Case Name: The State of Ohio v. Kuhner & King, Partners, etc., et al.
Court: Supreme Court of Ohio
Jurisdiction: Ohio
Decision Date: 1923-04-24
Citations: 107 Ohio St. 406
Docket Number: No. 17787
Parties: The State of Ohio v. Kuhner & King, Partners, etc., et al.
Judges: Marshall, C. J., Wanamaker, Robinson, Jones and Allen, JJ., concur.
Reporter: Ohio State Reports, New Service
Volume: 107
Pages: 406–422

Head Matter:
The State of Ohio v. Kuhner & King, Partners, etc., et al.
Public contracts — Certificate that funds available — Piling and recording — Section 5660, General Code — Mandatory provisions — Advertisement for bids — Section 1206, General Code —State highway commissioner — Invalidity of contract as defense to action for breach — Contract not validated by curative act, when — Constitutional law — Retroactive legislation — Section 28, Article II, Constitution.
1. The provision of Section 5660, General Code, that no contract or obligation Involving the expenditure of money may be entered into by the public officials there designated unles3 the officer named first certifies that the money required is in the treasury to the credit of the fund from which it is to be drawn, is mandatory, and the making of such certificate is a prerequisite to the execution of a valid contract, but it is not essential to the validity of such contract that the certificate be recorded.
2. The requirement of Section 1206, General Code, that “the state highway commissioner shall advertise for bids for two consecutive weeks,” is mandatory, and a contract entered into on June 14, after advertisement in two weekly newspapers of the county on June 6 and June 13, is. invalid.
3. In an action brought to recover damages for the failure to enter upon and complete a contract for a highway improvement, such invalidity of the contract is a complete defense.
4. Such contract cannot be validated so as to bind a contractor or his surety by the passage of a so-called curative act subsequent to the default of the contractor and the construction of the improvement by the state. Construed otherwise, the act of the General Assembly passed December 18, 1919 (108 O. L., pt. 2, 1122), would be retroactive and in conflict with Section 28, Article II, of the Constitution of Ohio.
(No. 17787
Decided April 24, 1923.)
Error to the Court of Appeals of Franklin county.
This suit originated in the court of common pleas of Franklin county, where the state of Ohio sought to recover $345.20 as damages resulting from the breach of a road improvement contract entered into by W. J. Kuhner and Elza S. King, partners doing business under the name of Kuhner & King, and the state highway commissioner, acting for the state of Ohio.
It is alleged in the petition, in substance, that on May 22,1917, the state highway commissioner of the state of Ohio approved the application of the commissioners of Yinton county, Ohio, for state aid for the construction of a section of a certain highway in that county, and granted same; that thereafter plans and specifications therefor were prepared and transmitted to the county commissioners, the estimated cost of such construction being $5,500, the portion assessed by the county and to be borne by it in the first instance being $5,000, and that by the state $500; that on May 23, 1917, the county auditor of Yinton county made and filed with the board of county commissioners his certificate that the money for the payment of the county’s' portion of the cost of such improvement was in the treasury to the credit of the state and county road improvement fund, or had been levied, placed on the duplicate, and was in process of collection, which certificate was afterwards, on the 6th day of February, 1922, ordered by the board of county commissioners of Yinton county to be recorded as of May 23,19*17, and it was so recorded; that a resolution was adopted by the board of county commissioners on May 23, 1917, providing that the described section of highway be improved pursuant to the provisions of Sections 1178 to 1231-4, inclusive, General Code, and that such work be done under the charge, care, and superintendence of the state highway commissioner, which resolution approved and adopted the maps, plans, specifications, and estimates theretofore prepared and submitted, and appropriated the sum of $5,000 for improving said section of highway under said statutes, and authorized and directed the county auditor to issue his order on the county treasurer for said sum, or part thereof, on the requisition of the state highway commissioner, to pay the cost and expense of such improvement as the same might become due under the provisions of the statutes; that such resolution further contained an agreement on the part of the board of county commissioners to assume in the first instance the share of the cost and expense of the improvement over and above the amount to be paid by the state; that a certified copy of the resolution and certificate of the auditor was thereupon transmitted by the county auditor to the state highway