Dixon Contracting Co. v. Commonwealth

474 A.2d 701, 80 Pa. Commw. 445, 1984 Pa. Commw. LEXIS 1328
CourtCommonwealth Court of Pennsylvania
DecidedApril 9, 1984
DocketAppeals, Nos. 2304 C.D. 1982 and 2450 C.D. 1982
StatusPublished
Cited by2 cases

This text of 474 A.2d 701 (Dixon Contracting Co. v. Commonwealth) is published on Counsel Stack Legal Research, covering Commonwealth Court of Pennsylvania primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Dixon Contracting Co. v. Commonwealth, 474 A.2d 701, 80 Pa. Commw. 445, 1984 Pa. Commw. LEXIS 1328 (Pa. Ct. App. 1984).

Opinion

'Opinion By

Judge Williams, Jr.,

The Commonwealth of Pennsylvania* Department of Environmental Resources (Commonwealth) and Dixon Contracting Company, Inc. (Dixon) each petition for review of a Board of Claims (Board) order which awarded Dixon the sum of $466,805.49 (with interest) for work performed under a contract between the parties to eliminate air pollution from an abandoned, burning culm- bank. •

In January 1971, after competitive bidding, the Commonwealth awarded Dixon a $4,500,000.00 contract (entitled “The Land and Water. Conservation Reclamation Act, Air Pollution Project No. SL-210”) for the control and elimination of. air pollution resulting from an abandoned, burning coal refuse bank situate on private property in Schuylkill County. Mid-course in performance, the Commonwealth terminated the contract in September 1971, in order to have the job finished by another contractor at significantly lower cost. For the work it performed Dixon submitted invoices totalling $466,805.49 which the Commonwealth refused to pay.

On October 12, 1971, Dixon filed a Complaint with the Board alleging improper termination of the contract and requesting, inter alia, damages for work performed 'yet unpaid, a declaration that the termination was invalid and vague, nonspeeified damages flowing from equipment rental expenses. Contending that the contract was illegal, hence void and unenforceable,' the Commonwealth asserted a counterclaim of $203,175.00 seeking reimbursement of monies paid to Dixon under the contract.1 After discovery and much procedural wrangling Board hearings finally commenced on Feb[448]*448ruary 25, 1981. And, on that date, more than nine years after the filing of its original Complaint, Dixon sought leave to amend its pleading by requesting additional damages which included lost profits and consequential damages exceeding $2,500,000.00. Citing untimeliness and resultant prejudice to the Commonwealth, the Board refused Dixon permission to amend. By its opinion and order dated August 24, 1982, the Board awarded Dixon damages limited to monies due for work performed and, further, concluded that (1) the contract’s award, issuance and execution were valid as a matter of law; (2) the Commonwealth capriciously and in bad faith terminated the contract; and (3) the Commonwealth was estopped from asserting the contract’s purported illegality. Both the Commonwealth and Dixon appealed.2

Contract SL-210 provided for the extinguishing of a culm bank refuse fire on privately owned land. Monies for the project were appropriated under Section 20(a) of The Land and Water Conversation Act (Act)3 for the purposes specified in clause (1) of Section 16 of the “Act.” 32 P,S. §5116(a)(l). Section 16(a)(1), however, allocates funds “for the prevention, control and elimination of air pollution from abandoned burning coal refuse banks provided such land and bank material is [¡sic] publicly owned ....” (Emphasis added.) The Commonwealth argues that funds specifically appropriated for one purpose {i.e., the extinguishment of culm bank fires on public property) cannot constitutionally be used for another purpose {i.e., the extinguishment of culm bank fires on private property), and that contract SL-210, is therefore il[449]*449legal, void and unenforceable.4 See Article III, Section 24 of .the Pennsylvania Constitution (.prohibits payment of money out of the treasury except on appropriations made by law); see also, Department of Public Welfare v. Harambee, Inc., 21 Pa. Commonwealth Ct. 430, 346 A.2d 594 (1975).

At the time the parties contracted, however, the Commonwealth interpreted Section 16(a)(1) of the Act to permit the filing of consent lines against private property (in lieu of public ownership of the realty through condemnation) as a condition precedent to the extinguishment of culm bank fires on private land. In accordance with that interpretation and practice, since abrogated by Official Attorney General Opinion No. 117 (1972), a consent lien was filed prior to Dixon’s commencement of work. The Board concluded, inconsistently, that the consent lien procedure did not violate the Act and that the Commonwealth was equitably estopped from asserting the procedure’s illegality.

It is axiomatic that while estoppel cannot validate a void contract, the doctrine may preclude an attack on a voidable contract. 17 Am. Jur. 2d, Contracts i>7. A distinction exists, however, between an act completely outside a governmental entity’s jurisdiction “and the [450]*450irregular exercise of a basic power under the legislative grant in matters not in themselves jurisdictional. ” Summer Cottagers’ Association v. City of Cape May, 19 N.J. 493, 504, 117 A.2d 585, 590 (1955). “The former are ultra vires in the primary sense and void; the latter, ultra vires only in a secondary sense which does not preclude ratification or the application of the doctrine of estoppel in the interest of equity and essential justice.” Id. at 504, 117 A.2d at 590-91.

Assuming, without deciding, that the consent lien procedure was invalid, the threshold inquiry is whether the Commonwealth’s agreement with Dixon to extinguish a culm bank fire on private property is utterly beyond the Commonwealth’s jurisdiction under the Act or merely an irregular exercise of contractual power within the purview of the statute. The Commonwealth, being empowered to spend funds appropriated for the elimination of air pollution from burning culm banks, acted within its legislative grant when it contracted with Dixon. And, if, in conducting its authorized purpose, the Commonwealth failed to comply absolutely with the Act, it should not be permitted to benefit by its own mistake to the detriment of an innocent party. See Albright v. City of Shamokin, 277 Pa. Superior Ct. 344, 419 A.2d 1176 (1980) (city estopped from refusing to pay retirement benefits, even though its retirement benefits ordinance failed to conform with enabling legislation).

Because the Commonwealth (1) originally interpreted Section 16 as authorizing the consent lien procedure, (2) awarded the contract to Dixon in accordance with that interpretation and (3) directed Dixon to execute the contract which Dixon partially performed, the Commonwealth is estopped from now asserting a position (i.e., the “invalidity” of the consent lien procedure) inconsistent with its previous inter[451]*451preta/tion and practice. See Department of Revenue v. Family Hospital, 105 Wis. 2d 250, 313 N.W.2d 828 (1982) (revenue department estopped from assessing sales tax on hospital’s parking lot receipts when hospital failed to collect tax because it relied upon the department’s memorandum stating that hospital parking receipts are nontaxahle).

The Commonwealth next asserts that contract SL-210 is invalid and therefore unenforceable because the Secretary of the Department of Mines and Mineral Industries (DMMI)5

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Bluebook (online)
474 A.2d 701, 80 Pa. Commw. 445, 1984 Pa. Commw. LEXIS 1328, Counsel Stack Legal Research, https://law.counselstack.com/opinion/dixon-contracting-co-v-commonwealth-pacommwct-1984.