Duke
Kelso Construction v. Silva

















Filed 3/26/13 Duke Kelso Construction v. Silva CA6













NOT
TO BE PUBLISHED IN OFFICIAL REPORTS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opinion has not been certified for publication or ordered published for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.









IN
THE COURT OF APPEAL OF THE STATE OF CALIFORNIA



SIXTH
APPELLATE DISTRICT




>

DUKE KELSO CONSTRUCTION, INC. , Plaintiff and Respondent, v. JOHN ALBERT SILVA, et al., Defendants and Appellants.

H036879 (Monterey County Super. Ct. No. M93312)

Plaintiff
and respondent Duke Kelso Construction, Inc. (Contractor) sued defendants and
appellants John Albert Silva (Silva) and Susan Silva (jointly Owners)href="#_ftn1" name="_ftnref1" title="">[1] for href="http://www.fearnotlaw.com/">breach of contract and other claims
arising out of the construction of a single family residence in Soledad,
California.
Contractor was the general contractor for the project. After several months on the job, Contractor
stopped working because of alleged breaches by Owners, including delaying payment
and interfering with the parties’ written cost plus contract by hiring their
own subcontractors and suppliers. In a
court trial, the court awarded Contractor $52,294.30 in href="http://www.fearnotlaw.com/">contract damages. Owners appeal from the $52,294.30 judgment
and from an order after judgment awarding Contractor $53,185 in attorney
fees.

The
parties’ cost plus contract entitled Contractor to “costs incurred by the
contractor,” plus 15 percent profit and overhead based on those costs. Owners contend on appeal that the court erred
when it awarded Contractor 15 percent of the amounts paid directly by Owners to
certain suppliers and subcontractors hired directly by Owners because those
were not costs incurred by Contractor.
Owners also challenge the sufficiency of the evidence to support the
award in favor of Contractor, including attorney fees. And with respect to attorney fees, Owners
argue that Contractor waived any claim to attorney fees because the contract
required the parties to arbitrate rather than litigate disputes.

We conclude
that Contractor was entitled to profit and overhead on amounts Owners paid
directly to vendors. But certain
mathematical errors were made in the calculation of the award, and Contractor
was not entitled to amounts billed for its superintendent’s time or for profit
on amounts billed for extraordinary accounting expenses. Since those amounts are readily discernible,
we shall modify the judgment to adjust for these errors, thereby reducing the
judgment by $10,038.79 to $42,255.51. As
modified, we will affirm the judgment, and we will also affirm the award of
attorney fees.

Facts

I.
Description of Project & Preliminary Work

In June
2006, Duke Kelso (Kelso) learned that Owners planned to build an 8,000
square-foot house at 32750 Sanchez Road
in Soledad. The property was located on a 1,000-acre
working ranch owned by Silva’s father.
The project was in its early stages and Kelso helped Owners obtain
permits for the project. The parties
disputed the nature of their relationship at that time. Kelso testified that Owners hired him to
“help facilitate getting all the permits,” that Silva agreed to pay Kelso $80
per hour for his time, and that Kelso spent 50 to 70 hours working on the
permits. Silva testified that Kelso was
doing Owners a favor by working on the permits, that Kelso hoped to get the
contract, and that he was soliciting Owners’ business by working on the
permits. A few months later, Owners and
Contractor entered into a cost plus contract to build the house.

II.
Contract Provisions

Owners and
Contractor signed a written contract
on September 5, 2006. Among other things, the contract provided in
paragraph 4.1 that the contract price “shall be calculated on a cost plus
coordination basis, with all labor, materials, permits and insurance figured as
costs. Costs are defined as any costs
incurred by the contractor for materials, permits and subcontract
services. Labor will be billed at
current billing rates as set forth in [paragraph] 4.5. Construction coordination services shall be
charged at 15% of costs and current labor rates.” The contract required Owners to pay a $1,000
deposit, plus a $19,000 deposit to secure the cost of lumber and materials. It provided that “All special order items
will require a fifty percent (50%) deposit . . . to secure
special order and meet the deposit requirements of the vendors.”

