Ray D. Lowder, Inc. v. North Carolina State Highway Commission
| Decision Date | 06 August 1975 |
| Docket Number | No. 7510SC95,7510SC95 |
| Citation | 217 S.E.2d 682,26 N.C.App. 622 |
| Court | North Carolina Court of Appeals |
| Parties | RAY D. LOWDER, INC. v. NORTH CAROLINA STATE HIGHWAY COMMISSION. |
Berry, Bledsoe & Hogewood by Louis A. Bledsoe, Jr., and Yates W. Faison, III, Charlotte, for Ray D. Lowder, Inc., plaintiff.
Atty. Gen. Rufus L. Edmisten by Asst. Atty. Gen. Walter E. Ricks, III, Raleigh, for the N.C. State Highway Commission (now Dept. of Transportation), defendant.
This appeal raises two important issues for our determination: (1) whether the
overrun constitutes a changed condition entitling Lowder to an equitable adjustment in the contract unit price for undercut excavation pursuant to § 4.3A of the specifications; and (2) whether certain entries and reports which were offered to substantiate Lowder's claim for additional compensation were properly admitted as substantive evidence.
Before reaching the questions raised by this appeal, we acknowledge the well-established rule that the Commission is not subject to suit except in the manner provided by statute. Nello L. Teer, Co. v. North Carolina State Highway Commission, 265 N.C. 1, 143 S.E.2d 247 (1965). General Statute § 136--29 establishes the procedure for the settlement of claims against the Commission by a contractor who claims he has not received 'such sum as he claims to be entitled to under said contract.' The statute has been interpreted to mean that recovery is possible only within the terms and framework of the contract. Nello L. Teer, Co. v. North Carolina State Highway Commission, 4 N.C.App. 126, 166 S.E.2d 705 (1969).
A threshold question to be resolved is whether the contract provision that 'no subsurface information is available' should work to place the loss occasioned by the unexpected amount of undercut squarely on Lowder. This provision is designed apparently to insulate the Commission, the agency responsible for stating estimates in its contract plans and proposals, from liability should those estimates turn out to be erroneous.
There can be little doubt that the contract proposals and plans, as submitted to the bidders for project 8.11618, constituted material representations as to the location and quantity of undercut excavation. Lowder relied on the relative accuracy of the undercut locations and quantities and was reasonably justified in doing so. It had no reason to believe that project 8.11618 would produce an excessive amount of undercut excavation.
As has been noted in the statement of facts, the estimate of 12,000 cubic yards of undercut was based on the results of a 1963 geological test conducted by the Commission's geologists. The results of that test were routed to the Roadway Design Department for computation of the amount of undercut to be used in the proposals for project 8.11618. The estimate of 12,000 cubic yards of undercut was submitted to bidders. However, the 1963 test, the basis of that estimate, was not made available to the bidders. As we have noted, the author of the 1963 test report emphasized that it was based on the conditions prevailing during the weeks preceding 11 September 1963 when 'the country side was unusually dry from the lack of summer rains.'
The clause in the project special provisions stating '(t)here is no subsurface information available on this project except as may be shown in the plans' cannot limit the Commission's liability. Clauses of this type, stating in effect that the contracting agency does not guarantee the statements of fact in the plans and specifications and requiring the contractor to make his own independent investigation of the site and satisfy himself of the conditions, are not given their full literal effect. See Morrison-Knudsen Company v. United States, 397 F.2d 826, 841 184 Ct.Cl. 661 (1968); 397 F.2d 826, 841, 184 Ct.Cl. 661 (1968); F.Supp. 817, 825, 138 Ct.Cl. 571, 584 (1957), Cert. denied, 355 U.S. 877, 78 S.Ct. 141, 2 L.Ed.2d 108. The information in the plans constituted positive representations upon which Lowder was justified in relying. We are of the opinion, therefore, that (1) a contracting agency which furnishes inaccurate information as a basis for bids may be liable on a breach of warranty theory, and (2) instructions to bidders to make their own independent investigations of the conditions to be encountered cannot be given full literal reach. Hollerbach v. United
States, 233 U.S. 165, 34 S.Ct. 553, 58 L.Ed. 898 (1913); See Anderson, Changes, Changed Conditions and Extras in Government Contracting, 42 Ill.L.Rev. 29, 44 (1947). It is simply unfair to bar recovery to contractors who are misled by inaccurate plans and submit bids lower than they might otherwise have submitted.
Having decided that Lowder should not solely bear the loss for its misplaced reliance on the contract quantities, we are confronted with the first of the two critical issues raised by this appeal: Did the overrun constitute a changed condition entitling Lowder to an equitable adjustment of the contract price pursuant to § 4.3A of the specifications?
We acknowledge the established principles that (1) an interpretation which gives a reasonable meaning to all its provisions will be preferred to one which leaves a portion of the writing useless or superfluous, See 4 Williston on Contracts § 619 (3d ed. 1961); and that (2) contract provisions should not be construed as conflicting unless no other reasonable interpretation is possible. Hol-Gar Mfg. Corp. v. United States, 351 F.2d 972, 979, 169 Ct.Cl. 384, 395--396 (1965). A standard provision such as § 4.3A cannot lightly be read out of the contract or deprived of most of its normal substance.
The Commission's argument is that § 4.3A, dealing with 'alterations of Plans or Character of Work,' should be ignored in favor of § 4.3B, dealing with 'Overruns and Underruns.' The gist of this assertion is that § 4.3B is a more specific contract provision and should control the more general § 4.3A. The Commission cites one of Williston's secondary rules of contract interpretation, as reported in the Restatement, Contracts § 236(c), as the basis for this contention: 'Where there is an inconsistency between general provisions and specific provisions, the specific provisions ordinarily qualify the meaning of the general provisions.' This is not an ironclad rule to be followed in every case. It is merely one rule helpful in arriving at an interpretation of a contract.
Section 4.3A, governing 'Alteration of Plans or Character of Work,' states:
'The Commission reserves the right to make, at any time during the progress of the work, such increases or decreases in quantities and such alterations in the details of construction, including alterations in the grade or alinement of the road or structure or both, as may be found to be necessary or desirable. Such increases or decreases in alterations shall not invaildate the contract nor release the Surety, and the Contractor agrees to accept the work as altered, the same as if it had been a part of the original contract.
'Under no circumstances shall alterations of plans or of the nature of the work involve work beyond the termini of the proposed construction except as may be necessary to satisfactorily complete the project.
'Unless such alterations and increases or decreases materially change the character of the work to be performed or the cost thereof, the altered work shall be paid for at the same unit prices as other parts of the work. If, however, the character of the work or the unit costs thereof are materially changed, an allowance shall be made on such basis as may have been agreed to in advance of the performance of the work, or in case no such agreement has been reached, then the altered work shall be paid for by force account in accordance with Article 9.4.
'No claim shall be made by the Contractor for any loss of anticipated profits because of any such alteration, or by reason of any variation between the approximate quantities and the quantities of work as done.
'Should the Contractor encounter or the Commission discover during the progress of the work conditions at the site suffering materially from those indicated in the contract, which conditions could not have been discovered by reasonable
examination of the site, the Engineer shall be promptly notified in writing of such conditions before they are disturbed. The Engineer will thereupon promptly investigate the conditions and if he finds they do so materially differ and cause a material increase or decrease in the cost of performance of the contract, an equitable adjustment will be made and a supplemental agreement entered into accordingly.
The section which the Commission contends is solely applicable, § 4.3B, governing 'Overruns and Underruns,' states:
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