People ex rel. Bullard v. Contracting Board

Gould, J.

A careful reading of the different parts of the 10th section of chapter 329 of the laws of 1854, (Bess. L. 1854, 696, 7,) has entirely satisfied me that its provisions were not fully appreciated on the argument. Subdivision 3 of that section must be construed to mean that the terms of the contract (into which .the successful bidder would be required to enter) should be “prescribed by the contracting board,” not, as was claimed on the argument, after the bidding and before the execution of the contract itself, but before the bidding; so that the bidder might see what kind of a contract he was to execute and perform, and might bid accordingly. And such was manifestly the action of the contracting board in this case. For, though there was some contradiction on this point, between counsel on the argument, the advertised proposals state that, among the papers to be furnished by the board to all persons wishing to bid, were “forms of contractso that, after having furnished such a form of contract, the board had no power to alter it so as to “provide for the security of the state,” in the emergency of any unusual manner of bidding. If the bid was such that the state could not be secure, under a contract made in that prescribed form, the board could not make it so.

Again, although the form of that prescribed contract is omitted from the papers, yet the 5th subdivision of the same section says that every such contract shall contain a “provision that fifteen per cent of the amount of any work done, &c. at the contract price thereof, shall be reserved by the canal commissioner until the whole work shall be completed”—a clause carrying with it the necessary implication that all but fifteen per cent was to be paid before the work was completed, and fairly referring every one to the very well known fact that all such contracts provide for monthly estimates and payments. The same division states that the engineer, certifying the amount of work, &c. shall certify the deduction of this 15 per cent, “ and the net amount to be paid” for such work, &c. And the proposals for this very bid contain this identical clause of the section, providing for retaining the 15 per cent; leading plainly to the conclusion that the forms of contract furnished to these bidders did contain a provision for the payment of all but fifteen per cent before the work was done. And it would be indeed unusual and purposeless for a contract to contain any such provision, without jprescrt&róy a fixed time, or times, for such payments as were to be made during the progress of the work. And thus we are driven back to the necessity of knowing that stated times for such payments were fixed in the contract; and that permits but little ground for holding it doubtful that such payments were to be monthly, on monthly estimates.

The 3d division, above referred to, provides for just the bond which is before us, (furnished by the board,) with its precise condition that, upon any failure fully and faithfully to perform the contract, (in the aggregate or in detail,) the damages to be recovered were liquidated at 10 per cent of the engineer’s estimate; and it further provides that, upon the prosecution of such bond, the recovery is to be for “the liquidated damages specified in the condition thereof.” The statute adds, “and all damages sustained by the state, by the non-performance of the said contract, or any part thereof.” But, with all deference to legislative omnipotence, is there not a legal impediment to recovering liquidated damages and unliquidated damages for precisely the same breach, or breaches ? The precise and fixed rule must prevail over the loose and indeterminate; and the liquidated damages must remain the true amount of recovery, especially when the bond is not conditioned for these, “ all damages,” but only for the liquidated damages.

If these views be sound, it must be entirely plain that a bid so palpably open for a gross imposition on the state, should be treated as this was by the board. If no fraud were intended, the temptation thereto is too strong to deserve encouragement from the courts. Stopping the work, after the first parts (the earth excavation and rock blasting) had been done, losing the 15 per cent, and paying the 10 per cent, would still leave the state defrauded of some $10,000 or $12,000. Nothing but the clearest right should call on us to issue a mandamus in such, a case. And in my view no such clear right exists in this case.

I should reverse the order of the special term, and deny the mandamus.

Peokham, J.

