Court Opinion

ID: 9781716
Source: CourtListenerOpinion
Date Created: 2023-08-30 17:16:48.326501+00
Date Added: 2024-06-11T12:13:23.016859
License: Public Domain

CORRIGAN, J., Dissenting.
The question presented is whether a public entity can be liable on a breach of warranty claim based on an unintentional misrepresentation or nondisclosure of material facts. The majority holds that, generally, a public entity may be liable “if it knew, but failed to disclose, material facts that would affect the contractor’s bid or performance.” (Maj. opn., ante, at p. 745.) The majority then sets forth a four-part test to make this determination modeled after the federal “superior knowledge doctrine.” (Id. at pp. 753-754.) I believe the majority’s holding is contrary to existing precedent.
In Souza & McCue Constr. Co. v. Superior Court (1962) 57 Cal.2d 508, 510 [20 Cal.Rptr. 634, 370 P.2d 338], we said, “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.” (Italics added.) “This rule is mainly based on the theory that the furnishing of misleading plans and specifications by the public body *755constitutes a breach of an implied warranty of their correctness.” (Id. at pp. 510-511.) Thus, some intentional wrongdoing on the part of the public entity (e.g., the furnishing of misleading plans) was required to hold it liable for a breach of warranty.
We elaborated on this concept in Wunderlich v. State of California (1967) 65 Cal.2d 777 [56 Cal.Rptr. 473, 423 P.2d 545] (Wunderlich). The plaintiffs sued the state for a breach of implied warranty when ground conditions at a project site were different than represented by test data provided to project bidders. We noted that “[t]he crucial question is thus one of justified reliance. If the agency makes a ‘ “positive and material representation as to a condition presumably within the knowledge of the government, and upon which ... the plaintiffs had a right to rely” ’ the agency is deemed to have warranted such facts . . . [Citation.]” (Id. at p. 783.) We also distinguished between affirmative representations that were intended to mislead and honest statements. While stating that a public entity would be liable for the former, we held that a contractor cannot rely on a public entity’s statements when the public entity makes honest statements relating to the property’s condition that are “suggestive only.” (Id. at p. 783.) We stated, “[I]f statements ‘honestly made’ may be considered as ‘suggestive only,’ expenses caused by unforeseen conditions will be placed on the contractor . . . .” (Ibid.)
We again addressed this general principle in Warner Constr. Corp. v. City of Los Angeles (1970) 2 Cal.3d 285 [85 Cal.Rptr. 444, 466 P.2d 996], There, a contractor alleged a breach of the implied warranty of correctness in plans and specifications. The contractor also sued for fraudulent concealment based upon the city’s alleged misrepresentations and nondisclosures of subsurface soil conditions. We identified three instances where a cause of action may arise for a public entity’s nondisclosure of material facts: “(1) the defendant makes representations but does not disclose facts which materially qualify the facts disclosed, or which render his disclosure likely to mislead; (2) the facts are known or accessible only to defendant, and defendant knows they are not known to or reasonably discoverable by the plaintiff; (3) the defendant actively conceals discovery from the plaintiff.” (Warner, supra, 2 Cal.3d at p. 294, fns. omitted.) With respect to the plaintiff’s claim of nondisclosure, we held all three instances of liability were present because the defendant affirmatively misrepresented and intentionally failed to disclose information relating to inaccuracies in the soil test logs prepared by the city and provided to the contractor in the bid package. (Id. at pp. 294-295.)
The lower courts have followed our precedent in similar cases. (See Jasper Construction, Inc. v. Foothill Junior College Dist. (1979) 91 Cal.App.3d 1, 10 [153 Cal.Rptr. 767] (Jasper); Thompson Pacific Construction, Inc. v. City of Sunnyvale (2007) 155 Cal.App.4th 525 [66 Cal.Rptr.3d 175] (Thompson).)
*756Jasper involved a breach of implied warranty claim. The court considered the propriety of a jury instruction that did not require evidence of misrepresentation or intentional concealment. The court held that “there can be no liability of a public entity for extra work caused by plans and specifications that are merely ‘incomplete.’ . . . [Rjecovery on this theory cannot be maintained upon a showing of a ‘defect’ unless that defect consists of intentional concealment or positive assertions of material facts which prove to be false or misleading.” (Jasper, supra, 91 Cal.App.3d at p. 11.) Thompson also involved jury instructions in an implied warranty claim. The Thompson court reached a result similar to Jasper stating, “In order to recover on such an action, the contractor must prove that the agency affirmatively misrepresented, or actively concealed, material facts which rendered the bid documents misleading, and that the contractor reasonably relied on such representations in preparing its bid. [Citation.]” (Thompson, supra, 155 Cal.App.4th at p. 551.)
Both of these cases properly relied on our precedent requiring proof that a public entity affirmatively misrepresented or intentionally failed to disclose a material fact to establish a breach of warranty claim.
Here, relying on Jasper, the trial court resolved all of Hayward Construction Company’s (Hayward) claims in favor of the Los Angeles Unified School District (District), specifically finding that Hayward could not establish a claim for breach of contract based on misrepresentation, because Hayward failed to show that the District actively concealed or intentionally omitted any material information. I believe the trial court’s decision correct. Jasper is firmly grounded in our precedent and sets forth a rule that is clear, straightforward and easy to apply. It also promotes integrity in the public contract bidding process by discouraging underbidding,1 while providing contractors protection from improper behavior by a public entity. The Jasper rule also punishes public agency misconduct, but avoids blurring the line between affirmative misconduct and negligence.2
*757The majority’s holding shifts an inordinate amount of risk to public entities in public construction contracts and exposes them to needless and protracted litigation.
I would reverse the Court of Appeal’s judgment.

 We have stated, “[A] governmental agency should not be put in the position of encouraging careless bidding by contractors who might anticipate that should conditions differ from optimistic expectations reflected in the bidding, the government will bear the costs of the bidder’s error.” (Wunderlich, supra, 65 Cal.2d at p. 786.)

 Welch v. State of California (1983) 139 Cal.App.3d 546 [188 Cal.Rptr. 726], does not support the majority’s holding. In Welch, the state provided inaccurate tide data that resulted in increased costs for construction of a pier. Welch was decided on the “limited ground” that a public entity can be liable for intentionally withholding information that would “cast doubt” on the truth of facts that were disclosed. {Id. at pp. 556, 558-560.) The court expressly refused to reach the contractor’s argument that Government Code former section 14270 (now Pub. Contract Code, § 10120) “impose[d] a broader obligation on the State to disclose ‘complete’ information irrespective of whether the State has affirmatively made misleading representations or partial disclosures.” (139 Cal.App.3d at p. 559.) Accordingly, Welch was decided on the *757narrow ground that a public entity may be liable “for nondisclosure in combination with [its] affirmative and misleading representation.” (Id. at p. 550.)