Monaghan v. City of Indianapolis

Robinson, J.

Suit by appellant, an abutting property owner, to enjoin the letting of a contract for a street improvement.

The complaint avers that tbe city’s board of public works adopted a resolution for the improvement of the street by paving with brick; that afterward, upon tbe petition of a majority of tbe resident freeholders on the street sought to be improved, tbe resolution, plans and specifications were modified so as to provide Warren’s patent bitulitbie pavement. Tbe resolution,, modification and detailed specifications are set out in tbe complaint. It is also' averred that all tbe steps preliminary to tbe letting of tbe contract have been duly taken; that tbe board advertised for bids, and threatens to and will, unless enjoined, let tbe contract and have tbe work done, to tbe irreparable injury of appellant. It is further averred that tbe pavement specified is a patented pavement covered by letters patent of tbe United States; that there can be no competition in such work, and that an unlawful monopoly is necessarily created by making such improvement with a patented pavement; that there was no necessity for its selection by tbe board, for tbe reason that there are many other as good and durable modern first-class accepted pavements not covered by patent, and not controlled by any monopoly; that tbe cost of tbe improvement will be greatly increased by tbe use of such patented pavement, and appellant’s property assessed for more than it will be if competition is bad.

Appellees answered, alleging that tbe resolution was modified upon tbe petition of a majority of tbe property owners; that tbe pavement in question is one of tbe accepted modern city pavements, and has been laid in many cities of this and other states; that its cost is approximately the same as other bituminous or asphalt pavements, and practically no more; that the specifications call the attention of bidders to the fact that the city engineer will furnish, upon request, to any bidder, a copy of a proposal from the company owning the patent, stating at what price it will furnish the same. A copy of this proposal or agreement is made a part of the answer, and, among other things, provides that the company agrees “to furnish to any contractor to whom a contract is awarded to pave a street or streets in the city of Indianapolis with Warren’s bitulithic pavement, during the year 1905, and who shall enter into such contract with such sureties as may be provided by law and by said city, who is equipped or shall equip himself with the necessary appliances purchasable in the open market for preparing and laying such pavement, all the necessary compounds, to prepare and lay such pavement, according to standard specifications for such work, for the sum of ninety cents per square yard for such pavement; said pavement to have a-inch foundation and a two-inch top, and said compounds to bo as follows: [Specifying the different compounds]. In addition to the above we hereby propose and agree to allow the contractor to use our patented processes for laying our pavement, and to furnish an expert who will advise in the laying of the pavement without extra charge.” It is further alleged that competition in bidding is thus provided; that appellees are informed and believe and allege that competitive bids will be submitted for the improvement; that they have the right to have the street improved with a patented pavement, even though there could be no competition. A demurrer to this answer was overruled, and, upon appellant’s refusal to plead further, judgment was rendered in appellees’ favor.

Section ninety-five of the act of March 6, 1905 (Acts 1905, pp. 219, 281, §3519 Burns 1905), provides: “Such board shall * * * let such contract to the lowest and best bidder.” Section 107 of said act (Acts 1905, pp. 219, 286, §3531 Burns 1905) provides: “If * * * there shall have been filed * * * a petition * * * in writing, of a majority in number of resident freeholders upon such street * * * sought to be improved, requesting that said street * * * be paved with any certain kind of the accepted kinds of modern city pavement, then the board * * * shall not have the power or authority to pave said street * * * with another kind of material, unless the same is specifically ordered by an ordinance passed by a two-thirds vote of the council of such city. If such original resolution be confirmed or modified, it shall be final and conclusive on all persons, unless, within ten days thereafter’, a majority of the resident freeholders •upon such street * * * remonstrate against such improvement.”

(1) The question presented by the complaint may be briefly stated thus: Does an improvement which is covered by letters patent permit the competition provided for by section ninety-five, supra? If this question is answered in the affirmative, it is unnecessary to consider any question raised by the answer, for the reason that if there may be competitive bidding for a pavement covered by letters jDatent, the complaint is bad.