The
contract also contained provisions relating to progress payments, insurance,
arbitration, and the duties of both Contractor and Owners. Regarding progress payments, the contract
provided in relevant part: “5.1 The
Owner will make payments to the contractor pursuant to the draw schedule as
determine[d] by Owner and Contractor schedule as work
required by said schedule is satisfactorily completed. Owner shall make draw payments to contractor
within FIVE (5) days after request by contractor. Should the owner fail to make payment,
contractor my charge a penalty of 10% annually upon the unpaid amount until
paid. [¶] 5.2 If payment is not received by the
Contractor within five days after delivery of payment demand for work
satisfactorily completed, contractor shall have the right to stop work or
terminate the contract at his option.”

Regarding
Owners’ duties, the contract provided:
“7.1 The Owner shall communicate with subcontractors only through the
Contractor. [¶] 7.2 The Owner will not assume any liability
or responsibility, nor have controls over or charge of construction means,
methods, techniques, sequences, procedures, or for safety precautions and
programs in connection with the project, since these are solely the
Contractor’s responsibility.” According
to Kelso the purpose of these provisions was to protect the scope of the
project, to keep the work moving forward, and to keep Owners from
interfering. In Kelso’s experience, when
an owner gets involved with the subcontractors, it prevents the job from moving
forward and the general contractor loses control of the project.

III. Course
of Construction

After the
project began, Owners made several changes, including rotating the house so
that it would face a different direction from that in the plans, adding a wine
cellar, adding a radiant heating system over the concrete floor, replacing a
spiral staircase with an elevator, and asking Contractor to order an
eco-friendly lumber that was different from the lumber called for in the
specifications.

Although he
testified that he understood paragraphs 7.1 and 7.2 of the contract relating to
restrictions on working and communicating directly with subcontractors, Silva
insisted on using his own subcontractors and suppliers (hereafter sometimes
jointly “vendors”) for portions of the job.
Silva paid those vendors directly, as opposed to running those expenses through
Contractor. Silva testified that when
Owners negotiated the contract with Contractor, he told Kelso he “wanted
options” regarding vendors because he was concerned about getting the best
price. He therefore asked Kelso to
obtain two to three bids from each type of subcontractor or supplier. Although not set forth in the written
contract, Silva testified that Kelso agreed and said that was the way he did
business.

As the
project progressed, Owners engaged vendors directly for concrete, windows,
plumbing, and lumber. Although Contractor
retained Granite Construction to supply the concrete for the foundation and
subterranean walls, Silva Farms (Silva’s father’s business) had an account with
Don Chapin (Chapin), so Silva hired Chapin to supply and pour the concrete. Silva also hired the concrete finishers,
through Chapin, but arranged for Contractor to pay them in cash. Toward the end of the foundation work, both
Chapin and Granite Construction provided concrete; Silva paid both vendors
directly for those services.

Before
completing the concrete work, Contractor needed to know the sizes and
dimensions of the windows and glass doors to determine the proper placement of
the stag bolts and hold downs for the foundation. Owners decided to use Pella Windows;
therefore, Kelso and Owners met with Sally Tuttle of Pella Windows and chose
the styles and sizes of windows. Tuttle
prepared an initial bid for the chosen windows.
But in March 2007, Owners purchased the windows directly from Pella
Windows, through Direct Buy (a membership buying service), even though
Contractor had worked with Owners to have the initial bid prepared by
Tuttle. Owners subsequently asserted
that Contractor was not entitled to profit and overhead based on the
substantial cost of those windows.

Concerning
plumbing, Contractor wanted to hire OCG Plumbing (OCG). But Silva did not want to hire OCG because he
thought its hourly rate was too high and he did not want to pay the $50,000
“retainer” required by OCG. Silva hired
BG Plumbing instead.

