C. R. Fedrick, Inc. v. Borg-Warner Corp.

• Decision Date: 22 February 1977
• Docket Number: BORG-WARNER,No. 75-1424,75-1424
• Citation: 552 F.2d 852
• Parties: 21 UCC Rep.Serv. 26 C. R. FEDRICK, INC., Plaintiff-Appellant, v.CORPORATION, Defendant-Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 852

552 F.2d 852

21 UCC Rep.Serv. 26

C. R. FEDRICK, INC., Plaintiff-Appellant, v. BORG-WARNER CORPORATION, Defendant-Appellee.

No. 75-1424.

United States Court of Appeals Ninth Circuit.

Feb. 22, 1977.

Rehearing Denied April 14 and 20, 1977.

Edward K. Allison, Ehrlich, Allison & Rovens, San Francisco, Cal., for plaintiff-appellant.

Lawrence W. Jordan, Jr., Cotton, Seligman & Ray, San Francisco, Cal., for defendant-appellee.

Appeal from the United States District Court for the Northern District of California.

Before DUNIWAY and WALLACE, Circuit Judges, and EAST, District Judge. ^*

OPINION

EAST, District Judge:

The appellant (Fedrick) appeals from a summary judgment in favor of the appellee (Borg) entered by the District Court on the several grounds that the provision of the Statute of Frauds, California Commercial Code (C.C.C.) § 2201(1) and (2), barred Fedrick's action against Borg for the breach of an alleged oral bid or contract to supply and sell certain motor driven pumping units (pumps), and relief could not be granted under any theory of equitable estoppel. We affirm.

Fedrick raises two issues on review. Did the District Court err in determining that:

(1) The Statute of Frauds, C.C.C. § 2201, was applicable to Borg's oral offer to sell the pumps? and

(2) Borg was not estopped from raising the defense of the Statute of Frauds in the action for damages?

Fedrick originally instituted the proceedings in the Superior Court of California for the County of Marin. Borg timely removed the action to the District Court pursuant to 28 U.S.C. § 1446 and moved for summary judgment. Jurisdiction in the District Court and in this court is established.

The undisputed facts pertinent to review are:

Fedrick had prepared a bid as the prime contractor on a construction project under the auspices of the United States Bureau of Reclamation (Bureau). At 9:50 a. m. on May 30, 1974, approximately ten minutes before the time fixed for the submission of bids on the project and after Fedrick had fixed the amount of its intended bid, Borg was asked and did submit a telephonic offer to supply and sell Fedrick the pumps required by the specifications of the prime contract for the price of $826,550, with an increased cost escalation. Borg's telephonic figure was $450,000, plus, lower than the next lowest bid which Fedrick had received for the pumps. Whereupon Fedrick reduced its intended prime contract bid figure of $15,766,693 by an even $200,000.

On the following day, Fedrick in turn orally indicated to Borg that in the likely event it was awarded the prime contract, Fedrick intended to purchase the pumps from Borg.

Some three weeks later, on June 20, representatives of Fedrick and Borg met to discuss the contemplated transaction. During the meeting, Borg expressed concern that its proposed exceptions might not be acceptable to the Bureau. To avoid potential problems, Borg, as an alternative proposal, suggested certain modifications to bring the pumps more in accordance with the Bureau's published specifications. Thereafter on the same day Borg wrote Fedrick detailing the proposed modifications and fixing a revised price of $1,114,572 for the pumps.

Fedrick's counsel responded by letter dated June 25 denying that Borg's original telephonic offer was subject to the additional exceptions as claimed by Borg and further stating in its pertinent parts:

"Your bid was the lowest bid received by our client for the subject matter thereof and our client relied upon your bid and used the amount thereof in compiling its bid to the Bureau of Reclamation. On May 31, 1974, Mr. Ohman advised your Mr. Amaral that your bid was low and that our client had so used your bid. You are aware, of course, that our client's bid for the captioned contract was the lowest bid submitted.

"Promptly after the captioned contract is awarded, our client intends to send to you its standard form of Purchase Order Agreement which will incorporate the price and terms of the bid you submitted. If you do not promptly execute and return that Purchase Order Agreement to our client, I have been instructed to file suit against you for the damages which our client will sustain as a consequence of your refusal to honor your bid. . . . ."

Borg replied by letter dated July 15 that it was prepared to abide by the original telephonic offer as Borg claimed it was made or the June 20th modified offer.

The prime contract was awarded to Fedrick on July 11 next, and on July 19 Fedrick's counsel wrote Borg a letter stating in its pertinent parts:

"This will confirm my telephone conversation of this morning with your Mr. Christensen on the subject of my letters to you . . . I stated (Fedrick) is willing to issue a purchase order to you for the price and on the terms of your bid to Fedrick, as stated in my letter to you, dated June 25, 1974. Mr. Christensen stated that you would not accept such a purchase order and denied that the terms of your bid were as stated in my letter to you, dated June 25, 1974. Accordingly, Fedrick intends to purchase the pumps in question from another supplier and immediately will commence an action against you for all damages which it sustains as a consequence of your refusal to honor your bid."

