Court Opinion

ID: 9558195
Source: CourtListenerOpinion
Date Created: 2023-08-21 17:04:12.458244+00
Date Added: 2024-06-11T09:08:28.873669
License: Public Domain

*541DISSENTING OPINION BY
MIZUHA, J.
I respectfully dissent. Defendant has waived objection to the form of taxpayer’s action — that the taxpayer’s contention of invalidity of the specifications could not be presented by a mandamus suit.
It has long been settled in this jurisdiction since Lucas v. The American-Hawaiian Engineering & Construction Co., 16 Haw. 80, 86, that when “* * * there has been a violation or evasion of the law requiring the awarding of the contract to the lowest bidder, after a public advertisement for tenders, damage is presumed to result to all taxpayers. * * *”
I do not see how this principle as applied to a taxpayer in the Lucas case, swpra, where an attack was made as to the invalidity of the specifications, is inapplicable where a taxpayer attacks the invalidity of the specifications under our public concessions statute.
Munoz v. Commissioner of Public Lands, 40 Haw. 675 is clearly distinguishable. In the Munoz case, supra at 685, this court stated that “although the petition alleges that the Territory ‘suffered irreparable loss in that the maximum rental for parcel A-3 was not obtained pursuant to the auction,’ it does not allege that such loss in revenues resulted in an increase of the appellant’s tax burdens or that of taxpayers in general if such be the case and therefore is insufficient as a matter of law. * * *” Here, the taxpayer alleged:
“That if revenues were insufficient for payment on account of said Aviation Revenue Bonds, and for operating and maintenance expenses, then payments on said $5,385,601.00 general obligation bonds of the State of Hawaii and payments for operating and maintenance expenses would be required to be made by appropriation from the general funds of the State, which general funds are derived by the State through the ex*542ercise of its power of taxation; and that if said appropriations were so required to he made from the general funds of the State, Petitioner’s burden of taxation, as well as those of all other taxpayers of the State of Hawaii whom she represents, would be substantially increased.
“That if revenues were insufficient for payment on account of said Aviation Revenue Bonds, and expenses of operation and maintenance, Petitioner and all other members of the public at large who utilize air transportation within the State of Hawaii, whom she represents, would be required ultimately to pay additional fees for the use of said public air transportation because of the increased cost of aviation fuel taxes and/or landing fees.”
Aside from the presumption that damage is presumed to all taxpayers, it is difficult to follow the argument in the court’s opinion which concludes that the taxpayer has suffered no pecuniary damage, where the bids were as follows:
(a) Ten year period of the lease (1963-1972), guaranteed annual rental:
Air Terminal Services, Inc.....................$4,263,000
Interstate Hosts, Inc............................... 2,425,000
Dobbs Houses, Inc................................... 2,140,000
International Airport Enterprise.......... 1,752,000
(b) Guaranteed percentage of food and beverage gross sales.
FOOD LIQUOR
Air Terminal Services, Inc........... 13.6% 17.1%
Interstate Hosts, Inc..................... 8.0% 13.0%
Dobbs Houses, Inc......................... 13.5% 17.0%
International Airport Enterprise 7.5% 12.5%
(c)Amount to be expended in the installation, fur*543nishing, and equipment of the concession leasehold improvements and the decor therefor:
Air Terminal Services, Inc.................$ 800,000.00
Interstate Hosts, Inc........................... 1,120,289.98
Dobbs Houses, Inc............................... 652,000.00
International Airport Enterprise...... 751,910.00
The total bid submitted by Air Terminal Services, Inc., the guaranteed rent, plus the improvements costs exceeded Interstate Hosts, Inc. by $1,517,710.02. This does not take into consideration guaranteed percentage of food sales which was 3.5% higher and liquor sales which was 5% higher. By some magical computation, defendant came to the conclusion that Interstate Hosts, Inc. was the highest responsible bidder under specifications which were fatally defective.
I cannot agree with the opinion which holds that the taxpayer has not made out a case for exercise of the power to declare that the contract based upon faulty specifications is null and void. The decisive question as far as taxpayer is concerned is whether the specifications were fatally defective. There is no burden upon taxpayer to show that any of the bidders were backed by financial resources sufficient to assure payment of the guaranteed rent, for it is impossible under the invalid specifications to determine who has submitted the highest monetary award.
R.L.H. 1955, § 7B-9 (Supp. 1961), (Act 245, S.L.H. 1959, § 9) provides as follows:
“SECTION 9. Bond; conditions. Before any contract is entered into, the party with whom the same is proposed to be made shall give security for the performance thereof by a good and sufficient bond conditioned for the full and faithful performance of the contract in accordance with the terms and intent thereof, which bond shall be in an amount equal to two months’ *544rental or other charge required under the contract. Such bond-shall also by its terms inure to the benefit of the State or of the county, as the case may be.”
Once the taxpayer has shown that the specifications are invalid, there is no additional duty on the part of the taxpayer to prove financial responsibility where all that the statute requires is a bond which could have been re^ quested by the defendant. The burden is upon the State to prove financial irresponsibility of all the unsuccessful bidders who may have submitted a higher monetary bid if said bid was rejected on this basis.
