Cauldwell-Wingate Co. v. State

[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] On or about March 1, 1928, Cauldwell-Wingate Company entered into a contract with the State of New York, through the State Office Site and Building Commission, for the construction of a superstructure, State Office Building, New York city, specification No. 5014, project No. 1936, and addenda 1, 2 and 3, which contract was completed and the construction accepted by the State of New York, on or about January 20, 1930. The completion date provided for in said contract was March 31, 1929.

The State had advertised for, and awarded, two separate contracts; one, for the excavation and foundation work; and the other, for the erection of the superstructure. The contract of J.L. McDonald for the foundations was approved by the State on March 10, 1928. The Cauldwell-Wingate contract for the superstructure was approved March 2, 1928.

The Cauldwell-Wingate Company could not begin the superstructure work until McDonald had finished the foundations; consequently, the contract contained the following provision:

"(B) General Description, page 3, paragraph 3.

"Work not included: The work of this contract is contingent upon the execution of the foregoing work by the Foundation Contractor and shall follow said work in orderly sequence. * * * The time of completion specified for the foundation work is July 1, 1928."

What was meant by the "execution of the foregoing work by the Foundation Contractor?" The plans and specifications for this work were submitted to these contractors before bidding, and for the purpose of procuring bids thereon. These were the representations made by the State as to the nature of the foundation, and the work which the foundation company was expected to do, in accordance with its bid thereon. At the time of the advertising for, and of the letting of, each of these two contracts, the site consisted of a city block, the area of which was graded over and entirely covered with a cinder fill, except a small portion, which was occupied by two small brick buildings. The foundation plans and specifications which were furnished Cauldwell-Wingate Company and other bidders on the superstructure "for information pertaining to work included in the foundation contract" showed the elevation and the artificial structures to be removed and only represented thereon the aforesaid two small brick buildings. The superstructure was to be built on a finished foundation to be constructed by the State.

The judge, in his opinion in this case, has found: "The plans furnished McDonald by the State included a cross section and showed ``the elevation and artificial structures to be removed and only represented thereon the aforesaid two buildings.'"

This provision (B), general description in the Cauldwell-Wingate contract, stating, "The work of this contract is contingent upon the execution of the foregoing work by the Foundation Contractor and shall follow said work in orderly sequence," has reference to this foundation work shown in these plans and specifications submitted to all of the contractors for the purpose of bidding. This point is to be noted as we go along, as it is decisive of the questions presented.

The contract read as a whole meant this: McDonald was to dig and construct the foundations according to the plans and specifications submitted. No superstructure work could be commenced until the foundation was complete. Cauldwell-Wingate Company made its contract to erect the superstructure upon the completion of the foundation, according to the plans and specifications submitted to it. These plans and specifications called for work which could be completed in about three weeks, and so it was stated in the specifications that the foundation work would be completed July 1, 1928. All the bidding, both by the foundation contractor and the superstructure contractor, was based upon the plans and specifications submitted by the State's engineers — the servants and employees of the State — and all of the conditions in the contracts of these two parties must be read, bearing this fact in mind.

What was the superstructure contractor to do immediately upon signing this contract? It was expected to assemble all of its material and working equipment, including the fabrication of the steel, so as to have everything in readiness to proceed on July 1, 1928. It was under severe penalties for delay. The contract allowed nine months to erect the entire superstructure, after the dates specified for completion of the foundations, and obligated it to the payment of liquidated damages and severe penalties for delay, or failure to complete within the specified time. The Cauldwell Company, by the contract provision above quoted, accepted the contingency of delay in the execution of the foundation contract, but only such delay as was occasioned in the performance of that contract, according to plans and specifications. The plans and specifications were its only guide, and the measure alike of its duty and its obligations. If the foundation contractor were delayed in doing its work, the Cauldwell Company assumed such risk. It did not, however, by any provisions of its contract, assume the risk and loss occasioned by the act of the State, in furnishing to both these contractors misleading, imperfect and defective plans and specifications, wherein and whereby the whole scheme of foundation building had to be revised, new plans and specifications adopted, and the work which was to take three weeks necessarily extended for almost a year. Instead of a surface such as represented, there appeared upon further investigation an underground swamp or pond and other obstacles.

