Wil-Fred's Inc. v. Metropolitan Sanitary Dist. of Greater Chicago

• Decision Date: 17 January 1978
• Docket Number: WIL-FRED,No. 76-481,76-481
• Citation: 372 N.E.2d 946,14 Ill.Dec. 667,57 Ill.App.3d 16
• Parties: , 14 Ill.Dec. 667 'S INC., Plaintiff-Appellee, v. The METROPOLITAN SANITARY DISTRICT OF GREATER CHICAGO, Defendant-Appellant.
• Court: United States Appellate Court of Illinois

Page 946

372 N.E.2d 946

57 Ill.App.3d 16, 14 Ill.Dec. 667

WIL-FRED'S INC., Plaintiff-Appellee, v. The METROPOLITAN SANITARY DISTRICT OF GREATER CHICAGO,

Defendant-Appellant.

No. 76-481.

Appellate Court of Illinois, First District, Second Division.

Jan. 17, 1978.

Allen S. Lavin, Chicago (James W. Kennedy, Alan J. Cook and Ina S. Winston, Chicago, of counsel), for defendant-appellant.

James E. O'Halloran, Jr., D. Daniel Barr and Thomas C. Walker, Chicago (Bell, Boyd, Lloyd, Haddad & Burns, Chicago, of counsel), for plaintiff-appellee.

PERLIN, Justice.

In response to an advertisement published by the Metropolitan Sanitary District of Greater Chicago (hereinafter Sanitary District) inviting bids for rehabilitation work at one of its water reclamation plants, Wil-Fred's Inc. submitted a sealed bid and, as a security deposit to insure its performance, a $100,000 certified check. After the bids were opened, Wil-Fred's, the low bidder, attempted to withdraw. The Sanitary District rejected the request and stated that the contract would be awarded to Wil-Fred's in due course. Prior to this award, Wil-Fred's filed a complaint for preliminary injunction and rescission. After hearing testimony and the arguments of counsel, the trial court granted rescission and ordered the Sanitary District to return the $100,000 bid deposit to Wil-Fred's. The Sanitary District seeks to reverse this judgment order.

The Sanitary District's advertisement was published on November 26, 1975, and it announced that bids on contract 75-113-2D for the rehabilitation of sand drying beds at the District's West-Southwest plant in Stickney, Illinois, would be accepted up to January 6, 1976. ¹ This announcement specified that the work to be performed required the contractor to remove 67,500 linear feet of clay pipe and 53,200 cubic yards of gravel from the beds and to replace these items with plastic pipe and fresh filter material. Although plastic pipes were called for, the specifications declared that "all pipes * * * must be able * * * to withstand standard construction equipment."

The advertisement further stated that "(t)he cost estimate of the work under Contract 75-113-2D, as determined by the Engineering Department of the * * * Sanitary District * * * is $1,257,000.00."

A proposal form furnished to Wil-Fred's provided:

"The undersigned hereby certifies that he has examined the contract documents * * * and has examined the site of the work, * * *.

The undersigned has also examined the Advertisement, the 'bidding requirements,' has made the examinations and investigation therein required, * * *.

The undersigned hereby accepts the invitation of the Sanitary District to submit a proposal on said work with the understanding that this proposal will not be cancelled or withdrawn.

It is understood that in the event the undersigned is awarded a contract for the work herein mentioned, and shall fail or refuse to execute the same and furnish the specified bond within thirteen (13) days after receiving notice of the award of said contract, then the sum of One Hundred Thousand Dollars ($100,000.00), deposited herewith, shall be retained by the Sanitary District as liquidated damages and not as a penalty, it being understood that said sum is the fair measure of the amount of damages that said Sanitary District will sustain in such event. " (Emphasis added.)

On December 22, 1975, the Sanitary District issued an addendum ² that changed the type of sand filter material which was to be supplied by the contractor. During the bidding period the District's engineering department discovered that the material originally specified in the advertisement was available only out of state and consequently was extremely expensive. This addendum changed the filter material to a less expensive type that could be obtained locally.

On January 6, 1976, Wil-Fred's submitted the low bid of $882,600 which was accompanied by the $100,000 bid deposit and the aforementioned proposal form signed on behalf of the company by Wil-Fred's vice president. Eight other companies submitted bids on January 6. The next lowest bid was $1,118,375, and it was made by Greco Contractors, Inc.

On January 8, 1976, Wil-Fred's sent the Sanitary District a telegram which stated that it was withdrawing its bid and requested return of its bid deposit. This telegram was confirmed by a subsequent letter mailed the same day.

