Recently, Division II of the Washington Court of Appeals held that a Pierce County contract with a son’s proprietorship was illegal, void, and unenforceable when the project was competitively bid by the father’s proprietorship and awarded to the father by the County. Bankston v. Pierce County, 174 Wn.App. 932, 301 P.3d 495 (Division II, May 21, 2013).
In Bankston, John Bankston, a sole proprietor doing business as Aarohn Construction, submitted a bid to Pierce County for a small public works project involving tree replacement. At the time of the bid, John held a valid contractor’s registration. On March 28, 2006, Pierce County informed John that he was the lowest responsible bidder and that he would receive the contract award.
On April 13, 2006, the Department of Labor and Industries suspended John’s contractor’s registration. RCW 39.06.010(1) prohibits counties from executing a contract “[w]ith any contractor who is not registered or licensed as may be required by the laws of this state.”
Richard Bankston is John’s son. In 2006, Richard worked as a security guard. He had done no work as a construction contractor, other than “grunt work” he performed for his father’s business while in high school, 10-15 years earlier.
Richard instructed John to register him as a construction contractor. On April 25, 2006, the Department of Labor and Industries registered Richard’s sole proprietorship with its own Uniform Business Identifier (UBI number) and contractor registration number. Richard’s sole proprietorship was also called Aarohn Construction, and its address was the same as John’s residence. Richard obtained a contractor’s bond and a performance bond in his name.
In May 2006, Pierce County executed a written contract listing the contractor as “Aarohn Construction.” On the signature page, John signed his name as “Contractor” and named himself as the contact person, but wrote Richard’s UBI number and contractor registration number on the signature page. John specified that the contractor was a sole proprietorship, listing the business owner’s name as “R J Bankston” and the trade name as “Aarohn Const[ruction].”
Although Richard signed papers necessary to implement the contract and once visited the job site, he was not otherwise involved. Instead, John acted as the project manager and the County paid John, not Richard.
When the contract was not completed in the required 90 days, John claimed that the work could not be completed because the County failed to provide access to the job site, to clear an adjacent parking lot so John could fall trees, to agree to pay additional money for changes in the project’s scope, and to approve his request for additional time.
Pierce County terminated the contract and then invoked its rights under the performance bond. Richard’s surety then paid to complete the project. The surety then sued Richard and obtained a judgment against him for approximately $66,000.
Richard then sued the County for breach of contract. The County moved for summary judgment. The trial court ruled that any contract between Richard and the County was illegal and void because Richard never submitted a bid, and then dismissed Richard’s claims.
The Court of Appeals affirmed. The Court found that Aarohn Construction was not a legal entity separate from Richard. There are in fact two Aarohn Constructions: John Bankston, d/b/a Aarohn Construction, and Richard Bankston, d/b/a Aarohn Construction. When an individual does business as a sole proprietorship, the individual in the sole proprietorship are legally indistinguishable. Neither John nor Richard created a separate legal entity known as Aarohn Construction.
The Court ruled that when a public body makes a contract in violation of the competitive bidding laws, the contract is illegal and imposes no obligation on the public body. In this instance, the Pierce County Code required competitive bidding for all public works contracts exceeding $25,000. PCC 2.106.035. In addition, to competitively bid projects between $10,000 and $200,000 in value, the County was allowed to follow the procedures in RCW 39.04.155 for small works roster contracts. PCC 2.106.060(A)(4). The County used the small works roster procedure to award this contract. Former RCW 39.04.155(2)(c) required a public body to award each small works roster contract “to the lowest responsible bidder, as defined in RCW 43.19.191.”
Because Aarohn Construction was not a separate legal entity, only John could have submitted the bid to the County on March 23, 2006. John submitted his bid more than a month before Richard registered as a sole proprietorship. Richard did not sign the bid. Neither Richard’s UBI number nor his contractor registration number appeared on the bid. John, not Richard, bid on the contract. Because Richard did not bid on the contract, any contract between Richard and the County did not comply with the competitive bidding requirements of PCC 2.106.035 and former RCW 39.04.155. Accordingly, any contract between Richard and the County was in violation of the applicable competitive bidding laws and was therefore illegal and void.
The Court declined Pierce County’s request to award attorneys’ fees on the basis that Richard’s appeal was frivolous.