Alaska Bussell Elec. Co. v. Vern Hickel Const. Co., s. 7727

• Decision Date: 27 July 1984
• Docket Number: 7762,Nos. 7727,s. 7727
• Citation: 688 P.2d 576
• Parties: 32 Cont.Cas.Fed. (CCH) P 72,760 ALASKA BUSSELL ELECTRIC COMPANY, Appellant/Cross-Appellee, v. VERN HICKEL CONSTRUCTION CO., Appellee/Cross-Appellant.
• Court: Alaska Supreme Court

Page 576

688 P.2d 576

32 Cont.Cas.Fed. (CCH) P 72,760

ALASKA BUSSELL ELECTRIC COMPANY, Appellant/Cross-Appellee, v. VERN HICKEL CONSTRUCTION CO., Appellee/Cross-Appellant.

Nos. 7727, 7762.

Supreme Court of Alaska.

July 27, 1984.

As Modified on Rehearing,

Sept. 7, 1984;

Rehearing Denied in All Other Respects.

H. Craig Schmidt, William M. Bankston, Bankston & McCollum, Anchorage, for appellant/cross-appellee.

Joseph N. Barcott and Jermain, Dunnagan & Owen, Anchorage, for appellee/cross-appellant.

Before BURKE, C.J., and RABINOWITZ, MATTHEWS, COMPTON and MOORE, JJ.

OPINION

MOORE, Justice.

Alaska Bussell Electric Company (Bussell) appeals the judgment of the superior court entered pursuant to the special jury verdict. The jury held that Bussell was liable to Vern Hickel Construction (Hickel) on a theory of promissory estoppel for refusing to perform according to the terms of Bussell's bid. Hickel cross-appeals the trial court's judgment awarding Hickel less than the requested measure of damages. We affirm.

I. FACTUAL BACKGROUND

Bussell is an electrical subcontractor. Hickel is a general contractor. Both operate in the Anchorage area. Their dispute concerns a 1979 United States Air Force contract to build a commissary at Elmendorf Air Force Base.

On July 17, 1979, the Air Force opened bids on the project. On that day, Bussell called Hickel to submit its bid for the electrical portion of the project. ¹ Bussell stated it could do the entire job for $477,498, and made no exclusions.

Hickel submitted its primary bid to the Air Force allegedly incorporating Bussell's bid of $477,498. However, the amount actually included in Hickel's bid for the electrical portion of the project was $488,606. Hickel received at least eight electrical subcontracting bids, the lowest of which was Bussell's. The next lowest bids were $564,697 ² and $632,649.

Hickel learned at the bid opening on July 17, 1979, that it was the low bidder. Patrick Brodigan, Bussell's electrical estimator, also attended the opening and learned that Bussell was the low bidder. He soon became aware that Bussell's bid was too low. He discussed Bussell's bid with the representative from Alcan Electric, a competitor. After comparing numbers, the two felt that the spread between their bids was too large to be correct. They determined that the problem was omission of the site work.

That evening, Brodigan and Roger Spencer, president of Bussell Electric, decided it would be unwise to try to absorb the additional cost, which they approximated to be between $70,000 and $80,000. On July 19, they met with Hickel (owner of Hickel Construction) and Helzer (project manager at the time) in Hickel's offices to discuss the omission. The parties dispute the content of that conversation.

Bussell contends that it informed Hickel that its bid was withdrawn because doing the job for the price bid would force Bussell into bankruptcy. Allegedly, Spencer specifically stated that he would not negotiate the bid under any circumstances as it was wrong to do so after completion of the bidding process.

Hickel's understanding, however, was based on a different version of the July 19 meeting. Hickel described the situation as a subcontractor making the low bid and then returning to the general contractor to ask for more money to cover work the subcontractor had left out of the initial bid.

Both sides testified that Bussell wanted to go to the Air Force and explain that Bussell had made a mistake. ³ Bussell offered to file a claim with the Air Force, and to place its attorneys at Hickel's disposal. However, Hickel insisted that Bussell not contact the Air Force and Bussell, therefore, did not do so. Hickel responded to Bussell's request and offers with a cryptic offer to help once Hickel Construction had been awarded the contract. Hickel offered to cooperate, process legitimate change orders and to do the paperwork.

Bussell alleges that Hickel stated that after the Air Force had awarded the contract, Hickel would look into getting some relief for Bussell. Hickel claims to have promised only to minimize Bussell's financial exposure by timely payment, provision of storage for materials on the job site, and coordination of the work through Hickel's superintendent.

Bussell sent Hickel a letter dated July 23, 1979 to confirm the meeting of July 19 and to briefly discuss the subject of that meeting. However, the letter left ambiguous Bussell's position on whether to perform the contract or withdraw its bid. Brodigan informed Hickel that the bid was about $70,000 low due to a "neglectful omission" and asked that Hickel allow Bussell "consideration in re-evaluating this omission."

