No. 13699
I N THE SUPFEMF, COUIiT O THE STATE OF
F ~~~
1978
SORNSIN CONsTRUCTION CaMPANY,
a North Dakota corporation,
Plaintiff and Respondent,
THE S A E OF M3NTANA; and THE DP
T T E-
O NATURAL RESOURCES AND CONS~TION
F
an adrinistrative agency of the State of
Montana,
Defendants and Appellants.
Appeal f r m : District Court of the F i r s t Judicial District,
Honorable Gordon R. Bennett, Judge presiding.
Counsel of Record:
For Appellants:
Hon. Mk Greely, Attorney General, Helena, Pbntana
ie
Allen B. Chronister argued, Assistant Attorney General,
Helena, Wntana
Garrity and Keegan, Helena, E.lontana
Donald A. Garrity argued, Helena, Pbntana
Ted Doney , Helena, Pbntana
For Respondent:
Scribner and H u s s , Helena, Wntana
Walker and Grover, Denver, Colorado
Philip E. Riedesel argued, Denver, Colorado
S-tted: October 1 9 , 1978
Decided : DEc 2 !j 1978
Filed: DEc, J lQ78
M r . J u s t i c e John Conway H a r r i s o n d e l i v e r e d t h e Opinion o f
t h e Court.
P l a i n t i f f , S o r n s i n C o n s t r u c t i o n Company, b r o u g h t t h i s
a c t i o n i n t h e ~ i s t r i c C o u r t of t h e F i r s t J u d i c i a l D i s t r i c t
t
t o r e c o v e r damages f o r t h e a l l e g e d b r e a c h of a c o n t r a c t f o r
t h e c o n s t r u c t i o n of a n i r r i g a t i o n pump system on t h e Yellow-
s t o n e R i v e r n e a r S i d n e y , Montana. From a judgment f o r
p l a i n t i f f , d e f e n d a n t S t a t e of Montana a p p e a l s .
On J u l y 28, 1970, t h e Montana Water Resources Board
(MWRB) (now t h e Department o f N a t u r a l Resources and Conserva-
t i o n ) i s s u e d a n i n v i t a t i o n f o r b i d s on a c o n t r a c t f o r t h e
c o n s t r u c t i o n of a n i r r i g a t i o n pump system p r o j e c t . The
p r o j e c t e n t a i l e d c o n s t r u c t i n g t h r e e r i v e r pump u n i t s t o pump
w a t e r from t h e Yellowstone R i v e r and f o u r r e l i f t pump s t a -
t i o n s t o pump t h e w a t e r from t h e r i v e r u n i t s i n t o v a r i o u s
i r r i g a t i o n canals. The p r o j e c t w a s d e s i g n e d by t h e P o r t l a n d ,
Oregon, d e s i g n u n i t of t h e United S t a t e s Department of
Agriculture S o i l Conservation Service.
P l a i n t i f f r e c e i v e d a number of p l a n s , s p e c i f i c a t i o n s
and d r a w i n g s from t h e MWRB which i t u s e d i n p r e p a r i n g i t s
bid. A f t e r t h e c o n t r a c t had been awarded t o p l a i n t i f f and
work had begun, it became a p p a r e n t t h a t a number of s p e c i -
f i c a t i o n s w e r e only approximations. Specifically, the
l i s t e d e l e v a t i o n s f o r t h e r i v e r bed, i n t h e neighborhood o f
1880 f e e t , v a r i e d from t h e a c t u a l e l e v a t i o n s a s much as 1 5
feet. These d i s c r e p a n c i e s r e s u l t e d i n i n c r e a s e d c o s t s t o
plaintiff. I n a d d i t i o n , a number of o t h e r c l a i m s developed
t h r o u g h t h e c o u r s e of performance o f t h e c o n t r a c t which
d e f e n d a n t r e f u s e d t o compensate. P l a i n t i f f s u e d , and a j u r y
t r i a l commenced on A p r i l 1 2 , 1976, c o n t i n u i n g t h r o u g h May 6 ,
1976. The j u r y awarded damages t o p l a i n t i f f i n t h e amount
of $335,328 p l u s $6,751.05 i n c o s t s . The o r i g i n a l b i d
s u b m i t t e d by p l a i n t i f f and a c c e p t e d by d e f e n d a n t had been
$962,108.40.
The i s s u e s r a i s e d by a p p e l l a n t on a p p e a l a r e :
1. Did S o r n s i n C o n s t r u c t i o n Company assume t h e r i s k of
f a i l u r e of i t s proposed c o f f e r d a m d e s i g n s ?
2. Did S o r n s i n C o n s t r u c t i o n Company assume t h e r i s k
t h a t t h e m a t e r i a l t o be e x c a v a t e d a t Pump U n i t 3 m i g h t n o t
s t a n d on a v e r t i c a l c u t ?
3. Was t h e g i v i n g of I n s t r u c t i o n No. 22 e r r o r ?
4. Under t h e t e r m s of t h i s c o n t r a c t , w a s t h e c o n t r a c -
t o r r e s p o n s i b l e f o r damage p r i o r t o a c c e p t a n c e ?
5. Is a c o n t r a c t o r who b i d s on a n i t e m , knowing t h a t
t h e q u a n t i t y l i s t e d f o r t h a t i t e m i s wrong, e n t i t l e d t o
r e c o v e r l o s t p r o f i t s on t h e e x c e s s q u a n t i t y ?
6. Did S o r n s i n C o n s t r u c t i o n Company p r o v e t h a t mate-
r i a l s u i t a b l e f o r compacted g r a n u l a r e a r t h f i l l w a s n o t
a v a i l a b l e a t t h e s i t e of Pump U n i t l-A?
7. May t h e c o n t r a c t o r r e c o v e r f o r e x t r a work n o t
c o v e r e d by a change o r d e r ?
