Opinion
E050272
10-12-2011
BEDON CONSTRUCTION, INC., Plaintiff, Cross-defendant and Respondent, v. K. HOVNANIAN COMMUNITIES, INC., Defendant, Cross-complainant and Appellant; BOND SAFEGUARD INSURANCE COMPANY et al., Defendants and Appellants.
Ulich & Terry, Andrew K. Ulich, Jonathan C. Terry and James C. Jardin, for Defendants, Cross-complainant and Appellants. The Mouzis Law Firm, Gerald W. Mouzis and Adrienne N. Matheson, for Plaintiff, Cross-defendant and Respondent.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
(Super.Ct.No. RIC473534)
OPINION
APPEAL from the Superior Court of Riverside County. John J. Lynch, (retired judge of the Inglewood Muni. Ct. assigned by the Chief Justice pursuant to art. VI, § 6 of the Cal. Const.), and Gloria Trask, Judges. Affirmed.
Ulich & Terry, Andrew K. Ulich, Jonathan C. Terry and James C. Jardin, for Defendants, Cross-complainant and Appellants.
The Mouzis Law Firm, Gerald W. Mouzis and Adrienne N. Matheson, for Plaintiff, Cross-defendant and Respondent.
Bedon Construction, Inc. (Bedon), plaintiff, sued defendants, K. Hovnanian Communities, Inc., formerly K. Hovnanian Forecast Homes, Inc. (Hovnanian), the general contractor, along with Bond Safeguard Insurance Company and The Continental Insurance Company, for money owed to Bedon arising from Hovnanian's retention of money owed to Bedon for work performed on a storm drain system in Hovnanian's residential real estate development project. After the jury returned special verdicts in favor of Bedon for the full amount sought, defendants made a motion for new trial, challenging the jury's award. The trial court issued a minute order granting a new trial unless Bedon agreed to a remittitur of the damages. Bedon consented to the remittitur but defendants sought a larger reduction, so the order on the new trial motion was not filed within 60 days. The court denied the motion due to the expiration of 60 days from the date of the entry of judgment pursuant to Code of Civil Procedure section 660. Defendants appealed.
Just as the final opinion was ready to file, the parties submitted a signed "Stipulation for Dismissal of Appeal and Remand of Action to the Superior Court of Riverside With Instructions to Dismiss Action With Prejudice." The stipulation referred to Code of Civil Procedure section 128, subdivision (a)(8), which authorizes a stipulated reversal if we make two findings: "(A) There is no reasonable possibility that the interests of nonparties or the public will be adversely affected by the reversal; and (B) The reasons of the parties for requesting reversal outweigh the erosion of public trust that may result from the nullification of a judgment and the risk that the availability of stipulated reversal will reduce the incentive for pretrial settlement."
We cannot make the finding required under subparagraph (B). Thus, we deny the stipulated request relating to dismissal of the appeal and remand, although the parties may file an acknowledgment of satisfaction of judgment to reflect their settlement. (Code Civ. Proc., §§ 724.010 et seq.)
On appeal, defendants claim: (1) the trial court granted Hovnanian's motion for new trial which precluded entry of judgment in favor of Bedon by the presiding judge; (2) the jury's verdict is contrary to law resulting from a misconstruction of the term "operated and maintained;" (3) the trial court erred in admitting parol evidence to contradict the terms of the rate sheet; and (4) the trial court erred in admitting hearsay testimony regarding unbilled work. We affirm.
BACKGROUND
Bedon is a licensed engineering contractor in California. On February 23, 2004, Bedon and Hovnanian entered an off-site agreement for the performance of storm drain work on Hovnanian's Boulder Springs project in Perris, California (Project). On August 30, 2004, prior to commencement of Bedon's work, the parties executed a master vendor agreement.
The off-site agreement specified a $1,594,020 "all-inclusive price" for original contract work, and required Bedon to obtain prior written authorization for extra work. Continental Insurance Company issued a faithful performance/material and labor bond for the project. The master vendor agreement provided that only written modifications to the contract, in the form of additive change orders, would provide authorization for Bedon to perform additional compensable work. Change order work that was billed was subject to a 10 percent retention, or a portion of the agreed rate that was withheld pending final completion of all work.
Pursuant to the schedule included in the off-site agreement, Hovnanian was to make the site available for construction in February 2004, during the dry season. But the Riverside County Flood Control District did not issue approved storm drain plans until November 22, 2004, so the site was not available for Bedon to commence its storm drain work until December 2004. This meant that instead of commencing the work in the dry season, it was commenced when the wet season begins, in December. The county imposes a deadline for having erosion control devices in place to prevent runoff from a project, so completion of the storm drain system timely was critical.
