Theodore G. WUNDERLICH and Charles E. McCammon, co-partners, doing business under the name and style of McCammon-Wunderlich Co., and C. K. Moseman, a Joint Venture, Plaintiffs and Respondents, v. The STATE of California, Acting By and Through the DEPARTMENT OF PUBLIC WORKS of the State of California, Defendant and Appellant.
This is an appeal by the defendant State of California from a judgment against it in the amount of $621,779.16. The primary question to be resolved is whether the trial court correctly determined that there was a breach of warranty on the part of the State with respect to a source of materials designated for use in the performance of a highway construction contract. In entering into the contract the plaintiffs acted together pursuant to a joint venture agreement.
The findings of fact of the trial court were in part as follows: 1. On or about April 23, 1954, the State advertised for bids for the construction of certain highway improvements in Riverside County. 2. The plaintiffs, as one of the prospective bidders on the project, were furnished by the State with a copy of the special provisions relating to the project, wherein it was represented that the material on the hillside left of Station 6151 was of satisfactory quality for the production of gravel blanket, imported base material, mineral aggregate for cement treated base, and mineral aggregate for plant-mixed surfacing.2 3. The plaintiffs and other prospective bidders attended a pre-bid showing of the job conducted by the State at the job site on May 7, 1954. 4. At that showing the State exhibited to the plaintiffs a report on local material sources prepared by the State. That report, interpreted according to the custom and practice prevailing in the construction industry at the time of and in the area of the project, represented that the State had tested that particular source designated in the special provisions [the Wilder pit] and that the tests on the samples indicated a high of 55% sand and 45% rock and a low of 88% sand and 12% rock and that the average between the high and low tests was 71.5% sand and 28.5% rock.3 5. That report on local material sources was made available to prospective bidders at that showing (May 7, 1954) without being accompanied by the reports of the individual tests made by the State ‘relative to said designated source.’ 6. The report on local material sources was not one of the ‘contract documents.’ It did not vary, add to or change any of the terms of the contract, but it did explain in detail what the State meant by the phrase ‘material of satisfactory quality’ used in the special provisions. 7. It was the intent of the State in furnishing such information to the plaintiffs that they would rely thereon in selecting their sources of material, and that the plaintiffs would prepare their bid on the assumption that the designated source [the Wilder pit] was as represented in the special provisions and in the report on local material sources. The State knew or should have known that the plaintiffs and other bidders would rely upon those representations in preparing their bids. 8. It was the intention of the parties that those representations would, upon the awarding of the contract, constitute a warranty as to the quality of material available and the quantity of material that would have to be processed in the designated material source. 9. The plaintiffs believed those representations and warranties and relied upon them in making their bid and determined the unit prices contained in the bid on the assumption that material of satisfactory quality for the production of the imported base material, gravel blanket material, and mineral aggregates for plant-mixed surfacing and cement treated base required for the work could be obtained from the designated source left of Station 615 [the Wilder pit]. 10. The material in that designated source was not of satisfactory quality for the production of gravel blanket, imported base material, mineral aggregate for cement treated base, or mineral aggregate for plantmixed surfacing, in that the gradation of that material was substantially finer than represented in the report on local material sources, being on the average approximately 10% rock and 90% sand. 11. Some test reports on samples of materials obtained by the State were available to prospective bidders at the bid showings and at the district office of the Division of Highways in San Bernardino, California. The sources of materials designated in the special provisions as being located left of Stations 600 and 615, approximately, were optional sources available to the successful bidder for the production of the required materials. 12. On or about June 24, 1955, the plaintiffs first discovered that the particular designated source [the Wilder pit] did not contain material of satisfactory quality for the production of gravel blanket. Immediately thereafter the plaintiffs notified the State that gravel blanket could not be produced without importing a large percentage of rock material from another source, that it would be necessary to import approximately 80% of the material for the gravel blanket to meet the specifications, and that the plaintiffs expected to be reimbursed for all additional costs incurred. 13. On or about September 6, 1955, the plaintiffs first discovered that the particular designated source [the Wilder pit] did not contain material of satisfactory quality for the production of imported base material, mineral aggregate for plant-mixed surfacing, or mineral aggregate for cement treated base. Immediately thereafter the plaintiffs gave notice thereof to the State. 14. During July of 1955, the plaintiffs brought an additional crushing and screening plant to the vicinity of the project and used it to produce gravel blanket material. Commencing in December of 1955, the plaintiffs produced rock from that plant and hauled it to the particular designated source [the Wilder pit], where it was processed with the material in that designated source to produce mineral aggregates for cement treated base and plant-mixed surfacing which would meet the requirements of the specifications. That additional plant would not have been necessary if material in that designated source [the Wilder pit] had been as represented and warranted by the State. 15. In addition, the plaintiffs were required to and did process more material at the particular designated source [the Wilder pit] than would have been necessary if the material in that source had been as represented. 16. In order to produce the gravel blanket, imported base material, mineral aggregate for plant-mixed surfacing, and mineral aggregate for cement treated base required by the contract, the plaintiffs were required to and did incur costs in excess of those that would have been necessarily incurred if the material in the particular designated source [the Wilder pit] had been as represented. Such excess costs were in the reasonable sum of $542,244.67, no part of which had been paid by the State to the plaintiffs. 17. The completion of the performance of the contract by the plaintiffs was delayed for a period in excess of 172 calendar days by reason of the fact that the material in the particular designated source [the Wilder pit] was not as represented. The State had no right under the contract to withhold from the plaintiffs the sum of $17,200, or any other sum, as liquidated damages. The sum of $17,200, withheld by the State as liquidated damages, became due and payable to the plaintiffs on November 6, 1956. 18. In the performance of the contract the plaintiffs applied ‘18,157.11 M gallons of water’ for which the State failed and refused to pay. That amount of water was applied to lay dust caused by grading operations and traffic on haul roads that were constructed and maintained for the purpose of enabling the plaintiffs to haul mineral aggregate materials from the additional crushing and screening plant to the roadbed and to the particular designated source [the Wilder pit].4 Such haul roads would not have been necessary if the material in that particular designated source had been as represented. The plaintiffs were entitled to be paid for such water at the contract price of $2.50 per M gallons, a total amount of $45,392.78, which became due and payable on November 6, 1956.
