Title: Orion Portfolio Servs. 2 v. Clark County

State: nevada

Issuer: Nevada Supreme Court

Document:

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126 Nev., Advance Opinion 341
IN THE SUPREME COURT OF THE STATE OF NEVADA

ORION PORTFOLIO SERVICES 2, LLC, | No. 53969
Appellant,

vs.
COUNTY OF CLARK EX REL.
UNIVERSITY MEDICAL CENTER OF FILED
SOUTHERN NEVADA,

Respondent. oct 14 2000

func

Certified questions, pursuant to NRAP 5, regarding a local

government entity's sale of personal property. United States District
Court for the District of Nevada; Roger L. Hunt, Judge.
Questions answered,

Bailey Kennedy and Dennis L. Kennedy, Sarah E. Harmon, and Joseph A.
Liebman, Las Vegas,
for Appellant.

Olson, Cannon, Gormley & Desruisseaux and Thomas D. Dillard, Jr.,
Walter Cannon, and Joseph M. Ortuno, Las Vegas,
for Respondent.

BEFORE THE COURT EN BANC.

OPINION

By the Court, DOUGLAS, J.:

‘The United States District Court for the District of Nevada
has certified two questions to this court, pursuant to NRAP 5. Although
we accept the federal court's certified questions, we reframe them to better
reflect the factual circumstances of the federal case and, accordingly,

answer the following questions. When a local government entity sells

D- 26%

 
property using the competitive bidding process, does NRS 332.185 require
the government to follow public bidding rules outlined in Chapter 332?
And, under Nevada law, is a contract obtained through competitive
bidding void when it materially differs from the contents of the invitation
to bic

 

We conclude that the answer to both questions is yes. If a
public entity chooses to sell property by competitive bidding, it must follow
the rules set forth in NRS Chapter 332, And a contract obtained through
‘competitive bidding is void if it materially differs from the contents of the
invitation to bid.

PROCEDURAL HISTORY AND FACTS:

Respondent County of Clark ex rel. University Medical Center
of Southern Nevada (UMC) decided to sell certain consumer health care
accounts through competitive bidding by extending an invitation to bid,
which was published in a newspaper.: ‘The invitation included a provision
that if UMC determined not to sell an account that it initially intended to
sell, UMC could substitute that account with an account of equal value,
‘Thereafter, UMC issued an addendum to its bid invitation providing that
no accounts would be replaced.

Ultimately, UMC accepted appellant Orion Portfolio Services
2s bid, which Orion made contingent on the parties entering into a

purchase agreement for the accounts. The parties subsequently entered

"The Clark County Commission sits as the governing board for
UMC. Because UMC is a local government entity, it must conform to NRS
Chapter 832, which concerns purchases and sales by a local government.
UMC was selling the right to collect debts on accounts on which UMC had
been unable to collect.

 

 
into a purchase agreement, which included a provision that allowed the
parties to replace certain accounts, notwithstanding UMC's invitation-to-
bid addendum providing that no accounts would be substituted,

After the parties finalized the contract, Orion asked UMC to
substitute a number of accounts under the provision in the parties’
agreement purportedly allowing it to do so, When UMC refused to
substitute the accounts, Orion instituted a breach of contract action
against UMC in the United States District Court.

UMC eventually moved for summary judgment, arguing that
‘the parties’ contract is void because it materially differs from the
invitation to bid. Orion opposed the motion and filed a countermotion for
summary judgment. In addition to arguing that Nevada law does not void
a contract that materially differs from the invitation to bid on which it is
based, Orion also argued that Nevada's statute concerning a government
entity's sale of personal property, NRS 332.185, does not require a
government entity to sell personal property using competitive bidding, but
rather, gives the government entity discretion to dispose of the personal
property “by any manner.” Thus, Orion argued, the requirements of
competitive bidding found in NRS Chapter 332 do not apply to UMC's sale
of personal property that is no longer required for public use. Because the
parties’ arguments raise questions of Nevada law that have never been
addressed by this court, the United States District Court certified two
questions, which we have reframed to better reflect the factual situation

presented in this case.

 

 
DISCUSSION

NRAP 5

This court may answer questions of law certified by a federal
‘court when the “answers may ‘be determinative’ of part of the federal case,
there is no controlling [Nevada] precedent, and the answer will help settle
important questions of law.” Volvo Cars of North America v. Ricci, 122
Nev. 746, 751, 137 P.3d 1161, 1164 (2006) (quoting Ventura Group v.
Ventura Port Dist., 16 P.3d 717, 719 (Cal. 2001); NRAP 5.

