Ann Rathner, as City Clerk of the City of Susanville, California, and Ralph Conway, as Superintendent of Streets of the City of Susanville, California, Cross-Defendants and Respondents. v. <<

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District Court of Appeal, Third District, California.

Application of the CITY OF SUSANVILLE, a municipal corporation and political subdivision of the State of California, for validation of Proceedings and Proposed Contract under the Provisions of the ‘Improvement Act of 1911’. Lee C. Hess Company, a corporation, Respondent, Cross-Complainant and Appellant. City of Susanville, a municipal corporation and political subdivision of the State of California, Petitioner, Cross-Defendant and Respondent. Ann Rathner, as City Clerk of the City of Susanville, California, and Ralph Conway, as Superintendent of Streets of the City of Susanville, California, Cross-Defendants and Respondents.

Civ. 8801.

Decided: July 15, 1955

Clewe, Blade & McDonald, Robert W. Anderson, Oroville, for appellant. Sturgis, Den-Dulk, Douglass & Henes, Oakland, and Donald P. Cady, City Atty., Susanville, for respondent.

The City of Susanville adopted a resolution of intention to do certain public work within its boundaries, proceeding under the Improvement Act of 1911, now contained in Division 7, Part 3, of the Streets and Highways Code, § 5100 et seq. All prescribed action was duly taken, up to and including a call for bids, and Lee C. Hess Company, a corporation, submitted the lowest bid. The city council passed a resolution declaring Hess Company to be the lowest responsible bidder and awarding to it the contract for doing the work. Four days later, and acting upon mistaken advice by the Assistant Director of the Department of Professional and Vocational Standards that Hess Company was not a properly licensed contractor, the city council held a special meeting attended by all its members, but without any notice to Hess Company, and thereat passed a resolution declaring that Hess Company had not been qualified to bid the work and purporting to award the contract to one Katsaros, a bidder whose bid had been next lowest to that of Hess Company.

In this case the trial court found that the Hess Company had been properly licensed at all material times. The first resolution awarding the contract of Hess Company directed, as required by the statute, that the city clerk publish notice of that award, but no notice was published. The second resolution directed the publication of notice of award to Katsaros, and that publication was made, and a proposed formal written contract was delivered to Katsaros. At this point, and before the formal contract was executed by Katsaros, the city began this action under the provisions of chapter 10 of said division 7 of said Streets and Highways Code, to determine the validity of proceedings theretofore taken. The code provides that at any time after bids have been received, and prior to the date fixed for the beginning of the work, the legislative body conducting the proceedings may bring an action in the superior court to determine the validity of the proceedings and the validity of any contract entered, or to be entered into pursuant thereto. Any contractor to whom a contract has been awarded may also bring the action. The action is declared to be in the nature of a proceeding in rem and anyone interested is given the right to appear and ‘contest the validity of such proceedings and contract or uphold the same.’ Section 5268. Hess Company answered the city's petition, asserting that the contract had been awarded to it and declaring its willingness to enter into the formal written contract in accordance with the award. It asked that the legislative body and other city officials be mandated to recognize it as the contractor for the work and to proceed to deal with it in that capacity. The trial court found in favor of the city, declaring all proceedings taken to be valid, including the second resolution which, in effect, rescinded the prior resolution awarding the contract to Hess Company and adjudging that a contract executed by the city and Katsaros would be a valid contract. All relief asked by Hess Company was denied. From that judgment Hess Company has appealed.

In support of its appeal Hess Company contends that when the city council made the award to it a binding contract between the city and the Hess Company arose; that the city's power to act further in the matter of making an award had been exhausted and that its action rescinding the award was a nullity. It contends further that the meeting at which the second and rescinding resolution was passed was an illegal meeting in that it was not held at the city hall as prescribed by law. Before examining these contentions we will consider the claim of the city that Hess Company lost all right it might have had to object to the rescinding action taken by the counsel or to litigate the issue of the counsel of the city's proceedings because it had never appealed to the city council, that is to say, had not exercised its right to administrative remedies which the city contends was afforded it by the relevant statutes. The contention cannot be sustained.

It is, of course, well settled that where an administrative remedy is provided by statute relief must be sought from the administrative body and the remedy exhausted before the courts will act; and that a court violating the acts in excess of jurisdiction. Abelleira v. District Ct. of Appeal, 17 Cal.2d 280, 292, 109 P.2d 942, 132 A.L.R. 715. It is equally well settled that where a statute provides an administrative remedy and also provides an alternative judicial remedy the rule requiring exhaustion of the administrative remedy has no application if the person aggrieved, and having both remedies him by the same statute, elects to use the judicial one. Scripps Memorial Hospital, Inc., v. California Emp. Comm., 24 Cal.2d 669, 673, 151 P.2d 109, 112, 115 A.L.R. 360. Said the Supreme Court there:

‘If it may be said that there was here an administrative remedy provided by this statute and by the rules of the commission which was available to the respondent it cannot be said that that remedy was exclusive or that its exercise was a necessary precedent to the use of the other remedy expressly given by the statute. None of the cases cited in support of the usual rule go to the extent of holding that that rule applies as against another remedy expressly provided in the same statute, which creates the administrative remedy.’

