James Stewart & Co. v. State

Ackerson, P. J. This claim, as amended, asks for damages against the state for more than $400,000. The claimant (the claimant and its assignors are both referred to herein as the claimant) contends that it has been damaged in that amount by reason of the misrepresentation made by the state as to the materials to be excavated in the canal prism on the site of contract No. 39, which it entered into with the state. This contract was made and entered into by the state and this claimant in pursuance of the law which provided for the construction of the Barge canal. This law provided in general that the state would investigate the site of the contract, determine the quantity of materials to be removed therefrom, and estimate as accurately as possible the approximate cost of removing such materials; nothing is said in the law about determining the quality of the material to bs> removed, but of course it was absolutely necessary to do this in order to make an accurate estimate of the cost of removing such material; that the state should then prepare plans and specifications setting forth upon said plans the nature of the work to be performed and a description of the material to be removed from the prism of the canal, as far as possible. The state spent some three or four months, all told, in investigating the site of this contract, and in making rod soundings, wash — 828 — drill borings, etc., in an effort to acquaint itself with the nature of the materials to be removed, so that plans showing the work to be done and an estimate of the cost of such work could be accurately made. Thereafter and about February 1, 1910, the state advertised for bids on this contract. The advertisement provided that bids must be submitted on March 29, 1910, or thirty-six days from date of advertisement. The state’s estimate for excavating the material to be removed from the prism of the canal on the site of this contract was seventy-seven cents per cubic yard. The claimant’s bid was eighty-three cents a cubic yard, and being the lowest bid it was awarded the contract. The contract presented to the claimant for signature was one drawn and prepared by the agents of the state. It provided, among other things, that the contractor must rely upon the information gained by what investigation he had made of the site of the contract. The law specifically provided that the agents of the state should procure this information themselves and make a “ statement thereof with * * * maps, plans and specifications ” which they should publicly exhibit “ to every person proposing or desiring to make a proposal for such work.” Section 6 of the Barge Canal Law (Laws of 1903, chap. 147) reads, in part, as follows: “ § 6. All the work herein authorized shall be done by contract. Before any such contract shall be made the state engineer shall divide the whole work into such sections or portions as may be deemed for the best interests of the state in contracting for the same, and shall make maps, plans and specifications for the work to be done and materials furnished for each of the sections into which said work is divided and shall 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 and make a detailed estimate of the cost of the same, and a statement thereof with the said maps, plans and specifications, when adopted by the canal board, shall be filed in his office and a copy thereof shall be filed in the office of the superintendent of public works and publicly exhibited to every person proposing or desiring to make a proposal for such work.” It is apparent that it was wholly impracticable for the contractor to make any adequate investigation of the site of this contract during the thirty-six days between the date of advertisement for bids and the submission thereof. It is obvious that the bidder had no equality of opportunity with the state to examine the site of this contract. The law plainly provided that the state itself should make this investigation. Not only that, but it provided — 829 — that the state should make an accurate estimate of the cost of doing this work. Then, in addition, it provided that no bid for doing the work could be accepted which was more than ten per cent in excess of the cost estimated by the state, without the consent of the canal board. But notwithstanding this plain provision of the statute which placed upon the state the responsibility of giving to the bidder an approximately accurate statement of the work to be done, the agents of the state sought to place upon the contractor the entire responsibility of determining at least the character of the material to be removed from the prism of the proposed canal. Then in addition to this, "the agents of the state limited the time in which the contractor should make this investigation to such an extent that it became totally and absolutely impossible for the contractor to make any such investigation. In addition, the contract provided in section 10 thereof, in substance, that the contractor would not make any claim against the state for any misrepresentation made by any agent or employee of the state concerning any of the work mentioned in the contract. The claimant in this case contends that it was compelled to rely upon the representations, as to the material to be removed, made by the state; that it could not make subsurface investigation of about eleven miles, mostly in the bed of the Oswego river, in February and March when climatic conditions forbid such investigation, and when the course of the proposed canal was not buoyed out, so that it could know where to make its soundings, to say nothing about the flood conditions of the river which prevented it. Acting, therefore, upon the theory that the state had performed the duty imposed upon it by statute and had represented upon the plans and specifications furnished to the contractor the nature of the materials to be removed with approximate accuracy, and had estimated the cost of such work at seventy-seven cents per cubic yard with approximate accuracy, the claimant herein made its bid of eighty-three cents per cubic yard for doing this work, with perfect confidence that the work could be performed for that amount of money. As the work progressed, it was found that there was a wide variance between the materials. actually met with in excavating the prism of the canal and the materials represented to be there by the state upon its plans and specifications. The claimant was continually calling the state’s attention to this variance. But, not until after the work was actually performed, and even after the commencement of the trial of this action for damages, was it discovered that these misrepresentations of the state were made by the agents and employees of, the state with full knowledge of their falsity. — 830 — The state investigated the site of the contract, with its own boring parties, under the supervision of its state engineer. It also procured the boring books of the United States Deep Waterway Survey, a survey which had been made practically over this same route by the United States government a few years before. The