1. The complaint alleges that the bitulithic pavement in question is a patented pavement covered by letters patent of the United States. From the nature of letters patent the presumption prevails, until the contrary is shown, that the patentee has the exclusive right to make and use, and sell to others to be used, the thing patented during the term for which the exclusive right is granted. “Letters patent,” said the court in Seymour v. Osborne (1870), 11 Wall. 516, 20 L. Ed. 33, “are not to be regarded as monopolies, created by the executive authority at the expense and to the prejudice of all the community except the persons therein named as patentees, but as public franchises granted to the inventors of new and useful improvements for the purpose of securing to them, as such inventors, for the limited term therein mentioned, the exclusive right and liberty to make and use and vend to others to be used their own inventions, as tending to promote the progress of science and the useful arts, and as matter of compensation to the inventors for their labor, toil, and expense in making the inventions, and reducing the same to practice for the public benefit, as contemplated by the Constitution and sanctioned by the laws of congress.”

2. If it is proposed to put down a patented pavement, and the patentee has “the exclusive right and liberty to make and use and vend to others to be used” this patented pavement — and under the above definition of a patent this is the case made by the complaint — -we fail to see any reasoning upon which to base the statement that there could be competitive bidding as required by the statute. If the patentee controls and retains absolutely the right to use and to sell to others the patented article, so long ag he retains this right there could be no competitive bidding for a contract to use the patented article.

3. In all the legislation in this State since 1852 touching-street improvements, provision has always been made for competitive bidding. From 1852 to 1891 the contract was to be let to the “best bidder,” and from 1891 to 1905 to “the lowest and best bidder.” The one important fact has been kept in view through all this legislation — that competition is safe and is in the interest of the property owner. The legislature has delegated to the municipality, through its board of public works, the power to charge the property of individuads with the expense of the improvement, and it has been held time and again that the steps to be taken in fixing this assessment are mandatory and are to be strictly pursued. The property owner may insist upon the observance of every requirement that will in the least tend to protection. “ Tt is, however, the duty of the courts to resolve doubts against the validity of the exercise of the authority wherever there is any substantial deviation at all, and to sustain proceedings in cases where there is not an exact compliance with the statute only when it clearly and unmistakably appears that no possible injury has resulted to the landowner, or could result to him.’ ” Wickwire v. City of Elkhart (1896), 144 Ind. 305. See, also, City of Bluffton v. Miller (1904), 33 Ind. App. 521, and cases cited.

4. It is quite true it will be presumed that public officers will do their duty, and let it be presumed that if there is but one bid, and it is exhorbitant or unreasonable, the board will reject it. But it is not a question of good faith or bad faith, or the exercise of a sound discretion,, on the part of the municipal officers. It is simply a question of power. What does the statute say they shall do, and have they done it ? It is true, as argued, that the statute safeguards the property owners and municipality in various ways; — by stipulating that no contract shall be let which shall be more than ten per cent in. excess of the engineer’s estimate, nor where the total cost exceeds fifty per cent of the aggregate value of the property as it is assessed for taxation, and the right of the board to reject any and all bids. But are these provisions any more important as safeguards than the provision for competitive bidding? Can any reason be given for ignoring-one and observing another ? The statute does not expressly exclude patented pavements, but if the use of a patented pavement wholly nullifies the provision for competitive bidding, it is impliedly excluded. If the patented pavement can not be used without disregarding the provision for competitive bidding, its use is as clearly prohibited as it would have been had the statute so stated.

5. It can not be said that this construction is importing a new term into the statute, that it reads into the statute an additional provision to the effect that a street shall not be improved with a patented pavement. Such a construction does impliedly exclude a patented article, not because it is a patent, but because of conditions necessarily created and existing under which competitive bidding could not be had. The effect of the construction that should obtain is that these conditions can not be permitted if they result in nullifying a positive statutory provision inserted for the protection and security of the property holder.

6. It must be admitted that the same reasoning that excludes a patented pavement would exclude a pavement not patented, but which is owned and controlled by a single individual. No logical reason can be given for saying that there could not be competitive bidding for a patented pavement, and that there could be competitive bidding for a pavement not patented, but monopolized by a company or individual. If the owner of the pavement sought to be used has and retains “the exclusive right and liberty to make and use and vend to others to be used” what is desired, what possible difference can it make, so far as it affects the question here considered, whether this exclusive privilege is because of a patent or because of circumstances ? And when it is said, as it is in the argument, that the rule deprives municipalities of the use of such patented articles, no difference how beneficial they may be to the public, and that where the best interests of the muncipality will be subserved by the use of a patented article the provision for competitive bidding has no application, then it must also be said that this provision has no application if the best interests of the municipality will be served by the use of an article controlled absolutely by a single individual. The result of this reasoning must necessarily be that in any case the provision for competitive bidding may be nullified or ignored if the best interests of the municipality in the particular case will be subserved by so doing.