The primary question to be resolved is whether the record sustains the determination of the trial court that there was a warranty on the part of the State which was breached.
In Souza & McCue Constr. Co. v. Superior Court, 57 Cal.2d 508, at pages 510–511, 20 Cal.Rptr. 634, at page 635, 370 P.2d 338, at page 339, the Supreme Court stated: ‘A Contractor of public works who, acting reasonably, is misled by incorrect plans and specifications issued by the public authorities as the basis for bids and who, as a result, submits a bid which is lower than he would have otherwise made may recover in a contract action for extra work or expenses necessitated by the conditions being other than as represented. (E. g., United States v. Spearin, 248 U.S. 132, 136–137, 39 S.Ct. 59, 63 L.Ed. 166; Christie v. United States 237 U.S. 234, 239–242, 35 S.Ct. 565, 59 L.Ed. 933; McCree & Company v. State, 253 Minn. 295, 91 N.W.2d 713, 721–722; see Gogo v. Los Angeles etc. Flood Control Dist., 45 Cal.App.2d 334, 341, 114 P.2d 65; 43 Am.Jur. 852; Annotation 76 A.L.R. 268.) This rule is mainly based on the theory that the furnishing of misleading plans and specifications by the public body constitutes a breach of an implied warranty of their correctness.’
In MacIsaac & Menke Co. v. Cardox Corp., 193 Cal.App.2d 661, at page 669, 14 Cal.Rptr. 523, at page 528, this court stated: ‘As a general proposition, it is well recognized that where plans and specifications induce a contractor to reasonably believe that certain indicated conditions actually exist and may be relied upon in submitting a bid, the contractor is entitled to recover the value of such extra work made necessary by the existence of different conditions. Gogo v. Los Angeles County Flood Control Dist., 45 Cal.App.2d 334, 341, 114 P.2d 65.’
In the case of United States v. Johnson (9 Cir.1946) 153 F.2d 846, the specifications with respect to the construction of a highway contained the following paragraph: ‘Sources of Supply. Gravel for crushing is available approximately 0.5 mile right of Station 870 and rock for crushing is available approximately 0.3 mile right of station 1239. Unless otherwise specifically approved in writing by the engineer only materials from the above sources shall be used for crushing. Additional filler that may be necessary to meet the required grading shall be obtained rom sources approved in writing by the engineer.’ In undertaking the performance of the work under the contract the contractor discovered that there was soft rock beneath the surface of the quarry.
In the Johnson case, the contractor sought to recover damages on the theory that the quoted paragraph constituted a representation or warranty that satisfactory materials could be produced from the designated quarry for all the work required under the contract, and that the shortcomings of the quarry both with respect to quality and quantity of materials amounted to a breach of the warranty. The damages sought were for the increased costs growing out of the claimed breach, the added costs being in part for the change in location, for the opening of a new quarry, for longer hauls, and for expenses arising from shutdowns and delays and from repairs to machinery. In addition, recovery was sought as to the amount of the liquidated damages assessed by the government.
In affirming a judgment in favor of the contractor the court said in part (153 F.2d, at page 849): ‘Here there was a deceptive representation that rock suitable for crushing was ‘available’ at a given point, and the contractor was in so many words notified to look there for his source of supply. The inescapable assumption was that the material was adequate as well as suitable. The contractor, in estimating costs, was entitled to figure his bid on that assumption. The phrase ‘unless otherwise specifically approved in writing by the engineer, only material from the above source shall be used for crushing’ warned the bidder that he was not to look elsewhere in figuring costs of materials; and that if he did so he ran the risk of having such materials disapproved by the engineer. We do not believe that the final sentence of the specification put a different face on the matter. Requirements of fair dealing underlie government as well as private contracts.'
In the present case the portion of the special provisions upon which the plaintiffs place primary reliance was the statement that ‘Samples indicate that material of satisfactory quality for the production of imported base material, gravel blanket material, and mineral aggregate for plant-mixed surfacing and cement treated base, may be obtained left of approximate Station 615.’ Further reliance is placed upon the memorandum (designated in the findings of fact as the report on local material sources) which was made available to the prospective bidders at the showing on May 7, 1954 (see footnote 3, supra), a portion of which, relating to the Wilder pit, was as follows: ‘Tests indicate that after processing, to meet the grading requirements, the material is suitable for imported base material, cement-treated base aggregate, gravel blanket, and plant-mixed surfacing aggregate. Some selection may be necessary to insure that the material used for PMS aggregate is sufficiently hard to pass the LART test.’ It was also stated in that memorandum: ‘This hillside is composed of rather loosely compacted sand and gravel ranging from 4 inches to dust. A layer of blow sand covers the base of the hill and apparently exists in spots on the slope as some test holes encountered considerable coarse material while others were practically all sand.’
The position of the plaintiffs is that the information given to prospective bidders in the quoted portions of the special provisions and the memorandum was not accurate because the material in the Wilder pit was not of satisfactory quality for the production of the mineral aggregate products in that the gradation of the material to be found in the pit was substantially finer in nature than was represented. It is asserted that the memorandum contained the representation that the pit had an average gradation of 71 1/2% sand (passing the No. 4 sieve), whereas the pit actually averaged approximately 90% sand. It is further stated in part that such discrepancy was due to the fact that the State limited its sampling to the top ten feet of the pit and failed to disclose that fact in either the special provisions or in the memorandum, and to the fact that ‘the State made unwarranted assumptions from the samples which it took and presented those assumptions to prospective bidders as statements of fact.’
