United States v. Atlantic Dredging Co., 253 U.S. 1 (1920)

U.S. Supreme Court

United States v. Atlantic Dredging Co., 253 U.S. 1 (1920) United States v. Atlantic Dredging Company

No. 214

Argued March 16, 1920

Decided April 26, 1920

253 U.S. 1

APPEAL FROM THE COURT OF CLAIMS

Syllabus

The specifications upon which a dredging contract was based described the materials to be removed as believed by the government to be mainly mud and fine sand, declined to guarantee the accuracy of the description, required bidders to examine and decide for themselves, referred them to maps exhibiting results of test borings made by the government, confirming the description, declined to guarantee that such borings actually represented the character of the bottom over the entire vicinity in which they were taken, but expressed the government's belief that the general information thereby given was trustworthy. The representations were deceptive in that the test borings gave information to the government, not imparted to bidders, of materials more difficult to excavate than those shown by the maps and specifications.

Held:

(1) That a contractor which relied upon such representations of the results of the borings and of the government's belief based thereon, and whose reliance was confirmed by the government's approval of its plant, adapted only to the lighter materials and submitted for inspection as to its adequacy pursuant to the specifications, was entitled to stop work after part performance,

Page 253 U. S. 2

and recover the difference between the cost of the excavation done and the amount received under the contract. P. 253 U. S. 9.

(2) That this right was not lost by proceeding with the work and entering into a supplementary contract after the heavier materials were encountered, but before the contractor learned of the result of the test borings and that they were inadequate. P. 253 U. S. 11.

(3) That the cause of action was in contract, not in tort. P. 253 U. S. 12.

53 Ct.Clms. 490 affirmed.

Action in the Court of Claims to recover the sum of $545,121.72 from the United States on account of expenditures and loss caused, it is alleged, in the execution of a contract which it was induced to enter into by false and misleading statements of the officers of the United States in charge of excavations in the Delaware River.

In pursuance of advertisement by the United States through Col. Kuhn, the dredging company entered into a contract to do a certain part of the work for the sum of 12.99 cents per cubic yard, scow measurement.

Sealed proposals were required by the advertisement, and it was stated that information could be had on application, and bidders were invited to base their bids upon the specifications, which had been prepared by and were submitted by the government.

The specifications stated that the depth of the channel to be dredged was 35 feet, and, under the heading "Quality or Character of the Material" contained the following:

"The material to be removed is believed to be mainly mud, or mud with an admixture of fine sand, except from station 54 to station 55+144 at the lower end of West Horseshoe Range (the latter is not included in the contract) where the material is firm mud, sand, and gravel or cobbles. It was stated that"

"bidders were expected to examine the work, however, and decide for themselves as to its character and to make their bids accordingly, as the United States does not guarantee the accuracy of this description. "

Page 253 U. S. 3

The further statement was that--

"a number of test borings have been made in all of the areas where dredging is to be done under these specifications, and the results thereof may be seen by intending bidders on the maps on file in this office. (See paragraph 17.) No guaranty is given as to correctness of these borings in representing the character of the bottom over the entire vicinity in which they were taken, although the general information given thereby is believed to be trustworthy."

To ascertain the character of the material to be dredged, the government officers had subjected the bottom of the river to certain borings, called, according to their manner of being made, "test borings and wash borings," and the results thereof were correctly reported and recorded on the log or field notes at the time -- that is, that the probe had penetrated or had not penetrated -- but there was nothing on the map exhibited to bidders showing the field notes taken at the time the borings were made. It was hence shown that the material to be encountered was "mainly mud or mud with an admixture of sand." In other words, the map did not contain a true description of the character of the material which was to be encountered, and was encountered, by the dredging company in the prosecution of the work. The material dredged at certain places differed from that shown on the map exhibited to bidders. The company made no independent examination, though it had time to do so, and, in making its proposal, it stated that it did so with full knowledge of the character and quality of the work required.

The proposals required the character and capacity of the plant proposed to be employed by the contractor to be stated, and that it should be kept in condition for efficient work and be subject to the inspection and approval of the "contracting officer." In compliance with the requirement, the plant was submitted to such officer, and by him inspected and approved. It was efficient for dredging

Page 253 U. S. 4

the character of material mentioned in the specifications and described on the map to which bidders were referred for information; it was not efficient for dredging the material actually found to exist, and the company secured the services of another concern to do the dredging for it, and that concern did all of the work that was done.

After the company, and the concern it had employed, had been at work for some time, it complained of the character of material which was being encountered, and a supplementary contract was entered into by it and the "contracting officer."

This contract recited that "heavy and refractory material, consisting mainly of compacted sand and gravel, with a small percentage of cobbles had been encountered," and provided that such material might be deposited in the Delaware River, instead of on shore, as provided in the original contract.