8. Did t h e D i s t r i c t C o u r t err by a d m i t t i n g p l a i n t i f f ' s
E x h i b i t Nos. 119, 1 3 1 and 1 4 1 i n e v i d e n c e ?
9. Did t h e D i s t r i c t C o u r t err by r e f u s i n g t o a d m i t
d e f e n d a n t ' s E x h i b i t No. 555 i n e v i d e n c e ?
10. Is t h e v e r d i c t and judgment s u p p o r t e d by t h e
evidence?
The p a r t i e s a g r e e o n l y on t h e s t a t e m e n t of I s s u e Nos.
3 , 8 , 9, and 10. As a result, i n t h e d i s c u s s i o n of a l l
i s s u e s , t h e i s s u e s w i l l b e p r e s e n t e d i n p a i r s t o emphasize
t h e a l t e r n a t i v e p o s i t i o n s of t h e p a r t i e s .
Issue 1
P r i o r t o d i s c u s s i o n of I s s u e No. 1, w e s e t f o r t h t h e
g e n e r a l p r i n c i p l e a s s t a t e d i n Big Sky L i v e s t o c k , I n c . v.
Herzog ( 1 9 7 6 ) , 1 7 1 Mont. 409, 558 P.2d 1107, 1110, 33 St.Rep.
1232, 1236, t h a t t h e r o l e of t h e r e v i e w i n g c o u r t i s t o l i m i t
i t s r e v i e w t o whether t h e r e i s s u b s t a n t i a l c r e d i b l e e v i d e n c e
t o support the verdict. I n s o d o i n g , it w i l l r e v i e w t h e
e v i d e n c e i n t h e l i g h t most f a v o r a b l e t o t h e p r e v a i l i n g
party. S e e Davis v. Davis ( 1 9 7 2 ) , 159 Mont. 355, 497 P.2d
315, and S t a t e Highway Commission v . Vaughan ( 1 9 7 0 ) , 155
Mont. 277, 470 P. 2d 967.
D-1. Did S o r n s i n C o n s t r u c t i o n Company assume t h e r i s k
of f a i l u r e of i t s proposed c o f f e r d a m d e s i g n s ?
P-1. Did t h e S t a t e b r e a c h i t s w a r r a n t y of a c c u r a c y and
s u f f i c i e n c y of i t s p l a n s and s p e c i f i c a t i o n s ; w e r e t h e r e
" d i f f e r i n g site conditions"; i f so, d i d t h e S t a t e breach t h e
c o n t r a c t by f a i l i n g t o pay t h e r e f o r ?
Defendant a r g u e s t h a t p l a i n t i f f assumed t h e r i s k t h a t
i t s o r i g i n a l c o f f e r d a m p l a n s would n o t work.
P l a i n t i f f r e s p o n d s by a s s e r t i n g t h a t d e f e n d a n t b r e a c h e d
i t s w a r r a n t y r e g a r d i n g p l a n s and s p e c i f i c a t i o n s ; t h e r e were
" d i f f e r i n g s i t e c o n d i t i o n s " , and d e f e n d a n t i s e s t o p p e d from
s o denying.
T h i s i s s u e i n v o l v e s t h e t h r e e r i v e r pump u n i t s . To
c o n s t r u c t t h e s e u n i t s , it was n e c e s s a r y t o f i r s t remove t h e
w a t e r from t h e a r e a u s i n g c o f f e r d a m s . The r i v e r bed t u r n e d
o u t t o be lower t h a n p l a i n t i f f a n t i c i p a t e d r e s u l t i n g i n
h a v i n g t o u t i l i z e l a r g e r and more e x p e n s i v e c o f f e r d a m s .
The S t a t e a d m i t s t h e p l a n s from which p l a i n t i f f drew
i t s estimates were n o t c o n s i s t e n t w i t h r e s p e c t t o t h e e l e v a -
t i o n of t h e r i v e r bed. The S t a t e g o e s on t o a r g u e , however,
t h a t t h i s d i s c r e p a n c y i n t h e p l a n s s h o u l d have p u t p l a i n t i f f
on n o t i c e t o make f u r t h e r i n q u i r y , p u r s u a n t t o C l a u s e 12 of
t h e g e n e r a l p r o v i s i o n s of t h e c o n t r a c t :
"12. CONDITIONS AFFECTING THE WORK.
The C o n t r a c t o r s h a l l b e r e s p o n s i b l e
f o r having t a k e n s t e p s r e a s o n a b l y n e c e s s a r y t o
a s c e r t a i n t h e n a t u r e and l o c a t i o n o f t h e work,
and t h e g e n e r a l and l o c a l c o n d i t i o n s which c a n
a f f e c t t h e work o r t h e c o s t t h e r e o f . Any f a i l u r e
by t h e C o n t r a c t o r t o do s o w i l l n o t r e l i e v e him
from r e s p o n s i b i l i t y f o r s u c c e s s f u l l y p e r f o r m i n g
t h e work w i t h o u t a d d i t i o n a l expense t o t h e Con-
t r a c t i n g L o c a l O r g a n i z a t i o n . The C o n t r a c t i n g
L o c a l O r g a n i z a t i o n assumes no r e s p o n s i b i l i t y
f o r any u n d e r s t a n d i n g o r r e p r e s e n t a t i o n s con-
c e r n i n g c o n d i t i o n s made by any of i t s o f f i c e r s
o r a g e n t s p r i o r t o t h e e x e c u t i o n of t h i s con-
t r a c t , u n l e s s such understanding o r representa-
t i o n a r e expressly stated i n the contract."
