Opinion
No. 3-127 / 02-0625.
Filed May 29, 2003.
Appeal from the Iowa District Court for Woodbury County, MARY JANE SOKOLOVSKE, Judge.
The school district and its superintendent appeal from an adverse judgment stemming from a breach of contract action. AFFIRMED.
Micheal J. Frey of Hellige, Meis, Erickson Frey, Sioux City, for appellants.
Charles L. Corbett and Michele M. Lewon of Corbett, Anderson, Corbett, Poulson, Vellinga Buckmeier, Sioux City, for appellee.
Heard by MAHAN, P.J., and MILLER and VAITHESWARAN, JJ.
The Sioux City Community School District and its superintendent, Dr. James B. Austin (hereinafter referred to collectively as the District), appeal from a trial court ruling that found the District had breached its contract with Midland Restoration Company, Inc. (Midland), and awarded Midland the contract price for performed but uncompensated services. We affirm.
Background Facts and Proceedings . In 1997 Ray Rowe, Building Supervisor for the District, and his immediate supervisor, Mel McKern, Building and Maintenance Superintendent, determined that four of the District's schools required some masonry work. The District advertised for sealed competitive bids. The bid form contained the following: "Please phone 1-712-279-6651 Ray Rowe for answers to any questions."
In August 1997 Rowe conducted a pre-bid walkthrough of the four sites, including Hawthorne Elementary (Hawthorne). The walkthrough was attended by an employee of Midland. The initial specifications had not included the number of bricks to be replaced at Hawthorne, but at the walkthrough it was generally agreed that 150 bricks needed to be replaced. Rowe indicated bids should be submitted based on that number, but with an add/deduct price, or the price per brick that would be deducted or added from the base bid should less or more than 150 bricks be needed.
Bids were submitted by four companies. Each contained a base bid for work on all four buildings, as well as an add/deduct price for the brick work on Hawthorne. There was not a specific place on the bid sheet for the add/deduct price and two bidders, including Midland, attached an extra or "continuation" sheet for the add/deduct provision. Midland's base bid of $53,050 was the lowest of the four, while its add/deduct price of $50 per brick was the highest.
The two other bidders typed the information underneath their base bid.
The other three bids were as follows: a $54,664 base bid with a $28 per brick add/deduct price, a $57,007 base bid with a $7 per brick add/deduct price, and a $63,844 base bid with a $6 per brick add/deduct price.
Midland was awarded the contract, and began work on Hawthorn in November 1997. Rowe was the liaison between the District and Midland, and was the only district official with whom Russel Felt, the owner of Midland, had any contact. Rowe was the only district representative to visit the job site, and oversee and direct the work.
As Midland employees began removing bricks at Hawthorne they noted significant additional damage. Felt had his workers remove 150 bricks, then called Rowe to the site for further instruction. He told Rowe Midland would need to remove 400 to 500 bricks. Rowe, who was authorized to order removal of unsafe conditions, noted the brick was "sagging down" and "unsafe." He authorized removal for this reason. Rowe also spoke with McKern, who gave further approval for removal of any unsafe brick. McKern stated, however, that no brick should be replaced until he had an opportunity to speak with Felt.
Felt soon realized the damage was greater than first thought, and estimated that up to a thousand bricks would have to be replaced. Felt had his office draft, for Rowe's signature, an authorization for the removal and replacement of approximately one thousand bricks, "subject to the additional amount indicated on the continuation sheet attached to Midland's bid and contract." Rowe signed the form, by which point 500 to 600 bricks had been removed.
When McKern learned that Rowe had approved the additional work, he told Rowe neither of them was authorized to bind the District to that extent. Rowe returned to the site within a few hours after receiving the authorization form. He instructed Midland to immediately stop brick removal, and to replace only the 150 bricks covered in the contract. At that point 840 bricks had been removed, but none replaced.
McKern tried and failed to negotiate with Felt for completion of the job. On November 24, 1997 Felt received a letter signed by Rowe instructing him to stop replacement of the bricks at Hawthorne and relieving Midland of any liability stemming from the exposed brick. That same day Midland received written authorization, signed by Rowe, to replace sixty bricks in another part of the school, "subject to the additional amount indicated on the continuation sheet attached to Midland's bid. . . ."
Midland successfully completed the rest of the project, and was fully compensated for the removal and replacement of 150 bricks on the initial Hawthorn project, the additional sixty-brick Hawthorn project, and the work performed on the other three school buildings. Midland submitted a bill of $34,500, or $50 per brick, for the removal of the additional 690 bricks at Hawthorne. When the District refused payment, Midland sued under Iowa Code section 573.16 (1997), claiming breach of contract.
After a bench trial, the district court concluded the continuation sheet containing the add/deduct term had been made a part of the contract, that Rowe had the apparent authority to bind the District for the removal of the additional 690 bricks, and that the District had breached the contract by denying both performance and payment. It awarded the full $34,500 based on Midland's willingness to perform and Felt's testimony that removal constituted eighty percent of the per-brick cost. The court also awarded Midland $15,459 in attorney fees under Iowa Code section 573.21, and $2142 in witness fees. The District appeals, arguing that the add/deduct provision violates the competitive bidding statute, and that removal of the additional 690 bricks was not legally authorized.
