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Filed 12/28/04
CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIRST APPELLATE DISTRICT

DIVISION THREE

DIEDE CONSTRUCTION, INC.,

Plaintiff and Appellant,

A102035
v.

MONTEREY MECHANICAL CO.,
(Alameda County
Super. Ct. No. V-020416-7)

Defendant and Respondent.

Plaintiff Diede Construction, Inc. (Diede) was awarded a $12 million contract to
renovate the city hall in the City of Livermore (the city). After the bids were opened but
before Diede executed a contract with the city, defendant Monterey Mechanical
Company (Monterey), a subcontractor Diede had listed in its bid pursuant to Public
Contract Code1 section 4104, informed Diede that its proposal contained a $300,000
mistake, that it would not honor the proposal, and that Diede should seek to be relieved of
its bid to the city pursuant to sections 5101 and 5103. Diede nonetheless proceeded to
execute a contract with the city and, when Monterey refused to perform, contracted with
other subcontractors to perform Monterey's portions of the project. Thereafter, Diede
filed a complaint seeking to recover from Monterey, on a theory of promissory estoppel,
the difference between Monterey's original bid and the amounts Diede was required to
pay the replacement subcontractors. After a bench trial, the court denied Diede's claim
because Diede did not attempt to be relieved from its bid to the city after learning of
Monterey's mistake. We conclude relief is available under sections 5101 and 5103 only
for errors in the general contractor's bid and that Diede was not required to request relief

1 All statutory references are to the Public Contract Code unless otherwise noted.

1

from its bid to the city as a condition of holding Monterey to its bid for the subcontract.
Nonetheless, Diede's right to recover on the basis of promissory estoppel is dependant on
its proving that it reasonably relied on Monterey's mistaken bid in calculating the amount
of its bid to the city, as to which the trial court made no finding. Accordingly, we shall
reverse the judgment and remand for a determination of this controlling issue.
Factual and Procedural Background

Diede is a general contractor that performs large public works projects. Monterey
is a contractor specializing in mechanical, plumbing, and heating, ventilation, and air
conditioning (HVAC) work. On August 4, 2000, Diede submitted a bid to perform all
work on a project to remodel the city hall for $12,739,375. Monterey's bid to Diede to
perform the HVAC and certain other work on the project was $1,775,000. Diede listed
Monterey as its HVAC subcontractor and allocated 18 percent of the total contract price
to its work.2 Diede learned later that day that it was the low bidder on the job.

The next business day, three days later, Monterey faxed a letter to Diede stating
that it had discovered an inadvertent clerical error in its proposal and it was therefore
withdrawing its bid. The letter explained that Monterey's proposal failed to include the
cost of $302,100 for its controls subcontractor. Diede faxed a reply stating that it had
based its bid on Monterey's quote and expected Monterey to honor its bid. The next
morning, Monterey's attorney sent Diede a letter enclosing two declarations showing
how the mistake was made, and advising Diede that if it acted by the next day, it could
use the declarations to withdraw its bid under the relief provisions of the Public Contract
Code. Diede disagreed that such relief was available for Monterey's mistake, and it did
not wish to forfeit its bid bond, lose the substantial sums expended in bidding on the
project, or sacrifice the profit and the enhanced professional reputation that it felt it

2 The trial court's statement of decision correctly notes that Monterey's share of the total
project was not 18 percent. In fact, Monterey's bid constituted only 14 percent of the
total amount bid for the contract.

2

would realize from completing the project. Accordingly, Diede executed the contract
with the city for the original bid amount.

After Monterey refused to perform the subcontract work, Diede executed contracts
with the next lowest bidders for the portions of the work Monterey was to perform at an
increased cost of $467,064, and filed this action to recover these additional costs from
Monterey. The trial court found that Monterey's proposal contained a material clerical
mistake that satisfied the requirements for relief under the Public Contract Code.
Accordingly, it held that Diede had not established the elements of promissory estoppel
because Diede's continued reliance on Monterey's bid after receiving notice of the
mistake was unreasonable, and that the damages sought "could have been readily
prevented if Diede had sought to be relieved of its bid to the [c]ity." Diede filed a timely
notice of appeal.
Discussion
1.
Elements of Promissory Estoppel

