Opinion
B222533
08-16-2011
UNION EXCAVATING, INC., Plaintiff and Appellant, v. DJM CONSTRUCTION CO., INC., et al., Defendants and Respondents.
Law Offices of Patrick L. Garofalo and Patrick L. Garofalo for Plaintiff and Appellant. J. W. Biedebach & Associates and James W. Biedebach for Defendants and Respondents.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
(Los Angeles County Super. Ct. No. NC051157)
APPEAL from a judgment of the Superior Court of Los Angeles County, Ross M. Klein, Judge. Affirmed.
Law Offices of Patrick L. Garofalo and Patrick L. Garofalo for Plaintiff and Appellant.
J. W. Biedebach & Associates and James W. Biedebach for Defendants and Respondents.
Union Excavating, Inc. (Union) sued DJM Construction Company, Inc. (DJM) for breach of contract and quantum meruit. After a five-day court trial, the trial court held that no contract existed, and entered judgment for Union in the amount of $112,000 on its quantum meruit claim. Union appeals, arguing that the trial court erred in failing to assess statutory penalties and attorney fees and costs. We affirm.
BACKGROUND
Union filed a first amended complaint on July 24, 2008, alleging that in October 2007, Union and DJM entered into an oral agreement whereby Union agreed to furnish labor, equipment, and materials to DJM, which was building a fire station for the Port of Long Beach. Union alleged that it worked at the site in October and November 2007 and provided invoices to DJM, but DJM refused to pay. Union alleged that DJM owed Union $122,524.63. Union stated claims for breach of contract, statutory penalties and attorney fees under Business and Professions Code section 7108.5 and Public Contracts Code sections 7107 and 10262.5, and quantum meruit. Union requested as damages $122,524.63 with interest, statutory penalties, and attorney fees. DJM filed an answer asserting affirmative defenses.
After a court trial, the trial court issued a statement of decision on October 23, 2009. In its "Factual Findings," the court found that DJM was the general contractor hired by the Port of Long Beach to build the fire station. When DJM hired Union, Union thought that DJM would pay Union "on a 'time and materials' basis. [DJM], however, thought [Union] was to complete the work for a payment not to exceed $55,000." Work began immediately. DJM wanted Union to sign a contract and provide proof of $5 million in insurance coverage, but Union claimed it was never asked to provide a written agreement or proof of insurance. Union did additional work, giving DJM's agent on the construction site a daily list of workers and the cost of equipment, but DJM's "agent did not review them since he thought that the plaintiff was still working on the site on a 'not-to-exceed' contract." Union finished the work DJM requested, and in December 2007 submitted a bill for $122,500. DJM was "shocked," and "offered to settle the entire dispute for approximately $100,000. [Union] rejected this. [DJM] then went through the bills carefully and concluded that [Union's] bill should have been for $93,125." DJM offered to pay that amount if Union signed the original contract and showed proof of insurance. Union rejected this. DJM never tendered a check to Union or placed the undisputed funds in an escrow or separate account.
Union claimed it never received the contracts that DJM claimed it prepared and mailed or faxed to Union, although DJM believed Union received them because correspondence indicated the contract number. "While much is in dispute as to amounts requested, tendered, and the need for an additional insurance policy and a written contract, the parties are in agreement that no written contract was ever signed and no proof of $5,000,000 insurance was obtained nor provided. At no time did the plaintiff nor the defendant agree on the manner of computation nor the total dollar amount of the work." Union maintained the value of the work was approximately $129,000; DJM maintained it was approximately $80,000.
In its "Analysis and Decision," the court stated that "one party's unexpressed belief, not outwardly manifested, cannot give rise to a finding of mutual consent, and without mutual consent there is no contract. [Citation.]" The court continued: "[T]here was no meeting of the minds between the two parties. However, since the work was fully performed and completed . . ., another legally-recognized theory must be employed in determining the amount to be awarded. [¶] When performance is rendered by one party in the mistaken belief that a contract exists, his remedy is in quantum meruit. [Citation.] Ordinarily, the measure of recovery is the reasonable value of benefits conferred upon the other party. [Citations.]"
The court continued: "[A]s a general principle, . . . interest is not allowed on unliquidated damages or demands. The reason of such denial of interest is said to be that the person liable does not know what sum he owes and therefore can be in no default for not paying. [¶] The term 'unliquidated damages' applies equally to cases of quantum meruit for goods sold and delivered or services rendered. [¶] The damages in such cases are an uncertain quantity, depending upon no fixed standard and are referred to the wise discretion of the trier of fact and can never be made certain except by accord or verdict. [¶] Furthermore, as to such damages there can be no default and hence the initial point at which to fix the starting of interest is wanting." The court entered judgment for Union in the amount of $112,000.
Union objected to the statement of decision, asking for further findings including that it was entitled statutory penalties, attorney fees, and costs. DJM responded that since the court allowed recovery only under quantum meruit, there was no contract, and therefore no statutory penalties were appropriate. DJM included a proposed statement of decision, which stated that because there was a good faith dispute regarding the entire amount due, there could be no statutory penalties. The trial court overruled Union's objections and directed Union to prepare a proposed judgment consistent with its October 23, 2009 statement of decision.
