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East Porter County School Corp. v. Gough, Inc.
Citations: 965 N.E.2d 684; 2012 Ind. App. LEXIS 139; 2012 WL 1059430Docket: 64A04-1109-PL-471
Court: Indiana Court of Appeals; March 29, 2012; Indiana; State Appellate Court
East Porter County School Corporation (the "School") appealed a trial court's summary judgment ruling in favor of Gough, Inc. ("Gough") and Travelers Casualty and Surety Company of America ("Travelers"). The core issue was whether the court erred in granting summary judgment against the School. The School had solicited bids for construction work, with Gough submitting a base bid of $2,997,000 along with a bid bond from Travelers. Shortly after the bid submission deadline, Gough informed the School that an error had occurred and requested to withdraw its bid. Despite this, the School awarded Gough the contract on March 10, 2008. However, on March 17, Gough's president sent a letter to the School indicating that the contract amount was based on a clerical error and that Gough would not accept the contract, as they had promptly notified the School of the mistake.
On March 24, the School decided to award the contract to the next lowest bidder, contingent upon Gough's response to honor its bid by March 25. Following Gough's refusal to accept the contract, the School submitted a claim to Travelers for the bid bond, which was denied. Gough then filed a complaint seeking to rescind its bid and release the bid bond, citing legal precedent that allows a contractor to be excused from a mistaken bid. The School counterclaimed against Gough for breach of contract and filed a third-party complaint against Travelers for denying the claim on the bid bond, alleging bad faith. Gough and Travelers responded with defenses to these claims.
On August 20, 2010, the School filed a motion for summary judgment alongside a memorandum of law and evidence. In response, Gough and Travelers submitted a motion opposing the School's motion, as well as a cross motion for summary judgment, with supporting affidavits on December 20, 2010. A court hearing occurred on March 22, 2011, where arguments regarding the motions were presented. Subsequently, on August 12, 2011, the court ruled in favor of Gough and Travelers, referencing Bd. of Sch. Commr's of City of Indianapolis v. Bender, and granted summary judgment against the School.
The crux of the matter is whether the trial court erred in its ruling. Summary judgment is appropriate only when there are no genuine issues of material fact, and all facts must be viewed favorably for the non-movant. The reviewing court's assessment is confined to the materials designated to the trial court, ensuring no party is unjustly denied their right to a hearing. The moving party bears the burden of demonstrating the absence of material fact issues; failure to do so precludes summary judgment, regardless of the non-movant's response.
The School argues that, under Indiana law, Gough, as the lowest bidder, cannot rescind its bid and cites Bender, arguing its inapplicability based on its age and context. The School raises concerns about the responsibility for the mistake, questioning whether it falls on the bidder or taxpayers, and contends the court misapplied equity instead of the bid bond statute. Conversely, Gough and Travelers assert that Indiana law allows bid withdrawal due to errors, clarifying that a mathematical error occurred in Gough's bid calculation, which they argue distinguishes it from the circumstances referenced by the School. They contend that the trial court's decision aligns with precedent and public bidding statutes that have been in effect for over a century.
Gough and Travelers argue that legal precedents from other jurisdictions support their position, asserting that public policy does not warrant a different outcome. They contend the court correctly determined that Travelers cannot be bound if Gough is released from its bid. The School, in its reply brief, claims the court erred in relying on the Bender case and granting equitable relief, noting that the public bidding statutes at the time of Bender lacked detailed procedures including a mandatory bid bond requirement. The School emphasizes that the bidding instructions clearly outlined the process for bid withdrawal and the forfeiture of the bid bond, asserting the need for the appellate court to correct the trial court's ruling on bid security.
The Bender case involved a school board's bid for an addition to a school where Bender submitted a bid of $11,337, having miscalculated due to late estimates from subcontractors. After realizing his error, he informed the school board he could not honor his bid. The appellate court ruled that Bender's mistake was excusable and that no contract was formed because the parties' minds had not met due to his miscalculation. The court stated that equity could intervene to prevent injustice if there was no gross negligence and no rights had accrued.
