Marana Unified School Dist. No. 6 v. Aetna Cas. & Sur. Co., 2

• Decision Date: 03 December 1984
• Docket Number: CA-CIV,No. 2,2
• Citation: 144 Ariz. 159,696 P.2d 711
• Parties: , 23 Ed. Law Rep. 1046 MARANA UNIFIED SCHOOL DISTRICT NO. 6, an Arizona Unified School District, Plaintiff/Appellee, v. The AETNA CASUALTY AND SURETY COMPANY, a Connecticut corporation, and L.G. Lefler, Inc., an Arizona Corporation, dba Defco Construction Company, Defendants/Appellants. 5139.
• Court: Arizona Court of Appeals

Page 711

696 P.2d 711

144 Ariz. 159, 23 Ed. Law Rep. 1046

MARANA UNIFIED SCHOOL DISTRICT NO. 6, an Arizona Unified School District, Plaintiff/Appellee, v. The AETNA CASUALTY AND SURETY COMPANY, a Connecticut corporation, and L.G. Lefler, Inc., an Arizona Corporation, dba Defco Construction Company, Defendants/Appellants.

No. 2 CA-CIV 5139.

Court of Appeals of Arizona,

Division 2.

Dec. 3, 1984.

Review Denied Feb. 5, 1985.

DeConcini McDonald Brammer Yetwin & Lacy, P.C. by Spencer A. Smith and William B. Hanson, Tucson, for plaintiff/appellee

Lohse & Bloom by Ashby I. Lohse and Cliffton E. Bloom, Tucson, for defendants/appellants.

OPINION

BIRDSALL, Chief Judge.

This appeal arises from a complaint filed by the appellee, Marana Unified School District, seeking judgment on a bid bond given by appellants, L.G. Lefler, Inc., doing business as Defco Construction Company, principal, and the Aetna Casualty and Surety Company, surety. The bond was provided pursuant to A.R.S. § 34-201(A)(3) because Defco submitted a bid proposal to construct a junior high school building for the appellee. The statute provides:

3. That every proposal shall be accompanied by a certified check, cashier's check or a surety bond for five per cent of the amount of the bid included in the proposal as a guarantee that the contractor will enter into a contract to perform the proposal in accordance with the plans and specifications, or as liquidated damages in event of failure or refusal of the contractor to enter into the contract. The certified check, cashier's check or surety bond shall be returned to the contractors whose proposals are not accepted, and to the successful contractor upon the execution of a satisfactory bond and contract as provided in this article.

Although Defco was the low bidder, it refused to enter into a contract with the appellee because it had made a mathematical mistake in its proposal.

The trial court entered summary judgment in favor of the Marana District in the amount of $270,662.50, that being five per cent of Defco's base bid plus alternates together with costs and attorney fees. ¹ The appellants' cross-motion for summary judgment was denied.

The facts considered in the light most favorable to the appellants may be summarized as follows. The appellee gave notice of its intent to receive sealed bids for the construction of the school pursuant to A.R.S. § 34-201. The bids were required to be submitted by 4 p.m., February 2, 1982, at which time they were opened. The appellant's bid was for $4,890,000 together with alternates, all of which totalled $5,936,500. The bid bond attached to the proposal was "in the sum of five per cent of contract bid." No actual figures were set forth on the bond but the proposal referred to the required bid bond amount as five per cent of the "base bid" which would have been $244,500. Nine other contractors submitted bids. Defco's was the lowest base bid. The next lowest base bid was $5,447,000. The architect's estimated cost for the construction without alternates was $4,900,000. Defco's bid was within two-tenths of one per cent of that estimate.

After all bids were opened, the architect and school district officials reviewed them and a written recommendation was made that day to accept Defco's base bid together with two alternates totalling $5,253,080.

At about the same time, Defco personnel were rechecking their figures since it appeared that a mistake may have been made. The employee who had tabulated Defco's bid sheet then discovered that she had used $42,000 as the bid for the structural steel when the correct figure was $412,000, a mistake of $370,000.

According to the employee's affidavit attached to the appellants' cross-motion for summary judgment, she was still receiving telephone bids from subcontractors and suppliers and working on Defco's bid up until 3:30 on February 2; she found a mistake in her first tabulation of some 170 items on the bid sheet and did a second tabulation, then added the figures six times. Since this brought her so close to the time the bid had to be submitted, there was no time to have another employee check her figures.

Defco advised appellee by telephone within one and one-half hours of the bid opening of the mistake which came to $398,752 with the addition of other items based on percentages of the $370,000 error. A letter containing the same information was delivered to the school within three hours after the bid was opened at 4 p.m. In the letter Defco asked to meet with the school officials to show them the calculator tapes and bid sheet which revealed how the error had occurred.

