Wunderlich v. State ex rel. Department of Public Works

• Decision Date: 10 February 1967
• Citation: 56 Cal.Rptr. 473,65 Cal.2d 777,423 P.2d 545
• Parties: , 423 P.2d 545 Theodore G. WUNDERLICH et al., Plaintiffs and Respondents. v. STATE of California ex rel. DEPARTMENT OF PUBLIC WORKS, Defendant and Appellant. L.A. 28983. In Bank
• Court: California Supreme Court

Page 473

56 Cal.Rptr. 473

65 Cal.2d 777, 423 P.2d 545

Theodore G. WUNDERLICH et al., Plaintiffs and Respondents. v. STATE of California ex rel. DEPARTMENT OF PUBLIC WORKS, Defendant and Appellant.

L.A. 28983.

Supreme Court of California,

In Bank.

Feb. 10, 1967.

Rehearing Denied March 8, 1967.

Thomas C. Lynch, Atty. Gen., Walter S. Rountree, Asst. Atty. Gen., George M. Goffin, Deputy Atty. Gen., Harry S. Fenton, Kingsley T. Hoegstedt, Orrin F. Finch, William S. Ashton, Jr., Ronald A. Zumbrun and Richard W. Bower, Sacramento, for defendant and appellant.

Harold W. Kennedy, County Counsel, Lloyd S. Davis, Chief Deputy County Counsel, P. A. Towner, Robert W. James, William L. Berry, Jr., Bertram McLees, Jr., County Counsel, San Diego, David B. Walker, Deputy County Counsel, Keith C. Sorenson, Dist. Atty., San Mateo, and John B. Segall, Deputy Dist. Atty., as amici curiae on behalf of defendant and appellant.

Monteleone & McCrory and David P. Yaffe, Los Angeles, for plaintiffs and respondents.

Thelen, Marrin, Johnson & Bridges, Los Angeles, as amici curiae on behalf of plaintiffs and respondents.

PEEK, ^* Justice.

Defendant State of California appeals from a judgment based upon its alleged breach of warranty with respect to a source of materials available to plaintiff contractors for the construction of 14.4 miles of state highway in Riverside County.

In April 1954 plaintiffs, as prospective bidders on the project, were furnished by the Department of Public Works a copy of the 'Special Provisions, Proposal and Contract,' a document which provided detailed specifications for the contruction of the project, and which provided further that the work was to be done in accordance with the department's 'Standard Specifications.'

Pertinent portions of the Special Provisions read as follows: 'Chapter II. SPECIAL REQUIREMENTS (a) General. Attention is directed to Section 6 of the Standard Specifications * * * (c) Local Materials. Attention is directed to Section 6, articles (b) and (f), of the Standard Specifications. * * *

'Samples indicate that material of satisfactory quality for the production of imported base material, gravel blanket material, and mineral aggregate for plant-mixed surfacing and cement treated base, may be obtained left of approximate Station 615. Arrangements have been made for the Contractor to obtain material at the above location at a price not to exceed 3/4-cent per ton for material removed from the site and used in the work.'

Section 6 of the Standard Specifications provided in part: '(b) * * * When sources of materials to be furnished by the Contractor are designated in the special provisions, the Contractor shall satisfy himself as to the quantity of acceptable material which may be produced at such locations, and the State will not assume any responsibility * * * as to the quantity of acceptable material at the designated location.

'If tests have been made by the State of other locations in the vicinity, the results * * * are available to the Contractor or to prospective bidders on inquiry at the office of the district in which the work is situated. * * * This information is furnished for the Contractor's or the bidder's convenience only and the State does not guarantee such tests and assumes no responsibility whatsoever as to the accuracy thereof or the interpretation thereof stated in the test records. * * *

'Should the Contractor elect to obtain material from sources designated in the special provisions, he shall pay such charges as are specified. * * *'

In addition, section 2 of the Standard Specifications, 'PROPOSAL REQUIREMENTS AND CONDITIONS,' provides that: '(c) * * * The bidder shall examine carefully the site of the work. * * * It will be assumed that the bidder has investigated and is satisfied as to the conditions to be encountered, as to the character, quality and quantities of the work to be performed and materials to be furnished, and as to the requirements of these specifications, the special provisions, and the contract.' The remainder of the section declares that the state will not guarantee nor accept responsibility for the accuracy of preliminary investigations or their interpretation where made by the state 'in respect to foundation or other design.'

