Opinion
F038810.
10-30-2003
RONALD K. DUNCAN, Plaintiff and Respondent, v. DENNIS BANKSON, Defendant and Appellant.
Law Offices of Brett V. Myers and Brett V. Myers for Defendant and Appellant. Bruce M. Blythe for Plaintiff and Respondent.
Appellant, Dennis Bankson, challenges the trial courts judgment in favor of respondent, Ronald K. Duncan, on a negligence and breach of contract action. Bankson did construction work on Duncans home pursuant to a contract for home rehabilitation entered into under section 203k of the National Housing Act of 1934 (203k contract). Duncan sought and was awarded the costs of repairing the defects in Banksons work. According to Bankson, Duncans action was barred by a settlement agreement. Bankson further argues that Duncan did not establish the proper standard of care for work performed under a section 203k rehabilitation contract.
As discussed below, when Duncan signed a letter agreement releasing Bankson from further obligations, he did not release Bankson from liability for defects in the work already performed. Further, since Bankson has not set forth how, if at all, the federal standard of care for 203k contracts differs from the standard of care under California law, he has failed to demonstrate reversible error on this issue. Consequently, the judgment will be affirmed.
STATEMENT OF THE CASE AND FACTS
On June 25, 1998, Bankson and Duncan entered into a written homeowner/contractors agreement for the rehabilitation of Duncans home. The contract price for labor and materials for the specified tasks was $16,347.74. Since the loan was insured under section 203k of the National Housing Act of 1934, the construction was subject to the specific federal requirements and minimum standards delineated by the U.S. Department of Housing and Urban Development (HUD).
Throughout each stage of construction under the 203k contract, Ken Swanson, an independent inspector authorized to provide services for HUD, inspected Banksons work. Before every progress payment, Swanson certified in writing that the construction work met all HUD requirements for a section 203k rehabilitation loan. Duncan also certified in writing that the completed work had been done in a workmanlike manner.
During September 1998, Duncan and Bankson entered into an agreement for additional work to be done on Duncans home that was separate from the 203k contract. The agreed price for labor and materials was $4,700.
In late November 1998, Duncan advised both Bankson and Swanson that he wanted to terminate Banksons further involvement in the construction work. Duncan was not happy with the quality of Banksons work. Bankson was paid the full price under the 203k contract plus $4,700 for the work outside of the 203k contract.
By letter dated November 25, 1998, Bankson accepted Duncans decision to complete the project without Banksons assistance so long as the 203k contract price was paid in full. Bankson proposed that he would agree to make no claims for any work outside of the original 203k contract if the remaining 203k funds were released to him. Bankson further stated:
"In consideration of the above due funds being released, Bankson Construction agrees to make no further claims or file any Mechanical Liens against Ron Duncan or the subject property for any additional work.
"Payment and acceptance of these funds will release Bankson Construction from further obligations."
Duncan signed this agreement on November 25. On December 1, 1998, Duncan signed a mortgagors letter of completion acknowledging that the construction had been completed in a workmanlike manner to his satisfaction and requesting that the remaining funds be released from the rehabilitation escrow account.
Approximately 16 months after signing the November 25, 1998, letter agreement, Duncan filed a complaint against Bankson seeking damages for breach of contract and defective construction.
A bench trial was conducted. At trial, Duncan presented four expert witnesses who generally testified that Banksons work was of poor quality and/or did not appear to be done by quality craftsmen. They also testified that in some specific instances the quality of work did not conform to the standards of the building industry. However, Duncans experts admitted that they had never performed work on a 203k project and were not familiar with the federal publications setting forth the minimum standards.
Duncan acknowledged that he signed numerous documents certifying his approval of the work performed by Bankson. However, Duncan testified that he did so only because he was told that Bankson would place a lien on his property if he refused. Despite being unhappy with the quality of Banksons work, Duncan signed off on it because he was afraid that otherwise he would lose his home. This concern also motivated Duncan to sign the November 25, 1998, letter agreement. Bankson denied threatening Duncans property in any way.
The trial court found that a substantial amount of Banksons work was not of good quality and concluded that Duncans claims of breach of contract and negligence were supported by the evidence. Duncan was awarded damages in the amount of $20,989 for the cost of replacement or repair of Banksons work plus approximately $13,000 in costs and attorney fees.
DISCUSSION
Bankson contends that by signing the November 25, 1998, letter, Duncan released him from liability for defects in the completed work. According to Bankson, the statement that "[p]ayment and acceptance of these funds will release Bankson Construction from further obligations" exculpates him from liability for past negligence and breach of contract. Consequently, Bankson argues, Duncans action was barred.
Since no extrinsic evidence was presented with respect to the meaning of the above statement, it is solely a judicial function to interpret it. Thus, review is de novo. (Maggio v. Windward Capital Management Co. (2000) 80 Cal.App.4th 1210, 1214.)
In resolving a dispute such as presented here, the traditional rules governing interpretation of contracts apply. Accordingly, the overriding goal is to give effect to the parties mutual intentions as of the time of contracting. (Shaw v. Regents of University of California (1997) 58 Cal.App.4th 44, 53.) This intent must, in the first instance, be ascertained from the words used. Moreover, these words must be given their ordinary meaning, unless there is evidence that the parties intended to use them in a unique sense or to give them some different meaning. (Moss Dev. Co. v. Geary (1974) 41 Cal.App.3d 1, 9.)
The first interpretive issue is whether the subject statement is reasonably susceptible to the interpretation urged by Bankson. If it is not, the case is over. (Oceanside 84, Ltd. v. Fidelity Federal Bank (1997) 56 Cal.App.4th 1441, 1448.)
The statement "[p]ayment and acceptance of these funds will release Bankson Construction from further obligations" cannot reasonably be interpreted as a release from liability for defects in the completed work. A release is not effective unless it is clear, explicit and comprehensible in each of its essential details. (Skrbina v. Fleming Companies (1996) 45 Cal.App.4th 1353, 1368.) Such an agreement must clearly notify the prospective releasor of the effect of signing the agreement. (Ibid.)
This statement most certainly did not notify Duncan that by signing the letter he was releasing Bankson from all claims for defects in the completed construction. At most Duncan released Bankson from the obligation to do any additional work under the various contracts. When Duncan signed this letter, the project was incomplete. Accordingly, the November 25, 1998, letter agreement did not bar Duncans breach of contract and negligence action against Bankson.
Bankson further argues that Duncan did not establish his claim for professional negligence at trial because his expert witnesses were not familiar with the standards for 203k projects. Rather, the experts opinions were based on California construction standards. However, Bankson has not set forth what the federal standard of care for a 203k contract is and how, if at all, it differs from the standard of care under California law. Bankson, as the party challenging the judgment, has the burden of showing reversible error. (Ballard v. Uribe (1986) 41 Cal.3d 564, 574-575.) By not explaining how he was prejudiced by the application of California construction standards, Bankson has failed to meet his burden on this issue.
DISPOSITION
The judgment is affirmed. Costs on appeal are awarded to respondent.
WE CONCUR: Wiseman, Acting P.J., Gomes, J.