Board of Regents Murray Normal School v. Cole

• Decision Date: 19 June 1925
• Citation: 209 Ky. 761
• Parties: Board of Regents of the Murray State Normal School v. A.E. Cole, Doing Business Under the Name of Jack Cole.
• Court: United States State Supreme Court — District of Kentucky

209 Ky. 761

Board of Regents of the Murray State Normal School v. A.E. Cole, Doing Business Under the Name of Jack Cole.

Court of Appeals of Kentucky.

Decided June 19, 1925.

Schools and School Districts — Mistake of Successful Bidder in Computation of Estimates Held Fundamental. — Where, in preparation of lump sum bid for construction of normal school building, plaintiff, by mistake and without culpable negligence, omitted item of $22,000 for cut stone, his mistake was not incidental but fundamental, and a substantial part of whole consideration of contract, warranting cancellation of contract and return of check deposited with bid, on payment by him of cost of reletting contract, which was only damage sustained by board.

Appeal from Calloway Circuit Court

G.P. THOMAS for appellant.

J.D. MOCQUOT for appellee.

OPINION OF THE COURT BY JUDGE McCANDLESS.

Affirming.

This is a suit by A.E. Cole to cancel a check for $10,000.00 executed by him payable to the order of the Board of Regents of the Murray state normal school on the 23rd of September, 1924, and also to cancel a contract awarded to him by that body on the same date for the construction of a female dormitory at Murray, Ky., at the price of $207,787.00.

It appears that prior to the letting, a copy of the plans and specifications, together with a written advertisement, had been sent to prospective bidders in ample time for them to prepare their estimate and submit sealed proposals to be received at the office of the president up to 10 a.m., September 23rd, and not later; that all bids must be on regular forms provided by the board; that no claims would be allowed on account of mistakes or omissions in the bidding; that a certified check for $10,000.00 payable to the order of the board must accompany the proposal; that the check of the successful bidder would be retained until a written contract was signed and bond, executed by the bidder. It was also provided that the failure or refusal of any contractor to execute the written contract and bond according to the terms of the proposal after the contract was awarded him by the board would constitute grounds for the forfeiture of the check to the board.

At the appointed hour the board met and eight proposals were received and read in the presence of the bidders; Cole's bid being $31,000.00 under the next lowest bid. The board went into executive session and at 3 o'clock in the afternoon Cole was called in and asked if he had made any mistake in his bid and answered he had not and was willing to stand by his figures, whereupon he was awarded the contract and the board adjourned.

On his return to his home in Paducah about two or three hours later Cole discovered an error of approximately $22,000.00 in his proposal and at once notified an officer of the board and sought a correction. This proving fruitless he declined to execute the contract and bond and the board forfeited the check and advertised for a second letting. This was had and Cole was again the successful bidder, the second contract being awarded at the sum of $224,261.00. Written contract for this was executed and bond given and the work is progressing to the apparent satisfaction of all parties. The present contract calls for completion August 15, 1925, one month later than the date fixed by the first contract and the additional meeting of the board caused by the failure to execute the first contract entailed some expense.

This suit was filed October 23, 1924, the issues were made up by appropriate pleadings and the above facts developed. The chancellor found that he could put the parties in statu quo by requiring plaintiff to pay the actual damages sustained by defendant, which he found to be $200.00, and entered judgment against plaintiff for that sum and by his further judgment cancelled the contract and check mentioned. Defendant appeals.

The proposal submitted by Cole was for a lump sum, but in its preparation he had classified the different items of construction and had estimated the cost of each, had totalled these on a separate sheet of paper and added 8% as his profit and submitted the total thus found; but in so doing he entirely omitted the item of cut stone which he had estimated to cost $21,066.00 not including any percentage for himself. It thus clearly appears that the omitted item is several thousand dollars in excess of his contemplated profits and if his estimates were correct the contract would have resulted in a loss to him of that amount. These facts being established, it follows that the mistake was not incidental but fundamental and a substantial part of the whole consideration of the contract. His intention was to submit a proposal on which he stood to earn 8% on the cost of the construction. He certainly did not intend to contract for an estimated loss of over $5,000.00, and it cannot be said that the minds of the parties met on the proposition. The appellant did not know of this, but the disparity of the bids attracted the attention of the members of the board, hence the inquiry if he had made any mistake and his assurance he had not, he still being unaware of the omission.

While there is a diversity of opinion in the courts of last resort as to whether a court of equity will give relief in cases of this character the weight of authority is to the effect that an executory contract may be cancelled if it was entered into through mistake of one of the parties, if the mistake is of the substance of the whole consideration, is not due to culpable negligence and the parties may be placed in statu quo.

The general principle is thus stated in 13 C.J., page 373:

"Mistake of one of the parties only in the expression of his agreement or as to the subject matter, not known to the other, does not affect its binding force and is no ground for its recission even in equity, unless it is such a mistake as to show that there is a complete difference in substance between what is supposed to be and what is taken, so as to constitute an absence of consideration. The principle of our law is the same as that of the civil law and the difficulty in either case is to determine whether the mistake or misapprehension is as to the substance of the whole consideration, going as it were to the root of the matter or only to some point, even though a material point, an error as to which does not affect the substance of the whole consideration."

In Story's Equity Jurisprudence, section 1381, the rule is thus stated:

"But where the mistake is of so fundamental a character that the minds of the parties have never in fact met or where an unconscionable advantage has been gained by mere mistake or misappropriation and there was no gross negligence on the part of plaintiff, either in falling into the error or not sooner making redress and no intervening rights having accrued and the parties may still be placed in statu quo, equity will interfere in its discretion to prefent intolerable injustice."

In Hearne v. New England Mutual M. Ins. Co., 20 Wall. 488, it is said:

"A mistake on one side may be a ground for rescinding, but not for reforming a contract. Where the minds of the parties have not met there is no contract, and hence none to be rectified."

School Comrs. v. Bender, 72 N.E. 154, is analogous to this case. Bender was awarded a contract for the erection of a school building in Indianapolis at a cost of...