Scope of Review . Midland sued the District under Iowa Code section 573.16, which allows a contractor who provided material and labor on a public improvement to seek adjudication of rights to funds the public corporation retained from the contract price. See also Iowa Code § 573.12. Such an action would normally be tried in equity. Id. at § 573.16. However, both the parties and the district court treated this matter as an action tried at law, under a breach of contract theory. As a general rule, our scope of review is governed by the manner in which the matter was tried below. Davis-Eisenhart Mktg. Co., Inc. v. Baysden, 539 N.W.2d 140, 142 (Iowa 1995). Because this breach-of-contract action was tried at law, our review is for the correction of errors of law. See Land O'Lakes, Inc. v. Hanig, 610 N.W.2d 518, 522 (Iowa 2000).
While the district court did not specifically state that it viewed this matter as a law action, its decision was clearly based on common-law contact principals, and it routinely ruled on objections to evidence, rather than admit the evidence subject to the objections.
Validity of the Add/Deduct Provision . The District does not seem to question the finding that the continuation page, and its add/deduct provision, were a part of the contract. Indeed, such a claim would run contrary to the record. It also admits the terms and requirements of the competitive bidding statute were complied with. See Iowa Code § 73A.18 (requiring a public corporation to seek sealed bids for projects where the total estimated cost exceeds $25,000). It nevertheless contends the contract was void, arguing that the add/deduct provision circumvented the competitive bidding statute by allowing Midland to artificially inflate its bid. The District seeks to analogize this case to others where public improvement contracts were deemed void for circumvention of the statute. The analogy is unpersuasive, however, because the cases the District relies upon are factually distinct.
The written, signed agreement stated that "[t]he contract sum is for $53,050.00," and that the contract consisted of "this agreement, project specifications, [and] general conditions of contract . . . ." The contract was immediately followed, however, by several additional documents, including Midland's bid form and the continuation sheet. Moreover, the District gave effect to the add/deduct portion of the contract when it authorized replacement of an additional sixty bricks in another part of the school.
Some public corporations and/or bidders have attempted to avoid the competitive bidding process by splitting high-cost projects into multiple contracts with individual amounts under the statutory requirement. See, e.g., Everds Bros. v. Gillespie, 256 Iowa 317, 321, 126 N.W.2d 274, 277-79 (1964); Madrid Lumber Co. v. Boone County, 255 Iowa 380, 384-87, 121 N.W.2d 523, 526-27 (1963). Such acts violated the statute and rendered the public contract void, because the total cost of the improvement remained in excess of the statutory amount and competitive bids were therefore required. See Kunkle Water Elec., Inc. v. City of Prescott, 347 N.W.2d 648, 655 (Iowa 1984) (noting that breaking a project with a total estimate in excess of the statutory amount into multiple smaller contracts would "nullify" Iowa Code § 73A.18, as "[e]ven the most complex project could be broken down into contractual components small enough to avoid the bidding requirement"). In other words, the terms of the competitive bidding statue were not complied with in those cases.
In contrast, nothing in the competitive bidding statute dictates the form or content of the sealed bids, or precludes a bid proposal that subjects the base bid amount to a financial contingency. Iowa Code § 73A.18. While the District argues Midland failed to meet the requirement of providing a "good faith estimate," there is no such requirement in either the statute, or the cases that have interpreted it. Moreover, the claim is factually unsubstantiated. Midland, acting with the same knowledge as the District, merely complied with the bid procedures. See Brutsche v. Incorporated Town of Coon Rapids, 220 Iowa 1295, 1299, 264 N.W. 696, 698 (Iowa 1936) (noting duty to submit proposals in compliance with provided plans and specifications).
Case law does indicate an expectation of good faith compliance with statutory requirements. See Kunkle, 347 N.W.2d at 657; West Harrison Cmty. Sch. Dist. v. Iowa State Bd. of Public Instruction, 347 N.W.2d 684, 688 (Iowa Ct.App. 1984). The difficulty with the District's argument is that it presupposes, but fails to demonstrate, the existence of any such requirement applicable to the form or basis of Midland's proposal.
All the competitive bidding statute requires is that the public corporation "let the work to the lowest responsible bidder submitting a sealed proposal." Iowa Code § 73A.18. The term "responsible bidder" implies discretion on the part of the District in considering which bid should be accepted. Master Builders of Iowa, Inc. v. Polk County, 653 N.W.2d 382, 394 (Iowa 2002). If the District had judged all four bids unacceptable, it was free to reject all four and request new bids. Iowa Code § 73A.18. The District does not claim, and there is no indication in the record, that it abused or failed to exercise its discretion and judgment in determining that Midland submitted the lowest responsible bid. See Scheckel v. Jackson County, Iowa, 467 N.W.2d 286, 290 (Iowa Ct.App. 1991) (noting reluctance to interfere with determinations as to the lowest responsible bidders, absent proof of fraud, bad faith, arbitrariness, or an abuse of discretion). We see nothing here that violates the competitive bidding statute.
