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M.A. Stephen Construction Co. v. Borough of Rumson

Decided: December 16, 1971.


Lewis, Kolovsky and Halpern. The opinion of the court was delivered by Lewis, P.J.A.D.


Plaintiffs M.A. Stephen Construction Co., Inc. (Stephen Co.) and Sark Kavookjian, a borough taxpayer, appeal from a summary judgment of the Law Division entered on January 5, 1971 in favor of defendant Borough of Rumson (Rumson or municipality) which dismissed their complaint in lieu of prerogative writs and vacated the restraints imposed by a consent order of this court on December 14, 1970.

The critical issues posited on appeal are: (1) whether a municipality that advertises for public work may reserve the right to reject any and all bids, (2) if it may and does, whether the exercise of that reserved right by Rumson in the instant case was valid, and (3) whether, in the circumstances, summary judgment in favor of either party was appropriate. Before approaching these questions, a summary of the relevant facts and circumstances, as revealed by the record, is essential.

In early October 1970 Rumson advertised for bids on proposed contracts for sewer installations, expressly reserving to itself, in the notice and instructions to bidders, the right to reject all bids. On October 22 the municipality opened the sealed proposals, all of which were accompanied by appropriate bid bonds and certified checks, and the bid of Stephen Co. of $1,362,534 on Sewer System Contract No. 1 (North Central Sewer) was the lowest of the six submitted

and it was substantially lower than the cost estimate of Rumson's consulting engineers.

On December 7 Stephen Co. received a letter dated December 3 from Rumson advising it that all bids on the contract in question, together with Contract No. 5, were rejected and that a rebidding would take place on December 15, 1970 on these two contracts. No reasons for rejection were stated in the letter. The prompt efforts of Stephen Co. to obtain a copy of the resolution or abstract of the minutes of the governing body, with respect to its action on November 25 authorizing the letter, were unsuccessful.

Although Contract No. 5 is not directly involved in the instant litigation, it should be noted that the low bidder on that contract was Nero-Villa, which submitted an exceptionally low bid. The municipality had apparently received before its November meeting a communication from Nero-Villa indicating that it would not accept an award of the contract because the municipality had failed to give it proper notice of changes in the specifications.

It appears that Rumson rejected the bids on the recommendation of its engineers, who, by letter of November 23, indicated that they made inquiry of three references submitted by Stephen Co. and "[t]he consensus was that the low bidder [Stephen Co.] has good construction equipment and that he can install sewer pipe satisfactorily if careful and strict administration of the contract documents is imposed." The letter then proceeded to make reference to derogatory reports as to the contractor's "restoration" and "clean-up" work. In effect the consulting engineers concluded that Stephen Co. might not be a satisfactory contractor and that the borough should proceed forthwith to re-advertise for Contract 1 and Contract 5 separately or in combination with each other.

Plaintiffs' complaint and order to show cause were filed December 11, 1970 and their application for an order restraining the municipality from proceeding with its proposed rebidding was denied. This court was then presented with

an application for leave to appeal from the interlocutory order and on December 14 a consent order was entered permitting the acceptance and opening of new bids on December 15 for Sewer System Contracts 1 and 5 with a direction that the same be impounded and that no contracts be awarded until further order of the Law Division. On December 23 the trial court heard arguments on plaintiffs' order to show cause, a motion by defendant for summary judgment and a cross-motion by plaintiffs for a similar judgment, and on January 4, 1971 entered judgment in defendant's favor which is the subject of this appeal, notice of which was filed on January 13.

In the meantime, the municipality received new bids on December 15; Stephen Co. did not participate in the bidding. The lowest bids then submitted on Contracts 1 and 5 separately and in combination were higher than the lowest bids that had been received on October 22. The new low bid of Cruz Construction Co. of $1,398,340 on ...

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