Moffett, Hodgkins & Clarke Co. v. Rochester, 178 U.S. 373 (1900)

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Moffett, Hodgkins and Clarke Company v. Rochester

No. 217

Argued April 10-11, 1900
Decided May 21, 1900
178 U.S. 373

CERTIORARI TO THE COURT OF

APPEALS FOR THE SECOND CIRCUIT

Syllabus

The City of Rochester invited proposals from contractors for two separate contracts for work to be done for the improvement of its waterworks. Among others who bid were the petitioners, the Moffett, etc. Company, who put in bids for each. Owing to causes which are set forth in full in the opinion of the Court, some serious mistakes were made in the figures in their proposals whereby the compensation that they would receive if their bids were accepted and the work performed by them would be diminished many thousand dollars. When the bids were opened by the city government, their bids were the first opened, and as they were read aloud, their engineer noticed the errors and called attention to them and stated what the figures were intended to be and should be. The statutes of New York provided that

neither the principal nor sureties on any bid or bond shall have the right to withdraw or cancel the same until the board shall have let the contract for which such bid is made and the same shall have been duly executed.

The city government rejected one of their bids and accepted the other, and called for its performance at the prices stated in the bid. The company declined to enter into a contract for the performance of the work at that price, and, claiming that the city threatened to enforce the bond given with the proposals, brought suit praying for a reformation of the proposals to conform to the asserted intention in making them and their execution as reformed, or their rescission, and for an injunction against the officers of the city, restraining, them from declaring the complainant in default, and from forfeiting or enforcing its bond. Judgment was rendered in the Circuit Court in the company’s favor, which was reversed in the circuit court of appeals. The case was then brought here on certiorari. Held:

(1) That there was no doubt of the mistake on the part of the company.

(2) That there was a prompt declaration of it as soon as it was discovered.

(3) That when this was done, the transaction had not reached the degree of a contract.

The party alleging a mistake must show exactly in what it consists and the correction that should be made. The evidence must be such as to leave no reasonable doubt on the mind of the court as to either of these points. The mistake must be mutual and common to both parties to the instrument. It must appear that both have done what neither intended. A mistake on one side may be a ground for rescinding, but not for reforming a contract. Where the minds of the parties have not met, there is no contract, and hence none to be rectified. Hearne v. Marine Ins. Co., 20 Wall. 488, cited on these points and approved.

This suit grows out of alleged errors in the proposals of the complainant for the execution of certain improvements conducted by the City of Rochester, New York.

The proposals of the complainant were accepted, but it declined to enter into a contract in accordance therewith on the grounds hereafter stated, and the city, it is claimed, threatened to enforce the bond given with the proposals.

The bill prays for a reformation of the proposals to conform to the asserted intention in making them and their execution as reformed, or their rescission. Also an injunction against the officers of the city declaring complainant in default, its bond forfeited or enforced.

The substance of the bill is that the City of Rochester, through its proper executive board, determined to make improvements and extensions in the city’s waterworks, and, among other things, to construct a masonry conduit for a distance of 12,000 feet from Hemlock Lake northward, and proposed to enter into a contract therefor. The contract was known as contract No. 1.

Also to construct a riveted steel pipe conduit thirty-eight inches or forty inches in diameter commencing at the north end of the masonry conduit and terminating at Mount Hope Reservoir, in the city -- length, about 140,000 feet. The contract was known as contract No. 2.

Voluminous specifications were prepared by the city in printed form, aggregating about 300 printed pages, elaborately specifying, with infinite detail, the requirements of the executive board, the method in which the work was to be performed, the character of the materials required to be furnished, and the tests to which the materials were to be subjected. A copy of the schedule, with other schedules, was attached to the bill.

On December 10, 1892, public notice was given to contractors that proposals would be received for such work until 12 o’clock noon of December 23, 1892, at which time the bids were to be publicly opened by the chairman of the executive board.

The complainant was a contractor having an office in New York, and employed engineers to prepare proposals of the character contemplated by the City of Rochester, and complainant’s officers were engaged in important and distracting occupations, and connected with other business which required them to delegate the duties ordinarily performed by them in connection with the work, such as described, to their subordinates. The agents of complainants, though they exercised due diligence, were unable to procure the forms of the proposals for such contracts until on or about the 15th of December, 1892, and its engineer proceeded to Rochester on the 20th of December, 1892, having attempted in the meantime to familiarize himself with the terms of such contracts, and there conferred with the engineers of the city, visited the line of the proposed conduit, and proceeded with the preparation of the proposals of the contracts Nos. 1 and 2.

The labor devolving upon him in the period of time allowed him for preparing the proposals made him nervous and confused, and in transcribing the figures prepared by him he accidentally made certain clerical errors.

