Southern California Acoustics Co. v. C. V. Holder, Inc.

• Decision Date: 05 August 1969
• Citation: 79 Cal.Rptr. 319,456 P.2d 975,71 Cal.2d 719
• Court: California Supreme Court
• Parties: , 456 P.2d 975 SOUTHERN CALIFORNIA ACOUSTICS CO., Inc., Plaintiff and Appellant, v. C. V. HOLDER, INC. et al., Defendants and Respondents. L.A. 29607.

Page 319

79 Cal.Rptr. 319

71 Cal.2d 719, 456 P.2d 975

SOUTHERN CALIFORNIA ACOUSTICS CO., Inc., Plaintiff and Appellant, v. C. V. HOLDER, INC. et al., Defendants and Respondents.

L.A. 29607.

Supreme Court of California,

In Bank.

Aug. 5, 1969.

Rehearing Denied Sept. 4, 1969.

Munns, Kofford, Hoffman, Hunt & Throckmorton, Milton J. Morris, San Marino, David M. Raatz, West Covina, Jed L. Kelson and Gordon Hunt, San Marino, for plaintiff and appellant.

Raymond H. Levy, San Francisco, as amicus curiae on behalf of plaintiff and appellant.

Grant & Popovich and Irvin Grant, Los Angeles, for defendants and respondents.

TRAYNOR, Chief Justice.

Plaintiff appeals from a judgment of dismissal entered after a demurrer to its second amended complaint was sustained without leave to amend.

Plaintiff alleged this it is a licensed specialty subcontractor. On November 24, 1965, it submitted by telephone to defendant C. V. Holder, Inc., a general contractor, a subcontract bid in the amount of $83,400 for the furnishing and installation of acoustical tile on a public construction job. Later that day Holder submitted a bid for the prime contract to codefendant Los Angeles Unified School District. As required by law, Holder listed the subcontractors who would perform work on the project of a value in excess of one-half of one percent of the total bid. ¹ Holder listed plaintiff as the acoustical tile subcontractor. Holder was subsequently awarded the prime contract for construction of the facility and executed a written contract with the school district on December 9, 1965. A local trade newspaper widely circulated among subcontractors reported that Holder had been awarded the contract and included in its report the names of the subcontractors listed in Holder's bid. Plaintiff read the report and, acting on the assumption that its bid had been accepted, refrained from bidding on other construction jobs in order to remain within its bonding limits.

Sometime between December 27, 1965, and January 10, 1966, Holder requested permission from the school district to substitute another subcontractor for plaintiff, apparently on the ground that plaintiff had been inadvertently listed in the bid in place of the intended subcontractor. The school district consented, and the substitution was made. Plaintiff then sought a writ of mandamus to compel the school district to rescind its consent to the change in subcontractors. The trial court sustained the district's demurrer and thereafter dismissed the proceeding. Plaintiff did not appeal. Plaintiff then brought this action for damages against Holder and the school district.

Plaintiff contends that the trial court erred in sustaining the demurrer on the ground that the facts alleged in its complaint would support recovery of damages for breach of contract, breach of a statutory duty, and for negligence. We conclude that plaintiff has stated a cause of action for breach of a statutory duty.

There was no contract between plaintiff and Holder, for Holder did not accept plaintiff's offer. Silence in the face of an offer is not an acceptance, unless there is a relationship between the parties or a previous course of dealing pursuant to which silence would be understood as acceptance. (See Wold v. League of the Cross (1931) 114 Cal.App. 474, 479--481, 300 P. 57; Wood v. Gunther (1949) 89 Cal.App.2d 718, 730--731, 201 p.2d 874; 1 Williston on Contracts (3d ed. 1957) §§ 91--91A; 1 Witkin, Summary of Cal. Law (7th ed. 1960) Contracts, § 60, pp. 65--67.) No such relationship or course of dealing is alleged. Nor did Holder accept the bid by using it in presenting its own bid. In the absence of an agreement to the contrary, listing of the subcontractor in the prime bid is not an implied acceptance of the subcontractor's bid by the general contractor. (Klose v. Sequoia Union High School Dist. (1953) 118 Cal.App.2d 636, 641, 258 P.2d 515; Norcross v. Winters (1962) 209 Cal.App.2d 207, 217, 25 Cal.Rptr. 821. See Williams v. Favret, 5 Cir. (1947) 161 F.2d 822; 1 Corbin on Contracts (1963) § 24 and fn. 11 at pp. 72--73.) The listing by the general contractor of the subcontractors he intends to retain is in response to statutory command (Gov.Code, § 4104) and cannot reasonably be construed as an expression of acceptance. (Cf. Western Concrete Structures Co. v. James I. Barnes Constr. Co. (1962) 206 Cal.App.2d 1, 13, 23 Cal.Rptr. 506; Klose v. Sequoia Union High School Dist., supra, 118 Cal.App.2d 636, 641, 258 P.2d 515.)