With respect to the meaning of the particular language used in the special provisions, the State introduced the following testimony of its witness, Mr. Matich, one of the unsuccessful bidders: ‘Q. Mr. Matich, have the words ‘samples indicate that materials of satisfactory quality for the production of’ and so forth come to have a generally accepted meaning in the construction industry? A. Yes, sir. Q. And What do they mean? A. That materials at these locations may be produced. Q. And will meet what? A. Will meet the quality requirements of the specifications.' Mr. Matich further testified: ‘Q. BY MR. HOEGSTEDT [attorney for the State]: Well, Mr. Matich, as that clause is understood in the construction industry, does that mean that sufficient quantity of material can be obtained at the designated source? A. No, sir.’ Another of the State's witnesses, Mr. Fuller, testified upon the same subject: ‘Q. Now, have the words ‘samples indicate that materials of satisfactory quality’ come to have a meaning generally recognized in the construction industry, Mr. Fuller? A. Yes. Q. And what meaning have they come to have? A. That would indicate that with processing to meet the gradation requirements, that the materials in the site met the quality—already met the quality requirements and could be produced to meet the specific requirements of the particular item in the specifications. Q. And when you say the specific requirements, you mean the specific quality requirements? A. Yes, sir.'
Thereafter the plaintiffs offered evidence with respect to the meaning of the particular words of the special provisions in the construction industry. Mr. Atkinson testified as follows: ‘Q. And at that time in May of 1954, what was the customary meaning in the construction industry of the words ‘samples indicate that material of satisfactory quality for the production of certain items may be obtained left of approximate Station 615’? A. Well, it was simply the indication that the pit would be a satisfactory source for the material. Q. What was the customary meaning in the industry at that time as to the expression ‘Material of satisfactory quality’? A. Well, that it would pass all of the various tests for hardness and so forth. I think that's the first thing it would mean. Q. And did the expression at that time have any significance regarding the gradation of the material in the source? A. Well, quality, you've got to define that pretty carefully. Perhaps I can help if I Just say that this paragraph indicated to us that it would be a satisfactory source and that the site would not be mentioned unless the material were there. Now, whether the word quality means that the material is there is something for Webster but when ever we saw this paragraph or a paragraph comparable to it, we thought that the State was representing that the material was there and that it was of a satisfactory quality after being processed to be used on the after being processed to be used on the work. Q. By the material being of satisfactory quality, did you understand that the material was of a gradation that would allow it to be economically used to produce the products involved? A. Well, I don't mean to be begging the question but the paragraph wouldn't have been in there unless the State had felt—I mean, this, to my recollection, was always custom that the State would not mention the source unless the material could be produced from there with reasonable economy.'
Another witness for the plaintiffs, Mr. Westbrook, stated that in 1954 the particular language ‘would mean that the material was available there and it was satisfactory for the use that it says.’ Mr. Westbrook further testified in part as follows: ‘Q. In particular then the words ‘may be obtained left of approximate Station 615,’ what meaning would those words have in the construction industry in 1954? A. Well, it would mean that you could obtain and manufacture the materials that were required for the job. Q. Would it mean that the materials could be manufactured from that source without importing material from another source? A. It would. * * * Q. * * * The question is, do you know what the meaning would be in the construction industry at that time? A. That it would mean that the material was there and that you could produce it from the source. Q. Without excessive waste? A. Without excessive waste.'
On behalf of the plaintiffs, Mr. Bailey, a contractor, testified that the statement in the special provisions had the meaning in the construction industry ‘that the material was there’ and that the material could be produced from that source. He further testified in part as follows: ‘Well, Exhibit No. 1 [the special provisions] says the material is there and Exhibit No. 2 [the memorandum as to sources of material] shows the gradations in the various pits and from that I would or you would say that it had considerable material and it can be processed make the products required by the specifications. * * * In No. 1 the industry is informed the material is there. In No. 2 the industry is informed of the grading characteristics of the material and from that information you develop your method of processing.'4
It is clear from the record that it was important that the bidders be informed of the nature of the Wilder pit with respect to the matter of the relative amounts of its sand and rock content. The memorandum as to sources of material which was made available to prospective bidders contained the following statement: ‘This information has been developed during the investigation for borrow sites and possibly would be of value to the prospective bidders for this project.’ Information as to possible sources of materials which had been investigated was set forth. Thus, as an example, it was stated as to ‘Right Station 480 D to 500 D’ that the 'material * * * was tested and considered to be too fine for economical use as a source of PMS aggregate.' As to that statement Mr. Babcock, the person who actually prepared the memorandum, testified: ‘I think I meant that I felt that there was too much sand in relation to the rock for economical use of this source for this project.’
Mr. Babcock, who was assigned to work in the materials laboratory of the Division of Highways at the time he prepared the memorandum, testified that the samples used were limited to the top ten feet. He further stated that the gradation of the material in the pit was a factor to be used in determining the quantity of material available. The samples taken were sufficient for the State's purpose, which was to determine areas that were potential sources of material. In response to an inquiry as to whether, in his opinion, the samples were sufficiently representative for use by bidders, Mr. Babcock said: ‘I would not have bid with them if I were a bidder and it was my particular job to bid that project.’
In determining that there was a warranty as to the nature of the Wilder pit as a source of materials, the trial court considered both the language of the special provisions and the contents of the memorandum with respect to the Wilder pit. The State contends that such use of the memorandum constituted a violation of the parol evidence rule. That contention is untenable. It is a reasonable inference that the State offered that memorandum to the prospective bidders for the purpose, which was apparent to such bidders, of making more certain the general statement of the special provisions that ‘Samples indicate that material of satisfactory quality for the production of imported base material, gravel blanket material, and mineral aggregate for plant-mixed surfacing and cement treated base, may be obtained left of approximate Station 615.’ Such extrinsic evidence was admissible for the purpose of determining what the parties meant by the quoted language of the special provisions. (See Coughlin v. Blair, 41 Cal.2d 587, 605, 262 P.2d 305; Schmidt v. Macco Construction Co., 119 Cal.App.2d 717, 730, 260 P.2d 230; see Jones v. Holland Furnace Co., 188 Wis. 394, 206 N.W. 57, 58–59.)
The record affords substantial support for the finding of fact of the trial court that it was the intention of the parties that the representations made by the State in the special provisions and in the memorandum relating to local material sources would, upon the awarding of the contract, constitute a warranty as to the quality of the material available and the quantity of material that would have to be processed in the wilder pit. As has been noted, it was of substantial importance to the contractor to have information as to the relative amounts of sand and rock available in the Wilder pit. Too much sand would result in excessive waste and too little rock would affect the ability of the contractor to make part of the necessary products by use of that source.
