Peerless Casualty Company v. Housing Authority

• Decision Date: 16 December 1955
• Docket Number: No. 15684.,15684.
• Citation: 228 F.2d 376
• Parties: PEERLESS CASUALTY COMPANY, Appellant, v. HOUSING AUTHORITY OF the City of HAZELHURST, Georgia, Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

228 F.2d 376 (1955)

PEERLESS CASUALTY COMPANY, Appellant, v. HOUSING AUTHORITY OF the City of HAZELHURST, Georgia, Appellee.

No. 15684.

United States Court of Appeals Fifth Circuit.

December 16, 1955.

Alex McLennan, Atlanta, Ga., Chas. L. Gowen, Brunswick, Ga., Harry S. McCowen, Atlanta, Ga., for appellant.

J. H. Highsmith, Baxley, Ga., Gordon Knox, Jr., Hazelhurst, Ga., E. Way Highsmith, Brunswick, Ga., for appellee.

Before RIVES, TUTTLE and JONES, Circuit Judges.

JONES, Circuit Judge.

The appellant, Peerless Casualty Company, is a New Hampshire corporation qualified to do and doing business in Georgia. We will sometimes refer to it as the surety. The appellee, Housing Authority of the City of Hazelhurst, Georgia, is a public body corporate under the laws of Georgia. We shall refer to it as the Authority. Jurisdiction is founded on diversity of citizenship.

The Authority invited bids for the construction of two housing projects. The invitation for bids contained the following provision:

"A certified check or bank draft, payable to the Housing Authority of the City of Hazelhurst, Georgia, U. S. Government Bonds, or a satisfactory bid bond executed by the bidder and acceptable sureties in an amount equal to five per cent (5%) of the bid shall be submitted with each bid".

The invitation also provided that:

"No bid shall be withdrawn for a period of thirty (30) days subsequent to the opening of bids without the written consent of the Housing Authority of the City of Hazelhurst, Georgia."

In the invitation for bids the Authority reserved the right to reject any and all bids. There was nothing in the invitation for bids that indicated that the Authority might make a conditional acceptance of the bid.

H. W. Ivey submitted a bid of $463,733. The bid recited an understanding that the Authority reserved the right to reject all bids. Nothing in the bid either gave or recognized a right of the Authority to make a conditional acceptance of the bid. Ivey submitted with his bid a bid bond in the amount of $23,186.65, executed by Ivey as principal and the appellant as surety. The bond was conditioned upon the principal not withdrawing his bid within sixty days after the opening of bids, and upon the principal entering into a contract if he was the successful bidder. The bond provided that "in the event of the withdrawal of said bid within the period specified, or the failure to enter into such contract and give such performance and payment bond within the time specified * * * the principal shall pay the Local Authority the difference between the amount specified in said bid and the amount for which the Local Authority may procure the required work * * *."

The bids were opened and Ivey's bid was low. The next bid was that of A. B. Newton Construction Company in the amount of $478,000. On December 16, 1952, the Commissioners of the Authority adopted a motion to award the contract to Ivey, "the apparent low bidder, subject to the approval of the Public Housing Administration." A representative of Ivey was present when the bids were opened and we may infer that he remained present until the motion was adopted. That night Ivey found an error in the computation on which his bid was based in that subcontract bids aggregating $34,022 were not carried into or reckoned as a part of the bid figure. On the following day, December 17, 1952, Ivey sent the Authority a telegram, which was confirmed by letter, advising it of the error and withdrawing his bid. On January 5, 1953, the Public Housing Administration approved the acceptance of the Ivey bid and on January 7, 1953, the Authority tendered Ivey a written contract in the amount of his bid. Ivey declined to execute the contract. The Authority then made a contract with the next low bidder, A. B. Newton Construction Company, for $478,000, the amount of its original bid. This action was brought by the Authority against the surety for $14,267, the difference between the contract price and the Ivey bid.