On December 23, 2009, the trial court filed a judgment awarding Union $112,000, and stating that Union was not entitled to prejudgment interest or attorney fees. Union filed this timely appeal.
DISCUSSION
Union argues that it is entitled to the two percent penalty and attorney fees and costs provided for by Public Contracts Code sections 7107 and 10262.5, and Business and Professions Code section 7108.5. Whether the statutes apply to Union's recovery on its quantum meruit claim is a question of law which we review de novo. (S&S Cummins Corp. v. West Bay Builders, Inc. (2008) 159 Cal.App.4th 765, 777 (S&S Cummins).)
Union also contends that it was entitled to recovery under Civil Code section 3262.5, which governs payments to subcontractors in contract with a contractor doing business with a public utility. Union did not assert a claim under that statute in its complaint, its trial brief, or its objections to the statement of decision. We therefore do not address the issue. (North Coast Business Park v. Nielsen Construction Co. (1993) 17 Cal.App.4th 22, 28-29.)
"'California has a series of so-called "prompt payment" statutes that require general contractors to pay their subcontractors within specified, short time periods, and that impose monetary penalties for violations. Business and Professions Code section 7108.5 and Public Contracts Code section 7107 are two of those statutes.' [Citation.]" (Martin Brothers Construction, Inc. v. Thompson Pacific Construction, Inc. (2009) 179 Cal.App.4th 1401, 1409 (Martin Brothers).)
Business and Professions Code section 7108.5 "requires a general contractor to pay its subcontractors their respective shares of a progress payment within 10 days of receiving that payment from the project's owner, unless the parties agree otherwise in writing. If the general contractor fails to timely pay, the subcontractor may recover a penalty fixed at two percent of the amount due per month for every month the payment is not made. [Citations.]" (FEI Enterprises, Inc. v. Yoon (2011) 194 Cal.App.4th 790, 796.) The statute also provides that the subcontractor may recover attorney fees and costs.
As in effect in 2007, Business and Professions Code section 7108.5 provided: "A prime contractor or subcontractor shall pay to any subcontractor, not later than 10 days of receipt of each progress payment, unless otherwise agreed to in writing, the respective amounts allowed the contractor on account of the work performed by the subcontractors, to the extent of each subcontractor's interest therein. In the event that there is a good faith dispute over all or any portion of the amount due on a progress payment from the prime contractor or subcontractor to a subcontractor, then the prime contractor or subcontractor may withhold no more than 150 percent of the disputed amount. [¶] Any violation of this section shall constitute a cause for disciplinary action and shall subject the licensee to a penalty, payable to the subcontractor, of 2 percent of the amount due per month for every month that payment is not made. In any action for the collection of funds wrongfully withheld, the prevailing party shall be entitled to his or her attorney's fees and costs. [¶] The sanctions authorized under this section shall be separate from, and in addition to, all other remedies either civil, administrative, or criminal. [¶] This section applies to all private works of improvement and to all public works of improvement, except where Section 10262 of the Public Contract Code applies."
"In 2009, the Legislature '[r]ecast[ ]' Business and Professions Code section 7108.5 'for clarity and readability' [citation], but it did not alter the 'good faith dispute' language." (FEI Enterprises, Inc. v. Yoon, supra, 194 Cal.App.4th at p. 796, fn. 4.)
Public Contracts Code section 7107 "subject[s] project owners and prime contractors to 'charges' or 'penalties' for failing to timely remit progress payments or retention proceeds, absent adequate good faith justification," and provides for a charge of two percent per month, as well as attorney fees and costs. (S&S Cummins, supra, 159 Cal.App.4th at p. 777.)
Public Contract Code section 7107 "is applicable to contracts for the construction of any public work of improvement and governs the payment of retention proceeds by the public entity owner and by the general contractor. (§ 7107, subds. (a), (b).) The statute requires the public entity to pay retentions to its general contractor within 60 days after the date of completion. (§ 7107, subd. (c).) The statute requires the general contractor to then pay its subcontractors their respective shares of the retention proceeds within seven days after receiving the proceeds from the public entity. (§ 7107, subd. (d).) If the general contractor fails to pay the retention timely, the subcontractor may recover a penalty in the amount of '2 percent per month on the improperly withheld amount, in lieu of any interest otherwise due.' (§ 7107, subd. (f).) In any action for the collection of funds wrongfully withheld, the prevailing party is entitled to attorney fees and costs. (Ibid.)" (Martin Brothers, supra, 179 Cal.App.4th at pp.1409-1410.) Section 7107, subdivision (e) provides an exception to the requirement of payment within seven days: "The original contractor may withhold from a subcontractor its portion of the retention proceeds if a bona fide dispute exists between the subcontractor and the original contractor. The amount withheld from the retention payment shall not exceed 150 percent of the estimated value of the disputed amount."