In contrast, the Mid-States General case found that Mid-States did not claim a miscalculation but rather argued the bid documents were ambiguous. The court determined the documents were clear, rejecting Mid-States' interpretation as unreasonable and finding no basis for relief under equity, as no mutual mistake, fraud, or inequitable conduct was alleged. The court also noted that, generally, bid errors arising from clerical or arithmetic mistakes may be excusable, while mistakes of judgment do not qualify for relief. The School's bidding notice stated that bids would be accepted until February 5, 2008, at 2:00 p.m., with public opening at that time.
Joseph Gent, president of Gough, outlined in an affidavit the chaotic process leading up to their bid submission. He described that Gough was actively finalizing bid numbers just before the bid opening, soliciting quotes from subcontractors and preparing an in-house price summary that was updated continuously as bids were received. At approximately 1:30 p.m., Gent and two colleagues, Buzz Gough and Ken Akey, convened to determine the final bid amount, with earlier discussions allowing for a $30,000 reduction due to prior conversations. The initial bid total was $3,331,763.00, which they adjusted to $3,301,763.00. They aimed to drop the bid below $3,300,000.00 for psychological impact, leading to a rapid discussion that resulted in Gent suggesting a bid of $2,998,000.00. Akey wrote down this figure, then further reduced it to $2,997,900.00, which was communicated to Ross Martin for submission.
This entire decision-making process took less than two minutes. Martin submitted the bid at 1:53 p.m. Shortly after, Akey recognized that the bid had been excessively reduced, prompting him to contact Martin to withdraw it. Despite efforts to reach the School and its representative, Skillman Corporation, Gough was unable to communicate the mistake in time. Ultimately, when Gough informed the School's representative of the error and requested to withdraw the bid, they were pressured to proceed with the contract instead. Gent's deposition corroborates the details provided in his affidavit regarding the bid's formulation and subsequent error.
Gent testified that a mistake occurred in recording the bid amount, where he intended to submit $3,298,000 but mistakenly recorded it as $2,997,900 due to a misplacement of digits. He acknowledged an error in the intended reduction of $32,000, which instead resulted in a $332,000 reduction. Gent characterized this as a careless mistake made under time pressure. Although Gough attempted to withdraw the bid shortly before the deadline, phone records indicated the calls were made shortly after the deadline. The superintendent's affidavit did not contradict Gent’s statements.
The court found parallels with the Bender case, concluding that Gough did not intend to enter into a contract for the erroneous bid amount. The mistake in communication between Akey and Gent led to a substantial difference in the bid communicated to Martin. Consequently, the court determined that there was no meeting of the minds regarding the bid amount, and the School could not enforce Gough's erroneous bid. The ruling emphasized that clear clerical or arithmetic errors qualify for relief, while mistakes of judgment do not, and in this case, the mistake was deemed excusable. The School failed to demonstrate reliance on the erroneous bid that would render Gough's subsequent withdrawal inequitable.
Travelers is released from its Bid Bond because its principal holds no liability on the underlying contract. The trial court's summary judgment favoring Gough and Travelers against the School is upheld. The ruling from August 12, 2011, is affirmed, with Justices MAY and CRONE concurring. The School's appendix includes documents and affidavits but lacks clarity on what was designated to the trial court regarding the summary judgment motions, emphasizing the need for proper evidence designation. Additionally, the "Instructions to Bidders" allow for bid withdrawal prior to the bidding deadline, modification before bid opening, but prohibit recalling bids once opened. Gough's president, Joseph Gent, acknowledged a timing discrepancy in phone calls related to the bid submission. The case was originally filed in Lake County but later transferred to Porter County, and the summary judgment pleadings are not part of the record. A reference is made to a legal discussion on the right to rescind a bid due to mistakes.