Despite the permit delays, Hovnanian did not want to delay the vertical construction and actual sales of the homes, and instructed Bedon to go forward with the contract on an accelerated schedule and in spite of occasional inclement weather. This meant altering the usual construction procedure by proceeding with the vertical construction at the same time as the land development work, resulting in a need for overtime for the installation of the storm drain system. Normally, grading and streets are cut first, underground "wet" utilities (water, sewer and storm drains) are installed, and the gutters and base pavement are done before starting the on-site vertical construction. Also, storm drains normally are commenced at the lowest point, and construction works uphill.
However, Hovnanian decided to deliver the upper end of the project first, which forced Bedon to pick up their point of connection at the midpoint on the system, then work upstream, and come back later to tie into the lower end. Performing the vertical construction at the same time as the land development resulted in extra work and overtime for the storm drain installation. Further, due to rains that came during the project, Bedon had to clean out storm drains on several occasions and perform extra work. This meant Bedon incurred loss of production and overtime costs, which precipitated a written modification to the contract, whereby Bedon would perform overtime and extra-contractual work on a time and materials (T&M) basis and Hovnanian would compensate Bedon via change order.
The T&M work was billed at labor and equipment rates furnished by Bedon, and documented on time and material reports (T&M reports.) Work billed on a time and material ticket included separate entries for equipment and labor. The "overtime differential compensation" was based on a multiplier of 1.9, consisting of the sum of time and a half (1.5) and a factor of .4, to compensate Bedon for anticipated loss of productivity and efficiency.
Once Bedon commenced construction, it regularly worked 14- to 20-hour days, up to seven days a week, and through several holidays. During the performance of its work, Bedon submitted regular T&M reports to Hovnanian. After being submitted for approval, Hovnanian would issue a change order and generate an application for payment (AFP) to be mailed to Bedon. Once Bedon obtained a signature from Hovnanian's on- site superintendent, it billed Hovnanian for payment, which Hovnanian's accounting department ultimately issued.
During the course of performance on the Project, Bedon submitted a total of 39 change orders, of which 38 were paid in the above-described manner. Hovnanian disputed the final change order of approximately $12,000 in July 2005, which the parties later negotiated down to around $4,000. However, Bedon did not receive payment for the last change order.
Bedon substantially completed its work on the Project in September 2006, which the Riverside County Flood Control District subsequently approved. Some work could not be completed due to the presence of conflicting utility lines. Some manholes were not raised because Hovnanian decided not to pave out a section of the tract. On September 18, 2006, Bedon filed a mechanics' lien over its retention, which it identified as $423,698.92.
Bedon submitted its retention invoice seeking $327,381.56, or the 10 percent retention Hovnanian withheld on billed work under the contract terms. However, Hovnanian disputed the amount of the last change order invoice for the overtime and the T&M rates, so it did not pay for that last invoice or the retention. Hovnanian ultimately bonded around the lien. Bond Safeguard Insurance Company issued the mechanic's lien release bond.
Bedon filed suit on May 16, 2007, against Hovnanian, Continental Insurance Company (Continental) (surety for faithful performance), and Bond Safeguard Insurance Company (Bond Safeguard) (mechanic's lien release bond), seeking recovery of an amount in excess of $476,700.08 for breach of contract and related theories. Hovnanian cross-complained, alleging-among other things-breach of contract by Bedon.
On January 5, 2009, the case went to trial by jury. At trial, Bedon sought to recover a larger sum of $843,422.44 from Hovnanian, consisting of a $326,192.76 retention total, a 2 percent interest penalty of $166,358.43, and $350,871.25 for the operator regular time that was mistakenly unbilled. The recalculated recovery resulted from the audit of Hovnanian's Project file, obtained by Bedon's president, Don Parker (Parker), in December 2008, with adjustments in the form of a credit for work billed but not performed, and for work that was under-billed.
The audit was conducted because Bedon's records were incomplete after an employee who embezzled from the business destroyed many records. The review of Hovnanian's project file led to the discovery that Bedon had underbilled for several items, and overbilled for work that was not completed at Hovnanian's direction. Bedon also found errors in time and material reports, specifically that operator time was not billed in the labor column, and overtime rate was not properly calculated. Ultimately, Bedon was owed $350,871.25 for the underbillings. Altogether, Bedon was owed $677,064.01.
