RY-TAN CONST. v. WASHINGTON ELEMENTARY

Decision Date08 July 2004
Docket NumberNo. 1 CA-CV 03-0248.,1 CA-CV 03-0248.
Citation208 Ariz. 379,93 P.3d 1095
PartiesRY-TAN CONSTRUCTION, INC., an Arizona corporation, Plaintiff-Appellee, v. WASHINGTON ELEMENTARY SCHOOL DISTRICT NO. 6, a political subdivision of the State of Arizona; The Governing Board of the Washington Elementary School District, a Legislative Body of Washington Elementary School District No. 6, Defendants-Appellants.
CourtArizona Court of Appeals

Jennings, Strouss & Salmon, P.L.C., by David B. Earl, David J. Cantelme, Phoenix, Attorneys for Defendants-Appellants.

Francis J. Slavin, P.C., by Francis J. Slavin, Ellen B. Davis, Phoenix, Attorneys for Plaintiff-Appellee.

OPINION

WINTHROP, Judge.

¶ 1 This case arises out of the bid process of a public school construction project. The Governing Board ("the Board") of the Washington Elementary School District ("the School District") voted to award the contract to Ry-Tan Construction, Inc. ("Ry-Tan") as the lowest qualified bidder, and a letter documenting such award was prepared for delivery to Ry-Tan. However, before delivery of the letter or execution of the formal contract documents, a dispute arose between the School District and Ry-Tan, the award was "cancelled," and the project ultimately awarded to the next lowest qualified bidder upon re-bid.

¶ 2 Litigation ensued. The main issues raised in the case, and on appeal, focus on whether a contract was formed and, if so, whether the contract was materially breached by either party. Other issues involve the applicability of certain contractual defenses and the nature of the damages available to the contractor.

¶ 3 Before trial, the court ruled that, as a matter of law, a contract had been formed once the Board voted to accept Ry-Tan's bid. The trial court also denied multiple motions for summary judgment filed by both parties as to whether certain actions by Ry-Tan constituted material breaches of the contract between the parties.1 The trial court also ruled as a matter of law that certain defenses raised by the School District (Ry-Tan's failure to comply with the state's general claims statute, and the existence of a "termination for convenience" clause in the contract) did not apply. Finally, the trial court ruled that the Arizona education procurement rules, including the claims procedures outlined therein, applied to this dispute.

¶ 4 The case was tried to a jury, which returned a verdict in favor of Ry-Tan, awarding damages in the amount of $320,200. Ry-Tan filed motions requesting prejudgment interest, attorneys' fees, and costs, all of which the trial court awarded in the final judgment. This timely appeal followed. We have appellate jurisdiction pursuant to Arizona Revised Statutes ("A.R.S.") section 12-2101(B) and (F) (2003).2

ANALYSIS
1. Contract Formation

¶ 5 Before trial, the court granted partial summary judgment in favor of Ry-Tan on the issue whether a contract was formed with the School District. The School District argues that it did not enter a binding contract with Ry-Tan because, although the Board voted to accept Ry-Tan's bid, the parties never signed, and therefore never formally executed, the contract. We disagree with the School District.

¶ 6 The issue raised by the School District essentially involves a question of law. We review de novo the trial court's rulings on issues of law, as well as issues involving contract and statutory interpretation.3 See Nangle v. Farmers Ins. Co. of Ariz., 205 Ariz. 517, 519, ¶ 10, 73 P.3d 1252, 1254 (App.2003); Andrews v. Blake, 205 Ariz. 236, 240, ¶ 12, 69 P.3d 7, 11 (2003); Tenet HealthSys. TGH, Inc. v. Silver, 203 Ariz. 217, 219, ¶ 5, 52 P.3d 786, 788 (App.2002).

¶ 7 In this case, on January 4, 1999, the School District solicited bids for the construction of new classrooms, and Ry-Tan posted a bid bond and submitted the lowest bid. On February 12, 1999, the project architect recommended to the School District that Ry-Tan be awarded the contract, and he forwarded a copy of his recommendation to Ry-Tan.

¶ 8 Representatives from the School District met with Ry-Tan on March 1, 1999, and discussed a previous experience with Ry-Tan relating to a 1995 school construction contract in which Ry-Tan had started construction work prior to asbestos removal by the abatement contractor and which resulted in fines and citations levied by the State against the School District. Ry-Tan's president, Michael Nichols, signed an acknowledgment that Ry-Tan would "take all steps necessary to ensure that this type of situation does not occur again."

