Sanders Co. Plumbing & Heating, Inc. v. City of Independence

694 S.W.2d 841, 1985 Mo. App. LEXIS 3459

• Court: Missouri Court of Appeals
• Decided: June 18, 1985
• Docket: WD 34714
• Status: Published

Opinions

NUGENT, Judge.

The jury found in plaintiff’s favor on two counts for misrepresentation based upon a contract to build a sewer and a change order adopted regarding that construction. The trial court granted the defendant municipality a judgment notwithstanding the verdict on both counts. We reverse, reinstate the verdict on Count II, and remand for new trial with directions on Count III.

Plaintiff, Sanders Company Plumbing and Heating, contends that the court erred in upsetting the jury’s verdict in its favor and entering judgment for the defendant, City of Independence. In reviewing the court’s action, we only consider the evidence and inferences supporting the verdict, disregarding defendant’s evidence except as it may support the verdict. Bayne v. Jenkins, 593 S.W.2d 519, 521 (Mo.1980) (en banc). The following statement of facts conforms to that standard of review.

Sanders was the successful bidder on a sanitary sewer and pump station project let by the City to be built in east Independence along the Little Blue River. Engineers hired by the City prepared the plans and specifications upon which the contractors based their bids. The bidders had only thirty days to bid the project from the time they were given the city’s plans. The City Engineer at the time of the project, Donald Yelton, testified that one reason the City provided the plans and specifications was to receive lower bids since the bidders would be saved the expense of drafting their own plans. Sanders relied upon the information supplied by the City and did not conduct its own tests or investigation.

The crux of Sanders’ second count is that the documents provided by the City contained positive misrepresentations that the subsurface condition to be encountered in excavating the sewer pipe trench were stable, without the free-flowing ground water that the contractor actually encountered in its excavation. Sanders’ evidence was that the City’s plans, specifications and contract contained three positive misrepresentations of material fact.

First, attached to the documents as an appendix were the results of “auger bor-ings” drilled in 1974 that showed the subsurface situation to be sandy and moist. The contract provides that the test hole information is not part of the contract, that the City intended no express or implied guaranty as to the accuracy of the data nor of the interpretation of it and that the bidder must draw its own conclusions as to subsurface conditions. Mr. Yelton testified that, in spite of the disclaimer, as a municipal engineer he would expect a bidder to rely upon the boring results. Geotechnical engineer Donald Duncan testified that the custom and practice in the industry is for contractors to rely upon such boring results despite a disclaimer. Mr. Duncan also testified that it would be difficult for a bidder to do its own borings on a month’s notice.

The contract itself contained a drawing which is the second source of alleged misrepresentations. The drawing numbered Figure 1-2A and entitled “Emhedments for Conduits” showed the amount of excavation required and the amount and type of bedding needed for laying the pipe. The contract states that “[ejxcept where otherwise required, pipe trenches shall be excavated below the underside of the pipe, as shown on Figure 1-2A, to provide for the installation of granular embedment pipe foundation material.” Finally, the contract lists the drawing in the table of contents as a specification for the contractor to follow. Mr. Yelton testified that Figure 1-2A represented the subsurface conditions as stable without the presence of free-flowing ground water.

The last relevant source of misrepresentation was that the contract had no provision for plaintiff to furnish additional bedding material. Donald Yelton testified that the absence of such a provision indicates stable subsurface conditions not requiring extra foundation materials.

The contract also provides that the contractor must obtain a change order for payment of any extra expenditures.

Sanders began work on the project in February of 1977. Initial excavation revealed unstable subsurface conditions caused by free-flowing ground water. Mr. Duncan and Mr. Yelton testified that conditions were different from those represented in the City’s documents. The City’s representative on the job was alerted, and the process to get a change order was begun. For reasons not revealed by the record, however, it was never obtained. Sanders had to add extra bedding, pump out the water and, consequently, its progress slowed. Sanders claims that as a result it incurred over $500,000 in additional expense.

Once the project was almost complete, an inspection pursuant to the contract revealed “exfiltration and infiltration” in a twenty-one inch clay pipe. Mr. Duncan testified that the pipe cracked because the jointing material caused excessive stress in the pipe. Sanders had installed the pipe in accordance with and to the standard required by the City’s specifications.

Mr. Sanders, owner of Sanders Plumbing, testified that he was told that Sanders would be paid monthly for replacing the pipe. The city council adopted a change order that provided in pertinent part as follows:

Liability for the cause of the replacements and repairs called for by this change order has not been determined at this time and in the interest of expediting the time when the sewer may be put in service such additional work shall proceed now with a reservation of rights as hereinafter stated between the parties.

