Iversen Const. Corp. v. Palmyra-Macedon Cent. School Dist.

• Decision Date: 22 March 1989
• Docket Number: PALMYRA-MACEDON
• Citation: 143 Misc.2d 36,539 N.Y.S.2d 858
• Parties: , 52 Ed. Law Rep. 1211 IVERSEN CONSTRUCTION CORPORATION, Plaintiff, v.CENTRAL SCHOOL DISTRICT, Defendant, and David Christa Construction, Inc., Intervenor-Defendant.
• Court: New York Supreme Court

Page 858

539 N.Y.S.2d 858

143 Misc.2d 36, 52 Ed. Law Rep. 1211

IVERSEN CONSTRUCTION CORPORATION, Plaintiff, v. PALMYRA-MACEDON CENTRAL SCHOOL DISTRICT, Defendant and David Christa Construction, Inc., Intervenor-Defendant.

Supreme Court, Wayne County.

March 22, 1989.

Ernstrom & Estes (Andrea Quercia, Rochester, of counsel), for plaintiff.

Nesbitt & Williams (John B. Nesbitt, Palmyra, of counsel), for defendant.

Sutton, DeLeeuw, Clark & Darcy (John Darcy, Pittsford, of counsel), for intervenor-defendant.

MEMORANDUM DECISION

CARMEN R. PARENTI, Acting Justice.

The plaintiff instituted this action against the defendant, Palmyra-Macedon Central School District, seeking reformation or rescission of a general construction contract. The defendant school district has counter-claimed for affirmative relief directing the plaintiff to execute the contract. The intervenor-defendant, David Christa Construction, Inc., after having been granted the right to intervene with the consent of both other parties, demands judgment on its cross-claim awarding the contract to it as the next lowest bidder.

The trial of this action took place on March 20, 1989, and from the testimony of the several witnesses presented, the Court makes the following Findings of Facts and Conclusions of Law:

On February 9, 1989, Iversen Construction Corporation ("Iversen") submitted a bid to the Palmyra-Macedon Central School District ("School District") for construction work on a public project. Iversen also provided a bid bond as required by the "Instructions to Bidders" in the amount of five percent of the submitted bid. The Iversen bid was in the amount of $5,517,267.00. The second lowest bid submitted was that of David Christa Construction, Inc., ("Christa") in the amount of $6,420,000.00. Six additional bids were submitted on the project ranging from $6,522,000.00 to $7,395,000.00.

At the time of the opening of the bids on February 9, 1989, the architects from the architectural and engineering firm of Beardsley, Beardsley, Cowden & Glass were present. The two architects present at the bid opening were surprised by the low bid of Iversen and discussed the possibility that there might be a bidding error.

Later on February 9, 1989, Iversen discovered a material error in its computations on the bid which resulted in a submitted bid which was $696,232.00 (plus overhead and profit) lower than intended. The mistake occurred when one sheet of subcontractor bids was inadvertently not included in the total bid.

Christopher Iversen, president of Iversen Construction Corporation, immediately began notifying the architectural firm of Beardsley, Beardsley, Cowden & Glass (employed by the School District) and the School District of the error. They submitted to the architect and School District documentation substantiating the manner in which the error occurred. Iversen immediately sought withdrawal of its bid because of the obvious inadvertent error.

Although notified of the error, the School District did not respond but rather, on February 15, 1989, notified Iversen that it was awarding the contract for the submitted bid of $5,517,267.00. After being advised by letter of the position of the School District, the plaintiff, Iversen, again made efforts through counsel to withdraw the bid. Being unsuccessful in that regard, it thereafter instituted this action for reformation or rescission of the bid-contract. The plaintiff also seeks cancellation of the underlying bid bond.

It is conceded by the parties that the Iversen bid was an honest mistake and not the result of any fraud, collusion or other impropriety on the part of Iversen or any of the parties. It was clearly a clerical-arithmetical error of the type which our courts have found as justifying the granting of equitable relief in the nature of rescission or reformation. It would be unconscionable under the circumstances of this case, to require the mistaken bidder to perform the contract at a price in excess of $700,000.00 less than intended. (Balaban-Gordon Company, Inc. v. Brighton Sewer District No. 2, et al, 41 A.D.2d 246, 342 N.Y.S.2d 435 [4th Dept.1973]; Derouin's Plumbing and Heating, Inc. v. City of Watertown, 71 A.D.2d 822, 419 N.Y.S.2d 390 [4th Dept.1979]; Jobco, Inc. v. County of Nassau, 129 A.D.2d 614, 514 N.Y.S.2d 108 [2nd Dept.1987]; State of New York v. Atlantic Audio-Visual Corp., 118 A.D.2d 998, 499 N.Y.S.2d 995 [3rd Dept.1986] )

In the Derouin's Plumbing and Heating case, supra, the court permitted equitable relief where "Leon Derouin made a clerical error in transposing the total amount of his bid from the recapitulation sheets to the bid proposal sheet". This situation is similar to that now before the Court. The Derouin decision also states that the municipality was aware of the mistake three weeks prior to awarding the contract. The School District was, of course, aware almost immediately of the alleged error made by Iversen.

The law of this State makes it very clear that under the circumstances of this case, it would be unconscionable to require Iversen to perform at the mistaken bid price. In fact, the defendant, School District, although not conceding this point on the record, seeks as alternative relief, reformation rather than rescission of the contract, since the best interest of the School District and the taxpayers of the district would be better served by that result.

Although there is little New York law dealing with the question of equitable reformation of a bid-contract, there is considerable law in our Federal Court system and other jurisdictions which supports reformation as an appropriate remedy.

In the case of Dick Corporation v. Associated Electric Co-op, Inc., 475 F.Supp. 15 (1979), the United States District Court for the...