7. Much stress is placed, in argument, upon the fact that a majority of the resident property owners petitioned for the pavement in question under that provision giving them the right to designate a certain kind “of the accepted kinds of modern city improvement.” This is a comparatively new provision in street improvement statutes, and gives a right not heretofore generally granted. But we can not conclude that it was the intention of the legislature that competitive bidding would not be required in cases where this right is exercised. The provision for competitive bidding inures to the benefit of all property owners subject to assessment, whether residing upon the street to be improved or not. The persons most interested in the improvement are those who must pay for it. If this petition may nullify the provision for competitive bidding, a substantial right given to a very large majority of property owners subject to assessment may be taken from them by a very small minority. We are not questioning the wisdom or propriety of giving extraordinary power to a majority of those residing on the street. That is a matter exclusively for the legislature. But this power can not be said to be of any more importance than the safeguards provided for the protection of the majority; and, considering the basis upon which rests the doctrine that a municipality may put the cost of a public street improvement upon the owners of abutting property, we can not agree that the legislature intended that this petition should take out of the statute a safeguard which, through all the legislation on the subject, has been provided for the sole benefit of those who must bear the burden of the improvement. 8. This provision can not be waived by the board of public works, nor do we see any reason for saying that a majority in number of resident freeholders upon the street to be improved may waive it. And while the original improvement resolution, providing that the street should be paved with brick, was, upon petition of a majority of the resident property owners, modified so as to provide for Warren’s patent bitulithic pavement, the board was still required by the charter to let the contract for the improvement, if let at all, to the lowest and best bidder. So that the fact that the board adopted the kind of improvement petitioned for by a majority of the resident property owners does not make the case in any respects different from what it would have been had the board in the original improvement resolution specified the .bitulithic pavement instead of brick. If a contract is let it must be to the lowest and best bidder, whether the board in the first instance designated the kind of improvement or afterward selected the kind petitioned for by a majority of the resident property owners.

Upon the question above considered, the courts are not agreed. The case of Hobart v. City of Detroit (1868), 17 Mich. *246, 97 Am. Dec. 185, decides the question in the affirmative, and the case of Dean v. Charlton (1869), 23 Wis. 590, 99 Am. Dec. 205, decides the same question in the negative. These two cases were the pioneer cases on the subject. Upon the precise question presented by the complaint in the case at bar neither of these cases has been disapproved or modified in the respective jurisdictions in which decided. In a subsequent case (Kilvington v. City of Superior [1892], 83 Wis. 222, 53 N. W. 487, 18 L. R. A. 45), the Wisconsin court did not disapprove Dean v. Charlton> supra, but declined “to extend the rule of that case beyond the particular point there decided.” The courts in other jurisdictions are not agreed upon the question, but the better reasoning will be found underlying the rule declared by the Wisconsin court.

The doctrine of Hobart v. City of Detroit, supra, is followed in Holmes v. Common Council (1899), 120 Mich. 226, 79 N. W. 200, 45 L. R. A. 121, 77 Am. St. 587; Barber Asphalt Pav. Co. v. Hunt (1889), 100 Mo. 22, 13 S. W. 98, 8 L. R. A. 110, 18 Am. St. 530; In re Petition of Dugro (1872), 50 N. Y. 513; Yarnold v. City of Lawrence (1875), 15 Kan. 126; Verdin v. City of St. Louis (1895), 131 Mo. 26, 33 S. W. 480, 36 S. W. 52; Swift v. City of St. Louis (1904), 180 Mo. 80, 79 S. W. 172. See, also, Rhodes v. Board, etc. (1897), 10 Colo. App. 99, 49 Pac. 430; Mayor, etc., v. Raymo (1888), 68 Md. 579, 13 Atl. 383. If there is no distinction, so far as competitive bidding is concerned, between a monopoly existing by reason of a patent and one existing not by reason of a patent, but by reason of circumstances, and we can see no reason for a distinction, it would seem that the later case of Smith v. Syracuse Improv. Co. (1900), 161 N. Y. 484, 55 N. E. 1077, is in direct conflict with the earlier decisions in that state. The doctrine of Dean v. Charlton, supra, is followed in Nicolson Pav. Co. v. Painter (1868), 35 Cal. 699; State v. City of Elizabeth (1872), 35 N. J. L. 351; Burgess v. City of Jefferson (1869), 21 La. Ann. 143; Fishburn v. City of Chicago (1898), 171 Ill. 338, 49 N. E. 532, 39 L. R. A. 482, 63 Am. St. 236; Fineran v. Central, etc., Pav. Co. (1903), 116 Ky. 495, 76 S. W. 415. See, also, Perine, etc., Pav. Co. v. Quackenbush (1894), 104 Cal. 684, 38 Pac. 533. In Newark v. Bonnell (1894), 57 N. J. L. 424, 31 Atl. 408, 51 Am. St. 609, it is said: “The case of State v. City of Elizabeth [1872], 35 N. J. L. 351, is not in point, and does not decide the proposition stated in the syllabus.” See, also, Ryan v. Patterson (1901), 66 N. J. L. 533, 49 Atl. 587.

