Brief for the Respondents in Opposition — Massman Construction Co. v. United States

A ati: REALE i A oh RANT NF eh RL ET A ANNE

INDEX

Opinion below. ______- Fk ie ei iinet eerie a enn paren e ead wiaicame

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CITATIONS

Cases:

Board of School Commissioners of City of Indianapolis vy,

Bender, 36 Ind. App. 164__-..-... 5 ice aoe eee

‘onnolly v. Bouck, 174 Fed. 312... ___ Saas at te te

tdmund J. Rappoli Co. v. The United Slates, 98 C. Cls. 499_

Edward A, Dunn v. P. D. O’ Mara, 70 I. App: 0002 625.2;

Edwin Dougherty, ete... v. The United States, No. 45856,

Philippine Sugar, etc. Co. v. Philippine Islands, 247 U. S.

WON ane hdine shee dieu wnscokcuswsecaiacwe ec,

Restatement of Contracts:

Me WER eee iain san cnaskktoukwevaxaltbocuiac.u,

septs RES ie ean ee eet eae

RG aah atei ude hve ocd ick Goths fice cn ts

RM edAsente Se oe Grae nsCacnseecck cinwcun ul.

iii ia ssc Sx Onur dendd nn S¥icisies. oo

ON cinta ealwlate aleeicd sd ovin the cuauicic cen

Williston on Contracts (Rev. Ed., 1936):

REE PORES INS SINE SME Ts ect ENS

ME iAetikus Join we kine eccusneelncaiese

wo igh can Se POE NOSE a OEE AR Ie NR

Ns eeuinucy niboVewuwkconutnleskcun ce

646335—45 (1)

9

Board of Trustees, etc., v. O. D. Wilson Co., 133 F. 2d 399_ 8,9, 12

Inthe Supreme Gourt of the United States

OcroBer Term, 1944

No. 1169

TH MassMaNn Construction Company,

PETITIONER

Vv.

Tue Unitep States

ON PETITION FOR A WRIT OF CERTIORARI TO THE COURT

OF CLAIMS

BRIEF FOR THE UNITED STATES IN OPPOSITION

OPINION BELOW

The opinion of the Court of Claims (R. 57=62)

is not yet officially reported.

JURISDICTION

The judgment of the Court of Claims was

entered on January 8, 1945, and a motion for

a new trial was overruled on March 5, 1945 (R.

63). The petition for a writ of certiorari was

filed on April 16, 1945. The jurisdiction of this

Court is invoked under Section 3 (b) of the Act

(1)

a

of February 13, 1925, as amended by the Act of

May 22, 1939.

QUESTION PRESENTED

A bidder on a Government contract, after un-

successfully seeking modification or withdrawal of

its bid because of an alleged mistake in the bid

price, thereafter, under protest, signed, executed

and performed the Government’s contract and

accepted payment at the bid price. It thereafter

brought suit in the Court of Claims secking refor-

mation of the contract. The question presented

is whether, in these circumstances, the court

below properly refused to reform this contract

because of the alleged mistake in the bid price.

STATEMENT

On October 23, 1940, the United States Engi-

neer Office, New Orleans, Louisiana, invited bids

for the furnishing of labor and performance of

all work te repair the existing, rubble-mound, east

jetty at Caleasieu Pass, Louisiana (R. 5-10, 43).

The invitation stated that the ‘‘unit price bid for

each item must allow for all collateral or indirect

cost connected with it’’ (R. 8, 44). The invita-

tion also required bidders to execute bid bonds

with each bid (R. 6, 44), the bond to become “‘void

and of no effect’’ if the bidder shall ‘‘enter into a

written contract with the Government, in accord-

ance with the bid as aceepted’’ (R. 28-29). On

November 7, 1940, petitioner filed its bid in the

office of the District Engineer together with a bid

heen

3

bond in the amount of $200,000 (R. 28-29, 50).

The bids were opened on the same day, and peti-

tioner’s bid of $367,800 was the lowest of four

submitted (R. 50).

On November 20, 1940, petitioner, by letter,

notified the office of the United States Engineer

at New Orleans that its bid had ‘‘unintentionally

failed to include in [its] total cost the value of

equipment rentals which should be charged against

the job;’? and that such rentals ‘‘which should

have been added to [the] bid totaled $88,000.”