Apropos is the reasoning of the court in Sartoris v. Utah Const. Co. (9 Cir.1927) 21 F.2d 1, a case in which it was stated in the specifications that part of a tunnel excavation at each end was ‘expected to be in earth formation, and the remainder in solid rock, with possibly a short distance in loose rock, or a combination of all three.’ In the very early progress of the work, however, the plaintiff encountered a formation of unusually fine, loose sand, which caused an increase in the expense of performing the contract. The court said (21 F.2d, at page 2): ‘First, the liability of the railroad company: True though it may be that it was without conclusive knowledge of the character of the formation when it let the contract, we are of the opinion that the language above quoted from the specifications is to be taken as a representation or assurance on the part of the railroad company upon which plaintiff had the right to rely. * * * In form it may be conceded the language is not a positive declaration of fact; but we are concerned with the effect, rather than form, and we are to assume that some meaning was intended. The only conceivable purpose of inserting the statement must have been to influence bidders and affect bids; but, if not taken as a definite assurance respecting the character of the formation, how was it expected it would influence a rational bidder? Or are we to believe that it was inserted with the thought that thereby bidder would be induced to assume that the railroad company had information, not available to them, which gave to the ‘expectation’ a trustworthy basis, upon which it would be safe to bid? This view we should be loath to adopt, for, inasmuch as the company had no such information, it would necessarily imply an intent to deceive.'
In the Sartoris case, the court further stated (21 F.2d, at pages 2–3): ‘As we read the language, it was equivalent to saying to prospective bidders or contractors, ‘You may bid in the expectation,’ or, ‘In submitting your bids and in contracting, you may assume, that part of the tunnel excavation will be in earth formation and the remainder will be in solid rock, with possibly a short distance in loose rock, or a combination of all three; and by referring to the accompanying drawings you will see that the design is suited to such, and only such, a formation.’ So read, it constituted a warranty.'
The conclusion that there was a warranty as found by the trial court is not altered by reason of provisions in the standard specifications5 upon which the State places reliance. Aside from the question of the applicability of the quoted provisions of section 2 of the standard specifications to the facts of the present case, the position of the State is not sound. Apt reasoning is found in Hollerbach v. United States, 233 U.S. 165, at pages 171–172, 34 S.Ct. 553, at page 555, 58 L.Ed. 898, wherein the Supreme Court stated: ‘A government contracts should be interpreted as are contracts between individuals, with a view to ascertaining the intention of the parties and to give it effect accordingly, if that can be done consistently with the terms of the instrument. In paragraph 33 the specifications spoke with certainty as to a part of the conditions to be encountered by the claimants. True, the claimants might have penetrated the 7 feet of soft slushy sediment by means which would have discovered the log crib work filled with stones which was concealed below, but the specifications assured them of the character of the material,—a matter concerning which the government might be presumed to speak with knowledge and authority. We think this positive statement of the specifications must be taken as true and binding upon the government, and that upon it, rather than upon the claimants, must fall the loss resulting from such mistaken representations. We think it would be going quite too far to interpret the general language of the other paragraphs as requiring independent investigation of facts which the specifications furnished by the government as a basis of the contract left in no doubt. If the government wished to leave the matter open to the independent investigation of the claimants, it might easily have omitted the specification as to the character of the filling back of the dam. In its positive assertion of the nature of this much of the work it made a representation upon which the claimants had a right to rely without an investigation to prove its falsity.’
In the present case it would not be reasonable to hold that the State, by resorting to provisions of an exculpatory nature in the standard specifications, could escape responsibility for the accuracy of information upon which it expected bidders to place reliance in formulating their bids. In such circumstances the State is not relieved from liability by general contractual provisions requiring the bidder to investigate a source of materials which is designated by the State as being satisfactory in nature.
Before turning to the question of whether the evidence was sufficient to show a breach of the warranty, it is necessary to consider the matter of the plaintiffs' reliance on the warranty inasmuch as the State contends that the evidence was insufficient to sustain a finding of such reliance. James F. Seger, an employee of the plaintiffs at the time of the showing on May 7, 1954, and during the period of time in which the plaintiffs' bid was being prepared, testified that at that showing he copied information contained in the memorandum as to the Wilder pit. He further testified as to his use of that information in preparing the bid: ‘For the various items of imported base, cement treated base and plant-mixed surfacing I made an analysis from these, breaking it down finer actually into intermediate size screens, and in doing this prepared a visual colored chart to show the highs and lows of the various screen sizes so I would have a better picture of the pit as it looked and determine waste factors and problems that might be encountered in screening. * * * Q. And what was the purpose of going through this procedure of putting down the gradation from the State report and then comparing it with the gradations required in the specifications? What were you attempting to do? What was the process that you were going through? A. The process was to determine how much crushing would be required or screening or wasting might be necessary to produce the required products.’ Mr. Seger further stated that by means of plotting the information from the special provisions and the memorandum he made an estimate of the amount of waste that would be involved in producing the four mineral aggregate materials from the Wilder pit. In preparing the final bid, the Wilder pit was considered to be the sole source for the four products required, and in arriving at the bid prices for the four items the information furnished by the State in the memorandum was used. Mr. Seger also testified that in the making of that bid he relied exclusively upon the gradation as shown in that memorandum. At that time he anticipated that all of the material would be produced at the Wilder pit and that no material would have to be imported into that pit from another source.
Charles E. McCammon, one of the plaintiffs, testified that he attended the prebid showing which was held in the area of the project on May 11, 1954. He saw the memorandum as to local material sources. He observed the Wilder pit. Part of Mr. McCammon's testimony was: ‘Q. Then was this job bid by the McCammon-Wunderlich Company on the basis of the plant being located at the Wilder pit for producing all four of the mineral aggregate products? A. It was. Q. And was that decision based upon the information that you had received from the State in plaintiffs' Exhibit 2 [the memorandum] and in the special provisions, plaintiffs' Exhibit 1? A. Yes.’ He further testified that prior to the submission of the bid he did not cause any tests to be made on the Wilder pit because ‘we thought that we could rely on the State Tests.’ He assumed that the gradation of the pit was accurately set forth in the memorandum.