On January 12, 1976, Wil-Fred's, at the request of the Sanitary District, sent a letter setting forth the circumstances that caused the company to withdraw its bid. The letter stated that upon learning the amount by which it was the low bidder, Wil-Fred's asked its excavating subcontractor, Ciaglo Excavating Company, to review its figures; that excavation was the only subcontracted trade in Wil-Fred's bid; that the following day Ciaglo informed Wil-Fred's that there had been a substantial error in its bid, and therefore it would have to withdraw its quotation since performing the work at the stated price would force the subcontractor into bankruptcy; that Wil-Fred's then checked with other excavation contractors and confirmed that Ciaglo's bid was in error; that Wil-Fred's had used Ciaglo as an excavating subcontractor on many other projects in the past, and Ciaglo had always honored its previous quotations; that Ciaglo had always performed its work in a skillful fashion; that because of these facts Wil-Fred's acted reasonably in utilizing Ciaglo's quoted price in formulating its own bid; and that with the withdrawal of Ciaglo's quotation Wil-Fred's could not perform the work for $882,600.

On February 2, 1976, Wil-Fred's received a letter from Thomas W. Moore, the Sanitary District's purchasing agent. Moore's letter stated that in his opinion the reasons cited in Wil-Fred's letter of January 12 did not justify withdrawal of the bid. For this reason Moore said that he would recommend to the Sanitary District's general superintendent that the contract be awarded to Wil-Fred's at the original bid price.

At a February 20 meeting between representatives of the Sanitary District and Wil-Fred's, the company was informed that the District's board of trustees had rejected its withdrawal request, and that it would be awarded the contract. In response to this information, Wil-Fred's filed its complaint for preliminary injunction and rescission on February 26, 1976. The complaint alleged that the company would be irreparably injured if required to perform the contract at such an unconscionably low price or if forced to forfeit the $100,000 bid deposit. The hearing on this complaint commenced on March 10, 1976.

At the hearing William Luxion, president of Wil-Fred's, testified that the company had been in business for 18 years; that Wil-Fred's did 13 to 14 million dollars worth of business in 1975; that 95% Of the company's work was done on a competitive bid basis; that Wil-Fred's never had withdrawn a competitive bid in the past; and that he personally examined the company's bid prior to its submission. Luxion further stated that he told Wil-Fred's chief estimator to review the company's quotation immediately after he was notified on January 6 that Wil-Fred's bid was more than $235,000 below the next lowest bid. At this time he also requested that Ciaglo Company review its figures.

The reexamination by the chief estimator revealed that there was no material error in the portion of the bid covering work to be done by Wil-Fred's. However, the president of Ciaglo contacted Luxion on January 8 and stated that his bid was too low on account of an error and that, because of this, he was withdrawing his quotation. Upon receiving this information, Luxion sent the Sanitary District the telegram and letter in which he informed the District of this error, withdrew Wil-Fred's bid and requested a return of the company's bid deposit.

Lastly, Luxion testified that a loss of the $100,000 security deposit would result in the company's loss of bonding capacity in the amount of two to three million dollars; that Wil-Fred's decided not to attempt to force Ciaglo to honor its subcontract because the company felt that Ciaglo was not financially capable of sustaining a $150,000 loss; and that he was aware of the Sanitary District's cost estimate before Wil-Fred's submitted its bid. However, Luxion stated that he took the addendum changing the filter material into account when calculating the price of the bid and concluded that this alteration would result in a cost savings of over $200,000.

Dennis Ciaglo, president of Ciaglo Excavating, Inc., also testified on behalf of Wil-Fred's and stated that prior to January 6, 1976, his company submitted a quote of $205,000 for the removal of the existing material in the sand beds, for digging trenches for the new pipe and for spreading the new filter materials. Ciaglo further stated that a representative of Wil-Fred's called him on January 6 and asked him to review his price quotation. During his examination the witness discovered that he underestimated his projected costs by $150,000. Ciaglo said that this error was caused by his assumption that heavy equipment could be driven into the beds to spread the granular fill. Although he was aware that plastic pipes were to be used in the beds, Ciaglo still presumed that heavy equipment could be employed because the specifications called for the utilization of standard construction equipment. Ciaglo first learned that the plastic pipes would not support heavy equipment when, as part of his review of the price quote, he contacted the pipe manufacturer.

Ciaglo testified additionally that his company probably would have to file for bankruptcy if forced to take a $150,000 loss; that Ciaglo Excavating Co. had never before withdrawn a price quotation given to Wil-Fred's or any other company; and that in his opinion the change in the filter material called for by the second addendum would cause a $300,000 reduction...