Admitting that the ‘fault was entirely’? due to

its own ‘‘oversight,”’’ petitioner requested that the

$88,000 cost ‘“‘be added to [its] bid before the

contract is awarded,”’ or, in the alternative, that

its “‘bid be rejected,’’ and the ‘‘bid bond be re-

leased without penalty to either the surety com-

pany or [it]’? (R. 53).". On December 18, 1940,

the District Engineer advised petitioner that its

bid of $367,800 was accepted, that ‘‘after due con-

*The facts underlying petitioner’s “oversight,” and its

subsequent disclosure, are set forth in detail in the Special

Findings of Fact of the court below (Findings 4-16; R.

44-53). They may be briefly summarized as follows: Peti-

tioner’s bid was estimated and submitted by petitioner's

general superintendent and chief estimator, George E. Owens.

While computing the costs to be taken into consideration in

the submission of a bid, Owens, through inadvertence, failed to

remove from his brief case the cost sheet estimating equipment

rentals at $88,000, (R. 46-50), and as a consequence, the final

computation of the bid did not include this amount (R. 49).

After the submission of the bid, Owens became concerned

over its correctness, but attributed the error, if any, to poor

an

4

sideration’’ petitioner’s request to change its ‘‘bid

is denied,”’ but that petitioner has “the right to

file a claim with the District Engineer for sub-

mission through channels to the Comptroller Gen-

[petitioner’s] bid’? ($367,800) (R. 54-55). On the

ceipt of this letter, petitioner’s officers “‘con-

sidered the advisability of declining to enter into

the contract,’ and ‘‘the effect of the forfeiture

of its [bid] bond.’’ Considering, however, ‘‘as

one of the main factors the effect which a failure

to enter into the contract might have upon its

relations with the Government,”’ the petitioner

decided to sign the contract (R. 54).

Thereafter, on December 28, 1940, petitioner

executed the contract to ‘‘furnish the plant, labor

and perform the work’’ in accordance with the

specifications set forth in the government’s ad-

vertisement for bids, and at the “prices set out in

[petitioner’s] bid’? ($367,800) (R. 4-55). On the

same day, petitioner forwarded to the District En-

gineer, together with the contract, a written pro-

test stating that it was signing the contract “‘under

protest,”’ and “‘reserving all of its rights * * *

judgment (R. 51-52). Thereafter. the oversight was dis-

closed in a conference between Owens and petitioner’s presi-

dent and vice president (R. 52-53).

* The court below found that at the time petitioner exe-

cuted the contract at the bid price, it “had considerable Gov-

ernment business and did not desire to injure its established

good-will with the Government agencies with which it was

dealing” (R. 54). The court also found that “During the

past fifteen years,” petitioner’s contracts with the Govern-

ment “have amounted to some $60,000,000” (R. 43).

5

and asking for relief on account of error and mis-

take in its bid’? (R. 54-55). Petitioner enclosed

in this letter a letter to the Comptroller General

in which it prayed that ‘‘relief be given it in this

matter by allowing it the reasonable rental value

of said equipment so inadvertently overlooked in

[its] bid’’ (R. 55). The District Engineer for-

warded petitioner’s letter to the Comptroller Gen-

eral (R. 55). Thereafter, petitioner’s officials

had conferences with the Corps of Engineers sub-

mitting affidavits and information in support of

its claim (R. 55). On June 13, 1941, the Corps

of Engineers forwarded petitioner’s claim to the

Comptroller General, finding ‘‘that there is doubt

whether the [petitioner] did in fact make the

mistake,”’ that “‘the estimate was prepared in an

extremely careless manner,’ that ‘‘it would not be

unconscionable to require [petitioner] to perform

the work at its bid price,’’ that the ‘‘record does

not establish that the [petitioner] would incur a

loss in performing at the contract price,” and

recommending that the ‘‘claim be disallowed”’ (R.

55-56). The Comptroller General denied the

claim (R. 56). Petitioner thereafter completely

performed the contract and received payment at

the contract price (R. 56).°

On October 15, 1942, petitioner filed a petition

in the Court of Claims for ‘‘modification”’ of its

contract with the United States ‘“‘by the addition

*$100 was withheld from the petitioner because of its re-

fusal to sign the final voucher (R. 56).

