FLORA CRANE SERVICE INC v. ROSS (1963)

Appellant, Flora Crane Service, Inc., submitted the lowest bid, in amount $4,920, for razing buildings in a redevelopment area, in response to an advertisement published by the Director of Property for the City and County of San Francisco. The Department of Public Works approved an award of contract by the Director of Property and the department published notice that it had so approved. A form of contract, dated October 19, 1959, was signed by appellant, by the City and County of San Francisco by the Director of Property, was approved by the Director of Public Works and the Chief Administrative Officer and, as to form, by the City Attorney. The call for bids had stated: ‘The award of contract will be made subject to certification by the City's Controller. * * *’ A blank form had been submitted to appellant, containing the following, which later was typed into the original of the purported contract: ‘Said work shall be commenced by the Company within ten calendar days after being notified by the Director of Property that the City's Controller has certified this contract, and shall be completed within sixty calendar days after date of such notification. * * *’ The contract papers were not submitted to the City Controller for certification until July 1960, and the Director of Property had given no notice (which, if given, would have been in error) of Controller's certification. The Controller refused to certify on the ground that no valid contract had been made because of lack of prior certification. Meanwhile, appellant had furnished surety bonds and had proceeded with and completed the work. There is no contention that is was unsatisfactory.

The relevant provisions of the Charter of the City and County of San Francisco are contained in section 86:

‘No obligation involving the expenditure of money shall be incurred or authorized by any officer, employee, board or commission of the city and county unless the controller first certify that there is a valid appropriation from which the expenditure may be made, and that sufficient unencumbered funds are available in the treasury to the credit of such appropriation to pay the amount of such expenditure when it becomes due and payable.

‘Every officer who shall approve, allow or pay any demand on the treasury not authorized by law, ordinance or this charter, shall be liable to the city and county individually and on his official bond for the amount of the demand so illegally approved, allowed or paid.

‘Each such certification shall be immediately recorded by the controller. Each sum so recorded shall be an encumbrance for the purpose certified until such obligation is fulfilled, cancelled or discharged, or until the ordinance or resolution is repealed by the board of supervisors.

‘All obligations incurred, all ordinances passed, and resolutions and orders adopted, contrary to the provisions of this section, shall be void, and any claim or demand against the city and county based thereon shall be invalid.’ (Stats. 1931, ch. 56, pp. 3030–3031.)

At the time of the notice of award and of the signing of the form of contract, there were sufficient unencumbered funds available to the credit of a valid appropriation to pay the whole amount of $4,920. At the time of filing the petition for mandate, there were, according to an allegation on information and belief in the petition, $2,988.51 of unencumbered funds previously appropriated for a specific purpose of the Department of Public Works which had become surplus and which could be transferred under section 77 of the charter, for the purpose of paying appellant. There were other unencumbered balances in a cash reserve fund which could be certified by the Controller to the Board of Supervisors for payment of authorized expenditures under Charter section 80.

The petition prays that a writ of mandate issue (1) directing the Controller to certify that there is a valid appropriation from which $2,988.51 can be expended to pay appellant; (2) directing the Director of Property to request the Chief Administrative Officer to approve, and the Controller to authorize, transfer of $1,931.49 from surplus funds; (3) directing the Controller to transfer unused balances from other appropriations to the cash reserve fund, then to certify to the Board of Supervisors that $4,920 is due and payable to appellant, and directing the Board of Supervisors to use said funds for payment to appellant; and (4) commanding the Controller and Treasurer to draw a warrant to appellant.

The petition was denied.

It is appellant's position that a binding contract was made between the City and appellant upon the making of the award by the Department of Public Works and that it is a ministerial duty of the Controller, performable since demand was made on him, to certify as the first step, and of the Controller and othr officials, after certification, to act. The Controller's refusal being the first redoubt which appellant must carry, there is no struggle at present over the more remote ones.

