B-143438, OCT. 24, 1960

B-143438, OCT. 24, 1960

TO DIMEND AND THORMAN:

WE HAVE YOUR LETTER OF SEPTEMBER 16, 1960, REQUESTING ON BEHALF OF YOUR CLIENT, CAPITOL TRASH REMOVING COMPANY, INC., RECONSIDERATION OF OUR DECISION, B-143438, SEPTEMBER 9, 1960, TO THE ADMINISTRATOR, GENERAL SERVICES ADMINISTRATION, IN WHICH WE HELD THAT CONTRACT NO. GS 03B-7665, DATED FEBRUARY 2, 1960, UNDER WHICH YOUR CLIENT IS OBLIGATED TO FURNISH TRASH AND DEBRIS REMOVAL AND DISPOSAL SERVICES COULD NOT BE REFORMED SO AS TO GRANT AN INCREASE IN THE CONTRACT PRICE.

THE CONTRACT PROVIDES FOR THE REMOVAL OF TRASH AT A FIXED PRICE PER MONTH AND THE REMOVAL OF DEBRIS AT A FIXED PRICE PER CUBIC YARD. ONLY THE TRASH PORTION OF THE CONTRACT IS UNDER CONSIDERATION. THE INVITATION FOR BIDS UNDER ITEM 1 DESCRIBED THE EXTENT OF THE SERVICES THE CONTRACTOR IS TO PERFORM, AS FOLLOWS:

"FURNISH ALL REQUIRED TRASH AND DEBRIS REMOVAL AND DISPOSAL SERVICES AS ITEMIZED AND DESCRIBED IN THE ATTACHED SPECIFICATIONS AND GENERAL CONDITIONS * * * FOR A PERIOD OF ONE YEAR BEGINNING ON THE DATE SPECIFIED IN THE NOTICE OF AWARD AT THE SITES INDICATED IN EXHIBITS "A" AND "B" (SITES TO BE SERVICED AND SCHEDULE OF REMOVALS) OF THIS SCHEDULE * * *.'

EXHIBIT "A" IS MADE UP OF A LIST OF 43 SITES AND INDICATES THE NUMBER OF WEEKLY PICKUPS OF TRASH AT EACH SITE, PICKUP DAYS AND HOURS AND THE ESTIMATED CUBIC YARDS PER MONTH TO BE PICKED UP FROM EACH SITE. THE ESTIMATES TOTAL APPROXIMATELY 1,100 CUBIC YARDS. BASED ON THE ACTUAL EXPERIENCE OF THE CONTRACTOR, HOWEVER, IT IS UNDERSTOOD THAT THE QUANTITY OF TRASH REMOVED IS ABOUT TWICE THE AMOUNT ESTIMATED IN EXHIBIT "A.' THE DISCREPANCY, AS INDICATED BY A REPORT FROM THE GENERAL SERVICES ADMINISTRATION DATED AUGUST 19, 1960, APPEARS TO HAVE RESULTED FROM A FAILURE TO TAKE INTO CONSIDERATION THE INCREASED POPULATION IN THE STATE ANNEX, THE GENERATION OF TRASH DUE TO BUILDING RENOVATION AND THE UNANTICIPATED REFUSAL OF THE CONTRACTOR FOR THE PURCHASE OF WASTE PAPER BEGINNING JULY 1, 1960, TO ACCEPT USED PAPER COFFEE CUPS.

IN YOUR LETTER OF SEPTEMBER 16, 1960, YOU REQUEST RECONSIDERATION OF OUR DECISION OF SEPTEMBER 9, 1960, FOR THE REASON, AS YOU STATE IT, "THAT IT IS BASED UPON THE CONCEPTION THAT EVENTS HAD TAKEN PLACE AFTER THE AWARD WAS MADE, WHICH, WHILE IT MADE THE PERFORMANCE OF THE CONTRACT ONEROUS TO THE CONTRACT.' YOU ALSO STATE THAT THE SITUATION INVOLVES A "MISREPRESENTATION MADE BY THE GOVERNMENT ON WHICH THE CONTRACTOR HAD A RIGHT TO RELY WITHOUT AN INVESTIGATION TO PROVE ITS FALSITY.' YOU CITE THE FOLLOWING CASES IN SUPPORT OF YOUR CONTENTIONS: HOLLERBACH V. UNITED STATES, 233 U.S. 165; RAILROAD WATERPROOFING V. UNITED STATES, 133 CT.CL. 911; UNITED STATES V. ATLANTIC DREDGING CO., 253 U.S. 1; UNITED STATES V. JOHNSON, 153 F.2D 846; ARCALE MIDWEST CORP. V. UNITED STATES, 125 CT.CL. 818; AND, KOSTELAC V. UNITED STATES, 247 F.2D 723.

