This is a suit instituted by the plaintiff to enjoin the defendants from entering into a contract between the defendants Klamath News Publishing Company and the defendant F.R. Goddard et al., as officials of the City of Klamath Falls. The proposed contract was for the publication of legal notices required to be advertised by the charter and ordinances of said city. The charter of said city, Section 72, Article I, Chapter III, provides:
"All contracts for official advertising shall be let by the council to the lowest responsible bidder publishing a daily newspaper in the City of Klamath Falls and which has a bonafide circulation therein, Providing however that the council shall reserve the right to determine such circulation and reject any and all bids."
Section 6 of said charter provides:
"The City of Klamath Falls, is not bound by any contract or in any way liable thereon, unless the same is authorized by a City Ordinance, and any contract so authorized must be in writing, and be signed by the Mayor in behalf of the City, and sealed with the seal of the City and be attested by the Police Judge. But an ordinance may authorize the Mayor of the City, to bind the City without a contract in writing for the payment of any sum of money not exceeding One Hundred Dollars."
Section 77 of said charter provides:
"That, Every Ordinance shall be read (3) times and can be read the Second time by Title only, but no ordinance shall be passed by the council on the day of its introduction, nor within five (5) days *Page 72 thereafter, nor at any other time than at a regular meeting."
Section 66 of said Charter provides:
"The power and authority given to the Council by this Charter can be exercised only by Ordinance or Resolution, except as otherwise herein provided."
Pursuant to said Section 72 the police judge of said city duly advertised for sealed proposals for the official advertising of said city during the year 1925. In response to the said invitation the plaintiff submitted its bid alleged in the complaint as follows:
"Said bid proposed to print and publish all Headings and subject matter for each insertion at the rate and price of Five Cents Per Line 13 ems 8 point for said Advertising."
The defendant the Klamath News Publishing Company made its bid for said official advertising alleged in the complaint as follows:
"At the price and rate of Ten Cents for each Head Line for each insertion and for the subject matter five cents per line to four insertions, and for all subsequent insertions at the price of four and one-half cents per line for each insertion for the subject matter, the additional sum of Ten Cents for each Head Line for each insertion, of said subject matter and Head Lines contained in all official advertising matter for said city."
The complaint further alleges as follows:
"That, said Bid of the plaintiff was and is the less price and the lowest Bid for said advertising in money values than the Bid of the defendant Klamath News Publishing Company for like services for said official advertising for said city."
That only two bids were received and that the defendants composing the city council of said city *Page 73 refused to let said contract to the lower bidder and awarded said contract to the higher bidder; that said common council at the time of letting the contract did not pass any ordinance but merely passed a motion awarding the contract to the "Klamath News" and directing the police judge and mayor with the aid of the city attorney to enter into a contract with the defendant Klamath News Publishing Company. The complaint further alleges:
"That, the said Councilmen in control of said Council before and at said session of said Council acting in concert together under the influence of partisans, favoritism and to secure political advantages for and towards the defendant Klamath News Publishing Company and political opponents of and holding a dislike for the management and public municipal policies espoused and advocated in the columns of the said Daily Evening Herald by the plaintiff relative to the acts, doings and course pursued by said Councilmen in their official capacity as such officers for said city; that said Councilmen in control of the business of said Council in the disregard of their said duty, in bad faith unfairly formed, and held a fixed determination, to resist, frustrate and defeat the plaintiff from procuring said contract for said official advertising upon the plaintiff's said lowest bid or any bid therefor, and let and award said contract to the defendant Klamath News Publishing Company, the highest bidder therefor.
"That, said Councilmen, did not at any time or at all enter into a course and pursue due exercise of the use of a fair impartial investigation, comparison and inspection of said bids and proposals, to ascertain and acquire any knowledge of facts upon which to base and found a determination that tend to pecuniary responsibility, skill, integrity, capacity and judgment, as well as, the circulation of the said Evening Herald and Klamath News, the bids of the *Page 74 plaintiff and that of the defendant Klamath News Publishing Company, and did not find any facts tending to disclose the cause, reasons and matters of fact, that moved and caused said Common Council to accept the highest bid for said official advertising and to reject the lowest bid made by this plaintiff therefor submitted to said Council, in violation of the terms of said Charter to award said contract to the lowest responsible bidder and ordering said Mayor and Police Judge to execute said contract with the defendant Klamath News Publishing Company."