After the
concrete floors and walls were poured, Contractor started framing the lower
level of the structure. Owners
considered using an alternate, eco-friendly lumber for the second story and
treating the lower level with CopperNate.
After Contractor researched those options and discussed them with
Owners, Owners decided to use the type of lumber specified in the plans
(“number 2 or better”). Contractor
arranged for two or three truckloads of number 2 lumber to be delivered to the
jobsite. After the lumber was unloaded,
however, Silva said it was unacceptable and not what he wanted, so Kelso had
the lumber removed from the jobsite.
According to Kelso, this was the “straw that broke the camel’s
back.” Contractor left the job in early
April 2007.

IV. Funding
& Payment Problems

After
the contract was signed, Kelso learned that Owners had obtained a construction
loan from Pinnacle Bank (Bank). Bank
hired Construction Funds Control Services (CFCS) to oversee the funding
process. CFCS reviewed Contractor’s draw
requests to insure that they were supported by appropriate documentation (e.g.,
vendor invoices, time cards) and inspected the project to determine whether the
work had been completed. After CFCS
approved a draw request, Bank sent the money to Owners and Owners paid Contractor. The funding process usually took a few days,
but Kelso testified that Owners would not pay Contractor for three or more
weeks. Sometimes, Silva held up the
process by refusing to sign draw requests.


Concerning
the amount of the fee to be paid to Contractor, Kelso testified that his
“coordination fee” (profit and overhead) was to be based on all “time and
materials . . . encompassing . . . the whole project” and
that it included amounts Silva paid directly to the vendors he had hired. Contractor contends that Silva agreed with
this interpretation of the contract. On
March 8, 2007, for example, Contractor’s bookkeeper, Dawn Kelso Cricchio, sent
Silva an e-mail asking for copies of the invoices Silva had paid directly so
that Contractor could keep track of project costs and calculate its profit and
overhead. Silva acknowledged that their
agreement was “time and materials . . . plus 15 % of the
project cost (profit),” but he questioned a $5,000 charge that Contractor had
billed for Kelso’s time. Cricchio stated
that she needed all of the invoices because “the contract is for all costs of
the job regardless if you pay for them or if [Contractor] pays for them. . . . [B]ecause we are the
General Contractor on record, we are exposing our license to lots of liability
and additional insurance cost. Thus, we
need all the numbers to correctly calculate the true time and materials job
costs to date.” Silva asked Cricchio to
explain why he “should pay 15% profit for materials, before [he paid] for the
materials themselves.” Silva stated that
he was “not disputing the material to the job.
[Contractor] gets a profit of 15% off of these and others that are
incurring . . . .” Silva
agreed to send a copy of the invoice, but stated that he would not authorize payment
to Contractor until he had actually paid the vendor. “[T]hat is when the cost is realized on my
books and [I] will pay 15% to Kelso along with that.” Furthermore, in an e-mail dated March 14,
2007, Silva agreed that Contractor was entitled to profit and overhead on the
amounts billed by the concrete subcontractor.


At trial,
Silva testified that he had agreed that Contractor was entitled to profit on
the amounts he paid to the vendors he had hired directly because Kelso told him
that is what he had to do. After
Contractor left the job, Owners did not hire another general contractor;
instead, Silva hired subcontractors directly and coordinated the work himself.

Procedural
History

I.
Pre-litigation Claims

Shortly
after Contractor left the job, Silva filed a href="http://www.fearnotlaw.com/">criminal complaint with the Sheriff, in
which he claimed Kelso had misappropriated funds for materials and converted
funds. Ultimately, the district attorney
decided not to prosecute Kelso. Silva
also filed a complaint with the Contractor’s State Licensing Board (CSLB). The CSLB investigated and concluded the
complaint was without merit.

II.
The Pleadings

In August
2008, Contractor filed a complaint against Owners, which asserted five causes
of action, including claims for breach of
contract and malicious prosecution.
Owners answered and asserted affirmative defenses that Contractor’s
damages “are more than offset” by Owners’ claims and that the allegations of
the complaint were subject to “contractual binding arbitration.”