5 ce oes

a

6

thereto of the sum of at least $88,000” (R. 5).

That court entered judgment dismissing the peti-

tion, Judge Littleton dissenting without an opin-

ion (R. 62-63).

ARGUMENT

It is settled law that Where, because of mistake,

the terms of a written contract are ‘materially at

variance”? with the intention of both parties to

the contract, reformation will be allowed to re-

form the writing “so that it shall express the

intention of the parties.” Restatement of Con-

tracts, §504. In the absence of the “fraud or

misrepresentation of one” of the parties to the

contract (id. § 491),* the “‘mistake must be mutual

and common to both parties to the instrument,

It must appear that both have done what neither

intended.’’ Hearne v. Marine Insurance Com-

pany, 20 Wall. 488, 490-491. Following these

basic principles, the court below refused reforma-

tion of petitioner’s contract because there was no

clement of “mistake”? present at the time peti-

tioner signed its contract with the Government,

for both petitioner and the Government had

by then become aware of petitioner’s mistake in

the bid (R. 60). Petitioner contends, however,

that the element of mutual ‘mistake’? was in-

herent in the executed contract, since the contract

‘“‘was signed under written protest, and primarily

* Petitioner does not contend that the Government was

guilty of fraud or misrepresentation. And the mistake was

not a patent one; see note 7, p. 11, infra.

7

because the petitioner realized that its failure to

do so would work a forfeiture of its bid bond’?

(Pet. 13; see also Pet. 15, 19). We submit that

the facts of this case and the applicable rules of

jaw make these contentions untenable.

The undisputed findings of fact of the court

below make it clear that there was no element

of mistake—a “state of mind that is not in ac-

cord with the facts’? (Restatement of Contracts,

§500)—present at the time the petitioner exe-

cuted its eontract with the United States. At

that time, the alleged ‘oversight’? (R. 53) of

petitioner’s chief estimator and general superin-

tendent, George E. Owens, was known to_peti-

tioner’s officers and had been made known to the

Government (Findings 15-18; R. 52-54). Peti-

tioner had sought modification or withdrawal of

its bid, and the Government had ‘after due

consideration’ refused petitioner’s request

(Findings 16, 17; R. 53-54). With knowledge

of the alleged “oversight”? and the Government’s

position in respect thereto in mind, petitioner

elected not to rescind its bid, but to sign and

execute the contract with the United States at

the bid price (Finding 18; R. 54). It is, there-

fore, clear that there was no element of mistake,

either* mutual or unilateral, present at the time

of the signing and execution of the contract which

would, of itself, now justify reformation.

Petitioner contends, however,. that the ‘‘mis-

take”’ in its bid inhered in the executed contract,

8

since it signed that contract “primarily because

the petitioner realized that its failure to do s

would work a forfeiture of its bid bond’? (Pet,

13).’ This is but another way of asserting that

the contract was signed under duress. But it is

clear that petitioner’s liability on the bid bond

was litigable (Moffet, Hodgkins, etc. Co. v. Roches-

ter, 178 U. 8. 373) and may not be made a basis

for imputing “inequitable conduct’? to the Gov-

ernment (Pet. 12) or for contending that the

contract was executed conditionally or under

duress (Pet. 13). The courts have consistently

held that where one is entitled to litigate, there

is no duress or unconscionable conduct justifying

rescission or reformation of the transaction al-

legedly induced thereby. EF. g., Board of Trus-

tees, ete. vV. O. D. Wilson Co., 133 F. 2d 399 (App.

D. C.); see also cases cited in Williston on Con-

tracts (Rev. Ed., 1937), § 1606. As the court

°It is extremely doubtful if the record will support this

contention. The court below found that in “reaching a de-

cision to sign the contract” at the bid price, petitioner “con-

sidered the effect of the forfeiture of its bond and also as one

of the main factors the effect which a failure to enter into |

the contract might have upon its relations with the Govern-

ment. At that time | petitioner] had considerable Govern-

ment business and did not desire to injure its established

good-will with the Government agencies with which it was

dealing” (Finding 18; R. 54). The court below, in its opin-

ion, also observed the “factor” of petitioner's “potential lia-

bility” on its bid bond “was not, apparently, the dominant

one in arriving at the decision to sign. The dominant factor,

it may be inferred from the testimony of [petitioner’s] offi-

cial, was the desire of the [petitioner] to keep the good will

of its best customer” (R. 61).

