Zurn Engineers v. State of California ex rel. Dept. Water Resources

• Citation: 138 Cal.Rptr. 478,69 Cal.App.3d 798
• Parties: ZURN ENGINEERS, a California Corporation, Plaintiff and Respondent, v. The STATE of California, acting By and Through its DEPARTMENT OF WATER RESOURCES, Defendant and Appellant. Civ. 48784.
• Decision Date: 17 May 1977
• Court: California Court of Appeals

Page 478

138 Cal.Rptr. 478

69 Cal.App.3d 798

ZURN ENGINEERS, a California Corporation, Plaintiff and Respondent, v. The STATE of California, acting By and Through its DEPARTMENT OF WATER RESOURCES, Defendant and Appellant.

Civ. 48784.

Court of Appeal, Second District, Division 3, California.

May 17, 1977.

As Modified on Denial of Rehearing June 7, 1977.

Hearing Denied July 21, 1977.

[69 Cal.App.3d 801]

Evelle J. Younger, Atty. Gen., Iver E. Skjeie, Asst. Atty. Gen., and Henry G. Ullerich, Deputy Atty. Gen., for defendant and appellant

Monteleone & McCrory, Darrell P. McCrory and G. Robert Hale, Los Angeles, for plaintiff and respondent.

[69 Cal.App.3d 802] LORING, Associate Justice (Judge of the Superior Court of Los Angeles County, assigned by the Chairman of the Judicial Council).

Plaintiff-respondent Zurn Engineers, a California corporation, formerly known as Pascal & Ludwig, Inc. (Contractor) recovered judgment after a non-jury trial against defendant-appellant State of California, acting by and through its Department of Water Resources (State), in the aggregate sum of $896,245.89 with interest at 7 per cent per annum from December 21, 1967, on four causes of action which arose out of the alleged breach of a contract for the construction of the Grizzly Valley Dam (Dam) in Plumas County, California. ¹ Contractor's complaint as amended alleged 12 causes of action for 'extra' work aggregating $1,238,275.31. The contract contained provisions authorizing the State Engineer, or his designated representative, ² to decide disputes including claims for extra compensation between Contractor and State and making his decision 'Final and conclusive unless it is fraudulent or capricious or arbitrary or so grossly erroneous as necessarily to imply bad faith. Contractor filed 27 claims for extra compensation on which it was awarded $127,297.68. The trial court, disregarding the decision of the Engineer, tried the case de novo; that is, the court received original evidence bearing upon the Contractor's claims for extras and made findings that State had made certain representations to Contractor which were untrue which caused damage to Contractor, and rendered judgment accordingly in favor of Contractor on the first four causes of action. The trial court rendered judgment in favor of State on the last eight causes of action. State appeals from the judgment in favor of Contractor on the first four causes of action but Contractor does not appeal from the judgment in favor of State on the last eight causes of action. We will, therefore,

affirm the judgment in favor of State on the eight causes of action and treat the case as if it originally contained only the four causes of action on which this appeal is based

PRELIMINARY FACTS

Commencing at least as early as 1954, State began to formulate plans for the construction of Dam. Periodically topographic surveys and maps [69 Cal.App.3d 803] and geologic studies were made of the proposed site and some rotary core drilling was performed. By June of 1964, plans and specifications were prepared and the project was let for public bidding at unit prices for 66 different items of work. Many of the 66 items of work were for a specific quantity measured in terms of cubic feet, linear feet, pounds, tons or barrels. At the end of the 66 items, State included the following caveat:

'The foregoing quantities are approximate only, being given as a basis for the comparison of bids and the Department of Water Resources does not, expressly or by implication, agree that the actual amount of work will correspond therewith, but reserves the right to increase or decrease the amount of any class or portion of the work or to omit portions of the work, as may be deemed necessary or advisable by the Engineer.'