During a
two-day bench trial, the court granted Owners’ motion in limine to dismiss the
malicious prosecution claim; the case was tried on the breach of contract
claim.href="#_ftn2" name="_ftnref2" title="">[2]

III. Argument
and Evidence at Trial

At trial,
Contractor claimed damages totaling $74,094.30.
Contractor relied primarily on a spreadsheet prepared by Cricchio
(Exhibit 11), which set forth the expenses of the job, amounts Contractor
claimed as profit and overhead, payments made by Owners, and other
credits. The expenses included bills for
the time Kelso and Cricchio spent helping Owners obtain permits before the
contract was signed, amounts paid for permits, as well as amounts paid to
vendors (including those Owners paid directly) and to Contractor’s employees
for labor. Contractor’s evidence
included invoices, time cards, copies of checks, and other documents that
supported the entries on Exhibit 11. The
majority of that evidence was contained in Contractor’s Exhibit 10; Owners’
exhibits included documents that supported the claim.

Owners
argued that under the terms of the contract, Contractor was not entitled to
profit and overhead on the items Owners purchased directly. They also challenged other entries on
Contractor’s spreadsheet, arguing that they were not supported by back-up
documents and that the spreadsheet was incomplete, inaccurate, and contained
mathematical errors. They asserted that
Contractor was not entitled to bill for the time Kelso spent obtaining permits
before signing the contract and that some of Contractor’s work was
defective. Finally, they argued that
their claims offset any amounts due Contractor and urged the court to enter a
defense verdict.

IV. Court’s Ruling, Statement of Decision, and
Judgment

In
September 2010, the court issued a written ruling. The court used the $74,094.30 claimed by
Contractor as a starting point and disallowed three components of the
claim. The court held: “A portion of Plaintiff’s claim is for time
spent personally by Duke Kelso in securing initial permits. Defendants object to this because they were
incurred before a contract was entered into and there was no other separate
understanding that Defendants would be so charged. Rather, Defendants were led to believe
Plaintiff was taking on this role as an inducement to ultimately be awarded the
contract. The Court finds Defendants’
understanding in this regard to be reasonable, and there being no convincing
evidence of an agreement to pay for these services, they are not
recoverable. That claim is disallowed in
the amount of $6,800.” The court also
disallowed Contractor’s “claim for $5,000 on invoice #830” and the “$10,000
permit fees reflected in invoice #913.”
Altogether, the court deducted $21,800 for these items and awarded
Contractor $52,294.30. The trial court
also found against Owners on their construction defects claim.href="#_ftn3" name="_ftnref3" title="">[3]

Owners
filed a timely request for a statement of decision, which posed seven questions
about the court’s ruling. In response,
the court filed a proposed statement of decision that added the following to
its ruling: “The costs and profits
billed to [Owners], with the exception of those disallowed by the Court, are
found to have been appropriate under the terms of the contract, and were sufficiently
described in the billings to inform [Owners] as to their bases. In addition, [Owners’] requests for
clarification from [Contractor] and his office were satisfactorily responded to
by the personnel in his office, whom the court found to be credible. Their explanations of the records kept for
the project (see [Owners’] exhibits) substantiated those parts of the claim
upheld by the court. [¶] Regarding the contested trial issues
presented for adjudication, the court finds that [Contractor] acted within the
standards of fair dealing required under a cost-plus contract.”

Owners
filed written objections to the court’s proposed statement of decision. Essentially, they objected that the proposed
statement of decision did not adequately address their questions. The court issued a final statement of
decision that responded to each of Owners’ questions by stating: “the court
rendered its decision as stated below and based its decision on the facts and
legal basis stated below.” The court
then repeated the language from the proposed statement of decision and awarded
Contractor $52,294.30.

V.
Motions for Attorney Fees

Contractor
subsequently filed two motions for attorney fees. Before the court issued its proposed
statement of decision, there was a change in Contractor’s counsel, with
attorney Leigh Rodriguez substituting as counsel of record for attorney
Kathleen Mahan, who had handled the case through trial. At the time of the substitution of attorneys
in December 2010, Mahan filed a motion for attorney fees, claiming $50,645 in
fees on behalf of Contractor. Mahan
subsequently withdrew that motion as premature.

