executed on behalf of Brennan-Boyd; the contract was signed by the defendant Vorsanger on behalf of the University on March 28.

In the meantime plaintiff had qualified to do business in Arkansas as a foreign corporation, and had put the University on notice that it claimed that it was entitled to the contract; plaintiff filed this suit on March 18, ten days before the contract was signed by Mr. Vorsanger.

Plaintiff attacks Act 264 on a number of grounds, both federal and state. We deem it necessary to mention only plaintiff's contentions that the Act violates the Due Process and Equal Protection Clauses of the 14th Amendment to the Constitution of the United States, and that it also violates the Commerce Clause of the Constitution. Article 1, Section 8, Clause 3.

The defendants deny that the contentions of plaintiff have merit, and they further contend that since plaintiff had not qualified to do business in Arkansas as provided by Ark.Stats.Ann. § 64-1201, the contract could not legally have been let to plaintiff in view of the provisions of Ark.Stats.Ann. § 64-1202 and that plaintiff has no standing to maintain the action.⁴

While the complaint tendered a number of questions of State law and while, as indicated, the Arkansas Supreme Court has never construed Act 264 of 1961, neither side requested us to abstain in favor of state court litigation, and, as has been said, we held that abstention was not required.

Section 64-1202, insofar as here pertinent, provides that if a non-qualifying corporation does business in this State, it may not enforce either at law or in equity any contract made in the State, and that later compliance with the qualifying requirements of Section 64-1201 does not validate the contract.

Had the plaintiff entered into a contract with the University prior to qualifying to do business in Arkansas, the contract would have been not only unenforceable but also void ab initio. Worthen Bank & Trust Co. v. United Underwriters Sales Corp., 251 Ark. 454, 474 S.W.2d 899 (1971); Union Planters Nat'l Bank of Memphis v. Moore, 250 Ark. 272, 464 S.W.2d 786 (1971). That did not happen, however. Plaintiff has never had a contract with the University or with the State itself, and this is not a suit on such a contract. Hence, Section 64-1202 is not applicable to this case, and in our view plaintiff has standing to sue. Arkansas Airmotive Div. of Currey Aerial Sprayers, Inc. v. Arkansas Aviation Sales, Inc., 232 Ark. 354, 335 S.W.2d 813 (1960); cf. Hicks Body Co. v. Ward Body Works, 233 F.2d 481 (8th Cir. 1956). We point out in this...