Sanitary Dist. of Chicago v. Ricker

WOODS, Circuit Judge, after stating the facts, delivered the opinion of the court. We are of opinion that the decree under review rests upon an erroneous theory. The contract which the court ordered annulled was made hy parties dealing at arm’s length. The sanitary district stood, in no relation of trust or confidence, and owed no duty, to proposing contractors. The trustees of the district and their chief engineer, it might well be said, were bound in duty to the public to use diligence to obtain such knowledge of the conditions to be dealt with as was necessary to enable them, in letting contracts, to conserve the public interests, but there has been pointed out no provision in the statute whereby the drainage district was created and the powers of its officers defined, which required that information concerning the nature of materials to be excavated should be collected for the benefit of bidders, and for the assertion of such duty on the general principles of law or equity.there is, we believe, no foundation in authority or reason. If conceded, the proposition would mean that every representation made by public officials or trustees, appointed to obtain proposals for the execution of a public work, amounts to a warranty either that the representation is true or that experienced and skillful agents had been employed to obtain the information on which it was made, and that the agents had followed the best known methods and had been guilty of no negligence in the discharge of their duties; or, to say the least, that, if such representations are not to be regarded as warranties, either of the truth of the statements or of due diligence used to make them true, they do demonstrate, if they turn out to be untrue, a mutual mistake of the parties, by reason of which the bidder may abandon his contract, once he' discovers in the course of performance that the representations Were false or mistaken. The books would be searched in vain for precedents or principles to sustain such a doctrine. The possibilities which it would involve of peril to public interests are infinite. It would take from the contractor, and impose on the public, all undiscovered contingencies and risks, which by diligence might have been found out, incident to the construction of public works. If in this case, the trustees or their engineer were at fault for employing unskilled men to malee the borings in section E, the breach of duty was to the public, as represented by the drainage district, and the appellees had no ground for complaint, even assuming that the profile by which they are said to have been misled had purported, to- give information full and definite enough to justify reliance upon it, unless, by somebody authorized to speak for the district, they were purposely induced to believe that the borings had been skillfully made and tabulated. The bill contains no averment of the lack of skill'or of-negligence on the part of those who were employed to conduct the borings, and it is not pretended that the appellees supposed — 841 — that they were made by the chief engineer, Williams, in person: When, therefore, he declared to them his belied that the data of the profile were reasonably reliable, they knew that he was expressing only an opinion; and, as their own testimony shows, they did not inquire how or from what the profile was made up, or how and by whom the borings were made. The only reason Williams gave for his belief, that the dala could be regarded as reliable was that the “determinations were carefully taken and tabulated”; and by that he did not mean, and was not understood to mean, that he had any knowledge of the degree of care with which (he borings had been conducted and the results first noted. That neither he nor Kicker and Weston treated the profile as affording full and satisfactory information, as it plainly did not, is shown by the fact that, when they spoke of their intention to go down the line, he declared it a good idea, and suggested that they examine the spoil bank of the Illinois and Michigan canal, which he thought would afford as good evidence as any they could find of what they would meet with in digging the canal. One of the appellees has testified, and the master has found, that in making their bid the appellees relied upon the data found on the profile which they were allowed to examine; but that finding, at best, is only partially true. The appellees were aided by and were acting upon the advice of their own engineer, who was interrogated upon the point three or more times, with the evident purpose to procure an answer like that, of his employer; but he adhered steadily to the statement, “We relied upon the information which we obtained from the engineering department of the sanitary district, and our observation of the spoil bank of the Illinois and Michigan canal.” Cooley distrusted the data furnish (id by his own borings, and it is not strange that Weston was unwilling to say that he relied alone upon the indefinite data of the profile shown him. His testimony shows that they made inquiries of two others in the engineering department: besides Williams, and that they applied to him not in his official capacity, but individually, “for such information as he had personally of this ground, outside of what he had been able to gather.” They examined the spoil bank of the canal more than once, and, finding only tractable material, were of course the more ready to believe that the material described on the profile, (hough without any statement whether it was hard or not', was also tractable; and by the same logic Williams, who presumably had examined the spoil bank, had a right to believe, and to say to the appellees that lie thought, the notations on the profile