The parties agree that the City reserves all rights in connection with its obligation to pay for such additional work and that Sanders Co. Plumbing and Heating, Inc. reserves all its rights to be paid for this additional work.

By reason of this Change Order No. 4, the contract price shall be increased by not more than $175,914.00.

All other provisions of the contract remain unchanged.

Either because of Sanders’ guarantee or because of the City’s belief that Sanders material or work was defective, the City never paid Sanders. The cracked pipe was discovered within the guaranty period.

Sanders filed suit in four counts, but only two counts are before us on appeal. In Count II, Sanders alleged that the City’s plans, specifications and contract misrepresented the project’s subsurface conditions and that it relied upon those misrepresentations and incurred additional expenses of over $500,000. The jury found in the contractor’s favor on that count and awarded it $225,000. In Count III Sanders alleged that the City misrepresented that it would pay Sanders monthly for replacing the cracked twenty-one inch pipe. Again the jury found in plaintiff’s favor, awarding it $175,914. The court granted defendant’s motion for a judgment notwithstanding the verdicts on both counts.

As we have previously stated, in reviewing the court’s grant of a judgment notwithstanding the verdict we only consider the evidence and reasonable inferences supporting the verdict, disregarding the City’s evidence except where it supports the verdict. Bayne v. Jenkins, supra, 593 S.W.2d at 521. The trial court cannot take the case away from the jury unless the evidence is so strongly against the plaintiff that no room remains for reasonable minds to differ on the issue; where reasonable minds can differ on a question before the jury, the court may not disturb the verdict. Kuehle v. Patrick, 646 S.W.2d 845, 847 (Mo.App.1982).

I.

Plaintiffs first point is that the court erred in upsetting the jury’s verdict on Count II. Sanders argues that the court erred in finding that the contract disclaimer pertaining to the test hole results nullified any positive misrepresentations made by the results. Sanders believes that the court was mistaken in relying on Air Cooling & Energy, Inc. v. Midwestern Construction Co., 602 S.W.2d 926 (Mo.App.1980). We agree.

In Air Cooling, a contractor agreed with Jackson County to construct a public beach area. The city prepared the plans and specifications that included auger boring results. The contract disclaimed any representation that the results were accurate and informed the contractor to make its own tests and draw its own conclusions. The contractor hired the appellant sub-contractor to excavate trenches for the project. The sub-contractor encountered subsurface conditions different from those shown by the test holes. The sub-contractor sued the contractor and Jackson County on a warranty and misrepresentation theory. The case was tried to the court upon the pleadings and a stipulation of facts. On appeal, this court held at 929 that nothing in the evidence showed that the boring results were held out to be accurate and could be relied upon and found against the sub-contractor.

In contrast, the evidence supporting the verdict in the case at hand was that the custom and practice in the industry is for boring results to be relied upon by contractors despite disclaimers, that this reliance was invited by the city, and that one month is not sufficient time for a bidder to do its own tests. Moreover, the only representations appellant relied upon in Air Cooling were the disclaimed test hole results. Here two other representations are present: Figure 1-2A and the absence of a provision for extra work. The accuracy of Figure 1-2A was not disclaimed by the contract.

The holding in Air Cooling is limited by this court’s recent decision in Ideker, Inc. v. Missouri State Highway Commission, 654 S.W.2d 617 (Mo.App.1983).

The rationale of Ideker is that the courts, motivated by concepts of fundamental fairness and seeking to avoid unjust results, have refused to be circumscribed by the harshness of the doctrine of sovereign immunity, on the one hand, and, on the other, by the principle of contract law that, if performance is possible, the contractor is not entitled to extra compensation for unforeseen difficulties it encounters in performing. To avoid this choice between a latter-day Scylla and Charybdis, Judge Somerville concluded that

[sjyllogistically, where a governmental entity makes a positive representation of a material fact relied upon by a contractor in calculating its bid, which turns out to be false or incorrect after work is commenced and occasions additional expense, the contractor finds himself in the position of one who undertakes one contract but is confronted with performance of another. The governmental entity, pragmatically speaking, gets the benefit of another contract. If performance thereof by the contractor entails more expense than was calculated in submitting its bid, the governmental entity should bear the added cost rather than the contractor because the former is the beneficiary of necessary but unbargained for work resulting from its positive representation of a material fact which turned out to be false or incorrect.