Contract No. 2 submitted for consideration two routes, over 8,000 feet of the 140,000 of the proposed steel conduit. They were respectively designated in the proposals and specifications route "A" and route "B," and the city reserved the right of electing either of them, and further electing to require a thirty-eight-inch pipe or a forty-inch pipe to be furnished by contractors.

Route A was located in alluvial flats through which the creek meanders, and involved several crossings of its existing and former channels. Route B was located wholly west of the creek, and required the construction of a tunnel with the necessary shafts, inlet and overflow chambers, manholes, and their appurtenances.

The specifications of route A involved sixty-one different items and quantities of work and materials, route B seventy-five. Among the items of route B was that known as "d," and described in the specifications as follows:

For all earth excavations in open trenches or pits, for the masonry and pipe conduit, entrance and overflow chambers, gate vaults, blow offs, pipe overflows, bridges, railroad crossings, creek crossings, and culverts carried under said conduit, including bracing and sheeting, backfilling of trenches, and masonry, making embankments, and other final disposal of the excavated material with haul of 1,000 feet or less, bailing and draining and all incidental work.

That item in route A was in precisely the same language, and the quantity of excavation contemplated by said items was 184,000 cubic feet of earth, and referred to precisely the same work. The complainant and its engineer intended to bid for said work the sum of 70 cents per cubic yard, and which sum was a fair and reasonable price for the work, and such sum was inserted in the proposal for route A, but by accident and mistake, 50 cents was inserted in the proposal for route B, and the price intended to be proposed therefor was some $36,800. The sum of 50 cents per cubic yard was wholly insufficient price for such work. The proposal in route B also contained an item in the following language, to-wit:

"h." For all earth excavation in tunnel, including all necessary bracing, timbering, lighting, ventilating, removal and back filling and other final disposal of the excavated material with haul of 1,000 feet or less, pumping, bailing, and draining and all incidental work.

The defendants’ engineer estimated the quantity of excavation under this item at 2,000 cubic yards, and it was intended to charge for such work $15 per cubic yard, which was a fair and reasonable charge. In haste and confusion, the engineer, who is extremely nearsighted, in transcribing his figures, by accident and mistake inserted the sum of $1.50 per cubic yard, which was grossly inadequate and far below what would be the actual cost the work under the most favorable circumstances. The difference between the bid as inserted and that which was intended to be inserted was the sum of $27,000.

A bond was required with proposals in the penal sum of $90,000, conditioned upon the performance of the work if the bid should be accepted and the making of the contract with the city in accordance with the notice to contractors. Complainant executed the bond with Henry D. Lyman and the American Surety Company as sureties, but at the time of its execution, the proposal annexed thereto was entirely in blank, and in the time which elapsed between the time the bond was taken to the city and the presentation of the proposals, it was impossible to insert in the pamphlet containing the bond the proposals for the work contemplated by contracts Nos. 1 and 2, or either of them.

The prices were inserted in other and different pamphlets of the same general character, but were not signed or in any way executed by complainant or by any of its officers. The pamphlets containing the bond and the pamphlet containing the proposals were placed in a single package.

The complainant was led to believe by the defendants and their officers that, although the masonry conduit and the riveted steel conduit were separately described, they constituted a continuous piece of work, and any person bidding upon both sections whose bid was lower in the agregate than any other for the same work should be awarded the contract. With this understanding and for the purpose of making a single proposition for the entire work, complainant deposited the package containing the proposals for the work upon both sections with the executive board. The notice to contractors provided that every bid for the masonry conduit should be indorsed "Proposal for performing contract No. 1, Rochester Waterworks Conduit," and that every bid for the riveted steel pipe conduit should be enclosed in a sealed envelope and indorsed "Proposal for performing of contract No. 2, Rochester Waterworks Conduit." Complainant did not comply with the provisions, but addressed its proposals in one package to the executive board. The proposals were immediately opened by the chairman of the board and declared informal, and not in compliance with the requirements of the board, but they were nevertheless read together with other proposals. That for line B, in contract No. 2, was read by the clerk in the presence of the members of the board before any other proposals for work on said line were read, and immediately upon reading item "d," relating to earth excavation in open trenches, the engineer of complainant, who prepared the proposals, informed the board that the price of 50 cents per cubic yard was a clerical error, and that it was the intention to charge 70 cents per cubic yard, the same price charged for the identical work on line A.

There were six bidders on contract No. 1, including complainant. Its bid was $473,790. The lowest bidder was W. H. Jones & Son, whose bid was $262,518.

The bids on contract No. 2, with items, were tabulated in a statement and annexed to the bill.

The complainant’s bid on earth excavation, in open trench on route A, was 70 cents per cubic yard. The other bids ranged from 75 cents to 85 cents.

For the same work on route B, complainant’s bid was 50 cents per cubic yard. The other bids from 75 cents to 85 cents.