In April
2011, after the court issued its statement of decision, Rodriguez filed another
motion for attorney fees, requesting both the fees claimed by Mahan and his own
fees of $6,625 for past work done, plus $375 for future work related to the
motion for attorney fees.

Owners
opposed the motions for attorney fees, arguing that Contractor was not entitled
to fees because the contract required the parties to resolve any disputes by
binding arbitration, that the fees must be allocated between contract and
non-contract claims, and that the fees requested were unreasonable.

The court
granted Contractor’s motions for attorney fees, awarding Mahan $47,685 in fees
and Rodriguez $5,500 in fees.

Owners
appeal both the judgment and the post-judgment order awarding attorney fees.

Discussion

I. Profit
and Overhead Based on Amounts Owners Paid Directly to Vendors

Owners
contend the trial court erred as a matter of law when it awarded Contractor
profit and overhead on costs it “did not incur.” Owners assert that Contractor was only
entitled to profit and overhead on costs Contractor paid and not those costs
that Owners paid directly. This
contention is based on the following amounts Owners paid to the enumerated
subcontractors: (1) $2,849.51 to Granite
Construction for rock,href="#_ftn4"
name="_ftnref4" title="">[4]
(2) $29,439.33 to Chapin, (3) $10,675 to BG Plumbing, and (4) $76,164.23
to Direct Buy for the Pella Windows, for a total of $119,128.07. Fifteen percent profit and overhead on
$119,128.07 is $17,869.21. Contractor
claimed profit and overhead based on these items in its spreadsheet and those
amounts were not disallowed by the trial court.href="#_ftn5" name="_ftnref5" title="">[5] Owners contend the judgment should be reduced
by $17,869.21.href="#_ftn6" name="_ftnref6"
title="">[6] We agree with the trial court and conclude
that under the terms of the contract and the circumstances of this case,
Contractor was entitled to claim 15 percent profit and overhead on all costs,
including the amounts Owners paid directly to the four vendors.

A.
Nature of Cost Plus Contracts

On most construction projects, the
rights, duties and obligations of the owner and the general contractor are
defined by a number of documents and drawings that are collectively referred to
as the “contract documents.” (Gibbs
& Hunt, Cal. Construction Law (17th ed. 2011) §§ 3.02, p. 168 (Cal.
Construction Law).) The written contract
in this case provides that the “contract documents consist of this agreement,
general conditions, construction documents, specifications, allowances, finish
schedules, construction draw schedule, all addenda issued prior to execution of
this agreement and all change orders or modifications issued and agreed to by
both parties.” But the only contract
document in evidence was the written owner-contractor agreement. The dispute in this case focuses on the price
provision in that agreement.

The four most common types of
pricing provisions in owner-contractor construction contracts are: (1) lump sum or fixed fee; (2) unit price;
(3) cost plus; and (4) cost plus with a guaranteed maximum. (Cal. Construction Law, supra, § 3.02[A][4], pp. 170-172; see also >Crowe v. Boyle (1920) 184 Cal. 117,
130-139 (Crowe) [reviewing
construction industry publications as of 1920 to determine the meaning of
“cost-plus-fee plan with a guaranty” in city ordinance related to the
construction of the Hetch Hetchy water project]; Jones v. Pollock (1950) 34 Cal.2d 863, 865 (>Jones) [determining whether parties’
agreement was a cost plus contract or a cost plus contact with a guaranteed
maximum]; Anderson v. Pastorini
(1953) 117 Cal.App.2d 428, 429 [determining whether parties’ agreement was
a cost plus or a fixed fee contract]; but
see Carrico v. City and County of San
Francisco (1960) 177 Cal.App.2d 97, 103-107 [identifying another type
of pricing provision: “time and
materials” contract at issue did not include general contractor’s profit and
overhead, but did include amounts general contractor paid subcontractor for its
profit and overhead].)