g

below stated, the ‘‘insistence’’ of the Govern-

ment in refusing to reject or modify petitioner’s

bid “put the [petitioner] in the position where

it had to make up its mind whether it would be

wiser to refuse to sign the contract and contest

by litigation its liability on the bond, or to sign

_ the contract, keep its reputation clear with the

Government and seek relief through the disere-

tionary action of higher officials,’? and did not

make the Government’s position unconscionable

(R. 62). In other words, petitioner ‘simply

chose to contract and perform rather than have

its right to rescind [the bid] judicially deter-

mined. It is bound by the contract and cannot

recover * * *” (Board of Trustees, etc. v.

0. D. Wilson Co., 133 F. 2d at p. 400). In such

circumstances, it ‘is elementary”’ that ‘‘one who

merely performs his contract can recover merely

the contract price’’ (¢bid; see also Hawkins v.

Vivied States, 96 U. S. 689).° ;

Nor did petitioner’s execution of the contract

“under written protest’”’ (Pet. 13, 15, 19) because

° Hearne v. Marine Insurance Co., 20 Wall. 488 (Pet. 15,

18), Moffett, Hodgkins, etc. Co. v. Rochester, 178 U. S. 373

(Pet. 15-18, 20-21), Board of School Commissioners of City

of Indianapolis v. Bender, 36 Ind. App. 164 (Pet. 19, 22-23)

and Edward A. Dunn v. P. D. O'Mara, 70 Tl. App. 609 (Pet.

21-22), relied upon by petitioner, are not in point. In the

Hearne case, this Court refused reformation because the “cir-

cumstances” showed that there was “no mistake nor misap-

prehension” at the time the parties executed their contract

(20 Wall. at p. 491). In the Moffett and Board of School

Commissioners cases, it was held that one filing a bid at the

ee ae ok

Peper nr renqae nes mien

——

10

of the ‘‘mistake”’ in its bid price add anything to

its rights to subsequent reformation, absent mu-

tual mistake or duress. Petitioner, having chosen

not to rescind its bid, conceivably voidable if made

invitation of a governmental agency, which bid was based on

mistake, could withdraw the bid upon the discovery of the

mistake, and no contracts were thereafter executed. In the

Dunn case, the mutual mistake was disclosed after the con-

tract was executed, and the court specifically found that the

words of the contract did not express the true intention of the

‘parties.

Petitioner’s assertion (Pet. 14, 23-24) that the decision

of the court below is in “conflict” with its decisions in

Hygienic Fibre Co. v. The United States, 59 C. Cls. 598, Poole

Engineering & Machine Co. v. The United States, 58 C. Cls,

9, Edmund J. Rappoli Co. v. The United States, 98 C. Cis.

499, and Edwin Dougherty, ete. v. The United States, No.

45856, decided October 2, 1944, is without merit. In the

Hygienic Fibre case, reformation of a cost-plus contract was

allowed, but the court specifically found that the “prices

stipulated” by the parties “were not intended to be conclu-

sive” (59 C, Cls. at pp. 607-608). In the Poole case, re-

formation was allowed because, at the time of the contract's

execution, both parties to the contract understood the obliga-

tions of each thereunder to be different from those stated in

the written instrument. In the Xdmund J. Rappoli case, an

allegedly erroneous bid was submitted by a Government con-

tractor, but the contractor was persuaded by Government

officers to sign the contract at the bid price on the assurance

“that the mistake could be corrected by going through a

routine,” and that “when the routine was finished [the con-

tractor] would receive what it was entitled to” (98 C. Cls. at

p. 516). The court treated the assurance as 2” integral part

of the contract, and reformation was made to conform to the

understanding of the parties. In the Dougherty case, the

court denied the contractor relief, stating that “upon accept-

ance” of the bid by the Government, the contractor “became

obligated to do the work for the amount bid” (p. 11 of slip-

sheet opinion).