The complainant’s bid for earth excavations in tunnel upon route B, contract No. 2, was $1.50 per cubic yard. The other bids were, respectively, $12 and $15.

The complainant’s aggregate bid for work on route B was $857,552.50. The lowest was $1,130,195, that of Whitmore, Rauber & Co.

If complainant was allowed the amount of its error, viz., $63,800, its proposal for route B. would be $921,354.50, which sum was $208,842.50 less than the next lowest bid, which was that of Whitmore, Rauber & Vicinus.

The aggregate bids of complainant as corrected were $1,395,142.50, which were considerably less than the aggregate of any other contractor. For thirty-eight-inch pipe on line B, its aggregate bid was $1,331,342.50, which was largely below that of any other contractor.

In order to take an improper and unconscionable advantage of complainant and the clerical errors made by it, the executive board on the 10th of January, 1893, notified complainant that the defendants intended to enter into a contract for the work of contract No. 1 with W. H. Jones & Son, although complainant’s proposals for the work on both contracts were the lowest in the aggregate for the entire work contemplated. Thereupon, on the 11th of January, 1893, before any official action with respect to letting the contracts were taken, complainant protested against the division of the proposals and letting the work of contract No. 1 and No. 2 separately, and insisted that the defendants were bound to enter into a contract with it for the entire work described in both contracts, or none at all, and informed the defendants of the clerical errors for the work on line B, and requested to correct them. And further demanded the contract for both sections at the corrected prices, or that it be permitted to withdraw its proposals.

On the 12th of January, 1893, the executive board, acting in bad faith and to take an unfair and unconscionable advantage of the clerical errors which had been committed, the commission of which the defendants conceded, adopted the resolution annexed to the bill and marked schedule B, and caused copies to be served on the complainant.

The defendants proposed, in conformity with the resolutions, to insist upon the execution of the contract for laying a thirty-eight-inch pipe on route B for the prices inserted in complainant’s proposals, and intended, if complainant refused, to declare it in default, the bond executed by it forfeited, and to proceed to enforce the bond.

The said threatened action was contrary to good conscience, the contents of the proposals, and the rights of complainant, and, unless restrained, would cause it irreparable injury for which there was no adequate remedy at law. The matter in dispute, exclusive of interest and cost, exceeded the sum or value of $2,000.

The following are the resolutions marked "Schedule B:"

Office of the Executive Board

Rochester, N.Y. January 12, 1893

By Mr. Schroth:

Resolved, That the proposal of the Moffett, Hodgkins & Clarke Company, of New York, N.Y. submitted on December 23, 1892, for the construction of a riveted steel pipe conduit 38 inches in diameter, and all the required appurtenances thereto, commencing at the north end of the contemplated masonry conduit near the village of Hemlock Lake, Livingston County, N.Y. and terminating at Mt. Hope reservoir, in the City of Rochester, N.Y., and by route B as described in the notice of letting for said work be, and the same is hereby, accepted, and that said work be and hereby is awarded to said Moffett, Hodgkins & Clarke Company.

By Mr. Schroth:

Resolved, That the Moffett, Hodgkins & Clarke Company, of New York, be and they are herewith required to attend at the office of this board, along with the sureties to be offered by said company, on or before Thursday, January 19, 1893, and to execute at that time the contract for the performance of the work of constructing a riveted steel pipe conduit 38 inches in diameter, and all the required appurtenances thereto, by route B from the north end of the contemplated masonry conduit near the Village of Hemlock Lake, Livingston County, N.Y., to Mt. Hope Reservoir in the City of Rochester, N.Y., and that the failure of such attendance and execution will be regarded as an abandonment of intention on the part of said Moffett, Hodgkins & Clarke Company to perform said work.

By Mr. Schroth:

Resolved, That the clerk be, and he is hereby, directed to cause immediate legal service of notice of award of contract to be made on the Moffett, Hodgkins & Clarke Company, of New York, N.Y., in accordance with the foregoing resolutions.

The answer admitted the allegations of the bill in regard to the powers of the executive board, and that it determined to enter into a contract set forth in the bill; that it prepared specifications and gave notice as stated, and required bond to accompany proposals conditioned as alleged; that the complainant had such bond executed and annexed the same to its proposal of contract No. 2.

The answer alleged that the defendants did not know and could not set forth their belief or otherwise whether complainant was a corporation or employed engineers, or what their duties were, or that the officers of the complainant had to delegate important duties to subordinates, or whether its agents could procure firms to contract and make proposals before the 15th of December, 1892; or whether its engineer was nervous or made mistakes as alleged or in the way alleged, or the prices bid were inadequate, or that complainant was led to believe by the defendants that contract Nos. 1 and 2 would be let jointly and not separately, or its bid declared informal and cannot be received, or that its engineer when the bids were opened notified the board that the prices which had been read for item "d" of route B in contract No. 2 of fifty cents per cubic yard was a clerical error.