In this case, the federal district court certified two questions
regarding the interpretation of NRS 832.185. The questions asked by the
federal district court used the term “public auction’; however, the record

 

in this case indicates that UMC advertised an invitation to bid and acted
pursuant to the competitive bidding statutes. Because the instant case
involved competitive bidding and not a public auction, we have reframed
the federal court's questions to better reflect the factual circumstances and
procedural posture of the case before us. The federal district court also
asked, in part, whether a local government entity must follow the public
bidding rules set forth in NRS Chapter 333, However, because Chapter
388 concerns the state's purchasing and selling of property and this case
involves the sale of property by a local government, we also limit the
questions to whether the government must follow the public bidding rules

*Specifically, the federal district court certified the following
questions: When a local government entity sells property at a public
auction, does [NRS 332.185] require the government to follow public
bidding rules outlined in sections 332 and 383? Under Nevada law, is a
contract obtained through a public auction void when it materially differs
from the contents of the invitation to bid?

 

 
outlined in NRS Chapter 332, which relates to purchasing and selling by
local governments. “In so doing, we point out that, in exercising our
discretion to answer certified questions, we nevertheless must constrain
ourselves to resolving legal issues presented in the parties’ pleadings.”
Terracon Consultants v, Mandalay Resort, 125 Nev. _, __, 206 P.3d 81,
85 (2009). After restating the questions, we conclude that the three
criteria articulated in Volvo Cars are met. The answers to these two
questions will be determinative of the federal case, there is no controlling
Nevada precedent, and the answers will help settle important questions of
law. Therefore, we answer the certified questions.

We first address whether NRS 332.185 requires the
government to strictly adhere to the competitive bidding rules outlined in
NRS Chapter 332. We then consider whether a contract obtained through
competitive bidding is void if it materially differs from the invitation to
bid
Whether NRS 332.185 requires local governments to dispose of personal
property through the competitive bidding process

‘The first certified question requires this court to determine
whether NRS 332.185 requires local governments to use the competitive
bidding process outlined in NRS Chapter 332 when disposing of personal
property. Or, under NRS 332.185, may a local government dispose of its
property in any manner? To answer this question, we must interpret NRS
992.186's language and determine which manner of disposal is permissible
under the circumstances of this case. We conclude that local government
may dispose of its personal property in any manner it chooses, but if it

chooses to use the competitive bidding process, it must follow the

mandates of NRS Chapter 332 as nearly as possible.

 

 
‘NRS 332,185(1)'s statutory interpretation
NRS Chapter 332 governs purchases made by local
governments and requires that the purchases be completed through a
competitive bidding process. See generally NRS 332.039. The disposal of
government property, however, is governed by NRS 332.185, titled in part
“[slale of personal property of public entity.” NRS 332.185(1) states:

Except as otherwise provided in subsection 2 and
NRS 244.1505 and 834,070, all sales of personal
property of the local government must be made, as
nearly as possible, under the same conditions and
limitations as required by this chapter in the
purchase of personal property. The governing
body or its authorized representative may dispose
of personal property of the local government by
any manner, including, without limitation, at
public auction, if the governing body or its
authorized representative determines that the
property is no longer required for public use and
deems such action desirable and in the best
interests of the local government.

‘The construction of a statute is a question of law, which we
review de novo. State, Dep't of Mtr, Vehicles v, Lovett, 110 Nev. 478, 476,
874 P.2d 1247, 1249 (1994). When a
this court gives effect to the pla
does not resort to the rules of construction. Seput-v. Lacayo, 122 Nov. 499,
502, 194 P.2d 733, 735 (2006), abrogated on other grounds by Buzz Stew,
LLC v, City of N, Las Vegas, 124 Nev. 224, 228 n.6, 181 P.3d 670, 672 n6
(2008), Where a statute's language is ambiguous, however, the court must

 

fatute is clear and unambiguous,

 

and ordinary meaning of the words and

look to legislative history and rules of statutory interpretation to
determine its meaning. Leven v. Frey, 123 Nev. 399, 404, 168 P.3d 712,
716 (2007). A statute's language is ambiguous when it is capable of more

than one reasonable interpretation. Id, Internal conflict can also render a

 

 
statute ambiguous. Law Offices of Barry Levinson v, Milko, 124 Nev. 355,
367, 184 P.3d 378, 387 (2008).

