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MCINTOSH ROAD MATERIALS CO. v. WOOLWORTH (06/26/50)

June 26, 1950

MCINTOSH ROAD MATERIALS CO., APPELLANT,
v.
WOOLWORTH, SECRETARY OF PROPERTY AND SUPPLIES ET AL., APPELLANTS



Appeals, Nos. 5 to 8, incl., May T., 1951, from decrees of Court of Common Pleas of Dauphin County, Commonwealth Docket, 1950, Nos. 95 and 96, and Equity Docket, Nos. 1921 and 1922, in cases of McIntosh Road Materials Co. v. C. M. Woolworth, Secretary, Property and Supplies et al., and Dosch-King Company, Inc. v. Same. Decrees affirmed in part, and reversed in part.

COUNSEL

Earl G. Harrison, with him James Conwell Welsh, Louis F. Floge, Wm. A. Schnader, Hall, Hamilton, Wainwright & Welsh and Schnader, Harrison, Segal & Lewis, for plaintiffs.

Harry F. Stambaugh, Special Counsel, with him Robert M. Mountenay, Assistant Deputy Attorney General, Phil H. Lewis, Harrington Adams, Deputy Attorneys General, and T. McKeen Chidsey, Attorney General, for defendants.

Morris Wolf, with him Chas. H. Sachs and Wolf, Block, Schorr & Solis-Cohen, for Allegheny Asphalt & Paving Co., intervenor.

Wm. H. Wood, Arthur Hull and Hull, Leiby & Metzger, for Robert W. Schrech, amicus curiae.

Before Drew, C.j., Stern, Stearne, Jones and Bell, JJ.

Author: Jones

[ 365 Pa. Page 193]

OPINION BY MR. JUSTICE JONES

This matter is before us on separate appeals by the respective plaintiffs and on cross appeals by the Commonwealth acting by its administrative and fiscal officers named as defendants. The appellant plaintiffs complain of the lower court's refusal of their prayers for an injunction to restrain the defendants from entering into or acceding to any contracts for the furnishing and applying of bituminous materials in the maintenance and repair of State highways (for a specified period) other than as awarded to the plaintiffs and five other successful bidders by the Secretary of Property and Supplies on or about March 1, 1950; the plaintiffs

[ 365 Pa. Page 194]

    also complain of the lower court's enjoining of the defendants from proceeding to effectuate the contracts so awarded the plaintiffs, -- action which no one sought or requested. On the cross appeals, the Commonwealth assigns for error the action of the court below in declaring illegal, null and void the award of contracts for the furnishing of the specified materials and the performance of the correlative work which the Secretary of Property and Supplies attempted to make on March 29, 1950.

The questions involved relate in the main to the legal effect of the learned chancellor's supportable findings which received the approval of the court en banc and the legal conclusions properly to be drawn therefrom. The following is the factual situation giving rise to the controversy.

On January 18, 1950, the Department of Property and Supplies, acting as the purchasing agent for the Department of Highways,*fn1 invited bids on proposal forms prepared and furnished by the Secretary of Property and Supplies for certain specified bituminous materials and work in connection therewith for use in the maintenance and resurfacing of State highways in the eleven highway districts of the State during the contract year of April 1, 1950, to March 31, 1951. The bids were sought on alternative bases under three numbered schedules, viz., Schedule 1. for the furnishing of the desired materials, Schedule 2. for applying them and Schedule 3. for furnishing and applying the specified materials. In the fore part of the proposal form, it was stated that in considering the "bids and award of contracts, the right is reserved, by the Commonwealth, to determine the awards to the best interests of the Commonwealth for either; Schedule 1,... Schedule

[ 365 Pa. Page 1952]

... or Schedule 3... or any combination of bids for Schedules 1, 2, and 3..." (Emphasis supplied). The proposal form stipulated that bidders under Schedule 1 "... shall be liable for car service, track storage, and truck transport layover charges, except in such cases wherein the layover is caused by weather conditions or due to instructions issued by representatives of the Department of Highways" and it further provided that "The successful bidder shall be liable for demurrage only in such cases where demurrage results in the contractor having not complied with shipping instructions issued by the Department of Highways" (Emphasis supplied). That is to say, -- on materials for which bids under Schedule 1 were accepted, the Commonwealth would assume a contingent liability for car service, track storage or truck transport layover and demurrage charges. Under Schedule 2, the proposal declared that "the successful bidder shall not be liable for car service, track storage or truck transport layover charges, and demurrage..." (Emphasis supplied). Wherefore, the Commonwealth by accepting bids under Schedule 2 would assume all contingent charges of the character specified. On the other hand, Schedule 3 provided that "the successful bidder [thereunder] shall be liable for all car service, track storage or truck transport layover charges, and demurrage..." (Emphasis supplied), so that, for work and material accepted on bids under Schedule 3, the Commonwealth assumed no liability whatsoever for any additional contingent charges such as under Schedules 1 and 2.

The plaintiffs, as well as a number of other contractors, submitted bids pursuant to the "Invitation". The one plaintiff, McIntosh Road Materials Co. (hereinafter referred to as McIntosh Company or McIntosh), submitted bids under Schedules 2 and 3; the other plaintiff, Dosch-King Company, Inc. (hereinafter referred to as Dosch-King), submitted bids only under Schedule 3.

