holding that contractor entitled to recover for damages where increased expenses incurred by contractor were a “direct result” of the reliance on the misrepresented bid specification
How later courts described this case
- holding that contractor entitled to recover for damages where increased expenses incurred by contractor were a “direct result” of the reliance on the misrepresented bid specification
- independent testing to verify accuracy of PennDOT’s representation impractical due to size of project and impracticality of testing, as well as superior knowledge of PennDOT
- delay was caused by a failure to make a critical decision in a reasonable and timely manner
Written by the judges who cited it.
The opinion
NIX, Justice,
dissenting.
I dissent. The majority’s conclusion is based on a misreading of this Court’s holding in Pennsylvania Turnpike Commission v. Smith, 350 Pa. 355 , 39 A.2d 139 (1944), and fosters the erosion of both the competitive bidding process for public contracts and the binding effect of such contracts.
*346 Smith clearly requires that, to permit recovery on the basis of constructive fraud, the misrepresentation must be “substantial and not mere inaccuracy or innocent mistake.” Id., 350 Pa. at 362 , 39 A.2d at 142 . As this Court explained in Branna Construction Corp. v. West Allegheny Joint School Authority, 430 Pa. 214, 219-20 , 242 A.2d 244, 246 (1968):
[T]he decision in Smith was predicated upon several factors, ... (1) that the contractor was compelled to rely upon the plans as to the subsurface conditions since it was virtually impossible to make a thorough and independent investigation of the conditions in the short time allotted between the receipt of the plans and the time for bidding; (2) the Turnpike Commission had knowledge that the subsurface was predominantly rock and not soft loose earth as represented by the plans, and (3) the misrepresentations actually worked a constructive fraud upon the contractor. In contradistinction to the Smith case, the instant situation lacks any allegation that appellants knowingly or fraudulently misrepresented the test borings. ... (Emphasis supplied.)
See Montgomery v. Philadelphia, 391 Pa. 607 , 139 A.2d 347 (1958). Thus it is clear that recovery under Smith requires a showing that the defendant made a substantial misrepresentation with actual knowledge of its falsity or with reckless disregard for the truth.
Moreover, the Commonwealth Court has uniformly interpreted Smith as requiring proof that the misrepresentation was knowingly made. H.B. Alexander & Son, Inc. v. Commonwealth, Dept, of General Services, 65 Pa.Commw. 558, 443 A.2d 424 (1982); J.E. Brenneman Co. v. Commonwealth, Dept, of Transportation, 56 Pa.Commw. 210, 424 A.2d 592 (1981); Tri-County Excavating, Inc. v. Borough of Kingston, 46 Pa.Commw. 315, 407 A.2d 462 (1979); Commonwealth, Dept, of Transportation v. Brayman Const. Co., 33 Pa. Commw. 485 , 382 A.2d 767 (1978); Central Penn Industries, Inc. v. Commonwealth, Dept, of Transportation, 25 Pa. Commw. 25 , 358 A.2d 445 (1976); Commonwealth, Dept, of *347 Transportation v. Buckley & Co., 23 Pa.Commw. 18, 350 A.2d 438 (1976); Commonwealth, Dept, of Highways v. S.J. Groves & Sons Co., 20 Pa.Commw. 526, 343 A.2d 72 (1975); Commonwealth, Dept, of Transportation v. Acchioni & Canuso, Inc., 14 Pa.Commw. 596, 324 A.2d 828 (1974); Baker v. Commonwealth, Dept, of Transportation, 12 Pa.Commw. 254, 315 A.2d 669 (1974).
The facts in this case clearly fail to support a claim of constructive fraud under Smith . Appellant’s subcontractor, Tony DePaul & Sons, Inc., had calculated that 16,658 linear feet of trenching would be required to complete the project, whereas PennDOT’s bid specifications called for 13,131 linear feet. When DePaul contacted PennDOT’s engineers concerning this discrepancy, he was informed that the engineers had been directed to assume that approximately half of the existing conduit would be reusable. Thus, DePaul was aware that PennDOT’s figure was an “educated guess,” not based upon a knowledge of actual subsurface conditions. It is equally apparent that PennDOT had no knowledge of the condition of the existing conduit. Further, DePaul proceeded to calculate the cost of trenching using its own estimate of 16,658 feet rather than Penn DOT’s estimate. Thus, DePaul did not rely on the PennDOT engineers’ statement in arriving at his unit price of $24.00, which formed a part of appellant’s successful bid for the contract. Absent such reliance there can be no fraud. Thus, even under the majority’s interpretation of Smith , which I reject, appellant is not entitled to recover.
For the foregoing reasons I would affirm the order of the Commonwealth Court.