commissioner, who transmitted the same to the Attorney General, who, on May 29,1917, approved such agreement of the county commissioners as to form and legality; that thereupon the state highway commissioner proceeded to advertise forbids, and notice of the letting of a contract to perform the work was inserted in the McArthur Democrat-Enquirer, in its issues of June 6, 1917, and June 13,1917, and in the McArthur Republican Tribune in its issues of June 6, 1917, and June 13,1917; that the McArthur Democrat-Enquirer and the McArthur Republican Tribune were at and prior to the dates last mentioned newspapers published and of general circulation in Vinton county, Ohio, and of the two dominant political parties therein, and that such advertisement stated in substance that bids for the doing of the work would be received on June 14, 3917; that in response thereto the defendants Kuhner & King, partners, oh June 14, 1917, filed with the state highway commissioner their written proposal; that thereafter, on September 11, 1917, the auditor of state of the state of Ohio made and filed with the state highway commissioner his certificate that there were sufficient funds in the appropriation to the state highway department, not otherwise obligated, to pay the state’s share of the estimated cost of such improvement; that on September 14, 1917, the state highway commissioner, acting for the state of Ohio, and with the written concurrence and approval of the highway advisory board of the state of Ohio, accepted the proposal of the defendants Kuhner & King, as partners, and entered into a contract in writing with them, whereby, in consideration of the sum of $5,349.05, to be paid them, they undertook to furnish the materials, appliances, and labor required to make aud complete such improvement according to the plans and specifications; that, to secure the faithful performance of the conditions of the contract, Kuhner & King, as partners, executed and filed with the state of Ohio a bond in the sum of $5,349.05, conditioned upon the faithful performance of the terms and covenants of said contract; and that the defendant London & Lancashire Indemnity Company of America for a money consideration paid or agreed to be paid by the defendants Kuhner & King, as partners, signed and executed such bond as surety, a copy thereof being marked Exhibit A and made a part of the petition.
Among other things, it is provided in the contract that, should the contractor fail to complete the work contracted for on or before the date agreed upon, or a later date set by the commissioners, as therein provided, the contractor shall be liable to the state for an amount of money equal to that which shall have been paid as salaries, wages, and expenses to the person or persons employed by the state in engineering, superintending, and inspecting the work from the date named for the completion until the same shall be actually completed and accepted, and further that if, in the opinion of the state highway commissioner, the contractor has not commenced his work within a reasonable time, or does not carry the same forward with reasonable progress, or is improperly performing his work, or has abandoned or failed or refused to complete the work under any provisions of the specifications, the state highway commissioner shall have full power and authority to enter upon and construct such improvement or any part thereof, either by contract, force account, or in such manner as he may deem for the best interests of the public, paying the full cost and expense thereof from the balance of the contract price unpaid to said contractor, and that, in case there is not sufficient balance to pay for such work, the state highway commissioner shall require the contractor or surety on his bond to pay the cost of completing the work. It is further alleged in the petition that the time of the completion of the contract was extended by the state highway commissioner to October 1, 1917; that the defendants Kuhner & King, as partners, entirely failed in the performance of the contract and failed and refused to do any part of the work; that on or about September 25, 1917, the state highway commissioner found and determined that the defendants Kuhner & King had not made proper progress, and that they had expressed their inability to carry out the contract, and further found and determined that it was for the best interest of the public that he, the said highway commissioner, enter upon and perform such construction work by force account, to-wit, by employing the necessary teams, labor, and furnishing the necessary equipment and purchasing the necessary materials to perform and complete the work; that on or about September 25, 1917, notice of said finding and determination was given in writing to ail of the defendants; and that thereupon the state highway commissioner entered upon and completed said improvement by force account on or about November 1,1918, the total cost whereof amounted to $5,694.25. And plaintiff asked for damages in the sum of $345.20.
