Court Opinion

ID: 9472281
Source: CourtListenerOpinion
Date Created: 2023-08-05 03:55:11.037208+00
Date Added: 2024-06-11T17:42:50.617224
License: Public Domain

CLARK, Chief Judge,
dissenting:
It is a fundamental of all contract law, not just that of Mississippi which is applicable in this diversity case, that “[cjourts do not have the power to make contracts where none exist, nor to modify, add to, or subtract from the terms of one in existence.” Citizens National Bank of Meridian v. L.L. Glascock, Inc., 243 So.2d 67, 70 (Miss.1971). The majority opinion, proceeding from an untenable factual basis and without citation of any precedent in support of its analysis, changes the contractual relationship adopted by the contractor and subcontractor here. The result works an injustice in this case and surely will prove damaging to the stability of traditional business relations among those engaged in the performance of public works in Mississippi.
The record clearly shows that Affholder gambled with uncertainty in bidding for this job by speculating about subsurface conditions that would be encountered at the very “bid” site it so strongly relies on. When it made the bid, Affholder did not know whether its speculations about working conditions were overly optimistic or not. Even now Affholder does not know what the conditions actually would have been, or at least the record does not establish it knew the facts. There is no legal basis for shifting to Southern Rock this calculated risk that Affholder knowingly assumed.
The district court committed error (which the majority opinion affirms) in substituting Affholder’s speculations about engineering facts, whereby Affholder assumed the risk of loss at the “bid” site, for reliable engineering facts. The district court stood on its head the contract-defined relations of contractor and subcontractor. It compounded this legal error with a conclusory finding, unsupported by the record, that subsurface conditions at the “bid” site were “vastly different” from those at the actual work site.
It is undisputed that there were two critical aspects to tunnelling conditions: (1) the water level at the site; and (2) the elevation of Yazoo clay there. The record contains no evidence about the water level at the “bid” site in 1976. Mr. Affholder testified that during the first, aborted bidding process in 1975, he had observed pump tests made by other parties and had deduced from those observations how extensive a dewatering system would be required. That is the only evidence to indicate the water level. The record reveals, however, that this 1975 test was 45 to 50 feet removed from Affholder’s 1976 bid site. (R-III, p. 205). Moreover, the test took place over a year prior to the bidding. It is undisputed among the parties that this area in Mississippi is “famous for fluctuations of the water table” and that testing prior to bidding is critical. Yet Affholder conceded at trial that neither observations nor tests of the water level were made at the “bid” site. Kuhlmann, Affholder’s area manager, conceded at trial that he “didn’t know how much water was going to be in the sand” when the bid was made. (R. II, p. 95).
Likewise, the record does not support the conclusion that the tunnel would have been entirely in clay at the “bid” location. Affholder made a test boring only on the east side of the highway, five to ten feet off the shoulder. Obviously the tunnel had to pass from one side of the highway to the other. Without evidence of the clay elevation on the west side, there is no way to know if the tunnel would have been entirely in clay at the “bid” site.
Kuhlmann testified that their estimate of the clay elevation on the west side was only a “guess.” (R. II, p. 109). As the district court noted, this area is “famous ... for *1016differences in elevation of the clay.” As the elaborate mathematical computations demonstrate, a misjudgment in the clay elevation by a matter of inches may make a great difference in the cost of construction of this sewer system tunnel. This critical engineering fact is not susceptible of proof by guesses and hunches. It admits of no gray area. The clay elevation was either just high enough or it was not. Furthermore, the reliability of Affholder’s and Kuhlmann’s guesses are called into question when one considers that they misinterpreted their own boring to show clay at thirty-three feet, yet now concede that the test log reveals clay at thirty-four and a half feet. Likewise, these “experts” were not even able to recognize that they were working at a site 150 feet farther along the highway than where they had exercised their expertise only a few months earlier * or to realize that “vastly different” working conditions immediately encountered were related to a change in the work site.
Because there is no reliable proof of the elevation of clay on the west side of the highway, there is no basis for the district court’s conclusion that the tunnel would have been built entirely in clay at the “bid” location.
The district court, without reference to the actual contract language, decided that Southern Rock breached an implied condition of the subcontract when it submitted to Affholder, “without notice,” the revised working drawings which clearly showed to anyone proficient in the construction industry that the tunnel was to be constructed 150 feet north of the location indicated on the bid drawings. The majority opinion, apparently realizing that the district court’s reasoning is untenable in light of the express contract language, declines to reach the issue. I pause briefly to note that the district court erred in this regard on several counts.