It is alleged in the complaint that thereafter and after the commencement of this suit the defendants in their capacity as councilmen of said city passed an ordinance attempting to award said contract for official advertising to the defendant Klamath News Publishing Company; that thereafter the mayor of said city duly vetoed said ordinance, stating his reasons for such veto to be that the bid of plaintiff was the lower.
It is alleged that said ordinance was not re-enacted or passed over the mayor's veto.
It is further alleged in the complaint that the defendants composing the common council later passed another ordinance of the same purport as Ordinance No. 651, vetoed as stated, and awarded the contract to the defendant Klamath News Publishing Company; that said ordinance was introduced and passed on the same day at one session of the common council; that the last-named ordinance was also vetoed by the mayor for the same reasons as Ordinance No. 651 was vetoed; that the later ordinance was thereupon passed over the veto of the mayor; that the plaintiff is the owner of a large printing plant and was fully equipped to publish all advertising *Page 75 for said city; that the plaintiff is the owner of a large amount of real and personal property within the limits of said city and is a substantial taxpayer.
To this complaint the defendant Klamath News Publishing Company filed a demurrer on the ground that said complaint does not state facts sufficient to constitute a suit. The other defendants appeared together and filed a demurrer based upon three grounds, to wit: First, that the City of Klamath Falls was an indispensable party and was not a party defendant; second, that the complaint did not state facts sufficient to constitute a cause of action or suit; third, that the plaintiff had joined in said complaint a suit as taxpayer and one as and for itself relating wholly to the said printing company and that said causes of suit had been and are improperly united in violation of Subsection 5, Section 68, Or. L. Both demurrers were sustained. A judgment was entered dismissing the suit and awarding costs to the defendants. From this judgment the plaintiff appeals.
The prayer of the complaint is for a restraining order restraining the defendants from executing the contract for the official advertising for the city or, if the contract had been entered into, to prevent any performance of same.
Two questions are presented by the appeal, namely: First, is the City of Klamath Falls an indispensable party to the suit; second, does the complaint state facts sufficient to constitute a suit against the defendants.
The city is a proper but not an indispensable party to this suit. The object of the plaintiff measured by the prayer of its complaint is to enjoin the city officials from entering into an illegal contract. *Page 76 The motion passed by the city council directed the mayor and police judge of the city to execute the contract with the defendant The Klamath News Publishing Company.
"One who has, or claims, an interest in the controversy adverse to the plaintiff, is a necessary party; while one whose presence is requisite only to a full determination of the questions involved, is a proper party." Phillips on Code Pleadings, 481, § 453; Shipman on Equity Pleadings, 55, 56.
"Third, where he is not interested in the controversy between the immediate litigants, but has an interest in the subject matter which may be conveniently settled by the suit, and thereby prevent further litigation, he may be a party or not, at the option of the complainant." Bliss on Code Pleading (156), § 96; Maxwell, Code Pleading, 24, 25.
The controversy between the litigants can be determined without the presence of the city. In the stage of the litigation presented by this appeal no rights of the city are challenged. It cannot be said that the city is interested in becoming a party to an illegal or void contract. If interested at all it would seem to be in favor of the plaintiff, rather than adverse.
"Whether there has been a proper joinder of parties defendant depends largely upon the case as stated by plaintiff in his complaint, however it may turn out upon the merits." Sweeney v.Jackson County, 93 Or. 96 (178 P. 365, 182 P. 380).
"Who are proper or necessary parties to an action by or against a municipal corporation generally depends upon the nature of the action, the relief sought, and the charter or statutory provisions applicable." 5 McQuillin, Munic. Corp. 5173, § 2494." *Page 77
Keeping in mind that when this suit was instituted no ordinance had been passed authorizing the execution of the proposed contract; that the contract could not be legally executed without such ordinance; that the facts alleged in the complaint relate to the time the complaint was filed, — we are constrained that the city is not interested in this litigation except to prevent the execution of the alleged illegal contract in common with the plaintiff. The Supreme Court of Nebraska has correctly stated the law applicable as follows:
"If the authorities of Wymore are threatening to do an illegal act obviously beyond the scope and limit of their agency, the injunction must go against them and not against the City."Wabaska Electric Co. v. City of Wymore, 60 Neb. 199, 203 (82 N.W. 626, 627).
