Flintco Pac., Inc. v. TEC Mgmt. Consultants, Inc.

• Decision Date: 21 June 2016
• Docket Number: B258353
• Citation: 205 Cal.Rptr.3d 21,1 Cal.App.5th 727
• Court: California Court of Appeals Court of Appeals
• Parties: FLINTCO PACIFIC, INC., Plaintiff and Appellant, v. TEC MANAGEMENT CONSULTANTS, INC., Defendant and Respondent.

1 Cal.App.5th 727

205 Cal.Rptr.3d 21

FLINTCO PACIFIC, INC., Plaintiff and Appellant

v.TEC MANAGEMENT CONSULTANTS, INC., Defendant and Respondent.

B258353

Court of Appeal, Second District, Division 3, California.

Filed June 21, 2016

Lax & Stevens and Paul A. Lax, Los Angeles, for Plaintiff and Appellant.

Musick, Peeler & Garrett, Jack W. Fleming, Costa Mesa, and Peter J. Diedrich, Los Angeles, for Defendant and Respondent.

ALDRICH

, Acting P.J.

INTRODUCTION

Defendant and subcontractor TEC Management Consultants, Inc. (TEC) submitted a written bid to plaintiff and general contractor Flintco Pacific, Inc. (Flintco) to perform glazing work for $1,272,090 on a project to construct a new building at Diablo Valley College in Pleasant Hills, California. The bid contained terms and conditions that affected the bid price. Flintco used TEC's bid price in compiling its own bid to the owner. Flintco was awarded the contract on the building project (the project) and sent TEC a letter of intent to enter into a subcontract and a standard-form subcontract, both of which documents differed materially from TEC's bid. TEC refused to enter into a subcontract. Flintco secured another subcontractor for that scope of work and sued TEC on a theory of promissory estoppel seeking the difference between TEC's bid and the amount Flintco was required to pay the replacement subcontractor. After a bench trial, the court entered judgment in favor of TEC finding that Flintco did not reasonably rely on TEC's bid price without considering the material conditions stated in TEC's bid. The court found that thereafter, the proposed subcontract Flintco sent TEC constituted a counteroffer because it contained material variations from the conditions in TEC's bid. The counteroffer gave TEC the right to withdraw its bid. In its ensuing appeal, Flintco failed to demonstrate that there was no substantial evidence to support the trial court's findings. Accordingly, we affirm.

FACTUAL AND PROCEDURAL BACKGROUND

Flintco is a California licensed general engineering and general building contractor. It's eight nation-wide offices do approximately $1 billion a year in business. TEC is a California corporation.

On May 17, 2011, TEC submitted a bid to Flintco to perform subcontract work on the project for $1,272,960. Immediately below the bid price read: “A DEPOSIT OF 35 % IS REQUIRED FOR THIS WORK .” The deposit was for security and to enable TEC to lock in a price with its suppliers. Other conditions of TEC's bid were that the bid could be withdrawn if not accepted within 15 days and that the proposed price was “subject to a minimum 3% escalation, per quarter, after 15 days acceptance period.” TEC was the lowest bidder for the glazing work. TEC's Chief Executive Officer, Tim Coffey, submitted the bid with the intent that TEC would be listed as the subcontractor and testified it was reasonable for Flintco to rely on TEC's bid if the bid were complete and close to the low number.

Also on May 17, 2011, Flintco submitted its written general contractor's bid to the project owner, Contra Costa Community College District. Flintco incorporated TEC's bid and listed TEC as the curtain wall and glazing subcontractor.

John Stump, Flintco's Vice President of Operations who has worked for Flintco for 13 years, is responsible for overseeing Flintco's operations. He explained that subcontractor bids are usually submitted up to the bid deadline. Typically, after Flintco is awarded the prime contract, it notifies the winning subcontractors. Most often, Flintco gives notice over the telephone. If a subcontractor needs a more formal notice, Flintco will send out a “letter of intent.” Generally, Flintco then enters into what it calls the buyout procedure, during which the project manager goes through all of the bids to determine that they correctly cover the designated scope of work. If a bid raises no question about the scope of work, the project manager will send out a subcontract. If there are questions, the manager will make a call to the winning subcontractor first.

Craig Smart, Flintco's Project Engineer, testified that, based on his experience at Flintco and elsewhere, upon receipt of the general's standard-form subcontract, the subcontractors mark it up and identify changes. This is the negotiation process. Of the 40 subcontractors on the project, Flintco reached agreement with all but TEC.

TEC had notice that it was the winning bidder by July 1, 2011, shortly after Flintco began work on the project, because on that date, Flintco met with TEC and Universal Brass, Inc. (UBI), who was to do the glazing work on the project for TEC. The purpose of the meeting was “to discuss the up coming [sic ] project.”