Furthermore, there is another point which has not been considered by this court in arriving at the conclusion that although the specifications and bid documents are invalid the taxpayer must show pecuniary loss.
Dobbs Houses, Inc. — one of the unsuccessful bidders— bid on the percentage variable as compared with Air Terminal Services, Inc. and Interstate Hosts as follows:
FOOD LIQUOR
Air Terminal Services, Inc..................... 13.6% 17.1%
Interstate Hosts, Inc............................... 8.0% 13.0%
Dobbs Houses, Inc................................... 13.5% 17.1%
This court states :
“We note that the guaranteed rent offered by Air Terminal Services was well within the projected percentage rentals from that company if computed on the assumption (1) that the food and liquor sales at the new airport terminal would, in relation to the volume of passenger traffic, equal those experienced by the holder of the restaurant concession at the old airport terminal; and (2) that during the ten-year period the food and liquor sales would increase commensurately with the increase in passenger traffic projected in estimates which had been issued by the State. Plaintiff *545adduced testimony to that effect. * * *”
If the State had provided a common standard as to the weight of the three variables, it is possible that Dobbs Houses, Inc. would have had a higher bid than Interstate Hosts, Inc., thereby definitely establishing that the taxpayer has suffered pecuniary loss.
Here the taxpayer has clearly shown that the specifications lacked standards upon which the highest bid could be determined. The issue was first raised in a letter by Air Terminal Services’ to the defendant, dated August 31, 1960:
“We are also somewhat concerned about the fact that your form of proposal requests each bidder to propose three variables, a percentage, a minimum and an amount to be expended. It is entirely conceivable that the Commission will be confronted with a high set of percentages from one bidder, a high set of minimum guarantees from another bidder and a high expenditure from still another bidder. Does the Commission have any procedure planned for determining the successful bidder in such eventuality?”
Defendant’s reply prior to the opening of the bids was as follows:
“Under the question of whether or not the Commission has a procedure planned for determining the successful bidder, please be advised that at this time we do not feel able to give you further information than is contained in Paragraph 11 on page 5 of the Instruction to Bidders.”
There is no expression in paragraph 11 of the Instruction to Bidders as to the relative weight to be given to the three bid variables. There is no standard whereby the defendant could determine the highest responsible bidder.
As stated in the concurring opinion in Wilson v. Lord-*546Young Engineering Co., 21 Haw. 87, 97-8:
“* * * Such statutory provisions are based upon motives of public economy and originate in some degree of distrust of the officers to whom the duty to make contracts for the public service is committed. Frame v. Felix, 167 Pa. St. 47. Their object is ‘to prevent favoritism, corruption, extravagance and improvidence in the awarding of all public contracts. * * * A fair competition among the bidders is the prime object of such statutory provisions and anything which tends to impair this is illegal. * * * Such a provision requires such information to be put within the reach of bidders as will enable them to bid intelligently and will enable the official having charge of the proposed work to know whose bid is the lowest.’ Lucas v. American-Hawaiian Engineering & Construction Company, Limited, 16 Haw. 80, 90. As stated in another case, the objects sought are ‘to secure to the state the benefit and advantage of fair and just competition between bidders and at the same time close, as far as possible, every avenue to favoritism and fraud in its varied forms * * * and to insure the accomplishment of the work, at the lowest price by subjecting the contract for it to public competition. * * ':i In order to effectuate this it is manifest that where something is to be done that is required to be submitted to competition every essential part of it that goes to make up the whole of it must be submitted to such competition.’ Frame v. Felix, supra. ‘The character of the work and the materials of which it shall be composed must be decided in advance.’ Lucas v. Construction Co., supra. So also should the specifications include every other element essential to furnish a common standard by which to measure the respective bids. The use in the statute of the expression ‘lowest (respon*547sible) bidder’ necessarily implies as much. Any indefiniteness in the specifications permitting of favoritism or rendering it impossible to determine by a common standard which is the lowest bidder frustrates the purpose of the statute and invalidates the award and contract. Mazet v. Pittsburgh, 137 Pa. St. 548; Ertle v. Leary, 114 Cal. 238; Ricketson v. Milwaukee, 47 L. R. A. (Wis.) 685; Chippewa Bridge Co. v. Durand, 99 N.W. (Wis.) 603. ‘Genuine competition can only result when parties are bidding against each other for precisely the same thing and on precisely the same footing.’ Lucas v. Construction Co., supra.”
This court has conceded that the specifications upon which bids were tabulated were fatally defective, yet adheres to the principle that the taxpayer must prove pecuniary loss. I see no justification to abandon the principle stated in the Lucas case, supra, that damage is presumed to result to all taxpayers. This is not a situation where a bid has been awarded to the second highest monetary bidder upon valid specifications, the highest monetary bidder being rejected because of financial irresponsibility. Here, it is impossible to prove pecuniary loss because there are three bid variables and there is no common prescribed standard to be used in arriving at the highest monetary bidder. Since the specifications and bid documents upon which bids were solicited are void and contrary to law, I would set aside all proceedings of the defendant’s relating to the contract for restaurant and other food and beverage facilities and vacate the judgment below.