The testimony being completed, both parties moved for a directed verdict and the District Judge heard extended argument of counsel, of which some is and some is not in the record. Upon the conclusion of the argument the court stated:

"Well, I tell you what I am going to do. I think it is a very very close question. It isn\'t an open and shut case by any means. It is a close case. But this man gave the bond, and this bond says that it is to be effective in the event the bid is withdrawn. Now, he withdrew his bid. Whatever reason it was, he withdrew it. I am going to hold for the plaintiff in this case and you can bring the jury in and I will direct a verdict for the plaintiff."

Both parties take the position that the law of Georgia fixes the rights and determines the liabilities of the parties, and we agree that this is so.

In the case before us Ivey had made an offer by submitting a bid. The Authority accepted the offer. Its acceptance was not unqualified, but was subject to the approval of the Public Housing Administration.

It is an elementary rule of the common law of contracts that an offer may be withdrawn at any time before it is accepted. Unless the acceptance is unconditional and without variance from the offer it is of no legal effect as an acceptance and operates as a rejection and a counteroffer. Winder Mfg. Co. v. A. S. Pendleton Co., 27 Ga. App. 476, 108 S.E. 823; 1 Williston on Contracts, Rev.Ed. 222, § 77. The condition, annexed by the Authority to its attempted acceptance, that it was subject to the approval of the Public Housing Administration, was not one that changed the terms of the offer but merely deferred the time when the acceptance should take effect. As pointed out by Professor Williston:

"A nice distinction may be taken here between (1) a so-called acceptance by which the acceptor agrees to become immediately bound on a condition not named in the offer, and (2) an acceptance which adopts unequivocally the terms of the offer but states that it will not be effective until a certain contingency happens or fails to happen. In the first case there is a counter-offer and rejection of the original offer; in the second case there is no counter-offer, since there is no assent to enter into an immediate bargain. There is, so to speak, an acceptance in escrow, which is not to take effect until the future. In the meantime, of course, neither party is bound and either may withdraw." 1 Williston on Contracts, Rev.Ed. 226, § 77A.

The withdrawal of the offer represented by the bid on December 17, 1952, prevented the attempted acceptance on January 7, 1953, from creating a contract, but this does not of itself answer the question as to whether such withdrawal was or could be so made as to avoid liability of Ivey and his surety, the appellant, upon the bid bond.

The appellee Housing Authority brings to our attention the Georgia statutory provisions that:

"In all cases of a mistake of fact material to the contract or other matter affected by it, if the party complaining applies within a reasonable time, equity will relieve". Ga.Code, § 37-206.

and

"If a party, by reasonable diligence, could have had knowledge of the truth, equity shall not relieve." Ga.Code, § 37-211.

The Authority cites cases from the courts of Georgia where parties to contracts were, under the particular facts of the several cases, denied relief from mistakes caused by carelessness, ignorance or lack of diligence. Davis v. Holloway, 81 Ga.App. 158, 58 S.E.2d 234; Adler v. Leopold Adler Co., 205 Ga. 818, 55 S.E.2d 139; Central of Georgia R. Co. v. Gortatowsky, 123 Ga. 366, 51 S.E. 469; Keith v. Brewster, 114 Ga. 176, 39 S.E. 850; McCullough v. Kirby, 204 Ga. 738, 51 S.E.2d 812; Alexander v. Herring, 54 Ga. 200; Prince v. Friedman, 202 Ga. 136, 42 S.E. 2d 434. In none of the cited cases is there a factual situation comparable with that out of which this controversy arises. None of the foregoing decisions provide a precedent which furnishes us with a rule of decision.

The undertaking of the appellant was that of a surety. Ga.Code § 103-101. It is provided by statute in Georgia that "The obligation of the surety is accessory to that of his principal, and if the latter from any cause becomes extinct, the former shall cease of course, even though it is in judgment". Ga.Code, § 103-102. At the outset we start with the premise that unless there was...