Public Contracts Code section 10262.5 is incorporated by law into all public works construction subcontracts, and also requires the prime contractor to pay a subcontractor promptly (within 10 days) of receipt of a progress payment, subjecting the prime contractor to a two percent penalty on any amount unpaid after the 10-day period, and allowing for recovery of attorney fees and costs incurred in collecting the payments. (Washington Internat. Ins. Co. v. Superior Court (1998) 62 Cal.App.4th 981, 984, fn. 1.)
As in effect in 2007, Public Contract Code Section 10262.5, subdivision (a) provided: "Notwithstanding any other provision of law, a prime contractor or subcontractor shall pay to any subcontractor, not later than 10 days of receipt of each progress payment, the respective amounts allowed the contractor on account of the work performed by the subcontractors, to the extent of each subcontractor's interest therein. In the event that there is a good faith dispute over all or any portion of the amount due on a progress payment from the prime contractor or subcontractor to a subcontractor, then the prime subcontractor or subcontractor may withhold no more than 150 percent of the disputed amount. [¶] Any contractor who violates this section shall pay to the subcontractor a penalty of 2 percent of the amount due per month for every month that payment is not made. In any action for the collection of funds wrongfully withheld, the prevailing party shall be entitled to his or her attorney's fees and costs."
"The purpose of the various prompt payment statutes is to serve a 'remedial purpose: to encourage general contractors to pay timely their subcontractors and to provide the subcontractor with a remedy in the event that the contractor violates the statute.' [Citation.]" (S&S Cummins, supra, 159 Cal.App.4th at p. 777.) Under each statute, the contractor may withhold payment only in the event of a bona fide dispute regarding the subcontractor's work. (Bus. & Prof. Code, § 7108.5; Pub. Contract Code, §§ 7107, subd. (e), 10262.5, subd. (a).)
Union characterizes the trial court's statement of decision as determining that Union billed DJM for $122,500, DJM concluded that the bill should have been for $93,215, and therefore the amount in dispute was $29,375. Applying the various prompt payment statutes, Union argues that DJM was allowed to withhold only $44.062.60 (150 percent of $29,375), and therefore was required to pay Union approximately $78,462 (the difference between $44,062.60 and the $122,500 billed by Union). As DJM paid Union nothing at all, Union was entitled to interest of 2 percent a month on the improperly withheld amount, as well as attorney fees and costs. DJM, in response, argues that substantial evidence supports the conclusion that a good faith dispute existed over the money due to Union.
In support of this argument, DJM filed a motion to augment the record on appeal with some of the exhibits filed in the trial court. In light of our disposition, the exhibits are immaterial to our decision, and we deny the motion.
Both parties' arguments misinterpret the trial court's statement of decision. The trial court did not conclude, on Union's claim for breach of contract, that the amount in dispute was $29,375, or make a determination that the parties disputed that amount in good faith. The trial court recited the facts and then rejected Union's contract claim, concluded that there was no contract between Union and DJM, and awarded Union $112,000 in quantum meruit damages, as the reasonable value of the benefit Union conferred upon DJM.
"'Quantum meruit refers to the well-established principle that "the law implies a promise to pay for services performed under circumstances disclosing that they were not gratuitously rendered." . . . To recover in quantum meruit, a party need not prove the existence of a contract . . . , but it must show the circumstances were such that "the services were rendered under some understanding or expectation of both parties that compensation therefor was to be made" . . . .' [Citation.] '"The measure of recovery in quantum meruit is the reasonable value of the services rendered, provided they were of direct benefit to the defendant."' [Citation.]" (Advanced Choices, Inc. v. State Dept. of Health Services (2010) 182 Cal.App.4th 1661, 1673.) When an actual contract is in place, there can be no recovery in quantum meruit. "[T]here is no equitable basis for an implied-in-law promise to pay reasonable value when the parties have an actual agreement covering compensation. [Citation.]" (Hedging Concepts, Inc. v. First Alliance Mortgage Co. (1996) 41 Cal.App.4th 1410, 1419.)
Union does not contend that the trial court erred in determining that there was no contract between it and DJM and awarding it $112,000 as the reasonable value of its services. Union seeks to retain the quantum meruit damages and, simultaneously, argue that it was entitled to penalties, attorney fees and costs under the various prompt payment statutes cited above, calculated using an amount Union claimed it was due under a contract with DJM. Each of those statutes, however, premises penalties and attorney fees and costs on the existence of a contract between the parties. In the absence of such a contract, the trial court did not err in declining to award penalties and attorney fees and costs under the prompt payment statutes. Union cannot simultaneously retain $112,000 in quantum meruit damages and recover penalties and attorney fees for an amount in dispute measured by the $122,500 Union billed to DJM, based on Union's contention that a contract existed between it and DJM.
The trial court did not err in not awarding penalties and attorney fees.
DISPOSITION
The judgment is affirmed. Respondents are awarded their costs on appeal.
NOT TO BE PUBLISHED.
JOHNSON, J. We concur:
MALLANO, P. J.
CHANEY, J.