Before considering the contentions of Hess Company upon the merits, it should be said that the Improvement Act of 1911 was originally enacted and has maintained its place in the statute books because of a fixed legislative policy that fairness, efficiency and security in the construction of public works can best be attained by a statutory scheme which would require that such contracts for such work must be let at competitive bidding. From the beginning to the end the provisions of the Improvement Act of 1911 are mainly aimed at securing such competitive bidding; and the courts have consistently construed the act with that legislative purpose in mind. Legislative bodies must follow the act and no attempt upon their part to claim authority to act except strictly in accord therewith can be successful. The act contemplates that before bids are invited the public improvement shall be thoroughly planned; that detailed and exhaustive plans and specifications of the work shall have been adopted; and that every material term and condition of the proposed contract shall have been stated, all to the end that where contractors are invited to bid they will know exactly what they are proposing to do under the contract they offer to enter into. The statute does require that after an award has been made a formal written contract shall be executed and appropriate bonds furnished for faithful performance of the work and for the payment of subcontractors, laborers and materialmen. But so well have all things been stated in the plans and specifications, in the proposal for bids, in the information and instructions to bidders, in the notice inviting bids and in the required bid forms that the formal contract is a brief document referring to these preceding writings for a statement of the obligation of the parties; these writings being expressly made a part of the formal contract.

It has long been decided in this and other states and in the courts of the United States that in the letting of contracts for the doing of public works where the legislative body or the administrative officer is required by statute to call for bids and must under competitive bidding conditions let the contract to the lowest responsible bidder, the making of the award gives rise to a contract between the public body or agent and the successful bidder. In Garfielde v. United States, 3 Otto 242, 93 U.S. 242, 23 L.Ed. 779, a case involving an award of a contract for carrying mail, it was said:

‘The Court of Claims holds that the proposal on the part of Garfielde, and the acceptance of the proposal by the Department, created a contract of the same force and effect as if a formal contract had been written out and signed by the parties. Many authorities are cited to sustain the proposition. We believe it to be sound, and that it should be so held in the present case.’

In United States v. Purcell Envelope Co., 249 U.S. 313, 39 S.Ct. 300, 301, 63 L.Ed. 620, a case involving an award to the company on its bid for furnishing stamped envelopes to the Postoffice Department, the court said in discussing the Garfielde case:

‘* * * It passed upon a transaction of the Post Office Department and decided that a proposal in accordance with an advertisement by that department and the acceptance by it of the proposal ‘created a contract of the same force and effect as if a formal contract had been written out and signed by the parties.’ And for this, it was said, many authorities were cited but it was considered so sound as to make unnecessary review of or comment upon them.

‘* * * In the present case it is insisted his [Attorney General's] action is not so subordinate, that he has discretion, and when exercised it is paramount, his action being ‘quasi judicial,’ the contract not having been consummated, and that, therefore, it was within his power to review and set aside the decision of his predecessor. We are unable to concede the fact or the power asserted to be dependent upon it. There must be a point of time at which discretion is exhausted. The procedure for the advertising for bids for supplies or services to the government would else be a mockery—a procedure, we may say, that it not permissive but required (section 3709, R.S. [Comp.Stat.1916, sec. 6832]). By it the government is given the benefit of the competition of the market had each bidder is given the chance for a bargain. It is a provision, therefore, in the interest of both government and bidder, necessarily giving rights to both and placing obligations on both. And it is not out of place to say that the government should be animated by a justice as anxious to consider the rights of the bidder as to insist upon its own. And, we repeat, there must be some point at which discretion ceases and obligation takes its place. That point is defined in the Garfielde Case, and that the definition is applicable to the case at bar is illustrated by the findings of the Court of Claims.'

In State v. Toole, 1901, 26 Mont. 22, 66 P. 496, 499, it was said:

‘* * * The duty imposed is to award the contract to the lowest responsible bidder, unless the bids be rejected. This the statute commands it to do; and whenever, after a compliance with the statutory prerequisites essential to the valid acceptance of a bid, it has regularly awarded the contract, there spring into existence vested rights, which the board cannot destroy or impair.’

In Marbury v. Madison, 1 Cranch 137, 2 L.Ed. 60, 67, it was said:

‘The last act to be done by the president is the signature of the commission. He has then acted on the advice and consent of the senate to his own nomination. The time for deliberation has then passed. He has decided. His judgment, on the advice and consent of the senate concurring with his nomination, has been made, and the officer is appointed.’