‘The Legislature's intent is the primary consideration when
interpreting an ambiguous statute. Cleghorn v. Hess, 109 Nev. 544, 548,
858 P.2d 1260, 1262 (1993). When construing an ambiguous statutory
provision, “this court determines the meaning of the words used in a
statute by examining the context and the spirit of the law or the causes
which induced the [Legislature to enact it.” Leven, 123 Nev. at 405, 168
P.8d at 716 (internal quotation marks omitted). In conducting this
analysis, “{tJhe entire subject matter and policy may be involved as an
interpretive aid.” Id. (internal quotation marks omitted). Accordingly,
this court will consider “the statute's multiple legislative provisions as a
whole.” Id.

This court has a duty to construe statutes as a whole, so that
all provisions are considered together and, to the extent practicable,
reconciled and harmonized. Id.; Southern Nev. Homebuilders v. Clark
County, 121 Nev. 446, 449, 117 P.3d 171, 173 (2005). In addition, the
court will not render any part of the statute meaningless, and will not
read the statute's language so as to produce absurd or unreasonable
results. Leven, 123 Nev. at 405, 168 P.3d at 716.

Orion argues that the statute's plain language allows a local
government to dispose of its personal property “by any manner.” UMC
argues that the plain language of NRS 332.185 demands adherence to
competitive bidding requirements for the sale of personal property. UMC
focuses on the mandatory language contained in the first sentence of the
statute, which provides that “all sales of personal property of the local

government must be made, as nearly as possible, under the same

 

 

 
conditions and limitations as required by this chapter in the purchase of
personal property.” NRS 332.185(1) (emphases added).

Both parties contend that NRS 332,185(1) can be interpreted
according to its plain language. UMC and Orion assert that the statute's
first sentence mandates competitive bidding and the second sentence
provides an exception to using the competitive bidding process; they
disagree as to which sentence controls in this situation. UMC and Orion's
interpretation of the statute is reasonable. Because the statute’s language
is capable of more than one reasonable interpretation, we conclude that
NRS 332.185(1) is ambiguous.

However, in considering the statute's plain language, we
conclude that the statute's second sentence cannot be read as an exception
to the first sentence. To do so would render the first sentence
meaningless. Thus, the internal conflict also renders NRS 332,185(1)
ambiguous. Because the statute is ambiguous, we must look to the
legislative history and harmonize the two provisions to give all the words
meaning,

Legislative history

Since NRS 332.185 was adopted, it allowed personal property
to be sold at a public auction if the local government determined that such
a sale was desirable and in the government's best interest. 1975 Nev.
Stat, ch. 732, § 22, at 1539. In 1999, the statute was amended to require
that the government “determine[ ] that the property is no longer required

for public use” if the property was going to be disposed of at public auction.

This language was added to former NRS 382.190 in 1969, 1969
Nev. Stat., ch. 435, § 14, at 754.

 

 
1999 Nev, Stat., ch. 874, § 8, at 1685-86; 1999 Nev. Stat., ch. 606, § 54, at
3822, At the 1999 legislative hearings, a purchasing manager for Clark
County, Nevada, representing the Nevada Public Purchasing Commission,
testified that the amendment gave the local governments some flexibility
in disposing of property. See Hearing on S.B. 341 Before the Assembly
Comm. on Government Affairs, 70th Log. (Nev., April 15, 1999). Then in
2001, Assembly Bill 649 further expanded the local government's
discretion in the sale of government property. 2001 Nev. Stat., ch. 288, §
18, at 1319. This was the latest amendment to the statute and composes
the current version of NRS 332.185(1).

With the amendments to NRS 332.185, the Legislature
appears to have given local government more options for disposing of
personal property, but it also retained the first sentence, which requires
adherence to the rules of competitive bidding “as nearly as possible” and
the limitation as to what property could be disposed of. ‘Thus, the
Legislature's intent with respect to these two provisions is not entirely
clear. As the legislative history provides little guidance on the issue, we
must attempt to read the two sentences together in an effort to harmonize
them and not render any part superfluous.

Harmonizing the two sentences together requires us to
conclude that the local government has the discretion to dispose of
personal property in any manner; however, when the local government
chooses to sell through competitive bidding, it must follow the rules of
competitive bidding, as set forth in NRS Chapter 332
possible.”

