VAN METER v. BENT CONSTRUCTION COMPANY

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District Court of Appeal, Fourth District, California.

Morris S. VAN METER, Plaintiff and Appellant, v. BENT CONSTRUCTION COMPANY and Daley Corporation, joint adventurers, Daley Corporation, Bent Construction Company, a partnership, et al., Defendants and Respondents.

Civ. 4900.

Decided: July 26, 1955

Higgs, Fletcher & Mack, San Diego, for appellant. Procopio, Price, Cory & Schwartz, San Diego, Hill, Farrer & Burrill, Los Angeles, for respondents.

In this action the plaintiff sought compensation for claimed extra work in clearing trees and brush from a reservoir basin. The defendants, as joint adventurers, were the general contractor under a contract with the City of San Diego for the construction of Sutherland Dam. Section H–01 of the General Specifications required them to clear all of the reservoir basin up to contour elevation 2073. The plaintiff entered into a subcontract with the defendants by which he agreed to do, for a price of $29,750 all that portion of the work which the defendants were required to do by Section H–01. That section, so far as material here, reads: ‘The reservoir basin shall be cleared below elevation 2073. The contour 2073 will be flagged by City forces during the bidding period and the Bidder shall make visual observation before submitting bid. The area of the basin is about one square mile.’ The last page of the General Specifications was a map showing the outline of the entire reservoir basin, with the outer edges marked 2073, and stating: ‘Contractor shall clear area below contour 2073, about one (1) sq. mile.’

The reservoir basin shown on the map, and as it lies on the ground, is an extremely irregular area, with many arms, and with a narrow neck near the middle of it. This neck is about 900 feet long and from 600 to 800 feet wide. The portion of the reservoir basin between this neck and the dam site is referred to on this appeal as the ‘lower’ basin, and the portion above the neck as the ‘upper’ basin, although they were not so referred to in the specifications or by the parties prior to the execution of the subcontract. The area of the lower basin is about 400 acres and the area of the upper basin about 246 acres. The upper basin was more heavily wooded than was the lower.

There is some evidence, although it was contradicted, that the plaintiff was told by the defendants that he was to bid on clearing the ‘flagged area’. He was given a copy of the General Specifications, which he took with him, and his attention was especially called to Section H–01. He testified that he never saw the map which was a part of the specifications he had. He went out to the reservoir site, taking one of his employees who was a registered engineer with him. They spent some ten hours looking over the ground. They spent two hours in the upper basin, but found no flags there. They found seven flags placed by the city on contour line 2073, between the dam site and the neck of the basin. One of these was near the dam site, three were along the westerly side of the basin, and three were along the easterly side. Plaintiff's engineer placed the two outermost flags which they found, that is the ones farthest from the dam, as being about 600 feet below the narrow neck of the basin. He testified that he ‘knew that the outermost flags that (he) saw did not delineate the entire reservoir basin’; that they were some distance above the level of the stream bed; and that ‘the outermost flags should have been at the stream bed’ in order to delineate the reservoir basin. These flags show the contour line 2073 near the dam site and on both sides of the reservoir basin, but it was fully apparent even to a layman, that they did not indicate the perimeter of the reservoir basin, or of any natural basin as it lay on the ground. If it were assumed that the flags, as placed, indicated the perimeter of an area to be cleared, about one-third of the lower basin would clearly be outside that area. The plaintiff's engineer, at least, knew that the entire reservoir basin was not flagged. Because they found no flags above the neck of the basin, the plaintiff says that he concluded that he was to bid on what is now called the lower basin, although about one-third of that area was not within any perimeter indicated by the flags he found.

Without seeking further information from the city, or elsewhere, the plaintiff then made his bid which was accepted, and the subcontract was executed. After he started his work the plaintiff claimed to have learned for the first time that he was to clear the entire basin area, rather than the portion he had taken to be the ‘flagged area’, and demanded that the defendants make an adjustment with the city. The city refused to make an adjustment on the ground that while the area was not completely flagged this fact should have been obvious to prospective bidders. Thereupon, plaintiff completed the work of clearing the entire basin, the parties having executed a further agreement providing that the rights of neither party should be prejudiced thereby. He claims that his actual cost of cleaning the lower basin was about $25,000, while his actual cost of clearing the upper basin was about $50,000.

