KOCH CORPORATION v. 5TH STREET HIGH RISE CORPORATION, INC.
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RENDERED: NOVEMBER 27, 2002; 2:00 p.m.
NOT TO BE PUBLISHED
C ommonwealth O f K entucky
C ourt O f A ppeals
NO.
2001-CA-001794-MR
KOCH CORPORATION
APPELLANT
APPEAL FROM JEFFERSON CIRCUIT COURT
HONORABLE LISABETH HUGHES ABRAMSON, JUDGE
ACTION NO. 98-CI-003684
v.
5TH STREET HIGH RISE CORPORATION, INC.
APPELLEE
OPINION
AFFIRMING
** ** ** ** **
BEFORE:
COMBS and DYCHE, Judges; JOHN POTTER, Special Judge.1
COMBS, JUDGE:
Koch Corporation appeals from a judgment entered
by the Jefferson Circuit Court on July 27, 2001 in favor of 5th
Street High Rise Corporation, Inc. ("5th Street").
We conclude
that the trial court's factual findings are supported by
substantial evidence and that it correctly applied the law to
those facts.
Thus, we affirm.
5th Street, d/b/a J. O. Blanton House, a non-profit
corporation, provides low cost rental housing units to elderly
and low income Kentuckians.
1
In 1996, Blanton House received a
Senior Status Judge John Potter sitting as Special Judge by
assignment of the Chief Justice pursuant to Section 110(5)(b) of
the Kentucky Constitution.
$1,035,000 Operating Assistance loan from the U.S. Department of
Housing and Urban Development ("HUD").
Blanton House
subsequently issued an invitation for bids to replace the windows
of the facility.
On September 20, 1996, Koch Corporation submitted a bid
on the project in the amount of $512,816.00.
Another bidder,
W.R. Cole & Associates ("W.R. Cole"), submitted a lower bid of
$508,700.00.
Koch Corporation and W.R. Cole were the two lowest
bidders — with all other bids being significantly higher.
On October 1, 1996, the Operations Committee of the 5th
Street Board of Directors considered the bids on the window
replacement project and decided to accept the bid of Koch
Corporation.
Although Koch Corporation's bid was slightly higher
than that of W.R. Cole, the Operations Committee concluded that
Koch Corporation's bid satisfied certain Minority Business
Enterprise ("MBE") requirements of the bid solicitation while
W.R. Cole's bid did not.
Stephen Koch, President of Koch
Corporation, was orally notified of the resolution.
W.R. Cole, the low bidder, immediately lodged a bid
protest.
At a special meeting of the Operations Committee held
on October 24, 1996, the committee conducted further inquiry and
deliberation.
It then determined that the window replacement
contract should be awarded to W.R. Cole.
On December 4, 1996,
W.R. Cole received authorization from the project architect to
proceed with the window replacement.
Koch Corporation filed an action pursuant to 42 U.S.C.
§1983 against 5th Street in the United States District Court for
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the Eastern District of Kentucky.
Early in the proceedings, U.S.
Magistrate Judge James D. Moyer granted summary judgment in favor
of 5th Street.
The Sixth Circuit United States Court of Appeals
affirmed.
In July 1998, Koch Corporation filed this action
against 5th Street for breach of contract.
Following a bench
trial, the Jefferson Circuit Court entered its findings of fact,
conclusions of law, and judgment in favor of 5th Street.
This
appeal followed.
Koch Corporation contends that the trial court erred by
failing to conclude that 5th Street had breached the parties'
agreement.
It argues that the initial resolution of 5th Street's
Board of Directors resulted in a binding contract that would not
allow for modification so as to award the project to W.R. Cole.
As the trial court aptly concluded, however, 5th Street retained
broad, ongoing discretionary authority in awarding the contract;
its initial resolution was final or not binding on either party.
As part of the competitive bidding process, both Koch
Corporation and W.R. Cole were required to complete a document
which provided, in pertinent part, as follows:
In submitting this bid it is understood and
agreed that the J.O. Blanton House reserves
the right to accept any bid, or portion
thereof, reject any or all bids, to waive any
informalities in bids received where such
acceptance, rejection, or waiver is
considered to be in the best interest of the
J.O. Blanton House Louisville and to reject
any bid where evidence or information
submitted by the bidder does not satisfy the
J.O. Blanton House Louisville that the bidder
is qualified, capable of carrying out the
requirements of the Contract Documents or is
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in any manner unresponsive in the preparation
of its bid.
