Sornsin Const. Co. v. State

Citation180 Mont. 248,35 St.Rep. 2001,590 P.2d 125
Decision Date28 December 1978
Docket NumberNo. 13699,13699
Parties, 26 Cont.Cas.Fed. (CCH) P 83,215 SORNSIN CONSTRUCTION COMPANY, a North Dakota Corporation, Plaintiff and Respondent, v. The STATE of Montana, and the Department of Natural Resources and Conservation, an administrative agency of the State of Montana, Defendants and Appellants.
CourtMontana Supreme Court

Mike Greely, Atty. Gen., Allen B. Chronister, Asst. Atty. Gen. (argued), Garrity & Keegan, Donald A. Garrity (argued), Ted J. Doney, Helena, for defendants and appellants.

Scribner & Huss, Helena, Gorsuch, Kirgis, Campbell, Walker and Grover, Philip E. Riedesel (argued), Denver, Colo., for plaintiff and respondent.

HARRISON, Justice.

Plaintiff, Sornsin Construction Company, brought this action in the District Court of the First Judicial District to recover damages for the alleged breach of a contract for the construction of an irrigation pump system on the Yellowstone River near Sidney, Montana. From a judgment for plaintiff, defendant State of Montana appeals.

On July 28, 1970, the Montana Water Resources Board (MWRB) (now the Department of Natural Resources and Conservation) issued an invitation for bids on a contract for the construction of an irrigation pump system project. The project entailed constructing three river pump units to pump water from the Yellowstone River and four relift pump stations to pump the water from the river units into various irrigation canals. The project was designed by the Portland, Oregon, design unit of the United States Department of Agriculture Soil Conservation Service.

Plaintiff received a number of plans, specifications and drawings from the MWRB which it used in preparing its bid. After the contract had been awarded to plaintiff and work had begun, it became apparent that a number of specifications were only approximations. Specifically, the listed elevations for the river bed, in the neighborhood of 1880 feet, varied from the actual elevations as much as 15 feet. These discrepancies resulted in increased costs to plaintiff. In addition, a number of other claims developed through the course of performance of the contract which defendant refused to compensate. Plaintiff sued, and a jury trial commenced on April 12, 1976, continuing through May 6, 1976. The jury awarded damages to plaintiff in the amount of $335,328 plus $6,751.05 in costs. The original bid submitted by plaintiff and accepted by defendant had been $962,108.40.

The issues raised by appellant on appeal are:

1. Did Sornsin Construction Company assume the risk of failure of its proposed cofferdam designs?

2. Did Sornsin Construction Company assume the risk that the material to be excavated at Pump Unit 3 might not stand on a vertical cut?

3. Was the giving of Instruction No. 22 error?

4. Under the terms of this contract, was the contractor responsible for damage prior to acceptance?

5. Is a contractor who bids on an item, knowing that the quantity listed for that item is wrong, entitled to recover lost profits on the excess quantity?

6. Did Sornsin Construction Company prove that material suitable for compacted granular earth fill was not available at the site of Pump Unit 1-A?

7. May the contractor recover for extra work not covered by a change order?

8. Did the District Court err by admitting plaintiff's Exhibit Nos. 119, 131 and 141 in evidence?

9. Did the District Court err by refusing to admit defendant's Exhibit No. 555 in evidence?

10. Is the verdict and judgment supported by the evidence?

The parties agree only on the statement of Issue Nos. 3, 8, 9, and 10. As a result, in the discussion of all issues, the issues will be presented in pairs to emphasize the alternative positions of the parties.

Issue 1

Prior to discussion of Issue No. 1, we set forth the general principle as stated in Big Sky Livestock, Inc. v. Herzog (1976), 171 Mont. 409, 558 P.2d 1107, 1110, 33 St.Rep. 1232, 1236, that the role of the reviewing court is to limit its review to whether there is substantial credible evidence to support the verdict. In so doing, it will review the evidence in the light most favorable to the prevailing party. See Davis v. Davis (1972), 159 Mont. 355, 497 P.2d 315, and State Highway Commission v. Vaughan (1970), 155 Mont. 277, 470 P.2d 967.

D-1. Did Sornsin Construction Company assume the risk of failure of its proposed cofferdam designs?

P-1. Did the State breach its warranty of accuracy and sufficiency of its plans and specifications; were there "differing site conditions"; if so, did the State breach the contract by failing to pay therefor?