On January 16, 2009, after six consecutive days of testimony, the jury returned a unanimous verdict on all 10 special verdict questions in favor of Bedon and awarded damages to Bedon in the amount of $843,422.44. On April 3, 2009, Hovnanian moved for judgment notwithstanding the verdict (JNOV), and for a new trial on the grounds that the evidence produced at trial was insufficient to justify the special verdict, the award of damages was excessive, the special verdict was contrary to law, the special verdict is the result of a surprise at trial, and there was a prejudicial error of law.
The special verdicts against Continental and Bond Safeguard, were prorated in proportion to the sums of their respective bonds: $350,871.25 against Continental, and $492,551.19 against Bond Safeguard.
On April 27, 2009, the court denied the motion for JNOV and granted the motion for a new trial or, in the alternative, a remittitur of the amount of $350,871.25, leaving a total judgment of $492,551.19. In granting the motion for a new trial, the court found that it had "substantial questions with the credibility of the testimony of the plaintiff, Mr. Parker, and [found] that this testimony [was] untruthful" and that "[t]he weight of the evidence in this case was that the term operated and maintained included the weight of the operator."
The court directed plaintiff's counsel to prepare the remittitur for his signature, in the amount stipulated above. The remittitur would serve as an alternative to a new trial. Hovnanian disputed the amount of the remittitur and requested additional time to submit supplementary briefing on the issue. The court consented to Hovnanian's request, and set a nonappearance hearing at which it would rule on the matter based solely on the parties' May 12, 2009, written submissions.
On May 27, 2009, defendants appeared at the nonappearance hearing and attempted to argue in the absence of plaintiff's counsel. The court declined to hear oral argument on the matter, and indicated that if the plaintiff consented to a remittitur, it would deny the motion for a new trial. Bedon had submitted a proposed order to that effect, which the court intended to sign. Defendant's counsel, however, expressed concern about the form of the order. Unwilling to entertain argument in the absence of plaintiff's counsel, the court delayed signing the remittitur order until May 29, 2009, to provide Hovnanian an opportunity to put its objection in writing. The court admonished counsel that the June 2, 2009, deadline to file a motion for a new trial fast approached, and that his term was nearly over. The court further warned that if the deadline passed, the motion for new trial is automatically denied, and the original verdict stands, to which counsel for Hovnanian responded affirmatively.
On June 25, 2009, the original trial judge returned to the bench from retirement for the purpose of dictating a minute order that indicated the time limit for ruling on the motion for a new trial had expired. The minute order further stated that the court was required to enter judgment in the amount of the jury's verdict without a reduction in damages, and directed the plaintiff to serve and submit to the court a judgment in the amount of the jury verdict plus attorney's fees and costs.
Subsequent to the June 25, 2009, minute order and the original trial judge's retirement, both Bedon and Hovnanian filed cross-motions, the former making a motion for entry of judgment, the latter a motion to set a date for new trial. At a September 4, 2009, hearing, the court found that the 60-day period pursuant to Code of Civil Procedure sections 660, 661, and 657, ran from April 3, 2009, to June 2, 2009. The court also found that the April 27, 2009 minute order granting a new trial did not specify the ground or grounds upon which it was granted, or the reasons therefor, so the court had lost jurisdiction over the matter. The court then denied Hovnanian's motion for a new trial, and granted Bedon's motion for entry of judgment conditioned upon plaintiff's counsel submitting a judgment consistent with the verdict.
On February 5, 2010, a notice of appeal was timely filed.
DISCUSSION
1. Entry of Judgment in Favor of Bedon Was Proper Where the Trial Judge's Minute Order Did Not Constitute an Order Granting Defendants' Motion for New Trial, and No Order Was Made Within the Jurisdictional Time Limit.
Defendants argue that the minute order of April 27, 2009, constituted an order granting their motion for new trial. Consequently, defendants argue that the subsequent action by the superior court in entering judgment in favor of Bedon was in excess of the court's authority and void. We disagree.