A general contractor may recover damages incurred as a result of its reasonable
reliance on a subcontractor's mistaken bid under the theory of promissory estoppel. " `A
promise which the promisor should reasonably expect to induce action or forebearance of
a definite and substantial character on the part of the promisee and which does induce
such action or forebearance is binding if injustice can be avoided only by enforcement of
the promise.' [Citation.] This principle is applicable to a proposed subcontractor
(promisor) who makes a bid (and with it an implied subsidiary promise to keep the bid
open for a reasonable time after the awarding of the general contract) to a general
contractor (promisee) who in turn bids on a construction contract with a third person in
reliance upon the subcontractor's bid (and subsidiary promise) and is the successful
bidder." (Saliba-Kringlen Corp. v. Allen Engineering Co. (1971) 15 Cal.App.3d 95, 100
(Saliba-Kringlen), citing Drennan v. Star Paving Co. (1958) 51 Cal.2d 409 (Drennan).)
"As between the subcontractor who made the bid and the general contractor who

3

reasonably relied on it, the loss resulting from the mistake should fall on the party who
caused it." (Drennan, supra, 51 Cal.2d at p. 416.)

Thus, in order to prevail on its promissory estoppel claim, Diede was required to
prove that it had reasonably relied on Monterey's bid to its detriment, and that injustice
could be avoided only by enforcing Monterey's promise to perform at the quoted price.
2.
Statutory Provisions for the Relief of Bidders

"In 1971 the state Legislature established a comprehensive procedure in
connection with public contracts . . . to enable a contractor to claim relief from a bid
mistake by following certain procedural steps." (A & A Electric, Inc. v. City of King
(1976) 54 Cal.App.3d 457, 462 (A & A Electric).) The derivation of these provisions
traces back to more limited legislation first enacted in 1937 (see Stats. 1937, ch. 202, � 2)
and briefly described in A & A Electric, supra, at pages 461-464. These provisions were
initially found in Government Code sections 4200 through 4208, but in 1982, without
significant change, became chapter 5 of division 2, part 1 of the Public Contract Code,
entitled "Relief of Bidders." (� 5100 et seq.; Emma Corp. v. Inglewood Unified School
Dist. (2004) 114 Cal.App.4th 1018, 1025.) They provide the exclusive means by which a
contractor may be relieved from a mistake in a bid submitted to a public entity. (A & A
Electric, supra, 54 Cal.App.3d at p. 464.)

For purposes of the statute, a "bid" is defined as "any proposal submitted to a
public entity in competitive bidding" for any type of improvement. (� 5100, subd. (b).)
Section 5101, subdivision (a), provides, "A bidder shall not be relieved of the bid unless
by consent of the awarding authority nor shall any change be made in the bid because of
mistake, but the bidder may bring an action against the public entity . . . for the recovery
of the amount [of the bid bond] forfeited, without interest or costs. . . ." Section 5103
sets forth the grounds for relief under section 5101: "The bidder shall establish . . . that:
[�] (a) A mistake was made. [�] (b) He or she gave the public entity written notice within
five days after the opening of the bids of the mistake, specifying in the notice in detail
how the mistake occurred. [�] (c) The mistake made the bid materially different than he

4

or she intended it to be. [�] (d) The mistake was made in filling out the bid and not due
to error in judgment or to carelessness in inspecting the site of the work, or in reading the
plans or specifications."

Under these provisions, relief is available to a general contractor whose bid is
based on a clerical mistake brought promptly to the attention of the public agency.
Nonetheless, contrary to Monterey's contention and the premise of the trial court's ruling,
these provisions do not apply to mistaken bids submitted by a subcontractor to the
general contractor. As noted, the statute applies explicitly to proposals submitted "to a
public entity in competitive bidding." The contractor's bid to the city was such a
proposal, but the bids made by subcontractors and materialmen to Diede were not. Other
aspects of the statute confirm that it is not intended to apply to mistakes in the bid of
subcontractors. Section 5103, subdivision (c) provides that to obtain relief, the bidder
must show that the mistake made the bid "materially different than he or she intended it
to be." If the bid from the general contractor to the public entity is based on the bid
received from a subcontractor, the contractor cannot truthfully represent to the public
entity that the bid is different from what it intended. Moreover, the range of materiality
would change drastically if it were to be measured against the bid of each subcontractor,
rather than against the bid of the general contractor. In the present case, for example, the
$300,000 mistake may have been material to Monterey's bid of $1,775,000 (16.9
percent), but it was probably not material to Diede's bid of $12,739,375 (2.3 percent).
Likewise, section 5103, subdivision (d), requires that the mistake be made "in filling out
the bid," i.e., in filling out the proposal submitted to the public entity. Subcontractors'
bids are not submitted to the public entity.