“as nearly as

 

 

 
mee

 

rei ‘when NRS 332.185(1) allows for compliance “as nearly as
possible”
‘The first sentence of NRS 332.185(1) states that “all sales of

personal property of the local government must be made, as nearly as
required by [NRS
Chapter 332] in the purchase of personal property.” However, neither

possible, under the same conditions and limitations

 

party offers an interpretation of the phrase “as nearly as possible.” ‘The

 

interpretation of the phrase is key to determining whether a local
government is required to strictly comply with the competitive bidding
requirements of Chapter 332 when it chooses to sell property through
competitive bidding,

We conclude that the phrase should be given its plain
meaning. “[NJearly” is defined as “all but; almost....with close
approximation,” and “possible” is defined as “that may or can be, exist,
happen, [or] be done.” Webster's New Universal Unabridged Dictionary
1283, 1509 (1996). Using the dictionary definitions of the key words
within it, the phrase “as nearly as possible” means “with as close an
approximation as can be done.” We conclude the phrase was inserted to
allow for the differences between purchases and sales. For example, NRS
382.065 requires the award of the contract to the lowest responsive and
responsible bidder, but for a sale, it would be to the highest responsive and
responsible bidder.

Orion argues that even though UMC can choose to sell in any
manner, including competitive bidding, pursuant to the second sentence of
NRS 332.185(1), it did not have to follow the stringent requirements of
competitive bidding. Orion analogizes to this court's statement in a
footnote in Harmon v. Tanner Motor Tours, 79 Nev. 4, 12 n.2, 377 P.2d

10

 
622, 626 n.2 (1963). In that case, the court held that the government
entity (Las Vegas airport) could choose to use some form of public bidding
process as a matter of convenience without regard to the stringent
statutory competitive bidding requirements. Id,

Harmon is, however, distinguishable from the case before us.
‘The statute interpreted in that case, NRS 496.090, specifically pertains to
municipal airports. Harmon, 79 Nev. at 12 n.2, 377 P.2d at 626 n.2.
Unlike NRS Chapter 496, NRS Chapter 332 deals extensively with
‘competitive bidding. We conclude that UMC could have chosen to sell in
any manner, including competitive bidding, pursuant to the second
sentence of NRS 332.185(1), However, once UMC chose to sell through
competitive bidding, it had to follow the rules of competitive bidding, as
set forth in NRS Chapter 332 for the purchase of personal property, as
nearly as possible.

ther_a_contract obtained through competitive bidding is if it
materially differs from the invitation to bid

‘The second certified question asks this court to determine
whether a contract obtained through competitive bidding is void when it
materially differs from the contents of the invitation to bid.4 UMC asserts
that a local government has no discretion in awarding a contract if the bid
varies materially from the invitation requirements, and that a contract

“Both parties present arguments about whether the contract
between Orion and UMC materially differed from the contents of the
invitation to bid. This is a question of fact and is irrelevant to the
‘questions of law presented to this court. We have properly left this factual
determination to the federal court, which can address these issues after
this court answers the certified questions presented.

 

 
that materially differs from the invitation to bid is void. Orion contends
that the terms of the advertisement and the terms of the bid or contract do
not need to be identical.

While Nevada has never directly addressed whether a contract
obtained through competitive bidding is void when it materially differs
from the contents of the invitation to bid, in Faust v. Donrey Media Group,
95 Nev. 235, 237, 591 P.2d 1152, 1164 (1979), this court addressed a
similar question when it held that “[ajn awarding board has a duty to
reject any bid materially varying from bid specifications.” In explaining
its decision, the court stated that “[t]he rationale of this rule is to preserve
the competitive nature of bidding by preventing unfair advantage to any
bidder, or other conditions undermining the necessary common standard
of competition.” Id. at 238 n.1, 591 P.2d at 1154 n.1. This court has also
held that “[t]he purpose of bidding is to ‘save public funds’ and guard
against ‘favoritism, improvidence and corruption.” Richardson Constr. v.
Clark Cty. Sch, Dist., 123 Nev. 61, 66, 156 P.3d 21, 24 (2007) (quoting Gulf
Oil Corp. v. Clark County, 94 Nev. 116, 118, 575 P.2d 1332, 1333 (1978).
Other jurisdictions have taken the Faust rule a step further and
determined that the resulting contract must also be in substantial
accordance with the terms of the advertisement for bids. See Pascoe v.
Barlum, 225 N.W. 506, 507 (Mich. 1929) (holding “that the bid must
conform to the specifications, and the contract to both,” but to “destroy the
competitive character of the bid ..., the variation must be substantial”)
(citing Andrews v. City of Detroit, 206 N.W. 514 (Mich. 1925); National