We begin by pointing out that a party to an appeal has a duty to summarize the facts fairly in light of the judgment. (Ajaxo Inc. v. E*Trade Group Inc. (2005) 135 Cal.App.4th 21, 50; see also Lewis v. County of Sacramento (2001) 93 Cal.App.4th 107, 113.) The defendants thus have a duty to "fairly set forth all the significant facts, not just those beneficial to the appellant." (In re S.C. (2006) 138 Cal.App.4th 396, 402, citing Foreman & Clark Corp. v. Fallon (1971) 3 Cal.3d 875, 881.) In this case, defendants have omitted facts which undermine their position, and have referred to only a portion of the court's minute order in making its argument that the trial court had granted its motion for new trial. This necessitates a summary of the new trial motion proceedings.
a. Background Relating to the New Trial Motion
Reading the entire record, it is clear that the minute order of April 27, 2009, was not intended to serve as an order granting the motion for new trial. Instead, it represented a tentative or intended decision. On that date, the court expressed doubt as to the correctness of the jury's award of damages based on Parker's testimony about lost or stolen documents representing a portion of the contract damages claimed. However, before that hearing concluded, the court agreed with Bedon's suggestion of a remittitur in the amount of $350,871.25, leaving a net judgment of $492,551.19, as an alternative to a new trial. Hovnanian objected and requested time to file a written brief on the issue. The court ordered Bedon to prepare a proposed order and a consent to the remittitur for signature and continued the matter to May 27, 2009, at which time the matter would be decided on the basis of submitted pleadings, with no appearances required. On May 12, 2009, plaintiff filed its consent to a remittitur of $350,871.25. However, defendants never approved the proposed order on the motion for new trial.
Instead, defendants appeared at the nonappearance hearing of May 27, 2009, and argued for additional time to object to the judgment. At that time, defense counsel indicated he did not wish to make any arguments regarding the new trial motion, but was concerned with the form of the order. The court refused to hear argument from counsel in the absence of plaintiff's counsel, but agreed to delay signing the judgment until May 29, 2009, to give Hovnanian time to file its objection. The court warned defendants' counsel that the jurisdictional deadline for ruling on the motion was approaching and, if that deadline passed, the motion for new trial would be automatically denied.
The court docket shows no order granting the motion for new trial was filed between May 27, 2009, and June 25, 2009, or at any other time. On June 25, 2009, the superior court, on its own motion, denied the defendants' motion for new trial due to the expiration of time for ruling on the motion. After numerous other postjudgment proceedings relating to costs, prejudgment interest and attorneys' fees, judgment was finally entered and defendants appealed.
b. Analysis
Code of Civil Procedure section 660, provides, in relevant part, that the power of the court to rule on a motion for a new trial expires 60 days after filing of the first notice of intention to move for a new trial. That section further provides that a motion for new trial is not determined within the meaning of the section until an order ruling on the motion (1) is entered in the permanent minutes of the court or (2) is signed by the judge and filed with the clerk. When a new trial is granted, the court is required to specify the ground or grounds upon which it is granted and the court's reason or reasons for granting the new trial upon each ground stated. (Code Civ. Proc., § 657.)
Bedon points to the fact that the order fails to include both a statement of the grounds or a specification of reasons for granting the motion as a sign of its deficiency to constitute an order granting the motion. We agree, insofar as California courts have consistently required strict compliance with Code of Civil Procedure section 657. (Oakland Raiders v. National Football League (2007) 41 Cal.4th 624, 634.) The statute requires that the statement of reasons be filed no later than 10 days after the order granting a new trial is jurisdictional, and a statement of reasons filed more than 10 days after the order is ineffective. (Ibid.) Substantial compliance with the statute is not sufficient. (Ibid., citing La Manna v. Stewart (1975) 13 Cal.3d 413, 419-423.)
An order conditionally granting a new trial is no less of an order granting a new trial than an unconditional order of the same nature. (Neal v. Farmers Ins. Exchange (1978) 21 Cal.3d 910, 931.) Although the trial court's remarks at the hearing were more detailed than the minute order, they did not constitute an order on the motion because they were oral, not written. (Hasson v. Ford Motor Co. (1982) 32 Cal.3d 388, 420.) The minute order in question does not satisfy the requirements of Code of Civil Procedure section 657, as defendants' counsel acknowledged in correspondence to the court dated May 21, 2009, wherein defendants reminded the court of the deadline to file the order.
No order was made within 60 days of the filing of the motion for new trial, so it was properly denied by operation of law. The time limits of Code of Civil Procedure section 660 are mandatory and jurisdictional, such that an order made after the 60-day period purporting to rule on a motion for new trial is in excess of the court's jurisdiction and void. (Siegal v. Superior Court (1968) 68 Cal.2d 97, 101; Collins v. Sutter Memorial Hosp. (2011) 196 Cal.App.4th 1, 11.) The trial court lacked the power to grant a motion for new trial upon the expiration of the 60-day period. (Fischer v. First Internat. Bank (2003) 109 Cal.App.4th 1433, 1450-1451.) Defendants gambled on the possibility of persuading the court to increase the amount of the remittitur, to further reduce Bedon's damages, but lost due to their own machinations preventing the court from signing the order.