Defendant argues that plaintiff assumed the risk that its original cofferdam plans would not work.

Plaintiff responds by asserting that defendant breached its warranty regarding plans and specifications; there were "differing site conditions", and defendant is estopped from so denying.

This issue involves the three river pump units. To construct these units, it was necessary to first remove the water from the area using cofferdams. The river bed turned out to be lower than plaintiff anticipated resulting in having to utilize larger and more expensive cofferdams.

The State admits the plans from which plaintiff drew its estimates were not consistent with respect to the elevation of the river bed. The State goes on to argue, however, that this discrepancy in the plans should have put plaintiff on notice to make further inquiry, pursuant to Clause 12 of the general provisions of the contract:

"12. CONDITIONS AFFECTING THE WORK.

The Contractor shall be responsible for having taken steps reasonably necessary to ascertain the nature and location of the work, and the general and local conditions which can affect the work or the cost thereof. Any failure by the Contractor to do so will not relieve him from responsibility for successfully performing the work without additional expense to the Contracting Local Organization. The Contracting Local Organization assumes no responsibility for any understanding or representations concerning conditions made by any of its officers or agents prior to the execution of this contract, unless such understanding or representation are expressly stated in the contract."

The other clause pointed out by the State along this same line is Clause 2:

"2. SPECIFICATIONS AND DRAWINGS

The Contractor shall keep on the work a copy of the drawings and specifications and shall at all times give the Contracting Officer access thereto. Anything mentioned in the specifications and not shown on the drawings, or shown on the drawings and not mentioned in the specifications, shall be of like effect as if shown or mentioned in both. In case of difference between drawing and specifications, the specifications shall govern. In case of discrepancy either in the figures, in the drawings, or in the specifications, the matter shall be promptly submitted to the Contracting Officer, who shall promptly make a determination in writing. Any adjustment by the Contractor without such a determination shall be at his own risk and expense. The Contracting Officer shall furnish from time to time such detail drawings and other information as he may consider necessary, unless otherwise provided."

Finally, the State's argument turns to the competitive element involved in the bidding process and the attendant assumption of risk where one balances the risk involved in predicting what something will actually cost against the risk of losing the contract if one minimizes the risk in the first part too greatly.

The State, citing Haggart Construction Company v. State Highway Commission (1967), 149 Mont. 422, 427 P.2d 686, asserts that the crucial question of the contractor's right to recover for misrepresentations in the plans is one of "justified reliance."

Plaintiff argues that there were portions of the plans which expressly misstated certain elevations on which the cofferdams were to sit. Furthermore, construction experts at trial seemed to agree that plaintiff's reliance on the plans without the further investigations suggested by the State was reasonable. Plaintiff feels Clause 4 of the contract is most applicable to this issue:

"4. DIFFERING SITE CONDITIONS

(a) The contractor shall promptly, and before such conditions are disturbed, notify the Contracting Officer in writing of: (1) subsurface or latent physical conditions at the site differing materially from those indicated in this contract, or (2) unknown physical conditions at the site, of an unusual nature, differing materially from those ordinarily encountered and generally recognized as inhering in work of the character provided for in this contract. The Contracting Officer shall promptly investigate the conditions, and if he finds that such conditions do materially so differ and cause an increase or decrease in the Contractor's cost of, or the time required for, performance of any part of the work under this contract, whether or not changed as a result of such conditions, an equitable adjustment shall be made and the contract modified in writing accordingly."

Plaintiff gave proper notice, and the Contracting Officer for the State responded by letter on December 30, 1970. Among other things, he stated:

"After investigation, it is agreed that, while some change in the river bed level and configuration could be normally expected, the existing depth as compared to that indicated on the drawings is materially different so as to constitute a differing site condition under the terms of Clause 4 of General Provisions . . ."

The State withdrew this determination six months later, and no price adjustment was made.

The law is established that a contractor can rely on the plans and specifications and need not, as alleged by the State here, verify them. It has long been recognized that the owner, here the State, warrants and is responsible for the accuracy of the descriptions in the plans and...

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    ...the costs were unreasonable. Oliver-Finnie Company v. United States, 279 F.2d 498, 150 Ct.Cl. 189 (1960); Sornsin Construction Company v. State, 180 Mont. 248, 590 P.2d 125 (1978). Since the commission failed to refute the reasonableness of Brasel & Sims' extra costs, we cannot reject the t......
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