Mat-Su/Blackard/Stephan & Sons v. State, MAT-SU

• Decision Date: 16 July 1982
• Docket Number: No. 5685,MAT-SU,5685
• Parties: /BLACKARD/STEPHAN & SONS, a joint venture, Appellant, v. STATE of Alaska, Appellee.
• Court: Alaska Supreme Court

Page 1101

647 P.2d 1101

MAT-SU/BLACKARD/STEPHAN & SONS, a joint venture, Appellant, v. STATE of Alaska, Appellee.

No. 5685.

Supreme Court of Alaska.

July 16, 1982.

Raymond A. Nesbett, Anchorage, for appellant.

Susan Urig, Asst. Atty. Gen., Wilson L. Condon, Atty. Gen., Juneau, for appellee.

Before BURKE, C. J., and RABINOWITZ, CONNOR, MATTHEWS and COMPTON, JJ.

OPINION

PER CURIAM.

The appellant has appealed from an adverse decision of the superior court which is based on an order granting summary judgment to appellee. We affirm on the Memorandum of Decision of the superior court which, with minor editorial changes is as follows:

I. FACTS ¹

Mat-Su/Blackard/Stephan & Sons (MBS) is a joint venture engaged in construction work. On December 1, 1977, in response to the bid invitation of the State, MBS submitted a bid for paving a section of Rabbit Creek Road in Anchorage. The standard specifications which accompanied the bid invitation and the contract later executed provided that the contractor was to furnish gravel and other materials ² and was required to obtain the necessary permits ³ for removal of gravel.

MBS was the low bidder on the project by some $800,000. Immediately after the bid opening, William Hansen, MBS's representative at the bid opening, examined the competing bids and determined that MBS's low bid resulted from anticipated lower gravel costs of using a gravel pit (Spendlove source) near the paving project site. ⁴ Hansen told a State representative immediately after the bid opening that MBS based its bid on gravel from the Spendlove pit and that if there was any problem with gravel from that source, MBS intended to declare a mistake and attempt to withdraw the bid.

In the period following the bid opening, but prior to the contract award, MBS and the State conducted tests of the gravel in the Spendlove pit to insure that it would meet the quality specifications in the contract. The legal right to remove gravel from the pit was assumed by MBS ⁵ and this assumption was conveyed to the State. ⁶

Also prior to the contract award, residents of the area adjacent to the Spendlove pit learned of the plan to remove gravel and voiced their opposition to the State in a telegram. The State responded that the contractor had the duty to secure gravel, and suggested the matter be taken up with the contractor. The State notified the contractor about the residents' concern and the State's reply.

On December 27, 1977, the contract was awarded to MBS and on January 3, 1978, it was signed. The question of MBS's right to remove the Spendlove gravel was raised at the preconstruction meeting on January 11, 1978, at which time MBS assured the State the matter was being taken care of. ⁷

In late January, the State requested that MBS provide proof of its right to remove gravel from the pit. MBS complied by obtaining two letters from the Municipality of Anchorage setting out the grandfather rights in the Spendlove pit. ⁸ Once the letter was obtained, the State authorized MBS to begin work on the project and 46,000 tons of gravel were removed. However, neighboring property owners appealed the determination that the Spendlove pit was a non- conforming use. The Zoning Board of Examiners and Appeals then denied the right to remove gravel from the Spendlove pit. This decision was upheld by the superior court.

As a result of the loss of the Spendlove pit, MBS was forced to haul gravel from a more remote source provided to it by the State and for which no royalty was charged. MBS sought unsuccessfully to modify the contract administratively to compensate it for the higher costs in transporting the gravel. ⁹ MBS then filed this action to obtain compensation for additional expenses incurred in the project resulting from the closure of the Spendlove pit, based on a variety of theories. ¹⁰ These theories will be discussed in turn.

