S M Constructors v. Columbus

Full title: S M CONSTRUCTORS, INC., APPELLANT, v. CITY OF COLUMBUS, APPELLEE, ET AL

Court: Supreme Court of Ohio

Date published: May 19, 1982

70 Ohio St. 2d 69 (Ohio 1982)

434 N.E.2d 1349

Opinion

No. 81-837

Decided May 19, 1982.

Contracts — Municipal construction project — Municipality's liability to contractor for additional expenses incurred — Properly disclaimed, when.

A municipality may disclaim in writing its liability to the contractor of a sewer construction project for additional expenses necessitated by conditions differing from those described in subsurface reports.

APPEAL from the Court of Appeals for Franklin County.

In 1975, appellant, S M Constructors, Inc., successfully bid on the Milo-Grogan sewer construction project of the city of Columbus, appellee. The project required tunneling under Fifth Avenue in Columbus.

Thirty-eight days intervened between the initial advertisement of the project and the bid date. During this time, appellee made subsurface reports available to all prospective bidders upon request. Mason and Ray, Inc. ("Mason"), prepared these reports in 1970 and 1974 at the request of the design engineer for the project, Burgess Niple, Ltd. ("Burgess"), and with the approval of appellee. The reports analyzed subsurface borings done on either side of the centerline of the project.

During construction, appellant encountered concretions^_ and inflows of water at various locations. The concretions caused appellant's tunnel-boring machine to fail. Each condition resulted in construction delays and additional costs to appellant.

_ Webster's Third New International Dictionary (1971) defines "concretion" as "a mass of mineral matter that is found generally in rock of a composition different from its own and that is produced by deposition from aqueous solution in the rock."

Appellant filed a complaint against appellee, seeking damages for the additional costs incurred. Appellee impleaded Burgess as a third-party defendant to indemnify appellee against any liability arising out of the reports. The Court of Common Pleas found, inter alia, that: (1) there was no evidence of inaccuracies in the Mason reports, (2) "Mason and Ray specifically searched for evidence of concretions * * * but no evidence of concretionary material was found," and (3) appellee made all factual information on subsurface conditions available to all prospective bidders. The court concluded that appellant had no right to rely on them as "complete, a part of the contract documents, or as warranted to show the actual subsurface conditions."

The trial court based its conclusion on the following provision, SP-31, in appellant's contract with appellee: "Delete paragraph three of Standard Specification 104.02 and substitute the following therefore [ sic]: Test borings have been made at several locations along the line of the work involved under the Contract. Copies of the soil report, dated August 28, 1970 and the supplemental soil report, dated December 12, 1974, are available on request in the office of the Chief Sewerage Engineer, City of Columbus, Ohio, and may be examined upon request in the office of Burgess Niple, Limited, 2015 West Fifth Avenue, Columbus, Ohio. Samples of core borings recovered may be observed at the office of Mason Ray, Inc., 6035 Huntley Road, Columbus, Ohio. Said borings, test excavations, and other subsurface investigations, if any, are incomplete, are not a part of the contract documents, and are not warranted to show the actual subsurface conditions. The Contractor agrees that he will make no claim against the City or the Engineer if, in carrying out the work, he finds that the actual subsurface conditions encountered do not conform to those indicated by said borings, test excavations, and other subsurface investigations." The trial court found that "S M Constructors entered the contract with the City of Columbus to construct the Milo-Grogan project with the opinion that SP-31 was illegal and unenforceable." The court concluded that "[p]rovision SP-31 is clear and unambiguous on its face * * *." Accordingly, the Court of Common Pleas granted judgment for appellee. The trial court also granted judgment for Burgess on appellee's third-party complaint. The Court of Appeals affirmed.

The cause is now before this court pursuant to the allowance of a motion to certify the record.

Messrs. Andrews Ryan and Mr. Robert E. Ryan, for appellant.

Mr. Donald R. Keller, Mr. Gregory S. Lashutka and Mr. Patrick M. McGrath, for appellee.

LOCHER, J.

Appellant's proposition of law raises one issue: whether SP-31, as a matter of law, bars appellant from recovering its additional expenses. Appellant claims a right to recover, because it relied on the Mason reports. We disagree.

We recognize from the outset that this is a case in contract. "A Government contract should be interpreted as are contracts between individuals, with a view to ascertaining the intention of the parties and to give it effect accordingly, if that can be done consistently with the terms of the instrument." Hollerbach v. United States (1914), 233 U.S. 165, 171-172. Our analysis, likewise, hinges on the principles of contract law.

