Electrical Const. & Maintenance Co., Inc. v. Maeda Pacific Corp.
| Decision Date | 25 June 1985 |
| Docket Number | No. 84-2087,84-2087 |
| Citation | 764 F.2d 619 |
| Parties | ELECTRICAL CONSTRUCTION & MAINTENANCE COMPANY, INC., Plaintiff-Appellant, v. MAEDA PACIFIC CORPORATION, Defendant-Appellee. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Mark E. Cowan, Arriola & Cowan, Agana, Guam, for plaintiff-appellant.
Lawrence L. Teker, Gayle, Teker & Schnabel, Agana, Guam, for defendant-appellee.
An Appeal From the District Court of Guam, Appellate Division.
Before FARRIS, PREGERSON, and BEEZER, Circuit Judges.
Appellant subcontractor seeks damages based on breach of contract and promissory estoppel against appellee general contractor. Appellant appeals from the District Court of Guam's order of dismissal for failure to state a claim upon which relief could be granted. For the reasons stated below, we reverse and remand for further proceedings.
Appellant Electrical Construction & Maintenance Company, Inc. (ECM), and appellee Maeda Pacific Corporation (Maeda) are construction contractors.
The government of Guam awarded appellee Maeda the prime contract on the Container Yard Expansion Project, a Guamanian government construction project designed to expand and modernize its port facilities. Prior to bidding on the project, Maeda solicited proposals from various subcontractors to perform the electrical work. ECM was one of the subcontractors Maeda contacted. ECM alleges that when Maeda solicited ECM's bid, Maeda was told by ECM that it was unwilling to bid unless Maeda agreed to award ECM the subcontract if it were the lowest bidder on the subcontract and Maeda were the successful bidder on the prime contract. ECM further alleges that Maeda accepted ECM's proposal. The alleged agreement was oral. Maeda disputes that it made such a promise to ECM and that ECM was the lowest bidder. Although Maeda was awarded the prime contract, it chose not to hire ECM for the electrical subcontract.
Appellant initially brought its claim in the Superior Court of Guam and then appealed to the Appellate Division of the District Court of Guam. The Appellate Division is a local territorial appellate court, the jurisdiction of which is determined exclusively by the Guam legislature. 48 U.S.C. Sec. 1424(a). We must affirm a decision of the Appellate Division "on a matter of local law, custom or policy if the decision is based upon a tenable theory and is not inescapably wrong or manifest error." Schenck v. Gov't of Guam, 609 F.2d 387, 390 (9th Cir.1979). 1
Review of a dismissal for failure to state a claim is limited to the contents of the complaint. North Star International v. Arizona Corporation Commission, 720 F.2d 578, 581 (9th Cir.1983). To uphold such a dismissal, it must appear to a certainty that the law would not entitle plaintiff to relief under any set of facts that he or she could prove. Halet v. Wend Investment Co., 672 F.2d 1305, 1309 (9th Cir.1982). Finally, we must accept all allegations of material fact as true and construe them in the light most favorable to the non-moving party. North Star, 720 F.2d at 581.
Appellant contends that the district court erred in concluding that appellant's amended complaint failed to state a claim for relief. We agree. The district court concluded that because a subcontractor is bound not to revoke a bid once relied upon by a prime contractor, there was no consideration in this case for ECM's promise to submit a bid on condition that Maeda accept the bid if it were the low bid and if Maeda were awarded the prime contract.
Generally, the mere use of a subcontractor's bid by a general contractor bidding on a prime contract does not constitute acceptance of the subcontractor's bid and imposes no obligation upon the prime contractor to accept the subcontractor's bid. See Merritt-Chapman & Scott Corp. v. Gunderson Bros. Engineering Corp., 305 F.2d 659 (9th Cir.), cert. denied, 371 U.S. 935, 83 S.Ct. 307, 9 L.Ed.2d 271 (1962); Southern Cal. Acoustics Co. v. C.V. Holder, Inc., 71 Cal.2d 719, 456 P.2d 975, 79 Cal.Rptr. 319 (1969); Williams v. Favret, 161 F.2d 822 (5th Cir.1947). Moreover, ECM concedes that the mere solicitation of bids by a general contractor is not an offer and does not impose any obligations upon the general contractor. But ECM points out that even if it were obligated not to revoke its bid, it was not obligated to bid in the first place. ECM alleged in its complaint that it initially refused Maeda's solicitation to bid and only subsequently bid because Maeda promised that if ECM undertook the time and expense to prepare and submit an electrical subcontractor's bid, Maeda would award ECM the subcontract if its bid were the lowest. While this is an issue of first impression, we believe that where a subcontractor allegedly agreed to bid only after receiving the general contractor's promise to accept the bid if it were the low bid and if the general contractor were awarded the prime contract, there is consideration for the general contractor's promise. The consideration for Maeda's promise was ECM's submission of a bid--an act for which Maeda bargained and that ECM was not under a legal duty to perform. See Restatement (Second) of Contracts Secs. 71-73 (). See also A. Corbin, Corbin on Contracts Sec. 123 (1963); J. Calamari & J. Perillo, Contracts 136-39 (2d ed. 1977).
While this does seem to be a case of first impression, at least one scholar has implied that an agreement such as that involved in the present case may be enforceable:
A final point of interest is whether the prime and the sub could [create a binding contract requiring the prime to use the sub's services] by agreeing between themselves in advance that the sub would always get the subcontract from the prime bidder in a case where the prime used his bid to get the prime contract. Initially, the prime is not under any obligation to use the sub's bid (and the sub is under no obligation to make any bid), but if the prime should decide to use the sub's bid, then he is obligated to accept no other sub's bid for the same work, should he get the contract. The chief problem here is finding consideration for the prime's promise to award the subcontract. Note that the subcontractor does not promise to make any bids for the prime to use.... The prime will be bound by his promise as to any bids submitted by the sub in reliance on it, but ... he can revoke that promise as to future bids at any time without liability.
A. Corbin, Corbin on Contracts, Sec. 24 at 50-51 (C. Kaufman Supp.1984) (emphasis added).
The Appellate Division overlooked ECM's contention that ECM submitted its bid in the first place because of Maeda's conditional promise, and the court erroneously assumed that ECM's promise not to revoke its bid was the sole consideration alleged in the present case. Specifically, the Appellate Division found that ECM provided insufficient consideration because once it submitted its bid to Maeda and Maeda relied upon that bid, ECM was precluded from withdrawing the bid under Drennan v. Star Paving Co., 51 Cal.2d 409, 333 P.2d 757 (1958).
In Drennan, a subcontractor discovered a mistake in the preparation of a bid submitted to a prime contractor and then sought to revoke the bid after the prime contractor had used the sub's bid in submitting its own bid. The subcontractor had not reserved the right to revoke the bid. The California Supreme Court found the subcontractor liable under a theory of an implied promise not to revoke the bid. The present case is distinguishable from Drennan. ECM does not allege that it promised not to revoke its bid in consideration for Maeda's conditional promise to accept ECM's bid....
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