time spent by the state and the United States government in procuring the information set forth in these boring books amounted in all to about four months, extending over three or four years. The agents of the state were, therefore, thoroughly acquainted with the character of the material to be removed from the prism of the canal on the site of this contract. They also knew it was impossible for the claimant to make any subsurface investigation in the short space of thirty-six days which would reveal the nature of the material to be excavated. After the claimant commenced the work of excavation on the contract, it immediately discovered that the material was much harder and more difficult of excavation than that which was represented on the contract plans. They immediately called the attention of the engineers of the state to this discrepancy but were told that they must proceed with the work of the contract. They proceeded under a continual protest and finally completed the work. Owing to the hard nature of the material, however, it took them about seven years to complete the work which the contract specified should be done in about three. After the completion of the work to the satisfaction of the state they were paid therefor in accordance with the contract price. The claimant now brings this action to recover the amount it was damaged by reason of being compelled to excavate a large amount of hard material not shown on the contract plans. The nature of the action is one for breach of warranty or condition consisting of misrepresentation made by the defendant in its plans and specifications as to the character of the material to be excavated and the suppression of information as to the true nature of such material. It now clearly appears from the evidence in this case that the engineers of the state set forth information on the contract plans and specifications herein relating to the material to be excavated under the contract herein, which they knew to be false when they placed it on such plans and specifications. It abundantly appears from the evidence that such engineers and agents of the state deliberately represented on said plans and specifications that the nature of the material to be excavated was much softer and easier of excavation than it actually was and as they knew it to be as is fully set forth in our findings herein. These engineers in their zeal for rendering efficient service to the state, undoubtedly satisfied themselves that such a perform — 831 — anee on their part was justified in order to protect the state. But in law their acts constituted nothing less than fraud. They knew the facts. They knew that the representations on the plans as to the material were false. They knew that the plans were to be presented to proposers under the law to inform them of the nature of the work to be done. They knew that the quantity of hard material indicated upon the plans had a direct and vital bearing on the value of the work and they knew that the bidders and proposers relied upon the plans which these engineers made for their knowledge of the nature of the material to be removed. By such fraud, therefore, bidders were induced to believe that the material to be removed was much easier of excavation than that which the engineers of the state had found to actually exist on the site of the contract. The attorney-general contends that clause 10 of the contract protects the state from damages and renders the claimant remediless. That clause reads as follows: “ The contractor agrees that he has satisfied himself by his own investigation and research regarding all the conditions affecting the work to be done and labor and material needed, and that his conclusion to execute this contract is based on such investigation and research, and not on the estimate of the quantities or other information prepared by the state engineer, and that he shall make no claim against the state because any of the estimates, tests or representations of any kind affecting the work made by any officer or agent of the state, may prove to be in any respect erroneous.” Representations known to be false when made and made with a purpose to deceive, as in this cas,e, are not within the purview, scope, meaning or contemplation of clause 10 of the contract. Such a clause could avail the state only in the case of “ erroneous ” information furnished by its agents through an honest mistake. Such a mistake consists in giving “ erroneous ” information which was intended and believed to be the truth by the one giving it. That, of course, is not this case. The fraud of the agents of the state cannot, of course, be attributed to the state. Here the principle of respondeat superior does not apply. The state cannot be guilty of fraud nor can an action sounding in tort be maintained against it without its consent expressed by legislative act. No damages in this case, therefore, for fraud nor of a punitive nature can be awarded against the state. Inasmuch as the “ representations ” from which the claimant suffered were fraudulent it is relieved from the obligation imposed upon it by clause 10 not to make a claim against the state because of erroneous representations affecting the work made by any — 832 — officer or agent of the state. It can have redress for the fraud only against the agents of the state personally who actually committed the fraud. Being relieved, however, from the prohibition of clause 10, “ not to make a claim against the state because any of the estimates, tests or representations of any kind affecting the work made by any officer or agent of the state may be in any respect erroneous,” this claimant in our judgment is entitled to have its claim here considered upon the merits. We reach the conclusion that the claimant here is entitled not only to the contract price of eighty-three cents per cubic yard, but in addition it is entitled to recover the actual extra expense it was occasioned in doing the excavation work here by reason of the hard material it encountered not shown on the contract plans and known to the state to exist, which amount we have determined from the evidence is $369,237. We also think the evidence in this case abundantly justified an award for the sum we have allowed in our findings under items 3, 9 and 10 of the claim. There not being sufficient evidence to support an award for any other items of the claim, they are hereby dismissed. We are hot unmindful of the matters set forth in the able dissenting opinion of our colleague, Judge Smith. He .heard the oral argument of counsel when this, case was finally submitted and has given the briefs and record in this case long and careful consideration. He has reached conclusions with which the majority of the court, after full consideration, is unable to agree. He has suggested certain findings which he thinks the court ought to incorporate in the findings of fact and conclusions of law which make up our decision. We do not think such suggested findings have any reference to the merits of the controversy and have, therefore, declined to incorporate them in our findings. Webb, J., concurs.