K.L. Conwell Corp. v. City of Albuquerque

• Court: New Mexico Supreme Court
• Writing for the Court: SOSA; BACA; BACA
• Citation: K.L. Conwell Corp. v. City of Albuquerque, 802 P.2d 634, 111 N.M. 125, 1990 NMSC 104 (N.M. 1990)
• Decision Date: 26 November 1990
• Docket Number: No. 18984,18984
• Parties: K.L. CONWELL CORPORATION, Plaintiff-Appellant, v. CITY OF ALBUQUERQUE, Defendant-Appellee.

Page 634

802 P.2d 634

111 N.M. 125

K.L. CONWELL CORPORATION, Plaintiff-Appellant, v. CITY OF ALBUQUERQUE, Defendant-Appellee.

No. 18984.

Supreme Court of New Mexico.

Nov. 26, 1990.

[111 N.M. 126] Lester C. Cannain, Albuquerque, for appellant.

Mark Hirsch, Asst. City Atty., Albuquerque, for appellee.

OPINION

SOSA, Chief Justice.

On January 11, 1990, the trial court granted the City of Albuquerque's (City) motion for summary judgment and denied K.L. Conwell Corporation's (Conwell) equivalent motion. Conwell appeals, seeking reversal of the denial of its motion insofar as liability for breach of contract is concerned and a trial insofar as damages are concerned.

I. FACTS

The undisputed facts leading to the trial court's ruling and pertinent to this appeal are as follows:

On October 5, 1988, the City issued an advertisement for bids for the construction of the Loma Linda Community Center. By the terms of the bid proposal, sealed bids were to be opened on November 1. Bids were deemed irrevocable for 45 days after the bid opening date. The City was to make an award on the bids within 30 days from the bid opening date, unless the City and an offeror agreed to extend the City's time for acceptance of a bid beyond the 30-day period. The bid proposal also specified that the offeror had to deliver within 10 days of notification of acceptance by the City of the offeror's bid, certain documents to the City's architect. One of these documents pertained to certificates of insurance. The architect was designated by the City to draft the bid proposal specifications and to interpret the requirements of bid documents.

The bid proposal specified that the Subcontractors Fair Practices Act, NMSA 1978, Sections 13-4-31 to -43 (Repl.Pamp.1988 and Cum.Supp.1990) (the Act), was to be incorporated into the construction contract as Section 8, paragraphs A-H. Paragraph G of Section 8 reads, in pertinent part, as follows:

In the event a hearing is required pursuant to the provisions of the Subcontractors Fair Practices Act and a delay in the work is caused as a result of a subcontractor protesting its substitution, the CONTRACTOR shall not be entitled to an increase in the Contract Sum or Contract Time.

Conwell submitted a sealed bid on November 1. The City and Conwell then agreed to extend to December 8 the time for the City to make an award to Conwell. On December 8, Conwell received an award letter from the City, which provided in pertinent part as follows:

You are hereby notified that the contract for construction of the above referenced project has been awarded to your company * * *. As provided in the Bid Proposal, you are required to execute and deliver each of [certain specified forms] * * * together with the same number of copies of the Certificates of Insurance and all other information and forms that are required by the Contract Documents to [the City's architect], within ten (10) calendar days of receipt of this Notice of Award.

* * * * * *

After the Agreement has been signed and the * * * Certificates of Insurance have been accepted by the City, an executed counterpart of the Contract Documents will be transmitted to you by the consultant. The consultant will prepare, have executed by the city, and deliver to you a Notice to Proceed on the project at the pre-construction conference.

An addendum to the letter award provided, in pertinent part:

One actual original Policy and 6 copies of "Owner' [sic] and Contractors' Protective Liability" insurance policy must be included. Coverage must be in an amount not less than $500,000 and must include the City and the Engineering Firm as "Named Insured". (Architectural Firms do not need to be included as "Named Insured").

On December 16, eight calendar days after receipt of the letter award, Conwell delivered to the City's architect the necessary forms along with the certificates of insurance. The architect noted that he had not been named as an insured and asked Conwell to correct the certificate of insurance to include the architect. Conwell did so, returning the certificate to the architect on December 19. Saturday and Sunday fell on December 17 and 18, respectively. By the terms of the bid proposal the 45-day period for bid irrevocability expired on December 16. The City notified Conwell to attend the pre-construction conference scheduled for December 22, and Conwell complied.

