Board of Governors of Wayne State University v. Building Systems Housing Corp.
| Decision Date | 10 June 1975 |
| Docket Number | Docket No. 20196,No. 1,1 |
| Citation | 62 Mich.App. 77,233 N.W.2d 195 |
| Parties | BOARD OF GOVERNORS OF WAYNE STATE UNIVERSITY, Plaintiff-Appellant, v. BULDING SYSTEMS HOUSING CORPORATION, Defendant, and American Insurance Company, Defendant-Appellee |
| Court | Court of Appeal of Michigan — District of US |
Byron H. Higgins and Kenneth M. Smythe, Detroit, for plaintiff-appellant.
Honigman, Miller, Schwarz & Cohn by James K. Robinson, Detroit, for defendant-appellee.
Before T. M. BURNS, P.J., and CAVANAGH and O'HARA, * JJ.
The plaintiff of a breach of contract action, Board of Governors of Wayne State University (hereafter the 'University'), appeals from the grant of a summary judgment in Wayne County Circuit Court in favor of the defendants Building Systems Housing Corporation (hereafter 'Building Systems') and American Insurance Company.
In May of 1972 the board of governors of the University authorized the construction of a 527-unit apartment structure to be built on the campus. Bids were solicited and received. The scheduled closing time for receiving bids was 2 p.m., July 25, 1972. The defendant Building Systems submitted the low bid of $4,824,000. In accordance with the plaintiff's advertisements, Building Systems submitted a surety bond executed by American Insurance Company in the amount of five percent of the bid.
The bid provided, in pertinent part:
(a) 'The bidder understands that the Owner reserves the right to reject any or all bids and to waive any informalities in bidding.
(b) 'The bidder agrees that this bid shall be good and may not be withdrawn for a period of thirty calendar days after the scheduled closing time for receiving bids.
(c) 'Upon receipt of written notice of acceptance of this bid, bidder will execute the formal contract attached within ten days and deliver a surety bond or bonds as required by Paragraph 29 of the General Conditions.'
On August 10, 1972, the board of governors passed a resolution awarding the general contract to Building Systems 'subject to review and concurrence by the Department of Housing and Urban Development (HUD), and to the sale and delivery of bonds * * *'. That same day a letter was sent to Building Systems informing it of the board's decision including the two conditions. The letter stated further:
'As soon as the University receives approval from the Department of Housing and Urban Development in the award of this contract, we will be in touch with you to make the final arrangements for executing the necessary contract documents.'
Although Building Systems advertised for the submission of subcontractor bids, it thereafter decided not to continue with the project. By a letter dated August 30 and received August 31, 1972, Building Systems informed the board that it was withdrawing its bid 'pursuant to the terms of the bid proposal and the advertisement for bidders'. The letter concludes:
'Since more than 30 calendar days have passed since the submission of the bid, and since the contract was not unconditionally approved nor executed, we are exercising our rights under the bid procedures to withdraw our bid.'
At that time, the University had not received approval of defendant's bid from HUD.
Thereafter, the plaintiff almost immediately informed Building Systems that it considered the corporation's conduct to be an anticipatory breach of the contract. On September 8, 1972, the board awarded the general contract to the second lowest bidder for $5,090,000. Subsequently, the University demanded payment from defendants of $266,000 damages measured by the difference between the defendant's bid and that of the next lowest bidder. Upon a refusal to pay, the plaintiff instituted this suit. On April 19, 1974, the trial court entered an order granting final summary judgment in favor of the defendant surety, American Insurance Company, and partial summary judgment in favor of defendant Building Systems. From this order, plaintiff appeals.
The plaintiff contends that the trial court erred in granting summary judgment because there were genuine issues of material fact 1 and because the defendant surety was not entitled to a judgment as a matter of law. Plaintiff theorizes that when the University informed Building Systems of the contract award, a 'preliminary construction contract' was formed. The University's acceptance was unconditional since the conditions of HUD approval and the sale and delivery of financing bonds had been stated in the bid invitation, specifications, and conditions. The plaintiff's claim is that the bid was an offer impliedly proposing that the offeree (the University) make a conditional promise as part of its acceptance. This preliminary contract contemplated the execution of a subsequent formal contract between the parties. Thus, plaintiff contends that the 'withdrawal' of Building Systems' bid was actually a breach for which the appellee American Insurance Company as surety was also liable.
The defendant suretor naturally has a considerably different way of looking at the transaction. First, there were no genuine issues of material facts. Building Systems. as the bidder, offered to perform work for the University and to keep its offer open for thirty days. The University 'accepted' the offer subject to the concurrence of HUD and the preparation and sale of bonds to finance the work. This conditional acceptance, since it was not identical to the offer, amounted to a counteroffer and had the effect of rejecting the bidder's offer. After thirty days had elapsed but before either of the two conditions had been met, Building Systems revoked its offer. Defendant contends that there was nothing in the preliminary documents which the University made available to all bidders to indicate that the two conditions were to be attached to an acceptance.
The trial court adopted the defendant suretor's legal theory and granted summary judgment in its favor. According to the court's review of the records, the bidding documents contained no information indicating that the bid was to be conditioned on the two above-stated events. As a result, the defendant's acceptance was conditional and Building Systems was not bound by a preliminary contract when it made a timely withdrawal of the bid.
It is axiomatic that appellate courts reviewing the grant of a summary judgment for the defendant assume that every well-pleaded allegation in the plaintiff's complaint is true and consider these allegations in a light most favorable to the plaintiff. Bielski v. Wolverine Insurance Co., 379 Mich. 280, 283, 150 N.W.2d 788 (1967).
Since no Michigan appellate court appears to have passed on a situation similar to that of the present case, both parties primarily utilize federal cases. Plaintiff relies extensively upon United States v. National Optical Stores Co., 407 F.2d 759 (C.A. 7, 1969). In that case, the federal government brought an action for the defendant's alleged failure to perform under a contract to purchase surplus property. Included in the bid information provided to the defendant were the terms that the sale would be subject to antitrust clearance by the Attorney General and to a credit approval by the General Services Administration. After acceptance of the defendant's bid and within the allotted time limit, the defendant attempted to withdraw its bid by relying on the conditional nature of the government's acceptance.
The Court held that the government's 'notice of acceptance' was not a counteroffer but a genuine acceptance based on the mutual assent of the parties. Both the defendant and the lower court in the present case distinguish United States v. National Optical Stores Co. on the ground that in that case the invitation to bid contained the express antitrust and credit data conditions.
The watershed question before this Court is whether it was contemplated by the defendant Building Systems that inherent in its bid was the promise to abide by the conditions of HUD approval and the sale of financing bonds. We have carefully reviewed the numerous documents in this case and have not discovered any express statements which would inform a prospective bidder of at least one of these conditions. The fact that each bidder was required to submit certain HUD forms concerning affirmative action programs and other matters probably conveyed the implication that HUD must approve the awarding of the contract. 2 However, nowhere in any of the information furnished to the bidders does there appear the qualification that the award is subject to the sale and delivery of bonds necessary to finance the project. For this reason, we conclude that the trial court's distinguishing of United States v. National Optical Stores Co. was correct.
inapposite. In that case an unconditional acceptance was held to have been given to the successful bidder in spite of...
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