¶ 9 On March 11, 1999, the Board met and formally voted to accept Ry-Tan's bid. Nothing in the Board's minutes indicates that the acceptance was conditional. The Executive Director of Business Services for the School District, Kevin Hegarty, signed a formal Notice to Proceed for the project. The School District scheduled a meeting with Ry-Tan for March 12, 1999, at 3:00 p.m., at which the parties were to formally execute the contract documents and Ry-Tan was to receive the Notice to Proceed.

¶ 10 However, because Ry-Tan brought equipment onto the property on the evening of March 11, 1999, and began work on the morning of March 12 before the meeting, Bob Pickard, Director of Operations for the School District, told Ry-Tan that he would recommend the Board cancel the award and re-bid the project. The School District therefore refused to sign the contract.

¶ 11 Ry-Tan disputed that School District personnel had instructed Ry-Tan not to begin work before the meeting and argued that School District personnel lacked authority to cancel or modify the contract. Although the School District received multiple requests from Ry-Tan to proceed with the project, the Board voted to re-bid the project.

¶ 12 Ry-Tan filed a complaint and later filed a Motion for Partial Summary Judgment Regarding Contract Formation, arguing that a binding and enforceable contract had been created when the Board voted to approve the award of the contract to Ry-Tan and that the signing of formal contract documents was not a condition precedent to contract formation. The School District filed a response and cross-motion for summary judgment on the issue, in which it denied that a contract had been formed. After hearing argument on the motions, the trial court granted Ry-Tan's motion for partial summary judgment that a contract existed:

IT IS FURTHER ORDERED granting [Ry-Tan's] Motion for Partial Summary Judgment on the issue of formation of a contract only. The Court is persuaded by the case of K.L. Conwell Corp. v. City of Albuquerque, 802 P.2d 634 (N.M.1980 [1990]) and City of Susanville v. Lee C. Hess Company, 290 P.2d 520 (Cal.1955). The Court finds there were only ministerial functions left to accomplish once the school board awarded the contract, which it did in the context of its March 11, 1999 meeting. It found, in fact, that [Ry-Tan] was the lowest bidder and [Ry-Tan] was the most responsible bidder. The Court finds that there was a contract formed between the parties as of the date of the School Board vote granting [Ry-Tan] the contract.

¶ 13 The School District relies primarily on language in Covington v. Basich Brothers Construction Co., 72 Ariz. 280, 233 P.2d 837 (1951), as the basis for its argument that the bid and award were mere preliminaries and that a contract was not formed between the parties. In Covington, a California construction company, Basich Brothers, submitted a road construction bid accompanied by a $30,000 check, or "proposal guarantee,"4 to the Arizona State Highway Commission. Id. at 282, 233 P.2d at 838. Basich Brothers was the low bidder, but made several attempts to have its check returned, contending that it had overlooked various cost items in making its bid. Id. Basich Brothers eventually informed the Highway Commission that if Basich Brothers were not relieved of the contract, it would go through with the project, but it requested that the State Highway Engineer recommend a postponement in the award of the contract. Id. at 282-83, 233 P.2d at 838.

¶ 14 The State Highway Engineer declined to do so, and the next day, August 5, 1949, the Highway Commission accepted Basich Brothers' bid, awarded it the contract, and sent notification by mail. Id. at 283, 233 P.2d at 838. Basich Brothers received the letter awarding it the contract on August 8, 1949. Id. at 283, 233 P.2d at 839.

¶ 15 On August 12, the Highway Commission received a telegram from an employee of Basich Brothers that stated: "Confirming phone call to Mr. Perkins unable to return contract on Ashfork Flagstaff job by Monday 15th account R.L. and N.L. Basich have been out of town on urgent business expected back Tuesday. Respectfully ask for a few days extension of time." Id. That same day, the Highway Commission passed and adopted a resolution that stated if Basich Brothers did not execute and return the contract within ten days from the date of the award, the award would be annulled, the proposal guarantee forfeited to the state, and the next lowest bidder would receive the contract. Id. The Highway Commission informed Basich Brothers by telephone and wire that day that it had passed the resolution. Id. On August 20, Basich Brothers received a letter written by the Highway Commission on August 17, informing Basich Brothers that, on August 16, the Highway Commission had forfeited the proposal guarantee and awarded the contract to the next lowest bidder. Id.

¶ 16 Basich Brothers filed a claim for return of the $30,000 with the Highway Commission and others, but the claim was disallowed. Id. Basich Brothers then brought an action in mandamus to require the Highway Commission to approve its claim for return of the proposal guarantee. Id. The trial court issued a writ of mandamus, ordering the members of the Highway Commission to approve Basich Brothers' claim. Id.

¶ 17 On appeal, the Highway Commission pointed out that the Arizona Highway Department's Standard...

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