CLARK BROS CONTRACTORS v STATE
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No. 85-220 I N THE SUPREME COURT OF THE STATE OF MONTANA 1985 CLARK BROS. CONTRACTORS, P l a i n t i f f and A p p e l l a n t , -vsSTATE OF MONTANA, Defendant and Respondent, APPEAL FROM: District Court o f t h e S i x t h J u d i c i a l District, I n and f o r t h e County o f Sweet G r a s s , The H o n o r a b l e Byron Robb, J u d g e p r e s i d i n g . COUNSEL OF RECORD: For Appellant: Gough, S h a n a h a n , J o h n s o n & Waterman; R o n a l d F . Waterman, H e l e n a , Montana W i n s t o n & C a s h a t t ; P a t r i c k A. S u l l i v a n , S p o k a n e , Washington For Respondent: W. D. Hutchinson, Dept. of Highways, H e l e n a , Montana S u b m i t t e d on b r i e f s : Decided: Filed: D P c -- ~41985 Sept. 6 , 1985 December 4, 1985 M r . J u s t i c e Frank R . t h e Court. Plaintiff Morrison, d e l i v e r e d t h e Opinion o f Jr. C o n t r a c t o r s appeal s t h e February Clark Bros. 25, 1985, d e c i s i o n o f t h e S i x t h J u d i c i a l D i s t r i c t i n f a v o r o f W e v a c a t e t h e District Court t h e d e f e n d a n t S t a t e o f Montana. iudgment and remand f o r t r i a l . Clark Bros. corporation Contractors which has construction business (Clark been 20 for engaged years, p r o j e c t s f o r t h e S t a t e o f Montana o r e a r l y March, is Bros.) in a the Montana highway i n c l u d i n g many highway (State) . I n l a t e February 1979, t h e S t a t e s e n t o u t b i d i n v i t a t i o n s f o r t h e c o n s t r u c t i o n o f a segment o f i n t e r s t a t e n e a r B i g T i m b e r , Montana. The project, invitation included a description of the and n o t i c e t h a t s u b s u r f a c e d a t a was a v a i l a b l e from B i d s w e r e t o b e s u b m i t t e d by t h e M a t e r i a l s Bureau i n H e l e n a . March 2 8 , 1.979. In its preparing bid, Clark Bros. obtained c r o s s - s e c t i o n s o f t h e p r o j e c t a r e a from t h e M a t e r i a l s B u r e a u , b u t n o t t h e s u b s u r f a c e d a t a which was a v a i l a b l e . Clark Bros. Officers of d i d a n on s i t e i n s p e c t i o n , and t a l k e d w i t h l o c a l ranchers about s o i l conditions i n t h e a r e a . T h i s was an a r e a o f c o n c e r n b e c a u s e t h e segment o f i n t e r s t a t e t o b e b u i l t r a n t h r o u g h a low l y i n g i r r i g a t e d f a r m v a l l e y , and would r e q u i r e s u b s t a n t i a l amounts o f b o r r o w nearby sources) ( d i r t s e c u r e d from a d j a c e n t o r t o c o n s t r u c t t h e f o u n d a t i o n , o r embankment, f o r t h e road. T y p i c a l l y , t h e S t a t e p r o v i d e s e s t i m a t e s o f t h e amount o f borrow t o be used borrow figure road project a t by subsidence of i s t o be b u i l t ; compaction, of embankment; and estimate a is arrived calculating the the in the 3) t o determine 2) in a the i t s bid proposal. three soil that using the is 1) s t e p process: i n p l a c e upon w h i c h calculating the borrow The to be subsidence how much b o r r o w w i l l shrinkage, used and raise in or the shrinkage the road embankment t o d e s i g n s p e c i f i c a t i o n s . for borrow is about 10%. In A typical shrink factor the B i g Timber project, an u n u s u a l l y h i g h s h r i n k f a c t o r o f 4 0 % , and 55% i n some a r e a s , was e s t i m a t e d by t h e S t a t e i n i t s b i d p r o p o s a l . in the proposal clearly stated the borrow A provision figure was an e s t i m a t e only. In its calculating Bros. used Clark Bros. contract, the costs quantity submitted which was for the estimates the lowest executed borrow provided bid work, by and was 4, on A p r i l the Clark State. awarded 1979. the Pertinent c o n t r a c t p r o v i s i o n s i