The cases of Beazley v. Kennedy (1899), (Tenn.), 52 S. W. 791, Silsby Mfg. Co. v. Allentown (1893), 153 Pa. St. 319, 26 Atl. 646, and Baird v. Mayor, etc. (1884), 96 N. Y. 567, involved the right of the municipality to purchase patented or monopolized articles for municipal, uses.

9. As the question here presented involves the power of the municipality to charge the property of certain individuals with the cost of a public improvement, it seems foreign to the question to consider whether the municipality acting for itself may not buy or make use of patented articles for its municipal purposes. A public street improved at the expense of abutting property owners, and assuming to benefit the abutting property to the extent of the charge imposed upon it, is, to an extent, an improvement for the benefit of the inhabitants of the municipality not different from the public benefit resulting from the purchase of articles for municipal use. The distinction between such contracts is well defined in Kilvington v. City of Superior, supra, and Burgess v. City of Jefferson, supra.

In Hobart v. City of Detroit, supra, a lot owner sued to enjoin the collection of a tax levied to pay the expense of paving the street with the Nicolson pavement- — patented— alleging that the contract for the pavement was illegal. The city charter provided that no such contract should be let “except to and with the lowest responsible bidder.” The right to lay the pavement was owned exclusively by Smith, Oook & Co., the contractors, who alone, therefore, it is claimed, could and did bid for the contract, and, there being no possibility of a competitor, the contract was awarded to them on their own terms; and this exclusive right precluded the application of this charter provision. Upon the question of whether there should be competitive bidding in such a case the court said: “But it is not, I apprehend, strictly correct to say that because the patented invention which must be made use of is owned by one person exclusively, therefore, no one else can be a bidder. Every one has a right to bid, and to take upon himself the risk of being able to procure the right to make use of the invention.”

10. But if the patentee holds the exclusive right to use and to sell the article, and from the nature of a patent he holds that right, does not a choice of the patented improvement amount practically to a choice of the contractor? Of what consequence is a right to bid when there is no chance for competition ? The patentee may sell or may refuse to sell to anyone the right to use the article, and we fail to see how there could be any competition in the use of a needed article between two persons, one of whom neither owns nor is able to procure the thing needed, and the other of whom absolutely owns and controls the use and sale of the thing needed. Moreover, the statute (Acts 1905, pp. 219, 281, §95, §3519 Burns 1905) provides: “The board may by order impose further conditions upon bidders with regard to bond and surety, guaranteeing the good faith and responsibility of such bidders.” It does not appear in this case whether the board imposed this condition upon bidders, but it is not material, in construing the act, whether it did or did not, as the section must be construed as a whole. If it be conceded that the fact that every one has a right to bid and take upon himself the risk of procuring the right to use the article satisfies the requirements of the statute as to competitive bidding, then it must be conceded that this right to bid, in a case where the board has exacted of each bidder a bond guaranteeing his good faith, also satisfies the requirements of the statute.

In Hobart v. City of Detroit, supra, it is further said: “If that firm held the privilege of putting down the pavement for sale at a regular price per square foot or yard, the opportunity to bid for a public contract would be as much open to public competition as for any other work requiring skilled labor. For aught we know, this was the case; and we may well take notice of the fact that it is frequently by thus selling the ‘royalty’ that the owners of new inventions expect to obtain their reward.”