Still further, section 5101 recognizes that the public agency may consent to relieve
the general contractor of its mistake, but if it refuses to do so, the contractor must bring
an action to recover the amount of its bid bond that stands to be forfeited. (See Balliet
Bros. Constr. Corp. v. Regents of University of California (1978) 80 Cal.App.3d 321,
325-328.) The section provides that if the contractor does not prevail in such an action, it
"shall pay all costs incurred by the public entity in the suit, including a reasonable

5

attorney's fee to be fixed by the court." (� 5101, subd. (a).) Whether the public agency
consents or the contractor sues for relief, the contractor is barred from further bidding on
the project. (� 5105.3) Nowhere in the history of these provisions is there any indication
that the Legislature intended to foist these consequences on an innocent contractor
because of a mistake in the bidding of a subcontractor, and it would be highly inequitable
to do so. Indeed, even the trial court's ruling implicitly recognizes that Diede was not
obligated to risk forfeiture of its bid bond by withdrawing its bid if the city denied a
request for relief. (See � 20172.) Moreover, as discussed in part 4, post, requiring the
general contractor to seek withdrawal of its bid based on a mistake by a subcontractor
would impose other adverse consequences on the contractor that there is no reason to
suppose were intended by the relief-of-bidders provisions.

The bill analysis performed by the Department of Public Works in connection with
the initial 1971 legislation summarized: "The bill provides that a general contractor
must be relieved of his bid without penalty if he discovers an arithmetic error." (Cal.
Dept. Public Works, Business & Transportation Agency, Analysis of Sen. Bill No. 1170
(1971 Reg. Sess.) July 9, 1971, italics added.) The analysis of the Assembly Committee
on Commerce and Public Utilities refers only to "inadvertent mistakes made by
contractors in filling out their bids on public construction contracts." (Assem. Com. on
Commerce and Public Utilities, Analysis of Sen. Bill No. 1170 (1971 Reg. Sess.) Oct. 7,
1971.) Nowhere in the legislative history is there any suggestion that these provisions
apply to a mistaken bid submitted by a subcontractor to the general contractor, and
certainly nothing supports the view that a general contractor must exercise its rights
under this section in order to relieve a subcontractor from its mistakes.

Finally, there is merit in the assertion of the amicus curiae that permitting, much
less requiring, a general contractor to withdraw a bid to a public agency whenever any

3 Section 5105 provides, "A bidder who claims a mistake or who forfeits his or her bid
security shall be prohibited from participating in further bidding on the project on which
the mistake was claimed or security forfeited."

6

subcontractor has made what may be a miniscule mistake in relation to the total cost of
construction would threaten to seriously impede the timely and efficient prosecution of
public works projects. (Cf. Domar Electric, Inc. v. City of Los Angeles (1994) 9 Cal.4th
161, 173.) Indeed, if the statute were interpreted to apply in the present case, there is no
apparent reason why it would not apply as well to mistaken bids submitted by second or
successive tier subcontractors and materialmen, injecting immeasurable uncertainty into
the bidding process.

Hence, the premise underlying the trial court's decision is unfounded. Diede was
not entitled to be relieved from its bid to the city because of the bidding error by
Monterey. That is not to say, however, that the city could not have excused Diede from
its bid if it had been so inclined.
3.
Diede's failure to request relief under section 5101 does not negate reasonable

reliance on Monterey's mistaken bid.

The trial court concluded that Diede was required to at least seek consent to
withdraw it's bid under section 5101 in order to establish the reasonable reliance
necessary to support its promissory estoppel claim. The court explained, "After having
been timely advised by [Monterey] of its mistake; put on notice of the statutory procedure
through which relief from the bid could be obtained; having been timely provided with
specific and detailed declarations documenting the nature of the material, clerical error to
assist it in obtaining relief within the five days provided by statute; and having
independently confirmed that the cost of the HVAC control unit was indeed over
$300,000.00 and was omitted from [Monterey's] bid sheet, Diede's alleged continued
reliance upon [Monterey's] bid in executing the contract with the [city] was not
reasonable or justifiable under the law."