The trial court concluded that SP-31 is clear and unambiguous on its face, and the Court of Appeals affirmed. In Ullmann v. May (1947), 147 Ohio St. 468, this court held:

"1. Where a written agreement is plain and unambiguous it does not become ambiguous by reason of the fact that in its operation it will work a hardship on one of the parties thereto and corresponding advantage to the other. ( Ohio Crane Co. v. Hicks, 110 Ohio St. 168, approved and followed.)

"* * *

"4. In the absence of fraud or bad faith, a person is not entitled to compensation on the ground of unjust enrichment if he received from the other that which it was agreed between them the other should give in return."

We examine the language of SP-31 in light of this standard.

SP-31 expressly excludes paragraph three of Standard Specification 104.02 from the terms of the contract between appellant and appellee. Paragraph three provides: "Should the Contractor encounter or the Director discover during the progress of the work subsurface or latent physical conditions at the site differing materially from those indicated in this contract, or 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 the contract the Director shall be promptly notified in writing of such conditions before they are disturbed. The Director will thereupon promptly investigate the conditions and if he finds they do so materially differ and cause an increase or decrease in the cost of, or the time required for performance of the contract, an equitable adjustment will be made because of changed conditions other than subsurface soil conditions or rock conditions." Appellant cites various cases in which courts considered a "changed conditions" clause to be a significant factor. Foster Const. Co. C.A. v. United States (1970), 193 Ct. Cl. 587, 435 F.2d 873; Ray D. Lowder, Inc. v. State Highway Comm. (1975), 26 N.C. App. 622, 217 S.E.2d 682, certiorari denied, 288 N.C. 393; Metropolitan Sewerage Comm. v. R.W. Const., Inc. (1974), 72 Wis.2d 365, 241 N.W.2d 371. Obviously, these authorities are inapposite because of the absence of a "changed conditions" clause in the contract for the Milo-Grogan project.

Appellant cites other cases in which errors appeared in portions of the contract — particularly, in the plans, specifications or blueprints. Hollerbach, supra ( 233 U.S. 165); United States v. Spearin (1918), 248 U.S. 132; United States v. Smith (1921), 256 U.S. 11; Passaic Valley Sewerage Commrs. v. Holbrook, Cabot Rollins Corp. (C.A. 3, 1925), 6 F.2d 721, certiorari denied, 269 U.S. 582; Pitt Const. Co. v. Alliance (C.A. 6, 1926), 12 F.2d 28; Levering Garrigues Co. v. United States (1932), 73 Ct. Cl. 508; Condon-Cunningham, Inc. v. Day (1969), 22 Ohio Misc. 71; E.H. Morrill Co. v. State (1967), 65 Cal.2d 787, 56 Cal.Rptr. 479, 423 P.2d 551; Warner Const. Corp. v. Los Angeles (1970), 2 Cal.3d 285, 85 Cal.Rptr. 444, 466 P.2d 996; Raymond Intl., Inc. v. Baltimore Co. (1980), 45 Md. App. 247, 412 A.2d 1296, certiorari denied, 288 Md. 731, certiorari denied, 449 U.S. 1013; Hersey Gravel Co. v. State Highway Dept. (1943), 305 Mich. 333, 9 N.W.2d 567; Metropolitan Sewerage Comm. v. R.W. Const., Inc., supra. Yet, SP-31 states: "Said borings, test excavations, and other subsurface investigations, if any, are incomplete, are not a part of the contract documents * * *." (Emphasis added.) This language in the contract, therefore, clearly distinguishes this case from the authorities which appellant cites.

SP-31 further provides: "Said borings, test excavations, and other subsurface investigations, if any * * * are not warranted to show the actual subsurface conditions. The Contractor agrees that he will make no claim against the City or the Engineer if, in carrying out the work, he finds that the actual subsurface conditions encountered do not conform to those indicated by said borings, test excavations, and other subsurface investigations." Appellant argues that the difference between the conditions projected in the reports and the conditions actually found amount to misrepresentation. See Lima v. Farley (C.A. 6, 1925), 7 F.2d 40; Robert E. McKee, Inc. v. Atlanta (N.D. Ga., 1976), 414 F. Supp. 957; E. and F. Const. Co. v. Stamford (1932), 114 Conn. 250, 158 A. 551; Haggart Const. Co. v. State (1967), 149 Mont. 422, 427 F.2d 686; Peter Salvucci Sons, Inc. v. State (1970), 110 N.H. 136, 268 A.2d 899, ordered reopened as to the issue of interest and costs only in 110 N.H. 502, 272 A.2d 854, affirmed on that issue in 111 N.H. 259, 281 A.2d 164. "[I]f statements `honestly made' may be considered as `suggestive only,' expenses caused by unforeseen conditions will be placed on the contractor, especially if the contract so stipulates. [Citations omitted.] * * * The state did little more than report the results of its testing. "The borings were merely indications * * * from which deductions might be drawn as to actual conditions. * * * Both parties knew that deductions so drawn might prove untrue. * * *' ( Elkan v. Sabastian Bridge Dist. 291 F. 532, 538.) Both parties could and apparently did draw the same conclusions as to what the tests indicated, and the plaintiffs were given or had access to the identical, accurate information that was available to the state." Wunderlich v. State (1967), 65 Cal.2d 777, 783, 784, 56 Cal Rptr. 473, 423 P.2d 545. The trial court found that "[t]here is no evidence of inaccuracies" in the soil reports. We accept this finding and conform to this court's established practice of not reexamining the facts under these circumstances. See R.C. 2505.31; Huntington Finke Co. v. Lake Erie Lumber Supply Co. (1924), 109 Ohio St. 488; State, ex rel. Pomeroy, v. Webber (1965), 2 Ohio St.2d 84, 85-86.