The plaintiff then brought this action. The first cause of action was for declaratory relief seeking to have the subcontract interpreted as meaning that plaintiff was obligated to clear only so much of the area of this reservoir basin as ‘was flagged’ at the time of his inspection and bid. A second cause of action was for reformation of the subcontract, it being claimed that that portion of the contract which states ‘the reservoir basin shall be cleared below elevation 2073’ did not express the true intention of the parties and should have read ‘the reservoir basin within the area flagged by the City of San Diego during the bidding period shall be cleared below elevation 2073’. A third cause of action was for the reasonable value of labor and materials furnished. At the time of trial, a fourth cause of action seeking damages for false and fraudulent representations was added.

The plaintiff having requested a jury trial, the court determined that certain issues should be submitted to the jury on special interrogatories and that the court would decide the equitable issues. It was also ordered that the issue of liability should first be determined and that the issue as to the amount of damages, if any, should be deferred. A lage amount of evidence was received on the other issues, but only a prima facie showing was permitted with respect to the reasonable value of the work.

Briefly stated, the jury gave the following answers to six questions submitted to it:

1. Did the plaintiff believe that the area to be cleared was only that portion of the basin below the flags placed by the city? Answer: Yes.

2. Did any of the defendants, prior to the execution of the subcontract, make any untrue representations to the plaintiff with regard to the extent of the area to be cleared? Answer: Yes.

3. Did any of the defendants know that said representations were false? Answer: No.

4. Did the defendants make such representations as a positive assertion in a manner not warranted by their information although believing them true? Answer: Yes.

5. Did the plaintiff believe such representations and rely on them? Answer: Yes.

6. In entering into this subcontract did the plaintiff use reasonable care to ascertain the extent of the area to be cleared? Answer: No.

The court accepted and approved the special findings of the jury, and further found that the defendants were required by their general contract, as interpreted by the court, to clear all of the reservoir basin below the elevation of 2073 feet; that the plaintiff by his subcontract undertook to perform that part of th work; and that he has performed that work. The court then found as follows:

‘III

‘That when plaintiff entered into said subcontract he believed in good faith that the area which was required to be cleared by the terms of said subcontract was that portion of the reservoir basin beneath the contour of elevation 2,073 marked by flags that had theretofore been placed by the employees of the City of San Diego; that the City of San Diego, pursuant to a statement made in its invitation for bids, had placed flags marking said contour, but said flags were not placed around the entire thereof.

‘IV

‘That prior to the execution of said subcontract, representatives of said joint venture did make untrue representations to the plaintiff with regard to the extent of the area to be cleared under the terms of said subcontract, said representations having to do with the location of flags upon said contour of elevation 2,073.

‘V

‘At the time of the making of said representations the representatives of said joint venture did not know that said representations were false, and in fact believed them to be true, but did make said representations as a positive assertion in a manner not warranted by their information. The representatives of said joint venture believed that flags had been placed around the entire contour at the time of the making of such representations.

‘VI

‘The plaintiff Van Meter believed said representations and relied upon them in entering into said subcontract, and was thereby caused to believe that by the terms of his contract he was to clear that portion of the reservoir basin laying below the flags which were actually then on the ground.

‘VII

‘It is true that in and about the investigation of said reservoir site and the inspection thereof and the subsequent entry into said subcontract, the plaintiff, Van Meter, an experienced and licensed contractor, failed to use reasonable care to ascertain the extent of the area to be cleared according to the terms of said subcontract. The court further finds in this connection that a contractor of ordinary skill, training and experience, and doing business in the vicinity of San Diego County, and in the exercise of ordinary care, should have known that it was the intent and purpose and the requirement of said contract that the entire reservoir basin be cleared, and that had plaintiff made those inquiries reasonably suggested by the provisions of the agreement and specifications and by an inspection of the premises, he would have discovered that it was intended that the entire basin be cleared.

‘VIII

‘It having been found that plaintiff was negligent in ascertaining the extent of the work to be performed under said contract, and it having been established that there was no wilful fraud perpetrated upon him, the court finds that the findings theretofore made are determinative of all issues involved in this action and that it becomes unnecessary to make any further findings of fact.’