The o t h e r c l a u s e p o i n t e d o u t by t h e S t a t e a l o n g t h i s same
l i n e i s C l a u s e 2:
"2. SPECIFICATIONS AND DRAWINGS
The C o n t r a c t o r s h a l l keep on t h e
work a copy o f t h e d r a w i n g s and s p e c i f i c a t i o n s
and s h a l l a t a l l t i m e s g i v e t h e C o n t r a c t i n g
O f f i c e r a c c e s s t h e r e t o . Anything mentioned i n
t h e s p e c i f i c a t i o n s and n o t shown on t h e d r a w i n g s ,
o r shown on t h e d r a w i n g s and n o t mentioned i n t h e
s p e c i f i c a t i o n s , s h a l l b e of l i k e e f f e c t as i f
shown o r mentioned i n both. I n c a s e of d i f -
f e r e n c e between drawing and s p e c i f i c a t i o n s , t h e
s p e c i f i c a t i o n s s h a l l govern. I n case of d i s -
crepancy e i t h e r i n t h e f i g u r e s , i n t h e drawings,
o r i n t h e s p e c i f i c a t i o n s , t h e m a t t e r s h a l l be
promptly s u b m i t t e d t o t h e C o n t r a c t i n g O f f i c e r ,
who s h a l l promptly make a d e t e r m i n a t i o n i n
w r i t i n g . Any a d j u s t m e n t by t h e C o n t r a c t o r w i t h -
o u t s u c h a d e t e r m i n a t i o n s h a l l be a t h i s own
r i s k and expense. The C o n t r a c t i n g O f f i c e r s h a l l
f u r n i s h from t i m e t o t i m e s u c h d e t a i l d r a w i n g s
and o t h e r i n f o r m a t i o n as h e may c o n s i d e r neces-
s a r y , u n l e s s otherwise provided."
F i n a l l y , t h e S t a t e ' s argument t u r n s t o t h e c o m p e t i t i v e
e l e m e n t i n v o l v e d i n t h e b i d d i n g p r o c e s s and t h e a t t e n d a n t
a s s u m p t i o n of r i s k where one b a l a n c e s t h e r i s k i n v o l v e d i n
p r e d i c t i n g what something w i l l a c t u a l l y c o s t a g a i n s t t h e
r i s k of l o s i n g t h e c o n t r a c t i f one minimizes t h e r i s k i n t h e
f i r s t p a r t too greatly.
The State, citing Haggart Construction Company v. State
Highway Commission (1967), 149 Mont. 422, 427 P.2d 686,
asserts that the crucial question of the contractor's right
to recover for misrepresentations in the plans is one of
"justified reliance."
Plaintiff argues that there were portions of the plans
which expressly misstated certain elevations on which the
cofferdams were to sit. Furthermore, construction experts
at trial seemed to agree that plaintiff's reliance on the
plans without the further investigations suggested by the
State was reasonable. Plaintiff feels Clause 4 of the
contract is most applicable to this issue:
"4. DIFFERING SITE CONDITIONS
(a) The Contractor shall promptly, and
before such conditions are disturbed, notify the
Contracting Officer in writing of: (1) subsurface
or latent physical conditions at the site differ-
ing materially from those indicated in this con-
tract, or (2) unknown physical conditions at the
site, of an unusual nature, differing materially
from those ordinarily encountered and generally
recognized as inhering in work of the character
provided for in this contract. The Contracting
Officer shall promptly investigate the conditions,
and if he finds that such conditions do materially
so differ and cause an increase or decrease in
the Contractor's cost of, or the time required
for, performance of any part of the work under
this contract, whether or not changed as a result
of such conditions, an equitable adjustment shall
be made and the contract modified in writing ac-
cordingly."
Plaintiff gave proper notice, and the Contracting Officer
for the State responded by letter on December 30, 1970.
Among other things, he stated:
"After investigation, it is agreed that, while
some change in the river bed level and configura-
tion could be normally expected, the existing
depth as compared to that indicated on the draw-
ings is materially different so as to constitute
a differing site condition under the terms of
Clause 4 of General Provisions . . ."
The State withdrew this determination six months later, and
no price adjustment was made.
The law is established that a contractor can rely on
the plans and specifications and need not, as alleged by the
State here, verify them. It has long been recognized that
the owner, here the State, warrants and is responsible for
the accuracy of the descriptions in the plans and specifica-
tions of the contract that are issued. See Haggart Construc-
tion Company v. State Highway Commission, supra; Halvorson
v. United States (Ct-C1. 1972), 461 F.2d 1337.
Section 4(a) of the Differing Site Conditions clause of
this contract hereinbefore cited, formerly known as the
Changed Conditions clause in government contracts, is the
most applicable to this situation. In Farnsworth & Chambers
v. United States (Ct.Cl. 1965), 346 F.2d 577, 580-81, the
court said:
"The contractual requirement that plaintiff
make its own investigation of the site does
not obliterate the Changed Conditions clause
nor did this requirement obligate bidders to
discover, at their peril, subsurface condi-
tions hidden by the river's water and thus
unavailable to any reasonable pre-award
inspection."
The exculpatory clauses in the contract relied upon by
the State do not, as a matter of law, waive, eliminate, or
modify the contractor's right to rely on the representations
made in the plans or specifications nor its right to rely on
the Differing Site Conditions clause. Haggart Construction
Company v. State Highway Commission, supra; Morrison-Knudsen
v. United States (Ct.Cl. 1965), 345 F. 2d 535; Fehlhaber
Corp. v. United States (Ct.Cl. 1957), 151 F.Supp. 817; and
Farnsworth v. United States, supra. In Haggart Construction,
149 Mont. at 687, 688, case cited above, this Court recog-
nized that the owner cannot be allowed to rely on the excul-
patory provisions, citing Sandkay Const. Co. v. State (1965),
145 Mont. 180, 399 P.2d 1002, and said:
"Or to state it with a more particularity, where
plans and estimates or specifications are used
as the basis for bids, [it] is a contractor who
has been led to believe that the conditions
indicated in such plans exist, [and is] able to
rely on them and recover for expenses necessary
by conditions being other than as represented
in such plans."
