Preload Technology, Inc. v. A.B. & J. Const. Co., Inc.

• Decision Date: 27 January 1983
• Docket Number: No. 82-1050,82-1050
• Citation: 696 F.2d 1080
• Parties: PRELOAD TECHNOLOGY, INC., Plaintiff-Appellee, v. A.B. & J. CONSTRUCTION COMPANY, INC., Defendant-Appellant. Summary Calendar.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 1080

696 F.2d 1080

PRELOAD TECHNOLOGY, INC., Plaintiff-Appellee, v. A.B. & J. CONSTRUCTION COMPANY, INC., Defendant-Appellant.

No. 82-1050

Summary Calendar.

United States Court of Appeals Fifth Circuit.

Jan. 27, 1983.

Joe F. Canterbury, Jr., Frederic Gover, Dallas, Tex., for defendant-appellant.

W. Edward Walts, Dallas, Tex., for plaintiff-appellee.

Appeal from the United States District Court for the Northern District of Texas.

Before RUBIN, JOHNSON and GARWOOD, Circuit Judges.

GARWOOD, Circuit Judge:

This is a Texas law diversity suit between a general contractor, Preload Technology, Inc., and a subcontractor, A.B. & J. Construction Company, Inc. Preload Technology sued A.B. & J. under theories of breach of contract and promissory estoppel for damages resulting from A.B. & J.'s refusal to perform "earth work and piping" on a water project in Grand Prairie, Texas for which A.B. & J. had submitted a subcontractor's bid. The district court, following a bench trial, held for Preload Technology under both theories, and A.B. & J. appeals on the questions of liability, damages, and the award of attorney's fees. We affirm.

I. FACTS

In March 1979, Preload Technology, a general contractor, was preparing to bid on the construction of a "ground storage reservoir" for the City of Grand Prairie, Texas and was accepting bids from subcontractors to do "earth work and piping" on this project. A.B. & J. learned of the project and became interested in submitting a subcontractor's bid. On March 26, 1979 A.B. Cadenhead, president of A.B. & J., met with Jack Hornstein, vice president of Preload Technology, to discuss the work required for this subcontract. ¹ The deadline for the submission of bids to the City was the next day, March 27, at 11:00 a.m. At this meeting Cadenhead gave Hornstein an oral tentative estimate of the cost to perform the work, and Hornstein told him that this "quotation" was the lowest received by Preload Technology, "and to please look his price over to make sure all the work that we discussed was included." Early the following morning, Cadenhead called Hornstein with a revised and final bid which was On April 4, 1979 Cadenhead telephoned Hornstein to inquire about the status of A.B. & J.'s bid. Hornstein was not in the office and Cadenhead's call was transferred to Bill Bush, the United States construction manager for Preload Technology and the vice president in charge of construction for the Preload Company, a sister corporation. Bush informed Cadenhead that A.B. & J. would be the subcontractor used on the Grand Prairie water project since its bid had been the lowest, and this conversation was confirmed with a memo sent to Cadenhead the same day under the "Preload Company" letterhead. Preload Technology throughout these negotiations contemplated that the Preload Company, until this time unknown to Cadenhead, would sign the actual subcontract with A.B. & J.

                $30,000 higher.  Hornstein informed him that he was still the low bidder, "that we would like to use him and in order to use him I needed a written confirmation before the bid [of Preload Technology to the City] went in."    Cadenhead thereupon agreed to submit this bid to Preload Technology in writing before the City's 11:00 a.m. deadline.  He did so 2 and Preload Technology in fact incorporated it into its final bid submitted to the City of Grand Prairie. 3   When bids were opened March 27, 1979, Preload Technology was the low bidder and on April 4, 1979, it was formally awarded the contract by the City of Grand Prairie
                

Subsequently, on April 17, 1979, Cadenhead sent a letter to the Preload Company, informing it that A.B. & J. would not act as a subcontractor on the Grand Prairie project, citing "changes in our workload and other developments," and stating "it would be utterly impossible for us to perform the work in the allotted time without escalating our equipment inventory and increasing our personnel level beyond our desire." ⁴ Hornstein responded for Preload Preload Technology then filed suit against A.B. & J., claiming its right to recover under theories of breach of contract and promissory estoppel. At trial Cadenhead asserted that his refusal to perform was due to the fact that the Preload Company sought to accept his bid when it had been submitted to Preload Technology, Inc., a different entity. Cadenhead claimed that he never intended to do business with the Preload Company and that he had doubts about its financial stability as well as the financial stability of Preload Technology. He maintained that he expressed these doubts by the phrase "other developments," used in his April 17, 1979 letter. The district court, however, determined, with ample justification, that Cadenhead's testimony was "not credible." It found that the corporate structure of the "Preload Group" was not material to A.B. & J., and that the reason A.B. & J. refused to perform was its fear of losing money on the subcontract. ⁵ The district court held A.B. & J. liable under theories of promissory estoppel and breach of contract, and awarded Preload Technology damages equal to the difference between A.B. & J.'s bid and the bid of United, the subcontractor which actually performed the work, together with attorney's fees.