This analysis misconstrues Diede's claim of reliance. Diede acknowledges that it
was aware of Monterey's mistake when it signed the contract with the city, and it does
not suggest that it relied on the assumption that Monterey would perform at its bid price
when it decided to proceed with execution of the contract. Rather, Diede's contention is
that it relied on the accuracy of Monterey's quotation when it calculated and submitted its

7

bid to the city. Diede's bid was the lowest and was accepted by the city. Absent a basis
for relief, Diede was bound to execute a contract with the city under the terms of the bid
or forfeit its bid bond. (A & A Electric, supra, 54 Cal.App.3d at p. 461, citing M. F.
Kemper Const. Co. v. City of L. A. (1951) 37 Cal.2d 696, 700 [once opened, bid for
public construction contract was "in the nature of an irrevocable option, a contract right
that a public entity could not be deprived of without its consent unless the requirements
for rescission were satisfied"]; � 20172.) Additional or continued reliance with respect to
the execution of the contract is not necessary. (Drennan, supra, 51 Cal.2d at p. 415
["When plaintiff used defendant's offer in computing his own bid, he bound himself to
perform in reliance on defendant's terms"]; Saliba-Kringlen, supra, 15 Cal.App.3d at pp.
102-103, 105-106.) Whether or not Diede should have withdrawn its bid when advised
of Monterey's error is not relevant to whether Diede relied on Monterey's bid in
submitting its bid to the city, much less to the reasonableness of such reliance. Its failure
to seek relief under section 5101 relates only to whether injustice could have been
avoided without holding Monterey to its mistaken quotation.
4.
Enforcement of Monterey's bid is necessary to avoid injustice.

The trial court concluded that "[u]nder the circumstances of this case, injustice
could have been readily prevented if Diede had sought to be relieved of its bid to the
[city] and thereby avoided or at least mitigated its losses. It chose not to do so, not
because it reasonably doubted the availability of relief or lacked the means or opportunity
to seek timely relief as in [Saliba-Kringlen, supra, 15 Cal.App.3d 95], but because it
preferred instead to pursue a business opportunity it was put on notice was highly
questionable." (Fn. omitted.)

While it is of course correct that Diede could have requested to be relieved of its
bid in light of Monterey's mistake, as discussed in part 1, ante, the city was not required
to have consented and Diede was not entitled to be relieved of the forfeiture of its bid
bond. Indeed, as noted above, the trial court did not suggest that Diede was obligated to
undertake the risks of withdrawing its bid and bringing an action under section 5101 for

8

relief from forfeiture. While there is thus no basis to assume that a request for relief by
Diede would have been granted by the city, there are also compelling reasons why Diede
should not have been obligated to make such a request. Contrary to the tenor of the trial
court's explanation, there was nothing untoward about Diede's desire to proceed with the
contract it had been awarded in the competitive bidding process. The bidding process is
both time consuming and financially risky. Having been awarded the contract, Diede
anticipated earning a profit on the job and also believed that performing this particular
public project would enhance its reputation and ability to obtain other jobs in the future.
Conceivably Diede would have been entitled to recover its wasted bid preparation costs
from Monterey but, as Monterey has acknowledged, Diede could not have recovered its
potential lost profits or the intangible added value to its reputation that would have come
from completing the project. (Kajima/Ray Wilson v. Los Angeles County Metropolitan
Transportation Authority (2000) 23 Cal.4th 305, 316.) In addition, requiring Diede to
withdraw its bid or absorb the costs of Monterey's mistake would be particularly
inequitable in light of the fact that section 5105 would have prohibited Diede but not
Monterey from further bidding on the city hall project.

Saliba-Kringlen confirms that, if Diede reasonably relied on Monterey's mistaken
bid in submitting its bid to the city, holding Monterey to its bid is necessary to avoid
injustice to Diede. In Saliba-Kringlen, the court held that a general contractor was
entitled to recover from a subcontractor who refused to honor its mistaken bid the
additional costs paid to a substitute subcontractor, despite the fact that the general
contractor had not attempted to be relieved of its bid under the relief-of-bidders
provisions. The court found no merit in the contention that "the general contractor was
required at the very least to seek to be relieved of its bid to the state on the basis of the
mistake made by the [subcontractor]." (Saliba-Kringlen, supra, 15 Cal.App.3d at
p. 105.) Monterey correctly argues that the court there found that the subcontractor had
not provided sufficient details about how the mistake occurred to have permitted the
general contractor to submit a request for relief in compliance with the statute, an
omission that Monterey avoided. However, the court went on to say that even if the

9

general contractor could have successfully avoided forfeiture of its bond, it was not
obligated to do so. "[T]he general contractor by `winning' the lawsuit to be relieved of
its bid would not only lose the possibility of making a substantial profit from the contract,
but would also incur costs and attorney fees in accomplishing this result." (Id. at p. 105.)
Finally, the court concluded that " `injustice can be avoided only by enforcement of the'
bid whenever the general contractor acting in good faith is unable to do the work called
for in the bid of the prospective subcontractor (or to get the work done by another
subcontractor) for a price at or below the price bid by the prospective subcontractor."
(Id. at p. 111.)

