Elsinore Union Elementary School District v. Kastorff

California Court of Appeal · 1960 · Contracts

Contractsvenuebid bondpublic contract bidsexecution of instrumentdeliveryacceptanceplace of contract

Facts

The school district advertised for bids for construction of two classroom buildings in Elsinore, Riverside County. Kastorff signed a bid in Orange County, obtained a bidder's bond from Seaboard Surety Company in Los Angeles County, and mailed both to the district. The district's board of trustees opened the bids and accepted Kastorff's bid at a meeting in Elsinore, Riverside County, where Kastorff was present, but he later refused to execute the formal contract. Plaintiff then contracted with another builder at a higher price and sued on the bid bond for the difference.

Issue

Was Riverside County a proper venue for an action on the bid bond under Code of Civil Procedure section 395(1), even though Kastorff resided in Orange County and the bid and bond were signed outside Riverside County? More specifically, where was the obligation on the bid bond incurred or the contract entered into for venue purposes?

Rule

An instrument is executed by subscribing and delivering it, not by signing alone. A written contract takes effect upon delivery to the party in whose favor it is made, and the place where the last act necessary to render the contract obligatory occurs is the place where the contract is made and the obligation is incurred. When a public body advertises for bids, a binding obligation arises upon the public body's acceptance of the bidder's written proposal, and venue is proper in the county where that acceptance creates the obligation.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

The Red Mesa Water District in San Bernardino County solicited sealed bids for a pump station. Nolan Price signed a bid in Ventura County, and Harbor Crest Surety signed the accompanying bid bond in Sacramento County; both documents were mailed to the district, which later accepted the bid at a board meeting in San Bernardino County. Price then refused to sign the formal construction contract.

In the district's suit on the bid bond, which county is the strongest basis for proper venue under the majority rule?

Explanation. Under the majority rule, signing alone does not execute the instrument; execution requires subscribing and delivery, and the obligation becomes binding when the last act necessary to create it occurs. In the public-bid setting, that last act is the public body's acceptance of the written proposal, which also effects acceptance of the proposal bond. Therefore venue is proper in San Bernardino County, where acceptance created the obligation.