WITH REGARD TO YOUR FIRST CONTENTION, A READING OF THE DECISION OF SEPTEMBER 9, 1960, INDICATES THAT IT IS NOT BASED UPON THE CONCEPTION THAT THE EVENTS IN QUESTION HAD TAKEN PLACE AFTER THE AWARD WAS MADE. THE DECISION WAS BASED UPON AN ANALYSIS OF THE QUANTUM OF SERVICES REQUIRED UNDER THE CONTRACT AS INDICATED BY THE PROVISION IN THE INVITATION CALLING FOR BIDS UNDER ITEM 1 TO FURNISH "ALL REQUIRED TRASH AND DEBRIS REMOVAL AND DISPOSAL SERVICES AS ITEMIZED AND DESCRIBED IN THE ATTACHED SPECIFICATIONS AND GENERAL CONDITIONS * * *.' THE DECISION NOTED THAT THE GOVERNMENT BY PROVIDING THAT THE CONTRACTOR FURNISH "ALL REQUIRED" TRASH REMOVAL SERVICES AND DESCRIBING THE QUANTITY OF TRASH IN ESTIMATED FIGURES, DID NOT INTEND TO LIMIT THE SERVICES TO BE PROVIDED TO THE AMOUNT ESTIMATED. FURTHERMORE, THE DECISION NOTED THAT IN ORDER TO JUSTIFY THE REFORMATION OF ANY INSTRUMENT, THE MISTAKE RELIED ON MUST HAVE BEEN IN DRAWING THE INSTRUMENT AND NOT IN MAKING THE CONTRACT OUT OF WHICH IT GREW OR WHICH IT EVIDENCES. THE MISTAKE IN QUESTION DID NOT CONSIST IN DRAWING THE CONTRACT. AS FINALLY FORMALIZED IT CLEARLY EXPRESSED THE INTENTION AND AGREEMENT OF THE PARTIES. WE CONCLUDED, THEREFORE, THAT THERE WAS NO LEGAL BASIS FOR REFORMING THE CONTRACT.

THE QUESTION WHETHER OR NOT THE PRIOR DECISION WAS BASED ON THE CONCEPTION THAT EVENTS HAD TAKEN PLACE AFTER THE AWARD WAS MADE IS NOT VITAL, IN ANY EVENT, TO THE CONCLUSION REACHED. FOR PURPOSES OF DISCUSSION, ONLY, WE MAY ASSUME THAT THE ERRONEOUS ESTIMATES WERE CAUSED SOLELY BY THE FAILURE OF THE GOVERNMENT ESTIMATORS TO TAKE INTO ACCOUNT ALREADY EXISTING CONDITIONS. EVEN IN THE CASE, HOWEVER, THE MISTAKE WOULD STILL CONSIST IN THE INDUCEMENT OF THE CONTRACT AS WRITTEN EXPRESSES THE TRUE INTENTION AND AGREEMENT OF THE PARTIES AND THE FACT THAT THE PARTIES MIGHT HAVE MADE A DIFFERENT CONTRACT HAD THEY KNOWN THE TRUE STATE OF AFFAIRS IS IMMATERIAL. MARYLAND CASUALTY CO. V. UNITED STATES, 169 F.2D 102. THEY DID NOT, IN FACT, AGREE TO ANY TERMS OTHER THAN THOSE EXPRESSED IN THE CONTRACT AS FINALLY EXECUTED, AND REFORMATION DOES NOT LIE TO MAKE A NEW OR DIFFERENT AGREEMENT FOR THE PARTIES OR TO ADD TERMS, NOT PREVIOUSLY AGREED UPON, TO AN EXISTING CONTRACT. THE MARYLAND CASUALTY CO. CASE, SUPRA, QUOTES THE FOLLOWING LANGUAGE OF WILLISTON WITH APPROVAL:

" "THE PROVINCE OF REFORMATION IS TO MAKE A WRITING EXPRESS THE BARGAIN WHICH THE PARTIES DESIRED TO PUT IN WRITING. * * * IF, BECAUSE OF MISTAKE AS TO AN ANTECEDENT OR EXISTING SITUATION, THE PARTIES MADE A WRITTEN INSTRUMENT WHICH THEY MIGHT NOT HAVE MADE, EXCEPT FOR THE MISTAKE, THE COURT CANNOT REFORM THE WRITING INTO ONE WHICH IT THINKS THEY WOULD HAVE MADE, BUT IN FACT NEVER AGREED TO MAKE.' 5 WILLISTON ON CONTRACTS, REV., 1936 ED., SEC. 1549.'