The Court of Claims was under the impression that the contractor for the superstructure was bound to make borings to discover the nature of the subsoil, and should have been aware of these conditions. We can find no such onerous duty placed upon this contractor. The information to bidders, entitled, "Visit to Site," leads to no such conclusion. This reads: "Proposals will be held as having been made with full knowledge of conditions and requirements. The Contractor will be held to have visited the premises, prior to the time of submitting his proposal, and to have appraised the conditions under which the work of this contract is to be executed." Very unreasonable indeed would it be to hold that a contractor, whose only work commenced when the foundations were finished, was obliged to make soundings and borings to discover whether the plans and specifications of the State regarding such foundations were true or false. Whether this were McDonald's duty we need not now determine. Certainly it was no obligation resting upon the superstructure contractor. This apparently was the main argument for rejecting Cauldwell's claim for damages in this case. The Court of Claims made these findings: "That the subsurface of the contract site was found to consist of old foundations, piling and obstructions not shown upon the plans or specifications. That a portion of such old structures had been erected in former days over a pond which once had water to a depth of about fifty feet. That because of the subsurface conditions found on the site the foundation contractor worked nearly one year in excavating whereas had the site complied with surface conditions said excavation should have been performed in about three weeks' time." Consequently the work of the Cauldwell Company, which was to be completed March 31, 1929, was not finished until January 20, 1930 — nine months later.

What effect did this have upon the Cauldwell Company? The Court of Claims has made these findings: "That all construction work was completed December 20th, 1929. That the wages of artisans, mechanics, laborers and other employees in the trades engaged in the construction of the building generally increased May 1st, 1929. That the cost of workmen's compensation insurance likewise increased. That the partial erection of the building in two sections ([as was required to be done]) increased the cost thereof. That some of the subcontractors had their products and materials ready for delivery before the site was ready to receive them and were obliged to store them. That the work of erecting steel, setting granite, constructing floor and roof arches, laying of concrete and setting of gypsum block is each more expensive to perform in winter than in warm weather." And "that the cost of bronze increased after January 1929."

Now the point is, must the Cauldwell Company, superstructure contractor, suffer this loss when it was occasioned solely because the State submitted to these contractors, in order to induce them to make the contract, misleading and inaccurate plans and specifications? In other words, the State by its initial act misled the parties not only as to the foundation for the building, but the foundation for the contracts, and caused loss in consequence.

The Court of Claims in its opinion has told us: "When McDonald began work with his steam shovel ``it was immediately disclosed upon excavation that beneath said two feet of cinders were foundation walls and masonry footings of about thirty houses, apartments and office buildings super-imposed on wooden piles from fifteen to twenty feet in length which structures had formerly occupied said entire block and a portion of which had been erected in former days over a pond which once had water to a depth of about fifty feet, and these old foundation walls had been covered with said cinder fill.' McDonald was then directed by the State Department of Public Works ``to make thirty-seven composite borings over the entire site which borings were made to varying depths including one boring to the depth of one hundred twenty-seven feet.' These borings ``disclosed the existence of said old foundation and the existence of said pond' and thereupon the specifications in McDonald's contract ``were changed and altered to require the removal of the old foundations' which required blasting and other difficult and expensive work resulting in McDonald's being required ``to work nearly one year in excavating * * * when said excavation should have been performed, had the site complied with the surface condition, in about three weeks' time.'"