The answer then proceeded in substance as follows:

The notice for bids required that all bids should state the prices for every separate item of work named in the proposals, should be plainly stated and distinctly written in ink, both in words and figures, in the proposed blanks left therefor; that the complainant’s engineer received all communications requested by him from the executive board and its engineer, and all the plans and specifications and information were at the complainant’s command before its submission of the proposals for the contract.

On account of the treacherous subsoil disclosed by borings along route B in contract No. 2, the latter route would be the least expensive, and the prices complained of by complainant were reasonable and fair values for the work set forth, and it was denied that clerical errors were entertained in the proposals, or that they were less than the average bids by competitive bidders, and averred that the amounts were knowingly and intentionally inserted to make complainant’s bid what is known as an "unbalanced bid," to wit, in which the contractor will give a

low price for one kind of work or materials in the same contract with the hope that the quantity of work and materials for which a low price is bid will be reduced, while the quality of materials or work for which a high price is bid will be increased, thus making up on the high price bid sufficient to give the contractor a large profit upon the whole work.

The complainant bid upon some items in contract No. 2 in excess of a reasonable price, thus making its bid for route B, contract No. 2, an unbalanced bid, enabling complainant to realize upon the completion of the work far in excess of the amount based upon the estimates of defendant’s engineer.

In pursuance of the notice to contractors, the board awarded to W. H. Jones & Sons contract No. 1, they being the lowest bidders, and to complainant contract No. 2, it being the lowest bidder, but this was not done to take undue and unconscionable advantage of the manner in which the proposals were made under contracts Nos. 1 and 2, and presented to the board, nor did the board act in bad faith and award the contract for the purpose of taking advantage of the alleged clerical errors.

On the 12th of December, 1892, by the resolution marked schedule B, the board duly and legally awarded to the complainant the contract for the construction of the conduit of route B in contract No. 2, and the complainant was notified to attend at the office of the board with its sureties to execute the proposed contract, and the complainant,

without sufficient reason or excuse, and with intent to defraud said defendants, did refuse and neglect to enter into said contract, and said defendants deny that said complainant is entitled to the relief, or any part thereof, in the said complaint demanded, and they respectfully submit that the injunction awarded against them by this honorable court on the 15th day of February, 1893, ought to be dissolved, and that the said bill ought to be dismissed, with costs.

Evidence was submitted on the issues, including the specifications, proposals, and bond.

A decree was entered adjudging the proposals of the complainant for the conduit on line or route B to be "rescinded, cancelled, and declared null, void, and of no effect," and ordering an injunction to be issued restraining the city and its officers from declaring complainant in default with respect to its bids and proposals,

or from declaring forfeited the bond executed by and on behalf of said complainant, and accompanying the aforesaid bids and proposals, or from in any manner suing upon or attempting to enforce or collect the said bond.

Commenting on the facts, the learned trial judge said:

The question in this controversy is plain and simple: shall the complainant be held to an erroneous bid by which it agreed to do certain work for the City of Rochester for $63,800 less than was intended? The work related to a construction of a conduit to convey the water of Hemlock Lake to the city. By a mistake of Mr. Burlingame, its engineer, never, the complainant bid fifty cents per cubic yard for earth excavation in open trenches when it intended to bid seventy cents, and one dollar and fifty cents for earth excavation in tunnel when it intended to bid fifteen dollars.

The proof of these mistakes is clear, explicit, and undisputed. As soon as the item proposing to do the work for fifty cents, as aforesaid, was read at the meeting of the executive board, and before any action was taken thereon, Mr. Burlingame stated that it was an error, and that complainant intended to bid for route B the same as for route A, viz., seventy cents.

There is some testimony of a negative character that this prompt repudiation of the bid did not take place, but the great weight of testimony is in favor of the complainant. Had the errors been corrected, the complainant’s bid would still have been $200,000 below the next lowest bid. On route A, the complainant’s bid was $903,324. The mistakes all occurred on route B, and yet route A was selected, and the work awarded to other bidders for $1,123,920, or $220,596 more than the complainant’s proposal.

Upon the principal issue, there is no disputed question of fact. Counsel for the defendants, though not admitting the mistakes, which are the basis of the action, do not dispute them. The oral argument proceeded upon the theory that the mistakes were made precisely as alleged.

In order that no injustice may be done to the defendants, their position in this regard is stated in the language of their brief as follows:

We admit that the evidence of the complainant shows that Mr. Burlingame entered in his proposal sheets certain figures and numbers different from those which he intended to make, and that the defendants have no evidence to contradict his testimony.

82 F. 255.

On appeal to the circuit court of appeals, the decree was reversed, with instructions to the circuit court to dismiss the bill. 91 F. 28. The case is here on writ of certiorari.

Other facts are stated in the opinion.