Centex Construction Co. v. James

• Decision Date: 30 March 1967
• Docket Number: No. 18524.,18524.
• Citation: 374 F.2d 921
• Parties: CENTEX CONSTRUCTION CO., Inc., Appellant, v. Worth JAMES, d/b/a Worth James Construction Co., and the Fidelity and Casualty Company of New York, Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

374 F.2d 921 (1967)

CENTEX CONSTRUCTION CO., Inc., Appellant, v. Worth JAMES, d/b/a Worth James Construction Co., and the Fidelity and Casualty Company of New York, Appellees.

No. 18524.

United States Court of Appeals Eighth Circuit.

March 30, 1967.

Leon B. Catlett, of Catlett & Henderson, Little Rock, Ark., for appellant. Catlett & Henderson, Little Rock, Ark., were on the brief.

Herschel H. Friday, of Smith, Williams, Friday & Bowen, Little Rock, Ark., for appellee. James W. Moore, Little Rock, Ark., was with him on the brief.

Before MATTHES, LAY and HEANEY, Circuit Judges.

LAY, Circuit Judge.

Worth James Construction Co. sought declaratory relief pursuant to Tit. 28 U.S.C. § 2201 for recision of a construction subcontract to be performed in New Orleans, Louisiana. Appellant Centex was the general contractor under a contract with the City of New Orleans. Centex filed a counterclaim, joining appellee's bonding company, for $104,372.19, this amount being the excess it claimed in expense and cost of reletting the subcontract because of appellee's refusal to perform. The district court heard evidence and made findings of fact, holding in favor of the appellees. The court allowed recision of the contract and dismissed appellant's counterclaim. Appellant brings this appeal from the judgment below. A full statement of the facts and the law applicable is found in the lower court's opinion, James v. Centex Construction Co., D.C., 255 F. Supp. 508. We affirm.

In August 1963, appellee James was invited by appellant to bid on sewer work in New Orleans. Competitive bids were filed by other contractors, ranging from $773,000 to $532,000. Appellee is an individual who does business under the name of Worth James Construction Co. His home base of business is in Arkansas. Appellee's bid was approximately $100,000 below the others, and he was awarded the contract at $431,861.81. It was first discovered by James' superintendent in October 1963 that it would be necessary to excavate on the average more than two feet deeper than originally figured in their bid, and there would be no additional compensation for it. This information was first disclosed in "cut sheets" provided by appellant in October. The basic difference between the James bid and the other contractors arises because of this additional excavation. When appellee discovered his mistake, even though he had moved men, equipment and material to the job, he refused to continue his work and filed this suit for recision.

The district court found that: (1) appellee's mistake on his bid was non-negligent, (2) the mistake was induced by appellant, and (3) appellant knew that James had made a serious mistake and also knew or should have known the nature of the mistake.

This court must accept the lower court's factual determination unless clearly erroneous. Under Arkansas law (agreed upon by the parties to be applicable) to allow recision proof must be clear and convincing, and not simply by the preponderance. Herr v. Murphee, 240 Ark. 834, 402 S.W.2d 393; Foster v. Dierks Lumber & Coal Co., 175 Ark. 73, 298 S.W. 495; Hutcheson v. FritoLay, Inc., 315 F.2d 818 (8 Cir., 1963). Although the lower court does not specifically assess the evidence in this light we, nevertheless, feel it meets this heavy burden of persuasion.

Appellant contends that the mistake was not mutual. However, his reliance upon the doctrine of mutual mistake is applicable only to cases involving reformation. E.g., Fullerton v. Storthz, 182 Ark. 751, 33 S.W.2d 714. Cancellation of the instrument does not require mutual misunderstanding. Arkansas State Highway Commission v. Ottinger, 232 Ark. 35, 334 S.W.2d 694; Hubbard v. Elam, 238 Ark. 976, 385 S.W.2d 925. The 1965 decision of Hubbard casts some doubt upon the validity and full acceptance of the Ottinger case and its predecessors in Arkansas. Prior to Hubbard, Arkansas law was clear that a unilateral mistake would be grounds for recision if the moving party was non-negligent and the parties could be restored to their status quo. The mistake had to relate to a material feature of the contract and be of such consequence that it would be unconscionable to enforce the bargain. Arkansas State Highway Commission v. Ottinger, supra; Frazier v. State Bank of Decatur, 101 Ark. 135, 141 S.W. 941; Fleischer v. McGehee, 111 Ark. 626, 163 S.W. 169. Contra, Restatement, Contracts § 503. However, in Hubbard v. Elam, supra, 385 S.W.2d at 926-927 although the Arkansas court recognizes its former rule, Mr. Justice Ward states:

"What appears to be the modern, and we think the better, rule relative to recision for a unilateral mistake, is well stated in 13 Am.Jur.2d, Cancellation of Instruments § 32 which reads:

`Equity will relieve a party from a unilateral mistake that was a result of fraud or duress or was accompanied by other special facts creating an independent equity on behalf of the mistaken person, such as inequitable conduct of the other party, but cancellation should not be decreed against a party whose conduct did not contribute to or induce the mistake and who will obtain no unconscionable advantage therefrom.\'

In Hubbert v. Fagen, 99 Ark. 480, 138 S.W. 1001, the Court quoted with approval the following:

`Where relief is given because of the mistake of one party alone, it is where it is induced by the conduct of the other party, or because the other seeks unconscionably to take advantage of it, and the ground of jurisdiction is really fraud.\'"

Relevant only to the overall circumstances, as the trial court found, appellant had knowledge immediately after the bids of the gross variance of appellee's figures with the other contractors. However, more significant under the Hubbard rule is whether appellee was induced to make his mistake by reason of conduct of the appellant.

The testimony reflects a sewer contractor always estimates the depth of his excavation from the "ground lines" as disclosed in the plans and specifications. As more fully disclosed in the lower court's opinion, appellee's mistake was in assuming the "curb lines" shown on the plans submitted for bidding to be "ground lines." The pivotal issue surrounds appellee's assumption that they were the same: Was it his negligence or was he reasonably justified in light of appellant's conduct to make his bid accordingly?

There are many factors considered by the trial court, the most significant being appellant's plans and specifications submitted to appellee prior to the competitive bidding. Appellant's "Schedule of Prices" recited the approximate amount of pipe necessary to be laid at various depths and appellee was required to enter his bid for each of the "cuts" at the respective depths...