Engineering & Cont, Co. v. City of Cleveland, 146 N.E.2d 340, 345 (Ohio
Ct. Com. Pl. 1957) (citing Pascoe, 225 N.W. 506, and Andrews, 206 N.W.
514); Wantland v, Andereon, 203 S.W.2d 787, 790 (Tex. Civ. App. 1947)

 

 

 
(holding that “a variation betweon the contract as advertised and the one
actually entered into...must be substantial fin order to) render such
contract void and illegal”) (citing Pascoe, 225 N.W. 506); Platt Elec, Sup.,
Inc. v, City of Seattle, Div. of Pur,, 555 P.2d 421, 430 (Wash. Ct. App.
1976) CA public contract awarded pursuant to competitive bidding

 

procedures must be substantially in accordance with the terms of the
invitation to bid.”); 64 Am. Jur. 2d. Public Works ‘ontracts § 65 (2001
& Supp. 2010).

We conclude that a contract is void if it materially differs from
the contents of the invitation to bid. The court's reasoning in Faust, and
the cases the court relied upon in Faust, indicate that this court has
already moved in this direction. See also Inge v. Board of Public Works,
33 So. 678, 682 (Ala. 1903) (“The basis of the bidding and the contract
entered into should be the same, for otherwise the very object and purpose
of the law in calling for competitive bidding might be thwarted.”); Hillside
‘Twp. v. Sternin, 196 A.2d 265, 268 (N.J. 1957) C{AIIl bids must comply
with the terms imposed, and any material departure therefrom invalidates
a nonconforming bid as well as any contract based upon it.”); Smith Tug &
Barge Co. v. Columbia-Pacific Towing Corp., 443 P.2d 205, 218 (Or. 1968)
(We find that the variation was substantial and rendered the bid and the

consequent lease invalid.”).

However, we note that it is well-established that the terms of
the advertisement and the terms of the bid or contract do not need to be
identical. Bud Mahas Const, v. Clark County School Dist., 767 F. Supp.
1045, 1048 (D. Nev. 1991) (“[Mlinor variations from the specifications are
not a basis to reject the bid....”). Only where a contract contains
substantial variations from bidding specifications is the contract void. 64

 

 
Am. Jur, 2d Public Works & Contracts § 65 (2001 & Supp. 2010); 13
Eugene McQuillin, The Law of Municipal Corporations § 37:107 (8d ed.
2008), We agree that the terms of the advertisement and the terms of the
bid or contract do not need to be identical. Nevertheless, the question of
whether any variations between the invitation to bid and the contract in
this case are material is a mixed question of law and fact not before this
court, and we make no ruling regarding the facts of this case. So, Foods
Group v. State, Dept, of Educ,, 974 P.2d 1033, 1042 (Haw. 1999).

If the invitation to bid and the contract differ materially, then
the contract is void. It is void, not voidable, because the local government
exceeded its authority and was not authorized to make such a contract, 13
McQuillin, supra, § 37:107; 10A McQuillin, supra, § 29,104.20 (34 ed.
2009). The Arizona Supreme Court has held that “the County, in its
contracts must act not only within the limits of the power granted it by the
legislature, but must also comply with the statutory requirements

 

prescribed by the legislature. Failure to do so precludes enforcement of
the contract according to its terms.” Mohave County v. Mohave-Kingman
Estates, 586 P.2d 978, 981 (Ariz. 1978). We agree with Arizona's
reasoning. The local government must act within the limits of its power
when forming contracts, and contracts whose terms materially differ from
the terms of the invitation to bid exceed the local government's authority
and are void.§

5As UMC points out, not only must municipal contracts be formed
with no material variations from the specifications, but it is the burden of
the private entity to assure compliance. “The rule is firmly established
that one who makes a contract with a municipal corporation or
administrative agency is bound to take notice of the limitations of its
continued on next page

 

 

 
   
 
 
  
   
  
 
  

CONCLUSION
We conclude that if a public entity chooses to sell property by
competitive bidding, it must follow the rules set forth in NRS Chapter 332.
Additionally, a contract obtained through competitive bidding is void if it
materially differs from the contents of the invitation to bid. Accordingly,

we answer the U.S. District Court's certified questions in the affirmative.

“ pbouq lek J
Douglas

Cu.

Pickering
~ continued

powers to contract.” Hanna v. Board of Education of Wicomico County, 87
A.2d 846, 850 (Md. 1952); see 13 MeQuillin, supra, § 37:99 (3d ed. 2008).