Sanford Const. Co. v. S & H Contractors, Inc.

• Court: United States State Supreme Court (Kentucky)
• Writing for the Court: STEINFELD; All concur, except OSBORNE; OSBORNE
• Citation: 443 S.W.2d 227
• Decision Date: 06 June 1969
• Parties: SANFORD CONSTRUCTION COMPANY, Inc., Appellant, v. S & H CONTRACTORS, INC., Appellee.

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443 S.W.2d 227 SANFORD CONSTRUCTION COMPANY, Inc., Appellant,
v.
S & H CONTRACTORS, INC., Appellee. Court of Appeals of Kentucky. June 6, 1969.

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William J. Parker, Harlin, Parker, Ricketts, Lucas & English, Bowling Green,

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Harry Kottler, Daus, Schwenger & Kottler, Cleveland, Ohio, for appellant.

Paul R. Huddleston, Huddleston & Huddleston, Bowling Green, for appellee.

STEINFELD, Judge.

Appellant, Sanford Construction Company, Inc. (hereafter Sanford) was engaged as general contractor to develop land and construct a shopping center thereon. Sanford contracted with S & H Contractors, Inc. (hereinafter S & H) to excavate and grade the land. Claiming that Sanford fraudulently induced S & H to enter into the contract at a grossly inadequate price S & H sued Sanford and others for $125,000.00 damages in what S & H described as an 'action in deceit' and as 'founded on a tort involving misrepresentations as to the nature and extent of underlying rock at the shopping center site.' All defendants below except Sanford escaped liability, but on trial a jury returned a verdict against it in the amount of $75,000.00. Motions for a new trial and for judgment notwithstanding the verdict were overruled and judgment was entered pursuant to the verdict. Sanford appeals. ¹ We affirm.

Forest City Enterprises, Inc., the owner, and Sanford engaged licensed experts to prepare plans and specifications for improvements of the site and construction of the building. A booklet entitled 'Site Improvement Specifications for Bowling Green Mall at Bowling Green Kentucky' with the plans was delivered by David Wakser (an officer of Sanford) to various companies, including S & H, as an invitation to bid on the various phases of the project. The booklet and plans were prepared by Keeva J. Kekst and Ernest Ross, architects for Forest City Enterprises, Inc. and Sanford Construction Co. Among other things, the booklet contained a section entitled 'Information to Bidders' which included the following:

'Bidders are required to satisfy themselves by personal examination of the contract documents and investigation at the site of the work as to the condition existing and the difficulties likely to be encountered in the construction of the work.

'No plea of ignorance of conditions that exist or that may hereafter exist, or of conditions or difficulties that may be encountered in the execution of the work as a result of failure to make such examination and investigation will be accepted as an excuse for any failure or omission on the part of the contractor to fulfill in every respect, all the requirements of the contract, nor will the same be accepted as a basis for any claim whatsoever for extra compensation, or for an extension of time.

'Bidders are required to verify all data to their satisfaction and to satisfy themselves as to the character of the material and conditions to be encountered. Owners and Engineers will not assume responsibility for exactness or interpretation of any subgrade data furnished.'

'Neither the general contractor nor the Project Superintendent are to be responsible if, upon the completion of the work, the actual quantities are found to be greater or less than the estimated quantities. The Sub-Contractor shall make no claim for anticipated profits or loss of profits because of a difference between the actual and estimated quantities.'

Under the heading of general conditions two sections read:

'6--RESPONSIBILITY OF THE CONTRACTOR

The Contractor shall take all responsibility for the work, shall bear all losses

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resulting to him on account of the amount or character of the work, or from any unforeseen obstructions or difficulties which may be encountered, or because the nature of the land in or on which the work is done is different from what is assumed or was expected, or on account of the weather, floods or other causes; then he shall assume the defense of, and indemnify and save harmless the Owner from all claims of any kind arising from the performance of the Contract.'

'18--ESTIMATED AND ACTUAL QUANTITIES

The estimated quantities of the various classes of work to be done under this Contract are approximate, and are for the purpose of comparing, on a uniform basis, the bids offered.

Neither the Owner nor the Engineer are to be held responsible if, upon the completion of the work, the actual quantities are found to be greater or less than the estimated quantities. The Contractor shall make no claim for anticipated profits or loss of profits because of a difference between actual and estimated quantities.'

