Double AA Builders, Ltd. v. Grand State Construction LLC
114 P.3d 835 (2005)
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Rule of Law:
A subcontractor's bid is an enforceable promise under the doctrine of promissory estoppel if the general contractor reasonably relies on it in submitting its own bid. However, a claim based on promissory estoppel does not arise out of a contract for the purposes of a statute allowing attorneys' fees in contract actions, as it is an equitable remedy based on a contract implied-in-law.
Facts:
- Double AA Builders, Ltd., a general contractor, was preparing a bid to construct a Home Depot store and solicited bids from subcontractors.
- On December 18, 2001, Grand State Construction L.L.C., a subcontractor, submitted a written but unsigned bid of $115,000 for the insulation work, stating, 'Our price is good for 30 days.'
- Double AA relied on Grand State's bid, incorporating the $115,000 figure into its own total bid for the Home Depot project.
- On December 21, 2001, Home Depot awarded the construction project to Double AA.
- On January 11, 2002, within the 30-day period, Double AA sent a formal subcontract to Grand State for the insulation work.
- Grand State refused to sign the subcontract or perform the work, informing Double AA that it had since entered into other contracts and could not staff the job.
- As a result, Double AA had to hire a replacement subcontractor at a cost of $131,449, which was $16,449 more than Grand State's bid.
Procedural Posture:
- Double AA Builders, Ltd. sued Grand State Construction L.L.C. in superior court for promissory estoppel.
- The case was first heard by an arbitrator, who ruled in favor of Grand State.
- Double AA appealed the arbitrator's decision to the superior court for a trial de novo.
- Following a bench trial, the superior court found in favor of Double AA, awarding damages of $16,449 but denying its request for attorneys' fees.
- Grand State appealed the judgment to the Arizona Court of Appeals, and Double AA cross-appealed the denial of attorneys' fees.
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Issue:
Does the doctrine of promissory estoppel make a subcontractor's bid an enforceable promise when a general contractor relies on it, and does a claim arising from such a promise qualify for attorneys' fees under a statute that applies to actions arising out of a contract?
Opinions:
Majority - Judge Gemmill
Yes, but No. Yes, a subcontractor's bid is an enforceable promise under the doctrine of promissory estoppel when a general contractor reasonably relies upon it in submitting its own bid. No, a claim based on promissory estoppel does not arise out of a contract for the purposes of a statute allowing attorneys' fees in contract actions. The court adopted Section 90 of the Restatement (Second) of Contracts and followed the precedent set in Drennan v. Star Paving Co., holding that a subcontractor's bid constitutes a promise that the subcontractor should reasonably expect a general contractor to rely upon. When Double AA used Grand State's bid, it bound itself to perform the work for Home Depot in reliance on that price, and injustice could only be avoided by enforcing Grand State's promise. The court also rejected Grand State's statute of frauds defense, applying the 'predominant purpose' test and concluding the subcontract was primarily for services (installation), not goods (materials). Regarding the cross-appeal, the court held that attorneys' fees under A.R.S. § 12-341.01(A) are not available because promissory estoppel is an equitable remedy that creates a contract 'implied-in-law,' not an 'express or implied-in-fact' contract to which the statute applies.
Analysis:
This decision formally adopts the widely-held Drennan rule in Arizona, providing stability and risk allocation in the construction bidding process. It confirms that subcontractors' bids are not mere offers but binding promises once a general contractor relies on them, preventing subcontractors from revoking bids after the general contractor is contractually bound to the owner. The case also clarifies the remedial scope of promissory estoppel, distinguishing it from a true contract claim by denying the recovery of attorneys' fees. This maintains a clear doctrinal line between actions arising from bargained-for exchanges and those based on reliance-based equity, impacting how damages and fees are calculated in similar disputes.
