Stark Elec., Inc. v. Huntington Housing Authority, 17667

• Decision Date: 23 November 1988
• Docket Number: No. 17667,17667
• Citation: 375 S.E.2d 772,180 W.Va. 140
• Parties: STARK ELECTRIC, INC. v. HUNTINGTON HOUSING AUTHORITY, et al., and James Electric Co.
• Court: West Virginia Supreme Court

Page 772

375 S.E.2d 772

180 W.Va. 140

STARK ELECTRIC, INC. v. HUNTINGTON HOUSING AUTHORITY, et al., and James Electric Co.

No. 17667.

Supreme Court of Appeals of West Virginia.

Nov. 23, 1988.

Syllabus by the Court

"A party to whom an offer of contract is made must either accept it wholly or reject it wholly. A proposition to accept on terms varying from those offered is a rejection of the offer, and a substitution in its place of the counter proposition. It puts an end to the negotiation so far as the original offer is concerned." Syllabus Point 2, Bowers Co. v. Kanawha Valley Prod. Co., 100 W.Va. 278, 130 S.E. 284 (1925).

James W. St. Clair, Marshall & St. Clair, Huntington, for Stark Elec.

Norman K. Fenstermaker, Susan E. Morton-Smith, Jenkins, Fenstermaker, Krieger, Kayes & Farrell, Huntington, for Huntington, WV Housing Auth., etc., et als.

PER CURIAM:

This is an appeal by Stark Electric Company, Inc. (Stark), from a final order of the Circuit Court of Cabell County dismissing its complaint for failure to state a claim upon which relief could be granted, pursuant to Rule 12(b)(6) of the West Virginia Rules of Civil Procedure. ¹ Stark was the plaintiff below in a suit for damages for breach of a delayed construction contract. On appeal, Stark argues two primary points: (1) that there was a binding contract between Stark and the defendant Huntington, West Virginia Housing Authority (HHA), and (2) that the trial court improperly granted HHA's motion to dismiss. We find that the trial court did not err in granting HHA's motion to dismiss.

I.

The defendant HHA is an agency of the City of Huntington. In early 1984, HHA decided to improve the electrical system in a low-income housing project, Marcum Terrace. This work was funded through the Department of Housing and Urban Development (HUD). ² After its architect prepared detailed plans and specifications, HHA sent out invitations to bid on the project. The bids were opened on August 29, 1984, and the low bidder was the defendant, James Electric Company.

Immediately after the bids were opened, a controversy arose over some informalities in James Electric's bid: (1) the certified check furnished as bid security was $1,000 less than the required 5 percent of the total bid; (2) no unit prices were provided for the base bid; (3) alternate cost items to be utilized in the event the bids exceeded the budget were submitted on James Electric's business stationery, rather than on the "alternate form" provided; (4) it erroneously added, instead of subtracted $9,000 for "alternate one," a deduction; and (5) HHA doubted the authenticity of the notary's signature, although no one questioned that the signatures verified were authentic.

HHA discovered these discrepancies and gave James Electric twenty-four hours to submit the required information and a new check for the bid security. James Electric complied with this request. Although it is not clear from the record, the notary was apparently contacted and verified that the signatures were authentic.

Concerned that the initial informalities in the James Electric bid might raise questions about the bidding process, HHA decided to defer awarding the contract until its regular meeting on September 11, 1984. ³ At the September meeting, representatives were present from both James Electric and Stark. Initially, general counsel for HHA presented his opinion which gave two options that HHA could follow: (1) reject the bid from James Electric as not fully complying with the bid requirements and award the contract to Stark; or (2) find that the bid submitted by James Electric substantially complied with the bid requirements, waive the informalities, and award the contract to James Electric.

HHA decided to follow the first option and accept Stark's bid, which was approximately $32,000 higher than James Electric's, but conditioned its acceptance upon HUD's formal approval of the contract. This conditional acceptance was set forth in Resolution No. 652-84:

"BE IT RESOLVED: By the Huntington West Virginia Housing Authority that the execution of a contract by and between the Huntington West Virginia Housing Authority and Stark Electric, Inc., for the electrical distribution system at Project W.Va. 4-3, Marcum Terrace, in connection with Mod Project WV4-905, in a base bid amount not to exceed $1,048,423, be approved, subject to HUD approval." (Emphasis added).

The next day Pat Lovely, the Executive Director of HHA, wrote HUD requesting approval to reject the bid of James Electric. HUD responded by letter dated September 13, 1984, which contained the following statement: "[I]t is the opinion of HUD legal counsel that the bid of James Electric in the amount of $968,200 substantially meets the bid documents. Therefore, this office cannot concur in your request." Both James Electric and Stark were notified by letters dated September 18, 1984, of HUD's refusal to accept the plaintiff's bid and that "no further action will be taken by the authority until the next regular meeting ... on Tuesday, October 9, 1984." At the October meeting, HHA adopted a resolution awarding the contract to James Electric subject to the approval of HUD. ⁴ The contract was thus awarded to James Electric.

On October 31, 1984, the plaintiff filed suit in the Circuit Court of Cabell County against HHA, its directors, and James Electric. The complaint prayed for a writ of mandamus to compel HHA and its directors to cancel and annul the contract with James Electric and award it to the plaintiff; in the alternative, the plaintiff sought $200,000 in damages.

II.

The core of Stark's argument is that HHA is bound by its instructions to bidders. Since there was nothing in the bid documents that stated HHA's acceptance would be conditioned on HUD's approval, it had no right to make such requirement. Stark ignores basic contract law.

It cannot be doubted that HHA's documents were an invitation to bid. The bidders such as Stark and James Electric in returning their proposals were making bids. The invitation to bid documents clearly indicated that HHA was not obligated to accept any of the bids. ⁵ The various contractors by returning their bids were making an offer to perform the work at the price stated in their bid documents.

Moreover, it is clear from W.Va.Code, 5-22-1 (1983), which relates to government construction contracts, that "the State and its subdivisions may reject all bids and solicit new bids on said project." ⁶ Thus, we conclude that HHA's acceptance of the Stark bid conditioned on HUD's approval did not create a binding contract. HHA's subsequent rejection of the bid due to HUD's refusal to approve, therefore, did not constitute a breach of contract.

It is rather universally accepted that where an offer is made and the person accepting the offer does not do so unequivocally, but conditions his acceptance, then no binding contract arises. We spoke to this point in Bowers Co. v. Kanawha Valley Prod. Co., 100 W.Va. 278, 130 S.E. 284 (1925), where we stated in Syllabus Point 2:

"A party to whom an offer of contract is made must either accept it wholly or reject it wholly. A proposition to accept on terms varying from those offered is a rejection of the offer, and a substitution in its place of the counter proposition. It...