Midway Excavators, Inc. v. Chandler

• Decision Date: 03 October 1986
• Docket Number: No. 85-359,85-359
• Citation: 128 N.H. 654,522 A.2d 982
• Parties: MIDWAY EXCAVATORS, INC. v. John P. CHANDLER, Commissioner, New Hampshire Department of Public Works and Highways.
• Court: New Hampshire Supreme Court

Page 982

522 A.2d 982

128 N.H. 654

MIDWAY EXCAVATORS, INC. v. John P. CHANDLER, Commissioner, New Hampshire Department of Public Works and Highways.

No. 85-359.

Supreme Court of New Hampshire.

Oct. 3, 1986.

Upton, Sanders & Smith, Concord (Robert Upton, II, on brief, and Gilbert Upton, orally), for plaintiff.

Stephen E. Merrill, Atty. Gen. (orally) (Michael J. Walls, Asst. Atty. Gen., on brief), for the State.

BATCHELDER, Justice.

This case involves an alleged mistake in a bid by the plaintiff, Midway Excavators, Inc., on a highway construction project in the town of Franconia. The New Hampshire Department of Public Works and Highways (now the department of transportation) accepted the bid, but refused to reform it to correct the alleged mistake. The plaintiff challenged that refusal in a petition for equitable relief. The Superior Court (Dickson, J.) denied the petition, and the plaintiff appealed. For the reasons that follow, we affirm.

In May 1985, the department solicited bids for the project. The notice stated that bids were due on June 6, 1985, at 2 p.m., and that the department's estimate for the job was approximately $8.3 million. On June 6, the plaintiff's officers were engaged in hectic, last minute bid preparation, which is customary in the construction industry. In preparing the written bid proposal, the plaintiff's chief estimator entered a total bid price of $7,846,067, but failed to write in $525,000 next to the item entitled "mobilization." Thus, the sum of the itemized prices was $7,321,067. The plaintiff's officers did not notice this omission before the bid was submitted, and the bid was read at the bid opening that afternoon. When he discovered the error, the plaintiff's chief estimator informed the department that the total proposal amount was correct. The second lowest bid was $7,955,455, and thus the plaintiff was low bidder.

The next morning, two of the plaintiff's officers met with the commissioner to explain the mistake. At the meeting, the deputy commissioner recalled in passing a similar incident involving a blank item in a bid some twenty years earlier in which a previous commissioner had waived the error and accepted the total bid proposal.

On June 26, the commissioner awarded the contract to the plaintiff at the lower price, i.e., the sum of the itemized prices. Later that day, the plaintiff filed a petition for equitable relief in the superior court, and obtained a temporary restraining order prohibiting the commissioner from requiring it to execute a contract at the lower price, from awarding the contract to the second lowest bidder, and from soliciting new bids.

At an evidentiary hearing on July 3, the plaintiff's chief estimator testified that an inadvertent clerical error resulted in the bid discrepancy. The commissioner testified that the integrity of the bid process and the best interests of the State were his primary concerns in the matter, that he acted pursuant to the department's bid specifications in awarding the contract, and that he was not bound by departmental precedent. The court denied the plaintiff's petition.

Thereafter, the State agreed not to cause the plaintiff to forfeit its bond if the plaintiff chose to rescind the contract. Thus, the plaintiff was faced with the choice of rescinding the bid and reacquiring its bond, or entering into the contract at the allegedly erroneous lower price. On July 22, the plaintiff executed the highway construction contract for a contract price of $7,321,067. The plaintiff subsequently appealed the court's denial of equitable relief.

The plaintiff argues on appeal that (1) the contract should be reformed to correct the clerical mistake; (2) the commissioner abused his discretion in making the award without recognizing and correcting the mistake; (3) the department's failure to develop and apply standards for determining which technicalities it will waive resulted in the denial of the plaintiff's due process right to receive the contract as the lowest responsible bidder; and (4) the commissioner was bound by departmental precedent to accept the total bid price.