In the instant case an injunction preventing the mayor and police judge from executing the alleged illegal contract, or denying that remedy, will as completely determine the merits of the controversy as though the city was a party.
"Where an ordinance threatened to be adopted by a mayor and council is prejudicial to the rights of an individual, injunction may issue against the officers, but not against the city; its enforcement will be enjoined if it is invalid, if private rights are invaded." 2 Smith on Mod. Mun. Corp., § 1624.
The authorities are apparently in conflict on this question. Texas is the only state holding directly contrary to the view herein expressed. The cases cited to support its view upon examination are found to involve cases where the contract had been executed in behalf of the city, or the city held property in its name directly involved in the litigation, or the city was otherwise directly involved in the *Page 78 identical thing litigated: Basham v. Holcombe (Tex. Civ.),240 S.W. 691, 693.
Because of a divergence of opinion it would have been better to have made the city a party defendant. The city being under the control of defendants would not become a party plaintiff. To have made the city a party would have avoided the needless and wasteful controversy about a formal matter.
We cannot indulge a presumption that the mayor has executed the proposed contract since the commencement of this suit. It was his duty not to execute. The complaint discloses that by a comparison of the two bids he ascertained the plaintiff's to be the lower bid. People ex rel. Coughlin v. Gleason, 121 N.Y. 631 (25 N.E. 4, 5). The presumption is that the mayor did his official duty by refusing to execute the illegal contract: Or. L., § 799, subd. 15.
If it develops with the progress of the trial that the city should be made a party it will be the duty of the court to order it brought in: Or. L., § 41.
"Where public officers are acting illegally or without authority and in breach of trust and are causing irreparable injury or a multiplicity of actions at law, they will be enjoined." 22 Cyc. 879 E. "Equity has jurisdiction to prevent public officers and boards from letting or carrying out unauthorized and illegal contracts for public buildings, bridges, and other improvements, when such action may cause the levy of illegal taxes, the expenditure of public funds in an improper manner, or a complication of a public business that will bring about many actions at law." 22 Cyc. 693, Sec. 3. "Where the statute requires a contract to be let to the lowest bidder, the letting of it to one not the lowest bidder will be enjoined": 22 Cyc. 894 D; 32 C.J. 240, Sec. (383) F, 243, Sec. (385) c; 263, Sec. (412), Note 47, 264, Sec. (415) 6; 267, Sec. (420) b; 3 McQuillin, *Page 79 Mun. Corp., Secs. 1223-1227. "But they may not arbitrarily refuse to accept the lowest bid without any facts tending to show that it is not that of a responsible bidder. Any arbitrary determination to accept the highest bid, without facts justifying it, cannot have the effect of a judicial determination." Donnelly, Public Contracts, Sec. 122, p. 801; 2 High on Inj. (4 ed.), Secs. 1308-1310; 1 Smith, Modern L. of Munic. Corp., Sec. 671.
The complaint states further facts showing that the bid of the Herald Publishing Company was the lower bid; it sets out in substance the two bids made. This is followed by a positive allegation that the bid of the Herald Publishing Company is the lower bid. Other facts are alleged in the complaint either directly averring the bid of the Herald Publishing Company to be lower or that of the Klamath News Publishing Company to be higher. The complaint alleges that the plaintiff is the owner of "the `Evening Herald,' a daily newspaper that has been published in said city for 19 years; that said paper is printed, published and circulated in the said city, and has a larger circulation therein than any other newspaper," and that in equipment, capacity and pecuniary ability is "able to perform a contract to print, publish and circulate to the largest number of subscribers in said city the said official advertising in said city." It is also alleged in effect that the council did not exercise its discretion reserved to it in the charter "to determine such circulation and reject any and all bids."
It was not necessary to set out in the complaint the evidence necessary to prove the allegation that plaintiff's bid was lower than the other bid. No motion was made to require the plaintiff to make the complaint more definite and certain. The court *Page 80 will not try issues of fact upon a demurrer. Which of the two bids is the lower must be determined from an examination of the evidence. The allegation that plaintiff's bid is lower is not a conclusion of law, but a statement of fact. Whether or not that statement is true cannot be determined upon a demurrer, but must await the evidence. The bids are not set out in full, but only the effect. Whether or not the plaintiff's bid is the lower depends on the number of insertion, style of type employed and width of column used. These matters are all evidentiary. By demurring the defendants admit the allegations of fact including the averment that plaintiff's was the lower. The allegation regarding the bids should have been more definite and specific, but since no motion to strike was made, and in view of the allegations showing gross violations of provisions of the charter, the complaint is not fatally deficient. It is alleged that the council made no examination so as to determine the circulation or the relative price of the two bids; that the ordinance directing the execution of the contract was introduced and passed on the same day.
