Moffett, Hodgkins & Clarke Co. v. City of Rochester

• Decision Date: 07 December 1898
• Docket Number: 5.
• Citation: 91 F. 28
• Parties: MOFFETT, HODGKINS & CLARKE CO. v. CITY OF ROCHESTER et al.
• Court: U.S. Court of Appeals — Second Circuit

91 F. 28

MOFFETT, HODGKINS & CLARKE CO. v. CITY OF ROCHESTER et al.

No. 5.

United States Court of Appeals, Second Circuit.

December 7, 1898

Joseph H. Choate, for appellant.

Louis Marshall, for appellee.

Before WALLACE, LACOMBE, and SHIPMAN, Circuit Judges.

WALLACE Circuit Judge.

By the decree appealed from, the complainant has been released from the obligation to enter into and perform a contract with the city of Rochester for the construction of certain municipal works conformably to the terms of a written proposal delivered by the complainant to the executive board of said city. The decree adjudged the proposal void, and ordered it rescinded, upon the theory that it embodies terms inserted by the mistake of the complainant. The case presents the general question of the power of a court of equity to rescind a contract on the ground of mistake.

Under the provisions of the charter of the city of Rochester, the executive board has control of the waterworks of the city and authority to let contracts for such extensions and additions as it may from time to time determine to make. In December, 1892, the board, having determined to make extensions and additions, invited proposals for contracts among them for those known as 'Contract No. 1' and 'Contract No. 2.' This was done pursuant to section 172 of the charter, which reads as follows:

'The executive board is hereby directed to cause a notice to be published in one or more of the daily newspapers of said city, at least ten days before the letting of any contract for sealed proposals therefor, each to be accompanied by a bond signed by at least two responsible sureties, conditioned that the person, firm or corporation making such bid, if it is accepted, will perform the work or furnish the materials, or both, mentioned in such proposals, and fulfill any contract that may be made with him, them or it, and the amount specified in the bond shall be recoverable thereon in case the proposer fails to perform the conditions of the bond and its accompanying proposal; such bids shall be opened on the day named in such notice. Said board may let any contracts as it deems for the best interests of taxpayers, but it shall publish all bids received by it, and the persons, firms, or corporations to whom contracts are awarded. Such contracts shall be enforceable by and in the name of the city of Rochester, or said executive board as such. Neither the principal or sureties on any bid or bond shall have the right to withdraw or cancel the same until the board shall have let the contract for which such bid is made, and the same shall have been duly executed.'

Contract No. 1 contemplated the construction of a masonry conduit for a distance of 12,000 feet from Hemlock Lake northward. Contract No. 2 contemplated the construction of a riveted steel pipe conduit, either 38 or 40 inches in diameter, and 140,000 feet long, commencing at the north end of said masonry conduit, and terminating at Mt. Hope Reservoir, with an option to the executive board of selecting either one of two different routes (designated as 'A' and 'B') over a length of about 8,000 feet.

The notice inviting bids required separate bids for the different contracts. It stated that the award would be made as soon as practicable after the bids were publicly opened and read, and that, after the delivery of the bids to the board, 'the bid cannot be withdrawn.' The complainant, a corporation engaged in the contracting business, submitted proposals for each of the two contracts. Each was distinct in itself, but instead of being inclosed in a separate sealed envelope, as required by the notice to the bidders, the complainant inclosed and delivered both under one cover.

The proposals of the various bidders for the work were opened by the board at the time specified in the notice, and severally read in the presence of the bidders. For contract No. 1 the bid of the complainant was about $81,000 higher than that of the lowest bidder. For contract No. 2, route A, 38-inch pipe, the bid of the complainant was $857,552, being about $273,000 below that of the next lowest bidder.