There was no order granting the motion for new trial; thus, it was not error for the trial court to enter a denial of the motion.
2. There Is Substantial Evidence to Support the Jury's Special Verdict.
Defendants make several challenges to the verdict in favor of plaintiff which are presented as challenges to the jury finding as to the meaning of the term "operated and maintained." While the meaning of that term was the subject of much testimony during the trial, the special verdicts signed by the jury do not include any construction (or misconstruction) of that or any term. Instead, the essence of defendants' arguments is that there is insufficient evidence to support the verdict. We disagree.
In reviewing the sufficiency of the evidence to support a verdict, our authority begins and ends with a determination whether, on the entire record, there is any substantial evidence, that is, evidence which is of ponderable legal significance, contradicted or uncontradicted, which will support the judgment. (Nordquist v. McGraw-Hill Broadcasting Co. (1995) 32 Cal.App.4th 555, 561.) We indulge in all inferences favorable to the plaintiff. (Bowers v. Bernards (1984) 150 Cal.App.3d 870, 873-874.) It is not our role to reweigh the evidence, redetermine the credibility of witnesses, or resolve conflicts in the evidence. (Hiser v. Bell Helicopter Textron Inc. (2003) 111 Cal.App.4th 640, 652.)
Instead, we must consider the evidence in the light most favorable to the prevailing party, giving that party the benefit of every reasonable inference and resolving conflicts in support of the judgment. (Lenk v. Total-Western, Inc. (2001) 89 Cal.App.4th 959, 968.) Neither conflicts in the evidence, nor testimony which is subject to justifiable suspicion, justifies the reversal of a judgment, for it is the exclusive province of the trier of fact to determine the credibility of a witness and the truth or falsity of the facts upon which a determination depends. (Oldham v. Kizer (1991) 235 Cal.App.3d 1046, 1065.)
Defendants' arguments focus on the trial court's oral statements regarding the credibility of Don Parker, the owner of Bedon, prior to making its tentative ruling on defendants' motion for new trial. However, the function of the trial court in considering a new trial motion is quite different from our function in reviewing a judgment for substantial evidence. A trial court, in considering a motion for new trial, may review conflicting evidence, reweigh its sufficiency, reconsider credibility of witnesses, reject any testimony believed false and draw any reasonable inferences from the evidence. (Ganahl v. Certain Individuals (1962) 204 Cal.App.2d 571, 581-582.) In this case, the trial court's comments in connection with the new trial motion related to the exercise of this power and impacted the portion of the damages claimed for under-billed work.
As discussed in the previous section, defendants have mischaracterized the trial court's ruling on the motion for new trial by setting out the trial court's statements, made at the inception of the hearing prior to arguments of counsel, and a portion of the minute order, as representing an order granting the motion. In doing so, defendants ignore the fact that the court's ruling was conditional and that defendants objected to the proposed order, delaying the making or entry of the order on the motion.
However, while a trial judge sits as the thirteenth juror in ruling on a motion for new trial, (Seffert v. Los Angeles Transit Lines (1961) 56 Cal.2d 498, 507; Lutz v. Schendel (1959) 175 Cal.App.2d 140, 144), we do not. (Schonberg v. Perry (1966) 247 Cal.App.2d 436, 441; Perry v. Fowler (1951) 102 Cal.App.2d 808, 811-812.) Our review of the same matters on appeal is circumscribed by the standards of review.
Under applicable appellate standards of review, all factual matters must be viewed in favor of the prevailing party and in support of the judgment. (Turman v. Turning Point of Central California, Inc. (2010) 191 Cal.App.4th 53, 58.) When two or more inferences can be reasonably deduced from the facts, we are without power to substitute our deductions for those of the trial court. (Western States Petroleum Assn. v. Superior Court (1995) 9 Cal.4th 559, 571.) All issues of credibility are likewise within the province of the trier of fact. (Long Beach Police Officer Assn. v. City of Long Beach (1984) 156 Cal.App.3d 996, 1001.)
