Pavel Enterprises, Inc. v. A.S. Johnson Co., Inc.
| Decision Date | 01 September 1995 |
| Docket Number | No. 62,62 |
| Citation | 674 A.2d 521,342 Md. 143 |
| Parties | PAVEL ENTERPRISES, INC. v. A.S. JOHNSON COMPANY, INC. , |
| Court | Maryland Court of Appeals |
Douglas L. Patin (Spriggs & Hollingsworth, on brief) Washington, DC, for Appellant.
Tarrant H. Lomax (Rhodes, Dunbar & Lomax, Chartered, on brief) Washington, DC, for Appellee.
Argued before MURPHY, C.J., and ELDRIDGE, RODOWSKY, CHASANOW, KARWACKI, BELL, and RAKER, JJ.
In this case we are invited to adapt the "modern" contractual theory of detrimental reliance, 1 or promissory estoppel, to the relationship between general contractors and their subcontractors. Although the theory of detrimental reliance is available to general contractors, it is not applicable to the facts of this case. For that reason, and because there was no traditional bilateral contract formed, we shall affirm the trial court.
The National Institutes of Health [hereinafter, "NIH"], solicited bids for a renovation project on Building 30 of its Bethesda, Maryland campus. The proposed work entailed some demolition work, but the major component of the job was mechanical, including heating, ventilation and air conditioning ["HVAC"]. Pavel Enterprises Incorporated [hereinafter, "PEI"], a general contractor from Vienna, Virginia and appellant in this action, prepared a bid for the NIH work. In preparing its bid, PEI solicited sub-bids from various mechanical subcontractors. The A.S. Johnson Company [hereinafter, "Johnson"], a mechanical subcontractor located in Clinton, Maryland and the appellee here, responded with a written scope of work proposal on July 27, 1993. 2 On the morning of August 5, 1993, the day NIH opened the general contractors' bids, Johnson verbally submitted a quote of $898,000 for the HVAC component. 3 Neither party disputes that PEI used Johnson's sub-bid in computing its own bid. PEI submitted a bid of $1,585,000 for the entire project.
General contractors' bids were opened on the afternoon of August 5, 1993. PEI's bid was the second lowest bid. The government subsequently disqualified the apparent low bidder, 4 however, and in mid-August, NIH notified PEI that its bid would be accepted.
With the knowledge that PEI was the lowest responsive bidder, Thomas F. Pavel, president of PEI, visited the offices of A.S. Johnson on August 26, 1993, and met with James Kick, Johnson's chief estimator, to discuss Johnson's proposed role in the work. Pavel testified at trial to the purpose of the meeting
Pavel also asked if Johnson would object to PEI subcontracting directly with Powers for electric controls, rather than the arrangement originally envisioned in which Powers would be Johnson's subcontractor. 5 Johnson did not object.
Following that meeting, PEI sent a fax to all of the mechanical subcontractors from whom it had received sub-bids on the NIH job. The text of that fax is reproduced:
Pavel Enterprises, Inc.
We herewith respectfully request that you review your bid on the above referenced project that was bid on 8/05/93. PEI has been notified that we will be awarded the project as J.J. Kirlin, Inc. [the original low bidder] has been found to be nonresponsive on the solicitation. We anticipate award on or around the first of September and therefor request that you supply the following information.
1. Please break out your cost for the "POWERS" supplied control work as we will be subcontracting directly to "POWERS".
2. Please resubmit your quote deleting the above referenced item.
We ask this in an effort to allow all prospective bidders to compete on an even playing field.
Should you have any questions, please call us immediately as time is of the essence.
On August 30, 1993, PEI informed NIH that Johnson was to be the mechanical subcontractor on the job. On September 1, 1993, PEI mailed and faxed a letter to Johnson formally accepting Johnson's bid. That letter read:
Pavel Enterprises, Inc.
September 1, 1993
Mr. James H. Kick, Estimating Mngr.
Subject: Letter of Intent to award SUBJECT: Subcontract
Dear Mr. Kick;
We herewith respectfully inform your office of our intent to award a subcontract for the above referenced project per your quote received on 8/05/93 in the amount of $898,000.00. This subcontract will be forwarded upon receipt of our contract from the NIH, which we expect any day. A preconstruction meeting is currently scheduled at the NIH on 9/08/93 at 10 AM which we have been requested that your firm attend.
As discussed with you, a meeting was held between NIH and PEI wherein PEI confirmed our bid to the government, and designated your firm as our HVAC Mechanical subcontractor. This action was taken after several telephonic and face to face discussions with you regarding the above referenced bid submitted by your firm.
We look forward to working with your firm on this contract and hope that this will lead to a long and mutually beneficial relationship.
Upon receipt of PEI's fax of September 1, James Kick called and informed PEI that Johnson's bid contained an error, and as a result the price was too low. According to Kick, Johnson had discovered the mistake earlier, but because Johnson believed that PEI had not been awarded the contract, they did not feel compelled to correct the error. Kick sought to withdraw Johnson's bid, both over the telephone and by a letter dated September 2, 1993:
A.S. Johnson Co.
We respectfully inform you of our intention to withdraw our proposal for the above referenced project due to an error in our bid.
As discussed in our telephone conversation and face to face meeting, the management of A.S. Johnson Company was reviewing this proposal, upon which we were to confirm our pricing to you.
Please contact Mr. Harry Kick, General Manager at [telephone number deleted] for any questions you may have.
Very truly yours,
/s/ James H. Kick
Estimating Manager PEI responded to both the September 1 phone call, and the September 2 letter, expressing its refusal to permit Johnson to withdraw.
On September 28, 1993, NIH formally awarded the construction contract to PEI. PEI found a substitute subcontractor to do the mechanical work, but at a cost of $930,000. 6 PEI brought suit against Johnson in the Circuit Court for Prince George's County to recover the $32,000 difference between Johnson's bid and the cost of the substitute mechanical subcontractor.
The case was heard by the trial court without the aid of a jury. The trial court made several findings of fact, which we summarize:
1. PEI relied upon Johnson's sub-bid in making its bid for the entire project;
2. The fact that PEI was not the low bidder, but was awarded the project only after the apparent low bidder was disqualified, takes this case out of the ordinary;
3. Prior to NIH awarding PEI the contract on September 28, Johnson, on September 2, withdrew its bid; and
4. PEI's letter to all potential mechanical subcontractors, dated August 26, 1993, indicates that there was no definite agreement between PEI and Johnson, and that PEI was not relying upon Johnson's bid.
The trial court analyzed the case under both a traditional contract theory and under a detrimental reliance theory. PEI was unable to satisfy the trial judge that under either theory that a contractual relationship had been formed.
PEI appealed to the Court of Special Appeals, raising both traditional offer and acceptance theory, and "promissory estoppel." Before our intermediate appellate court considered the case, we issued a writ of certiorari on our own motion.
The relationships involved in construction contracts have long posed a unique problem in the law of contracts. A brief overview of the mechanics of the construction bid process, as well as our legal system's attempts to regulate the process, is in order.
Our description of the bid process in Maryland Supreme Corp. v. Blake Co., 279 Md. 531, 369 A.2d 1017 (1977) is still accurate:
Id. at 533-34, 369 A.2d at 1020-21 (citing The Firm Offer Problem )
The problem the construction bidding process poses is the determination of the precise...
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