As conclusions of law, the court found that the general contract required the defendants to clear the entire area of the reservoir basin below elevation 2073; that the marking of the contour of said elevation was for the purpose of showing the location and height of said contour an not to delineate the area to be cleared; that plaintiff's subcontract required him to perform all that portion of the general contract relating to the clearing of the reservoir basin for the contract price of $29,750; and that the plaintiff is entitled to recover nothing from the defendants. Judgment was entered accordingly, and a motion for a new trial was denied. In denying this motion the court stated that the jury's special findings were to the effect that there was no intentional fraud, and that its findings 5 and 6 were simply to the effect that while the plaintiff relied upon the statement made to him, in relying upon it he failed to use ordinary care and prudence. He further stated:

‘The sole question was whether, in view of the statements which he claimed were made to him and which the jury found were not intentionally fraudulent or misleading, he used reasonable care. The evidence amply justifies this finding. All that was said to Mr. Van Meter was that the City had placed flags around the area to be cleared. He had before him the written statement of the City that all of the reservoir basin was to be cleared beneath a certain contour. There was a statement that the contour would be marked with flags. It was marked with flags, but the flags did not extend all the way around. In other words, the flags did not extend into the smaller thickly wooded arm of the basin. The purpose of taking the wood and brush out of a reservoir basin is well known. It would be difficult to believe that the City intended that a part only of the basin was to be cleared. Mr. Van Meter knew that this arm was a part of the basin, as evidenced by his testimony that he and his engineer spent some two hours in this portion looking for flags, and that he then concluded, not because he was so told, but because he found no flags, that he was not required to clear this portion of the basin. According to his own statement, he knew that there was a question, and it was perfectly apparent that all he had to do to determine that question was to put in a telephone call to the City Engineer's office. I feel that the jury was amply justified in making this finding.’

On this appeal from the judgment, the plaintiff's main contention is that the matter of the plaintiff's negligence is absolutely immaterial in an action for reformation based upon a mutual mistake, or in any case where it appears that the defendant made such a misrepresentation as that described in subdivision 2 of Section 1572 of the Civil Code. It is argued that the findings show a mutual mistake; that the subcontract did not express the true intention of both parties, which was that only the area ‘below the flags' was to be cleared; that the findings show actual fraud of the defendants, which caused the plaintiff's mistake; that in cases of mutual mistake a plaintiff's ordinary negligent mistake, induced by the defendant's actual fraud, compels a court to grant reformation; that any statements found in the cases which seem to support a contrary theory are merely dicta or are found in rescission cases where reformation was not involved; and that in many of the decided cases the courts have confused reformation with rescission, and unilateral mistake with mutual mistake.

Many cases are cited, by both parties, only a few of which need be mentioned. In Security-First Nat. Bank v. Earp, 19 Cal.2d 774, 122 P.2d 900, 902, it was held that the terms of a contract were fraudulently represented to the defendant, and that his negligence in failing to read the contract would not bar his right to relief, if he was justified in relying on the representation. The court there said: ‘Contributory negligence is no defense to an intentional wrong.’ In Hanlon v. Western Loan & Bldg. Co., 46 Cal.App.2d 580, 116 P.2d 465, 475, where reformation was allowed although the defendant had been negligent in not discovering the mistake in the discription of the property covered by a trust deed, the court pointed out that while there are cases denying reformation where the person seeking that relief was negligent, there are other cases holding that failure to read a contract does not necessarily prevent a reformation. The court there said: ‘Whether the failure to discover the defective description was the result of inexcusable negligence, so as to preclude relief by way of reformation, or, whether [it] was the result of excusable neglect, is a question of fact, the determination of which rests largely in the discretion of the trial court.’ In Blackman v. Howes, 82 Cal.App.2d 275, 185 P.2d 1019, 1022, 174 A.L.R. 1004, involving a misrepresentation made with knowledge that it was false, it was pointed out that the negligence of a plaintiff is no defense to an intentional misrepresentation; that “‘Every case must be judged for itself, and the circumstances which warrant or forbid relief cannot be scheduled”’; and that the fact that an imperfect examination was made would not necessarily prevent relief since the examination may have been imperfect because of the representations made. It was held that the misrepresentation there made ‘was not such that its falsity must have been so obvious to the appellants as to preclude any justifiable reliance thereon by them.’ In Stafford v. California Canning Peach Growers, 11 Cal.2d 212, 78 P.2d 1150, 1154, both parties believed and intended when they signed the contract that it should have a certain legal effect. It was held that such a mistake was a mistake of law; that the defendant had represented to the plaintiff what the legal effect of their acts would be, in other words they ‘purported to interpret the contract’; and that when this occurs a plaintiff is not negligent in accepting the interpretation of a contract urged upon him by the defendant.