n c l u d e d a l l o w i n g d e v i a t i o n s o f up t o 25% i n e s t i m a t e d q u a n t i t i e s , t h a t payment would o n l y b e f o r u n i t s o f work p e r f o r m e d , and t h a t t h e borrow was t o b e p r o v i d e d by the contractor. Clark Bros. excavation, year. borrow, the State issued on a fact. June approximately of the borrow by t h e end o f pits showed the that l e s s borrow had b e e n u s e d t h a n e s t i m a t e d , reflecting that protest embankment work and Measurement substantially 7 979, and c o m p l e t e d t h e began work i n May, 5, change c l a i m on December on Clark Bros. 1980. 1 8 % , which paid t o C l a r k Bros. order The borrow significantly 1980, alleging a work d u e t o f i x e d c o s t s and o v e r h e a d . 1980, 13, signed t h e o r d e r under under t h e c o n t r a c t . 14, February so underrun reduced the C l a r k Bros. was amount filed a l o s s on t h e b o r r o w The S t a t e r e f u s e d t o s e t t l e , c l a i m i n g it was o n l y o b l i g a t e d t o pay f o r u n i t s o f work p e r f o r m e d , and t h e c o n t r a c t f u r t h e r a l l o w e d f o r q u a n t i t y d e v i a t i o n s up t o 2 5 % . The issues at Clark Bros. trial were: filed suit. 1) w h e t h e r the S t a t e was negligent i n preparing t h e shrinkage f a c t o r included i n t h e bid proposal; 2) w h e t h e r C l a r k B r o s . was e n t i t l e d t o b e p a i d f o r e x t r a work i n c u r r e d n o t c o n t e m p l a t e d by t h e c o n t r a c t ; and 3) whether exculpatory language i n t h e c o n t r a c t barred the c l a i m s a s s e r t e d by C l a r k B r o s . The D i s t r i c t C o u r t found i n f a v o r o f t h e S t a t e on e a c h i s s u e . Clark 1. Bros. Was asserts the the District following Court issues opinion on appeal: supported by s u b s t a n t i a l e v i d e n c e o r was it c 1 e a r l . y e r r o n e o u s ? 2. Did t h e D i s t r i c t C o u r t p r o p e r l y r e f u s e t o c o n s i d e r t h e d e p o s i t i o n t e s t i m o n y o f managing employees o f t h e S t a t e ? 3. Can the State of Montana avoid liability for m a t e r i a l m i s t a k e s i n i n f o r m a t i o n s u p p l i e d t o and r e l i e d upon by highway construction bidders by means of exculpatory c o n t r a c t language? C l a r k B r o s . a s s e r t numerous e r r o r s i n t h e D i s t r i c t C o u r t opinion. The court computation, and independently found testing that selection the of Clark a soils, borrow placed c a u s e d by an u n d e r r u n on C l a r k B r o s . Bros.' method of site the without risk of loss While a r e a d i n g o f t h e c o n t r a c t may s u p p o r t t h e s e f i n d i n g s , o t h e r e v i d e n c e was n o t t a k e n i n t o a c c o u n t b e c a u s e i t was i m p r o p e r l y e x c l u d e d . During t r i a l , counsel f o r Clark Bros. t w i c e attempted t o introduce i n t o evidence t h e deposition testimony of c e r t a i n managing a g e n t s o f D i s t r i c t Court that the r e l i e d upon could In refusing admission, the (1) a l a c k o f n o t i c e t o t h e S t a t e were depositions cross-examination Bros. State. the to be be offered, conducted, and (2) (3) that that no Clark showing t h a t t h e w i t n e s s e s w e r e u n a v a i l a b l e . made no The D i s t r i c t C o u r t was i n e r r o r . Rule 3 2 ( a ) ( 2 ) , M.R.Civ.P. of a party or of anyone reads i n part: who at the time "The d e p o s i t i o n of taking d e p o s i t i o n was an o f f i c e r , d i r e c t o r , o r managing a g e n t may b e u s e d by an a d v e r s e p a r t y f o r a n y p u r p o s e . " no p r o v i s i o n in Rule 32 ( a ) ( 2 ) , M.R.Civ.P. the ... There i s which r e q u i r e s a f i n d i n g o f u n a v a i l a b i l i t y o f t h e w i t n e s s o