This court is not free to reject testimony that has been believed by the trier of fact unless there exists either a physical impossibility that it is true or its falsity is apparent without resorting to inferences or deductions. Even testimony which is subject to justifiable suspicion does not warrant the reversal of a judgment. The trial court believed the evidence introduced by the plaintiffs upon the issue of reliance and that evidence was sufficient to sustain the finding of fact in their favor with respect to that issue. (See Maurice L. Bein, Inc. v. Housing Authority, 157 Cal.App.2d 670, 681, 321 P.2d 753.)
The record sustains the finding of the trial court that the gradation of the material in the Wilder pit was substantially finer than was represented by the State in the memorandum relating to local material sources in that it was, on the average, approximately 10% rock and 90% sand. Raymond G. Osborne, the president of a concern engaged primarily in the testing and inspection of construction materials, testified as to gradation analyses of mineral aggregates from the Wilder pit made for the plaintiffs by his laboratory in January and February of 1956. He stated that Exhibit 48 was an accurate summary of the gradations as shown in the test reports of his laboratory (Exhibit 41) and that that exhibit contained an accurate reproduction of the gradations as shown on the memorandum relating to local material sources (Exhibit 2) with respect to the Wilder pit. The comparison so made is set forth in the footnote (the no. 4 sieve representing the line of demarcation between rock and sand).6
Turning to the matter of damages caused by the breach of warranty, as has been noted the trial court found as follows: ‘In order to produce the gravel blanket, imported base material, mineral aggregate for plant mixed surfacing, and mineral aggregate for cement treated base required by the contract, plaintiffs were required to and did incur costs in excess of those that would have been necessarily incurred if the material in said designated source had been as represented. Said excess costs incurred by plaintiffs were in the reasonable sum of $542,244.67, no part of which has been paid by defendant to plaintiffs.’ Thus the trial court made a finding as to the difference between the actual reasonable cost of the work and what the reasonable cost would have been if the warranty had not been breached. (F. Gogo v. Los Angeles etc. Flood Control Dist., 45 Cal.App.2d 334, 339, 114 P.2d 65; United States v. Johnson, supra, 153 F.2d 846, 848.) It is thus obvious that the trial court proceeded in accordance with the theory of the measure of damages which the State concedes to be proper,7 although the State contends that the evidence does not support the amount of the judgment even if there is liability on the part of the State. The State argues that the damages that could properly be recovered were limited to the added costs of producing gravel blanket because, it is asserted, any misrepresentation or breach of warranty related only to the plaintiffs' ability to produce that item. That the waste factor with respect to that item was great is clear from the record.8 But while the evidence shows that the plaintiffs became aware in June of 1955 of the necessity of obtaining gravel blanket from another location, it also supports the inference that the situation with respect to the other products gradually became worse. In September of 1955 the plaintiffs informed the State that it then appeared ‘that there will not be sufficient material to supply the requirements for Imported Base material and Mineral Aggregate for Cement Treated Base and Plant Mix Surfacing, even though, in accordance with our previous letters we are producing gravel blanket elsewhere.’
The State also argues that in any event damages must be limited to the amount of expenditures made by the plaintiffs to bring the rock content of the Wilder pit to a point commensurate with its represented condition. But the attention of this court is not called to any portion of the record that compelled the trial court to draw an inference that that point was ever reached by means of the importation of rock from the S.P. pit or that the represented condition could in fact be satisfactorily duplicated by that method. Moreover, the State's argument based on the section of the standard specifications with respect to the exhaustion of designated sources of material9 is not well founded inasmuch as the rights of the plaintiffs arose out of a breach of the warranty as to the nature of the Wilder pit rather than merely out of the exhaustion thereof.
The State also attacks the determination of the trial court that the plaintiffs were entitled to recover $45,392.78 for water applied by them. The contention is that the plaintiffs failed to establish any right of action under the contract for payment of water applied to their haul roads and that no evidence of actual costs or increased costs was introduced to support the findings which allowed such amount with respect to the breach of warranty as to the Wilder pit.
Section 15 of the standard specifications provided in part as follows: ‘Water * * * for laying dust caused by grading operations and traffic, shall be applied in the amounts and at the locations designated by the Engineer.’ It was further provided that payment would be made ‘at a unit price per thousand gallons for applying water.’ Another portion of that section was: ‘The price paid per thousand gallons for applying water shall include full compensation for furnishing all labor, materials, tools, and equipment and doing all the work incidental to applying water as herein specified.’ In their contract with the State the plaintiffs agreed to take in full compensation for applying water the unit price of $2.50 per thousand gallons.
The pertinent findings of fact of the trial court were: 1. In the performance of the contract the plaintiffs ‘applied 18,157.11 M gallons of water’ for which they were not paid. 2. That water was ‘applied to lay dust caused by grading operations and traffic on haul roads which were constructed and maintained for the purpose of enabling plaintiffs to haul mineral aggregate materials from said additional crushing and screening plant to the roadbed and to the designated source. Said haul roads would not have been necessary if the material in said designated source had been as represented.’ 3. The State's engineer did not contest the necessity of the use of such water for laying dust, but refused to approve payment for that water on the sole ground that the State was not obligated under the contract to pay for water applied to haul roads off the roadbed which application the engineer had not ordered.
It is clear from the findings of fact and conclusions of law that the plaintiffs were permitted to recover damages on the ground that there had been a breach of warranty and that the additional application of water had been rendered necessary because of that breach. Accordingly, the plaintiffs were entitled to recover the reasonable value of such application of water as one of the items of damage suffered by them. The State argues, however, that the plaintiffs offered no proof as to their costs or expenditures in applying water to the haul roads, such as ‘equipment charges for water trucks and operators plus pumping or royalty costs in obtaining the water.’ The State further asserts that the contract price of $2.50 per unit could not be considered as evidence of reasonable value because that contract price was not the subject of specific negotiation but was ‘merely one item out of a total of 45 items unilaterally submitted by plaintiffs' and was in the nature of an ‘unbalanced’ bid.
