James T. Taylor & Son, Inc. v. Arlington Ind. School Dist.

• Decision Date: 27 April 1960
• Docket Number: No. A-7147,A-7147
• Citation: 335 S.W.2d 371,160 Tex. 617
• Parties: JAMES T. TAYLOR AND SON, INC., Petitioner, v. ARLINGTON INDEPENDENT SCHOOL DISTRICT, Respondent.
• Court: Texas Supreme Court

Page 371

335 S.W.2d 371

160 Tex. 617

JAMES T. TAYLOR AND SON, INC., Petitioner, v. ARLINGTON INDEPENDENT SCHOOL DISTRICT, Respondent.

No. A-7147.

Supreme Court of Texas.

April 27, 1960.

Rehearing Denied June 1, 1960.

McGown, Godfrey, Logan & Decker, Warren W. Shipman, III and John W. McMackin, Fort Worth, for petitioner.

Brown, Herman, Scott & Young, Fort Worth, for respondent.

HAMILTON, Justice.

The Court of Civil Appeals has reversed and remanded a summary judgment granted to the petitioner (hereinafter referred to as Taylor) by the trial court. That summary judgment denied the School District's right to its requested relief of $36,278.322 S.W.2d 548.

The School District had decided to build a Junior High School building and had called for competitive bids from various contractors for the construction. Taylor submitted a bid, together with a performance bond, as was required, and his bid of $534,175 was the lowest of nine bids submitted. The School District, within a few minutes after the bids were opened, accepted the bid of Taylor. His bond, furnished by Seaboard Surety Company, provided that it would be null and void if the contract to build the building was subsequently executed by him; otherwise the obligors would pay the difference between the Taylor bid and the bid finally accepted. In addition to the total amount of the estimates an amount of 6% was to be added by Taylor as anticipated profit margin. When this was done an error of $100,000 occurred due to a failure to carry a digit.

The error was not discovered until the morning after the School District had accepted the Taylor bid, when notice of such mistake was promptly given to the School District. Taylor refused to execute the tendered construction contract, and when the contract was returned unexecuted the Board awarded the contract to the next lowest bidder, Bock Construction Company. No readvertisement or additional expense was involved for the School District. Suit was instituted by the School District to recover on the bond the amount of the difference between the Bock bid and the Taylor bid, an amount of $36,278.

In reversing and remanding the summary judgment granted by the trial court to the petitioner the Court of Civil Appeals held that on a new trial Taylor must prove by clear and convincing evidence that the unilateral mistake made by petitioner was not due to Taylor's negligence, and that the School District knew or had reason to know that Taylor had made a mistake prior to its acceptance of the bid. The holding of the Court of Civil Appeals is that Taylor is liable unless he proves these points. Taylor's points of error assert that equitable relief is not barred by ordinary negligence, but only by gross negligence or bad faith, and that it was not necessary that the School District know or have reason to know of the error prior to acceptance of the bid before rescission can be granted.

On the question of equitable relief by way of rescission, we have concluded that we cannot agree with the Court of Civil Appeals in holding that before petitioner is entitled to relief he must show by clear and convincing evidence that the unilateral mistake was not due to his own negligence and that the School District either knew or should have known of the mistake before accepting his bid. We think the great weight of authority is against the law as announced by the Court of Civil Appeals. Most of the cases and legal writers affirm the proposition that equitable relief will be granted against a unilateral mistake when the conditions of remediable mistake are present. These conditions generally are: (1) the mistake is of so great a consequence that to enforce the contract as made would be unconscionable; (2) the mistake relates to a material feature of the contract; (3) the mistake must have been made regardless of the exercise of ordinary care; and (4) the parties can be placed in status quo in the equity sense, i. e., rescission must not result in prejudice to the other party except for the loss of his bargain. There may be other circumstances which will govern or influence the extension of relief, such as the acts and extent of knowledge of the parties. Steinmeyer v. Schroeppel, 1907, 226 Ill. 9, 80 N.E. 564, 10 L.R.A.,N.S., 114; M. F. Kemper Const. Co. v. City of Los Angeles, 1951, 37 Cal.2d 696, 235 P.2d 7; City of Baltimore v. De Luca-Davis Const. Co., Inc., 1956, 210 Md. 518, 124 A.2d 557; Story's Equity Jurisprudence, Sec. 138i; 59 A.L.R. 809, Anno.: Unilateral Mistake as Basis of Bill in Equity to Rescind the Contract; 52 A.L.R.2d p. 792, Anno.: Rights and Remedies of Bidder for Public Contract Who Has Not Entered Into a Contract, Where Bid Was Based on His Own Mistake of Fact or That of His Employees.

