Timber Investors, Inc. v. United States

• Decision Date: 15 November 1978
• Docket Number: No. 61-75.,61-75.
• Citation: 587 F.2d 472
• Parties: TIMBER INVESTORS, INC. v. The UNITED STATES.
• Court: U.S. Claims Court

587 F.2d 472

TIMBER INVESTORS, INC. v. The UNITED STATES.

No. 61-75.

United States Court of Claims.

November 15, 1978.

Lyman C. Johnson, Bend, Or., attorney of record, for plaintiff.

Jean Schepers, Washington, D.C., with whom was Asst. Atty. Gen. Barbara Allen Babcock, Washington, D.C., for defendant.

Before FRIEDMAN, Chief Judge, and KUNZIG and BENNETT, Judges.

OPINION

PER CURIAM:

This case comes before the court on defendant's motion, filed June 2, 1978, requesting that the court adopt the recommended decision of Trial Judge Thomas J. Lydon, filed April 24, 1978, pursuant to Rule 134(h), as the basis for its judgment in this case since neither party has filed a notice of intention to except thereto and the time for so filing pursuant to the Rules of the court has expired. Upon consideration thereof, without oral argument, since the court agrees with the trial judge's recommended decision, as hereinafter set forth,^* it hereby grants defendant's motion of June 2, 1978, and affirms and adopts the decision as the basis for its judgment in this case. Accordingly, it is concluded as a matter of law that plaintiff is not entitled to recover and the petition is dismissed.

OPINION OF TRIAL JUDGE

LYDON, Trial Judge.

On March 31, 1970, plaintiff, as the highest bidder, was awarded a timber sale (identified as the Varmint Creek Timber Sale (VCTS)) contract by the Forest Service, United States Department of Agriculture, whereby, for the payment to the Forest Service of $466,722, it was permitted to cut and remove 24.5 million board feet of Forest Service timber from 3,500 acres of the Ochoco National Forest in Oregon. As an adjunct to this timber sale contract, plaintiff was required to construct two new roads and to perform reconstruction work on five existing roads in this National Forest for the payment to it by the Forest Service of $351,865. The road construction work, involving some 25.9 miles, was primarily to facilitate the removal of Forest Service timber, although some of the roads would also have recreational use. The Forest Service estimated that it would cost $351,865 to perform the road construction work called for by the contract. The cost (referred to as purchaser road credit) of the work required for each of the seven roads was estimated separately in the contract to arrive at the total estimated cost figure of $351,865 (purchaser road credit limit). The total estimated cost figure represented the maximum purchaser road credits available under the contract for the road construction work called for by the contract plans and specifications.¹ It is the road construction work phase of the contract that precipitated this litigation.

Plaintiff was a frequent purchaser of Forest Service timber and was most familiar with timber sale procedures, purchaser road credits, etc. However, plaintiff was in the timber business, and did not engage in road construction work. Accordingly, when it was awarded a timber sale contract that involved road construction work, plaintiff would engage a road contractor to perform such work. The Forest Service was aware that some timber companies, such as plaintiff, relied on subcontractors to perform the road construction work called for by timber sale contracts. Plaintiff would make every effort to induce a road contractor to perform contract road construction work for the purchaser road credit limit set forth in the contract. Sometimes it was successful in this effort; at other times it had to pay road contractors amounts in excess of said contract figure in order to induce them to perform the road construction work called for by timber sale contracts awarded it by the Forest Service.

On June 23, 1970, plaintiff entered into a contract with Reid Brothers, Inc. (Reid) wherein Reid agreed to perform the road construction work called for by plaintiff's timber sale contract with the Forest Service for $350,339. Edwin W. Reid, Jr. (E. W. Reid) was president of the company and the motivating force behind all company activities. It is to be noted that Reid agreed to do the work for $1,526 less than the Forest Service estimated cost of doing the work as reflected in the contract's purchaser road credit limit of $351,865.

Plaintiff brings the present suit on behalf of its subcontractor, Reid, seeking to recover $70,483 representing excess costs over and above the contract purchaser road credit limit which Reid claims it incurred in performing the road construction work called for by plaintiff's timber sale contract. Plaintiff and Reid blame the Forest Service for these excess costs.

