DOUBLE AA BUILDERS v. GRAND STATE CONST.

• Decision Date: 28 June 2005
• Docket Number: No. 1 CA-CV 03-0609.,1 CA-CV 03-0609.
• Citation: DOUBLE AA BUILDERS v. GRAND STATE CONST., 114 P.3d 835, 210 Ariz. 503 (Ariz. App. 2005)
• Parties: DOUBLE AA BUILDERS, LTD., an Arizona corporation, Plaintiff-Appellee, Cross Appellant, v. GRAND STATE CONSTRUCTION L.L.C., an Arizona corporation, Defendant-Appellant, Cross Appellee.
• Court: Arizona Court of Appeals

114 P.3d 835

210 Ariz. 503

DOUBLE AA BUILDERS, LTD., an Arizona corporation, Plaintiff-Appellee, Cross Appellant, v. GRAND STATE CONSTRUCTION L.L.C., an Arizona corporation, Defendant-Appellant, Cross Appellee.

No. -0609.

Court of Appeals of Arizona, Division 1, Department E.

June 28, 2005.

Holden Brodman, PLC By Michael J. Holden, Phoenix, Attorneys for Plaintiff-Appellee, Cross Appellant.

Law Office of Lyndon B. Steimel By Lyndon B. Steimel, Scottsdale, Attorneys for Defendant-Appellant, Cross Appellee.

OPINION

GEMMILL, Judge.

¶ 1 Grand State Construction L.L.C., a subcontractor, appeals a judgment awarding damages to Double AA Builders, Ltd., a general contractor, on a promissory estoppel claim. Double AA cross-appeals the trial court's denial of attorneys' fees under Arizona Revised Statutes ("A.R.S.") section 12-341.01(A) (2003). We affirm the judgment in favor of the general contractor because the evidence is sufficient to support the trial court's implied findings of each element of promissory estoppel. We also conclude that § 12-341.01(A) is not applicable to a promise made enforceable by the doctrine of promissory estoppel and we therefore affirm the trial court's denial of attorneys' fees to the general contractor.

I.

¶ 2 In anticipation of submitting a bid for the construction of a Home Depot Store in Mesa, Double AA ("General Contractor") solicited bids from subcontractors for various portions of the work.

¶ 3 On December 18, 2001, Grand State ("Subcontractor") faxed a written but unsigned bid to General Contractor in the amount of $115,000 for installation of the Exterior Insulation Finish System ("EIFS") on the project. Subcontractor's proposal stated: "Our price is good for 30 days." General Contractor also received other bids from subcontractors for the EIFS work.

¶ 4 General Contractor relied upon several subcontractor bids, including Subcontractor's, in preparing its overall price for the project. Specifically, General Contractor used Subcontractor's price of $115,000 for the EIFS portion of the work in arriving at the total bid submitted to the owner.

¶ 5 On December 21, 2001, Home Depot advised General Contractor that General Contractor was the successful bidder for the project. On December 31, 2001, Home Depot forwarded a contract to General Contractor for the project.

¶ 6 On January 11, 2002, within the 30-day "price is good" period, General Contractor sent a subcontract for the EIFS work to Subcontractor to be signed and returned. Subcontractor advised General Contractor that it would not sign the subcontract or perform on the project. A letter from Subcontractor to General Contractor explained: "Upon reviewing your schedule for this upcoming project and our own inventory of presently scheduled work, we will not be able to enter into a contract with your company. From the time we received a contract from your office we signed four other contracts that were bid around the same time period."

¶ 7 General Contractor subsequently entered into a subcontract with a replacement subcontractor to install the EIFS at a cost of $131,449, which exceeded Subcontractor's quoted price by $16,449. General Contractor demanded that Subcontractor pay the difference between its bid and General Contractor's ultimate cost to perform the same work. After Subcontractor refused, General Contractor filed suit based upon promissory estoppel.

¶ 8 In accordance with superior court rules, an arbitrator initially heard the case. The arbitrator ruled in favor of Subcontractor. General Contractor appealed, seeking a trial de novo in superior court. After a one-day bench trial, the court ruled in favor of General Contractor and awarded $16,449 in damages but denied General Contractor's request for attorneys' fees. This appeal and cross-appeal followed.

II.

¶ 9 Because this case was tried to the court, we view the evidence in the light most favorable to upholding the trial court's decision. See Federoff v. Pioneer Title & Trust Co., 166 Ariz. 383, 388, 803 P.2d 104, 109 (1990). Neither side requested that the court make specific findings of fact and conclusions of law pursuant to Arizona Rule of Civil Procedure 52(a), and the court did not, sua sponte, make detailed findings. Under these circumstances, we must presume that the trial court found every fact necessary to support its judgment and we will affirm if any reasonable construction of the evidence justifies it. See Garden Lakes Comty. Ass'n, Inc. v. Madigan, 204 Ariz. 238, 240, ¶ 9, 62 P.3d 983, 985 (App.2003); In re CVR 1997 Irrevocable Trust, 202 Ariz. 174, 177, ¶ 16, 42 P.3d 605, 608 (App.2002).