Technology by an April 25, 1979 letter to Cadenhead demanding that he retract his refusal and threatening a lawsuit if he did not. The parties then had a meeting on May 10 at which they were unable to reach an agreement, and Cadenhead maintained his refusal to perform. Hornstein then solicited bids from other subcontractors, and in June 1979 United Contracting Company (United) was awarded the subcontract to perform the work for $605,000, which was $155,056 higher than the A.B. & J. bid.

On appeal, A.B. & J. denies its liability under both theories, objects to the calculation of damages and objects to the award of attorney's fees if liability is based on a theory of promissory estoppel. We affirm A.B. & J.'s liability on the grounds of promissory estoppel and the award of damages and attorney's fees. ⁶

II. PROMISSORY ESTOPPEL

Texas cases have recognized the doctrine of promissory estoppel as set forth in Sec. 90 of the Restatement (First) of Contracts. Wheeler v. White, 398 S.W.2d 93 (Tex.1965); Cooper Petroleum Co. v. LaGloria Oil & Gas Co., 436 S.W.2d 889 (Tex.1969). Section 90 states:

"A promise which the promisor should reasonably expect to induce action or forebearance of a definite and substantial character on the part of the promisee and which does induce such action or forebearance is binding if injustice can be avoided only by enforcement of the promise." Restatement (First) of Contracts Sec. 90.

In Montgomery Industries International, Inc. v. Thomas Construction Co., 620 F.2d 91 (5th Cir.1980), this Court applied Sec. 90 in a Texas law diversity suit involving a general In its analysis the Montgomery court relied heavily on the case of Drennan v. Star Paving Co., 51 Cal.2d 409, 333 P.2d 757, 760 (1958), in which Justice Traynor explained the rationale for applying the doctrine of promissory estoppel in such instances:

contractor's reliance upon a subcontractor's bid which the latter thereafter revoked. In Montgomery, Thomas Construction Co. was a general contractor bidding on the construction of a hospital in Galveston, Texas. It solicited bids from suppliers of pneumatic trash disposal systems. Trans Vac Systems submitted the lowest bid, and Thomas incorporated Trans Vac's figure into its final bid offer on the hospital. Thomas learned that it had submitted the lowest bid on the overall job and immediately informed Trans Vac that the latter's bid on the trash disposal system had been lowest. Trans Vac subsequently refused to perform the work on the system for the price stated in its bid. Trans Vac offered to perform for an additional $32,500 and Thomas, without a realistic alternative, accepted. After construction Thomas refused to pay the added sum, and Trans Vac sued to recover it.

"When the plaintiff [general contractor] used the defendant's [subcontractor's] offer in computing his own bid, he bound himself to perform in reliance upon defendant's terms. Though defendant did not bargain for this use of its bid neither did defendant make it idly, indifferent to whether it would be used or not. On the contrary it is reasonable to suppose that defendant submitted its bid to obtain the subcontract. It was bound to realize the substantial possibility that its bid would be the lowest and that it would be included by plaintiff in his bid. It was to its own interest that the contractor be awarded the general contract; the lower the subcontract bid, the lower the general contractor's bid was likely to be and the greater the chance of acceptance and hence the greater defendant's chance of getting the paving subcontract. Defendant had reason not only to expect plaintiff to rely on its bid but to want him to. Clearly defendant had a stake in plaintiff's reliance on its bid. Given this interest and the fact that plaintiff is bound by his own bid, it is only fair that plaintiff should have at least an opportunity to accept defendant's bid after the general contract has been awarded to him." 333 P.2d at 760.

Based on this rationale, the court in Montgomery held Trans Vac liable to Thomas under a theory of promissory estoppel. It concluded:

"In Texas, a subcontractor who submits a bid offer to a general contractor, knowing that the general contractor is going to rely on its bid in submitting the general bid, is bound unless it is clearly shown that the subcontractor's bid offer was not final." 620 F.2d at 97.

We hold that the case at hand falls within this general rule. A.B. & J. was specifically advised to recheck its bid, because it was the lowest. It did so, and submitted a higher bid. It was again informed that its bid was lowest and that Preload Technology intended to use it. Written confirmation was requested, and...