r t h a t n o t i c e was given of the intended use of a deposition a t t r i a l . Rule 3 2 ( a ) ( 2 ) , M.R.Civ.P. governs t h e use of depositions a t t r i a l , is misplaced. a n d t h e S t a t e ' s r e l i a n c e o n R u l e 804 M.R.Evid. See Edington v. St.Rep. C r e e k O i l Co. ( 1 9 8 4 ) , 690 P.2d 970, 978, 41 1 9 9 0 , 2000. Whether o n e i s t o b e c o n s i d e r e d a managing a g e n t f o r t h e S t a t e depends on s e v e r a l factors, including the individual's right of general control, a u t h o r i t y , and judgment w i t h i n h i s department; interests whether the of i d e n t i f i e d t o be t h o s e o f t h e S t a t e ; individua 1 the are and whether any person o f h i g h e r a u t h o r i t y p o s s e s s e s knowledge a b o u t t h e m a t t e r s a t issue. See 1 9 7 2 ) , 57 F.R.D. Co. v. Terry Modern Woodmen 141; and C a r r o l l v . America (w.D.Mo. W i s c o n s i n Power & L i g h t is. 4 9 0 , 79 N.W. (Wisc. 1 9 5 6 ) 273 of 2d 1. In t h i s case, the depositions offered were those of the chief of Section, Materials chief supervisor of of Bureau, head the Geology latter Section. one, We find Road Design and a s s i s t a n t the deposition with t h e possible exception entail sufficient supervisory t o pl ace these individuals within t h e s t a t u s responsibility of Location t h e P r e c o n s t r u c t i o n Bureau, t e s t i m o n y shows t h a t t h e s e j o b s , of of managing a g e n t s for the State. One m i g h t q u e s t i o n t h e m a n a g e r i a l s t a t u s o f a s s i s t a n t s u p e r v i s o r o f Geology S e c t i o n , but we need only on t h e d e p o s i t i o n focus of the chief of M a t e r i a l s Bureau. We find Materials the Bureau justifiable deposition to reliance. be useful testimony evidence The w i t n e s s ' s of on the chief of the issue of s t a t e m e n t s acknowledge t h a t t h e S t a t e i s a w a r e c o n t r a c t o r s r e l y on S t a t e e s t i m a t e s in preparing t h e i r bids. W find e it w a s e r r o r t o e x c l u d e t h i s testimony. The f i n a l i s s u e i s w h e t h e r t h e e x c u l p a t o r y l a n g u a g e o f the contract relieves the S t a t e from l i a b i l i t y caused by t h e borrow underrun. f o r damages The t e s t p r e v i o u s l y a p p l i e d by this Court contractor in similar justifiably specifications in cases its preparing been whether the upon relied has the plans and bid and executing the contract. W i l l i a m C l a r k t e s t i f i e d t h a t h i s company r e l i e d on t h e e s t i m a t e s provided by t h e S t a t e i n p r e p a r i n g i t s b i d , because it had neither t i m e n o r r e s o u r c e s t o be the investigating project data. independently Clark a l s o t e s t i f i e d t h a t he d i d n o t o b t a i n a l l t h e s u b s u r f a c e d a t a w h i c h w a s made a v a i l a b l e by the Highway investigation Department, and but talked to Court found he area did ranchers conduct about site on the local s o i l conditions. The Clark District Bros., in part due contained i n t h e contract. no to justifiable the reliance exculpatory by language The c o n t r a c t e x p l i c i t l y p r o v i d e d : 1) t h a t q u a n t i t i e s i n t h e b i d p r o p o s a l w e r e e s t i m a t e s o n l y ; 2 ) t h a t p a y m e n t w o u l d o n l y b e f o r u n i t s o f work p e r f o r m e d ; that quantity were not deviations cause for of less equitable than 25% o f adjustment; and 3) the estimate 4) that the borrow s o u r c e was t o b e s e c u r e d by t h e c o n t r a c t o r . This is t h e f i r s t case before t h i s Court concerning t h e e f f e c t o f an e x c u l p a t o r y c l a u s e o n t h e c o n t r a c t o r ' s right t o r e c o v e r damages Previous caused by a q u a n t i t i e s underrun. cases