In urging us to adopt the trial court's skepticism of Parker's testimony, defendants argue that the jury "rewrote" the term "operated and maintained", pointing to the conflicts between the testimony of Parker as to the interpretation of the term, and that of its own expert. Bedon's witnesses (Parker and Scarpulla) testified that the T&M rate sheets used separate entries for equipment rates and labor rates, including equipment operators. Defendants' witnesses testified that the term includes the costs of the operator.
The special verdict in favor of Bedon showed the jury resolved the conflicting evidence and credibility issues in favor of Bedon. The jury did not, contrary to defendants' argument, "re-write the term 'operated and maintained.'" In fact, the jury verdict includes no reference whatsoever to the term in question. The documentary evidence produced as a result of the audit of Hovnanian's own project file supports the jury's special verdict and constitutes substantial evidence to support the verdict. On appeal, we are not free to reject the jury's determination on this issue.
In a separate sub-issue, defendant argues that case law confirms that "operated and maintained" includes the cost of the operator, citing dicta in Sparks v. L. D. Folsom Co. (1963) 217 Cal.App.2d 279, and Coop. Bldg. Materials v. Robbins & Larkey (1947) 80 Cal.App.2d 832, 836-837. We do not find this to be true. The Sparks case contains a simple statement in the background section that the defendant arranged with the decedent's father to hire a bulldozer, fully maintained and operated, at a certain hourly rate. (Sparks, at p. 282.) The reviewing court did not hold, as a matter of law, that the term "operated and maintained" has a specific meaning.
Cooperative Building Materials, supra, involved a contract between a contractor and the Unites States Engineers Division of the War Department of the United States Government. That case involved the interpretation of maximum price regulations, section 1399.12, of the Office of Price Administration, adopted under Emergency Price Control Act of 1942 (50 U.S.C. § 901). The opinion noted that the act included definitions of the terms "fully operated," and "operating and maintenance services," in connection with government contracts. (Coop. Bldg. Materials v. Robbins & Larkey, supra, 80 Cal.App.2d at pp. 836-837.) Neither case stands for the proposition that, as a matter of law, the term "operated and maintained" includes the cost of the operator.
Defendant also argues that Parker's testimony regarding the failure to bill operator regular time in addition to its "operated and maintained" rate was a mistake made by his brother in failing to bill operator regular time, which was insufficient to reform the contract, and that Bedon should not have been awarded additional compensation after accepting payment for change orders. This was a factual issue which the jury resolved against defendants in awarding damages to Bedon. We cannot and will not disturb that finding.
Defendants also argue that there is insufficient evidence to support the jury's assessment of $166,358.43 as a penalty for defendants' failure to pay the retention, in arguing that the finding was contrary to law. In connection with this argument, defendants assert that jury instruction No. SP 21 contravenes Civil Code section 3260, governing payment of retention by an owner or contractor. Neither point has merit.
At trial, defendants agreed that the instruction was proper. However, instructional issues are not deemed waived by acquiescence. (See Huffman v. Interstate Brands Corp. (2004) 121 Cal.App.4th 679, 706.)
Jury instruction No. SP 21 is a correct statement of the law relating to the retention of proceeds withheld from any payment by the owner from the original contractor, or by the original contractor from any subcontractor. (Civ. Code, § 3260.) Hovnanian signed the contract with Bedon as "contractor," not owner. Additionally, Bedon's complaint against Hovnanian referred to the latter as "prime contractor," not owner. It was therefore proper to instruct the jury on the law relating to the payment of retention by a contractor to a subcontractor. (Marshall & Co. v. Weisel (1966) 242 Cal.App.2d 191, 196; Warshauer v. Bauer Constr. Co. (1960) 179 Cal.App.2d 44, 50.) Even as an owner, Hovnanian withheld the retention more than 45 days, giving rise to a penalty under Civil Code section 3260, subdivisions (b) and (g). Defendants' argument that there was a bona fide dispute between Bedon and Hovnanian, an indirect attempt to invoke the provisions of Civil Code section 3260, subdivision (e), was a factual issue that was resolved by the jury in favor of Bedon.
Because the jury was correctly instructed on the law pertaining to retention of payments and the penalty relating thereto, the special verdict awarding $166,358.43 as a penalty is not contrary to law. There is substantial evidence to support all aspects of the jury's verdict.
3. Admission of Parol Evidence Was Proper Where the Trial Court Determined that the Term "Operated and Maintained" Was Ambiguous.
Defendants argue that the trial court erroneously admitted parol evidence to contradict the terms of the rate sheet. We disagree.
