Opinion
For Opinion on Hearing, see 85 Cal.Rptr. 444, 466 P.2d 996. Roger Arnebergh, City Atty., Bourke Jones and Charles W. Sullivan, Asst. City Attys., and Robert A. Clinco, Deputy City Atty., for defendant and appellant.
Caryl Warner, Los Angeles, for plaintiff and respondent.
KINGSLEY, Associate Justice.
This is an appeal by the defendant city from a judgment for $150,000 in favor of plaintiff Warner Construction Company for damages for a breach of a public works construction contract. Motion for new trial was argued and denied.
Vista Del Mar, a street at the waterfront, abuts and runs parallel along the crest of a hill. The entire hill is composed of dry, loose, cohesionless sand. A retaining wall was to be built for the purpose of retarding erosion of the crest of the hill which was undermining Vista Del Mar street.
The retaining wall was to be supported by 29 soldier beams. These soldier beams are reinforced concrete pilings varying in size from 24"' in diameter and 18' in length to 30"' in diameter and 34' in length. On the other side of Vista Del Mar street, 29 anchor caissons (reinforced concrete pilings) were to be sunk into the ground and joined to the retaining wall and the soldier beams by a series of 2"' steel tie back rods running under Vista Del Mar street.
Warner Construction placed the lowest bid and the contract was awarded to Warner at $81,000.
The contractor began performance on January 4, 1965, and it was discovered that the ground line had changed between the city's original survey and the commencement of work. By mutual agreement the price was increased by $1,810.08 to increase the depth of the wall.
The plans and specifications for the job, furnished to the bidders, purported to show the logs of two test holes. They showed that the holes would go through various levels of sand and gravel with differnt characteristics, ranging from 'loose coarse sand' to 'sand with clay binder.' The logs omitted two items of information: (1) the fact that there had been caving in the test holes during the drilling; (2) the fact that the data procured from samples was such that the depths at which the various types of earth would be found was an approximation and not (as a reading of the plan would suggest) exact. In addition the plans nowhere expressly advised a bidder that the entire area was composed of such unstable soil that steel casings could not safely be driven into it.
It is the significance of those omissions which lies at the foundation of the present lawsuit. In that connection, two entries on the face of the plans are important:
(1) The sheet on which the logs of the test holes appear contains the following note:
'The test-hole information on these plans show conditions found only at the date and location indicated. Bidders are cautioned that the city in no way warrants that such information is representative of conditions at any other location, or at any other time. Groundwater levels, particularly, are subject to change.'
(2) Sheet one of the plans contains a series of 16 'General Notes,' of which notes 7 and 8 are applicable:
'7. Holes for the soldier beams and anchor caissons shall be made by boring and/or drilling.
'8. Soldier beams and anchor caissons shall be cast in place within unsupported holes, except that where, in the opinion of the engineer, the holes are subject to caving or sloughing, or are in anyway unstable, the walls shall be temporarily supported by steel casings or shells. Before placing the steel casings or shells as much of the loose soil as is practical shall be removed from the holes.'
During the course of the work, caving developed. The contractor then resorted to the use of casings by driving the casings down into the sandy material--the ordinary method of installing such supports. Because of the highly unstable nature of the area, the jarring resulting from that methodology not only caused further caving in the holes, but threatened to cause collapse of the entire area of the work, with potential danger to workmen and to structures. The contractor desired to use what is referred to as the 'rotary mud' method. That method is described as follows in one standard text:
'Drilling may be accomplished with rotary drills using drilling mud or water and * * * inserting a steel casing, which drops by its own weight, then removing the drilling fluid. * * *'
The contractor ceased all operations on February 24, 1965, claiming that notes 7 and 8 of the plans and specifications designated a specific procedure to be followed in drilling the holes for the soldier beams; that such specified procedure was impossible of performance and it demanded that the city amend the contract to provide for The city contended that the plans and specifications merely required that certain holes be dug and that the method of digging said holes were to be left to the contractor, so long as a drilling technique was used.
The city ordered the contractor to resume work and the contractor refused unless the city issued a change order authorizing the contractor to use the 'rotary mud' method for an additional $12,000.
There was an oral offer to pay the $12,000, the contractor refused to accept and said the contract would have to be increased by $34,000. On April 1, the contractor said no meeting of the minds resulted from the negotiations, but that it would resume construction. The contractor resumed construction and, by using the rotary mud method, completed the job.
The case was submitted to the jury under instructions which: (a) left to the jury the interpretation of the contract language (Instructions 17 and 18), and (b) told the jury in effect that, if they construed data contained in the bid proposal as to test borings as constituting a warranty as to subsoil conditions, it should find for the plaintiff (Instruction 27). We conclude that the trial court was in error in both respects: that it was the duty of the trial court in the first instance and of this court on appeal to construe the contract documents (which include the bid proposal) and that, properly construed, there was no warranty as to soil conditions. We conclude, also, that the record does disclose evidence on which plaintiff might have recovered had the case been submitted to a jury under proper instructions limited to the issue of fraudulent concealment. Since we must reverse for a new trial, we think it unnecessary to comment on the respective contentions as to the measure of damages, because the instructions on that issue will necessarily be different in light of the different theory of liability which will be involved.