It was stipulated by counsel for the parties that certain facts be considered as though a part of the amended petition, the substance of which stipulation is as follows: A form comprising: (1) The certificate of the county auditor as to the availability of the fund to meet the county’s portion of the expense of the improvement; (2) the final resolution of the county commissioners authorizing the improvement and appropriating the money therefor; and (3) the certificate of the clerk of the board of county commissioners as to the correctness of the copy of said resolution, provided in duplicate by the state highway department, one of which duly dated and signed by the respective county officers, was transmitted to the state highway commissioner on May 24, 1917, and has since remained on file in the state highway department; the other, with the signatures of the county commissioners below said resolution, but with the said certificate undated and unsigned, being retained in the files of the county auditor, and neither said resolution nor certificate, otherwise than as above stated, being filed or spread upon any record until November 26, 1922, when said resolution and certificate were recorded on the commissioners’ journal as stated in the amended petition.
A general demurrer filed by the defendant London & Lancashire Indemnity Company of America was sustained by the court of common pleas, and final judgment was rendered for such defendant, which judgment was affirmed by the Court of Appeals, and error is here prosecuted to procure a reversal thereof.
Mr. C. C. Grabbe, attorney general; Mr. J. G. Williamson and Mr. William J. Meyer, for plaintiff in error.
Mr. Charles S. Druggan, for defendants in error.

Opinion:
Matthias, J.
The first question presented by the demurrer is whether failure to record the certificate of the county auditor made pursuant to Section 5660, General Code, renders the contract for the improvement void. The portion of Section 5660, General Code, essential to the consideration of this question is as follows:
"The commissioners of a county shall not enter into any contract, agreement or obligation involving the expenditure of money, or pass any resolution or order for the appropriation or expenditure of money, unless the auditor # * '* first certifies that the money required is in the treasury to the credit of the fund. Such certificate shall be filed and forthwith recorded."
It is also provided by Section 5661, General Code, as follows:
"All contracts, agreements or obligations, and orders or resolutions entered into or passed contrary to the provisions of the next preceding section, shall be void," etc.
The purpose in requiring such certificate to be made and in prohibiting public officials entering into any such contracts unless such certificate is first made is clearly to prevent fraud and the reckless expenditure of public funds, but particularly to preclude the creation of any valid obligation against the county above or beyond the fund previously provided and at hand for such purpose. Such provi sions have frequently been held mandatory, and compliance therewith an absolutely essential prerequisite. In the absence of such compliance no valid contract can be entered into. By the very terms of Section 5660, General Code, the making of such certificate is a condition precedent to the power or authority to enter into such contract, but the recording thereof is not made such prerequisite or condition precedent.
It is conceded in this case that such certificate was made, but it was not recorded until subsequent to the execution of such contract, and in fact subsequent to its completion. It is contended that the recording forthwith of such certificate being one of the requirements of Section 5660, General Code, the entering into a contract prior thereto is, in the language of Section 5661, General Code, "contrary to the provisions of the next preceding section" and void.
It is to be observed that under the mandatory provisions of Section 5660, General Code, such contract may not be entered into unless the auditor first certifies, etc., and the irresistible conclusion is that, if and when the auditor so cértifies, the contract may be immediately made, and in such respect would be valid, and that the provision as to recording the certificate, a mere clerical act, is only directory. The making of the certificate is the essential thing to meet and carry out the protective purposes of the statute; the recording of the certificate being merely for the purpose of preservation and future reference. Had it been intended by the Legislature to also make the recording of such certificate a condition precedent to entering into a contract, it certain ly would have provided that no contract be entered into unless the auditor first certify, etc., and such certificate be recorded. The only condition precedent to the making of the contract in respect to such certificate was fully complied with, and the purpose of such requirement was completely served, although the certificate was not recorded prior to the execution of the contract. It was on file in the office of the state highway commissioner, where bids were to be received and the contract made.