d e a l t with overruns but a r e analagous. I n S t e n e r s o n v. 38 S t . R e p . City of Kalispell One 773, 9 3 8 , t h e c o n t r a c t o r p r e v a i l e d w h e r e it h a d r e l i e d on t h e c i t y ' s e s t i m a t e o f done, ( 1 9 8 1 ) , 629 P.2d t h e amount o f g r a d i n g work t o b e y e t e n d e d u p d o i n g much more d u e t o f a u l t y e s t i m a t e s . issue on appeal exonerated t h e c i t y . was whether exculpatory language In holding such language t o h e a f a c t o r i n determining j u s t i f i a b l e reliance b u t not t o he c o n t r o l l i n g t h i s Court said: S e v e r a l o t h e r c a s e s have p r e s e n t e d t h e i s s u e o f t h e e f f e c t o f e x c u l p a t o r y c l a u s e s on a c o n t r a c t o r ' s 6 r i g h t t o r e c o v e r i n s i t u a t i o n s i n which r e l i a n c e i s a l l e g e d by t h e c o n t r a c t o r . I n H a g g a r t C o n s t . Co. v . S t a t e Highway Comm'n ( 1 9 6 7 ) , 149 Mont. 422, 427 P.2d 686, H a g g a r t b i d on a highway c o n s t r u c t i o n j o b and was told that he could use gravel in State-optioned p i t s a s described i n t h e "Available Surfacing Materials Reports". The g r a v e l was l a t e r found t o b e u n s u i t a b l e and t h e p l a i n t i f f i n c u r r e d a d d i t i o n a l expense i n o b t a i n i n g g r a v e l elsewhere. The d e f e n d a n t d i d n o t deny t h a t t h e m a t e r i a l s b u t r a t h e r r e l i e d on r e p o r t s w e r e misleading, exculpatory provisions i n t h e contract a s a defense t o the suit. Those p r o v i s i o n s i n d i c a t e d t h a t t h e Commission made no g u a r a n t y a s t o t h e q u a l i t y and q u a n t i t y o f t h e m a t e r i a l s a v a i l a b l e , and f u r t h e r t h a t i f t h e c o n t r a c t o r c h o s e t o f u r n i s h h i s own materials, h e would b e r e s p o n s i b l e t o p r o d u c e satisfactory material. The d i s t r i c t judge found t h a t t h e e x c u l p a t o r y H e noted t h a t provisions w e r e not enforceable. Haggart received t h e m a t e r i a l s r e p o r t s only 1 4 days b e f o r e b i d l e t t i n g , g i v i n g him l i t t l e t i m e t o i n v e s t i g a t e independently. H e f u r t h e r found t h a t few c o n t r a c t o r s b i d d i n g on s u c h p r o j e c t s h a v e s u f f i c i e n t t i m e o r t e s t f a c i l i t i e s t o make a n i n t e l l i g e n t appraisal of materials. Despite t h e e x c u l p a t o r y c l a u s e s , t h e d i s t r i c t judge c o n c l u d e d : "[Tlhere is nothing expect[ed] less t h a n materials reports. to show that appellant c o m p l e t e r e l i a n c e on i t s " I f t h e S t a t e Highway Commission were a l l o w e d t o r e l y on t h e e x c u l p a t o r y p r o v i s i o n s o f t h e c o n t r a c t , t h e p u r p o s e f o r which s u c h r e p o r t s a r e o f f e r e d would be sadly frustrated, if not totally destroyed. No p r u d e n t c o n t r a c t o r would p r o c e e d i n r e l i a n c e on s u c h r e p o r t s a t h i s a b s o l u t e p e r i l ; t h e n e c e s s i t y t o guard a g a i n s t unforeseen d e f i c i e n c i e s would r e s u l t i n much h i g h e r b i d s t h a n c o n d i t i o n s would n o r m a l l y w a r r a n t . " H a g g a r t , s u p r a , 149 Mont. a t 425, 427 P.2d a t 687-688. W e a f f i r m e d t h e d i s t r i c t judge i n t h a t d e c i s i o n b u t noted: "We a r e n o t h e r e holding t h a t such exculpatory c l a u s e s may n o t b e e n f o r c e d i n o t h e r s i t u a t i o n s , t h a t d e t r i m e n t a l r e l i a n c e may b e assumed i n a l l c a s e s , o r t h a t p a r t i e s t o s u c h c o n t r a c t s a r e bound t o e x e r c i s e a n y t h i n g Iess t h a n r e a s o n a b l e and p r u d e