The school board held a special meeting at 7:30 that evening, February 2, receiving the report and recommendation of the architect and the letter from Defco. Apparently because of the latter, they deferred consideration of the bids and the school superintendent was instructed to consult with legal counsel.

A second special meeting of the board was held on February 4 with Mr. Lefler from Defco present. Pursuant to a motion passed by the board, the president asked Lefler if Defco was prepared to perform the contract if awarded under Defco's original low base bid. Lefler answered no, whereupon the board passed a motion that "the board reject all bids received on February 2 and instruct the architect to prepare to re-bid the construction contract...."

There is no conflict in any of the foregoing facts. Other facts will be discussed as necessary in relation to the issues.

The important issue presented by this appeal is whether a low bidder for a public contract may refuse to enter into a contract because of a mistake in the bid without forfeiting the bid bond. Although this question has never been decided in Arizona, it has been the subject of numerous opinions in our sister states and federal courts. For a recent compilation and discussion of these cases see the annotation in 2 ALR4th 991, "Right of bidder for state or municipal contract to rescind bid on ground that bid was based upon his own mistake or that of his employee."

Before discussing this issue, which we believe to be dispositive, we reject certain other contentions made by the appellants.

The appellants contend first that the school board never offered a contract to Defco and that it rejected all bids including Defco's. We disagree. The only evidence is that the school board at its meeting on February 4 asked the Defco officer whether Defco would perform if the contract were awarded for the low base bid. The answer was an unequivocal no. Nothing more should be required. There is no room for any doubt. Defco refused to enter into the contract. It is also abundantly clear that the bids were not rejected until after this refusal. The appellants' contention that this action released the bid bond is without merit. Likewise we reject the argument that the action of the board rejecting the bids constituted a mutual rescission of the Defco bid bond contract. No weighing of the evidence is required. It is impossible to make any inference other than that the appellee offered the contract and the appellant refused.

Thus we must consider the controlling question--whether Defco's refusal to enter into a contract because of the mistake in the bid must result in the forfeiture of the bid bond.

It is the appellee's position that the statute permits no escape from forfeiture. There is authority to support such a result. These decisions are cited by the appellants: Board of Edn. v. Sever-Williams Co., 22 Ohio St.2d 107, 258 N.E.2d 605, cert. denied, 400 U.S. 916, 91 S.Ct. 175, 27 L.Ed.2d 155 (1970), and A.J. Colella, Inc. v. County of Allegheny, 391 Pa. 103, 137 A.2d 265 (1958). They stand for the very position argued by the appellee and followed by the trial court, that given a statute like Arizona's, forfeiture of the bid bond is mandated even though there is legal justification for the withdrawal of the bid. The reasoning in these decisions is generally the same, that this is the purpose of the statute and to permit exceptions would materially weaken the purpose of the bidding procedure for public contracts and make the bid bond requirement meaningless. In Colella the court opines that plea of a clerical mistake would make the system of sealed bids a mockery. Sever-Williams speaks of possible abuse of the bidding procedure, i.e., favoritism or fraud. See also Crenshaw County Hospital Board v. St. Paul Fire & Marine Insurance Co., 411 F.2d 213 (5th Cir.1969); Anco Construction Co., Ltd. v. City of Wichita, 233 Kan. 132, 660 P.2d 560 (1983); Triple A Contractors, Inc. v. Rural Water District No. 4, 226 Kan. 626, 603 P.2d 184 (1979); and City of Newport News v. Doyle & Russell, Inc., 211 Va. 603, 179 S.E.2d 493 (1971) where no state statutes were involved.

We do not agree with the reasoning or result in those cases. Nor do we believe that the Arizona legislature intended that there be no relief from forfeiture of the bid security for equitable reasons. We agree with the appellants that unless the legislature clearly indicates an intention to do so, its enactments shall not be construed so as to change established common law. Terry v. Lincscott Hotel Corp., 126 Ariz. 548, 617 P.2d 56 (1980); Kilmer v. Hicks, 22 Ariz.App. 552, 529 P.2d 706 (1974). The doctrine of rescission for unilateral clerical mistake was set forth by the United States Supreme Court as early as 1900. See Moffett, Hodgkins, & Clarke Co. v. City of Rochester, 178 U.S. 373, 20 S.Ct. 957, 44 L.Ed. 1108 (1900).

We believe the trial court erred in granting summary judgment in favor of the appellee. We follow those decisions which hold that when relief from the forfeiture is legally justifiable, statutes like Arizona's do not mandate the forfeiture. The cases upon which we rely all arise under a statute or bid solicitation which, on its face, prohibits a withdrawal of bids. The notice inviting the sealed bids in the instant case provided,...