reliable. If there was a failure to examine the spoil hank of the canal with due care, the opportunity was open alike to both, and neither may complain of (he other on that score. It will not do to say that the appellees were not put upon inquiry, or that the profile caused them to refrain from inquiry. From the examination of the profile and other documents in the engineer's office, and from their talks with Williams and others in his office, (hey proceeded forthwith to make inquiry; and if not: with sufficient care, the fault was their own. We have proceeded thus far on (he assumption that what the engineer said about the profile was in some measure binding, upon — 842 — the board of trustees or the drainage district. While we do not question that the master was right in finding, or assuming, that the engineer had authority to exhibit the profile to contractors, though it was not a part of the specification and plans referred to in the advertisement for proposals, it does not follow, and no facts or circumstances are reported from which it may be inferred, that he had authority to bind the board of trustees or the district by representations of fact outside of the papers which he was authorized to show, and certainly not by expressions of opinion and belief or the grounds thereof. If his statement that he thought the data of the profile trustworthy was in any wise binding on the board of trustees, equally binding, and, as it turned out, equally untrue, was his suggestion that the spoil bank of the canal would be as good evidence as any to be had. Furthermore, the testimony of Weston, the engineer of the appellees, shows that what he “was particular to ask” of Williams was where the proposed channel would come close to the old canal, and if he thought there would be much seepage of water from the old channel into the new; to which Williams answered “No.” If his answer had proven untrue, and bothersome seepage had been the cause of complaint, Instead of indurated clay, it would hardly be contended that the drainage district was responsible for the statement of the engineer on that point; and yet there seems to be in principle as much reason for asserting authority for one utterance as .the other. The engineer had no special authority by statute or by action of the board of trustees, and we cannot assent to the view that he had general authority, by virtue of his office, to speak for the drainage district in respect to matters, like those in question, touching the interests of contractors proposing to enter into engagements to do the work of excavation. The equity of the case, therefore, is as if the particular statements which the master has reported had not. been made. The principles underlying the conclusion already declared are inconsistent with the proposition, in the master’s findings of law, that, while the drainage district was under no obligation to give any information to the complainants touching the character of material likely to be encountered in section F, yet, when it did make and exhibit a profile for the information of bidders, it was bounid in good faith to communicate to them, also, all the information in its possession on the subject, namely, the reports of the Cooley borings, the government borings, and the statements of General Fitz Simons made before the engineering committee of the defendant. The drainage district was represented by its board of trustees, not by the individuals who composed the board, and could be bound by the action of the board, directly or through agents empowered to act or speak for it, but not by the knowledge or conduct of its individual members. It is not material, therefore, that some of the trustees, at the time of the making of the contract with the. appellees, were familiar in a general way with the fact that Gooley, when chief engineer, two years or more before, had made borings, and by his reports had known the results of such borings; or that some of the trustees, two years or more before, had been present and heard the statements of General Fitz Simons to a committee of engineers; or that the certified copy of the — 843 — government borings was also on file in the office of the defendant. The important and controlling finding is that the evidence does not show that the trustees, or any of them, at the time when this contract was made, had any actual knowledge, of the existence of said intractable material, or that they intended any deceit. The drainage district was not originally, and by nothing that occurred did it come, under obligation to the appellees that its trustees should recall and communicate to them facts of the past, which they had forgotten, and of the significance of which, being men without experience in engineering, they had little or no understanding when they were told of them. While the reports of the Cooley borings and the government borings were on file in the office, and in that sense were in the possession of the defendant, the fact is of no significance unless they were brought to the attention and comprehension of the board under circumstances which made it the board’s duty to give information thereof to the appellees. Nothing of the kind occurred. The appellees made no inquiry whether other borings had been made, or test pits sunk, nor whether the board had other information from any source. If the inquiry had been made, there is no reason to believe that the frankest response would not have been made. The report of the government borings was a matter of public knowledge, accessible to all, and the statements of General Fitz Simons were given publicity at the time in the newspapers of Chicago, and in the natural course of affairs were more likely to have been known to and understood by the engineer of the appellees, who