We begin by setting out the department's pertinent standard specifications. Section 102.07 of the Standard Specifications for Road and Bridge Construction states that "[p]roposals will be considered irregular and may be rejected ... [i]f the proposal does not contain a unit price for each pay item listed." N.H. DEPT. PUB. WORKS & HIGHWAYS, STANDARD SPECIFICATIONS FOR ROAD AND BRIDGE CONSTRUCTION (1983) (hereinafter cited as STANDARD SPECIFICATIONS). Section 103.01 states:

"After the proposals are opened and read, they will be compared on the basis of summation of the products of the quantities shown in the bid schedule by the unit bid prices. The results of such comparisons will be immediately available to the public. In case of a discrepancy between the prices written in words and those written in figures, the prices written in words shall govern. In case of discrepancy between the total shown in the proposal and that obtained by adding the products of the quantities of items and the unit bid prices, the latter shall govern.

The right is reserved to reject any or all proposals, to waive technicalities or to advertise for new proposals, if in the judgment of the Commissioner the best interests of the State will be promoted thereby."

Id. § 103.01 (emphasis added).

The plaintiff first argues that the court should reform the bid, and therefore the contract, to correct the clerical mistake. It maintains that reformation will prevent an unconscionable loss to the plaintiff and a windfall to the State. To support this contention, the plaintiff relies on authorities from other jurisdictions. See, e.g., Dick Corp. v. Associated Elec. Co-op., Inc., 475 F.Supp. 15 (W.D.Mo.1979); Bromley Contracting Co., Inc. v. United States, 596 F.2d 448 (Ct.Cl.1979). See also 13 S. WILLISTON, A TREATISE ON THE LAW OF CONTRACTS § 1548, at 125 (W. Jaeger 3d ed. 1970) ("Knowledge by one party of the other's mistake regarding the expression of the contract is equivalent to mutual mistake"). These authorities, however, are not in accord with New Hampshire law.

In Erin Food Servs., Inc. v. 688 Props., 119 N.H. 232, 237, 401 A.2d 201, 204 (1979), this court stated that "reformation will only be granted when the evidence is clear and convincing that (1) there was an actual agreement between the parties, (2) there was an agreement to put the agreement in writing and (3) there is a variance between the prior agreement and the writing." We have also stated that reformation may be proper when an instrument "fails to express the intention which the parties had in making the contract," Minot v. Tilton, 64 N.H. 371, 374, 10 A. 682, 684 (1887) (quoting J. POMEROY, A TREATISE ON EQUITY JURISPRUDENCE § 845), and that reformation, absent fraud, requires a mutual mistake, Franklin Nat. Bank v. Austin, 99 N.H. 59, 62, 104 A.2d 742, 745 (1954); Fitch Company v. Company, 82 N.H. 318, 321, 133 A. 340, 342 (1926).

Moreover, in the case of a unilateral mistake the remedy is rescission, not reformation. Fitch supra; see Curran Company v. State, 106 N.H. 558, 215 A.2d 702 (1965); 3 J. POMEROY, A TREATISE ON EQUITY JURISPRUDENCE § 870a (5th ed. 1941). Therefore, the plaintiff in this case, which chose not to exercise its option to rescind the bid and re-attain its bid bond, cannot now seek to reform the bid, and therefore the contract. See Lemoge Electric v. County of San Mateo, 46 Cal.2d 659, 297 P.2d 638 (1956); Baltimore v. DeLuca-Davis Co., 210 Md. 518, 124 A.2d 557 (1956); Geremia v. Boyarsky, 107 Conn. 387, 140 A. 749 (1928); Annot., 2 A.L.R. 4th 991 (1980). The plaintiff entered into the contract freely and, absent mutual mistake, the court will not reform it.

In rejecting the plaintiff's argument, we agree with the decision of the California Supreme Court in Lemoge Electric supra. The court stated:

"Plaintiff had a remedy which it chose not to exercise that would have relieved it of any hardship that could result from its error. However, instead of rescinding, plaintiff, with full knowledge of its mistake, proceeded to perform the contract, and it cannot now compel defendant to pay the amount which it claims it intended to bid or obtain...