If written notice of intent to award the
contract connected with this bid is mailed,
telegraphed or delivered to the undersigned
within sixty (60) days after the opening
thereof, or at any time thereafter, unless
the bid is withdrawn in writing, the
undersigned agrees to execute and deliver a
contract in the prescribed form and furnish
the required bonds and meet other stipulated
requirements within ten (10) days after the
contract is presented to him/her for
signature. (Emphases added.)
Koch Corporation never received a "written notice" of
5th Street's intent to award the contract to Koch Corporation.
Instead, Stephen Koch was informed orally by a representative of
5th Street that it was the intent of the Board of Directors to
award the contract to Koch Corporation.
In light of W.R. Cole's
bid protest and before any written notice was delivered, 5th
Street elected to exercise its prerogative to re-evaluate the
bids and awarded the contract to W.R. Cole.
In reaching its
decision, 5th Street relied on the paragraph quoted above, by
which it had reserved:
the right to accept any bid, reject any or
all bids, to waive any informalities in bids
received when such acceptance, rejection or
waiver is considered to be in the best
interest of the J.O. Blanton House.
Early in the process, 5th Street identified MBE
participation in the project as a "priority objective."
W.R.
Cole's low bid was initially passed over in favor of Koch
Corporation because W.R. Cole had omitted to include such
participation in its bid.
Upon closer scrutiny, however, 5th
Street became convinced that Koch Corporation's proposed
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subcontractor, Juanita Burks (or Burks Construction), did not
satisfy MBE requirements.
First, the proposed subcontractor
could not produce (per subsection XXII of the Supplemental
Instructions to Bidders) "evidence satisfactory to 5th Street of
minority ownership."
Next, the Operations Committee had serious
concerns about the ability of Ms. Burks's company to perform the
proposed contract.
While Koch Corporation's bid indicated that
Ms. Burks's company was to furnish workers and install windows in
the Blanton House project, it could not be established that the
company had a place of business, had any inventory or equipment,
or employed any workers.
In fact, evidence indicated that the
company was merely a broker lending its name and minority status
in exchange for a percentage of the contract price.
Upon concluding that the Koch Corporation bid failed to
fulfill initial MBE participation goals, 5th Street determined
that it could no longer be preferred over W.R. Cole, the low
bidder.
5th Street's decision to award the contract to W.R. Cole
was undoubtedly justified under the broad discretion that it
retained under the bid documents.
We agree with the trial court that 5th Street's initial
resolution in favor of Koch Corporation (as memorialized in its
Board Minutes) did not constitute a final award of the contract
to Koch Corporation nor did it give rise to any binding
obligation on the part of 5th Street's Board of Directors.
The
bid documents clearly outlined the procedure by which a contract
between the parties was to be formulated.
First, "written notice
of intent to award the contract connected with this bid" would be
-5-
"mailed, telegraphed or delivered to the undersigned within sixty
days after the opening thereof."
The same paragraph further
provided that unless the bid were withdrawn in writing, the
bidder would be required to execute and deliver a contract in the
prescribed form "within ten days after the contract is presented
to him/her for signature."
Thus, by the plain terms of the bid
documents, Koch Corporation could not claim any entitlement until
it received "written notice" of 5th Street's intent to contract
and then executed the prescribed contract — a sequence of events
which never occurred.
Instead, W.R. Cole immediately filed its
protest of the initial vote to award the contract to Koch
Corporation.
5th Street's Board of Directors reacted promptly to
address the protest.
Any reliance by Koch Corporation on the preliminary,
oral notification was clearly premature and tentative.
We agree
with the trial court's conclusion that there was no contract
between 5th Street and Koch Corporation.
At most, there was an
“agreement to agree” in the loosest fashion which never matured
into a binding contract.
The trial court correctly concluded
that no other basis exists for awarding Koch Corporation any
damages on the facts presented.
The judgment of the Jefferson Circuit Court is
affirmed.
ALL CONCUR.
BRIEF AND ORAL ARGUMENT FOR
APPELLANT:
BRIEF AND ORAL ARGUMENT FOR
APPELLEE:
Richard L. Masters
Louisville, Kentucky
Cecil A. Blye, Sr.
Louisville, Kentucky
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