It is further contended that no valid contract was entered into by the parties for the reason that the advertisement for bids did not comply with the requirement of Section 1206, General Code. It is disclosed by the amended petition that the advertisement in question, which gave notice that bids would be received up to June 14,1917, was published in each of two weekly newspapers of the county on June 6 and June 13. Was this a compliance with the requirement of the section that "the state highway commissioner shall advertise for bids for two consecutive weeks?" In our opinion the word "for" has some significance as used in this statute, and applying the dictionary meaning thereof, which seems to us clearly indicated by the context as that most likely meeting the intent of the Legislature, such advertisement is required "during the continuance of" or "throughout" the period of two weeks. (Finlayson v. Peterson, 5 N. D., 587, 67 N. W., 953, 33 L. R. A., 532, 57 Am. St. Rep., 584, and cases there cited.) In the instant case it was only eight days from the first publication until the date fixed for the filing of bids. The purpose to be served by such publication of notice is an element to be considered in determin ing the meaning of the language employed. That purpose clearly is to give notice to all who may be concerned therein, and particularly to those who may desire to file bids. The second advertisement would aid little in effectuating that purpose if bids may be received the morning following the publication, and that purpose could be thwarted if "for two consecutive weeks" be held to mean the same as "in two consecutive weeks." As a practical proposition, bids may as well be received on the day of the second publication as on the following morning. Concededly the advertisement may be made in either a daily or weekly newspaper. If the argument of counsel for the state is sound, then the insertion of the advertisement in a daily newspaper on Saturday and again on Monday would comply with the statute, for that would be a publication in each of two consecutive calendar weeks. The evident purpose of our statute was to require not only two publications, but two weeks notice, and it was contemplated that a period of two weeks would be allowed for filing bids from the date of the first publication. If the requirement of the statute were that notice be published for one week, it surely would not be claimed that bids might be received the very day following the publication of the notice. That would scarcely be any notice at all, and could serve no beneficial purpose. Our conclusion is that the advertisement in question here did not comply with the mandatory requirements of the statute. This statute has not been construed by this court, although involved in the case of Cowen, State Highway Commissioner, v. State, ex rel. Donovan, a Taxpayer, 101 Ohio St., 387, 129 N. E., 719, where the judgment of the Court of Ap peals was affirmed. The opinion in that case, however, assumes, rather than decides, the invalidity of the contract, because of the insufficiency of the publication there made, and proceeds to discuss and determine the effect of the curative act thereon. In that case, however, bids were received on the same day as the date of the paper containing the second publication of the notice. The Court of Appeals of Mahoning, county, in the case of State, ex rel. Boyd, a Taxpayer, v. McMasters, 29 O. C. A., 382, construing this statute, held that the date of receiving bids must be two full calendar weeks subsequent to the date of the first publication. A like construction of a similar statute appears in the same volume in the case of State, ex rel. Ciraci, v. Kehres, page 458. A number of cases have been cited from other states involving statutes varying somewhat in their terms, but are not of material aid to a determination of the meaning of the language of our statute. In many of them the language is such as to indicate, not a period of time to be covered by such notice, but rather the number of insertions thereof in a newspaper, as, for example, "once in each week for four consecutive weeks prior to the day of sale."
But it is urged that, even if the proceedings were defective in the matter of publication of such notice, such defect has been cured by the act of the General Assembly passed December 18, 1919, appearing in 108 Ohio Laws, pt. 2, p. 1122. This is a so-called curative statute, and provides, in substance, that all contracts entered into by the state through its highway commissioner prior to January 1, 1918, in the proceedings preliminary to which there has been failure on the part of boards or officers of the state or any of its subdivisions to comply -with the provisions of any statute, are, notwithstanding such failure, declared to be valid and binding contracts and proceedings. It further provides that all such contracts are on behalf of the state of Ohio ratified, approved, and confirmed, and that the passage of such act shall not operate to revive, reinstate, or in any manner give rise to any right or claim against the state or any of its subdivisions under or by virtue of any contract, action, or proceeding which has been canceled, vacated, or abandoned by the state or its subdivisions, or to renew any right or claim against the state or its subdivisions under or by virtue of any contract which has been completed or compromised.