In the absence of other pertinent evidence in the record as to the reasonable value of such application of water10 we are not constrained to hold that the trial court erred in considering the unit price as set forth in the contract as evidence of such reasonable value. The applicable reasoning is that found in Ferrier v. Commercial Steel Corp., 142 Cal.App.2d 424, at page 427, 298 P.2d 555, at page 557: ‘It is well settled that the price agreed upon by the parties for work to be done may be used as a criterion in ascertaining the reasonable value of services performed. The point is illustrated by Whitty v. Fidelity & Deposit Co., 123 Cal.App. 334, 11 P.2d 84, 85. In that case plaintiffs had sued to recover ‘the reasonable value of the work performed by them.’ The amount which the trial court found to be the reasonable value of the work performed was the exact sum specified in the contract to be paid for it. The only point urged on appeal was that the amount of the reasonable value of the services found by the trial court was not supported by the evidence. In affirming the judgment the court pointed out, 123 Cal.App. at page 337, 11 P.2d at page 85: ‘it has been repeatedly held in this state that the contract price of work to be performed furnishes some evidence of its reasonable value. In the case of Divani v. Donovan, 214 Cal. 447, 455, 6 P.2d 247, 250, it was said: ‘The contention of the defendants apparently is the, in the absence of any proof other than proof of the price paid, or the contract price, the plaintiff cannot recover. But the lack of merit in this contention is made apparent by a number of decisions in which it has been held that the contract price or the price paid is some evidence of value. [Citation.]’ It necessarily follows that the findings of the trial court as to the reasonable value of the work done by the plaintiffs find support in the evidence and in the contract between plaintiffs and the cross-complainants; the contract price being some evidence of value which the trial court could adopt as the measure of the reasonable value of the work done.' In Wilson v. Mattei, 84 Cal.App. 567, 258 P. 453, 456, it is held that in an action on a common count for the value of materials furnished and labor performed the contract between the parties was competent evidence ‘as an admission of the standard of value.’ In 27 Cal.Jur., 232, sec. 40, the rule is stated thus: ‘Evidence of a special contract to pay a sum certain for services is admissible under a common count for work and labor as tending to show the value of the services. * *’ Kimes v. Davidson Inv. Co., 101 Cal.App. 382, 386, 281 P. 639; Pacific States Savings & Loan Co. v. Painter, 37 Cal.App.2d 645, 646, 99 P.2d 1103.'
It is true that in the findings of fact it was stated that the plaintiffs were entitled to be paid for the water ‘at the contract price of $2.50 per M gallon[s]’. But, in the light of the record, it is not reasonable to assume that the total amount found to be due to the plaintiffs would have been different if the finding had been expressed in terms of reasonable value. Hence there has been no miscarriage of justice and there is no basis for a reversal of the judgment with respect to this item of damage. (See Vaughn v. Jonas, 31 Cal.2d 586, 601, 191 P.2d 432.)
The trial court found that the sum of $45,392.78 for the application of water became due and payable to the plaintiffs on November 6, 1956. Interest on that sum was allowed from September 18, 1959,11 to the date of entry of judgment. Since the plaintiffs were entitled to recover only the reasonable value of the application of water made necessary by the breach of warranty and since that amount was not certain or capable of being made certain by calculation at the time the plaintiffs' right to recover damages because of the breach of warranty accrued, the plaintiffs were not entitled to interest with respect to that item prior to judgment. (Cf. Parker v. Maier Brewing Co., 180 Cal.App.2d 630, 635, 4 Cal.Rptr. 825.
One further matter of a specific nature remains for consideration. The trial court found that the plaintiffs' completion of their work under the contract was delayed for a period in excess of 172 calendar days by reason of the fact that the material in the Wilder pit was not as represented and that, accordingly, the State had no right under the contract to withhold from the plaintiffs the sum of $17,200 as liquidated damages. The State contends that the evidence supports only the conclusion that the ‘overrun’ of 172 calendar days in completing the project resulted from delays caused by the contractor prior to the production of any of the local materials. While the evidence may well have supported an inference in favor of the State's position, our independent examination of the record has led to the conclusion that the trial court was justified in making the findings of fact to which reference has been made.
Moreover, in any event we would be warranted in assuming that the evidence is sufficient to support the specific findings of fact of the trial court upon the issue of delay because the State has failed to show on this appeal that there was no substantial evidence to support the challenged findings. As was said in Routh v. Palm Oil Co., 160 Cal.App.2d 359, at pages 360–361, 324 P.2d 936, at page 938: ‘Where an appellant claims that some particular issue of fact is not sustained by the evidence, he is required to set forth in his brief all of the material evidence on the point and not merely his own evidence. If this is not done, the error assigned is deemed waived.’ The soundness of such requirement that a fair and adequate statement of the pertinent evidence be made is apparent in this case in which the reporter's transcript is approximately 2,100 pages in length. However, to assure a thorough consideration of the matter, this court has examined with care the transcript of the testimony before the trial court.
In its closing brief, the State asserts that the computation of damages was made upon an improper basis and that the amount awarded was not supported by the evidence. The attack is primarily upon a statement in the plaintiffs' brief which we set forth in the footnote.12 Thus, it is argued that the correct amount of ‘theoretical waste’ was 426,000 tons which, when compared with the estimated requirement of 515,000 tons, ‘gives a theoretical waste factor of approximately 45%.’ It is stated that ‘there was no evidence whatsoever to support the 31% waste factor.’ The record discloses, however, that Marion E. Nelson, the resident engineer for the State on the project for a period of time, testified as follows as to a calculation which he had made: ‘I see I have 31% average waste and that's without any contingency added. That's meeting the bare minimum on the critical sieve sizes, also neglecting the effects of crushing.’ But even if it be assumed that a waste factor of 45% was the correct factor to be employed, the State has not shown that the trial court did not use a proper basis in arriving at its determination of damages in the amount of $542,244.67 (exclusive of the item for application of water and the sum of $17,200 involved in the issue as to delay in performance), a sum substantially less than the plaintiffs' claim of $754,881.33 as to that portion of its damages as embodied in the report of their accountants received in evidence as Exhibit 64. The trial court was not, of course, required to set forth its computations showing by what method the amount of damages awarded was determined. The pertinent inquiry on appeal is whether there was substantial support in the evidence for the findings as to damages. (Gollaher v. Midwood Constr. Co., 194 Cal.App.2d 640, 649, 15 Cal.Rptr. 292.)