_—-

11

under duress or based on a mistake of fact

(Williston on Contracts (Rev. Ed., 1937),

§§ 15, 1626), elected to contract with the United

States at its bid price (Findings 18, 19; R. 54-55),

and thus terminated any right to reformation

thereof. See Restatement of Contracts, § 431

(comment g); Williston, supra, § 1528; ef. Re-

statement of Restitution, § 68." As the court

‘In this respect, it is significant to note that, after the

opening of the bids which disclosed petitioner’s to be the low-

est of four submitted, petitioner's chief estimator and gen-

eral superintendent, George EK. Owens, conferred with the

District engineer in regard to the performance of the proj-

ect. At that time, neither the District Engineer nor his as-

sistant, both of whom were experienced estimators, regarded

petitioner’s bid as erroneous or unconscionably low. Indeed,

the bid was not substantially different from bids submitted

some sixteen months earlier for similar work in the same

area (Finding 14; R. 51-52). Thereafter, neither the Dis-

trict Engineer, the Corps of Engineers, nor the Comptroller

General found petitioner’s bid unconscionable (Findings 17,

20, 21; R. 53-54, 55-56). In fact, the Corps of Engineers,

after considering affidavits and supporting data submitted

by petitioner, found that “there is doubt” as to whether peti-

tioner did “in fact make the mistake” and that the “present

record does not establish that [petitioner] would incur a

loss in performing at the contract price” (Finding 20; R.

56). Petitioner nowhere alleges that it actually incurred a

loss in executing the contract. Since it is “firmly estab-

lished” that it is not sufficient to establish the facts upon

which reformation of a contract is sought “by a mere pre-

ponderance of the evidence, but the proof thereof must be

of the clearest and most satisfactory character—proof that is

plain and convincing beyond reasonable controversy” (Fire-

men’s Ins. Co. v. Lasker, 18 F. 2d 375, 378 (C. C. A. 8) ; see

also Philippine Sugar, etc. Co. v. Philippine Islands, 247 U.S.

385, 391), there is substantial doubt whether the facts of this

case would have even supported reformation of petitioner’s

a

12

stated in Board of Trustees, etc. v. O. D. Wilson

Co., 133 F. 2d 399, 400 (App. D. C.), where,

as here, the contractor executed the contract in

accordance with the bid price, but “ ‘reserving’

all rights arising from its estimator’s mistake,” |

petitioner ‘‘could not on any theory contract,

perform, collect the full contract price, and then

repudiate the contract and recover as if there had

been none. It could not acquire such a right by —

purporting to ‘reserve’ it.”” To allow petitioner

relief in these circumstances would, in the words

of the court below, ‘‘be making for the parties the

very contract which one of them, the Government,

expressly refused to make * * *, though re-

quested to do so by the [petitioner]’’ (R. 60).'

bid, had it chosen not to sign and execute the contract at the

bid price. Clearly, therefore, they are not sufficient to sup-

port reformation of an executed contract, entered into after

such facts were disclosed to both parties to the contract.

* Petitioner also argues (Pet. 19) that although it believes

“the mistake here was mutual,” the “petition and arguments

below sought, in the alternative, a rescission of this contract

so that if [this] Comrt should believe that the mistake was

unilateral,” relief should be granted in accordance with the

rule that a “mistake on one side may be ground for rescind-

ing, but not for reforming, a contract.” Although the peti-

tioner in the court below only sought “modification” of its

contract with the Government (R. 5)—which can hardly be

characterized as rescission—it is clear that the instant case

is not one in which petitioner could seek rescission. Where

a right to rescission exists, it is terminated by an election to

proceed with the contract, and by an acceptance of benefits

thereunder. Ford Motor Co. vy. Pearson, 40 F. 2d 858, 863

(C. C. A. 9); see also Connolly vy. Bouck, 174 Fed. 312

(C. C. A. 8) ; Restatement of Contracts, $§ 484, 510.

13

CONCLUSION

The decision below is correct and no conflict

exists. It is, therefore, respectfully submitted

that the petition for a writ of certiorari should

be denied.

Hue B. Cox,

Acting Solicitor General.

Frances M. Supa,

Assistant Attorney General.

Pau A. SWEENEY,

JEROME H. Srmonps,

Attorneys.

May 1945.

U S. GOVERNMENT PRINTING OFFICE 1945

y .

_

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