The reason for the Differing Site Conditions clause of
a contract is to eliminate the contractor's risk of an
unanticipated subsurface condition and still allow the
government to avoid the unnecessary expense of the contrac-
tor including a contingency amount in his bid for possible
unanticipated subsurface conditions. See Foster Construc-
tion Company v. United States (Ct.Cl. 1970), 435 F.2d 873,
The State in its citation of authority relied upon the
cases of Austin Company v. United States (Ct.Cl. 1963), 314
F.2d 518, and Beacon Construction of Massachusetts v.
United States (Ct.Cl. 1963), 314 F.2d 501. Neither of these
cases are factually similar to the situation in this case on
the point of the assumed risk by the contractor. In Austin
the contractor, not the owner (the state as here), prepared
the plans and specifications and promised to perform under
those specifications--those are not the facts in this case.
In Beacon the evidence indicated that the contractor was
aware of the ambiguities prior to bidding-that is not the
case here.
The State argues that Sornsin could not "justifiably
rely" on the plans because it alleges that the plans do not
show elevations in the areas where the cofferdams were to be
placed and the plans had significant discrepancies. As
previously set forth, the evidence simply does not support
those allegations. There was justifiable reliance on the
r i v e r bed e l e v a t i o n s a s shown on t h e p r o p e r s h e e t s of t h e
plans submitted.
Issue 2
D-2. id S o r n s i n C o n s t r u c t i o n Company assume t h e r i s k
t h a t t h e m a t e r i a l t o b e e x c a v a t e d a t Pump U n i t 3 m i g h t n o t
s t a n d on a v e r t i c a l c u t ?
P-2. Did t h e S t a t e b r e a c h i t s w a r r a n t y of a c c u r a c y and
s u f f i c i e n c y of i t s p l a n s and s p e c i f i c a t i o n s ; were t h e r e
" d i f f e r i n g s i t e conditions"; i f s o , d i d t h e S t a t e breach t h e
c o n t r a c t by f a i l i n g t o pay t h e r e f o r ?
T h i s i s s u e i n v o l v e s t h e n e c e s s a r y e x c a v a t i o n a t Pump
Unit 3. The d e s i g n f o r t h i s u n i t c a l l e d f o r e x c a v a t i o n of a
t r e n c h from t h e r i v e r i n t o t h e bank t o p e r m i t i n s t a l l a t i o n
of t h e p i p e and pumping a p p a r a t u s o f t h e u n i t . The p l a n s
f o r Pump U n i t 3 i n d i c a t e d a n e x c a v a t i o n pay l i n e ( a n "exca-
v a t i o n pay l i n e " e s t a b l i s h e s t h e a r e a of e x c a v a t i o n f o r
which t h e c o n t r a c t o r w i l l b e p a i d ) on a 1.1 s l o p e f o r t h e
f i r s t twenty f e e t of t h e e x c a v a t i o n and a v e r t i c a l pay l i n e
f o r t h e r e m a i n i n g twenty-two f e e t of t h e e x c a v a t i o n . Rock
was n o t e n c o u n t e r e d u n t i l some f o u r t e e n o r f i f t e e n f e e t
below t h e l e v e l where t h e drawings i n d i c a t e d t h e v e r t i c a l
pay l i n e w a s t o b e g i n . P l a i n t i f f s o u g h t damages f o r t h e
c o s t s of i t s e x c a v a t i o n beyond t h e v e r t i c a l pay l i n e on t h e
t h e o r y t h a t drawing s u c h a pay l i n e c o n s t i t u t e d a w a r r a n t y
t h a t t h e e a r t h i n t h a t area w a s r o c k c a p a b l e of b e i n g exca-
v a t e d on a 90° a n g l e . P l a i n t i f f ' s argument w i t h r e s p e c t t o
t h i s i s s u e p a r a l l e l s t h e argument r e g a r d i n g t h e c o f f e r d a m s
i n I s s u e 1. The a d d i t i o n a l e l e m e n t i n t h i s s i t u a t i o n seems
t o b e C l a u s e 1 7 of t h e g e n e r a l c o n d i t i o n s of t h e c o n t r a c t .
Defendant r e l i e s h e a v i l y on t h i s c l a u s e :
"17. RECORDS OF TEST PITS AND BORINGS
The C o n t r a c t i n g L o c a l O r g a n i z a t i o n d o e s
n o t r e p r e s e n t t h a t t h e a v a i l a b l e r e c o r d s show
c o m p l e t e l y t h e e x i s t i n g c o n d i t i o n s and d o e s n o t
g u a r a n t e e any i n t e r p r e t a t i o n o f t h e s e r e c o r d s .
The C o n t r a c t o r assumes a l l r e s p o n s i b i l i t y f o r
d e d u c t i o n s and c o n c l u s i o n s a s t o t h e n a t u r e of
r o c k and o t h e r materials t o be e x c a v a t e d , t h e
d i f f i c u l t i e s of making and m a i n t a i n i n g t h e r e -
q u i r e d e x c a v a t i o n s and o f d o i n g o t h e r work a f -
f e c t e d by t h e geology of t h e s i t e of t h e work,
and f o r t h e f i n a l p r e p a r a t i o n of t h e f o u n d a t i o n s
f o r t h e s p i l l w a y , d i k e s , and o t h e r s t r u c t u r e s . "
P l a i n t i f f argues t h a t t h i s clause i s not r e f e r r i n g t o
i n t e r p r e t a t i o n s made by t h e o w n e r ' s d e s i g n e r s , b u t m e r e l y
contractor interpretations. Moreover, p l a i n t i f f a r g u e s t h a t
t h e D i f f e r i n g S i t e Conditions c l a u s e supersedes t h i s clause.