In Roller v. California Pacific Title Ins. Co., 92 Cal.App.2d 149, 306 P.2d 694, 697, the court states that Section 1577 of the Civil Code, in defining a mistake of fact, rules out any mistake which is “caused by the neglect of a legal duty on the part of the person making the mistake.” The court there cited Grymes v. Sanders, 93 U.S. 55, 23 L.Ed. 798 and Fraters Glass & Paint Co. v. Southwestern Const. Co., 107 Cal.App. 1, 290 P. 45, 47. In the Grymes case, it is said: ‘Mistake, to be available in equity, must not have arisen from negligence, where the means of knowledge were easily accessible. The party complaining must have exercised at least te degree of diligence ‘which may be fairly expected from a reasonable person.’' In the Fraters case, it is said: ‘Courts of equity will not encourage the cancellation or revision of instruments on the ground of mistake where they appear to have been executed by the complainant without the exercise of reasonable care.’ In the Fraters case it was held, in effect, that there was no wilful fraud but only a negligent misrepresentation upon which the plaintiff was not justified in relying. Ordinarily, a contractor who is required by the bidding instructions to determine the actual conditions of the proposed work by a personal examination, is bound by any situation there which is, or should be, obvious to him. Furton v. City of Menasha, D. C., 71 F.Supp 568. ‘[T]here is a vast distinction between an untruthful statement due to negligence and one born of a fraudulent desire to cheat another.’ Podlasky v. Price, 87 Cal.App.2d 151, 196 P.2d 608, 614; Seeger v. Odell, 18 Cal.2d 409, 115 P.2d 977, 980, 136 A.L.R. 1291. In the Seeger case, the court said: ‘A fraudulent misrepresentation is one made with the knowledge that it is or may be untrue, and with the intention that the person to whom it is made act in reliance thereon. * * * It must appear, however, not only that the plaintiff acted in reliance on the misrepresentation but that he was justified in his reliance. * * * Negligence on the part of the plaintiff in failing to discover the falsity of a statement is no defense when the misrepresentation was intentional rather than negligent. * * * As a general rule negligence of the plaintiff is no defense to an intentional tort.’ Also, ‘If the conduct of the plaintiff in the light of his own intelligence and information was manifestly unreasonable, however, he will be denied a recovery. * * * ‘He may not put faith in representations which are preposterous, or which are shown by facts within his observation to be so patently and obviously false that he must have closed his eyes to avoid discovery of the truth * * *.’'

As we read these cases, and many others, they do not support the plaintiff's contention that it must be held, as a matter of law, that his negligence was no defense in this action. While the cases seem to establish the rule that the negligence of a plaintiff in such a case is no defense where the defendant is guilty of intentional fraud, they also recognize the natural factual distinction between a mere negligent misrepresentation and one which was intentional, and a further difference with respect to the conduct of the plaintiff, depending on whether his failure to discover the truth was, in fact, the result of excusable neglect or the result of inexcusable negligence. Where there is no intentional fraud, and where the evidence discloses that the plaintiff's failure to discover the truth was the result of his own unreasonable neglect, the cases support the conclusion that he will be denied recovery, and we know of no cases compelling a contrary conclusion. Insofar as material here, no good reason appears why this rule should not be as applicable in a reformation case as in one for a rescission.

The jury here found that the defendants did not know that the representations which the plaintiff claimed to rely on were false. The court found the same thing, and that the defendants believed them to be true. The clear import of the findings is that there was no intentional fraud on the part of the defendants; that the plaintiff in making his investigation, as required by the specifications, failed to use reasonable care in ascertaining the extent of the area to be cleared; and that his conduct in the light of his own intelligence and information was manifestly unreasonable.