On July 5, 2011, Flintco sent its “letter of intent” to TEC. The letter indicated Flintco's “intent to issue a Subcontract Agreement to TEC” for the project. (Italics added.) The letter stated that the “contract award is contingent upon the following terms and conditions ,” including (1) a requirement that TEC accept liquidated damages and retention provisions, and (2) agree on a complete scope of work. (Italics added.)

On July 14, 2011, Flintco's Project Manager Joshua Frantz sent Flintco's standard-form subcontract with exhibits to TEC. In Coffey's view, the subcontract Flintco sent was a sample but was incomplete because it did not name TEC, identify a scope of work, or list a price. Furthermore, “[a] lot of items that we stated in our May 17th proposal [were] in conflict with a lot of other terms” contained Flintco's standard-form subcontract. Upon receipt of the “draft contract” and letter of intent, Coffey called Frantz to explain that the parties had “some major differences that we need to discuss.” Among the items they “chatted about” were that (1) TEC would not provide a bond, whereas Flintco required a bond; (2) TEC had not received a scope of work that complied with TEC's contractor's license; (3) TEC would not agree to the liquidated damages clause; and (4) Flintco's version did not acknowledge TEC's deposit requirement, “which is very critical.” Coffey also noted that the 15 days TEC's offer would remain open had already lapsed, triggering TEC's escalation clause. Frantz said he would look into the bond problem because he was new to Flintco.

The next conversation between Flintco and TEC occurred a couple of weeks later, in late July 2011, but there was no progress in negotiations.

Although Stump was authorized to waive many of the provisions in the Flintco subcontract that deviated from TEC's bid, he never told Coffey that he was willing to exercise that authority.

On August 23, 2011, TEC sent a letter notifying Flintco of its decision not to pursue the contract for the project. Flintco received the notice on August 29, 2011.

Meanwhile, on August 26, 2011, Flintco sent TEC a new subcontract that had not been modified to acknowledge any of the conditions contained in TEC's bid. The new contract contained no provision requiring Flintco to pay a 35 percent deposit. Frantz acknowledged that he never reviewed the conditions in TEC's bid while assisting in the preparation of a subcontract with TEC.

On September 8, 2011, Frantz e-mailed Coffey that Flintco “cannot relieve TEC of their obligation to perform” the work as bid. Frantz's e-mail asked TEC to sign Flintco's subcontract as issued to TEC.

On September 12, 2011, Coffey told Frantz that TEC's bid had expired. Coffey explained that TEC was exercising its right under its proposal to withdraw its bid. Frantz did not indicate that any of the terms or conditions in the Flintco subcontract were negotiable.

Flintco found a new subcontractor to do the glazing work and sued TEC for $327,050 in a single cause of action alleging promissory estoppel.

At trial to the bench, Jay Washburn, Flintco's project manager, explained that in his experience, bid day is “usually chaotic” because of the sheer volume of paperwork and so it is impossible to negotiate the terms and conditions in a subcontractor's bid that day. Conflicts between bid conditions and contracts are normally resolved and specific terms and conditions are negotiated only after the project contract is awarded. Stump, Washburn, and Frantz testified that it is standard practice for subcontractors to include an extensive number of terms and conditions in their bids. Specific terms and conditions in a subcontractor's bid are not relevant to the scope of work, are typically boilerplate and conflict with Flintco's sub- and prime- contracts. Thus on bid day, Flintco disregards all terms and conditions of a subcontractor's bid except for scope of work, price, length of time the bid would remain open, and bonding. The stated “purpose of reviewing the terms and conditions in a subcontractor's bid prior to the bid deadline is to find ‘red flags.’ The issue, according to Mr. Stump, is whether ‘we are going to be fighting about something.’ ” Hence, Washburn agreed it was fair to say that an unusual term or condition might escape his attention because of the cursory nature of his review of bids on bid day.

Frantz did not look at TEC's terms until after TEC was listed in Flintco's bid. No one at Flintco discussed TEC's requirement for a 35 percent deposit on bid day. Stump may have looked at the conditions of TEC's bid before trial.

The trial court ruled in favor of TEC. It found that Flintco did not satisfy every element of promissory estoppel because its reliance on TEC's bid price only without regard for material conditions that related directly to TEC's bid price was not reasonable. Thereafter, in sending TEC its standard form subcontract, with terms that conflicted with TEC's bid terms, Flintco made a counter offer that gave TEC the right to withdraw its bid. TEC's withdrawal was caused by Flintco's unwillingness to accept a number of material terms of TEC's bid. No agreement was reached between Flintco and TEC concerning material terms. Flintco's written communications to TEC demonstrate...