Wilson v. Lord-Young Eng'g Co.

• Decision Date: 23 April 1912
• Citation: 21 Haw. 87
• Parties: JOHN H. WILSON v. LORD-YOUNG ENGINEERING COMPANY, LIMITED, A CORPORATION, MARSTON CAMPBELL, SUPERINTENDENT OF PUBLIC WORKS OF THE TERRITORY OF HAWAII, J. J. FERN, MAYOR OF THE CITY AND COUNTY OF HONOLULU, ANDREW ADAMS, T. H. PETRIE AND S. C. DWIGHT, LOAN FUND COMMISSIONERS, AND J. H. FISHER, AUDITOR OF THE TERRITORY OF HAWAII.
• Court: Hawaii Supreme Court

21 Haw. 87

JOHN H. WILSON

v.LORD-YOUNG ENGINEERING COMPANY, LIMITED, A CORPORATION, MARSTON CAMPBELL, SUPERINTENDENT OF PUBLIC WORKS OF THE TERRITORY OF HAWAII, J. J. FERN, MAYOR OF THE CITY AND COUNTY OF HONOLULU, ANDREW ADAMS, T. H. PETRIE AND S. C. DWIGHT, LOAN FUND COMMISSIONERS, AND J. H. FISHER, AUDITOR OF THE TERRITORY OF HAWAII.

Supreme Court of the Territory of Hawai‘i.

Argued April 9, 1912.

Decided April 23, 1912.

APPEAL FROM CIRCUIT JUDGE, FIRST CIRCUIT.

Syllabus by the Court

Under a statute providing for the letting of public contracts to the lowest responsible bidder, the refusal of the awarding officers to award a contract to the lowest bidder can be justified only when it has been made to appear upon a public hearing and investigation conducted with fairness, impartiality and thoroughness that he is not a responsible bidder.

The phrase “responsible bidder” means one who is not only financially responsible, but who is possessed of the judgment, skill, ability, capacity and integrity requisite and necessary to perform the contract according to its terms. In determining the question of the responsibility of a bidder awarding officers have a wide discretion, but that discretion must be exercised fairly, honestly and judicially.

The specifications for a public contract upon which bids are requested should include every element essential to furnish a common standard by which to measure the respective bids, and where they are so indefinite or misleading as to prevent real competition between the bidders, no valid contract can be based upon them. Where, in a call for tenders for the construction of a road, no time was fixed within which the work should be completed, but the bidders were required to state in their bids the time in which they would agree to complete the work, and neither the call for tenders nor the specifications stated the value which would be placed upon the difference in time, and the awarding officers were not bound to consider the difference in time in which the bidders agreed to complete the work in determining who was the lowest bidder, held that the specifications were fatally defective and no contract could be awarded on them.

R. B. Anderson ( Kinney, Prosser, Anderson & Marx on the brief) for complainant.

E. W. Sutton, Deputy Attorney General ( Alexander Lindsay, Jr., Attorney General, with him on the brief), for respondents Oahu Loan Fund Commissioners.

ROBERTSON, C. J. PERRY AND DE BOLT, JJ.

OPINION OF THE COURT BY ROBERTSON, C. J.

This is an appeal from a decree of a circuit judge, sitting in equity, whereby the respondents were perpetually enjoined from performing, or partaking in the performance of, a certain contract for the construction of a public road in the City and County of Honolulu. The contract was awarded to the respondent, Lord-Young Engineering Co., Limited, by the respondents Campbell, Fern, Adams, Petrie and Dwight, acting as a commission appointed pursuant to section 5, Act 166 of the Laws of 1911. The complainant, who was an unsuccessful bidder for the contract, brought this suit as a taxpayer alleging that he and not the Lord-Young Engineering Co. was the lowest responsible bidder. The statute (Act 62 of the Laws of 1909, as amended by Act 47 of the Laws of 1911,) provides that, with certain exceptions, no expenditure of public money where the sum to be expended shall be one thousand dollars or more shall be made except under contract let after public advertisement for sealed tenders, and that all such contracts shall be made with the lowest responsible bidder after publication for not less than ten days of such call for tenders. The complainant's contentions were that the commission, in determining who was the “lowest responsible bidder” was charged with the duty of granting a hearing before arriving at a conclusion, and was required to make a fair and reasonably thorough investigation of the facts before making a decision; also that the specifications accompanying the call for bids were fatally uncertain in not stating a time in which the contract must be completed. The circuit judge, without passing on the question of the validity of the specifications, based his decree on the point that the decision in favor of the Lord-Young Engineering Co. was of no validity for the reason that in determining the question before it the commission had acted in secret and without granting an open hearing before making an award.