At the time of making the supplemental contract, the company was not aware of the manner in which the "test borings" over the area embraced in its contract had been made. Upon learning of this in December, 1915, it discontinued work and declined to do further work. The company then had not been informed of the fact that impenetrable material had been reached by the probe. At the time of the cessation of work, there remained approximately 350,000 cubic yards of material to be dredged in the area of the contract. The American Dredging Company completed the dredging at 16.2 cents per cubic yard.

The amount expended by the company was $354,009.19, upon which it had received $142,959.10, making its loss on the contract $211,050.09. For such sum judgment was rendered, and the United States prosecuted this appeal.

Page 253 U. S. 9

After stating the case as above, MR. JUSTICE McKENNA delivered the opinion of the Court.

The case turns upon the statement of the government of its belief of the character of the material to be encountered,

Page 253 U. S. 10

and, as misrepresentation, the omission from the map exhibited to bidders of the actual borings made and their disclosures.

The government asserts that there was no misrepresentation, basing the assertion upon the declaration of the specifications that no guarantee was intended and the admonition to bidders that they must decide as to the character of the materials to be dredged, and to "make their bids accordingly."

The assertion puts out of view, we think, other and determining circumstances. There was not only a clear declaration of the belief of the government that its representation was true, but the foundation of it was asserted to be the test of actual borings, and the reference to maps as evidence of what the borings had disclosed. The finding is that the maps contained a record of twenty-six borings as covering specified sections that were to be dredged, and of these, ten were in the section of the river which, by its contract afterwards made, the plaintiff agreed to dredge.

There was a further assertion of belief, through its "contracting officer," by the approval of the company's plant. As we have seen, the government's care of its interests extended to the inspection of the instrumentalities of the contractor, and required the character and capacity of the plant which was to be used to be submitted for inspection and approval. In fulfillment of the requirement, the company submitted its plant. It was only efficient for dredging material of the character mentioned in the specifications and described on the map, and it was so approved. The significance of the submission and approval are manifest. The character and capacity of the plant conveyed to the officer the fact that the company was accepting as true the representation of the specifications and the map of the materials to be dredged, and reciprocally the approval of the plant by the officer was an

Page 253 U. S. 11

assurance to the company of the truth of the representation and a justification of reliance upon it.

The case is therefore within the ruling of United States v. Spearin, 248 U. S. 132, 248 U. S. 136, where it is stated that the direction to contractors to visit the site and inform themselves of the actual conditions of a proposed undertaking will not relieve from defects in the plans and specifications, citing Christie v. United States, 237 U. S. 234, Hollerbach v. United States, 233 U. S. 165, and United States v. Utah, Nevada & California Stage Co., 199 U. S. 424. It is held in those cases "that the contractor ought to be relieved if he was misled by erroneous statements in the specifications." The present case is certainly within the principle expressed. In the cited cases, there was no qualification of the requirement; in this case, it was accompanied by the expression of belief and conduct which was, in effect, a repetition and confirmation of the belief, and gave assurance that it had a reliable foundation. The company therefore was justified in acting upon it.

The government, however, contends that, at best, the alternative was presented to the company, when it discovered the character of the materials, to either quit work and sue for damages or continue the work, and that, having elected the latter, it cannot now resort to the other. In fortification of this contention, it is said that

"even if the government made a misrepresentation as to the borings, that misrepresentation would necessarily have been as to the character of the materials to be dredged, and claimant knew all there was to know about this from the 'very beginning.'"

This assumption, and the extent of it and the conclusion from it, are not justified. It is true the company discovered that the material it encountered was different in character from that represented, but the company did not know of the concealment of the actual test of the borings, and the fact that it, the company, attempted to

Page 253 U. S. 12

struggle on against the difficult conditions with its inefficient plant, should not be charged against it. In other words, it should not now be held to have been put to the suggested election. It did not know at that time of the manner in which the "test borings" had been made. Upon learning that they had been made by the probe method, it then elected to go no further with the work -- that is, upon discovering that the belief expressed was not justified and was in fact a deception. And it was not the less so because its impulse was not sinister or fraudulent.

The government makes the point, however, that the implication of the case is that bad methods were used, and insists that the implication makes the action one for a tort, and not tenable against the United States. We cannot assent. There is no intimation of bad faith against the officers of the government, and the Court of Claims regarded the representation of the character of the material as in the nature of a warranty; besides, its judgment is in no way punitive. It is simply compensatory of the cost of the work of which the government got the benefit.

Affirmed.

THE CHIEF JUSTICE and MR. JUSTICE CLARKE dissent.