I n s u p p o r t of t h i s a s s e r t i o n , p l a i n t i f f c i t e s F o s t e r Con-
s t r u c t i o n C.A., e t a l . v . United S t a t e s ( C t . C l . 1970) , 435
"Even u n m i s t a k a b l e c o n t r a c t l a n g u a g e i n which
t h e Government s e e k s t o d i s c l a i m r e s p o n s i b i l i t y
f o r d r i l l hole d a t a does not l e s s e n t h e r i g h t
of r e l i a n c e . The d e c i s i o n s r e j e c t , a s i n con-
f l i c t w i t h t h e changed c o n d i t i o n s c l a u s e , a
' s t a n d a r d mandatory c l a u s e o f broad a p p l i c a t i o n , '
t h e v a r i e t y o f s u c h d i s c l a i m e r s of r e s p o n s i b i l i t y
--that the logs a r e not guaranteed, not repre-
s e n t a t i o n s , t h a t t h e b i d d e r i s urged t o draw h i s
own c o n c l u s i o n s . " (Citations omitted.)
The S t a t e d o e s n o t a d d r e s s t h i s a u t h o r i t y nor any of
t h e o t h e r arguments made by p l a i n t i f f i n i t s r e p l y b r i e f .
W e hold t h a t t h e S t a t e f a i l e d t o overturn t h e finding with
respect t o t h i s issue.
Issue 3
W e next d i r e c t our a t t e n t i o n t o Issue No. 3 wherein t h e
S t a t e a l l e g e s e r r o r by t h e g i v i n g of I n s t r u c t i o n No. 2 2
which r e a d s :
"One of t h e p l a i n t i f f ' s c l a i m s i s f o r damages f o r
t h e i n c r e a s e d c o s t s of p l a c i n g r i p r a p a t Pump
U n i t No. 1, a l l e g e d t o have been i n c u r r e d b e c a u s e
of t h e o w n e r ' s a l l e g e d d e l a y i n c o n s e n t i n g t o t h e
removal of the old pump house at that location.
In your consideration of this claim, you should
take into account the provisions of paragraph
7(a)2 of the Specifications for Structure Removal
reading in part as follows:
" ' 7 (a) 2 Except for the existing transformer
base at Pump Unit No. 1, the existing pumping
plants shall be left intact and kept in operation
until the replacement pumping plants are installed
and operable. The time for removal and salvaging
or disposal of existing facilities shall be as
directed by the Contracting Officer. The concrete
transformer base can be removal [sic] at any time
after the transformers are relocated. Relocating
the transformers is not a part of this contract.'
"You are instructed that provisions such as this
one, prohibiting a contractor from performing cer-
tain work without the owner's consent, do not per-
mit the owner to withhold consent unreasonably,
or to delay giving consent for an unreasonable
period of time. Therefore, if you find that such
consent was unreasonably withheld or delayed by
the owner in this case, you may consider whether
the withholding or delay in giving such consent
caused damage to the contractor, and if so, the
amount of the damages sustained thereby."
Defendant argues that the court altered the clear
meaning of this provision of the contract by suggesting,
through this instruction, that the existing pumping plants
could be removed if such removal would be "reasonable", in
which event the owner had a duty to promptly consent.
Plaintiff emphasizes the sentence in the contract
stating the time for removal shall be "as directed by the
Contracting Officer". The consent was finally given before
the replacement pump was operable lending credence to plain-
tiff's assertion that the Contracting Officer's understanding
of this contractual provision was the same as plaintiff's.
Again, defendant did not respond to plaintiff's arguments.
We find no error.
Issue 4
This issue is directed to the responsibility of either
plaintiff or the State for damage to the project prior to
acceptance :
D-4. Under the terms of this contract, was the con-
tractor responsible for damage prior to acceptance?
P-4. Did the State breach its warranty of adequacy of
design for the riprap work, and did the risk of loss pass to
the State once this work had been accepted as fulfilling the
State's specifications?
In the winter of 1971-1972, a massive ice breakup: on
the Yellowstone River dislodged some 150 cubic yards of the
rock riprap which had been installed at Pump Unit 1. (Rip-
rap is a foundation or sustaining wall of stones thrown
together without order, as in deep water or on an embankment
slope to prevent erosion.) Plaintiff alleged in its amended
complaint that the damage resulted because of the State's
defective design but apparently offered no proof of that
allegation. Instead plaintiff relied on the fact that this
work was completed to the State's specifications and paid
for prior to the damage.
The State relies on two provisions of the contract.
The first is Clause 11:
"11. PERMITS AND RESPONSIBILITIES
The Contractor shall, without additional
expense to the Contracting Local Organization, be
responsible for obtaining any necessary license
and permits, and for complying with any applicable
Federal, State, and municipal laws, codes, and
regulations, in connection with the prosecution
of the work. He shall be similarly responsible
for all damages to persons or property that occur
as a result of his fault or negligence. He shall
take proper safety and health precautions to pro-
tect the property of others. - shall - -be
He also
responsible for all materials delivered and work
performed until - acceptance of -
and - - the
for any completed
h theretofore
phasisaddedl)
The other provision of the contract cited by the State is
Clause 7, part (d):
"7. PAYMENTS TO CONTRACTOR
" ( d ) A l l m a t e r i a l and work covered by p r o g r e s s
payments made s h a l l thereupon become t h e s o l e
p r o p e r t y of t h e C o n t r a c t i n g Local O r g a n i z a t i o n ,
b u t t h i s p r o v i s i o n s h a l l n o t be c o n s t r u e d a s
r e l i e v i n g t h e C o n t r a c t o r from t h e s o l e r e s p o n s i -
b i l i t y f o r a l l m a t e r i a l and work upon which pay-
ments have been made o r t h e r e s t o r a t i o n of any
damaged work, o r a s waiving t h e r i g h t of t h e
C o n t r a c t i n g Local O r g a n i z a t i o n t o r e q u i r e t h e
f u l f i l l m e n t of a l l of t h e terms of t h e c o n t r a c t . "
P l a i n t i f f ' s argument i s t h a t t h e S t a t e warranted t h e
adequacy of i t s p l a n s and s p e c i f i c a t i o n s . The f a c t t h a t t h e
r i p r a p was damaged by t h e f o r c e i t was designed t o s u s t a i n
i s t h e e x t e n t of t h e proof o f f e r e d by p l a i n t i f f t h a t t h e
d e s i g n was d e f e c t i v e . P l a i n t i f f f u r t h e r argues t h a t t h e
r i p r a p was a "completed u n i t " which had been a c c e p t e d .