The State radically altered the plans and specifications for the foundation contract, increasing through orders to McDonald the actual foundation construction work and materials by sixty-eight per cent. It recognized its mistake and liability therefor by voluntarily paying to McDonald for this extra work $168,590.47, besides which McDonald recovered from the Court of Claims $29,622.86, additional cost of excavation. Now it has been held that the superstructure contractor, who had nothing to do with the foundations, must suffer its loss, occasioned in the same way, and for the same reason.

The clauses in the contract, relating to delay, "in the completion of the work by any act or neglect of the State, or by changes ordered in the work," and the damage clause, have no reference to delays and damages caused, as above stated, through the direct interference and misrepresentations of the State. The delay was caused before any work was commenced, not during its performance; and, as stated, it was due to acts not within the contemplation of the parties when they were induced to make their contracts by misleading and deceptive plans and specifications. This is not a case where plans, according to which a contractor has made his bid and entered into his contract, have been subsequently changed by the architect or the State to comply with different ideas or requirements, and for which changes the contractor is to be allowed, if they cost more money. These are changes and modifications which have been occasioned by acts or failure of the State, whereby the superstructure contractor, through no fault of its own, has suffered a loss. It will receive no compensation, except under the act of the Legislature, chapter 701 of the Laws of 1931, which has permitted the contractor to sue the State.

A similar situation arose with the excavations for the State Office Building in Albany. In digging the foundations, the contractors ran into quicksand, which required complete readjustment and modification of plans and specifications, as well as delay. For this the State was considered liable to the contractors; in fact the State admitted its moral obligation. After the enabling act, chapter 692 of the Laws of 1931, the Court of Claims made certain awards, which were reviewed by the Appellate Division and this court. We held the Court of Claims was justified in making the award. (Seglin ConstructionCo. v. State of New York, 275 N.Y. 527.) The contract provisions regarding delays were similar to those in this case.

Wright Kremers, Inc., v. State of New York (263 N.Y. 615) and Weston v. State of New York (262 N.Y. 46) are not in conflict with this present ruling, as neither rested upon misrepresentations and direct interference by the State. Even in the Wright case the State was held liable for the delay caused in failing to turn over the site by the removal of a wall, so as to permit the work to proceed. What we are holding in this case is in harmony with such cases as Faber v. City of New York (222 N.Y. 255); Sundstrom v. State of New York (213 N.Y. 68);Horgan v. Mayor (160 N.Y. 516). The law is well stated inFoundation Co. v. State of New York (233 N.Y. 177): "A contract and specifications may contain representations as to existing physical conditions. If so, a bidder may rely upon them, even though it be provided that he shall satisfy himself by personal inspection and investigation as to their truth, where because of time or situation such investigation would be unavailing (Faber v. City of New York, 222 N.Y. 255); or statements may be made on which the bidder, because of the language of the contract, cannot rely. He may have agreed that he will not. Then if they are made in good faith he takes the risk of their accuracy" (p. 184).

The contract in the Foundation case required foundations to rest on bed rock. The contractor apparently relied upon boring sheets which the court said were not part of the plans and specifications or representations. Even then this court was divided. In the case now before us the plans and specifications were an integral part of the contract, furnished "for information pertaining to work included in the foundation contract."

Each case necessarily depends upon its own facts, and we find them here entirely different from those in Niewenhous Co. v.State of New York (272 N.Y. 484), where the moist and soft nature of the ground indicated to the contractor the nature of the soil he would encounter in digging foundations. (See statement of facts, 248 App. Div. 658.) Here the plaintiff had nothing to do with the foundations. It had the contract for the superstructure to be erected as soon as the foundations were completed. It was under no obligation to make borings to ascertain whether the foundations could be completed within the specified time. It entered into its contract, as above stated, upon the representations of the State regarding these foundations, and upon plans and specifications submitted by the State, indicating that the foundation work could be done within three weeks. The site for its work was to be ready in that time; the State did not furnish the site until nine months later.

The judgments should be reversed, and the claim remitted to the Court of Claims for a rehearing, with costs in all courts to abide the event.