n t judqment. I n o t h e r words w e w i l l l o o k t o j u s t i f i a b l e r e l i a n c e . ' " H a g g a r t , s u p r a , 149 Mont. a t 428, 427 P.2d a t 689. W e f i n d t h e Stenerson r a t i o n a l e persuasive. language in the contract is a factor justifiable reliance but not controlling. in Exculpatory determining T h e r e i s c o n s i d e r a b l e e v i d e n c e h e r e upon which t o f i n d justifiable reliance. W i l l i a m C l a r k t e s t i f i e d t h a t h e had two t o t h r e e weeks i n which t o s u b m i t h i s b i d , which was n o t a d e q u a t e t o p e r f o r m h i s own q u a n t i t i e s e s t i m a t e s , and t h a t he r e l i e d on t h e S t a t e ' s e s t i m a t e s i n p r e p a r i n g h i s b i d . conducted site on investigation and made further Clark inquiry a b o u t t h e s o i l s i n t h e a r e a , b u t found no r e a s o n n o t t o u s e the State's refused at estimates. trial, of Deposition the chief of testimony, the improperly Materials Bureau i n d i c a t e d t h e S t a t e i s aware c o n t r a c t o r s r e l y o n t h e S t a t e ' s soil analysis. Nevertheless, we are reluctant f i n d i n g o f j u s t i f i a b l e r e l i a n c e a s a m a t t e r o f law. should be retried considering t h e deposition t o make a The c a s e testimony and applying t h e l e g a l p r i n c i p l e s herein set f o r t h . W e v a c a t e t h e judgment o f t h e D i s t r i c t C o u r t and remand fde c o n c u r : Mr. Justice L. C. Gulbrandson, dissenting. I respectfully dissent. I would a.ffirm the decision of the trial jud.ge to exclude the offered depositions of State employees. The State had propounded two sets of interrogatories to plaintiff, asking for identification of witnesses. Plaintiff never identified deponents as proposed witnesses although the interrogatories were continuing in nature, failed to list deponents in its proposed pre-trial order just prior trial, and made no effort to subpoena said deponents. to This Court, in Ropischke v. First Continental Corp. (1980), 187 Mont. 471, at 510-511, 610 P.2d 668, at 689, upheld the exclusion of a deposition which would indicate that Rule 32(a) should not be construed nor implemented in a void. The trial judge's finding of fact no. 40 clearly indicates that he was exercising his discretionary power to prevent an abuse of discovery. Mont. This Court, in Blassaro v. Dunham (1979), 184 400, at 404-405, 603 F.2d 249, at 251-252, stated: The District Court has the inherent discretionary power to control discovery. That power is based on the District Court's authority to control trial administration In controlling discovery, the District Court must regulate traffic to insure a fair trial to all concerned, neither according one party an unfair advantage nor placing the other party a.t a disadvantage. ... . . . Discovery fulfills this purpose by a-ssuring the mutual knowledge of all relevant facts gathered. by both parties which are essential to proper litigation. (Citations omitted. ) I also do not concur in the majority's decision to apply the Stenerson rationale to the underrun situation in this case. In my view, there is substantial evidence in the record to support the trial judge's findings of fact and conclusions of law. Several pertinent findings read as follows: 12. The state's invitation to bid and standard specifications called for unit price bids on listed work items. Two contract work items listed were item 11 1-030-000 (Excavation-Unclassified Borrow) in the amount of 1, 658,857 cubic yards, and item 112-001-000 (Compaction Roadbed) in the amount of 1,930,034 cubic standard yards. The State ' s specifications. concerning bid schedule quantities state: .. "02.04 INTERPRETATION OF QUANTITIES IN BID SCHEDULE. The quantities appearing in the bid schedule are approximate only and are prepared for the comparison of bids. The unit prices to be tendered by the bidder are to be tendered expressly for the scheduled quantities as they may be increased or decreased within the restricting percentage hereinafter stipulated. Payment to the contractor will be made only for the actual quantities of work performed and accepted or materials furnished in accordance with the contract." 