I

Plaintiff seeks reformation of its timber sale contract with the Forest Service on two alternative grounds. First, plaintiff maintains that all concerned parties were mutually mistaken as to the unreasonable inaccuracy of the Forest Service estimates of work and related costs, which were set forth in the contract and which were part and parcel of the contract purchaser road credit figures. The record supports a finding that all the parties believed prior to bidding on the timber sale contract that the Forest service work and cost estimates were reasonably accurate. Implicit in plaintiff's contention, as it must be for mutual mistake to justify a reformation request, is the belief that the Forest Service intended that reasonably accurate estimates underscore its purchaser road credit contract figures. See Ling-Temco-Vought, Inc. v. United States, 475 F.2d 630, 639, 201 Ct.Cl. 135, 150 (1973). Case law would lend support to recovery on this ground if, in fact, the contract estimates were as unreasonably inaccurate as plaintiff suggests. See Peter Kiewit Sons' Co. v. United States, 74 F.Supp. 165, 167-68, 109 Ct.Cl. 517, 522 (1947); Virginia Engineering Co. v. United States, 101 Ct.Cl. 516, 532 (1944). However, plaintiff must show a mistake by the Forest Service in the contract estimates before it can obtain reformation. Otherwise the mistake is not mutual. Fraass Surgical Mfg. Co. v. United States, 571 F.2d 34, 38, 215 Ct.Cl. 820, 826 (1978). There is no allegation nor evidence of bad faith on the part of the Forest Service in drawing up the contract work and cost estimates. See C. W. Roberts Constr. Co. v. United States, 204 Ct.Cl. 913, 914 (1974); see also Pacific Architects & Eng. Inc. v. United States, 491 F.2d 734, 742, 203 Ct.Cl. 499, 514 (1974).

Second, and alternatively, plaintiff argues that the Forest Service misled prospective bidders by misrepresenting in the contract documents that "reasonably intensive investigations" were made of surface and subsurface conditions. Plaintiff's position appears to be that had the Forest Service conducted reasonably intensive surface and subsurface investigations the contract estimates of work and related costs would have been more reasonably accurate. To justify reformation of a contract on the ground of misrepresentation, the evidence must be clear and convincing. A party seeking reformation on the ground of misrepresentation must show not only that the misrepresentation was false, but that it was actually misled by it. Tree Preservation Co. v. United States, 172 Ct.Cl. 577, 581 (1965).² On this record, the evidence of misrepresentation on which plaintiff relies in support of reformation is far from clear and convincing.³

Defendant seems to argue that under the purchaser road credit provision of the contract plaintiff agreed to perform the road construction work called for by the contract plans and specifications for $351,865 and thus cannot recover any amount in excess of that figure on the theory of mutual mistake, or on any other legal theory.⁴ Defendant, in advancing this position, gives no consideration to the contention of plaintiff that the estimates which underscored the $351,865 figure were grossly inaccurate. Evans Reamer & Machine Co. v. United States, 386 F.2d 873, 880, 181 Ct.Cl. 539, 551 (1967), relied on by defendant, does not support defendant's broad and rather cavalier disavowal of liability. The Evans case did not involve the question of whether grossly erroneous estimates would support contract reformation on the ground of mutual mistake. As indicated earlier, grossly erroneous estimates can, under certain circumstances, support a reformation claim grounded on mutual mistake. Moreover, there is no evidence that either plaintiff, its subcontractor, or the Forest Service, believed, or had reason to believe, prior to contract award, that any mistake had been made relative to the work and cost estimates set forth in the contract. Compare Perini Corp. v. United States, 381 F.2d 403, 415, 180 Ct.Cl. 768, 788 (1967). (Contractor recognized that government contract estimate was grossly inaccurate and thus did not rely on it.) In this case, all the parties operated on the assumption the estimates were reasonably correct. It would be only by contract performance in most instances that one would be able to uncover estimating mistakes. Accordingly, Allied Contractors, Inc. v. United States, 310 F.2d 945, 159 Ct.Cl. 548 (1962), relied on by defendant, has no relevancy to the factual situation present in this case. In the Allied case, a contractor's mistake in bid which was not sufficiently apparent to put government officials on notice of it at time of award and which was not called to the attention of the government until some months after the contract work had commenced was deemed a unilateral mistake and thus provided no basis for contract reformation.

Defendant also implies that plaintiff as the prime contractor with the Forest Service, who makes no claim on its own behalf, cannot recover on behalf of its subcontractor who asserts claims arising out of the prime contract but had no contractual relationship with the Forest Service. Plaintiff, while denying any liability on its part to Reid, believes it has a moral obligation to assist its subcontractor in recovering on what it believes are just claims and will undoubtedly...