Ideker, Inc. v. Missouri State Highway Commission, supra, 654 S.W.2d at 621.

Ideker holds that a “boiler plate” provision that a contractor is fully informed regarding all conditions affecting the work to be done by reasons of its own investigations and not from any representations made by the municipality does not nullify positive representations of material fact; but such a disclaimer may negate implied or suggestive representations. Id. at 623. In light of Ideker and the following cases, we hold that a boiler plate disclaimer like that found in this case does not negate the representations made by the test results where those results are positive representations of material fact. Bernard McMenamy Contractors, Inc. v. Missouri State Highway Commission, 582 S.W.2d 305, 311 (Mo.App.1979); See also, United States v. Atlantic Dredging Co., 253 U.S. 1,11, 40 S.Ct. 423, 424, 64 L.Ed. 735 (1920); United States v. Spearin, 248 U.S. 132, 136, 39 S.Ct. 59, 61, 63 L.Ed. 166 (1918); Christie v. United States, 237 U.S. 234, 240-42, 35 S.Ct. 565, 567-68, 59 L.Ed. 933 (1915); Hollerbach v. United States, 233 U.S. 165, 170-72, 34 S.Ct. 553, 556-56, 58 L.Ed. 898 (1914).

The auger boring logs state that the subsurface soil conditions are sandy and moist or very moist. The subsurface conditions were crucial to Sanders’ determination of the amount of its bid and thus the log’s representations were material. The results were positively stated and presented as test results. The holes were drilled in 1974, but Sanders’ evidence was that the city invited contractors to rely upon its test results as it was to defendant’s economic advantage that the contractors use its results because that usage enabled bidders to avoid the additional expense of new tests. Not surprisingly, the city’s engineers who did the design work on the project relied upon the borings to design the sewer. The depth of the trench and the amount of fill shown on the design were based on the borings. Figure 1-2A is a part of the design, and it specified bedding and excavation conforming to the test results. It was not disclaimed. The City presented the results as positive facts and invited the plaintiff’s reliance.

The City raises several other arguments supporting the court’s action on Count II. Its brief appears to argue that the evidence was insufficient to submit Count II to the jury. Six elements are required for a cause of action in the nature of a breach of warranty based on a positive misrepresentation of material fact by a government entity.

(1) a positive misrepresentation by the entity

(2) of a material fact

(3) that is false or incorrect

(4) lack of knowledge by the contractor that the positive representation is false or incorrect,

(5) reliance by the contractor, and

(6) damages sustained as a direct result of the positive representation.

Ideker, Inc. v. Missouri State Highway Commission, supra, 654 S.W.2d at 621.

We have already observed that the City made three representations that the subsurface conditions were stable and unaffected by free-flowing ground water. The representations were false or incorrect because Sanders quickly encountered free-flowing ground water. The City argues that the boring results were correct when the documents were drafted and that unusually heavy rains in 1977 caused a change in conditions. But it presented no evidence of the amount of such rainfall, or that the rains occurred before the excavation or that such amount as fell was enough to raise the water table. Also, the City’s Figure 1-2A was represented as showing present conditions. Finally, the City does not contest that Sanders was forced to make additional expenditures because of the actual underground conditions. The contractor’s evidence pertaining to each of the six essential elements is at least sufficient to raise a question about which reasonable minds could differ and, therefore, the court erred in upsetting the verdict on Count II. Kuehle v. Patrick, supra, 646 S.W.2d at 847.

The City’s next two contentions are that Sanders’ recovery is precluded because it did not obtain a change order pursuant to the contract and because § 432.-070¹ does not allow a municipality to enter into oral agreements. The evidence was that the process for obtaining a change order was initiated but never completed. The contractor notified the City of the subsurface problems and the need for extra funds. Argument about absence of a change order and § 432.070 precluding recovery under Count II sidesteps the question raised by the theory of plaintiff’s cause of action. Sanders seeks to recover from the City in an action for breach of the warranty inherent in the City’s positive representations of material fact. The representations were that the subsurface conditions Sanders would encounter were stable and unaffected by free-flowing water. If in fact in its contract, plans and specifications the City made false or incorrect representations of material fact that Sanders relied upon and that led to extra expense to the contractor, the City has no right to demand that Sanders first obtain a change order approved by the City Council before it can recover damages for breach of warranty. Discussion of a change order in this context is totally irrelevant.

