Blue Water Excavating Co. v. State

• Decision Date: 13 September 1966
• Docket Number: No. 603,No. 2,603,2
• Citation: Blue Water Excavating Co. v. State, 4 Mich.App. 266, 144 N.W.2d 630 (Mich. App. 1966)
• Parties: BLUE WATER EXCAVATING COMPANY, Inc., a Michigan corporation, Plaintiff-Appellant, v. The STATE of Michigan, John C. Mackie, Michigan State Highway Commissioner, and Michigan State Highway Department, Defendants-Appellees. Cal
• Court: Court of Appeal of Michigan — District of US

Page 630

144 N.W.2d 630

4 Mich.App. 266

BLUE WATER EXCAVATING COMPANY, Inc., a Michigan corporationPlaintiff-Appellant, v.The STATE of Michigan, John C. Mackie, Michigan State HighwayCommissioner, and Michigan State Highway Department, Defendants-Appellees.

Cal. No. 603.

Court of Appeals of Michigan, Division No. 2.

Sept. 13, 1966.

William J. Drillock, Atkins & Drillock, Marlette, for appellant.

Frank J. Kelley, Atty. Gen., Robert A. Derengoski, Sol.Gen., Louis J. Caruso, Asst. Atty. Gen., in Charge, Highway Dept., Lansing, for appellees.

Before LESINSKI, C.J., and T. G. KAVANAGH and McGREGOR, JJ.

LESINSKI, Chief Judge.

PlaintiffBlue Water Excavating Company appeals from the granting of defendantState of Michigan's motion for summary judgment by the court of claims for 'failure of the complaint to set forth facts alleging liability on the part of the defendants.'

The action arose from a contract in the amount of $2,041,310.99, awarded to plaintiff and K. G. Marks, Inc., by defendant as the successful joint bidders on a portion of the I-94 highway--a cost-sharing project of the federal government and the defendant.The above total included a bid for 792 lineal feet of 84 corrugated metal pipe, unit price $4.00 per foot.

On July 22, 1963, Russell Sheldon, president of the plaintiff company, informed Fred Tripp of the Michigan state highway department by letter that an error had been made in the bid proposal by transposition of a figure for the corrugated pipe from $40.00 per foot to $4.00 per foot--a misplaced decimal point.This action stems from plaintiff's attempts to avoid alleged financial loss in the amount of $28,512.00 through a price adjustment in this amount.

Pursuant to advice given in a letter ¹ to one of plaintiff's employees by Sanford A. Brown, state treasurer, plaintiff filed a complaint on May 13, 1964, against the State of Michigan, the highway commissioner, and the State highway department.

On May 28, 1964, defendants filed a motion to dismiss.After hearing arguments, the trial judge stated that it was his understanding that the court of claims was without jurisdiction to hear this type of claim.² However, he offered plaintiff's counsel time to file a brief.The latter had not been filed by February 16, 1965, at which time the trial judge entered the order dismissing the action from which this appeal is taken.

Plaintiff-appellant argues that the sole question on appeal is the jurisdiction of the court of claims.It is appellant's contention that the court of claims has jurisdiction to grant the relief sought, and that, therefore, the trial court erred in refusing to hear the case which should be returned for a hearing on the merits.

Although appellee states that the court of claims as a statutory tribunal of limited jurisdiction is without authority to reform the contract, it contends that the basis of the court's decision was not its lack of equity power, but rather that the order of the court was a summary judgment on the merits for 'failure of the complaint to set forth facts alleging liability on the part of the defendants.'Appellee maintains that No court in Michigan can grant the relief sought by plaintiff, as, in the absence of mistrepresentation or fraud, a unilateral mistake in an unambiguous contract, no longer wholly executory, and without breach thereof, cannot be a ground for the claim herein sought to be recovered.

Appellant's argument is predicated on the theory that the court of claims has jurisdiction to grant the relief sought under the revised judicature act, P.A. 1961, No. 236, C.L.S. 1961, § 600.6419(Stat.Ann.1962 Rev. § 27A.6419).The pertinent portion of the statute, subdivision (1)(a) which appellant cites as controlling on this point, reads as follows:

'(a) To hear and determine all claims and demands, liquidated and unliquidated, ex contractu and ex delicto, against the state and any of its departments, commissions, boards, institutions, arms or agencies.'