I
Although there was a variety of allegedly expert testimony as to the meaning of some of the language in the contract, the determinative issue does not depend on any resolution of those matters. The issue, strictly one of law under Parsons v. Bristol Development Co. (1965) 62 Cal.2d 861, 44 Cal.Rptr. 767, 402 P.2d 839, was whether or not the data as to test borings, as shown on page 2 of the plans, constituted either an express or an implied warranty or representation as to the subsurface conditions. The conflicting expert testimony was not directed to that issue. As we have indicated, it was plaintiff's theory that there was such a warranty and the case went to the jury on that theory. We conclude, however, that the 'Logs of Test Borings,' on which plaintiff relies did not constitute a warranty by city.
At no time, so far as we can determine, did the contractor base any claim on the fact that the various kinds of sand and gravel were not encountered at the exact depths shown on the plans; the claim is based on an alleged failure to disclose the known fact of caving and the failure to indicate that soil conditions might prevent the driving of casings. As we have indicated above, not only were the logs accompanied by a cautionary note as to their accuracy, but General Note 8 clearly indicated that caving was a possibility, if not a probability.
The California cases on the effect of disclaimer clauses were recently explained in Wunderlich v. State of California (1967) 65 Cal.2d 777, 56 Cal.Rptr. 473, 423 P.2d 545, and E. H. Morrill Co. v. State of California (1967) 65 Cal.2d 787, 56 Cal.Rptr. 479, 423 P.2d 551. The rule as therein laid down may be summarized, for the purposes of the case at bench, as follows: If statements as to geological conditions are 'suggestive only' and if disclaimer language is plainly tied In the case at bench, the disclaimer language was so expressly tied into the geological data as to permit the city to invoke the rule of Wunderlich and escape that of Morrill.
Since, under the instructions, the jury may have found for the plaintiff on what we conclude is an improper interpretation of the contract, the judgment based on its verdict may not stand.
II
However, disclaimer language, no matter how expressed, does not protect the contracting agency from liability for deliberate misrepresentation or concealment. (A. Teichert & Son, Inc. v. State of California (1965) 238 Cal.App.2d 736, 48 Cal.Rptr. 225.) It is the rule that, by failing to impart the knowledge of difficulties to be encountered in a project, the owner will be liable for misrepresentation if the contractor is unable to perform under contract provisions. (City of Salinas v. Souza & McCue (1967) 66 Cal.2d 217, 222, 57 Cal.Rptr. 337, 424 P.2d 921.)
Although Morrill, relying on Souza & McCue Constr. Co. v. Superior Court (1962) 57 Cal.2d 508, 20 Cal.Rptr. 634, 370 P.2d 338, disapproved language in Teichert as to the effect of disclaimer language in the 'general conditions' part of bid documents, nothing in Morrill overrules the part of Teichert herein relied on.
Whether or not the failure to advise bidders of the caving encountered in drilling the last holes, and to warn of the possibility that the soil conditions were such that casings could not be driven in the usual manner, were material omissions, and whether or not, if material, the omissions were deliberate or accidental, were questions involving issues of fact, and on which there was conflicting evidence, expert and otherwise. The instructions given to the jury, although directing its attention to the theory of an intentional omission of material data, did not clearly point up the exact issues to be determined.
The contractor, of course, testified both to materiality and to reliance. The city's contentions were that any omissions were unintentional and also that the data given were enough to warn any competent contractor of the existence of the conditions that ultimately were discovered.
The instructions, therefore, were defective in two particulars: (1) they allowed the jury to grant recovery on a theory of warranty which we hold was inapplicable, and (2) they also permitted the jury to find for plaintiff without necessarily finding all of the elements of fraudulent concealment. Under those circumstances, the verdict may not stand.
III
The contractor contends that General Notes 7 and 8, above quoted, required it to drill the holes without support other than that which might be afforded by casings installed in the usual (and cheaper) manner, whereas the city contends that the contractor was permitted to use any drilling method it desired, so long as the requirement that the casings ultimately be removed was met.
On this issue, we conclude that the city is correct. The notes merely require drilled holes and ultimate removal of any supporting casings; how the contractor installed the casings was strictly for it to determine. The issue is not whether the contract needed a change order to authorize the use of the rotary mud method, but whether the necessity for using that Gogo v. L. A. Etc. Flood Control District
Kenworthy v. State of CaliforniaThe city asserts that the strong public policy requiring competitive bidding may not be subverted by an attempt to force the city to reform its contract. Defendant cites Paterson v. Board of Trustees (1958) 157 Cal.App.2d 811, 321 P.2d 825, for the proposition that modifications of a contract can only be awarded through the competitive bidding process. The Paterson case is not relevant here. As stated earlier, where there is active concealment the contractor may perform his contract and sue for damages for misrepresentation. (Gogo v. L. A. Etc. Flood Control District, supra (1941) 45 Cal.App.2d 334, 114 P.2d 65.) To call the completion of performance by the contractor, under the authority of the Gogo case, an attempt to subvert the competitive bidding process is merely to manipulate semantics without changing the ultimate legal arguments and conclusions.
IV
The parties also argue as to the admissibility of certain evidence purporting to explain the meaning of the contract terms and as to alleged misconduct by counsel for plaintiff. We deem it unnecessary to consider the matters thus presented. What evidence may or may not be admissible, on a new trial, under the rule of PACIFIC GAS & ELEC. CO. V. G. W. THOMAS DRAYAGE & RIGGING CO. (1968) 69 Cal.2d ----, 69 CAL.RPTR. 561, 442 P.2d 641, can best be decided anew in the light of the issues therein in litigation as the result of this opinion. We cannot speculate now as to the evidence that may or may not be offered to explain what, on this record, is the clear effect of General Notes 7 and 8.
The judgment is reversed.
FILES, P. J., and DUNN, J., concur.