The state conducted a 'job-showing' at the project site on May 7, 1954, at which plaintiffs were represented by their estimator. The representative of the Division of Highways of the Department of Public Works brought with him copies of the plans and specifications, and test reports of mineral sources convenient to the project site. One of the documents was an interdepartmental memorandum dealing with the condition of these sources. Plaintiffs' estimator was aware that test reports used to compile the memorandum were available for inspection at the division's district office, but he utilized the memorandum alone, after a brief inspection of the area, in forming an opinion as to the adequacy of the sources.

Plaintiffs chose to use the 'Wilder pit,' about which the present controversy centers, as a source of the specified materials. With reference to that pit the memorandum provided: 'Submitted herewith is information concerning possible local material sources for the project. * * * This information has been developed during the investigation for borrow sites and possibly would be of value to the prospective bidders for this project. * * * Hillside Left of Station 600D to 625D.

'This hillside is composed of rather loosely compacted Sand and gravel ranging from 4 inches to dust. A layer of blow sand covers the base of the hill and apparently exists in spots on the slope as Some test holes encountered considerable coarse material while others were practically all sand.

'Tests indicate that after processing, to meet the grading requirements, The material is suitable for imported base material, cement-treated base aggregate, gravel blanket, and plant-mixed surfacing aggregate. * * *

'This source is well located as far as economy of hauling is concerned considering a single source of material for the entire length of the project. With this in mind, a borrow agreement was negotiated with the property owners by the Right of Way Department for the material on the hillside Left of Station 595D to Station 615D.' (Emphasis added.)

The memorandum reproduced the results of tests taken in the above described area of the Wilder pit, stating: 'Tests on this material indicate that the material has the following qualifications: * * * 'Passing a No. 4 sieve * * * 55--88%. " Material passing a No. 4 sieve--containing four wires to the inch--apparently establishes a demarcation between 'gravel' and 'sand' for the purposes of the project requirements.

Prior to commencing operations, plaintiffs studied other potential sources in the project area, but determined ultimately to utilize the Wilder pit. A few weeks after beginning work plaintiffs complained to the state's resident engineer that necessary materials could not be produced at the bid price from the pit and that it was composed of too much sand. They demanded that the state provide another plant at a different location. The resident engineer ran tests at the pit in June 1955; results ran from 47.1% To 96.4% Passing a No. 4 sieve. The engineer determined that plaintiffs had not exhausted all the acceptable material at the designated source and refused to approve a shift. Plaintiffs completed the project, first bringing in new equipment for the Wilder site, then using materials from more distant sources.

There is no factual dispute as to the nature of the reports and representations made by the state. There is, however, considerable dispute as to the legal consequences of such representations, and this constitutes the determinative issue before us. Plaintiffs contend that the information furnished by the state with reference to conditions in the Wilder pit constituted a representation and warranty that sufficient suitable material would be available at the pit to complete the project, and that in fact the state misrepresented the conditions, requiring plaintiffs to undertake excess processing at the pit and to ultimately utilize more remote materials sources, with consequent increased costs.

The state asserts that what it represented by the statements reproduced above was only that tests had been taken, that they were accurately reported, and that they did, indeed, indicate that the Wilder pit was a potential source of materials for the project. The trial court, finding that the state had warranted the content of the Wilder pit and had breached that warranty, ordered that plaintiffs recover in excess of $600,000 in damages.

We have heretofore recognized liability based on a theory of breach of an implied warranty when a governmental agency represents as a fact what in fact does not exist, and the claimant is damaged by its reliance on the assertion. 'When a state makes a contract with an individual, it is liable for breach if its agreement in like manner as an individual, * * *. A contractor of public works who, acting reasonably, is misled by incorrect plans and specifications issued by the public authorities as the basis for bids and who, as a result, submits a bid which is lower than he would have otherwise made may recover in a contract action for extra work or expenses necessitated by the conditions being other than as represented.' (Souza & McCue Constr. Co. v. Superior Court (1962) 57 Cal.2d 508, 510, 20 Cal.Rptr. 634, 635, 370 P.2d 338, 339.) On the other hand, if one agrees to do a thing possible of performance 'he will not be excused or become entitled to additional compensation, because unforeseen difficulties are encountered. * * *' (United States v. Spearin (1918) 248 U.S. 132, 136, 39 S.Ct. 59, 61, 63 L.Ed. 166.)

The crucial question is thus one of justified reliance. If the agency makes a "positive and material representation as to a...