11. If in that case the firm did in fact hold the right to put down the pavement for sale at a regular price, then the question there presented is not the same we are now considering. That opinion does not say that it would be presumed that the firm held the right for sale at a regular price. Nor will such a presumption be indulged. The patent laws may contemplate that the patented article will be offered to the public on equal terms, but the patentee is not required to do so, nor is he required to offer the article to the public on any terms. So long as he retains the exclusive right to use and sell the article, he has a rigid monopoly, and bidding under such a condition would be no more than a mere form.

12. (2) It remains to consider the effect of the proposal pleaded in the answer. Does the proposition made by the patentee, relative to the use of the patented article, place all bidders on equal terms and remove the objection to its use? We think not. Without this proposition, we have already concluded that the patentee could absolutely control the bidding, and with such control there could be no competitive bidding except in name. In the proposition made, aside from its sufficiency or insufficiency in any other respect, the patentee has the power to determine indirectly, but effectively, to whom the contract shall be awarded, by reserving to himself the right to determine. arbitrarily who is equipped with the necessary appliances for laying the pavement. The statutory safeguard for full and free competition, or the possibility for such, is not preserved with this reservation in the grantee. When the patentee, although granting the right to use the patent, reserves a right by which he may determine arbitrarily who shall have the contract, he has not, so far as competition among bidders is concerned, conceded anything.

13. We quite agree with counsel that municipalities should not be deprived of the right to use improved methods in street paving because the process or material is patented or is in control of a single individual. And they need not be deprived of this power. The patentee may relinquish his right to irse the patented article and place bidders upon even terms by giving them an opportunity to purchase the article or process at its value. It is for the patentee to determine whether the right to use the article, or “royalty, shall acquire a sort of market value which becomes well understood and all persons have the benefit of such market value.” Hobart v. City of Detroit, supra. Whether the improvement to be made shall be expensive or inexpensive must be determined by the municipal officers under the limitations prescribed in the charter. The specifications filed with the pleadings show that the jaatent here in question applies to a part of the improvement. The specifications provide that a subgrade shall be prepared, and upon this shall be placed a,concrete foundation made in accordance with general specifications for concrete. Upon this concrete foundation is to be placed the pavement in question. Suppose a part or all of the ingredients, none of which are patented, entering into this concrete foundation are in the control of a single individual, but have a fixed price, or market valúe, at which they must be purchased, if purchased and used at all, and that the city’s board of works knows that fact, but that such ingredients could be purchased by any one desiring to purchase them, could it be said that the board could not let the contract because there could be no competitive bidding? We think not.

In Hastings v. Columbus (1885), 42 Ohio St. 585, suit was brought against the city and certain lot owners seeking to charge the lot owners with the cost of a patented pavement. The court said: “Objection is made that each of these improvements required a species of pavement which was patented; that the contractors, in each case, owned the patent; and hence that there was no competition, and defendants can not be assessed. But in each case, before there was any letting, the city had acquired the right to secure, at a reasonable cost, the right of such patent, with respect to this improvement, for any successful bidder for the work, and the bidders were placed by the city, in this respect, substantially on equal terms. We think the objection untenable.” The character of the agreement with the city referred to in this case does not appear, but it would not be material whether the city purchased the right to use the. patent or the patentee relinquished the right, provided all bidders were placed upon equal terms and given opportunity to purchase the article at its value.

The question decided in Kilvington v. City of Superior (1892), 83 Wis. 222, 53 N. W. 487, 18 L. R. A. 45, is unlike the question presented by the answer in the case at bar in two respects: (a) The improvement was made at the expense of the municipality; and (h) the patentee, without any reservation, relinquished to any contractor who took the contract the right to use the patent at a fixed sum.

We think the rule should be that where the patentee retains the exclusive right to use and to sell to he used ,by others the patented pavement, and he has this right as ■ a patentee, a contract for such pavement to be paid for by abutting property owners cannot be entered into, for the reason that in such case competitive bidding within the plain intent and meaning of the statute cannot be had. But this rule should not and does not exclude the use of a patented pavement. We are not required in this case to indicate the manner in which it may be done, but upon the showing made by the answer, for the reasons given, there could not be the competitive bidding the statute requires. The demurrer to the answer should have been sustained.

Judgment reversed.

Roby, C. J., Myers and Oomstoek, JJ., concur. Black, P. J,, concurs in result. Wiley, J., dissents.