The City’s final argument in support of the judgment on Count II is that the verdict director did not include an instruction that the contractor did not know the representations were false or incorrect. The City failed to raise that objection below or include it in its motion for judgment notwithstanding the verdict or, in the alternative, a new trial, therefore, the point is not preserved for review. Rule 70.03; George v. Howard Construction Co., 604 S.W.2d 685, 695 (Mo.App.1980).

In his dissent in this case, Judge Somer-ville views with alarm the prospect that the rule in Ideker may be taken as “a panacea for every successful bidder whose costs overrun the bid price.” What is and what is not a “positive representation” will always be a question to be answered by the trier of fact case-by-case. But, if those in charge of a public project wish to eliminate that question from any disputes with their contractors, they may do so in advance, first, by making very sure that any representations they make are accurate and, second, by not making any representations as to soil conditions and the like and by truly putting the entire burden upon the contractors to do their own pre-bidding investigations. As the evidence in this case shows, however, that approach is not without its own special costs in the time needed to conduct such inquiries and the expense of independent investigations that will certainly be reflected in the bids made on the project.

II.

The jury also found in Sanders’ favor on Count III for the expense of replacing the cracked clay sewer pipe. This count also was submitted on the misrepresentation theory. Sanders argues that the City positively represented that it would be paid monthly for the replacement work. Those representations were orally made by the city engineer, but the change order adopted by the City Council reserves the rights of the parties and does not provide for monthly payments. We assume that the City declined to pay the contractor on the ground that Sanders’ guaranty obligated it to replace the pipe at its own expense or on the ground that the pipe cracked due to Sanders’ fault.

The court erred in submitting Count III on a misrepresentation theory. The parties entered into a written agreement, Change Order # 4, which was signed by Sanders. That writing does not mention monthly payments and reserves the rights of the parties. The representations relied upon by Sanders were orally made by an agent of the city, and § 432.070 precludes a municipality from being bound by oral agreements. The alleged representations are not found in the written change order. Therefore, the court erred in submitting Count III to the jury.

Although Sanders was not entitled to a verdict on a misrepresentation theory, it does have a viable contract action. The City’s refusal to pay is grounded on its belief that either the contractor’s fault caused the pipe to crack or that Sanders is responsible under the guaranty. Generally, when a contractor is to construct a project according to another’s plans it does not insure that the plans are sufficient to obtain the result sought. The contractor should be paid when it does what it is required to do under the plans. Sandy Hites Co. v. State Highway Commission, 347 Mo. 954, 149 S.W.2d 828, 832 (1941); See also North County School District R-1 v. Fidelity & Deposit Co. of Maryland, 539 S.W.2d 469, 478 (Mo.App.1976); and Eveready Heating & Sheet Metal, Inc. v. D.H. Overmyer, Inc., 476 S.W.2d 153, 155 (Mo.App.1972). Common sense dictates that the guaranty here is not a defense since, if it were, a contractor would be penalized for doing exactly what it was required to do under another’s plans. See generally, United States v. Spearin, supra, 248 U.S. at 136-37 (a contractor is not responsible for the consequences of defects in another’s plans and specifications); St. Joseph Hospital v. Corbetta Construction Co., Inc., 21 Ill.App.3d 925, 316 N.E.2d 51 (1974); and MacKnight Flintic Stone Co. v. Mayor of New York, 160 N.Y. 72, 54 N.E. 661 (1899).

If justice requires, this court in its discretion may remand the case to allow plaintiff to amend its pleading and for a new trial on the amended petition. Stouse v. Stouse, 270 S.W.2d 822, 826 (Mo.1954); and Grindley v. Blankenship, 671 S.W.2d 393, 396 (Mo.App.1984). Therefore, Count III is remanded for new trial contingent upon plaintiff’s amending its pleading to state a viable cause of action.

Accordingly, we reverse the judgment for defendant on Count II and remand Count II to the trial court with the direction to reinstate the verdict and enter judgment for plaintiff. We reverse the judgment for defendant on Count III and remand that count to the lower court for new trial in the event plaintiff files an amended petition proper in form and substance.

LOWENSTEIN, J., concurs by way of separate opinion.

SOMERVILLE, J., dissents.

1 . Revised Statutes of Missouri, 1978. § 432.070 provides as follows:

No county, city, town, village, school township, school district or other municipal corporation shall make any contract, unless the same shall be within the scope of its powers or be expressly authorized by law, nor unless such contract be made upon a consideration wholly to be performed or executed subsequent to the making of the contract; and such contract, including the consideration, shall be in writing and dated when made, and shall be subscribed by the parties thereto, or their agents authorized by law and duly appointed and authorized in writing.