The contract in question here was entered into by the parties on September 14,1917. The claimed default therein occurred October 1,1917, and the state highway commissioner completed the improvement required by the terms of the contract November 1, 1918. It is claimed that, by virtue of this so-called curative statute, damages may be awarded the state against the contractor and his surety for failure to perform the contract, although, if the same had been performed, no compensation, either as stipulated therein or upon quantum meruit, could have been recovered because of the invalidity of such contract under the law as it existed when the contract was made and at the time of defendant's default. That contention presents the question whether, if no damages were recoverable at the time of the breach of such contract, because of its invalidity, the Legislature by a so-called curative provision may confer the right of action upon the state a year or more after the breach of the contract, and after the cause of action, if any there was, accrued. Because of the invalidity of this contract, under authority of the line of cases beginning with Buchanan Bridge Co. v. Campbell, 60 Ohio St., 406, 54 N. E., 372, the contractor at the time of his contract, and at the time he failed and refused to proceed with the improvement thereunder, would not have been entitled to recover any compensation even though he had completed the contract according to its terms, and therefore he may well have refused to proceed on the ground that because of the invalidity of the contract, for the reasons above stated, he could not recover either under the terms of the contract or upon quantum meruit. At that time, and under the law as it then existed, the state could not recover damages from the contractor by reason of his failure or refusal to perform the contract. That is also clear under the rule well established by the line of cases in this state to which reference is above made.
The construction and application of this curative statute urged by counsel for the state would render the same unconstitutional as violative of Section 28, Article II of the Constitution of Ohio, which denies the power of the General Assembly to pass retroactive laws. It is not even claimed that such curative act was passed under the. permissive clause of Section 28, Article II, but it is asserted it was passed because it did not contravene the retroactive clause. The right and authority of the state by such retrospective legislation, both for itself and on behalf of the subdivisions thereof, to waive irregularities and ratify and confirm all contracts theretofore made, notwith standing the failure to comply with any statute, is not questioned, and that must be held to be the purport and effect of this statute, for it cannot create an obligation upon the part of the contractor with no corresponding obligation upon the part of the state. It was enacted at a time when, if given effect, it would be beneficial only to the state and detrimental only to the contractor. It would not only validate a contract which was invalid when made, but would do so a year or more subsequent to the time the relations of the parties had ceased.
The record discloses that on October 1, 1917, thq contractor not having entered upon such improvement, the state highway commissioner declared him in default and proceeded to make such improvement, which he completed November 1,1918; therefore any cause of action which he might have had against the contractor and his bond accrued at that time. The statute in question was passed December 18, 1919, filed in the office of the secretary of state January 29, 1920, but did not go into effect until April 28, 1920. This act, if given the effect claimed for it, would result in taking away existing rights as well as creating new liabilities and obligations, and, where retrospective laws are prohibited, acts having such effect are held unconstitutional. (8 Cyc., 1020; Miller v. Hixson, Treas., 64 Ohio St., 39, 59 N. E., 749.) The Constitutions of many of the states do not contain a provision prohibiting retroactive legislation, as does ours; hence decisions cited from those jurisdictions can be given no consideration.
It is further contended that the indemnity company is estopped by the recitals of its bond from asserting that it is not under contract with the state of Ohio to see that the construction work involved in this case is at all events completed within the contract price. A surety company is estopped by the material recitals in a bond which it has executed. The bond in question was furnished and filed at the time of the filing of the bid, June 14, 1917, and not at the time of the execution of the contract. It recited that the principal had filed a written proposal for the construction of the portion of the highway in question, and the obligation provided that, if such proposal were accepted, the contractor should within 10 days after receiving notice thereof enter into a proper contract with the state for the construction and completion of such improvement, and would comply with and perform the terms thereof and complete the improvement in accordance with the plans and specifications which were made a part thereof.
It was held in Russell v. Failor, 1 Ohio St., 327, 59 Am. Dec., 631, that it is the essence of the contract of suretyship that there be a subsisting valid obligation of the principal debtor. The same rule is announced in the syllabus in the case of State, ex rel. Commrs. of Knox County, v. Blake, 2 Ohio St., 147, and it. is there further stated that—
"Whatever, therefore, amounts to a good defense to the original liability of the principal, is a good defense for the sureties when sued upon the collateral undertaking."
And this rule is universally recognized and applied. It seems clear, therefore, that there is no element of estoppel in this case.
Judgment affirmed.
Marshall, C. J., Wanamaker, Robinson, Jones and Allen, JJ., concur.