'Detail provisions' stated: 'If the bidder desires to obtain information as to soil conditions, the Owner will afford him an opportunity, at his own expense, to make borings or to dig test pits on the site of the work.' A section relating to 'Grading and Excavating' provided:

'b. Sub-surface soil data: Subsurface investigations have been made and the results shown on the drawings. This information was obtained primarily for use in preparing the Foundation design, but the Grading Contractor may draw his own conclusions therefrom. No responsibility is or will be assumed by the Owner, General Contractor or Engineer for subsoil quality or conditions other than at the locations and at the time the exploration was made. No claim for extra compensation, or for extension of time, will be allowed on account of subsurface conditions inconsistent with the data shown, except as may be permitted elsewhere herein.'

Dallas Sandlin and Ray Hanser, officers of S & H, received the material from Wakser between Christmas 1965 and March 1966. They testified that as he handed it to them he stated: '* * *. The plans and specifications have been spelled out for you; you got the borings indicating your rock elevations; you got a complete picture of the work to be done, and this is all you need to complete the job. We would like a price on it at your convenience.' At the same time he said: '* * * that all the information that (S & H) needed to calculate any subsoil rock that was to be encountered could be calculated from the plans, in fact, was all (S & H) needed to calculate the job.' Also 'Here's the plans and specifications to do the Bowling Green Mall by. You boys will not have nothing to worry about. Everything will be all laid out for you to do the job by.' The plans indicated that boring had been made over only part of the land and in a grid pattern at 100 foot intervals. The soil profile lines of the area explored showed the depth of the borings. No tests had been made in certain areas where there were visible rock outcroppings but the plans required that cuts be made at those places.

From those plans S & H originally estimated for Sanford that it could do the work for $94,000.00. Later it began a site investigation which included a ground inspection of the entire area during which it observed rock outcroppings. It used a backhoe for exploration purposes in the area which the plans showed had not been bored and possibly in other areas. With a rod it probed in various places. It discovered larger quantities of subsurface rock than it had anticipated. On May 18, 1966, it contracted to do the work for $104,000.00 agreeing that: 'S & H has thoroughly examined the plans and specifications and the site has been visually examined

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to corroborate if there are any deviations between the prints, specifications and the actual site. Any deviations have been included in the contract price.'

On May 23, 1966, S & H began working and spent approximately two weeks clearing the site of brush and other debris and stock-piling top soil. Next it moved dirt from and to areas selected by the project superintendent and finally it blasted rock, keeping a minute check and record of exposed rock to correlate the work with the site plans. Hanser detected some discrepancies between what he found and what the plans showed. He testified that this was not unusual and that 'it wasn't apparent immediately that there was a great discrepancy or that it even would be a discrepancy.' Finally it became obvious that the estimates which were furnished to S & H were not realistic.

S & H claimed that it was entitled to additional compensation and before completing all the work it attempted to adjust the matter with representatives of Sanford and Forest City but was unsuccessful. The engagement was substantially completed by November 1966 and shortly thereafter S & H sued ² for an additional $125,000.00. At the conclusion of claimant's evidence a motion by Sanford for a directed verdict was overruled and at the conclusion of all evidence the motion for a directed verdict was renewed and again overruled.

The first trial error claimed is that S & H failed to prove all 'six elements' necessary to establish its claim of fraud. We said in Cresent Grocery Co. v. Vick, 194 Ky. 727, 240 S.W. 388 (1922):

'We have adopted the general rule that an action cannot be maintained for fraud or deceit unless it be made to appear (1) that defendant made a material representation; (2) that it was false; (3) that when he made it he knew it was false, or made it recklessly, without any knowledge of its truth and as a positive assertion; (4) that he made it with intention of inducing plaintiff to act, or that it should be acted upon by the plaintiff; (5) that plaintiff acted in reliance upon it, and (6) that plaintiff thereby suffered injury.'

'Although the alleged representation was made by defendant, if it was not material, or was not false, or defendant did not know it was false, and did not make it recklessly in disregard of the truth, or did not make the representation intending that plaintiff should be induced to act upon it; or, if plaintiff was not induced to and did not act upon the representation, or if he did so without injury or loss resulting to him, no cause of action exists in favor of the plaintiff.'

Appellant cites McGuffin...