Here, Diede established that it was required to pay replacement subcontractors
substantially more than Monterey's bid, and Monterey does not challenge Diede's good
faith in securing the replacements. In accordance with Saliba-Kringlen, Diede
established that, if it did reasonably rely on Monterey's mistaken bid, the avoidance of
injustice requires enforcement of Monterey's promise.
5.
The trial court failed to determine whether Diede's reliance on Monterey's bid
was
reasonable.

The fact that a general contractor is not obliged to seek to withdraw its bid
whenever it is apprised that one of its subcontractors made a mistake in calculating its
sub-bid does not mean that general contractors may take unfair advantage of the
mistakes of their subcontractors. As the court noted in Saliba-Kringlen, if the contractor
did rely on the accuracy of the subcontractor's bid in calculating its proposal to the
public entity, the benefit of the mistake will not be realized by the general contractor but
by the public agency. (15 Cal.App.3d at p. 104, fn. 1.) More importantly, under the
theory of promissory estoppel, the subcontractor is liable for the costs of the mistake
only if the general contractor reasonably relied on the mistaken bid. If the mistake
should have been apparent to the general contractor because there was a substantial
variance between that bid and the next lowest bid, or for any other reason, the general
contractor is not entitled to rely on that bid. (Drennan, supra, 51 Cal.2d at p. 416 ["if
plaintiff had reason to believe that defendant's bid was in error, he could not justifiably

10

rely on it, and section 90 would afford no basis for enforcing it"]; Saliba-Kringlen,
supra, 15 Cal.App.3d at pp. 102-103.) Accordingly, in order to recover, Diede must
prove that it reasonably relied on Monterey's mistaken proposal.

Because the trial court concluded that Diede's failure to seek the city's consent to
withdraw its bid precluded reasonable reliance, the court did not expressly determine
whether Diede reasonably relied on Monterey's mistaken bid in calculating the amount
of its own bid to the city. The trial court's findings relevant to this issue are
inconclusive. The statement of decision reads, "Diede received two other bids from
mechanical subcontractors that combined both HVAC and sheet metal work. The next
lowest bids were $2,200,000.00 and $2,325,000.00. Due to the differences in the scope
of work submitted by the three mechanical subcontractors, Diede contended it was
unable to accurately compare and contrast the line item cost figures among them,
although it did undertake some comparison. [Monterey's] proposal was $425,000.00
lower than the next lowest mechanical subcontractor, a substantial variance. [�] Pursuant
to Public Contract Code section 4101, Diede listed [Monterey] as the provider for the
HVAC portion of the work and represented to the [city], under oath, that [Monterey's]
bid represented 18% of the total contract, or almost $2.3 million. Diede contended at
trial that the 18% figure was an error on its part which occurred due to its failure to
recalculate percentages in the final round of compiling numbers for the master bid.
However, the bid for HVAC and sheet metal submitted by Diede to the [city] was higher
than the bid submitted by [Monterey] to Diede." Both parties suggest that these findings
support an implied finding in their favor regarding the reasonableness of Diede's
reliance. We believe, however, that the court's factual observations do not reach the
ultimate question. Whether Diede reasonably relied on Monterey's proposal is a
question of fact for the trial court to decide in the first instance, "unless but one inference
can be drawn from the evidence." (Greene v. Wilson (1962) 208 Cal.App.2d 852, 857.)
As the evidence is in conflict, we must remand the matter to the trial court to determine
the issue of reasonable reliance.

11

Disposition

The judgment is reversed and the matter is remanded for further proceedings in
conformity with this opinion. Diede shall recover its costs on appeal.

_________________________

Pollak, J.

We concur:

_________________________
Corrigan, Acting P. J.

_________________________
Parrilli, J.

12

Trial court:
Alameda County Superior Court

Trial judge:
Honorable Julia Spain

Counsel for plaintiff and appellant:
BIEN & SUMMERS

E. Elizabeth Summers
Elliot Bien

Ray Thomas Rockwell

Counsel for Amicus Curiae on behalf
BELL, ROSENBERG & HUGHES LLP
of plaintiff and appellant:
Roger M. Hughes

Teresa Jenkins Main
for Construction Employers' Association

Counsel for defendant and respondent: McINERNEY & DILLON

Timothy L. McInerney

A102035

13