Irrespective of the question of the power of the board to protect the interests of the state by the contract to be entered into by the relator, by withholding the payments beyond the fifteen per cent, until the work should be all performed, I am of opinion that the board was not bound to accept a proposal like the one in question. Its purpose could not be other than fraudulent, and it would rarely fail to result in a fraud upon the state. It may be safely said that a proposition so utterly out of proportion as this, contains some purposed fraudulent advantage to the proposer not always apparent, and therefore the more dangerous. I do not think a board should even entertain a proposition like the one in question, under circumstances like these.' Suppose the contract be fully and thoroughly performed, it by no means follows that the state is not defrauded. Here is a proposition to make some 400 yards of rock excavation with blasting estimated by the engineer to be fairly worth 25 cents a yard, for $6 per yard. This, it will be observed, is a mere estimate by the engineer, as accurate as may be, of the amount of rock excavation to be done. Suppose it turns out, in executing the contract, that instead of being 400 yards of rock excavation there should be 2000. The state of course would be seriously defrauded. Such a gross disproportion in prices leads to strife and contest as to the amount of work of the peculiar character so overcharged. It will be sought to be magnified. The inducements to magnify it will be strong; the temptation to wrong will be quite too strong. That the amount of such work would be larger than stated in the estimate, might be generally safely calculated. At best it is but an estimate, and when there is a departure therefrom, an error or a mistake in judgment, or in making the experiment ón which, to base the estimate, we may safely calculate that with such inducements the error would almost universally be to the benefit of the contractor. Though the engineer may make the estimate in the best possible faith, which I should not ordinarily be disposed to question, still that does not deprive individuals of the right of making examinations and estimates, and the vigilance stimulated by great interest would be very apt to obtain the more accurate knowledge. The state would always be the loser. The estimates of course cannot be accurate ; they will always vary; and it is entirely safe to say that the state will always lose by the variance. Such a proposal also leads to suspicion of probable connivance between the contractor and the engineer who makes the estimate. It certainly offers strong temptation for such connivance. In fact) such a disproportion in price leads and incites to all sorts of frauds, and should not receive the ■least encouragement -from the courts. . The proposition is a clear fraud upon the law. This principle'of course gives no sanction to rejecting a bid unless the disproportion be broad and palpable5—entirely and flagrantly transparent. Exhorbitant prices does not express the idea. They are fraudulent prices, hi or would it apply with great force to a contract ■ where the thing to be done was clearly and absolutely known. But a case like the one at bar is the peculiarly appropriate field for the exercise of this species of management, and the state the true subject.

It seems that these fraudulently high prices are all upon that part of the work first to be done. Suppose the work, after being partly performed, should for any cause be suspended, when the contractor, to that time, had received some twenty-five times what his work was worth. Such suspensions have, occurred from unavoidable causes. Would the contractor’s sense of justice prompt him to refund ?

Though the estimates be erroneous, as they cannot be en.tirely accurate, if the proposals bear a reasonable approach to the value of the different kinds of work to be done, no material injury results to either party. But a proposal like this makes it a lottery, and as between an individual and the state, the latter, it may be safely predicted, will generally if not universally draw a blank, It is a mere lottery or a bet, and the statutes of our state do not give countenance to lotteries or to betting and gaming. Why is this very gross and glaring disparity made in prices for different kinds of work, in proposals ? Obviously because the proposer believes, and no doubt has reliable reasons for believing, there is or there will be more of the high priced work than the estimate presents, or less of the low, and such a proposition should operate as a direct notice to the board of an unfair advantage sought to be taken. If a public officer should sanction it he would do so after foil notice of the intended improper advantage, and therefore would be virtually a participator in accomplishing the fraud. It is alleged on the one side and denied on the other, that the board" has accepted such bids before. But no practice of the board could render the acceptance of such proposals proper, however it might encourage their being made. It seems that this view of the case was not presented or considered by the justice at special term, or he would probably have arrived at a different result. The mandamus should be denied.

[Albany General Term, March 4, 1861.

Gould, Hogeboom and Peckham, Justices.]

Hogeboom, J,

concurred in reversing the order of the special term and denying the mandamus, for the reason that the bid was, on its face, palpably fraudulent; and that upon that ground the board had a right to disregard it.

Order reversed,