Kinser Construction Co. v. . State of N.Y.

Vann, J. This appeal comes to us on the findings made by the Court of Claims and unanimously affirmed by the Appellate Division, so that the facts are settled beyond our power of review. The main question presented for decision is whether the facts thus, finally resolved sustain the conclusions of law found by the trial court. That question depends on the meaning of the seventh clause of the contract, when read in connection with the context and construed in the light of the circumstances surrounding the parties when they entered into the agreement. It will be convenient for any one who reads this opinion to have that clause directly before him as he considers our views upon the subject and, hence, we quote it again as follows : “7. It is mutually agreed that the State reserves the right until the final completion and acceptance of the work, to make such additions to or deductions from such work or changes in the plans and *391 specifications covering the work, as may be necessary, and the contract shall not be invalidated thereby, and no claim shall be made by the contractors for any loss of profits because of any such change or by reason of any variation between the quantities of the approximate estimate and the quantities of the work as done.” This clause permits the state not only to make such additions to or deductions from the work, but also to make such changes in the plans and specifications covering the work as may at any time be necessary, without rendering the contract invalid or subjecting the state to claims for loss of profits by the contractor. (Clark v. Mayor, etc., of N. Y., 4 N. Y. 338; Kingsley v. City of Brooklyn, 18 N. Y. 200.) No limitation other than necessity is placed upon the right to make additions, deductions and changes in the work, plans and specifications. Necessity is the sole basis and standard for the protection of both parties. On the one hand, it protects the contractor from arbitrary, capricious or unreasonable action by public officers, and on- the other it protects the state from unforeseen conditions, which would render the work as originally planned impossible of performance. The necessity need not be absolute, but it must be reasonable, for the law writes the word “reasonably” before the word “ necessary ” in the contract as unavoidably within the contemplation of the parties, when the extent of the work is considered. (Jerome v. Boss, 1 Johns. Ch. 315, 340.) Reasonable necessity did not require that it.should be absolutely or physically impossible to build the lock on the old location, for, assuming that it was an engineering possibility, if the expense involved was so enormous as to make it impracticable, performance was impossible within the meaning of the contract. The surrounding circumstances show that the word, “ necessary” was used to fulfill a purpose of the highest importance to the state. The contractor agreed that it had satisfied itself by its own investigation and research *392 as to all the conditions affecting the work to be done; that its conclusion to execute the contract was based on such investigation and research and that it would make no claim against the state because of any estimate, test or representation of any kind affecting the work made by any officer or agent of the state which might prove to be in any respect erroneous. We may assume from this that the state itself had made investigations and tests along the line of the work as to the nature of the soil to be excavated as well as the nature of the soil upon which completed structures were to rest. Both parties, however, were mistaken as to the physical conditions affecting the work at lock No. 7 and they ultimately realized that those conditions were such as to prevent performance of the contract they had made according to the original plan. The plan was not defective, but the earth gave way and thus a situation was created which neither party had foreseen. That situation shows the exact object of the clause in question in view of the surrounding’ circumstances known to both parties when they made the contract. The state was engaged in a work of such magnitude as to be without precedent in its own history or in the history of any other state. Nearly a century before it had built the Erie canal at a cost of about $1,000,000 with capacity to carry boats of seventy-five tons burden. Years later it had enlarged the canal so that it could carry boats of over two hundred tons, but at last it was about to construct a great waterway to carry boats of more than three thousand tons and at an expense of more than $100,000,000. It extended from Lake Erie to the Hudson river with one branch from Three River Point to Lake Ontario, another from the Hudson river at Waterford to .Lake Champlain and a third to connect with the Seneca and Cayuga lakes, making a total of more than four hundred and fifty miles. In laying out a line of canal engineers have less lati *393 tude than in laying out the route of a road or a railway, because water runs down hill and gradients are not possible. Hence the route to a great extent depends on natural conditions. Among the requirements in the construction of the barge canal were many locks to be operated by hydraulic or electric power and each between three and four hundred feet long with lifts ranging from six to forty feet; over thirty dams, some of them nearly two thousand feet in length and over forty feet in height; reservoirs of immense size with a holding capacity measured only by billions of cubic feet of water and other huge structures too numerous to mention. According to the statutes providing for the work, which are referred to in the contract and notice of claim, four rivers were to be “canalized” so as to make a minimum bottom width of two hundred feet, with short sections of wholly new construction across bends and long sections of wholly new construction after the canal leaves the rivers and continues on through the unbroken country. Three lakes were to be utilized; harbors and basins were to be built ranging from 1,200 to 1,500 feet in length and a vast amount of other work done. Within three months after the first bonds were sold in order to raise the money needed, the superintendent of public works and the state engineer were commanded to proceed with the improvement, to acquire the necessary land, notify the landowners, make and file surveys and maps, prepare plans and specifications for every section of. the work, make detailed estimates of quantity and cost, and “ascertain with all practicable accuracy the quantity of