Naugatuck Valley Development Corp. v. Acmat Corp., 4364

• Decision Date: 07 April 1987
• Docket Number: No. 4364,4364
• Citation: 10 Conn.App. 414,523 A.2d 924
• Court: Connecticut Court of Appeals
• Parties: NAUGATUCK VALLEY DEVELOPMENT CORPORATION v. ACMAT CORPORATION et al.

Page 924

523 A.2d 924

10 Conn.App. 414

NAUGATUCK VALLEY DEVELOPMENT CORPORATION

v. ACMAT CORPORATION et al.

No. 4364.

Appellate Court of Connecticut.

Argued Feb. 11, 1987.

Decided April 7, 1987.

Thomas J. Byrne, Stamford, for appellants (defendants).

Kevin T. Nixon, Naugatuck, for appellee (plaintiff).

Before DUPONT, C.J., and HULL and DALY, JJ.

HULL, Judge.

The plaintiff claimed damages against Acmat Corporation (Acmat), the low bidder on a public construction project, and Insurance Company of North America, the surety on Acmat's bid bond, when Acmat failed to sign the contract awarded to it on the ground that its bid was too low because of inadvertent error on its part. The court awarded the plaintiff $14,240 liquidated damages plus attorney's fees. The defendants appealed claiming that the court erred in requiring that Acmat be free of negligence in the preparation of its bid before the defendants could avoid obligation for damages to the plaintiff caused by Acmat's erroneous bid. ¹

The trial court's underlying findings of fact are not in dispute. The factual conclusions and legal standards applied in reaching its judgment are the essence of this appeal.

On September 17, 1979, bids were opened for the alterations of an office building for the plaintiff as follows: Acmat Corporation, $285,000; Gunnoud Construction, Inc. (Gunnoud), $380,000; R.A. Civitello Co., Inc., $439,000.

In accordance with the invitation to bid, Acmat agreed that the bid bond "shall become the sole and exclusive property of the Naugatuck Valley Development Corporation as liquidated damages to the Naugatuck Valley [Development] Corporation, if the undersigned fails to execute a contract in conformity with the accompanying Form of the Agreement ... after due notifications therefor in the Contract Documents." Acmat's agent attended the bid opening and became aware of the amounts of the three bids submitted, but Acmat did not notify the plaintiff that there was an error in the submission of its bid until October 1, 1979, fourteen days after the bid opening. At that time, the plaintiff called Acmat to schedule a contract signing, and was informed by Acmat that there was an error in the amount of the bid. Acmat wanted to negotiate a new contract figure somewhere between its bid of $285,000 and Gunnoud's in the amount of $380,000. The plaintiff told Acmat that under the rules governing the bidding of public contracts it was impossible to negotiate a new figure. Acmat notified the plaintiff by letter dated October 8, 1979, that it would not sign the contract.

The plaintiff's complaint alleged in count one that it is entitled to recover $14,250 as "agreed upon liquidated damages in the amount of said bid bond" as a result of Acmat's breach of contract, and in the second count that it is entitled to recover "substantial and additional costs of damages" resulting from such breach of contract. Since those "substantial and additional costs of damages," including the $95,000 difference between Acmat's and Gunnoud's bid, extra material cost of $3887.27 and extra heating costs of $8105.32, amount to a total of $106,992.59, the court considered the second count first.

The plaintiff claimed that Acmat's arithmetical error was deliberately intended to enable it to get the job at a higher figure than its bid, thus indicating a fraudulent intent on Acmat's part. The court reached two conclusions concerning this claim: (1) a careful review of the plaintiff's written claims and the testimony of Acmat's agent Henry Nozko, Jr., did not disclose any evidence of fraudulent intent, but rather an inadvertent error on Acmat's part and (2) the fraud must be specially pleaded. The plaintiff did not do this. Because of the lack of evidence of fraud and the failure to plead fraud, the court denied the plaintiff recovery under count two.

Concerning count one, the court held that the plaintiff was clearly entitled to liquidated damages of 5 percent of Acmat's bid, or $14,250. In so doing, it specifically relied on Colella v. Allegheny County, 391 Pa. 103, 137 A.2d 265 (1958), which enumerates the Pennsylvania firm bid rule in cases of this nature. The court also distinguished Geremia v. Boyarsky, 107 Conn. 387, 140 A. 749 (1928), the seminal case in establishing the standards applicable to an inadvertent low bid case, by emphasizing that in Geremia a private contract was involved and the plaintiff was attempting to take advantage of the defendant's low bid of which he was aware. The court apparently did not consider Regional School District No. 4 v. United Pacific Ins. Co., 4 Conn.App. 175, 493 A.2d 895, cert. denied, 196 Conn. 813, 494 A.2d 907 (1985), decided after the trial in this case but before the court's memorandum of decision. Regional School District No. 4, building on Geremia, established the appropriate criteria in such a case.

The trial court in this case concluded: "To deny the plaintiff damages under this Count would be inappropriate especially where it appears from the evidence that [Acmat] attempted to take an unfair advantage of the situation by learning the amounts of the other bids and suggesting an agreement for a higher figure than their bid. To deny the plaintiff relief under these circumstances would encourage [Acmat] and other bidders on public contracts to carry on this practice in the future without fear of being accountable in damages. Accordingly, the liquidated damage agreement should come into play, and since the obvious negligence of [Acmat] in failing to add the figures correctly and failing to recheck same caused substantial losses to the plaintiff, the agreed upon sum of $14,250 is awarded to the plaintiff, plus its costs and reasonable attorney's fees."

We agree with the defendants that the trial court erred in applying a firm rule that where a contractor makes a negligent mistake in a bid, the contractor and its surety are liable for the amount of the bid bond if the contractor withdraws its bid. In Geremia v. Boyarsky, supra, the defendant contractors submitted a bid of $1450.40 for painting and carpentry work. Because of an arithmetical mistake, the bid was $760 less than the total of the items included in the estimate. On the day the defendants signed a contract to do the work for $1450.40, they found the error and notified the owners. They offered to do the work for the true total of the items in their bid or for as low as any responsible contractor would perform the work. The owner had a good reason to know of the substantial error when the contract was signed but insisted on performance of the contract. Since the defendants refused to perform the contract, the owner gave the job to another contractor for $2375, and sued the original bidders for damages.

The Geremia court denied the plaintiff any recovery on the ground that the bidders' mistake was so material and fundamental that it precluded a meeting of the minds necessary for the creation of a contract between the parties. The court based its decision on equitable principles stating: "It may be conceded that the error in addition made by the defendant Boyarsky, when he hastily totaled the items of his estimate at the request of the plaintiff, involved some degree of negligence. It would be inequitable under the circumstances to permit the plaintiff, who had good reason to know before the contract was signed that there must have been a substantial omission or error in the amount of the bid, to take advantage of such error while the contract was still executory and he had...