On the nature of a bid under the Improvement Act the Supreme Court of California said in M. F. Kemper Construction Co. v. City of Los Angeles, 37 Cal.2d 696, 700, 235 P.2d 7, 10:

‘Once opened and declared, the company's bid was in the nature of an irrevocable option, a contract right of which the city could not be deprived without its consent unless the requirements for rescission were satisfied.’

In Williams v. City of Stockton, 195 Cal. 743, 748–749, 235 P. 986, 988, where Williams had submitted a bid for construction of a city hall, the council had accepted the bid and had awarded the contract to him, it was said concerning the situation thus arising:

‘* * * The discretion of the city's governmental body, which alone could determine whether or not the contract should be awarded, had been exercised. * * * The contract was awarded in all respects as required by law. * * * Under such circumstances the appellant [Williams] became vested with a right to have the contract signed as directed by the council.’

The court said further, at page 751, quoting from Donnelly on the Law of Public Contracts, section 143:

‘* * * ‘When an award has once been made the public body has no discretion but to execute the contract. The rights of the parties then become fixed, and the power to cancel the award or reject the bids does not exist. The obligation of the contract made cannot thus be impaired at the option of one of the contracting parties.’'

The following is from 3 McQuillin on Municipal Corporations, 2nd ed., p. 1229, sec. 1328:

‘While it is true that a municipal corporation has discretion as to the time and manner of making corporate improvements and the purchase of supplies, still when this discretion has been exercised and a contract made relative thereto, the legislative function has been exhausted, and the duty has become purely ministerial, and a contract so made cannot be impaired at the option of the municipality. Hence, when a bid has been accepted by the proper authorities, such acceptance cannot be revoked.’

Applying the foregoing, we hold that the Hess Company's bid had been accepted and the contract awarded to it by regular action of the city council in strict pursuance of the statutory scheme. All the essentials of contract were present and Hess Company was entitled as of right to have the further proceedings take their statutory way. The city was without power, in the absence of fraud, mutual mistake or some other ground of rescission, none of which is claimed to have existed, to rescind its action and to take the contract from Hess Company and award it to Katsaros.

Respondent argues that since the statutes require that ‘Notice of the award of the contract shall be published by the clerk’, Sts. & H. Code, § 5248, this fixes the way, and the exclusive way, in which the acceptance of the bidder's proposal can be communicated to the successful bidder and that until this has been done no contract has arisen. Says respondent:

‘The provisions of the Civil Code of the State of California provide the essentials of a contract. These essentials are:

‘(a) Offer;

‘(b) Acceptance;

‘(c) Communication by each to the other.’ (Citing sections 1550, 1565 and 1581 of the Civil Code.)

We think the Streets and Highways Code section referred to was not intended by the legislature as a method whereby communication of the acceptance by the city should be given to the bidder, but on the contrary that it is limited in its effect to the notification which is required to be given to the property owners interested who for ten days after the giving of such notice are by the statute given the right of taking over the work themselves by entering into a written contract to do so at the price at which the award had been made to the bidder. The language of the statute bears this out. The section does not say that the notice by the clerk is a notice to the bidder of the city's acceptance of his offer, but on the contrary is a notice of the award itself. The award is treated as having been made and so far as the bidder be concerned any of the usual methods of conveying that information to him could be followed. Indeed, since the resolution making the award is the public act of a public body, it is a matter of which notice may be presumed so far as interested parties are concerned. It appears in the case at bar that the president of Hess Company was present when the bids were opened and the award was made.

Appellant asks that this Court not only reverse the judgment of the trial court but go further and mandate the city council, its members, its clerk and the city's superintendent of streets to proceed to notice the award to appellant, and if within the ten days allowed the property owners themselves do not take over the work, then to go further and enter into the formal contract with appellant and permit it to proceed to perform the work. We think it would not be proper for this Court to so order. This is a special statutory proceeding whereunder a legislative body or one who has been awarded a contract by such body for the doing of public work may, without refusing to go forward, set at rest all questions concerning the legallty of what has been done by bringing this action. The matter of whether or not the legislative body or any member of that body or employee of the city has refused to perform ministerial duties is not before the Court. The sole issue is the legality of what has been done. We cannot assume that it by the court these proceedings are declared to be valid and the contract declared to have been awarded to Hess Company, there will be any refusal to perform ministerial acts arising because of that situation. We, therefore, decline to go further than to decide the issues of legality of proceedings tendered by the petition filed by the city. The proceedings wer valid to the point to which they had been taken when the award was made to the Hess Company and were invalid beyond that point.

The judgment appealed from is reversed.

VAN DYKE, Presiding Justice.

FINLEY, Judge pro tem., concurs.

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