Upon request, Bussell wrote Hickel Construction a letter of confirmation dated July 30 to substantiate the original bid of July 17. Bussell believed the purpose of such a letter was to provide documentation of the error and the difference between Bussell's bid and the next lowest bid which Hickel would substitute for the electrical portion of the work. According to Bussell, Hickel asked that the letter omit any mention that Bussell would not perform the work or that an error had been made in its bid. Hickel's project manager testified that he interpreted the July 30 letter as an election by Bussell to do the work. ⁴

Hickel was awarded the Air Force contract on August 20, 1979. The parties met on August 22, 1979. Bussell testified that it went to the meeting expecting that Hickel would now process Bussell's withdrawal since it had received the government contract. However, Hickel announced it had received the job and Bussell was expected to perform the work. Bussell left the meeting promptly without looking at the contract Hickel had drafted.

Spencer wrote a letter on August 23 outlining Bussell's position. He observed in that letter that without Bussell's low bid, Hickel would not have been low bidder. ⁵ Hickel asserted that Bussell had made a judgment error and that a change or withdrawal was legally and financially impossible. Hickel asked Bussell to reimburse Hickel $60,792, the difference between Bussell's and Alcan's bids, and Bussell refused to do so. At trial, Hickel requested $58,025 in damages since Alcan eventually reduced its price to $535,523. ⁶

Hickel filed its complaint on January 18, 1980 and an amended complaint on March 12, 1980. Bussell requested a jury trial. Both parties made motions for summary judgment. In oral argument on these motions, Bussell observed that each party had submitted Genuine Issues of Fact in its opposition to its opponent's motion. Hence, Bussell withdrew its motion and argued that the court should deny Hickel's motion. The motion was denied. On three occasions, Bussell moved unsuccessfully for a directed verdict. After a jury trial, a special verdict was entered against Bussell for $43,432. Bussell moved for judgment notwithstanding the verdict, which the court denied. Both Hickel and Bussell filed timely Notices of Appeal.

II. APPLICATION OF PROMISSORY ESTOPPEL DOCTRINE

Hickel reasserts that it relied upon Bussell's bid and on an implied promise that it would not be revoked. Bussell argues that Hickel's judgment rests on an improper application of the doctrine of promissory estoppel and that contract principles of offer and acceptance should control this case.

This case was properly submitted to the jury on principles of promissory estoppel and contract law. The parties disputed the terms, if any, of the agreement reached after Bussell advised Hickel of its error. They disagreed on what the intended remedy was to be. Bussell used equivocal language in its letters dated July 23 and 30, 1979 to Hickel, leaving open the question of whether it had withdrawn its bid, or, in the alternative, wanted Hickel to apply to the Air Force for an amendment to cover the additional cost to be paid to Bussell. The jury clearly decided, as expressed in its special verdict, that no contract had been formed. It also decided that the elements of promissory estoppel were present.

We have not previously had occasion to apply the theory of promissory estoppel to construction industry disputes over the bidding process. However, we have recognized the doctrine in other contexts. See Glover v. Sager, 667 P.2d 1198 (Alaska 1983); Johnson v. Curran, 633 P.2d 994 (Alaska 1981); State v. First National Bank of Ketchikan, 629 P.2d 78 (Alaska 1981).

In Glover, 667 P.2d at 1202, we recognized that pursuant to State v. First National Bank of Ketchikan, supra, Alaska has adopted the Restatement (Second) of Contracts, Section 90. ⁷ Section 90 provides in relevant part:

Promise Reasonably Inducing Action or Forbearance

(1) A promise which the promissor should reasonably expect to induce action or forbearance on the part of the promisee ... and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise. The remedy granted for breach may be limited as justice requires.

Quoting from State v. First National Bank of Ketchikan, 629 P.2d at 81, the Glover court states:

Corbin identifies four elements necessary to a successful section 90 action: a) [sic] that the action induced "must amount to a substantial change in position," 2) that the action induced must have been either actually foreseen or reasonably foreseeable by the promissor, 3) that "an actual promise must have been made" and "must itself have induced the action or forbearance in reliance on it," and 4) that enforcement must be necessary in the interest of justice.

667 P.2d at 1202.

The jurisdictions which have applied promissory estoppel to construction industry bidding disputes are split as to the scope of the doctrine. The two leading cases on application of the doctrine are James Baird Co. v. Gimbel Bros., Inc., 64 F.2d 344 (2d Cir.1933), and Drennan v. Star Paving Company, 51 Cal.2d 409, 333 P.2d 757 (1958). Baird formulated the narrower view. The facts in Baird were...