had long been interested in engineering enterprises at that city, than by nonprofessional members of the board of trustees of the drainage district. It would certainly have been an easy matter for the appellees to obtain all the knowledge which it is now insisted the board of trustees should have sought out for them; and on the facts found there is no ground, except the supposed duty of the board in that: respect, for the legal conclusion of the master that there was a “concealment,” or, as the court below called it, “suppression” of information. The report of the Cooley borings differed from the data of the profile only in the use of the adjectives “hard” and “very hard”; and the very absence of such details from the profile exhibited, in all reason, should have called for explanation to those familiar with such works, as the appellees and their engineer are shown to have been. It is said that the appellees themselves were not bound to put down test pits; but it was their jirivilege to do so; and it is evident that with small expense, and within two or three days’ time, at places where the water did not cover the ground, they could have sunk one pit or more through the loose materials to the depth of 10 or 12 feet, and that by so doing they would have come upon the intractable material. A single pit at the place of a boring would have demonstrated that no inference was to be drawn from the data of the profile beyond what was explicitly stated; and beyond thal., from the beginning, there was, in the profile itself, no justification for an inference. So, too, a little digging into the spoil bank of the canal, instead of walking along and kicking at it, would have discovered the real character of material in the bank. The omission to employ such palpable and certain means of accurate information was hardly less than gross negligen.ee. — 844 — “Caveat emptor” is a just maxim, and equally the contractor must stand guard for his own interests when making his agreements. “If either party/’ it was said in Cleaveland v. Richardson, 132 U. S. 318, 330, 10 Sup. Ct. 104:, “desires information from the other, he must ask for it; and then he must not he misled or deceived by answers given.” In this case, information beyond that given was not asked, and that given was ndt intended to deceive, nor was it of a character which was likely to deceive a prudent man. “No fraud or culpable artifice” was used by the board to obtain the execution of the contract. It is said in the brief for the appellees that “Mr. Weston, and any engineer, would naturally presume that the district had fully satisfied itself as to the correctness of the determinations [on the profile], from whatever source they were gotten, before it would exhibit them in the manner it did. If it had not satisfied itself, it was a very simple matter for it to have qualified the showings made by stating thereon that the specifications had been taken from borings, and they assumed no responsibility in regard thereto.” The obvious response to these propositions is that there was no justification for any such assumption by an engineer as that suggested; that to have indulged it would have been to give strong proof of incompetency or carelessness; and that no fairer or more conclusive denial of responsibility for the character of the materials which might be encountered in the prosecution of the proposed work could have been devised than the provision of the contract for the classification of material, whereby, it is to be observed, hardpan is expressly mentioned as included in glacial drift. With that provision in the contract, the appellees are not in a position to say that they were in any respect misled, or not fairly forewarned of the 'character of material likely to be met with. We are also of opinion that if the appellees had the right, on discovery of the intractable material, to repudiate the contract and have 'it set aside, they lost that right by subsequent conduct. The discovery was made in March, 1894, but the prosecution of the work was continued until late in the ensuing October. Eescission, whether upon the ¿round of fraud or mistake, is a right which must be asserted pronlptly, and the excuse set v. for the delay in this case is wholly inadequate. It rests largely on alleged assurances of adjustment given by individual members of the board after that body had declared its puipose to insist upon performance of the contract. Those assurances were in no sense binding on the board, and the appellees had no right to rely upon them. The law required the letting of contracts for excavation to lowest and best bidders. But if the contention of the appellees is right, then for six months they were prosecuting their work without a contract, on the assumption that a new agreement would be made, or that in default thereof they would compel compensation on such terms' as they might be able to show to be just, and meanwhile they were expending large sums for additional machinery (it seems, illadvi'sedly), the use and damage to which are to be included in the accounting ordered. Equity can hardly sanction so bald a violation of uts'familiar rule that one who would rescind a contract must exercise ¡his election at once upon the disclosure of the fraud or mistake which is supposed to justify such action. The proper course for .the ap — 845 — pelleos was to cease operations, give notice to the board of trustees, and await their response; and, short of an agreement that the work might be continued pending negotiations, without prejudice to the right of rescission, it is difficult to think of a good excuse for departing from the well-established rule. The decree below is reversed, with instruction to dismiss the bill. Judge SHOWALTER did not participate in this decision.