The District's own policies are in accord with the statute, authorizing its board and superintendent to accept "the lowest responsible bidder based upon total cost considerations. . . ."
In fact, McKern testified that when the recommendation to accept Midland's bid was made, it was specifically noted that Midland's add/deduct price was higher than those of the other bidders. He stated the higher per unit price was not a concern, because he felt "the replacement issue had been addressed at the . . . inspection."
Authority to Order Removal of Additional Bricks . The District agrees that Rowe served as its agent in regard to the school repair project, but argues that he was without authority to bind it for removal and replacement of more than the initial 150 bricks. However, as only 150 bricks were replaced, the question is actually whether Rowe was authorized to order the removal of the additional 690 bricks. The District's argument focuses on Rowe's authority to increase the contract price. However, the District entered into a valid contract that governed the price of any work beyond that included in the base bid. As such, nothing Rowe did could be construed as independently contracting for additional work, or increasing the price of the contract approved by the District. We therefore focus solely on Rowe's authority to order the physical removal of the bricks.
The District offers no challenge to the validity of the contract beyond its claim that the add/deduct provision violated the competitive bidding statute.
The nature and extent of Rowe's authority, and whether his actions fell within the scope of his authority, are factual questions. See Mayrath Co. v. Helgeson, 258 Iowa 543, 547, 139 N.W.2d 303, 305-06 (Iowa 1966). The district court found that Rowe was authorized to order the removal of the bricks, and we must uphold this finding if it is supported by substantial evidence. Collins-Draine v. Knief, 617 N.W.2d 679, 682 (Iowa Ct.App. 2000). We review the evidence in the light most favorable to upholding the court's judgment. Id. In doing so, we conclude a reasonable mind would deem the evidence adequate to establish that Rowe acted within this authority as an agent of the district. See id.
Rowe stated that he was expressly authorized to order the removal of unsafe or hazardous conditions, and that in his estimation the newly-exposed, damaged and sagging brick constituted such a condition. The District did not counter this testimony. On the contrary, McKern not only verified Rowe's emergency authority, but provided further, explicit authorization for the removal of the unsafe condition. The fact that either man's emergency authority was generally subject to a monetary cap is irrelevant in light of the contract entered into by the District. There would seem to be substantial evidence that ordering removal of the brick was within Rowe's actual authority. See Gabelmann v. NFO, Inc., 571 N.W.2d 476, 481 (Iowa 1997) (citation omitted) (finding actual authority exists where the principal "by writing or through other conduct which, reasonably interpreted, allows the agent to believe that he has the power to act").
Even if the sheer scale of the masonry damage somehow placed Rowe's actions beyond the scope of his actual authority, there was substantial evidence his approval of the brick removal was within the scope of his apparent authority. See Waukon Auto Supply v. Farmers Merchs. Sav. Bank, 440 N.W.2d 844, 847 (Iowa 1989) (noting apparent authority exists where actions of principal led other party to believe agent had authority to act). Any manifestations of the District as to Rowe's authority are not viewed from the District's perspective, or Rowe's. See Curran Hydraulic Corp. v. National-Ben Franklin Ins. Co. of Illinois, 261 N.W.2d 822, 827 (Iowa 1978). They must be interpreted in light of what Midland knew or should have known. Id.
Apparent authority is not only that which the principal holds out the agent as possessing, but also that which the principal knowingly permits. Magnusson Agency v. Public Entity Nat'l Co.-Midwest, 560 N.W.2d 20, 25-26 (Iowa 1997). Here, Rowe was the only representative the District presented to Midland, and nothing in the District's actions indicated any limitation on Rowe's authority to direct the work. To the contrary, Rowe was placed in charge of the project, and regularly made representations and decisions on behalf of the district. We can find no error in the district court's decision.
Conclusion . Contrary to the District's position, there were no hidden costs in Midland's bid, or in that of the other three companies. The evidence demonstrates that all involved anticipated 150 bricks would need to be removed at Hawthorne, but acknowledged the possibility that more or less might be required. By accepting Midland's bid and entering into a contract based on the same, the District ran the risk that the ultimate contract price would be higher than the base bid, but was poised to reap the benefit if the damage to Hawthorne had been overestimated. In essence, the District is seeking avoid a bad but voluntary bargain, without demonstrating a basis for rescission. After considering all the presented arguments, we conclude the judgment of the district court must be affirmed.
Appellate Attorney Fees . Midland seeks appellate attorney fees in the amount of $4345.50. While the District recognizes an award of appellate attorney fees would be authorized under Iowa Code section 573.21, it argues that the amount of fees claimed is excessive. We find that Midland should be awarded $3500 in attorney fees on appeal. The costs of this appeal are assessed to the District.
The District also claims the amount of the attorney and witness fees awarded by the district court was excessive. By failing to cite any authority in support of this claim, the District has waived the issue. Iowa R.App.P. 6.14(1)( c).