II. MUTUAL MISTAKE

MBS alleges first that the availability of the Spendlove source was a basic assumption of the parties at the time of contracting, and that the parties were mistaken in this assumption. Judicial relief from the provisions of a contract on the basis of mutual mistake is proper where there was a mistake of both parties at the time of contracting as to a basic assumption on which the contract was made; the mistake had a material effect on the agreed exchange of performances, and the party seeking relief did not bear the risk of the mistake. ¹¹

While MBS was mistaken as to the continued availability of the Spendlove source, MBS's theory of mutual mistake must fail because the contract of the parties expressly allocated to MBS the burden of providing materials. While at the time of contracting the State knew MBS intended to use the Spendlove source and had bid on the basis of using that source, nothing in the record suggests the State premised its acceptance of MBS's bid on use of the Spendlove source. Any gravel source meeting quality specifications would have been appropriate. The State was indifferent to the gravel source-that decision rested with MBS. ¹²

In Fowler v. City of Anchorage, 583 P.2d 817 (Alaska 1978) a contractor sought reformation of a contract with the city. Between the time of the bid and the time of the contract award, the State's minimum wage rates rose, forcing the contractor to pay higher than anticipated wages. The court refused to find a mutual mistake, declaring:

The doctrine of mutual mistake does not permit rescission when the contract has expressly allocated the risk of a particular occurrence to one party and such an event has occurred (footnote omitted). The instant situation reflects such an allocation of risk; the invitation to bid contained a notice (stating) that the bidder must inform himself of wage conditions, and we believe this provision amounts to an express requirement that the bidder bear the particular risk of mistake.

583 P.2d at 824. In the instant case the allocation of the risk of providing materials is even more explicit than in Fowler, since the costs (and the risk) incident to increased length of gravel haul were placed on MBS. ¹³ MBS has failed to indicate any actions or representations by the State which would raise a genuine issue of material fact as to the allocation of the risk of obtaining gravel. ¹⁴

III. OTHER THEORIES

Extensive discussion of MBS's other theories of recovery is unnecessary because each theory requires, as a matter of law, that the risk making performance of the contract more burdensome was not allocated to the party claiming relief from the contract.

MBS's theory that the purpose of the contract was frustrated by the unavailability of the Spendlove source is without merit. ¹⁵ First, the risk of unavailability was placed on MBS. Second, while MBS may have felt it desirable to obtain gravel from the Spendlove source, it cannot be said that removal of Spendlove's gravel was the object or effect the parties intended in contracting. The object of the contract was to build a road, and this purpose was not frustrated.

MBS next contends that the unanticipated unavailability of the Spendlove source constituted a contingency which rendered performance commercially impracticable. Of course, it is not necessary that performance be literally impossible to claim relief from contractual terms, ¹⁶ and completion of the contract is not a bar to recovery. ¹⁷ For purposes of this motion it is assumed that the closing of the Spendlove pit was unanticipated and that the higher cost of gravel made performance impracticable.

MBS argues that the motion for summary judgment should be denied on the basis of Northern Corp. v. Chugach Electric Association, 518 P.2d 76 (Alaska 1974) and Merl F. Thomas Sons v. State, 396 P.2d 76 (Alaska 1964). Neither case is helpful.

In Northern Corp. the contract between the parties provided that rocks would be transported across the surface of a frozen lake to a dam. After several unsuccessful attempts to move the rock over the ice, the contractor abandoned the contract. Recovery by the contractor of the costs of attempting to perform was based on the fact performance in the manner specified by the parties was impossible. Had the agreement of the parties in the instant case been that the contract would be performed with Spendlove gravel, then the case would be analogous. As noted, MBS has failed to show that use of Spendlove's gravel was other than a means unilaterally selected by it to perform the contract and meet its obligation to provide materials.

Similarly, in Merl F. Thomas the court found there was a genuine issue of material fact as to whether the contract contained an implied condition specifying performance by moving equipment over the frozen Susitna River. There was evidence that all bidders assumed the equipment would cross the river at this point over the ice, and but for the State's delay in opening bids and awarding the contract the crossing could have been made. At least for purposes of summary judgment this presented a fact issue. In the instant case all other bidders bid out of more conventional gravel sources. More importantly, MBS has presented no evidence and none is in the record which raises a factual question whether use of Spendlove's gravel was a mutually specified method of performance, in light of the unambiguous contract language to the contrary.

MBS next contends that because removal of gravel from the Spendlove source became unlawful by virtue of the zoning decision, it is entitled to recovery. The doctrine of impossibility by virtue of supervening illegality is unavailable to MBS. First, the ban on removal of the Spendlove gravel was not the result of an enactment after the time of contracting, but rather was the application of pre-existing law to the activity. Thus there was no supervening illegality. ¹⁸ Secondly, as noted above, the risk of procuring necessary legal rights to obtain the gravel was placed on MBS by the contract. ¹⁹

MBS's final...