Between December 16 and 22, Conwell on three occasions submitted three separate requests to substitute subcontractors on the project. According to the provisions of the Act, subcontractors to be substituted are entitled to notice and hearing, NMSA 1978, Sections 13-4-36, to -43, in order to protest the substitution. According to paragraph 8-G of the contract, quoted above, should such hearings cause a delay, Conwell could not obtain additional time for performance or additional monies for performance of the contract.

On December 27, the City asked Conwell to agree to extend the time for bid irrevocability to January 30, 1989. On January 3, 1989, Conwell responded to the City's request by asking the City to waive paragraph 8-G of the contract. On January 23, 1989, Conwell received a letter from the City withdrawing its notice of award. The letter stated, in pertinent part:

In essence, the City cannot accept a counter-proposal to the stated terms and conditions of the original contract * * *. The City does not agree to waive [paragraph 8-G] and is therefore unwilling to enter into contract with your firm. In addition you failed to timely submit the correct and complete contract documents with your signature.

* * * * * *

Therefore, the City hereby withdraws the previously issued Notice of Award for this contract to K.L. Conwell Corporation.

II. ARGUMENTS ON APPEAL

Conwell's contentions on appeal are as follows: A legally binding contract was formed on December 8, with Conwell's receipt of the award letter. Delivery of the various forms and the certificate of insurance to the architect within ten days of December 8 was, in Conwell's language, a "condition subsequent." Conwell delivered these documents to the City's architect on December 16. Thus the so-called condition subsequent was satisfied.

The fact that Conwell had to correct the certificate of insurance was the City's fault in stating in the award notice that the architect did not have to be named. Thus Conwell's delivery of the corrected certificate on December 19 was not a failure of the "condition subsequent." Further, December 18 fell on a Sunday, and Conwell thus had until Monday, December 19, to deliver all documents to the architect, regardless of its correction of the certificate.

Conwell further alleges that its three requests to substitute subcontractors after award of the contract do not constitute a repudiation of the contract. The Act, Conwell points out, explicitly provides for substitution of subcontractors. Nor, Conwell contends, was its request to the City to waive paragraph 8-G of the contract a repudiation of the contract. According to Conwell, it was simply trying to bargain with the City after the City had asked for an extension of time.

Conwell contends that the City erroneously assumed that it was barred by the Act from waiving paragraph 8-G. Conwell points out that there is no requirement similar to paragraph 8-G in the Act and that the City had the prerogative to waive the paragraph. The City, Conwell argues, erroneously construed Conwell's attempt to bargain with the City over the waiver of paragraph 8-G as Conwell's attempt to change the terms of its bid acceptance.

The City, on the other hand, contends that no contract was ever formed. It argues that the December 8 award letter was a conditional acceptance of Conwell's bid. The City states that Conwell's delivery on December 19 of the last of the required bid documents was three days late, because the forty-five day bid-irrevocability period expired on December 16. The City construes the bid proposal's requirement to deliver all forms and documents to the City by December 16 as a condition precedent to the formation of the contract.

Conwell's demand that the City waive paragraph 8-G, the City argues, was a material and substantive change in the terms and conditions of the notice of award. The City argues that to allow Conwell to change the terms of the bid award in effect would be to bestow a competitive advantage upon Conwell, something inconsistent with applicable law. The City construes Conwell's supposed "attempt to bargain" as a "demand" that the City change the terms of the contract or be faced with Conwell's repudiation of the contract.

Finally, the City contends that it validly exercised its discretion to withdraw its notice of award. Because no contract was formed, the City concludes, Conwell's motion for summary judgment on liability was properly denied, and Conwell's attempt to recover damages is misplaced. Conwell's remedy, if any, is to seek award of the contract from the court.

III. DISCUSSION OF LEGAL ISSUES

We note at the outset the rule that the requirements of competitive bidding are strictly construed against the governmental authority proposing the bid. Cosentino v. City of Omaha, 186 Neb. 407, 183 N.W.2d 475 (1971). We note also that interpretation of public works contracts involving a municipality is controlled by the same rules that govern contracts involving private citizens. Hensler v. City of Los Angeles, 124 Cal.App.2d 71, 268 P.2d 12 (1954); Henry Shenk Co. v. Erie County, 319 Pa. 100, 178 A. 662 (1935); See City of Orlando v. Murphy, 84 F.2d 531 (5th Cir.), cert. denied, 299 U.S. 580, 57 S.Ct. 45, 81 L.Ed. 427 (1936).

Ordinarily a municipality's acceptance of a valid bid constitutes a binding contract. 10 E. McQuillin, The Law of Municipal Corporations Sec. 29.80 (3d ed. 1990) (hereinafter McQuillin). This may be so even though there may have been defective compliance with certain legal formalities. Id.; see United...