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

Decided: July 30, 1973.

M.A. STEPHEN CONSTRUCTION CO., INC., A CORPORATION OF THE STATE OF NEW JERSEY, PLAINTIFF-APPELLANT, CROSS-RESPONDENT, AND SARK KAVOOKJIAN, PLAINTIFF,
v.
BOROUGH OF RUMSON, A MUNICIPAL CORPORATION OF THE COUNTY OF MONMOUTH, STATE OF NEW JERSEY, DEFENDANT-RESPONDENT, CROSS-APPELLANT. CARDELL, INC., A CORPORATION OF THE STATE OF NEW JERSEY, PLAINTIFF-RESPONDENT, V. THE TOWNSHIP OF MADISON, A MUNICIPAL CORPORATION IN THE COUNTY OF MIDDLESEX, STATE OF NEW JERSEY, DEFENDANT-APPELLANT



Lora, Allcorn and Handler.

Per Curiam

Both of these appeals turn on the issue of whether the lowest responsible bidder for public work, whose bid was improperly rejected and the contract awarded to another bidder by the municipal governing body, is entitled to recover damages against the municipality. Accordingly, they will be treated in a single opinion.

In Rumson the borough on October 22, 1970 received bids for the construction of a portion of its sanitary sewer system

in response to advertisement. Seven bids were received, of which that of Stephen was the lowest. On November 25, 1970 the governing body formally rejected all of the bids and directed the borough clerk to readvertise for new bids. The present action was commenced on December 10, 1970, and on January 5, 1971 the trial court entered summary judgment in favor of the municipality. On appeal that judgment was reversed and the cause remanded for plenary trial to determine whether, in rejecting all of the bids, the municipality had acted in good faith. 117 N.J. Super. 431 (App. Div. 1971).

In the interim the borough received the bids which had been solicited by the readvertisement. The plaintiff submitted no bid on this occasion, although invited to do so. The contract was awarded to another contractor and, Stephen not having pursued an application for a stay, the work was substantially completed prior to the argument on the first appeal. On the remand the trial court determined that the rejection of all the October 22, 1970 bids was arbitrary and wrongful, but that inasmuch as the work had been completely performed, no "legal remedies are now available" to Stephen -- the judge having earlier granted the motion of the borough to strike the issue of damage from the complaint and the pretrial order, on the ground that Stephen was "not entitled to damages as a matter of law." 118 N.J. Super. 523, 524 (Law Div. 1972).

In Madison bids were solicited and received on October 10, 1968 for resurfacing of streets. Although Cardell was the low bidder, because of errors in calculation by Cardell the totals did not so indicate and the township governing body awarded the contract to the next lowest bidder. Thereupon Cardell commenced an action to set aside the award and to compel the township to award the contract to it. Although unsuccessful in the Law Division and the Appellate Division, Cardell ultimately prevailed in that action in the Supreme Court. Cardell, Inc. v. Madison Tp., 105 N.J. Super. 594

(Law Div. 1969), aff'd 105 N.J. Super. 604 (App. Div. 1969), rev'd 54 N.J. 151 (1969).

Following some delay the contract award to the second lowest bidder was vacated and the township awarded the contract to Cardell. A portion of the included work having previously been performed by the second lowest bidder (apparently pursuant to a resolution adopted by the governing body in spite of a stay of the Law Division judgment),*fn1 Cardell undertook performance of the balance of the work and completed it in September 1970.

The present action was commenced by Cardell against the township in May 1971, seeking damages "for increased costs to plaintiff due to delay in awarding and executing the contract; [and] loss of anticipated profits" for that portion of the work under the contract performed by the second lowest bidder. There is also included a claim for $10,000 "on a certain book account" and "upon an account stated," the nature of which is not stated.

Before trial was had the township moved "for an order of summary judgment dismissing the plaintiff's complaint for consequential damages." The motion was denied. The present appeal was taken from said denial, upon leave granted by this court.

We are thus brought to the single issue in each of these appeals: Does the wrongful rejection of the bid of the lowest responsible bidder by a municipality render the municipality liable in damages to the bidder -- whether for loss of ...


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