Plaintiff contends, however, that its reliance on Holder's use of its bid and Holder's failure to reject its offer promptly after Holder's bid was accepted constitute acceptance of plaintiff's bid by operation of law under the doctrine of promissory estoppel. Section 90 of the Restatement of Contracts states: 'A promise which the promisor should reasonably expect to induce action or forbearance of a definite and substantial character on the part of the promisee and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise.' This rule applies in this state. (Drennan v. Star Paving Co. (1958) 51 Cal.2d 409, 413, 333 P.2d 757.) Before it can be invoked, however, there must be a promise that was relied upon. (Bard v. Kent (1942) 19 Cal.2d 449, 453, 122 P.2d 8, 139 A.L.R. 1032; Hilltop Properties v. State of California (1965) 233 Cal.App.2d 349, 364, 43 Cal.Rptr. 605; 1 A Corbin on Contracts (1963) § 222, p. 218.)

In Drennan, we held that implicit in the subcontractor's bid was a subsidiary promise to keep his bid open for a reasonable time after award of the prime contract to give the general contractor an opportunity to accept the offer on which he relied in computing the prime bid. The subsidiary promise was implied 'to preclude the injustice that would result if the offer could be revoked after the offeree had acted in detrimental reliance thereon.' (51 Cal.2d at p. 414, 333 P.2d at p. 760.)

Plaintiff urges us to find an analogous subsidiary promise not to reject its bid in this case, but it fails to allege facts showing the existence of any promise by Holder to it upon which it detrimentally relied. Plaintiff did not rely on any promise by Holder, but only on the listing of subcontractors required by section 4104 of the Government Code and on the statutory restriction on Holder's right to change its listed subcontractors without the consent of the school district. (Gov.Code, § 4107.) Holder neither accepted plaintiff's offer, nor made any promise or offer to plaintiff intended to 'induce action or forbearance of a definite and substantial character * * *.'

Plaintiff contends, however, that the Subletting and Subcontracting Fair Practices Act ² confers rights on listed subcontractors that arise when the prime contract is awarded and that these rights may be enforced by an action for damages. Before that act was adopted in 1963, it was settled that the Government Code sections governing subcontracting, which the act superseded, conferred no rights on subcontractors. (Klose v. Sequoia Union High School Dist., supra, 118 Cal.App.2d 636, 641, 258 P.2d 515.) Klose was a proceeding in mandate brought by a taxpayer against the awardng authority to compel the latter to assess a penalty against a prime contractor. The prime contractor had changed subcontractors with the consent of the awarding authority on the ground that the original listing had been the result of error. The plaintiff contended that under the language of then Government Code section 4104, subdivision (d) ³ an awarding authority had no legal power to consent to the change on the ground stated and that the substitution was therefore in violation of the statute. Such a violation would render the prime contractor liable for penalties provided for by then section 4106. (Now § 4110.)

The court denied relief on the ground that the language of subdivision (d) of section 4104 that authorized the substitution of another for a subcontractor who failed to execute a written contract did not limit the awarding authority's discretion to consent to the substitution of subcontractors in other situations. In so concluding the court listed a series of situations in which substitutions not provided for by subdivision (d) would be necessary to the efficient execution of a public project. ⁴ The court also concluded that the purpose of the listing and substitution sections was not to grant rights to listed subcontractors, but to provide an opportunity to the awarding authority to investigate and approve the initial subcontractors and any proposed substitutions.

The amendments made by the 1963 Subletting and Subcontracting Fair Practices Act stated the purposes of the statute in a preamble (§ 4101) ⁵ and completely revised the section dealing with substitution of subcontractors, renumbering it section 4107. ⁶ The purpose of the amended statute is not limited, as Klose had concluded with respect to the prior statute, to providing the awarding authority with an opportunity to approve substitute subcontractors. Its purpose is also to protect the public and subcontractors from the evils attendant upon the practices of bid shopping and bid peddling subsequent to the award of the prime contract for a public facility. ⁷ Thus section 4107 now clearly limits the right of the prime contractor to make substitutions and the discretion of the awarding authority to consent to substitutions to those situations listed in subdivision (a), all of which are keyed to the unwillingness or inability of the listed subcontractor properly to perform. ⁸ Unless a listed subcontractor 'becomes insolvent or fails or refuses to perform a written contract for the work or fails or refuses to meet the bond requirements of the prime contractor,' the prime contractor may not substitute another subcontractor for the listed subcontractor and the awarding authority may not consent to such a substitution...