Westcott Const. Corp. v. Cumberland Const. Co., Inc.

• Citation: 3 Mass.App.Ct. 294,328 N.E.2d 522
• Parties: WESTCOTT CONSTRUCTION CORPORATION v. CUMBERLAND CONSTRUCTION COMPANY, INC.
• Decision Date: 23 May 1975
• Court: Appeals Court of Massachusetts

Page 522

328 N.E.2d 522

3 Mass.App.Ct. 294

WESTCOTT CONSTRUCTION CORPORATION v. CUMBERLAND CONSTRUCTION COMPANY, INC.

Appeals Court of Massachusetts, Norfolk.

Argued Dec. 12, 1974.

Decided May 23, 1975.

Charlotte Anne Perretta, Boston (Peter Y. Macktaz & Richard K. Kirby, Woonsocket, R.I., with her), for Cumberland Construction Co., Inc.

Robert J. Sherer, Boston (Frank M. Capezzera, Boston, with him), for plaintiff.

Before HALE, C.J., and ROSE KEVILLE, GRANT and ARMSTRONG, JJ.

ARMSTRONG, Justice.

This is a bill for declaratory relief in which the plaintiff (Westcott Construction) seeks to establish the propriety of the general bid submitted by it to the Joint Board of Water Commissioners of the towns of Abington and Rockland (board) for the construction of a project subject to G.L. c. 149, §§ 44A--44L. While Westcott Construction's bid was the lowest one submitted, the defendant (Cumberland), the second lowest bidder, challenged the legality of Westcott Construction's bid. The General Counsel of the Department of Labor and Industries issued a memorandum supporting Cumberland's contention, and the board withheld action on the bids until the matter could be resolved judicially.

A judge of the Superior Court entered a final decree declaring that Westcott Construction's bid was valid and that the board was neither required nor authorized to reject it. Cumberland appeals from the decree. The board, though joined as a defendant in the Superior Court proceeding, is not a party to the appeal.

The sole issue before us is whether Westcott Construction's bid was in violation of G.L. c. 149, § 44J, which insofar as relevant provides: 'If a general bidder customarily performs with his own employees any sub-trade . . . listed in Item 2 of the general bid form, he may submit a sub-bid on the sub-bid form . . . and shall also submit under Item 2 of his general bid his name and amount for such sub-trade' (emphasis supplied) ¹. The issue arose because a corporation affiliated with Westcott Construction, called Westcott Equipment Corporation (Westcott Equipment), had filed a bid for a mechanical subcontract for the project. As Westcott Equipment's was not the lowest sub-bid submitted, Westcott Construction's general bid substituted a different mechanical subcontractor's name. See Interstate Engineering Corp. v. Fitchburg, --- Mass. ---, --- - ---, ^a 329 N.E.2d 128 (1975). Cumberland challenged the bid on the ground that Westcott Construction and Westcott Equipment were essentially the same entity, and that Westcott Comstruction was therefore prohibited by § 44J from listing any mechanical sub-bidder other than Westcott Equipment in the general bid.

The case was heard on a sparse statement of agreed facts, which included the following facts concerning the relationship between Westcott Construction and Westcott Equipment. They are separate corporations but have some stockholders, officers and directors in common. The affairs of both corporations are managed and controlled by the same individuals. Westcott Construction's general bid and Westcott Equipment's sub-bid were signed by the same individual, one F. Thomas Westcott, who identified himself as president of the former and vice-president of the latter. The general bid and sub-bid gave the business address of both corporations as 135 East Washington Street, North Attleborough. '(F)or purposes of bonding the assets of both corporations are pooled. both corporations are part of a common enterprise and the stock is all family owned.'

Section 44J speaks only in terms of a general bidder who himself files a sub-bid, and makes no reference to a case such as the present one where, at least on the face of the bids, there is no such identity of bidders. Nor does the legislative history underlying § 44J and its predecessor, G.L. c. 149, § 44C(F), inserted by St.1939, c. 480, shed any light on the Legislature's intention in that regard. See 1939 Senate Doc. No. 272; 1939 House Doc. No. 2234. We assume, however, but do not decide, that where there is a substantial identity between corporations, as determined by the criteria set forth in such cases as My Bread Baking Co. v. Cumberland Farms, Inc., 353 Mass. 614, 618--620, 233 N.E.2d 748 (1968), they are to be treated as a single entity for purposes of § 44J.

On the basis of the facts before us we are of the opinion that no such identity is shown. It is well settled that common ownership and control of the two corporations, standing alone, is insufficient to merge them into one or to make either the agent of the other. Galdi v. Caribbean Sugar Co., 327 Mass. 402, 407--408, 99 N.E.2d 69 (1951), and cases cited. Gordon Chem. Co., Inc. v. Aetna Cas. & Sur. Co., 358 Mass. 632, 638, 266 N.E.2d 653 (1971). The same is true where the corporations also occupy common premises. Browne v. Brockton Natl. Bank, 305 Mass. 521, 530, 26 N.E.2d 360 (1940). Those factors are of importance only where they combine with others in such a way as to 'permit the conclusion that an agency or similar relationship exists between the entities.' My Bread Baking Co. v. Cumberland Farms, Inc., supra, 353 Mass. at 619, 233 N.E.2d at 752. Commonwealth v. Beneficial Fin. Co., 360 Mass. 188, 290, 275 N.E.2d 33 (1971), cert. den. sub nom. Fallell v. Massachusetts, 407 U.S. 910, 92 S.Ct. 2433, 32 L.Ed.2d 683 (1972), and sub nom. Beneficial Fin. Co. v. Massachusetts, 407 U.S. 914, 92 S.Ct. 2433, 32 L.Ed.2d 689 (1972).

The My Bread and Beneficial cases recognize two classes of such additional factors. The first of these is 'active and direct participation by the representatives of one corporation, apparently exercising some form of pervasive control, in the activities of another' together with 'some fraudulent or injurious consequence of the intercorporate relationship.' 353 Mass. at 619, 233 N.E.2d at 752; 360 Mass. at 290--291, 275 N.E.2d at 92. Even if the facts before us could be said to support a conclusion that the 'pervasive control' element of that class of cases exists here, the element of a 'fraudulent or injurious consequence of the intercorporate relationship' is wholly lacking. To be sure, the existence of the two corporations permitted Westcott Construction to ignore the sub-bid of its affiliate in submitting its general bid. But to say that that constitutes a 'fraudulent or injurious consequence' for purposes of the above-quoted rule is to reason in circles. We are mindful of the fact that Westcott Equipment's sub-bid excluded and general bidders other than Westcott Construction from availing themselves of it. But that might well have been motivated by legitimate business considerations having nothing to do with the advantage which might thereby accrue to Westcott Construction in submitting its general bid. We cannot infer that Westcott Construction 'used (Westcott Equipment) . . . to achieve an illegal purpose.' Browne v. Brockton Natl. Bank, 305 Mass. at 530, 26 N.E.2d at 364. There is no showing that either 'corporation is a sham, or is...