WITH REGARD TO YOUR SECOND GROUND FOR RECONSIDERATION--- MISREPRESENTATION BY THE GOVERNMENT AND MISTAKE BY THE CONTRACTOR--- THE GREAT WEIGHT OF APPLICABLE LAW HAS BEEN SUMMARIZED AND STATED AS FOLLOWS:

"BEFORE REFORMATION IS AUTHORIZED, THE INSTRUMENT MUST FAIL TO EXPRESS THE AGREEMENT OR INTENTION OF THE PARTIES, EITHER BECAUSE OF MUTUAL MISTAKE OR BECAUSE OF MISTAKE, INADVERTENCE, OR ACCIDENT ON THE ONE SIDE AND FRAUD OR INEQUITABLE CONDUCT ON THE OTHER; BUT IF THE INSTRUMENT DOES FAIL TO EXPRESS THE REAL AGREEMENT OR TRANSACTION DUE EITHER TO MUTUAL MISTAKE OR TO MISTAKE, INADVERTENCE, OR ACCIDENT TO ONE SIDE, AND FRAUD OR INEQUITABLE CONDUCT ON THE OTHER, AND REFORMATION IS ESSENTIAL TO GIVE COMPLETE LEGAL EFFECT TO THE INSTRUMENT, IT WILL BE ALLOWED. * * *" 76 C.J.S., REFORMATION OF INSTRUMENTS, SEC. 30.

"WHILE FRAUD HAS BEEN DECLARED A WELL-KNOWN GROUND FOR REFORMATION OF WRITTEN INSTRUMENTS, FRAUD PERPETRATED TO INDUCE THE CONTRACT, ALTHOUGH A GROUND FOR ITS CANCELLATION OR RESCISSION, * * * IS NOT AGROUND FOR ITS REFORMATION; IN ORDER TO BE THE BASIS OF REFORMATION OF THE INSTRUMENT, FRAUD MUST HAVE BEEN COMMITTED AT THE TIME OF THE EXECUTION THEREOF. ORDER TO AUTHORIZE REFORMATION, FRAUD MUST RESULT IN THE EXPRESSION BY THE WRITTEN INSTRUMENT OF A DIFFERENT PURPOSE FROM THAT WHICH THE PARTIES HAD AGREED ON AND INTENDED TO EMBODY THEREIN, OR MUST BE FRAUD WHEREBY THE TERMS AS AGREED ON BY THE PARTIES ARE SUPPRESSED OR MISREPRESENTED SO THAT THE INSTRUMENT EXECUTED DOES NOT ACCURATELY STATE THE CONTRACT ACTUALLY MADE. SO * * * WHERE THROUGH MISTAKE OR IGNORANCE ON ONE SIDE AND FRAUD OR INEQUITABLE CONDUCT ON THE OTHER THE INSTRUMENT DOES NOT ACCURATELY STATE THE AGREEMENT ENTERED INTO OR THE INTENTION OF THE PARTIES, ITS REFORMATION IS AUTHORIZED.' 76 C.J.S. REFORMATION OF INSTRUMENTS, SEC. 29A CITING, AMONG OTHERS, THE FOLLOWING CASES: SIMMONS CREEK COAL CO. V. DORAN, 142 U.S. 417; PRUDENTIAL INSURANCE CO. OF AMERICA V. STRICKLAND, 187 F.2D 67; CAMILLA FEED MILLS V. ST. PAUL FIRE AND MARINE INS. CO. OF ST. PAUL, MINN., 177 F.2D 746; SCHOONOVER V. SCHOONOVER, 172 F.2D 526; AND ROCK-OLAMFG. CORP. V. FILBEN MFG. CO., 168 F.2D 919, CERTIORARI DISMISSED 335 U.S. 855, CERTIORARI DENIED 335 U.S. 892.