embankment, excavation and masonry, the quantity and quality of all materials to be used and all other items of work to be placed under contract.” The extent of the work involved in making the maps and plans for the entire length of the canal and its branches is suggested by those put in evidence on the trial and furnished by the parties for our use on this review. Although prepared for less *394 than four miles of the canal and less than one per cent of the entire work, they cover nearly six hundred square feet of drawing surface, embracing general outlines, minute details and all that was required, not only for excavation and embankment, but also for the construction of locks, power plants, spillways, bridges and the like. It is obvious that in a work of this magnitude the highest engineering skill, even when exercised with the utmost care, could not learn in advance all the physical conditions to be met with during the progress of the work. Those to whom the mammoth undertaking was intrusted, even with the aid of the most expert engineers, could not find in all places throughout the long line of operations what nature had-placed beneath the surface of the earth in the form of obstacles to construction which could not be overcome. Alterations and changes, many slight and some substantial, would almost inevitably be required at various points in a work of such extent. Common prudence on the part of those in charge would compel them to make provision for such contingencies as could not be foreseen with ordinary care and prudence. This was the object of the clause in question, which should be so construed as to effect its important purpose. Bidders were bound to take notice that the state reserved the right to make additions and deductions In the work and changes in the plans and specifications covering the work, with no right on their part to claim damages for loss of profits on account thereof. Minor changes were certain and of slight importance. Radical changes might or might not be made, depending upon necessity, and the bidder ran his risk and doubtless increased his bid on account of the risk. In this case the result is harsh in its effect, not owing to absolute loss for which the judgment provides, but to the loss of profits that might have been made. This evil is less serious than to force the state to pay *395 a large sum as prospective profits upon work for the public that was not done because it could not he done. The trial court found every fact necessary to authorize the action taken by the state in making the changes. It found that it was impossible to construct lock number seven as planned at the location selected or to secure a suitable site within the sections covered by the claimant’s contract. It was necessary, as the court further found, to change the location of that lock and to exclude it entirely from the contract of the claimant, because the character of the sub-soil rendered performance of the contract as planned impossible. When performance became impossible owing to conditions unforeseen by either party, necessity for the changes arose, and those made were within the provisions of the contract and the power expressly reserved by the state. We have examined the authorities cited by the learned counsel for the claimant, but find none when carefully read which decide anything in conflict with the views here expressed, whatever may have been said as the personal view of the judge writing the opinion. It is one thing to build a single structure like the dam across the Hudson river near Palmer’s Falls and quite another to create a body of water extending across the state upon which barges can carry the commerce of the great lakes in loads of more than 3,000 tons each. (National Contracting Co. v. Hudson River Water Power Co., 192 N. Y. 209.) The case cited, which is the chief reliance of the appellant, involved a contract, not with the state, but between private parties, to build a single dam, while the contract in question covers hut a small part of a great work. There was no provision for a change in case of necessity, although there was power to make alterations without liability for anticipated profits. A change from a masonry dam with no earth called for, to a dam essentially of earth with comparatively little masonry, mads *396 for no reason but to save expense, was held to destroy the essential identity of the thing contracted for and to constitute a breach of the contract. There the change was made under a power reserved of narrower scope and simply because the change would make construction cheaper, but here it was made not because it was cheaper but because it was absolutely necessary, as otherwise the canal could not have been constructed at the point involved. There also the contractor was to be paid in bonds secured by a mortgage on the structure itself, and if the change proved a failure the value of the bonds would be impaired. McMaster v. State of New York (108 N. Y. 542) is also relied upon by the claimant, but there was no necessity for the change of plans in that case and the change made was arbitrary, radical and subversive of the thing to be done. There was no reason for it except that the new construction would be cheaper. An authority much more analogous to the case in hand, both in its facts and in the principle involved, lends strong support to the conclusion we have reached. (Kingsley v. City of Brooklyn, 78 N. Y. 200, 208.) The appellant claims that the state guaranteed its plan, but assuming, without deciding, that this is true, the trouble was not with the plan but with the earth, which refused the support relied upon by both parties, the one as much as the other. When the earth gave way and there was no adequate support for the structure to be built upon it, a contingency arose which authorized the state to exercise its reserved power. It was the same in effect as if an earthquake had utterly destroyed the foundation on which the lock was to rest. The defect was caused by nature, not by man. According to the facts'Tound by the trial court and unanimously approved by the Appellate Division there was no breach of contract by the state, and the claimant was not entitled to prospective profits nor to a judgment *397 more favorable in any respect than the one rendered by the Court of Claims. More might be said; but, in view of the careful opinions written in both of the courts below, I regard further discussion as unnecessary. I recommend that the judgment appealed from be affirmed, with costs. Cullen, Oh. J., G-bay, Haight, Willabd Baetlett, Hiscock and Chase, JJ., concur. Judgment affirmed.