The evidence satisfactorily proves that the complainant made a clerical error in inserting in the proposal for contract No. 2, route B, the price of 50 cents, instead of 70 cents, per cubic yard for certain earth excavation (of the estimated quantity of 184,000 cubic yards), whereby the total amount of the bid, when the various items were tabulated, was $36,800 lower than it would otherwise have been. The evidence also indicates that the complainant made an erroneous estimate of the cost of certain tunnel excavation by omitting to take into consideration certain features of the work, and in consequence inserted in that proposal the price of $1.50 per cubic yard, whereas it would have otherwise inserted a price of $15. At the estimated quantity of this excavation, the bid was $27,000 less than it would have been at $15 per cubic yard. These errors were doubtless attributable to the haste in which the specifications were considered and the proposals prepared by the complainant,--a haste which was unnecessary and almost inexcusable. At the time of the public reading of the bids the complainant called the attention of the board to the mistake in the price for the earth excavation, but did not mention the other alleged error. It did not ask to withdraw the bid, and took no further action in that behalf until about 20 days thereafter, and when the board had already awarded contract No. 1 to the lowest bidder. The complainant then sent a communication to the board, insisting that its bid for the whole work included in contracts No. 1 and No. 2 was a single proposal, protesting against letting the two contracts to different contractors, and stating that clerical errors had been made in the proposal for contract No. 2, route B, in the prices for earth excavation and tunnel excavation, and the details of the errors. The communication concluded as follows: 'We therefore respectfully request either that the contract in its entirety for both sections of the work be awarded to us, at the corrected prices, or that we may be allowed to withdraw our proposal. ' The board, after receiving this communication, adopted resolutions awarding contract No. 2, route B, to the complainant. Thereupon the complainant commenced the present action.

It is manifest that one of the alleged mistakes-- that in respect to the tunnel excavation-- was not a mistake in any legal sense, but was a negligent omission, arising from an inadequate calculation of the cost of the work. Courts cannot permit such omissions to be brought forward by those who make them as a ground for receding from their engagements. The party in fault must have exercised at least the degree of diligence which may be fairly expected from a reasonable person.

It is also manifest that the complainant did not intend to give the board an opportunity to correct the mistakes and award the contract on the corrected basis. There was no color of foundation for the assertion that the proposals were to be treated as a single bid for contracts No. 1 and No. 2, and that both contracts must be awarded to the complainant or neither. The position thus taken by the complainant was well calculated to excite distrust on the part of the board, and induce its members to believe that the alleged mistakes were an afterthought, conceived when the complainant had become convinced, by studying the proposals of its competitors, that it could not profitably carry out the contract on the terms proposed.

The case differs quite radically from any reported in the books arising under the head of mistake. The contract contemplated an extensive and important undertaking, the cost of which could only be intelligently estimated after a thorough investigation of all the conditions by competent experts. It was to be let, after a competitive bidding, by a board of public officers, who were not permitted to exercise any favoritism or indulgence, who were required by law to consult alone the interests of the municipality they represented, and who would be exposed to just censure if they should tolerate any modification of a proposal in his own favor by a bidder. The statute, as well as the notice to bidders, informed all bidders that a proposal once submitted could not be withdrawn. A proposal made under such circumstances is entitled to be regarded as having some attributes of finality which do not belong to ordinary contracts.

Although the charter provisions do not preclude any relief by the court to a bidder in a proper case, it is designed in order to protect the city from the danger of collusion between the board and bidders, or between bidders themselves, to constitute a proposal a perfect contract, as regards the bidder, from the time of its delivery to the board. The statute would be a nullity if the board or the courts could rescind such a contract whenever the bidder had made a mistake in the terms of his proposal. The nature of the contract forbids the court to interfere with it, much less to annul it, upon any latitudinarian notions of the doctrine of mistake as administered in equity.

The general doctrine is succinctly expressed in 15 Am.& Eng.Enc.Law, p. 628, as follows:

'In order that a mistake may come within the cognizance of a court of equity, it must be shown to be-- First, material, or the moving cause of the complaining party's action; second, mutual, or shared in by both parties to the transaction; third, unintentional; and, fourth, free from negligence.'

The salutary power of courts of equity to rescind or reform contracts which do not express the real intention of the parties is not to be extended to cases where the contract,...