THE SCHOONOVER CASE INVOLVED A COMPLAINT WHICH ALLEGED THAT THE DEFENDANT (HUSBAND) MADE FRAUDULENT REPRESENTATIONS TO THE PLAINTIFF (WIFE) REGARDING THE EXTENT AND VALUE OF THEIR JOINT PROPERTY; THAT THE PLAINTIFF RELIED THEREON, WAS DECEIVED THEREBY, AND AS A RESULT WAS INDUCED TO ENTER INTO A CONTRACT ACCEPTING $35,000 AS HER ONE-HALF OF THE VALUE OF JOINT PROPERTY WHEN, IN FACT, THE VALUE OF SUCH ONE-HALF INTEREST WAS MUCH GREATER. THE COURT HELD THAT THE PLAINTIFF STATED AN ACTION FOR FRAUD AND DAMAGES BUT DID NOT STATE, NOR WAS SHE ENTITLED TO, AN ACTION FOR REFORMATION OF THE CONTRACT.

THE ABOVE AUTHORITIES CLEARLY INDICATE THAT TWO SUBSTANTIVE CONDITIONS MUST BE SATISFIED BEFORE A PARTY TO A CONTRACT IS ENTITLED TO REFORMATION ON THE GROUNDS OF FRAUD OR MISREPRESENTATION: (1) THE FRAUD OR MISREPRESENTATION MUST IN FACT EXIST; AND (2) THE FRAUD OR MISREPRESENTATION MUST CONSIST IN THE EXECUTION OR REDUCTION OF THE AGREEMENT TO WRITING AND NOT IN THE INDUCEMENT OR MAKING OF THE AGREEMENT. THUS, AS IN REFORMATION FOR MUTUAL MISTAKE, REFORMATION FOR MISREPRESENTATION OR FRAUD MUST BE BASED UPON A FAILURE OF THE CONTRACT, AS WRITTEN, TO EXPRESS THE TRUE AGREEMENT OF THE PARTIES.

APPLYING THE ABOVE RULES TO THE MATTER BEFORE US WE FIND NO BASIS IN THE RECORD FOR CONCLUDING THAT THE ESTIMATES IN THE INVITATION WERE DELIBERATELY LOW. FURTHERMORE, THE QUANTITIES OF TRASH TO BE REMOVED WERE CLEARLY STATED IN THE INVITATION FOR BIDS TO BE ESTIMATES AND WERE NOT INTENDED TO REFLECT EXACT QUANTITIES. (IN THIS CONNECTION SEE THE ANNOTATION IN 27 A.L.R. 2D 35 FOR A DISCUSSION OF "ESTIMATES" AS CONSTITUTING STATEMENTS OF FACT PROPERLY TO BE RELIED UPON, OR OPINION WHICH CANNOT BE RELIED UPON.) THE SAME PRINCIPLES APPLICABLE TO REFORMATION FOR MUTUAL MISTAKE ARE APPLICABLE TO REFORMATION FOR FRAUD OR MISREPRESENTATION AND AS EXPRESSLY NOTED IN THE DECISION OF SEPTEMBER 9, 1960, WITH REGARD TO MUTUAL MISTAKE THE CONTRACT AS FINALLY FORMALIZED CLEARLY STATED THE INTENTION AND AGREEMENT OF THE PARTIES.

WE HAVE CAREFULLY REVIEWED THE AUTHORITIES CITED BY YOU IN SUPPORT OF YOUR CONTENTIONS AND WE FIND THEM INAPPLICABLE TO THE QUESTION BEFORE US. THOSE AUTHORITIES INVOLVED EITHER SUITS FOR DAMAGES OR EXCESS COSTS OR SUITS FOR THE RESCISSION OF CONTRACTS. NONE OF THEM INVOLVED SUIT FOR REFORMATION. ALSO, MOST OF THOSE DECISIONS INVOLVED EITHER POSITIVE AND UNCONDITIONAL STATEMENTS OF FACT UPON WHICH THE PLAINTIFF RELIED TO HIS DETRIMENT, OR THEY CONTAINED AN ELEMENT OF OUTRIGHT FRAUD.

UNDER THE CIRCUMSTANCES, WE HAVE NO ALTERNATIVE BUT TO CONCLUDE THAT THERE IS NO LEGAL BASIS FOR REFORMING THE CONTRACT, EITHER FOR MUTUAL MISTAKE, OR FOR MISREPRESENTATION AND MISTAKE. THE DECISION OF SEPTEMBER 9, 1960, IS AFFIRMED.