Haggart Const. Co. v. State Highway Commission

• Decision Date: 25 May 1967
• Docket Number: No. 11093,11093
• Citation: 427 P.2d 686,149 Mont. 422
• Parties: The HAGGART CONSTRUCTION COMPANY, a Corporation, Plaintiff and Respondent, v. The State of Montana, Acting By and Through the STATE HIGHWAY COMMISSION, Defendant and Appellant.
• Court: Montana Supreme Court

Page 686

427 P.2d 686

149 Mont. 422

The HAGGART CONSTRUCTION COMPANY, a Corporation, Plaintiff and Respondent, v. The State of Montana, Acting By and Through the STATE

HIGHWAY COMMISSION, Defendant and Appellant.

No. 11093.

Supreme Court of Montana.

Submitted April 12, 1967.

Decided May 11, 1967.

Rehearing Denied May 25, 1967.

Forrest H. Anderson, Atty. Gen., Helena, Donald D. MacPherson, Daniel J. Sullivan, Robert A. Tucker, K. M. Bridenstine, Helena, D. R. Matthews, Missoula, Peter McKinney and Thomas F. Dowling, Harry C. Alley (argued), Helena, for appellant.

Loble, Picotte & Fredricks, Helena, Anderson, Symmes, Forbes, Peete & Brown, Billings, Gene A. Picotte (argued), Helena, Jerome Anderson (argued), Billings, for respondent.

CASTLES, Justice.

This is an appeal from a judgment entered in favor of Plaintiff, hereinafter referred to as Haggart, for additional expenses incurred on a road construction contract between Haggart and appellant, Montana State Highway Commission.

Haggart, a general contracting company, received at its offices in Fargo, North Dakota, an invitation from appellant to bid on a highway construction project near Richey, Montana. This 'Notice to Bidders' was received 19 days prior to bid letting. Haggart thereupon requested a 'Bid Proposal' from appellant, which included the 'Plan and Profile' and the proposed 'General Contract'. These materials were received by Haggart 14 days before bid letting, and included 'Available Surfacing Materials Reports'. Such reports contained technical data on three gravel pits near the construction site from which the contractor could obtain materials to be used on the road. The three pits were State-optioned and gravel therefrom would be supplied free of charge to the successful bidder; or put another way 'royalty-free' gravel close to the job site.

The available materials report was based on test drillings and laboratory analysis conducted by appellant and indicated that acceptable surfacing materials could be produced economically and in sufficient quantities from the pits. Haggart won the contract. As stated in the findings of fact made by the district court, and these findings are not challenged, the gravel in all three pits was not suitable for the intended use and could not have been processed by Haggart to meet quality specifications in the contract. Haggart incurred expenses in excess of $147,000.00 in obtaining suitable gravel elsewhere and obtained a judgment therefor.

The district court's findings, unchallenged here, are to the effect that: (1) the appellant intended the bidders to rely on its sources of material; (2) the bidders could not independently investigate nor check the accuracy of the representations; and (3) the representations as to fitness constituted a warranty.

While no finding of wilful misrepresentation was made, at least an implied finding of negligent testing by the appellant was made. In this connection one witness testified that samples containing too much sand were rejected as a standard practice. At the very least the findings were that the representations were misleading.

Appellant does not seriously deny the fact that the material reports were misleading inasmuch as the gravel obtained was not of the quality indicated. Rather appellant relies upon certain exculpatory provisions of the contract, arguing that such provisions place the risk squarely on the contractor to make an independent assessment of available materials. The district court ruled that appellant in effect warranted the existence of suitable materials and that Haggart acted in justifiable reliance on such representations to his detriment. The only issue, then, is whether the exculpatory provisions offer a defense to appellant under the particular circumstances of this case.

Language in the contract relied upon by appellant provides in pertinent part:

'The Commission will provide test data concerning quality and quantity but will make no guaranty in any respect as to quality and quantity of material produced therefrom * * *. If the contractor elects to use any or all of such indicated sources, * * * the contractor shall be wholly and completely responsible for the quality and quantity of any and all materials supplied and furnished in such a case. * * * The contractor may use any indicated source he chooses, but it shall be his responsibility, and his alone, to produce satisfactory material therefrom * * * .'

In addition, the 'Available Surfacing Materials Report' itself contained the following language:

'The data shown herein represents condensed information from the Laboratories and as reported by the Field Forces regarding the source of surfacing materials for this project. It does not constitute a guarantee by the State Highway Commission of the quality or quantity of the material as shown * * * .'

Although Haggart argues that the contract is ambiguous and should be construed against the drafter of the instrument (here the appellant), we feel that the above-cited provisions are quite clear. But having considered case law and policy issues raised, we do not feel that the exculpatory clauses are enforceable in this instance.

Appellant admits that one purpose in furnishing available materials reports to prospective bidders is to induce lower bids. The advantage to Montana taxpayers as a result of this practice is clear. Since Haggart received the materials report only 14 days before bid letting, the practical difficulty in making an independent analysis of such materials is obvious. The record further indicates that few contractors bidding on such projects have sufficient time or test facilities to make an intelligent appraisal of available materials. There is nothing to show that appellant expects less than complete reliance on its materials reports.

If the State Highway Commission were allowed to rely on the exculpatory provisions of the contract, the purpose for which such reports are offered would be sadly frustrated, if not totally destroyed. No prudent contractor would proceed in reliance on such reports at his absolute peril; the necessity to guard against unforeseen deficiencies would result in much higher bids than conditions would normally warrant.

Although appellant cites some authority to the contrary, the position which the court takes here is amply...