Court Opinion

ID: 9759837
Source: CourtListenerOpinion
Date Created: 2023-08-29 00:29:05.668221+00
Date Added: 2024-06-11T07:29:05.102031
License: Public Domain

STEPHENS, Chief Justice,
dissenting.
Today the Court has taken a position that in effect sanctions the business practice commonly known as “bid shopping.”
The majority has done so by adhering to the antiquated notion that although the subcontractor is bound to perform once he submits a bid to the general contractor, the general contractor, on the other hand, is not similarly bound to the subcontractor. In so holding, this Court has strapped itself into judicial blinkers. It is obvious, given a broader and more realistic perspective, that when all the circumstances alleged by Fin-ney are considered they are sufficient to establish that Monarch did accept Finney’s bid and thus should be bound thereby. Moreover, the Court has taken this action in contravention of the law it established in the recent contract case of Meade Construction Company, Inc. v. Mansfield Commercial Electric, Inc., Ky., 579 S.W.2d 105 (1979). The holding in that case, coupled with the facts in the present one, necessitates that, at the very least, this case should be remanded to the trial court for a jury trial. Here, summary judgment is entirely inappropriate.
In Meade, supra, we decided that a subcontractor, Mansfield, was bound to perform for a general contractor, Meade, when the general had used the apparently low bid of the subcontractor in preparing its successful overall bid for a construction project. We held that the general contractor did have a binding contract with the subcontractor and that therefore the subcontractor was liable to the general contractor for damages caused by the subcontractor’s refusal to honor its subcontract bid.
I write this fully recognizing that in Meade the general contractor was trying to bind the subcontractor whereas in the case at bar the subcontractor is trying to bind the general contractor. However, despite the individual facts of each case, the general principles of law articulated in Meade should apply herein. No logical reason exists that reasonably justifies a separate set of laws for general contractors than those which apply to subcontractors.
The holding in Meade was not based upon the doctrine of promissory estoppel. After having declined to use the doctrine of promissory estoppel the Court then articulated the contractual and equitable rationales it did use to find that a binding contract existed. The law that this Court applied was explicitly laid out when the Court said:
Suffice it to say that under any conception of fairness and equity, one who submits a quotation for the purpose of its being used in the computation of a bid for a contract should be bound, when the contract is awarded pursuant to a bid prepared in reasonably foreseeable reliance on that question, to accept an agreement in conformity with the question. Id., at p. 106 (Emphasis added.)
In short, the Court in Meade established a two-pronged test for determining whether a binding contract exists between a subcontractor and a general contractor at the time “... when the [overall] contract is awarded....” The two prongs of the test are: (1) fairness and equity and (2) reasonably foreseeable reliance by the one party upon the actions taken by the other party.
After having established the two-pronged test the Court then went on to *862explain how it found the second prong, “reasonably foreseeable reliance”, to exist. In applying the aforementioned law to the facts of that case the Court said:
Mansfield submitted a clear quotation which was reiterated both orally and in writing. Mansfield should reasonably have expected that quotation to be used in the preparation of the contract bid, since it had notice that its subcontract bid was substantially lower than the other bids received by Meade. Although the trial judge did not make a specific finding on the question of reliance by Meade, we feel the weight of the evidence clearly compels a finding that Meade did rely upon Mansfield’s offer. Therefore, we hold Mansfield liable to Meade for damages caused by Mansfield’s refusal to honor its subcontract bid. (Emphasis added.) Id. at p. 106
Thus, this Court in Meade said that the second prong, “reasonably foreseeable reliance,” had taken place if (1) [to paraphrase] Party A should reasonably have expected Party B's reliance since Party A had “notice” that Party A’s bid was lower; and also if (2) this Court decided (despite the lack of such specific finding by the trial judge) that the weight of the evidence compels a finding that Party B did rely on Party A’s actions.
As to whether reasonably foreseeable reliance had taken place in this ease we must apply the factors set out in Meade. Using Meade’s first general test for “reasonably foreseeable reliance” we must determine whether Monarch should reasonably have expected Finney's reliance since Monarch (and Finney as well) had “notice” that Monarch’s bid (and Finney’s bid as well) was lower. In Meade the answer to the question posed in a like language was: yes, “reasonably foreseeable reliance” had occurred.
I point out that this Court in Meade did not require that the “notice”, which provoked the reasonably foreseeable reliance by one party upon another and which flowed between the subcontractor and the general contractor, either necessarily or specifically be in the form of a direct communication between the sub and the general. The Court only said that a party “ ... should reasonably have expected ... [the reliance] ... since it had notice that its bid was ... lower_” In addition, the facts as described in the opinion do not clarify or specify whether the sub’s first notice was or was not directly from the general contractor.
We should also recognize the fact that the notice which provoked the “reasonable foreseeable reliance” in Meade and upon which the issue turned in Meade was not generated by the subcontractor’s submission of a bid. Rather, the notice in Meade came during the bidding process. This is significant because the Meade court found a binding contract to exist based upon notice sufficient enough between the parties to engender reasonably foreseeable reliance by one party upon another party at a point in the bidding process where a traditionally or “regularly” communicated acceptance had not yet taken place.