Clause 1 of t h e g e n e r a l p r o v i s i o n s of t h e c o n t r a c t
1
provided t h a t t h e c o n t r a c t o r " s h a l l a l s o be r e s p o n s i b l e f o r
a l l m a t e r i a l s d e l i v e r e d and t h e work performed u n t i l t h e
completion and a c c e p t a n c e of t h e e n t i r e c o n s t r u c t i o n work,
e x c e p t f o r any completed u n i t which t h e r e t o f o r e may have
been accepted." N u n i t of t h e p r o j e c t , i n c l u d i n g t h e
o
r i p r a p a t Pump U n i t 1, was accepted b e f o r e November 2 , 1 9 7 2 .
Clause 7 of t h e g e n e r a l p r o v i s i o n s of t h e c o n t r a c t c a r e f o r
t h i s i s s u e and t h e s e p r o v i s i o n s f a i r l y p l a c e t h e r i s k of
damage p r i o r t o a c c e p t a n c e of t h e work upon t h e c o n t r a c t o r .
DeArmis v. United S t a t e s ( C t . C l . 1 9 4 7 ) , 70 F.Supp. 605, i s a
c a s e where a storm damaged t h e c o n t r a c t o r ' s p a r t i a l l y completed
j e t t y a t t h e mouth of t h e M i s s i s s i p p i River. The c o n t r a c t o r
f i l e d a c l a i m f o r a d d i t i o n a l compensation f o r t h i s work i n
r e p a i r i n g t h e damage. The Court of Claims denied r e c o v e r y
stating:
"The question then, is, who must bear the loss
from a destruction of a part of the work which
the plaintiff had contracted to do, while that
work was in an unfinished stage . ..The spe-
cifications as to final examination and accep-
tance certainly contemplated that the work
should stand in place in a useful condition
when the contract was completed. We think,
therefore, that its being damaged by forces of
nature and without anyone's fault before it
was completed and accepted as complete, was
the plaintiff's misfortune and loss." 70 F.Supp.
at 606.
See also John McShain, Inc. v. United States (Ct.Cl. 1967),
375 F.2d 829; Amino Brothers Co. v. United States (Ct.Cl.
1967), 372 F. 2d 485; Carman v. United States (Ct.Cl. 19581,
We find that the work being damaged by forces of nature
and without anyone's fault before it was completed and even
though accepted as complete, was the plaintiff's misfortune
and it must suffer the loss. This is in accord with the
general rule, applicable to both private and public building
contracts, that one who contracts to erect a structure must
bear the loss occasioned by an accidental destruction or
damage before completion. See 13 Am.Jur.2d Building and
Construction Contracts 964, and 64 Arn.Jur.2d Public Works
and Contracts S115.
Issue 5
D-5. Is a contractor who bids on an item, knowing that
the quantity listed for that item is wrong, entitled to
recover lost profits on the excess quantity?
P-5. Whether the Contracting Officer paid plaintiff an
equitable price adjustment for the quantity of miscellaneous
metal?
Clause 28 appears to be the controlling clause in this
issue. It provides for a variation of 25 percent which the
plaintiff's estimator was aware of at the time of the bid
and a quantity that he set forth was only an estimate sub-
ject to quantity variations. It would appear he logically
did not believe this difference of his estimate and that of
the State's was of any significance.
We note that perhaps the real point at issue here is
whether or not the Contracting Officer paid plaintiff an
equitable price adjustment. The Contracting Officer agreed
that was the only issue in his letter dated November 22,
1971, in which he responded to Sornsin's rejection of the 63
cents per pound for the steel. Part of that letter provided:
"As provided in the terms of the contract, would
you please furnish us a detailed breakdown de-
scribing your costs information in support of your
suggested price unit of $1.10 a pound. We will
need this information in order to make a decision
on the unit price."
At trial plaintiff presented testimony that the actual cost
was set forth in the final cost report and submitted data in
support thereof.
The Supreme Court in United States v. Callahan Walker
Construction Co. (1942), 317 U.S. 56, 61, 63 S.Ct. 113, 115,
87 L Ed 2d 49, 53, stated that "[aln 'equitable adjustment' of
the respondent's additional payment for extra work involved
merely the ascertainment of the cost of digging, moving, and
placing earth, and the addition to that cost of a reasonable
and customary allowance for profit." In Bruce Construction
v. United States (Ct.Cl. 1963), 324 F.2d 516, the court held
that a proper measure is the "reasonable cost" and declared
that to be "there is a presumption that the actual costs
paid are reasonable." That presumption must be overcome by
whichever party alleges its unreasonableness. Here, plain-
tiff proved that the claim was reasonably incurred and that
they were prima facie reasonable costs. Thus, the State,
having failed in its burden of proving these costs unreason-
able, must fail at this issue.
Issue 6
D-6. Did Sornsin Construction Company prove that
material suitable for compacted granular earth fill was not
available at the site of Pump Unit 1-A?