Under the findings of the trial court, Mason's reports did not misrepresent the conditions. They were accurate as far as they went under SP-31; the reports were merely to be "available on request" for bidders. In the absence of a showing of fraud or bad faith, a clear and unambiguous provision, such as SP-31, is both legal and enforceable. See Ullmann, supra ( 147 Ohio St. 468). The disclaimer of warranty and appellant's agreement not to assert a claim are, therefore, controlling.

Appellant argues that appellee is liable because the Mason reports failed to mention any of the geologic publications which suggested the possibility of concretions in this area. In support of this argument, appellant cites cases in which governmental entities did not communicate their knowledge of certain facts as opposed to their judgment based upon certain facts. Christie v. United States (1915), 237 U.S. 234; United States v. Atlantic Dredging Co. (1920), 253 U.S. 1; Walla Walla Port Dist. v. Palmberg (C.A. 9, 1960), 280 F.2d 237; Alpert v. Commonwealth (1970), 357 Mass. 306, 258 N.E.2d 755; Valentini v. Adrian (1957), 347 Mich. 530, 79 N.W.2d 885; Earl L. Reamer Co. v. Swartz Creek (1977), 76 Mich. App. 227, 256 N.W.2d 447; A.S. Wikstrom, Inc. v. State (1976), 52 App. Div. 2d 658, 381 N.Y. Supp. 2d 1010; Grow Const. Co. v. State (1977), 56 App. Div. 2d 95 , 391 N.Y. Supp. 2d 726; Ray D. Lowder, Inc. v. State Highway Comm., supra ( 26 N.C. App. 622). In contrast, the trial court found that the Mason reports were "fact reports" and that appellee "made available to prospective bidders all factual information concerning subsurface conditions which was within the possession of the city and Burgess Niple, including the 1970 and 1974 subsurface reports, for the purpose of full disclosure of all available information." The reports themselves put readers on notice of potential discrepancies: "It is concluded from the findings that subsurface conditions are extremely variable along the alignment of the sewer. Further, it is concluded that conditions on centerline of the sewer may vary to an unknown degree from conditions indicated by adjacent offset borings." Appellant's authorities are, therefore, not controlling.

Rather, SP-31 clearly disclaims any liability of appellee for differences between the conditions expected and those actually encountered. Appellant has argued the burdens of this type of provision. See Haggart, supra ( 149 Mont. 422), at 425. Appellee has argued its benefits. Wunderlich, supra ( 65 Cal.2d 777), at 786; Sasso Contracting Co., Inc. v. State (1980), 173 N.J. Super. 486, 490, 414 A.2d 603, certiorari denied, 85 N.J. 101. Nevertheless, we need not speculate as to whether this provision encourages high bids or low bids, good bids or bad bids.

Likewise, we need not decide whether 38 days was enough time for appellant to prepare its bid. We need only observe that SP-31 clearly and unambiguously limited the utility of the subsurface information. SP-31 is a specific provision in which appellant agreed to "make no claim" against appellee based on the differences between the actual conditions and the preliminary subsurface information. Application and the clear and unambiguous language of SP-31, then, places this case within a basic tenet of contract law: "Where one agrees to do, for a fixed sum, a thing possible to be performed, he will not be excused or become entitled to additional compensation, because unforeseen difficulties are encountered." (Citations omitted.) Spearin, supra ( 248 U.S. 132), at 136. The trial court, therefore, properly extended judgment for appellee.

Accordingly, we affirm the judgment of the Court of Appeals.

Judgment affirmed.

W. BROWN, Acting C.J., DOUGLAS, SWEENEY, HOLMES, C. BROWN and KRUPANSKY, JJ., concur.

DOUGLAS, J., of the Sixth Appellate District, sitting for CELEBREZZE, C.J.