[ 365 Pa. Page 196]

The bids were in the form of contracts, fully and completely executed by the plaintiffs so as to be automatically binding on them upon acceptance thereof by the Secretary of Property and Supplies at any time within thirty days from the date set for the opening of all bids. Each of the plaintiffs had complied with the proposal requirement that its bid be accompanied by a certified or bank check for $10,000 as a guarantee of the bidder's faithful effectuation of any award of contract made to it. The security deposit was to be retained by the Department of Property and Supplies in the case of a successful bidder until such bidder filed the required performance and labor and material bonds on the contract awarded to it., but it was to be returned promptly, as required by The Administrative Code, to any unsuccessful bidder following an award of contracts.

The bids were opened as stipulated by the proposal at 10 A.M. January 30, 1950; and, on March 1, 1950, which was within the thirty-day period during which the bids were to "remain firm", the plaintiffs were severally notified by telegram from the Assistant Director of Purchases (Highways) in the Department of Property and Supplies that awards had been made to them on portions of their bids. The telegrams concluded with "Letter follows." On March 2, 1950, the Secretary of Property and Supplies, acting by the Assistant Director of Purchases (Highways), sent each of the plaintiffs a letter stating that "Tentative award of contract... has been made to your company for furnishing and applying bituminous materials as listed on the attached schedule." The letter further stated that "This award is in accordance with your bid submitted on Proposal-Index Number H-4619, bid opening date January 30, 1950", and that "This tentative award is subject to your compliance with the provisions of the proposal form which require that you submit a performance bond and a labor and material bond, each in an amount equal to 50% of

[ 365 Pa. Page 197]

    the estimated total amount of the award." On the same day, to wit, March 2, 1950, the Department of Property and Supplies returned to the unsuccessful bidders their security bid checks.

In the letters of March 2, 1950, from the Department of Property and Supplies to the plaintiffs, the Secretary expressly engaged to forward to them later a copy of the release to the Field Offices of the Department of Highways which would "show all awards made on bids received on Proposal-Index Number H-4619"; and, on March 3, 1950, the Department of Property and Supplies did send to each of the plaintiffs a copy of such release in the form of a letter from its Assistant Director of Purchases (Highways) addressed to "All Bureaus, Sections, Units, Sub-Units, District Engineers and Maintenance Superintendents" of the Highway Department. The letter specifically declared that "Contracts, for furnishing and applying bituminous materials for the period April 1, 1950, to March 31, 1951, have been awarded to: [seven named companies]" whereof the plaintiffs were two (Emphasis supplied). The letter further disclosed that all of the contracts had been awarded on the basis of bids under Schedule 3 which, as will be recalled, was the schedule that required the contractor both to furnish the materials and to apply them at the bid price without any liability whatsoever to the Commonwealth for car service, track storage, truck transport layover charges or demurrage.

The total amount of the contract for material and work so awarded to McIntosh Company was $885,313, and to Dosch-King, $444,459. On March 3, 1950, the day following the Department's letter to the plaintiffs confirming the award of contracts to them, the Dosch-King Company forwarded to the Department of Property and Supplies its two bonds, each in the appropriate amount of $222,229.50 with responsible corporate surety; and on March 7, 1950, McIntosh Company likewise forwarded

[ 365 Pa. Page 198]

    to the Department of Property and Supplies its two bonds, each in the required amount of $442,656.50, with responsible corporate surety. Both of the plaintiffs were orally advised by the Department of Justice that these bonds had been approved; and it was admitted for the Commonwealth, at trial, that the bonds had been duly approved by the Department of Justice.

Inasmuch as performance by the contractors under the awards of March 1st, as confirmed by the Secretary's letter of March 2, 1950, could be required from April 1, 1950, onward under a $50-a-day penalty for a contractor's delay in performing, the plaintiffs as awardees of contracts at once set about to prepare themselves for timely performance. The learned chancellor, acting for the court en banc in disposing of McIntosh's exceptions, found that McIntosh "purchased four additional distributor trucks as a cost of approximately $50,000, which trucks were delivered to [it] on or about March 28, 1950.... [and McIntosh also] entered into written contracts with Atlantic Refining Company, dated March 3, 1950, for a total of 4,745,000 gallons of bituminous materials [out of its total requirement of 6,605,000 gallons under its award] to be applied pursuant to the award. In addition, [McIntosh] called its men back to work and hired twelve additional employees to get ready to perform the contract on April 1, 1950." Then chancellor also found, and the court below approved, that the Dosch-King Company likewise "made preparation for furnishing and supplying the materials included in the awards made to [it] as listed upon the schedule accompanying the letter of March 2, 1950.... [Dosch-King also] entered into contracts with Standard Oil Company of New Jersey and Riley Tan & Chemical Company for bituminous materials to be applied pursuant to the award."

On March 29, 1950 (just two days before the beginning of the contract term), the Secretary of Property

[ 365 Pa. Page 199]

    and Supplies, acting by his Deputy, addressed to the plaintiffs letters purporting to recall the award made on March 1, 1950, and further purporting to make a "new award" of contracts for the desired materials and work to eleven bidders. Six of the latter were among the prior unsuccessful bidders whose bid-guarantee checks had already been returned to them by the Department of Property and Supplies. The chancellor found that the Department of Property and Supplies privately negotiated with the six unsuccessful bidders for the purpose of making the award of March 29th and sought their consent thereto.

The reason assigned by the Deputy in his letters of March 29th for the proposed "new awards" was that, as against making awards to the lowest bidders under Schedule 3 exclusively, "a still lower combination of bids was available if Schedules '1' and '2' were considered along with Schedule '3' and the lowest combinations picked from one or the other Schedules." As proof thereof, the Department's letter of March 29th set out that, while the total amount of the awards made March 1, 1950, was $2,415,875, the total amount of the proposed "new awards" arrived at by taking Schedules 1, 2 and 3 in combination was $2,397,309 or a putative saving to the Commonwealth of $18,566. The calculation ...


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