Generally, cost plus contracts call
for the owner to pay the actual cost of the work plus a negotiated fee to the
contractor. The negotiated fee may be
either a fixed amount or some percentage of the cost of construction. (Crowe,
supra, 184 Cal. at pp. 138, 144; Cal.
Construction Law, supra,
§ 3.01[A][4][c]. p. 172; see e.g., Jones,
supra, 34 Cal.2d at p. 864
[contractor’s fee was 15 percent “of cost of construction”]; >Payne v. Cunningham (1917) 175 Cal. 166,
168 [contractor’s fee was 10 percent of
“the total cost of the buildings”].)

As one of the authorities quoted in
Crowe explained, in a lump sum or
unit price contract, “ ‘the contractor takes the . . .
specifications and estimates of the quantities, possibly checks the latter by
his own computation, guesses at the interpretation which will be placed by the
owner’s representatives on the terms of the specifications and, from his
knowledge of cost of materials and cost of labor, makes up a bid. In a lump sum contract the preliminary
estimate of quantities is final, . . . . Any changes must be a matter of settlement
between the owner and the contractor.
The [contractor] takes all the gamble, and if conditions or quantities
turn out more favorably than was anticipated, he wins; otherwise he loses, or
is tempted to decrease the cost to himself by some method which generally means
a poorer grade of work than that contemplated in the specifications. If conditions turn out much worse than
anticipated, [the contractor] may forfeit whatever bond he put up and leave the
owner and bondsmen to settle.’ The
tendency of such contracts, . . . ‘is to remove responsibility
from the owner and his representatives and place it on the contractor; also,
all the gamble on the weather, foundations, changes in labor and material market,
and every other unknown or unknowable factor is carefully unloaded on him. . . .
In “cost plus” contracts, the owner accepts all risks, all costs, and
receives the benefit of all favorable conditions; each job carries its own load
only, without the addition of losses on other jobs and without the percentage
added by the contractor to offset possibly unfavorable conditions, ambiguous
specifications, or captious owners.’ ” (>Crowe, supra, 184 Cal. at pp. 134-135.)
In Crowe, the court concluded
that one of the essential features “of the cost-plus form of contract is the
payment by the [owner] of the cost of the work.” (Id.
at p. 144.) One of the advantages
of cost plus contracts is that they “ ‘do away with the substantial sums
usually added in lump-sum or unit-price contracts to cover’ ” uncertainties
related to weather, shortages and changes in the cost of labor or materials,
and the delayed deliveries of materials.
(Id. at
pp. 138-139.) One of the
disadvantages of cost plus contracts is that it is difficult to determine the
cost of construction in advance, which can upset budgets “where definite
appropriations have been made or are required.”
(Id. at p. 139.) There “are a great many variations of the
cost-plus contract.”href="#_ftn7"
name="_ftnref7" title="">[7] (Id.
at p. 138.)

B.
Parties’ Contentions

Owners argue that under the cost
plus contract in this case, Contractor was only entitled to profit and overhead
on project costs Contractor paid and not those paid directly by Owners because
the contract defined costs as those “incurred
by the contractor for materials, permits, and subcontractor services.” (Italics added.) Citing cases from out of state, Owners argue
that both the contract and case law define costs as only those incurred by
Contractor.

Contractor argues that the out-of-state
cases cited by Owners do not apply and that Owners fail to address what happens
if extrinsic evidence is introduced to show how the parties interpreted the
contract. Contractor relies on Kelso’s
testimony that Contractor’s profit was to be based on all costs of the
project. In addition, Contractor argues
that the court may look to the acts of the parties to show what the contract
means and that the court admitted extrinsic evidence that showed that the
parties interpreted the contract to mean that Contractor’s fee was based on all
of the costs of the project, regardless of who paid them.

In reply, Owners argue that the
contract was not ambiguous and, consequently, there was no need to resort to
extrinsic evidence to interpret the contract.

Since the trial court allowed this
portion of Contractor’s claim for profit and overhead, it appears the court
rejected Owners’ interpretation of the contract. The trial court did not make any express
findings regarding this question of contract interpretation, including whether
the contract was ambiguous or whether the court relied on extrinsic evidence to
interpret it. Since Owners’ request for
a statement of decision did not address this issue and their objections did not
bring this omission to the court’s attention, we may imply findings in support
of the judgment. (SFPP v. Burlington Northern & Santa Fe Ry. Co. (2004) 121
Cal.App.4th 452, 462 (SFPP).)