It is identical to subsection 1 of section 8 of the prior statute.³ In Taylor v. Auditor General(1960), 360 Mich. 146, 103 N.W.2d 769, the Supreme Court analyzed the jurisdiction of the court of claims and concluded that this language did not give the court of claims the power to render declaratory judgments.At page 151 at page 771 of 103 N.W.2dthe Court said:

'The court of claims has no 'equity side' as that term is employed in respect of the jurisdiction of Michigan courts, it being, as we have pointed out, a legislative court of limited jurisdiction to which has been assigned the hearing of claims formerly heard by administrative boards.'

Although there has been a merger of law and equity in the state of Michigan, ⁴ this merger was not meant, and should not be construed to enlarge the jurisdiction of a statutory court of limited jurisdiction.⁵ Thus, the reasoning of Taylor, supra, is applicable to the case at bar wherein appellant seeks relief, the effect of which would be reformation, traditionally an equitable remedy, and precludes the granting thereof.

In addition, it is the holding of this Court that the relief sought is not available to the plaintiff under the facts presented in either law or equity, even in a court which would have the authority to grant relief as a court of general jurisdiction.

Although a fact situation similar to that presented herein appears not to have come to the attention of the appellate courts of Michigan prior to this time, there are reported cases from both New York and California wherein these courts have had occasion to deal with the problem presented in analogous circumstances, and both courts have denied relief to the contractors.

In Heating Maintenance Corp. v. City of New York, 129 N.Y.S.2d 466(Sup.Ct.Special Term 1954), the plaintiff sought reformation of a contract between it and the city of New York.Plaintiff, as successful low bidder on the contract, commenced work under same, and after several months' performance thereof brought to the attention of the city a mistake it (plaintiff) had made in the unit price of one of the six items bid upon.The alleged error was that one item which had been estimated at a unit price of $6.50 should have been estimated at $26.50, thereby causing a difference in total amount sought to be recovered of $32,600.The court pointed out at page 468 that:

'Unless the plaintiff may have the reformation of the contract sought in equity, the expressed written agreement of the parties would be binding upon them in law and plaintiff would be required to bear the loss occasioned by its own errors.'

The court then cited at page 470 authority for the well-known proposition that:

'In the absence of fraud, reformation of a contract is not warranted by the mistake of one party.To warrant reformation mistake must be made by both parties so that the intentions of neither are expressed in it.'

It is relevant to note that the events leading up to the bringing of the action evidence many similar elements to the case at bar, i.e., in both casesthe plaintiffs were successful low bidders on a government contract; in both cases the error was not discovered until performance had begun; in both the error claimed was an arithmetic one in stating the unit price of one of several items; in both the amount of monetary relief sought was similar--$32,600.00 for the New York case as compared to $28,512.00 in the instant case; and further, in both cases there was no breach of contract.

However, the similarity between the two cases does not end at this point.The New York court was also faced with the argument by plaintiff that the defendant knew the unit price of $6.50 'was inadequate and very much less than the reasonable market value of such work and concealed such knowledge from the plaintiff.'Appellant's brief in the instant case contains a similar allegation.⁶ The New York court said that these allegations 'are insufficient as a matter of law to constitute fraud.'Heating Maintenance Corp., supra, at p. 470.The court followed this with language that eloquently expresses the rationale of the holding:

'The defendant was not required to act for the protection of plaintiff's interest.The City's interest was conflicting and parties were bargaining for a price.It is the plaintiff contractor which submits the bid, wins and signs the contract at the amount given therein for the work to be done, which risks any resultant loss.The City is entitled to the bargain obtained in accepting the lowest bid.It is under no obligation to examine the bids to ascertain errors and to inform biders thereof.* * * The City's interest is to obtain and accept the lowest bid from a contractor financially responsible and otherwise competent.The City's obligation is to itself and the public interest to save money by getting low bids, and where the above conditions are met the immediate obligation is at an end.'pp. 470--471.

The New York court answered plaintiff's argument that the city, 'while not guilty of fraud in the usual connotation of that term, was shown to be guilty of inequitable conduct'(page 471) with the following language, which stated both the law and the reasoning behind it:

'The answer is that in accepting bids and entering into contracts thereon it is the contractor and not the City that acts on the bid at its peril.If that were not so all City contracts would have to be renegotiated upwards in favor of contractors asserting mistake and claiming inequity.'(Emphasis supplied.)

Across the country the California district court of appeals, when faced with an appeal by the defendant from a judgment granting reformation of a school construction building contract, reversed the trial court, holding that where the school board complied with the bidding statute and awarded the contract to the lowest bidder, the board could not enter into a new contract with the contractor for the same work at an increased price....