The parol evidence rule is codified in Code of Civil Procedure section 1856. The rule generally prohibits the introduction of any extrinsic evidence, whether oral or written, to vary, alter or add to the terms of an integrated written instrument. (Code Civ. Proc., § 1856, subd. (a); Alling v. Universal Manufacturing Corp. (1992) 5 Cal.App.4th 1412, 1433.) The parol evidence rule is not merely a rule of evidence concerned with the method of proving an agreement; it is a principle of substantive law. (Alling, at p. 1433.)
However, subdivision (b) of Code of Civil Procedure section 1856 permits parol evidence to explain or supplement the terms set forth in a writing, and subdivision (c) of Code of Civil Procedure section 1856 permits the introduction of parol evidence to explain or supplement a written agreement by the course of dealing or usage of trade or by course of performance. The test of admissibility of extrinsic evidence to explain the meaning of a written instrument is not whether it appears to the court to be plain and unambiguous on its face, but whether the offered evidence is relevant to prove a meaning to which the language of the instrument is reasonably susceptible. (Cedar Fair, L.P. v. City of Santa Clara (2011) 194 Cal.App.4th 1150, 1172.)
Where there is an ambiguity in a contract, the rule does not prohibit the introduction of extrinsic evidence "'to explain the meaning of a written contract . . . [if] the meaning urged is one to which the written contract terms are reasonably susceptible.'" (Casa Herrera, Inc. v. Beydoun (2004) 32 Cal.4th 336, 343, quoting BMW of North America, Inc. v. New Motor Vehicle Bd. (1984) 162 Cal.App.3d 980, 990, fn. 4.) Whether a contract is ambiguous is a question of law to be decided by the court. (WYDA Associates v. Merner (1996) 42 Cal.App.4th 1702, 1710.)
In the present case, the trial court determined that the testimony had been inconsistent and that the parol evidence could be offered to clear up the confusion. Both parties introduced parol evidence to support their respective interpretation of the terms used in the T&M rate sheets. There was no error.
4. The Trial Court Did Not Abuse Its Discretion in Admitting Testimony Regarding Unbilled Work.
Defendant contends that the trial court abused its discretion by admitting Donald Parker's testimony regarding unbilled work, and that his testimony was grounded upon inadmissible hearsay. We disagree.
a. Background of Objection and Court's Ruling
At trial, Parker testified as both a percipient witness and an expert. Parker brought to trial three voluminous notebooks of compiled records. Parker testified that both he and Joseph Kirby (Kirby), Bedon's estimator, found a great number of errors made by Bedon in the preparation of the time and material reports. After identifying the errors and verifying the work Bedon performed, Parker and Kirby prepared summary sheets of the relevant documents. As plaintiff's counsel inquired into Parker's method of compiling the summaries, counsel for Hovnanian objected on grounds of hearsay. The court pointed out that Parker had testified only to his part in the compilation and analysis of Hovnanian's project file, and permitted plaintiff's counsel to proceed with his line of questioning relating to the summary sheets.
These summaries were later admitted into evidence.
On appeal, defendants contend that Mr. Parker improperly relied upon out-of-court conversations with Jerry Mayes, his foreman, in calculating Bedon's claims of unbilled work. We disagree.
b. Standard of Review
Generally, the trial court retains a good deal of discretion regarding the inclusion of expert testimony. (People v. Carpenter (1997) 15 Cal.4th 312, 403; see also People v. Nicolaus (1991) 54 Cal.3d 551, 582.) We review an order admitting or excluding evidence for abuse of discretion. (North American Capacity Ins. Co. v. Claremont Liability Ins. Co. (2009) 177 Cal.App.4th 272, 285.) An abuse of discretion occurs when, in light of the applicable law and considering all relevant circumstances, the court's ruling exceeds the bounds of reason. (Ibid.)
c. Legal Discussion and Analysis
In California, experts may rely upon and testify to the sources on which they base their opinions (Evid. Code, §§ 801, 802), including hearsay of a type that is reasonably relied upon by experts in the particular field in forming their opinions. (Evid. Code, § 801, subd. (b); North American Capacity Ins. Co. v. Claremont Liability Ins. Co., supra, 177 Cal.App.4th at p. 294; Korsak v. Atlas Hotels, Inc. (1992) 2 Cal.App.4th 1516, 1523-1524.) As long as the requirement of reasonable reliance is satisfied, an expert witness may express an opinion based on information without regard to the information's admissibility.