Furthermore, apparently in the present case there was “notice” flowing from several sources of Monarch’s reliance upon Finney’s bid. According to the affidavit of Ben Finney, by 4:30 p.m. of February 5, 1981, the day that the bids were opened at 2:00 p.m., Finney Company had been told by “the state” over the telephone and by Mr. H.V. Staggs of Staggs & Fisher, the consulting engineers on the project, that Monarch had chosen and listed Finney Company as the mechanical contractor. According to the rationale of the Meade decision, a party should reasonably expect reliance upon notice that a bid is lower. Certainly, Monarch received notice that Finney’s bid was lower, Finney, likewise, received notice that its bid was lower, and they both received notice that Monarch’s bid was the lowest. Therefore, under the law in Meade, the two contractors should “reasonably have expected” each other’s reliance upon those communicated facts, i.e. upon that “notice”.
Under Meade to prove “reasonably foreseeable reliance” it must be found that *863Party B did rely on Party A’s actions. The facts are abundant to unequivocably prove Finney’s reliance upon the actions of Monarch. The facts also prove that Finney’s reliance took place after it received “notice” of the kind deemed sufficient in Meade. Ben Finney’s affidavit states facts that show that on February 5, 1981, Finney Company received first notice that Monarch was the low general contractor bidder and that Finney Company was the low subcontractor mechanical bidder. Mr. Fin-ney’s affidavit alleges that on February 12, 1981, February 24, 1981 and March 2, 1981, Finney Company refrained from bidding on three major construction projects and that as a result of Monarch’s actions Finney also incurred expenses of approximately $19,600 for purchases of equipment to be used on the Monarch project. Surely a jury should have had a chance to determine if these facts prove that Finney did rely on Monarch’s actions.
But even more than all of this, the Meade concept of reasonably foreseeable reliance could arguably also have arisen as a result of custom in the construction industry. Two allegations exist in this record which are sufficient to, at the very least, raise an issue as to whether the custom in the construction industry is that once a general uses a sub’s bid then the general considers itself bound to the sub. Obviously such a custom in the industry would produce reasonably foreseeable reliance by the sub and would thus fulfill the Meade standard.
The first of these allegations is that Monarch’s use of Finney’s bid coupled with additional facts tended to prove an acceptance by Monarch. The additional facts are that: (1) Monarch listed Finney in the contract executed by Monarch and the Commonwealth on February 19, 1981 which was two weeks after the bid opening and one week after Monarch had received Fin-ney’s written conformation of its bid; (2) Finney attended the pre-construction conference on March 2, 1981 without apparent objection from Monarch; (3) Ben Finney’s allegation # 3 on page one of his affidavit:
That bid shopping by a general contractor after being awarded a prime contract is considered to be an unethical practice within the standards of the construction industry generally and locally.
The second of the two major allegations which is sufficient to raise a jury issue about whether custom in the industry would indicate reasonably foreseeable reliance and/or that a binding contract existed between Finney and Monarch is that Finney alleged that at the pre-construction conference, Mr. Boyer Moore of Johnson-Romanowitz, the architects, Mr. H.Y. Staggs of Staggs & Fisher, the consulting engineers on this project, and Mr. Keith Abbott of the Division of Engineering for the state, emphasized in response to the voiced concerns of Finney and other listed subcontractors that “... all listed subcontractors were a part of the contract with Monarch and could not be changed unless a letter of release was obtained from the subcontractors.”
To conclude this examination of the second Meade test prong, “reasonably foreseeable reliance”, I reiterate that (1) the application of the general test established in Meade for determining if “reasonable foreseeable reliance” had occurred plus (2) the fact that Meade did not require direct “notice”, plus (3) the fact that Meade considered notice received during the bidding process to be sufficient for establishing reasonably foreseeable reliance plus (4) the facts that show Finney did rely upon Monarch’s actions plus (5) substantial allegations of industry customs that could be a credible basis for finding reasonably foreseeable reliance coupled with (6) a well reasoned precedent for allowing the admission of evidence of industry custom all amounts to certainly enough to not only compel, but to mandate that the Meade second prong issue, that is, whether Monarch could reasonably have foreseen that Finney would rely on Monarch’s action, should at the very least have been submitted to the jury.
The first prong from the Meade test, the “fairness and equity” standard also com*864pels a resubmission of this case for trial if not an outright reversal of it. In Meade we found a binding contract based in part upon “fairness and equity”. Surely, fairness and equity came into play in this situation to an equal or even greater extent than they did in Meade. In Meade fairness and equity were applied to reach the result when the case was a relatively clear cut contract bidding dispute. Here, however, the dispute wallows in the highly questionable practice of bid shopping.
It appears that here one party used inequitable advantage that antiquated law has given to it in order to dangle the not so advantageously situated party by a thread. The party with the unreasonable advantage keeps the less fortunate party suspended in an untenable position until it chooses to either hoist him up or unexpectedly cut him loose to plummet. The less fortunate party is left seriously damaged but without recourse.
Because Finney was bound to perform at Monarch’s call, Finney was required to be ready to start work at Monarch’s command. This meant Finney had no choice but to purchase needed equipment and to refrain from bidding on other jobs in order not to tie up its workers, equipment and capital so that they were available at a moment’s notice of work on the Monarch project. Yet, we have decided that despite these obligations imposed upon Finney, Monarch is free to dismiss Finney from the project, without cause, standard of “fairness and equity” all the more important. If ever there was a situation that called for the application of “fairness and equity” this is it. I regret that it has not been implemented.
At the very least this case should have been reversed and remanded to the trial court for a trial on the merits.