The subcontract between Southern Rock and Affholder explicitly incorporated the “terms, conditions, specifications, drawings, schedules and contract documents forming a part of the Original Contract between Contractor and Owner” (emphasis added). Affholder agreed to “complete the work in strict compliance with the terms of the Original Contract ____” Hence, Affholder bound itself to Southern Rock by the terms of the original contract by which Southern Rock bound itself to the owner, unless the terms were inconsistent with the subcontract or unless the subcontract contained words of definite limitation. See Perry v. United States, 146 F.2d 398, 400 (5th Cir.1945); Hill & Combs v. First National Bank of San Angelo, 139 F.2d 740 (5th Cir.1944). The terms were not inconsistent, and the subcontract contained no germane limiting language.
Nothing in the original contract supports finding an implied condition that the tunnel eventually would be constructed at exactly the location shown on the bid drawings. *1017The contract advised that working drawings would be issued as work progressed (Div. II, § A-04), that these supplementary drawings were an integral part of the contract (Div. II, § A-03), and advised Affholder to check the drawings carefully (Div. II, § A-04). Affholder was as bound to Southern Rock to construct the tunnel at the site shown on the engineer’s working drawings as Southern Rock was bound to the owner to construct it there. The “bid” site was only a point of .reference if some timely claim of cost of change was to be raised.
The contract explicitly reserved Rich-land’s right to increase or decrease the scope of work as necessary or desirable. (Div. I, § M-03). The contract provided a method whereby Affholder could, with advance authorization, procure additional compensation if the changes necessitated work not adequately reflected in the bid. (Div. I, § M-03).
There is no doubt that these provisions by which Richland reserved the right to alter the scope of the work and by which Affholder assumed the burden to seek advance authorization for additional compensation are valid and that these unambiguous provisions as read literally must be enforced. Cf. Jackson v. Sam Finley, Inc., 366 F.2d 148 (5th Cir.1966) (street-paving contract with City of Meridian, Mississippi, that provided for changes in the scope of work to be performed was valid and not breached by the city’s cutbacks in the project, even though the cutbacks radically altered the nature of the performance upon which the subcontractor had based its bid). Because there was no implicit condition that the “bid” location be invariable, there was no breach. Affholder was notified of the change in the location of the work in the manner that the contract provided.
The majority opinion seeks to dissociate itself from the district court’s error by declining to reach the issue of contractual breach, instead holding that “even if the contract terms govern, Affholder’s notice [to Southern Rock of increased costs due to changed conditions] was timely.” The majority opinion states: “There was no justification for additional compensation unless (1) conditions at the actual location were different from those that Affholder expected {i.e., those that would have been encountered at the “bid” location) and (2) this resulted from a change in location, not from some misjudgment on Affholder’s part.” The opinion concludes that notice was timely, since Affholder did not “know” until its work was finished that the changed conditions resulted from a changed location.
The majority opinion fails to discuss the fact that the original contract separately provides for additional compensation for two types of events. Under one set of provisions, the contract provides additional compensation for extra expenses arising out of changes made by the owner in the scope of the work required {i.e., “extras”) and for items inadvertently omitted from the original bid estimate {i.e., “work not covered”). (Div. I, §§ M-03, M-05). Such additional compensation must be authorized before the contractor proceeds with the work. (Div. I, § M-05).
The additional compensation provision quoted by the majority opinion appears in a separate section of the contract and states in full:
Any request by the Contractor for additional compensation, other than that compensation provided under the terms of the Contract, such as claims for extras, claims for work not covered, etc., shall be submitted to the Owner, through the Engineer, within thirty (30) days after the condition or conditions creating the alleged justification for additional compensation are discovered and/or become known to the Contractor.
Any incidents or conditions discovered by the Engineer by which additional compensation may be in order shall be deemed as “known to the Contractor” upon written notice to the Contractor by the Engineer of such incident or condition.
Failure of the Contractor to submit a claim for additional compensation during *1018the thirty (30) day period herein provided shall be considered as a waiver of all rights to additional compensation and no additional compensation will be allowed for any reason connected therewith.
(Div. I, § N-08) (emphasis added).