Other arguments made as to the computation of damages relate to conflicts in the evidence and to inferences to be drawn from the evidence. The resolution of those matters was within the province of the trial court. Since the record shows that there was sufficient evidence to support the challenged findings of fact, this court is not free to substitute its judgment for that of the trier of fact.
The judgment is excessive to the extent of the interest allowed on the sum of $45,392.78 from September 18, 1959, until the entry of judgment on July 31, 1963, which interest is in the amount of $12,286.25. The judgment should be modified by reducing the amount of interest set forth therein from $16,941.71 to $4,655.46, so that the correct amount of the judgment is composed of the sum of $604,837.45 as damages and the sum of $4,655.46 as interest, together with costs as stated in the judgment. The judgment is so modified and, as modified, is affirmed. Each party shall bear his or its own costs on appeal.
1. That particular designated source was known as the Wilder pit.
2. The special provisions were in part as follows: ‘CHAPTER II. SPECIAL REQUIREMENTS * * * (c) Local Materials.—Attention is directed to Section 6, articles (b) and (f), of the Standard Specifications. Samples indicate that material of satisfactory quality for the production of imported base material, gravel blanket material, and mineral aggregate for plant-mixed surfacing and cement treated base, may be obtained left of approximate Station 615. Arrangements have been made for the Contractor to obtain material at the above location at a price not to exceed 3/4 cent per ton for material removed from the site and used on the work.’
3. The document was dated April 28, 1954, and was a ‘Memo.’ addressed to Mr. Dekema by Mr. Hutchinson, Mr. Dekema being the assistant district engineer and Mr. Hutchinson being the acting materials engineer for District VIII of the Division of Highways of the Department of Public Works of the State of California. Portions thereof were as follows: ‘Submitted herewith is information concerning possible local material sources for the project VIII–Riv–26–D, E from 2.3 miles west of Garnet to Edom. This information has been developed during the investigation for borrow sites and possibly would be of value to the prospective bidders for this project. * * * This hillside [described as ‘Hillside Left of Station 600 D to 625 D’] is composed of rather loosely compacted sand and gravel ranging from 4 inches to dust. A layer of blow sand covers the base of the hill and apparently exists in spots on the slope as some test holes encountered considerable coarse material while others were practically all sand.‘Tests indicate that after processing, to meet the grading requirements, the material is suitable for imported base material, cement-treated base aggregate, gravel blanket, and plant-mixed surfacing aggregate. Some selection may be necessary to insure that the material used for PMS aggregate is sufficiently hard to pass the LART test.‘This source is well located as far as the economy of hauling is concerned considering a single source of material for the entire length of the project. With this in mind, a borrow agreement was negotiated with the property owners by the Right of Way Department for the material on the hillside Left of Station 595 D to Station 615 D.‘Tests on this material indicate that the material has the following qualifications:Passing a 2 1/2″ sieve70–100%Passing a 1″ sieve65–96%Passing a No. 4 sieve55–88%Passing a No. 30 sieve20–59%Passing a No. 200 sieve2–8%R-Value73–78Plasticity IndexN.P.'
4. The additional source of material was known as the S.P. pit.
4. The State's argument that the evidence offered by the plaintiffs as to the meaning of the particular words in the construction industry was inadmissible is untenable. As has been noted, the State first introduced parol evidence as to usage in the construction industry. The governing law is succinctly stated in section 375 of Witkin on California Evidence as follows: ‘Even though the words in an instrument, taken in their ordinary sense, are entirely certain, parol evidence is admissible to show that by a custom or usage they were used in a different sense.’ In Ermolieff v. R.K.O. Radio Pictures, 19 Cal.2d 543, at page 550, 122 P.2d 3, at page 6, the Supreme Court stated: ‘The correct rule with reference to the admissibility of evidence as to trade usage under the circumstances here presented is that while words in a contract are ordinarily to be construed according to their plain, ordinary popular or legal meaning, as the case may be, yet if in reference to the subject matter of the contract, particular expressions have by trade usage acquired a different meaning, and both parties are engaged in that trade, the parties to the contract are deemed to have used them according to their different and peculiar sense as shown by such trade usage. Parol evidence is admissible to establish the trade usage, and that is true even though the words are in their ordinary or legal meaning entirely unambiguous, inasmuch as by reason of the usage, the words are used by the parties in a different sense. [Citations]. The basis of this rule is that to accomplish a purpose of paramount importance in interpretation of documents, namely, to ascertain the true intent of the parties, it may well be said that the usage evidence does not alter the contract of the parties, but on the contrary gives the effect to the words there used as intended by the parties. The usage becomes a part of the contract in aid of its correct interpretation.’