Additional facts are to be found stated in the opinion of Mr. Justice Perry wherein also are contained our reasons for holding that the specifications upon which the bidders based their tenders were so indefinite and uncertain in respect to the time within which the contract was to be performed as to prevent real competition between the bidders, and that a valid contract could not be founded on them. That ground alone is enough to require the affirmance of the decree, but in view of the importance of the case because of the fact that public contracts are constantly being let by officers acting under the statute here involved we deem it our duty to express our views with reference to the procedure followed by the commission in considering the bids and awarding the contract in question.

The trial judge found as a fact that the complainant was the lowest responsible bidder and the finding was fully supported by the evidence. That alone would not, however, be conclusive of the complainant's right to the relief sought because if upon a fair and impartial public hearing the commission had found upon any substantial evidence that the complainant was not a responsible bidder, though the lowest, that finding, though erroneous, would not be disturbed by the court in the absence of a showing of fraud, or collusion, or arbitrary action amounting to fraud. It is admitted that the consideration and determination of the question of the complainant's responsibility was done, not at an open meeting of the commission, but behind closed doors. But it is argued that if in fact the investigation was fair, impartial, and sufficiently thorough, the decision ought not to be disturbed for the reason alone that the meetings were not open to the public. Assuming, without deciding, that the point is well taken, and conceding that there was no evidence that any improper motive influenced the action of the commission, yet the record shows that the investigation made was not conducted with that fairness, impartiality and thoroughness which should characterize proceedings of a judicial or quasi-judicial nature. At the meeting of the commission at which the bids were opened a general discussion was had in the course of which the statement was made that Wilson had failed to fulfil certain contracts which had been awarded him at previous times, but no action with reference to awarding a contract was taken. At the next meeting, after further discussion, the chairman was directed to investigate and report as to the responsibility as contractors of the three lowest bidders. At the third meeting the chairman made a verbal report, the substance of which, after the meeting, was reduced to writing, and appears in the minutes of the proceedings of the commission as follows:

“THE LOAN FUND COMMISSION,

CITY AND COUNTY OF HONOLULU.

GENTLEMEN:

At a meeting of this Commission held on September 29th, 1911, I was authorized and directed to investigate the responsibility as contractors of Mr. Theo. Bauman, the Lord-Young Engineering Company, Limited, and Mr. John H. Wilson.

I beg to make the following report:

I have found no record of irresponsibility on the part of Theo. Bauman as a contractor. I am informed by credible business men that his record is good.

So far as I can learn the Lord-Young Engineering Company, Limited, also has a good record for responsibility as contractors, as an instance of which it is stated that although they are reported to be losing on one of their operations by contract, namely the Hilo Breakwater, now under way, they are continuing to perform their obligations in good faith. Our engineer, Mr. Gere, has a criticism of Mr. Young's attitude toward the Queen Street paving proposition for the City and County Government, but I did not understand Mr. Gere to question the responsibility of the firm as contractors.

I am informed that Mr. J. H. Wilson has failed to complete two contracts which he has undertaken, one for the County of Kauai, and one for the Territory. I have sent a wireless message to the Vice-Chairman of the Kauai Board of Supervisors, asking for information bearing on the Kauai contract. I am informed that the County of Kauai was not put to additional expense by the failure of Mr. Wilson to complete his contract. I understand Mr. Wilson claimed that certain machinery used by him was not delivering the guaranteed amount of material and that, therefore, he could not perform the work as rapidly as he had expected to be able to do. I understand also that the County Government of Kauai caused an engineer to be sent to them from Honolulu and that after certain repairs were made to the machinery it was found to have the capacity of delivering a greater amount of material than was required. I understand further that the Kauai authorities claimed the machinery had not been properly operated by the contractor. I would state that I am informed that the machinery used by Mr. Wilson on the Kauai contract under question is a duplicate of the plant which the Supervisors of the City and County of Honolulu will lend to this Commission for use on Section No. 1 of the Oahu Belt Road, the bids for the construction of which are now being considered by this commission.

I quote the following from a published report of the Superintendent of Public Works, now incorporated in the public records, under the title ‘Loan Appropriations.

Completion and Extension of Sewerage, Honolulu.

A contract was made July 5th, 1899, with J. H. Wilson under the firm name of Wilson...