P-6. Was evidence introduced at trial from which the
jury could find that there was not sufficient granular earth
fill material at the site?
Both a letter of Sornsin dated December 24, 1970, and
testimony given at the time of trial indicated that the
material at the site was not suitable for compaction. In
the December 24 letter the Contracting Officer of the State
was advised that "there appears to be a question that the
available dry granular material is too fine for compacted
granular fill. We also noted considerable amount of coal
while drilling the test hole a week from the last Wednesday.
This coal appeared with the coarser gravel underneath the
gravel bed." In his testimony at trial Sornsin confirmed
the unsuitable conditions when he testified:
"Well, the site, the topsoil, the top section of
the soil above the river level was just like a
blow sand. There was a noncompactable material
and then, when we got down deeper we got into the
coarse gravel and that gravel had a lot of lignite
coal--you know what lignite coal is--particles
throughout it. During a conversation out on the
job site on December 16th, Mr. Fisher told me that
the material could not be used for granular back-
fill at this site, as so stated on the plan."
With this testimony and the reference to the letter of
December 24, 1970, there was sufficient evidence that the
jury could weigh as to the sufficiency of the granular earth
fill material and make a decision. We find no error.
Issue 7
D-7. May the contractor recover for extra work not
covered by a change order?
P-7. Did t h e S t a t e b r e a c h i t s w a r r a n t y of a c c u r a c y and
s u f f i c i e n c y of i t s p l a n s and s p e c i f i c a t i o n s ; were t h e r e
" d i f f e r i n g s i t e conditions"; i f so, d i d t h e S t a t e breach t h e
c o n t r a c t by f a i l i n g t o pay t h e r e f o r ?
W e n o t e f i r s t t h a t i t i s amazing t h a t t h i s p o i n t i s
r a i s e d by t h e S t a t e , f o r h e r e t h e e v i d e n c e i n d i c a t e s t h a t
t h e S t a t e unreasonably delayed preparing modified p l a n s f o r
w e l l over a year. The C o n t r a c t i n g O f f i c e r a d m i t t e d i n h i s
t e s t i m o n y t h a t it " w o u l d n ' t be u n r e a s o n a b l e " f o r p l a i n t i f f
t o keep t r y i n g t o make t h e e f f e c t i v e p l a n work u n t i l it was
g i v e n a w r i t t e n change o r d e r . With t h i s background, it i s
s l i g h t l y amazing t h a t t h e S t a t e raises t h e p o i n t a t a l l . We
n o t e f u r t h e r t h a t t h e S t a t e , i n c i t i n g Diamond v . U n i t e d
S t a t e s ( 1 9 4 3 ) , 98 C t . C l . 428, and Pope v . United S t a t e s , 76
Ct.Cl. 64, 97, r e l i e s on o l d c a s e s which do n o t i n v o l v e
c o n t r a c t s which have e i t h e r t h e " c o n s t r u c t i v e change" o r
" d i f f e r i n g s i t e c o n d i t i o n s " c l a u s e s i n them. The o n l y o t h e r
c a s e c i t e d by t h e S t a t e i n s u p p o r t of t h i s i s s u e i s L.I.
Waldrnan Co. v. S t a t e ( 1 9 6 0 ) , 202 N.Y.S.2d 764, and t h i s c a s e
d o e s n o t even i n v o l v e t h e i s s u e h e r e which was a d e f e c t i v e
design situation.
Here d e f e n d a n t S t a t e a d m i t s t h e e v i d e n c e i n d i c a t e s t h a t
i t s o r i g i n a l and r e v i s e d d e s i g n s p e c i f i c a t i o n s were d e f e c t i v e ,
s i m i l a r t o t h e c a s e s s e t f o r t h i n United S t a t e s v. S p e a r i n
( 1 9 1 8 ) , 248 U.S. 1 3 2 , 1 3 6 , 39 S.Ct. 5 9 , 63 L.ed. 166, wherein
t h e Court declared:
". . . i f a c o n t r a c t o r i s bound t o b u i l d ac-
c o r d i n g t o t h e p l a n s and s p e c i f i c a t i o n s p r e -
p a r e d by . t h e owner, t h e c o n t r a c t o r w i l l n o t b e
r e s p o n s i b l e f o r t h e consequences of d e f e c t s i n
the plans o r specifications . .. T h i s respon-
s i b i l i t y of t h e owner i s n o t overcome by t h e
usual clauses requiring builders t o v i s i t the
s i t e , t o check t h e p l a n s , and t o i n f o r m them-
selves of t h e r e q u i r e m e n t s of t h e work . . ."
(Citations omitted. )
We find sufficient evidence under any one of several
theories to support the findings of the jury for plaintiff
on this issue.
Issue 8
Did the ~istrictCourt err by admitting plaintiff's
Exhibit Nos. 119, 131, and 141 in evidence?
Principally the State argues that the exhibits were
improperly admitted over the State's continuing objections,
citing section 93-401-12, R.C.M. 1947, which provides:
"There can be no evidence of the contents of a
writing, other than the writing itself, except
in the following cases:
"5. When the original consists of numerous ac-
counts or other documents, which cannot be
examined in court without great loss of time,
and the evidence sought from them is only the
general result of the whole."
The State continues to argue that Rule 1006, Mont.R.Evid.,
has superseded this section since the date of trial. However,
since that rule does not purport to change existing law, an
examination of Rule 1006 would provide some insight into
section 93-401-12 (5) . Rule 1006 provides:
"The contents of voluminous writings, recordings,
or photographs which cannot conveniently be ex-
amined in court may be presented in the form
of a chart, summary, or calculation. The
originals, or duplicates, shall be made avail-
able for examination or copying, or both, by
other parties at a reasonable time and place.
The court may order that they be produced in
court."