When the first set of provisions for additional compensation is read in conjunction with this latter provision, the contractual framework is clear: Affholder was entitled to seek additional compensation for (1) alterations in the scope of the work made by Richland, or (2) discovery of conditions that differed from those contemplated in the bid. The majority opinion confuses the notice requirements for additional compensation under the two sets of provisions. Under the latter set of provisions, Affholder was entitled to seek additional compensation for extra work resulting from unexpected conditions, independent of any knowledge or discovery of changes Rich-land had made in the scope of the work, and regardless of whether Affholder’s failure to anticipate the conditions actually encountered resulted from its own misjudgment, from fluctuations in pre-existing conditions, or from a shift in the location.
It is undisputed that Affholder encountered and recognized unexpected conditions within days of beginning its work. Under the terms of the contract, its conscious decision to grit its teeth and absorb the extra costs resulting from unexpected conditions constituted a waiver of its rights for additional compensation. As Southern Rock complains, Affholder never gave notice of the unexpected conditions, causing Southern Rock to be barred from recovering additional compensation from Richland. Southern Rock had no duty to tell Affholder a fact plainly disclosed by the contract drawings Affholder agreed would govern its work. Southern Rock should not be penalized for Affholder’s disregard of Affholder’s own contractual obligations.
Nor was Affholder’s request for additional compensation timely under those provisions relating to “extras” and “items not covered.” Those provisions contain no 30-day asking period, but required Affholder to seek additional compensation before performing the work. In Delta Construction Co. v. City of Jackson, 198 So.2d 592, 600 (Miss.1967), the Mississippi court endorsed such prior-approval requirements in municipal contracts:
The contract in the instant case requiring a supplemental agreement for extra work over minor changes is essential, because municipalities and other governmental agencies obtain funds with which to build public improvements from bond issues based upon estimates furnished to them, and municipalities must reserve the right to stop a project if they determine the extra work will exceed the amount of money allocated to any given phase of a project.
Apart from its patent misconstruction of the contract, the majority opinion contains an internal inconsistency. While declining to address the district court’s untenable conclusion that Southern Rock breached the subcontract, the majority opinion nevertheless affirms the lower court’s award of damages based upon quantum meruit and contractual breach, rather than upon the express terms of the contract. To reach such a result, the majority opinion must assume that Southern Rock breached its contractual obligation with respect to Affholder’s request for additional compensation. Implicit in this assumption, however, is the issue that the majority opinion fails to reach, namely whether Southern Rock breached any duty to notify Affholder of changes in the working drawings. Under the contract, a change in the location did not entitle Southern Rock automatically to additional compensation. Accordingly, Southern Rock’s failure automatically to honor such a request is not in and of itself a contractual breach, and provides no basis for awarding damages. Moreover, as discussed above, Affholder’s request for additional compensation was in fact not timely. Premised on unexplored and unfounded assumptions, while yielding only fleeting and superficial attention to the unambiguous contract provisions that resolve this dispute, the result of the majority opinion is unjust and contravenes Mississippi law. See Delta Construction Co. v. City of Jackson, 198 So.2d 592, 600 (Miss.1967).
For all of these reasons, I respectfully dissent.

 The majority opinion suggests that the change in location was not easily observable because, although there were two cleared rights of way visible when Southern Rock began work on August 2, the whole area “apparently" had been cleared when Affholder began work on September 22. Aside from the obvious fact that it was Affholder’s choice not to familiarize itself until September 22 with the work it bid, the record belies the suggestion that no landmarks were visible. Kuhlmann testified that he in fact visited the actual site on August 31 and witnessed the work being performed by Southern Rock. He testified that he did not see any evidence of the previous boring he had taken. (R. II, p. 101). Mr. Lester, the engineer, testified that he visited the work site after receiving correspondence in October about the change in the location of the tunnel. (R. Ill, p. 362). He testified that the old and new sites were clearly visible: "there is the old stake 150 feet down the road and here is the new installation all laid out, staked out with new stakes and all of that.... [T]he old stakes become grey and aged and the new stakes that we put in there to build it by were new white pine stakes and you can tell, those of us engaged in this kind of work, we can tell whether it is an old line or a new line." (R. Ill, p. 367). Furthermore, Mr. Lester testified that the terrains were different at the two sites: ”[T]he terrain where the tunnel finally went in had a bog and a pond that began some — I’m guessing, fifty or seventy-five feet west of the end of the tunnel. Whereas, the terrain where the old installation was did not have such a bog.” (R. Ill, p. 371). The particulars of this testimony are undisputed in the record.