Court: Commonwealth Court of Pennsylvania; June 2, 1997; Pennsylvania; State Appellate Court
The City of Philadelphia appeals a ruling by the Court of Common Pleas that denied its post-trial relief motion and upheld a judgment in favor of NVC Computer Sales, Inc. NVC contested the City's termination of a bid award for leasing a mainframe computer, asserting that the City had a duty to provide an installation date to allow NVC to secure a performance bond. The City challenges three key points: (1) whether it was obligated to supply an installation date, arguing that NVC did not demonstrate an inability to obtain a bond without it, and that providing this date would create an unfair advantage for NVC; (2) whether NVC's compliance costs should be deducted from its damages; and (3) whether hearsay evidence was improperly admitted in NVC's case.
The trial court found that NVC was awarded the contract for a used IBM mainframe on January 8, 1992, with a performance bond due within ten days. The City approved an extension request and later placed the project on hold. After negotiations, NVC reduced the price, and the City allowed an open-ended extension for the bond. However, NVC struggled to obtain the bond due to the lack of a firm installation date. The City, citing high costs, requested further price reductions, which NVC refused. The City ultimately canceled the bid on January 21, 1993, alleging NVC's failure to secure the bond.
The trial court found that NVC could only obtain the performance bond with an installation date, which the City failed to provide. It concluded that all conditions for contract execution were satisfied prior to the award's cancellation, which the court deemed arbitrary and lacking legal basis, asserting that NVC had acquired contract rights that were wrongfully obstructed by the City's actions. The City later awarded a contract to another company under different conditions.
The Court's review focuses on whether findings are backed by substantial evidence or if there were legal errors or abuses of discretion, as established in Richland Township v. Prodex, Inc. The City contends that NVC did not obtain contract rights under the bid documents, referencing the Philadelphia Home Rule Charter. Section 8-200 requires a successful bidder to provide a performance bond within ten days of award and mandates that contracts be in writing and executed by the Procurement Department, after approval from the City Solicitor and Controller. The Charter's provisions are statutorily binding, meaning public contracts must adhere to these formalities to be enforceable. NVC acknowledges that no formal contract was executed, and the Court determined that NVC's failure to comply with the Charter's requirements prevented a written contract from being presented for signatures.
NVC's equitable claim centers on the City's alleged misconduct in not providing a firm installation date, which hindered NVC's ability to secure a performance bond. The City raised hearsay objections during trial regarding testimony from NVC's President, Nicholas Cicchitti, about bonding company communications, which the trial court allowed. The City's argument emphasized that NVC did not present direct testimony from representatives of the bonding company or its joint venturer, claiming Cicchitti's testimony was based on thirdhand information. NVC countered that the City’s indefinite extension for providing a bond made hearsay issues irrelevant.
Testimony from Nicholas Cicchitti regarding requirements imposed by the bonding company on NVC for bond procurement is deemed hearsay and inadmissible. Consequently, the trial court's finding that NVC needed an installation date from the City to obtain a performance bond lacks substantial evidence. The City emphasizes that competitive bidding laws protect taxpayers and property owners, not bidders, and courts, without evidence of misconduct, should not question municipal decisions. The City asserts it had no obligation to modify bid specifications or provide an installation date for NVC’s convenience. The trial court correctly noted the absence of an installation date was standard procedure, and NVC did not demonstrate that securing a bond without such a date was commercially unreasonable. Although the City extended NVC's time to obtain a bond, there is no evidence that it agreed to provide an installation date beforehand. NVC's claim that both judges found the City's defense as a mere pretext is unsupported by the evidence, which shows no agreement about an unlimited extension for bond procurement based on an installation date. The trial court's order is reversed, as there was never a contract between NVC and the City, and NVC could have rectified the situation by obtaining the required bond within ten days of its original bid. Evidence indicates that NVC had not adequately considered the bond requirement before the award, and it failed to provide admissible evidence that the bonding company, Amwest, required an installation date to issue a bond. Amwest sought to modify the bond language to limit its obligation to a specific date, which the City refused, and the bidding documents did not support such a limitation.
David Cicchitti, who had significant interactions with the City, did not provide testimony in the case. The Court explicitly disapproves of the City's conduct, suggesting it was sharp dealing, but primarily focuses on whether NVC had acquired rights that the City subsequently violated. The Court concludes that NVC's actions ultimately led to a lack of acquired rights. Consequently, the Court finds no necessity to address the City's concerns regarding potential windfall profits for NVC or the appropriateness of deducting compliance costs from damage awards. The trial court's order is reversed. The case, presided over by Honorable James D. McCrudden, who passed away before the City's post-trial motion ruling, was subsequently handled by Honorable Sandra Mazer Moss and Honorable Alfred J. DiBona, Jr.
NVC submitted evidence, including a letter from ComSource, Inc. detailing pricing for IBM equipment, without objection. The City had not declared NVC in default; had it done so, NVC would have had a ten-day period to remedy the situation. At trial, NVC did not demonstrate the ability to secure a bond without an installation date. NVC partnered with General American Financial Corporation to obtain a necessary bond, sharing profits equally, as NVC could not secure the bond independently. David Cicchitti signed a bond application to Amwest Surety Insurance Company, but General American was tasked with obtaining the bond. Amwest later sought modifications to limit its bond obligation, which the City rejected. NVC claimed it was uninvolved in the negotiations between General American and Amwest and was unaware of any requests made by Amwest.