13. The material to be used as unclassified borrow was to come from contractor furnished sources, which was not unusual to the industry. Since such sources, were not identified until after the contract was awarded, the state could not test unclassified borrow material that would actually be used prior to estimating the quantities used in the bid schedule. 16. Rather than basing its bid on unit prices, Clark Bros. estimated the total cost of constructing the highway embankment in place, and then used the state ' s estimated quantities of unclassified borrow and roadbed. compaction as divisors into its total projected costs to obtain unit prices for the borrow and compaction. By using such method, instead of that specified by the standard specs, plaintiff assured itself of claiming a loss if there were an underrun below the estimated quantities, and claiming it should be paid more if there were an overrun above the estimated quantities for these items. William Clark also acknowledged his awareness that contractors were not to submit unbalanced bids. 17. The method used by plaintiff to compute unit prices also ignored these factors if there were an underrun: (a) Less equipment would be needed, or it would be needed for a shorter period. (b) Less hauling, fuel and manpower expense would be incurred. (c) Less landowner royalty would have to be paid for borrow. 30. The plain meaning and clear intent of standard specifications 02.04, 04.02 and 09.03 are that changes in quantity may occur in the actual performance of contract work between anticipated or estimated quantities, and actual quantities used, and in such event, the contractor will be paid at contracted unit prices for actual quantities used and will bear the risk of loss for changes of quantity of less than 25% for major items. The changes of the unclassified borrow and road compaction in this case were both less than 25%, and the testimony of Roger Blossom indicated this was not uncommon. 31. Plaintiff cannot be said to have justifiably relied on exact amounts of borrow and compaction work to do when the bid proposals and contract specifically provided the amounts were estimates and subject to increase or decrease, when plaintiff's officers were well acquainted with such terms and conditions, and when William Cia-rk testified an overrun or underrun didn't much affect the total cost of a project and that plaj-ntiff's bid would not have been much different whether the state estimated a round figure or specific amount of unclassified borrow or road compaction. The trial judge, in an explanatory comment to his findings, stated: It is difficult to see how the state could make it any clearer to contractors bidding on highway jobs that various parts of the work to be done, such as borrow excavation and compaction, are just estimates and not specific amounts of materials to be supplied. If the contract terms and provisions are too loose in allowing for a 25% variation on such items, the contractor's association or the individual bidder should request amendment thereof before a contract is signed, but after execution, the court is "not to insert what has been omitted or to omit what has been inserted" (sec. 1-4-101, MCA 1983). As an experienced bidder and contractor, plaintiff must be held to the plain terms of the contract, as well as defendant. I concur in that statement and would affirm the decision of the trial judge. t
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