"[A]n expert may rely on any information of the type reasonably relied on by an expert, even if it is hearsay, and from a nonexpert." (Maatuk v. Guttman (2009) 173 Cal.App.4th 1191, 1198.) An expert may also disclose hearsay information to explain the basis of his or her opinion(s), including the matters considered in forming them, as long as the information is not considered for its truth. (TG Oceanside, L.P. v. City of Oceanside (2007) 156 Cal.App.4th 1355, 1383-1384.) Many types of information that could not be directly produced as competent evidence are nevertheless commonly used by experts in forming their opinions. (1 Witkin, Cal. Evidence (4th ed. 2000) Opinion Evidence, § 31, p. 561; see also People v. Gardeley (1996) 14 Cal.4th 605, 618.) Of course, a party may impeach the credibility of an expert witness by introducing contradictory matters (Kennemur v. State of California (1982) 133 Cal.App.3d 907, 922-923), but contradictions do not serve as a ground for exclusion; rather, they go to the weight of the opinion testimony. (Easterby v. Clark (2009) 171 Cal.App.4th 772, 781.)
An expert may not testify as to the details of inadmissible hearsay if such details are otherwise inadmissible. (Continental Airlines, Inc. v. McDonnell Douglas Corp. (1989) 216 Cal.App.3d 388, 415.)
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One who directs or supervises the preparation of business records may testify to their contents (Evid. Code, § 1271), and where those records are extensive, may submit into evidence a summary of such contents. (Kirby v. Alcoholic Bev. etc. Appeals Bd. (1970) 8 Cal.App.3d 1009, 1017; see also Wolfen v. Clinical Data, Inc. (1993) 16 Cal.App.4th 171, 182 [ref. admissibility of secondary evidence in the form of a summary].) Furthermore, Evidence Code section 1523, subdivision (d) provides that oral testimony to prove the content of a writing is not deemed inadmissible "if the writing consists of numerous accounts or other writings that cannot be examined in court without great loss of time, and the evidence sought from them is only the general result of the whole."
Here, although its records were incomplete, Bedon was unable to reconstitute its project file without documents from Hovnanian. In December 2008, Bedon received Hovnanian's project file and set about reconstructing the job with the newly obtained change orders. Parker enlisted the assistance of his estimator, Kirby, and directed him to assemble the contract, change orders, and other pertinent documents in sequence. Parker testified that he reviewed all the work once completed, and that he and Kirby ultimately invested 300-400 hours over the preceding five-week period compiling the records. Defendants' counsel cross-examined Parker on this issue.
There is no indication, however, that Parker relied upon out-of-court conversations with Jerry Mayes (Mayes), Bedon's foreman, in calculating the claims for unbilled work. Parker and Kirby jointly audited Hovnanian's project file and prepared admissible summaries of his findings. Parker's testimony was based primarily upon the summaries, as well as his efforts to reconcile Hovnanian's project file with his own understanding of the contract and its terms. As an expert witness, Parker was permitted to testify that he relied upon Mayes's hearsay anyhow, and is only prohibited from testifying to the truth of the details thereof. (Continental Airlines, Inc. v. McDonnell Douglas Corp., supra, 216 Cal.App.3d at pp. 414-415.)
Ultimately, the law does not grant the expert's opinion the same degree of credibility as the data upon which it is based, and "[l]ike a house built on sand, the expert's opinion is no better than the facts on which it is based." (Kennemur v. State of California, supra, 133 Cal.App.3d at p. 923.) It is within the trial court's discretion to inform the jury that it may disregard the expert's opinion and draw its own inferences from the facts. (Ibid.; see also Kastner v. Los Angeles Metro. Transit Auth. (1965) 63 Cal.2d 52, 58.) The jury was properly instructed it might disregard expert testimony.
Here, the court overruled defendants' hearsay objection because the testimony pertained to Parker's part in the compilation and analysis of Hovnanian's Project file, and because Parker had personally participated in the compilation of the summaries. Parker was qualified to testify as an expert, and as an expert he could rely on such summaries. To the extent Kirby prepared the summaries under Parker's direction, Parker was permitted to testify to their contents, and the summaries were properly received into evidence. Parker's oral testimony based upon Hovnanian's business records was also admissible, pursuant to Evidence Code section 1523, in light of the records' voluminous nature.
There was no abuse of discretion.
DISPOSITION
The judgment is affirmed. Plaintiff, Bedon, is awarded costs on appeal.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
Ramirez
P.J.
We concur:
McKinster
J.
Richli
J.