The complaint sets out the message of the mayor vetoing the ordinance, awarding the contract to the defendant Klamath News Publishing Company. The message is not plaintiff's statement of any fact. It could not be used as evidence. It is hearsay. No motion was made to strike it or other evidentiary matter embodied in the complaint. The message neither adds to nor detracts from the complaint except to display the grossest violation of the rules of pleading, manifest very generally in the complaint. *Page 81
The fact that the mayor vetoed the ordinance precludes the inference that a contract has been entered into between the city and the defendant Klamath News Publishing Company. He may have refused to sign the contract as did the mayor in People ex rel.Coughlin v. Gleason, 121 N.Y. 631 (25 N.E. 4, 5), where the court says:
"It is true that the common council, where there are several bidders, have jurisdiction to determine who is the lowest responsible bidder; but in order to give its action any legal effect it must exercise its jurisdiction, and make a determination based upon some facts. If it refuses to accept the lowest bid for work or supplies, there must be some facts tending to show that it is not that of a responsible bidder, or there must be at least some pretense to that effect. An arbitrary determination by such a body to accept the highest bid, without any facts justifying it, cannot have the effect of a judicial determination, and must be denounced as a palpable violation of law."
The complaint alleges that the ordinance directing the mayor and police judge to execute the contract was introduced and passed on the same day. This is clearly in violation of the mandatory provision of the charter prohibiting passing an ordinance on the day of its introduction, or within five days thereafter, or at any other time than at a regular meeting. Mr. Justice RAND expressed the principle applicable thus: "In this state the law is settled by an unbroken line of decisions that a compliance with the provisions of a charter such as this must be had before liability will attach against the city, or the city be bound by any contract not made in compliance with the provisions of the charter." (Many authorities are cited.) State ex rel. *Page 82 v. Funk, 105 Or. 134, 156, 157 (199 P. 592, 209 P. 113, 25 A.L.R. 625).
The other formal and necessary averments are embodied in the complaint. The complaint therefore states a cause of suit against the defendants.
The courts will not interfere with the acts of a municipal corporation or other public bodies or officers in the exercise of their functions where they are called upon to exercise discretion or judgment in the absence of proper allegations of fraud:DeNeffe v. Duby et al. (Or.), 239 P. 109, decided September 15, 1925. If the facts in this case required of the common council, the defendants herein, the exercise of discretion as to the choice of material or other matter that required investigation so that the court could not upon the face of pleading say which one of the two bidders was the lower, it would refuse to interfere; but in this case no choice of material is required, alternative proposals were not invited. Both bids were for the same service. The only discretion given the council is to determine the circulation, and the relation of the bids as to price. The complaint negatives any claim on the part of the defendants that the lower bidder is not responsible. If in the face of these facts the common council can ignore the plain provisions of the city charter and award the contract to the higher bidder, the taxpayers of the city are without remedy. The provision in the charter requiring the contract for the official advertisements of the city to be let to the lowest responsible bidder was intended to protect the taxpayers of the city against exorbitant charges. The common council is as much under obligation to obey the provision of the charter as any other citizen of the city. The defendants cannot *Page 83 lawfully let a contract to a higher bidder without showing sufficient reason therefor: Faist v. Mayor etc. of City ofHoboken, 72 N.J.L. 361 (60 A. 1120, 1121); Chippewa BridgeCo. v. City of Durand, 122 Wis. 85 (99 N.W. 603, 106 Am. St. Rep. 931, 947); Kelling v. Edwards, 116 Minn. 484 (134 N.W. 221, 222, 38 L.R.A. (N.S.) 668).
There is only one cause of suit stated in the complaint. The fact that the unsuccessful bidder is the plaintiff does not deprive him of the right of a taxpayer to be protected against the unlawful expenditure of public funds raised by taxation and to which he is compelled to contribute: Chippewa v. City ofDurand, above; Times Publishing Co. v. Everett, 9 Wash. 518 (37 P. 695, 43 Am. St. Rep. 865).
Mr. Justice BEAN concurs with this opinion.