In 52 A.L.R. p. 796, in summarizing the conditions under which equity will grant relief from the consequences of a bid for a public contract which has been submitted as the result of a remediable, unilateral mistake, before acceptance of the bid it is stated in effect that no case has been discovered in which equitable relief has not been granted by way of rescission or similar appropriate relief where there is proof of a combination of circumstances establishing remediable mistake and timely communication of knowledge to and assertion of the right to relief against the other party. The case of State Highway Commission v. Canion, Tex.Civ.App., 250 S.W.2d 439, error refused n.r.e., is one of the cases cited as supporting this proposition.

The School District contends that the Canion case is not in point because in that case the contractor gave notice of the mistake and attempted to withdraw his bid before acceptance by the Highway Commission, and in the case before us the School District had accepted the bid prior to notice of the mistake and the request for withdrawal of the bid. We do not interpret the court's opinion in said case as attributing any particular importance to the fact that notice of mistake was given prior to acceptance. The court did recognize that a contract already existed between the contractor and the Highway Commission, even though it was a unilateral contract. It did this by granting a rescission. The court in that case based its decision principally on the fact that to enforce the contract would be unjust, inequitable and oppressive upon the contractor for an honest mistake which did not injure the Highway Commission. It is true the Highway Commission had not accepted Canion's bid when notified by him of his error three days after his bid was opened, but, in that case, as in this one, no formal contract had been entered into. It is said in 43 American Jurisprudence, Public Works and Contracts, Sec. 63, p. 805:

'As a general rule, equitable relief will be granted a bidder for a public contract where he has made a material mistake of fact in the bid which he submitted, and upon the discovery of that mistake acts promptly in informing the public authorities and requesting withdrawal of his bid or opportunity to rectify his mistake, particularly where he does so before any formal contract is entered into.'

It seems to us to be well settled that even after acceptance of a bid, but before the execution of the contract contemplated by the parties, a bidder for a public contract who makes a remediable mistake in his bid may, by giving notice thereof before material change of position to the detriment of the offeree, obtain rescission of the bid or relief against its enforcement. Shepard v. United States, 1942, 95 Ct.Cl. 407; Bromagin & Co. v. City of Bloomington, 1908, 234 Ill. 114, 84 N.E. 700; Board of School Commissioners of City of Indianapolis v. Bender, 1904, 36 Ind.App. 164, 72 N.E. 154; Board of Regents of Murray State Normal School v. Cole, 1925, 209 Ky. 761, 273 S.W. 508; Kutsche v. Ford, 1923, 222 Mich. 442, 192 N.W. 714; School District of Scottsbluff v. Olson Construction Co., 1950, 153 Neb. 451, 45 N.W.2d 164; Barlow v. Jones, N.J.Ch.1913, 87 A. 649; Harper v. City of Newburgh, 1913, 159 App.Div. 695, 145 N.Y.S. 59; Donaldson v. Abraham, 1912, 68 Wash. 208, 122 P. 1003.

In applying the rules that should govern the granting of equitable relief for remediable mistake the principal difficulty with which we are confronted is determining the effect of negligence on the part of one claiming equitable relief for his own mistake. Of course the very word 'mistake' itself may connote some degree of negligence, and when the cases speak of an honest mistake and one made without negligence, it is difficult to determine just what kind of negligence is meant. In a footnote on page 794 of 52 A.L.R.2d, it is stated:

'The term 'negligence', or its equivalent, in this connection generally means ordinary negligence, which will not necessarily bar granting equitable relief. Otherwise qualified, it generally means carelessness or lack of good faith in calculation which violates a positive duty in making up a bid, so as to amount to gross negligence, or wilful negligence, when it takes on a sinister meaning and will furnish cause, if established, for holding a mistake of the offending bidder to be one not remediable in equity. It is thus distinguished from a clerical or inadvertent error in handling items of a bid, either through setting them down or transcription.'

In the case of Dixon v. Morgan, 154 Tenn. 389, 285 S.W. 558, the court points out that only culpable negligence will preclude relief, and for negligence to be culpable it must be due to the failure to perform some duty, that it is not a failure of duty to one's self, but to another, that constitutes culpable negligence, and that a mistake in the computation of the cost of construction work in order to make a bid therefor does not indicate such culpable negligence as will preclude equitable aid to rescind the contract where to sustain it would give the other party an unconscionable advantage.

In the case of Board of Regents of Murray State Normal...