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Montrose Contracting Co. v. County.

February 7, 1938


Appeal from the District Court of the United States for the Southern District of New York.

Author: Manton

Before MANTON, L. HAND, and CHASE, Circuit Judges.

MANTON, Circuit Judge.

This appeal is from a judgment entered on a jury's verdict for appellee. The cause was here before and we reversed a judgment for the appellent entered on a directed verdict and ordered a new trial, 2 Cir., 80 F.2d 841, certiorari denied, 298 U.S. 662, 56 S. Ct. 746, 80 L. Ed. 1387.

The theory of appellant's liability, which we held should be retried, was that it had breached its contract with appellee, who agreed to construct a sewer in a tunnel beneath the streets of the city of Yonkers, Westchester county.The contractor's claim is that the appellant represented that this tunnel work was a "free air" job with the exception of about 600 feet and that this was a misrepresentation, since in performing the work it became necessary to construct 6,142 feet of the total distance of 8,553 feet by the use of compressed air. This increased the cost of the work, for which a recovery has been had.

On the former appeal we stated the facts in considerable detail and indicated the reasons why, on the proof there, a jury question was presented. The testimony on this, the second trial, not only repeats that of the first trial, but the witnesses called by the appellant corroborate the appellee's claims that the methods of construction set forth in the specifications were suitable for a free air tunnel and were employed where portions of the turnel were built in free air. "Free air" methods could not be used in the portions of the tunnel built by the contractor in compressed air.

Appellant's expert witnesses admitted that the specifications for the work were normally those drawn for "free air" tunnel construction. Appellant's engineers admitted that the 600 feet allowed in the contract for compressed air work was an arbitrary figure and had no relationship whatsoever to the true amount of the compressed air work, and it was shown that the representations so made were prepared in the chief engineer's office, notwithstanding the fact that the appellant's engineers knew at that time that from $3,000 to 6,000 feet of the tunnel would require compressed air.

Whether or not, in view of the boring sheets, exhibited to appellee before bidding and the mark thereon, "Water Level," the contractor had the right to rely on the warranty contained in the contract and specifications, was a jury question under the evidence in this record. In a very well-considered charge, the learned judge below submitted the questions to the jury and they have found against the appellant. In such submission, the court directed the attention of the jury to the contract provision requiring that the bidder make a personal examination of local conditions and the court charged that, if the inspection of the site by appellee's engineers should have shown them that the representations contained in the contract were false, appellee was not entitled to rely on the misrepresentations. This record supports the jury's determination of that issue in favor of the appellee. We said when the case was here before:

"In all these, methods suitable for a free air job and impossible of use in a compressed air job were specified in the contract. The stipulation that these free air methods be used was a representation that the job was free air tunnel construction work. Where one party furnishes specifications and plans for a contractor to follow in a construction job, he thereby impliedly warrants their sufficiency for the purpose in view. [citing authorities.] The specifications outlined above would be adequate only where the tunnel was to be built in free air. Thus the appellee, setting out these specifications to be followed, impliedly warranted the tunnel was substantially a free air job. Whether the builder was damaged in proceeding with the work in reliance on this implied warranty, as in the cases supra, or whether he was damaged in relying on the warranty in making his bid, as he did here, he may recover. [citing authorities]."

In submitting the case to the jury, the court instructed them that the contractor claimed that it relied on these representations in preparing its bid; that, if it did not in fact rely on the representations in the contract or if it did not have a right to rely on them, as he explained later, the appellee could not recover damages, although the appellant prepared the contract, plans, and specifications, because appellant could not be held liable for erroneous representations in the contract, plans, and specifications unless such representations could fairly be said to have actually influenced the appellee to make the bid it submitted. And the court properly said that the representations of the contract that the tunnel was substantially a free air job are equally binding on the appellant whether they were merely erroneous, innocently made or fraudulently and wilfully false. And he called the attention of the jury to the respective claims of the parties, saying:

"Plaintiff contends that instead of this being substantially a free air job, with about 600 feet of compressed air tunnel work, it was obliged to build 6142 feet of the tunnel in compressed air out of a total of 8553 feet. The defendant has offered evidence, some of it through the commission's engineers and some through experts, to show that this was not essentially or substantially a compressed air job and that most of it could have been done in free air by various methods such as sinking wells and pumping therefrom."

This charge was in accord with our previous ruling and sufficiently presented the issues as to liability to the jury.

On this record it was shown by appellee's testimony and admissions by the appellant's engineers that the specifications and supplementary specifications indicated a normal or free air job and that compressed air was not necessary except for 600 feet and, as the work progressed, it became necessary to use compressed air in its prosecution. It was shown that most of the borings had been made for the tunnel as originally designed at a higher elevation than under the final designs shown on the contract drawings. After the change of design, the engineers attempted to obtain additional borings down to the new level of the tunnel, but, due to boulders encountered and length of time required for new borings, the attempt was abandoned. It appears that most of the borings except those that struck rock were useless because they did not penetrate to the tunnel level. The county engineers did not check the work of those who prepared the boring samples which were exhibited to the contractor prior to the bidding. Appellee's witnesses testified as to these borings that only four of them in a distance of 6,998 feet penetrated to the depth of the tunnel and they were of little or no use in determining the type of tunnel construction which would be required. Therefore the jury could have found, as they did, that these borings would not justify holding that the appellee had reliable information to indicate the contrary of the appellant's representation that this was a free air tunnel job.

The contract included not only the terms "set forth in express words, but, in addition, all such implied provisions as are indispensable to effectuate the intention of the parties and as arise from the language of the contract and the circumstances under which it was made." Sacramento Nav. Co. v. Salz, 273 U.S. 326, 329, 47 S. Ct. 368, 369, 71 L. Ed. 663.The contract provision specifying that not more than 600 feet of compressed air work would be paid for regardless of whether more was required does not relieve the appellant from liability for its misrepresentations. U.S. v. Atlantic Dredging Co., 253 U.S. 1, 40 S. Ct. ...

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