5. Article (c) of section 2 of the standard specifications of January, 1949, which were a part of the contract, contained the following provisions:‘The bidder shall examine carefully the site of the work contemplated and the proposal, plans, specifications, and contract forms therefor. It will be assumed that the bidder has investigated and is satisfied as to the conditions to be encountered, as to the character, quality, and quantities of work to be performed and materials to be furnished, and as to the requirements of these specifications, the special provisions, and the contract.‘Where investigation of subsurface conditions has been made by the State in respect to foundation or other design, bidders may inspect the records of the Department as to such investigation, including examination of samples, if any.‘Such investigations are made for purposes of design. The State assumes no responsibility whatever in respect to the sufficiency or accuracy of borings or other preliminary investigations or of the interpretation thereof and will not, either expressly or impliedly, make any guarantee of any of the same.‘Making such information available to bidders is not to be construed in any way as a waiver of the provisions of the first paragraph of this article and bidders must satisfy themselves through their own investigations as to conditions to be encountered.‘No information derived from such inspection of records of preliminary investigations made by the Department or from the Engineer or from his assistants or from the maps, plans, specifications, profiles or drawings will in any way relieve the Contractor from any risk or from properly fulfilling all the terms of the contract.‘Records of such preliminary investigations as may have been made by the Department may be inspected at the office of the District in which the work is situated, or in case of bridge construction, at the office of the Bridge Engineer, Public Words Building, Sacramento, California.’Article (b) of section 6 of the standard specifications was in part as follows:‘When sources of materials to be furnished by the Contractor are designated in the special provisions, the contractor shall satisfy himself as to the quantity of acceptable material which may be produced at such locations, and the State will not assume any responsibility (other than that hereinafter provided) as to the quantity of acceptable material at the designated location.‘If tests have been made by the State of other locations in the vicinity, the results of such tests are available to the Contractor or to prospective bidders on inquiry at the office of the district in which the work is situated, or in the case of bridge work, at the office of the Bridge Engineer, Public Works Building, Sacramento, California. This information is furnished for the Contractor's or the bidder's convenience only and the State does not guarantee such tests and assumes no responsibility whatever as to the accuracy thereof or the interpretation thereof stated in the test records.’
6. C2Exhibit 2 (Memorandum)C3Exhibit 41 (Osborne Reports)C2%C3%Passing 2 1/2″ sieve70–100100Passing 1″ sieve65–9688–100Passing No. 4 sieve55–8884–97Passing No. 30 sieve20–5933–71Passing No. 200 sieve2–8.03–2.7
7. In the opening brief of the State the following statement is made: ‘However, it is submitted that plaintiffs are entitled to only the increased costs over and above that which they would have been had there been no breach or misrepresentation. See Gagne v. Bertram [Bertran], 43 Cal.2d 481, 490 [275 P.2d 15], and Civil Code Section 3300.’
8. In Appendix D to the opening brief of the State, it is said in part: ‘In determining the amount of waste that will be encountered in a material site, two factors which affect waste must be considered. One is the percentage of sand present in the material source and the second is the percentage of sand which can be used in the particular products to be produced. The correct method of computing the waste may be illustrated as follows: The specifications for gravel blanket permit 25% to 35% of the finished product to be sand (-No. 4 materials). For simplicity in our illustration, we will assume Gravel Blanket to have fixed requirements of 65% rock (+No. 4 material) and 35% sand (-No. 4 material). This will place our product on the high side of the tolerances this contract permitted for Gravel Blanket (i. e., will permit the greatest use of sand in the product). Let us further assume that we have a 100 pound unit of material from a pit containing 29% rock and 71% sand. (The percentages assumed by plaintiffs in bidding this item.) In producing the Gravel Blanket product, we will have available out of the 100 pound unit only 29 pounds of rock. Of the remaining 71 pounds of sand we will be able to combine with the rock, only that quantity of sand which will give a product of 65% rock and 35% sand, which is the specification requirement for Gravel Blanket. Thus, with the 29 pounds of rock we will be able to use only 15.6 pounds of sand, or, out of the 100 pound unit, we will be able to use a total of only 44.6 pounds of material (29 pounds rock and 15.6 pounds sand). The remainder of the 100 pound unit or 55.4 pounds of material would be waste. Since we have used 100 as our unit, the percentage of waste would be 55.4%.’
9. Article (b) of section 6 of the standard specifications was in part as follows:‘When, in the opinion of the Engineer, all of the acceptable material obtainable at all of the designated sources has been exhausted, and it becomes necessary to move the entire plant to another location, the State will reimburse the Contractor for the cost of moving his plant to a new source of supply and erecting the same; however, the State will not reimburse the Contractor for any expense in connection with developing the new source of material for quarrying operations. The State will also allow or deduct, as the case may be, the increase or decrease in cost due to an increase or decrease in the length of haul involved. No allowance will be made for moving the Contractor's plant from one to another of the designated sources or from one location to another at any of the individual sources named. No allowance will be made for lost time or for delay in completing the work due to moving the plant from one source of supply to another. * * *‘Should the Contractor elect to obtain material from approved sources other than those designated in the special provisions, without first exhausting the supply at the locations thus designated, he shall make all necessary arrangements with the owners and he shall pay all costs involved, including any which may result from an increase in the length of haul.’
10. In the State's opening brief reference is made to calculations in the plaintiffs' bid estimate (part of the plaintiffs' own records) resulting in two figures, $1.01 and $1.18 per unit of ‘M gallons.’ But the figures were not used by the plaintiffs in their bid and did not relate to application of water to the haul roads in question under the unanticipated circumstances arising from the breach of warranty.
11. Section 3287 of the Civil Code, relating to the recovery of interest, was made applicable to the State by the amendment of 1959 which became effective on September 18, 1959. (Stats.1959, ch. 1735, p. 4186.)
12. The plaintiffs stated in their brief (their references to the record being omitted herein):‘The basis of computation used by Respondents was generally as follows: it was shown that the plant set up at the Wilder Pit was capable of processing pit run material at the rate of 679 tons per hour; if the pit had been as represented, 468 tons of the 679 should have been usable material, the other 211 tons being waste (assuming a waste factor of 31% as estimated by Appellant's Resident Engineer); at the rate of 468 tons per hour all of the mineral aggregate products (494,742 tons) could have been produced in 1,057 hours of plant operation; however, it was actually necessary to operate the plant at the Wilder Pit for 2,829 hours, or 1,772 hours in excess of what would have been necessary if the pit had been as represented. Respondents therefore computed the actual cost per hour of operating the plant and multiplied that cost by 1,772 hours. To this was added: the cost of operating the SP Pit which would not have been necessary if the Wilder Pit had been as represented; the cost of dozing away the excess waste in the Wilder Pit; the rental value of the asphalt plant which had to sit idle on the job awaiting the production of gravel blanket, imported base material and mineral aggregate for cement treated base; and the excess cost of hauling plant-mixed surfacing from the plant to the roadway caused by the loss of Respondents' hauling subcontract because of their inability to produce the product fast enough to keep the subcontractor's trucks busy.’
SHINN, P. J., and KAUS, J., concur.