Considering the above the State argues that it has always
been recognized that summaries may be based on documents
which are themselves competent as evidence and which are
made accessible to the opposing party so that the correct-
ness of the summary may be tested on cross-examination.
~ c ~ o l l u m 0 ' ~ e i l(19541, 128 Mont. 584, 281 P.2d 493;
v.
State v. Keneally (1963), 142 Mont. 256, 384 P.2d 770; 29
Am.Jur.2d Evidence S458.
The three exhibits objected to, Nos. 119, 131, and 141,
are preliminary and final cost reports setting forth the job
costs of the project, including detailed unit costs of
material, labor, and equipment attributable to each bid item
or work item for the project. Exhibit 131 was the 22nd
edition of a book published by the Associated Equipment
Distributors listing types of construction equipment and
their respective average rental rates. This book is recog-
nized by the construction industry as one of the standard
works for equipment rental rates and is also accepted as a
guide by federal and state agencies in showing the cost of
various types of equipment. The evidence indicated that
plaintiff maintained the records of all of the actual equip-
ment ownership costs on the company-wide, annual construc-
tion basis. Such records and supporting documentation were
made available prior to and during trial for inspection and
examination by defendant. Specific equipment, type of work
performed, and the period of time each worked on the project
were included.
Further, it was indicated that it was not the company's
policy to prepare individual records of the equipment owner-
ship cost for each specific item of equipment because it was
not economically feasible or practical to make such record.
To determine the equipment ownership costs for each project,
the company developed a certain procedure and criteria,
based on its experience and knowledge, for properly allo-
cating total equipment membership costs uniformly among each
of its jobs. This procedure was used on the ~idneyjob, and
Mr. lander, the cost accountant for plaintiff, determined
that the proper equipment membership costs for each item of
equipment was equal to 8 0 percent of the A.E.D. rate listed
in Exhibit 131.
The above method, as testified to by Mr. Olander, was
not represented nor used as the actual equipment ownership
cost rates, but rather as a method to aid in analyzing the
relative and comparative values of the various items of
equipment. For instance, the A.E.D. book did not list
trucks, and Mr. Olander calculated the fair rental rate
based on his construction knowledge and experience and
applied an 8 0 percent factor to this rate to be consistent
with the company's procedure and criteria. In determining
the factor as 8 0 percent A.E.D. rate, Mr. Olander testified
that he then applied this factor to the hours worked by each
item of equipment on the Sidney project to obtain the proper
allocations of equipment ownership costs to the project.
This procedure and this criteria have been used by plaintiff
as a regular practice for many years prior to, during, and
after the Sidney project and has proven satisfactory in the
company's operation.
As previously noted, the State argues that the cost
reports are summaries reflecting total equipment hours on
all plaintiff's projects, but the records of such total
equipment hours were no longer available. However, the
records show that these cost reports are summaries of the
total equipment hours "on the Sidney project only", not on
all projects, as argued by the State. The Sidney equipment
time reports were available to the State. The jury accepted
the testimony of Mr. Olander and gave credibility to the
policy of the company and the procedures it used in allo-
cating the equipment ownership costs. Therefore, we find
defendant's argument and citations not applicable and the
exhibits properly admitted.
Issue 9
Did the District Court err by refusing to admit defen-
dant's exhibit 555 in evidence?
In support of its position plaintiff cites Shechter v.
Brewer (Mo. 1961), 344 S.W.2d 784, 789, where the court was
faced with a very similar situation. There the court of
appeals ruled that no error had been committed by the court
in not allowing such an exhibit to be put in, noting:
"Whether the claim was contradictory would
depend upon (1) an interpretation of the
Federal tax laws and regulations, and (2)
the understanding placed upon those laws
and regulations by Nathan Shecter . .
. it
is apparent that if the trial court had
permitted the jury to be informed of the
claim, an entire new controversy then
arose . ..
"The law has wisely invested the trial court
the discretion to deal with these situations.
'If evidence pertaining to collateral matters
brings into the case a new controversial matter
which would result in confusion of the issues,
constitute unfair surprise or cause prejudice
wholly disproportionate to the value and use-
fulness of the offered evidence, it should be
excluded.' Conley v. Kaney, Mo.Sup., 250
S.W.2d 350, 353; Jones v. Terminal Railroad
Association of St. Louis, Mo.Sup., 242 S.W.2d
473; McComb v. Vaughan, 358 Mo. 915, 218 S.W.2d
548; Wigmore, Evidence, p. 458."
Here, defendant State had the opportunity to review
Sornsin's daily time sheets and payroll records for the
project, and to cross-examine the plaintiff and its wit-
nesses regarding these documents. We find it was unneces-
sary and would have been improper to have admitted Exhibit
555 which would have brought controversial matters into the
case and could have resulted in the confusion of issues and
caused prejudice to the case.
I s s u e 10
T h i s i s s u e i s d i r e c t e d t o whether t h e v e r d i c t and t h e
judgment a r e s u p p o r t e d by t h e e v i d e n c e . A s set f o r t h i n t h e
d i s c u s s i o n of t h e above n i n e i s s u e s c o n s i d e r e d by t h i s
C o u r t , w e s u s t a i n t h e f i n d i n g s of t h e j u r y and t h e judgment
on a l l i s s u e s w i t h t h e e x c e p t i o n of t h e f o u r t h i s s u e which
r e l a t e s t o t h e r i p r a p , a n i t e m amounting t o $21,295.
The judgment of t h e t r i a l c o u r t i s a f f i r m e d w i t h t h e
o n e e x c e p t i o n , and t h e m a t t e r i s remanded t o t h e t r i a l c o u r t
f o r c o r r e c t i o n and compliance w i t h t h i s o p i n i o n . Costs t o
plaintiff.
W Concur:
e
u