C.
Rules of Contract Interpretation and Standards of
Review

As in all
contract cases, interpretation of the construction contract in this case is
guided by the principle that it “must be so interpreted as to give effect to
the mutual intention of the parties as it existed at the time of contracting,
so far as the same is ascertainable and lawful.” (Civ. Code, § 1636.)href="#_ftn8" name="_ftnref8" title="">[8]

A contract
is to be interpreted as a whole, “so as to give effect to every part, if
reasonably practicable, each clause helping to interpret the other.” (§ 1641.) Where there are several provisions to the
contract, “such a construction is, if possible, to be adopted as will give
effect to all.” (Code Civ. Proc.,
§ 1858.)

As this
court explained in DVD Copy Control
Assn., Inc. v. Kaleidescape, Inc. (2009) 176 Cal.App.4th 697 (>DVD Copy Control), the “parties’ intent
is ascertained from the language of the contract alone, ‘if the language is
clear and explicit, and does not involve an absurdity.’ ([§§ 1636,] 1638.) Extrinsic evidence is admissible to explain
the meaning of a contract if ‘the offered evidence is relevant to prove a
meaning to which the language of the instrument is reasonably
susceptible.’ [Citation.] In order to determine whether the extrinsic
evidence is admissible, the trial court first makes ‘a preliminary
consideration of all credible evidence offered to prove the intention of the
parties.’ [Citation.] ‘If the court decides, after considering this
evidence, that the language of a contract, in the light of all the
circumstances, “is fairly susceptible of either one of the two interpretations
contended for . . .” [citations], extrinsic evidence relevant to
prove either of such meanings is admissible.’ ” (DVD
Copy Control, supra, at p. 712, quoting Pacific
Gas & E. Co. v. G.W. Thomas Drayage etc. Co. (1968) 69 Cal.2d 33,
37, 39-40 (PG & E.)

“The court
must explain the contract ‘by reference to the circumstances under which it was
made, and the matter to which it relates.’
(. . . § 1647.)
Any uncertainty or ambiguity ‘must be interpreted in the sense in which
the promisor . . . believed, at the time of making it, that the
promisee . . . understood it.’
(Id., § 1649.) The court may also look to the acts of the
parties that show what they believed the contract to mean. [Citation.]
That is, ‘the construction given [a contract] by the acts and conduct of
the parties with knowledge of its terms, and before any controversy has arisen
as to its meaning, is admissible on the issue of the parties’ intent.’ (Southern
Cal. Edison Co. v. Superior Court
(1995) 37 Cal.App.4th 839, 851 . . . .) This rule is not limited to the joint conduct
of the parties. ‘ “The practical
interpretation of the contract by one party, evidenced by his words or acts,
can be used against him on behalf of the other party, even though that other
party had no knowledge of those words or acts when they occurred and did not
concur in them. In the litigation that
has ensued, one who is maintaining the same interpretation that is evidenced by
the other party’s earlier words, and acts, can introduce them to support his contention” ’ ” (DVD
Copy Control, supra, 176 Cal.App.4th at p. 712.)

The
interpretation of a contract generally presents a question of law, which the
appellate court reviews de novo. (>Parsons v. Bristol Development Co.
(1965) 62 Cal.2d 861, 865.) “ ‘The
trial court’s determination of whether an ambiguity exists is a question of
law, subject to independent review on appeal.
[Citation.] The trial court’s
resolution of an ambiguity is also a question of law if no parol evidence is
admitted or if the parol evidence is not in conflict. However, where the parol evidence is in
conflict, the trial court’s resolution of that conflict is a question of fact
and must be upheld if supported by substantial evidence.’ ” (DVD
Copy Control, supra, 176
Cal.App.4th at p. 713, quoting Wolf
v. Superior Court (2004) 114 Cal.App.4th 1343, 1351.)

