Opinion
September 9, 1941 —
October 7, 1941.
APPEAL from a judgment of the circuit court for Lincoln Circuit Judge. Affirmed.
Frank E. Hebert of Tomahawk, for the appellants.
For the respondent there was a brief by Zimmers, Randall Zimmers of Milwaukee, and oral argument by Clifford A. Randall.
Action commenced October 27, 1939, by the Milwaukee Company against the city of Tomahawk, W. J. Draeger, its mayor, and Lillian Zietelhack, its city clerk, to recover money posted with defendant as a condition to bidding on a bond issue of defendant. From a judgment in favor of plaintiff, defendant appeals.
Defendant city sought to issue bonds. Preliminary steps were taken and an advertisement for bids was duly published stating that all bidders must deposit $2,000 in cash or certified check payable to defendant to insure completion of the purchase by the bidder. On June 20, 1939, prospective bond purchasers assembled at the city clerk's office and the city clerk read the advertisement for bids. No sealed bids had been received. An auction of the bonds was conducted by the city clerk. Plaintiff's bid was the highest. Before bidding plaintiff's agent stated its bid was subject to the opinion of plaintiff's counsel as to the legality of the issue. Immediately after bidding, plaintiff's agent submitted a written bid subject to this condition. The acting city attorney approved the bid and the defendant mayor and city clerk signed the acceptance. On that same day the common council of the defendant city adopted a resolution accepting plaintiff's hid and ratifying the action of the mayor and city clerk.
The case was tried to the court. Findings of fact are that the plaintiff announced before the bidding that it was bidding subject to the opinion of plaintiff's counsel for which plaintiff was to pay; that plaintiff having been the best bidder it submitted a written offer conditioned upon its receiving the final approving opinion of its attorneys, Chapman Cutler, evidencing the legality of the issue; that the opinion of the attorneys questioned the legality of the issue and indicated that either a favorable referendum by the electors of the city of Tomahawk or the submission of the proceedings taken by the city to the state legislature and the obtaining of a validating law covering such proceedings would be essential; and that the information was submitted to the attorney for the city who advised plaintiff by letter that the city was "planning to put through the legislature a validating bill." The conclusions of law are to the effect that the defendant city wholly failed to fulfil the conditions "which by the terms of the aforesaid contract were to be performed by the said defendant," and the court rendered judgment accordingly.
Plaintiff contends ch. 67, Stats., controls this case; that the contract is valid; that it was breached by defendant; and that therefore the money posted as a condition to bidding should be returned.
Defendant argues that the contract was invalid because not countersigned by the comptroller and approved as to form by the city attorney as required by sec. 62.15 (12), Stats.
Appellant's claim that the contract under which respondent seeks to recover its $2,000 is void is not well founded. Respondent's oral bid for the bonds was with the understanding that its contract of purchase was to be subject to the approving opinion of its attorneys as to the legality of the bond issue. And the written bid signed after the completion of bidding contained the same condition. Legality of the bond issue was considered by respondent's counsel who concluded not to give a final approving opinion on the bond issue until certain conditions were met. Such fact was communicated to appellant. Representatives of appellant advised respondent that it was planning to meet the objection by securing passage by the legislature of a validating act. However, the city sold the bonds to another without notice of its intention to do so and without any tender of the bonds to respondent. To hold on these facts that a contract resulted which compels respondent to forfeit the amount it deposited would necessitate overlooking or holding as of no effect the provision in the advertisement for bids that the city might reject all bids and that the bidder was to make a deposit to insure the completion of the purchase if his bid were accepted. The rule is that the bid cannot create a contractual relation "unless by the terms of the statute and the advertisement a bid in pursuance thereof is, as a matter of law, an acceptance of an offer wholly apart from any action on the part of the municipality or any of its officers." Molloy v. New Rochelle, 198 N.Y. 402, 408, 92 N.E. 94.
In responding to the notice offering the bonds the bidder was not precluded from attaching the condition that its bid was subject to the approval of its attorneys. 44 C.J. p. 1218, § 4190. Its attorneys having disapproved of the bond issue, the bidder can recover its deposit, provided such disapproval is not fraudulent, capricious, or in bad faith. 44 C.J. p. 1218, § 4189; Municipal Securities Corp. v. Buhl Highway Dist. 35 Idaho, 377, 208 P. 233; McNear Co. v. Kaufman (Tex.Civ.App.), 270 S.W. 211; Thurman v. Omaha, 64 Neb. 490, 90 N.W. 253. No question was raised either in the pleadings or on the trial as to the good faith or honesty of respondent's counsel in disapproving the bond issue, and the objection cannot be raised on this appeal.
As to appellant's contention that the contract arising out of the bid was invalid because not signed by the comptroller and approved as to form by the city attorney as required by sec. 62.15 (12), Stats., we agree with the trial court in its decision that "chapter 67 is the chapter which governs municipal borrowing and the provisions of that chapter alone must govern." The trial court said "the city certainly cannot claim that it made a contract, void on its face, and still retain the money it required the plaintiff in good faith and in reliance thereon to deposit. On the other hand, it could not rely on the validity of the contract and profit under it if it fails to carry out the terms on its part to be performed, and retain the deposit. Not even municipal corporations can go that far."
By the Court. — Judgment affirmed.