Thereafter Fedrick purchased the pumps from another supplier for the price of $1,162,200, incurring thereby the alleged damage of $95,903 sued for in the proceedings.

Issue 1:

We are, as was the District Court, bound to look to the substantive law of California for the resolution of the issues. Erie Railway Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938).

We believe that throughout their dealings concerning the pumps, Fedrick and Borg were "merchants" within the meaning of that term as used in C.C.C. § 2201(2). See C.C.C. § 2104; 1 Anderson, Uniform Commercial Code, 283, § 2-201:50, and 219-22, §§ 2-104:4-2-104:7 (2d Ed. 1970). So it follows from the undisputed facts that Borg's telephonic bid of May 30 in and of itself was subject to revocation by Borg during and awaiting "a reasonable time (for Fedrick's) writing in confirmation of the contract and sufficient against (Fedrick was) received and (Borg after receipt has) reason to know its contents, . . .." C.C.C. § 2201(2).

The dispute over the actual terms and exceptions in Borg's telephonic bid raised by Borg at the June 20th conference, and especially Borg's letter of June 20 proposing modifications of the telephonic bid, constituted a clear and decisive communicated revocation of the telephonic bid prior to any "writing" from Fedrick as permitted under C.C.C. § 2201(2). However, in order to deal with Fedrick's letters to Borg of June 25 and July 19, we will assume arguendo that Borg's telephonic bid or offer in and of itself remained outstanding.

We are satisfied that at most Fedrick's letters were self-serving statements of actions taken by Fedrick in reliance upon Borg's telephonic bid.

We then deem Fedrick's "writing" of June 25, as well as the subsequent letter of July 19, each to be far short of constituting a " confirmation of the contract." The express language of the second paragraph of the quotation from Fedrick's letter of June 25 speaks of a future intended executed agreement incorporating "the price and terms of the bid you submitted." Again, Fedrick's letter of July 19 speaks of future action and acknowledges that Borg would not accept a purchase order with the specifications required by Fedrick. None of Fedrick's writings were sufficient to bind Fedrick to the terms of Borg's telephonic bid. 1 Anderson, supra, 283, § 2-201:51, n. 8. See Doral Hosiery Corp. v. Sav-A-Stop, Inc.,377 F.Supp. 387, 389 (E.D.Pa.1974).

Accordingly we conclude that by virtue of C.C.C. § 2201(1), Borg's telephonic bid of May 30 in and of itself is not enforceable by Fedrick as a contract for the sale and delivery of the pumps.

The District Court did not commit error on this issue.

Issue 2:

Fedrick would avoid the barring effect of C.C.C. § 2201 through the application of the doctrine of estoppel. Fedrick claims that its cause of action is not actually for a breach of contract but rather in substance a cause for Borg's unlawful revocation of its telephonic bid or offer after reliance thereon by Fedrick to its detriment.

Fedrick first relies upon the rationale of Drennan v. Star Paving Co., 51 Cal.2d 409, 414-15, 333 P.2d 757 (1958); H. W. Stanfield Constr. Corp. v. Robert McMullan & Son, Inc., 14 Cal.App.3d 848, 852, 92 Cal.Rptr. 669 (1971); and Saliba-Kringlen Corp. v. Allen Engineering Co., 15 Cal.App.3d 95, 111, 92 Cal.Rptr. 799 (1971). The District Court with reference to those authorities succinctly stated the rationale of those authorities as being "clear . . . in the context of competitive bidding, an offer once relied upon is irrevocable even though it lacks consideration." However, the District Court quickly pointed out that Drennan and its progeny involved contractors bidding for construction work and materials subcontracts as opposed to vendors of specific goods such as Borg. Consequently C.C.C. § 2201 was not applicable nor considered in those authorities.

We find those California authorities lacking of definitive adjudication of this issue. Also our independent search for controlling California authority is wanting. Accordingly we are, as was the District Court, directed under Erie to reach the resolution of this issue as the Supreme Court of California would probably reach under the same facts. Furthermore, for us the "(a)nalysis by a district judge of the law of the state in which he sits . . . is entitled to great weight . . . That determination 'will be accepted on review unless shown to be clearly wrong.' " United States v. Pollard, 524 F.2d 808 (9th Cir. 1975); Owens v. White, 380 F.2d 310, 315 (9th Cir. 1967); Minnesota Mutual Life Insurance Co. v. Lawson, 377 F.2d 525 (9th Cir. 1967); and Bellon v. Heinzig, 347 F.2d 4 (9th Cir. 1965).

The District Court...