There being no ‘intent to deceive’, the findings do not disclose an ‘actual fraud’ as defined in Section 1572 of the Civil Code. There was no mutual mistake with respect to the terms of the contract itself. Both parties understood that the reservoir basin was to be cleared below elevation 2073, as required by Section H–01 of the specifications. The only mistake was as to the location of this reservoir basin on the ground, or as to how it was marked. The defendants thought the basin was ‘flagged’, as was provided for in Section H–01. The plaintiff thought, because he found no flags above the neck, that the area to be cleared was only the portion below the neck. Section H–01 plainly stated that the contour 2073 would be flagged, and not the entire perimeter of the reservoir basin; and that the bidder should make visual observation before submitting a bid. A visual observation would naturally disclose to any one that any statement that the entire basin was marked with flags could not be correct. There was no mutual mistake as to the contract requirement that the reservoir basin should be cleared, but there were separate mistakes with respect to the existing situation. While the defendants' representation related, in a way, to the extent of the area to be cleared, the error was obvious to any one examining the actual situation as it existed.

The plaintiff's further contention that the evidence is insufficient to support the finding of negligence on his part cannot be sustained. There was only one reservoir basin, as was clearly apparent on the ground, and it was unreasonable for the plaintiff to take the flags, which he knew represented the contour line 2073, as indicating that the ‘reservoir basin’ was confined to the portion below the neck when the contour line, as marked, plainly showed that the basin would extend through the neck and well beyond it. In spite of what he was told he was still required to make visual observation and to locate the area which was to be cleared as it lay on the ground, and he had the specifications to assist him in performing that duty. In attempting to do this, he not only misapplied what he had been told but disregarded the clear information contained in the specifications, namely, that the entire reservoir basin was to be cleared below contour 2073, and that it was the contour line only which was to be marked with flags. He proceeded to assume, in the face of the strongest kind of visual warning which was fully apparent on the ground, that he was to bid on clearing only the so-called lower basin which had never been mentioned. Water seeks it level and it should have been obvious, even to a layman, that the basin to be covered with water could not end abruptly at a point at or near the line of the last two flags. Moreover, the last page of the specifications he had was a map showing the perimeter line of the entire basin, including the upper basin, this perimeter line being marked 2073, both above and below the neck, and extending across the dam at or very near its top. While he testified that he did not see this map it could well be inferred that he should have seen it. Another contractor who bid on this same work testified that after looking at H–01 he turned to the contour map which was in the specifications; and that this is the accepted practice followed in the ordinary course of business in that trade. The plaintiff, who was an experienced contractor, testified that he had done a lot of clearing in dam site areas; and he had a registered engineer, who was in his employ, to assist him in the visual observation he was required to make. From the evidence as a whole it is difficult to see how the plaintiff, after going on the ground, could have assumed that he was to bid on clearing only the lower basin. The evidence amply supports the findings that the plaintiff was negligent and fully warrants the conclusion that he was not justified in relying on the representations which were made to him, or the location of the flags on the contour line, as indicating that only the lower basin was to be cleared.

The plaintiff next contends that defendants' unjust enrichment demands that he be awarded the relief prayed for in the third cause of action. It is argued that both parties understood that the plaintiff was contracting solely with reference to the lower basin; that the defendants received the benefit of work which neither party intended that the plaintiff should perform, which work was of large value; and that under the modern ‘law of restitution’ he was entitled to recover the reasonable value of his services even if he was negligent, as found by the court. Under the facts as shown by the evidence and as found by the court, this contention cannot be sustained. Both parties did not so understand, and if his other contentions are without merit the plaintiff was bound by his contract. Where his loss was due to his own mistake and negligence, a court cannot make him whole under the guise of another implied contract.

The final contention is that the court failed to make findings on material issues. It is argued that the court failed to find on the issue of declaratory relief; and on the issue of restitution for unjust enrichment as raised by the third cause of action, which was for the reasonable value of materials and labor furnished. The court sufficiently found on the issue of declaratory relief by finding that the general contract and the plaintiff's subcontract were interpreted by the court as requiring that the plaintiff clear all of said reservoir basin. Under the findings as a whole, the plaintiff was not entitled to recover the reasonable value of his additional services, and no further findings on the issue raised by the third cause of action were necessary.

The judgment is affirmed.

BARNARD, Presiding Justice.

GRIFFIN and MUSSELL, JJ., concur.

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