¶ 10 We apply a de novo standard when reviewing issues of law and statutory interpretation. See Jangula v. Ariz. Prop. and Cas. Ins. Guar. Fund, 207 Ariz. 468, 470, ¶ 12, 88 P.3d 182, 184 (App.2004); Maycock v. Asilomar Dev., Inc., 207 Ariz. 495, 500, ¶ 24, 88 P.3d 565, 570 (App.2004).

III.

¶ 11 We first address Subcontractor's position that the doctrine of promissory estoppel should not be applied in the context of subcontractors submitting bids to general contractors.

¶ 12 When a general contractor prepares an overall bid for a competitively-bid construction project, it receives bids and quotes from subcontractors for portions of the work. The general contractor uses the bids in preparing its overall price for the project. A subcontractor's refusal to honor its bid can be financially disastrous for the general contractor, because it will typically be bound by the bid price submitted to the owner.

¶ 13 Arizona has previously adopted Section 90(1) of the Restatement (Second) of Contracts (1981), see Chewning v. Palmer, 133 Ariz. 136, 138, 650 P.2d 438, 440 (1982), which describes those promises that will be binding under the promissory estoppel doctrine:

A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person 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.

¶ 14 This doctrine "has been used to require the subcontractor to perform according to the terms of its bid to the contractor if the contractor receives the contract award, since the contractor has relied on the subcontractor's bid and must perform for a price based on that reliance." Thomas C. Horne, Arizona Construction Law § 202, at 97 (2d ed.1994).

¶ 15 The leading case applying promissory estoppel in this context is Drennan v. Star Paving Co., 51 Cal.2d 409, 333 P.2d 757 (1958). The Drennan general contractor was preparing a bid for a public school job. Id. at 758. Before submitting the bid, the general contractor received a telephoned bid from a subcontractor of $7,131.60 for paving work. Id. One day later, the subcontractor informed the general contractor that the bid contained a mistake and that it would not perform the work for less than $15,000. Id. at 758-59. The general contractor, however, had already included the subcontractor's bid in its price, and the owner had accepted the general contractor's bid. Id. at 759.

¶ 16 Eventually, the general contractor retained another subcontractor to perform the paving work at a cost of $10,948.60. Id. The California Supreme Court ruled that the general contractor was entitled to a judgment against the subcontractor for $3,817, the difference between the subcontractor's bid and the general contractor's cost to perform the same scope of work. Id. at 759, 761. The court explained:

When [general contractor] used [subcontractor]'s offer in computing his own bid, he bound himself to perform in reliance on [subcontractor]'s terms. Though [subcontractor] did not bargain for this use of its bid neither did [subcontractor] make it idly, indifferent to whether it would be used or not. On the contrary it is reasonable to suppose that [subcontractor] submitted its bid to obtain the subcontract. It was bound to realize the substantial possibility that its bid would be the lowest, and that it would be included by [general contractor] in his bid. It was to its own interest that the contractor be awarded the general contract; the lower the subcontract bid, the lower the general contractor's bid was likely to be and the greater its chance of acceptance and hence the greater [subcontractor]'s chance of getting the paving subcontract. [Subcontractor] had reason not only to expect [general contractor] to rely on its bid but to want him to. Clearly [subcontractor] had a stake in [general contractor]'s reliance on its bid. Given this interest and the fact that [the general contractor] is bound by his own bid, it is only fair that [general contractor] should have at least an opportunity to accept [subcontractor]'s bid after the general contract has been awarded to him.

Id. at 760; accord Alaska Bussell Elec. Co. v. Vern Hickel Constr. Co., 688 P.2d 576, 579-80 (Alaska 1984); C.H. Leavell & Co. v. Grafe & Assocs., Inc., 90 Idaho 502, 414 P.2d 873, 878 (1966); Pavel Enters., Inc. v. A.S. Johnson Co. Inc., 342 Md. 143, 674 A.2d 521, 526 (1996); Loranger Constr. Corp. v. E.F. Hauserman Co., 6 Mass.App.Ct. 152, 374 N.E.2d 306, 309-10 (1978); Constructors Supply Co. v. Bostrom Sheet Metal Works, Inc., 291 Minn. 113, 190 N.W.2d 71, 75-76 (1971); E.A. Coronis Assocs. v. M. Gordon Constr. Co., 90 N.J.Super. 69, 216 A.2d 246, 251 (Ct.App.Div. 1966).

¶ 17 Arizona has long recognized and applied the promissory estoppel doctrine. See Weiner v. Romley, 94 Ariz. 40, 43, 381 P.2d 581, 584 (1963); Waugh v. Lennard, 69 Ariz. 214, 223-24, 211 P.2d 806, 812 (1949); Higginbottom v. State, 203 Ariz. 139, 144, ¶ 18, 51 P.3d 972, 977 (App.2002). Furthermore, this court in Tiffany Inc. v. W.M.K. Transit Mix, Inc., 16 Ariz.App. 415, 493 P.2d 1220 (1972), determined that the doctrine of promissory estoppel was applicable in a dispute involving a highway contractor and a...