Contractor was the low bidder at an aggregate price of $1,833,131. based on State's quantity estimates. The project included a 700 foot, 36 inch diameter outlet conduit constructed of steel pipe embedded in concrete under the embankment with upstream intake tower and downstream control valves (which was designed to allow drainage of water from the reservoir) and a concrete overflow chute-type spillway to accommodate any excess flow of water. The embankment of the Dam was composed of a core of impervious earth (Zone 1 material) against which gravel was banked upstream (Zone 2 material), against which sand and gravel were banked at a uniform width, both upstream and downstream (Zone 4 material), against which was banked a rock shell of larger rocks, both upstream and downstream (Zone 3 material). The base of the Dam was approximately 250 feet wide sloping to a crest 30 feet wide. Zones 1, 2 and 3 material was tapered from bottom to top. Each zone of material was to be laid and compacted concurrently. The upstream slope of the embankment was at a ratio of 2.5:1 and the downstream slope of the embankment at a ratio of 2:1. The project also included the construction of a road over the crest of the Dam and the relocation of certain roads around the reservoir. The reservoir area had to be grubbed and cleared. The plans included a map of the damsite and borrow pit locations for the excavation or quarrying of Zones 1, 2, 3 and 4 material.

State contemplated that the damsite area would be cleared of overburden and decomposed rock and excavated to a point where 'moderately weathered' rock was reached, both for the outlet conduit and the foundation for the Dam embankment. State had used its [69 Cal.App.3d 804] preliminary topographic surveys (both aerial and on the ground) and geologic studies including cored rotary drillings, auger holes and backhoe trenches for the purpose of preparing its design studies and plans and specifications. The drawings attached to the specifications included a map designating the location of the auger holes, cored rotary drilling holes and backhoe trenchings. The request for bids advised all prospective bidders that the surveys, geologic studies and reports and core samples were available for inspection on request at the Sacramento office. State calculated that the desired type of subsurface would be reached after a certain amount of excavation and computed its estimated quantities for various items of work accordingly. However, the desired type of subsurface was not reached after excavation within State's estimates. For example, State calculated that the project would require the removal of 33,000 yards of material in order to place the embankment of the Dam, whereas 64,724 cubic yards of material were ultimately excavated; State estimated 5,400 yards of material would have to be removed in order to build the outlet conduit

whereas 7,709 cubic yards were ultimately removed; State estimated the project would require 160,000 cubic yards of excavation for roadways whereas 190,498 cubic yards were ultimately removed. State estimated that 700 cubic yards of specially compacted material would be required whereas 2,129 cubic yards were ultimately required. Because of the increase in the quantities of the various items of work, State ultimately paid Contractor $2,269,382.05 based on actual quantities multiplied by the unit bid prices and approved change orders

The contract required Contractor to complete the project by November 15, 1966, and contained a liquidated damage clause of $500 per day for each day that completion was delayed. Contractor was notified to begin work on October 20, 1964. Under the contract, Contractor was authorized to arrange its schedule of work in any sequence which it desired in order to complete the work on schedule. Contractor completed the work on September 29, 1967. State extended the completion date from time to time for various periods for various reasons.

The contract provided that if the work to be performed was unclear, the Contractor should apply to the State Engineer for clarification, ³ and [69 Cal.App.3d 805] the Engineer's decision would

be final. The contract documents also provided that the State's calculations of quantities were 'estimates only' and actual quantities might vary and that such variations would not be 'changes' within the definitions of the contract. ⁴ The contract provided for change orders to accomplish any changes in the work and provided that Contractor would not be paid for [69 Cal.App.3d 806] changes without an authorized change order. ⁵ The contract provided that the contract price would be [69 Cal.App.3d 807] changed for the portion of work determined to be materially changed ⁶ and required Contractor to give 15 days advance notice of any changes which Contractor intended to use as the basis for any potential claim followed by a detailed claim within 60 days after the notice of potential claim. ⁷ The contract provided that State's Engineer should decide all of Contractor's claims for extra compensation 'and his decision shall be [69 Cal.App.3d 808] final and conclusive unless it is fraudulent or capricious or arbitrary or so grossly erroneous as necessarily to imply bad faith.' ⁸

The parties agree that Contractor complied with all contractual prerequisites to the assertion of the various claims. State's Engineer approved Contractor's various claims for extra work (discussed in more detail, Infra) in the aggregate sum of $125,142.18. State provided an administrative process for review of the Engineer's decision which Contractor pursued. On review the Deputy Director of the State Water Project (Alfred R. Golze ) on recommendation of a three man Appeals Board made minor changes in the Engineer's decisions and approved Contractor's various claims (discussed in more detail, Infra) in the aggregate sum of $127,297.68. Being dissatisfied with this award Contractor filed an action in the superior court for $1,238,275.31. Additional detailed facts will be discussed in correlation with the specific causes of action and assignments of error.

[69 Cal.App.3d 809]

DETAILED FACTS AS RELATED TO THE FOUR SPECIFIC...