Respondents contend that no contract was made and that no duty of the Controller exists except that which he has performed, of refusing to certify.

We sustain the position of respondents and we hold that the city was not bound by the purported contract because the City Charter was not followed. It would have been difficult for the freeholders who drew the Charter to have expressed more positively the requirement of the Controller's certification as an essential to the existence of liability on the part of the City and County. Section 86 commences with a denial of obligation unless the Controller first certify that there is a valid appropriation and unencumbered funds are available. The next paragraph makes an official liable on his bond if he approves, allows or pays any demand not authorized by law, ordinance or the Charter. The last paragraph makes all obligations incurred, or ordinances, resolutions or orders passed or adopted contrary to the provisions of the section, void.

It is plain to see that purposes of the section were to secure fiscal control, to be exercised by the Controller, to prevent the incurring of contractual obligations beyond appropriated funds and to obviate multiple claimants to the same funds, at the same time encumbering funds specifically for the benefit of persons who contract with the city and do obtain certification.

The case of Williams Bros. & Haas, Inc. v. City and County of San Francisco, 53 Cal.App.2d 415, 128 P.2d 56, holds directly that no enforceable liability arose where section 86 of the Charter had not been complied with. Appellant argues that the case is different because: (1) There was an alternate holding that a claim had not been timely filed. The fact that there was a second independent holding does not vitiate the first. (Bank of Italy Nat. Trust & Sav. Ass'n. v. Bentley, 217 Cal. 644, 650, 20 P.2d 940.) (2) The action there was on the contract, here it is for a writ. Essentially, the question is the same, that is whether there was a contract or not, where the prior certification had not been made.

Appellant cites Williams v. City of Stockton, 195 Cal. 743, 235 P. 986, for the proposition that a mere ministerial act may be compelled by mandamus, such as the signing of a contract by an officer who had no discretion to refuse because the whole matter of contracting, except signature itself, belonged to the city council under the charter. The plain terms of the San Francisco Charter making void any purported obligation, absent certification, patently distinguish the cases. Appellant also cites City of Susanville v. Lee C. Hess Co., 45 Cal.2d 684, 290 P.2d 520, for the proposition that the making of the award creates a contract between the public body and the successful bidder, and the fact that subsequent formalities are required, such as publishing notice of the award or execution of formal contract papers, does not impair the previous offer and acceptance. The notice in that case, however, was a merely formal one, not designed particularly to notify the successful bidder, and the written contract was a formality, too, because of the comprehensive statement in the plans and specifications. No statutory requirement of the nature of that expressed in the San Francisco Charter appears in the Susanville case.

It is argued by appellant that it was the duty of the City to obtain the Controller's certification. Cited for this point are Bomberger v. McKelvey, 35 Cal.2d 607, 220 P.2d 729, and Fong v. Rossi, 87 Cal.App.2d 20, 195 P.2d 854, which hold that a contracting party covenants, by implication, that he will do the necessary things to enable the other to perform, such as, in the Bomberger case, giving permission to a contractor who agreed to demolish buildings, to go on the premises; and in the Fong case, transferring liquor licenses as agreed, without demanding purchasing of inventory, which had not been agreed. In these cases, the question was not whether the contracts had been made, but what the duties of the parties were. In the case before us, the missing element is an essential to existence of the contract. To say that the obligation was on the City to supply that element would effectively convert the Charter section to declare that an uncertified contract is void unless a city officer had not got it certified, in which case it is valid. This would be virtual nullification of the law.

The argument that the Controller's duty is merely ministerial falls with our holding, in exact accordance with the Charter, that no valid contract was made. If the Controller had refused arbitrarily to certify before the work was done, perhaps the writ of mandate would lie; but, as there is nothing now to contract about, the Controller cannot first certify. He has no duty, discretionary or ministerial, to certify.

Judgment affirmed.

DEVINE, Justice.

DRAPER, P. J., and SALSMAN, J., concur.