D.
Language of the Contract & Analysis

We begin by reviewing the language
of the contract. The provisions related
to contract price are found in Article 4 of the contract. Paragraph 4.1 provides: “The construction contract shall be
calculated on a cost plus coordination basis, with all labor, materials,
permits and insurance figured as costs.
Costs are defined as any costs incurred by the contractor for materials,
permits and subcontract services. Labor
will be billed at current billing rates as set forth in 4.5. Construction coordination services shall be
charged at 15% of costs and current labor rates.” Paragraphs 4.2 through 4.4 set forth terms
regarding depositshref="#_ftn9" name="_ftnref9"
title="">[9]
and paragraph 4.5 sets forth hourly labor rates for the job foreman,
carpenters, and general laborers.

The first sentence of paragraph 4.1
provides that the contract price “shall be calculated on a cost plus
coordination basis, with all labor,
materials, permits and insurance figured as costs.” (Italics added.) This language supports Contractor’s
interpretation that his fee for coordination services (which the parties refer
to as profit and overhead) is based on “all” of the costs of the project,
including those paid for by Owners.

But reading the language of
paragraph 4.1 as a whole, as we must (§ 1641), casts doubt on that
interpretation. The second sentence of
paragraph 4.1 provides: “Costs are
defined as any costs incurred by the contractor for materials, permits and
subcontract services.” Arguably, this
sentence limits the kinds of costs that may be considered in determining
Contractor’s fee. It provides that costs
must be incurred, rather than
estimated or forecasted. (See e.g., >Crowe, supra, 184 Cal. at pp. 134, 136, 145.) The types of costs listed in the second
sentence differ from those in the first sentence. Both the first and second sentences include
“materials” and “permits.” But unlike
the first sentence, the second sentence does not list “labor” or “insurance” as
costs.href="#_ftn10" name="_ftnref10" title="">[10] The second sentence also adds “subcontract
services” as a type of cost. Finally,
the second sentence provides that the costs must be “incurred by the
contractor.” Arguably, this phrase
supports Owner’s interpretation of the contract that costs were limited to
those costs incurred by Contractor and did not include costs that Owners paid
directly.

But “incurring” a cost is not
synonymous with “paying” for that cost.
Webster’s Third New International Dictionary (1993) at page 1146 defines
“incur” as “to become liable or subject to”; “to bring down upon oneself,” for
example to incur a large debt or a penalty; or “to render liable or subject
to.” (Id. at p. 1146, col. 3.)
The same source defines “pay” as “to satisfy (someone) for services
rendered or property delivered: discharge an obligation to” and “to give in
return for goods or service.” (>Id. at p. 1659, col. 1.) Roget’s II The New Thesaurus (3d ed. 1995)
provides the following synonyms for “incur”:
“to take upon oneself: assume,
shoulder, tackle, take on, take over, undertake.” (Id.
at p. 522, col.1.) Its definition
of “pay” is similar to the dictionary definition cited above; synonyms for
“pay” include “compensate, recompense, remunerate.” (Id.
at p. 714, col. 2.) Arguably, by virtue
of its role as general contractor, Contractor became liable for all vendor
costs, even those paid directly by Owners.

In interpreting the price provision
in the contract, including the phrase “incurred by the contractor,” we
interpret the contract as a whole, “so as to give effect to every part, if
reasonably practicable, each clause helping to interpret the other.” (§ 1641.) In its trial brief, Contractor urged the
trial court to interpret the price provision in light of paragraph 7.1 of the
contract, which provides: “The Owner
shall communicate with subcontractors only through the Contractor.” In addition, paragraph 7.2 provides: “The Owner will not assume any liability or
responsibility, nor have controls over or charge of construction means,
methods, techniques, sequences, procedures, or for safety precautions and
programs in connection with the project, since these are solely the
Contractor’s responsibility.” These
clauses of the contract provide that Contractor, not Owners, was responsible
for securing, coordinating, and paying the subcontractors. Thus, the contract contemplated that
Contractor would incur all of the costs of construction. Interpreting paragraph 4.1 in light of the
requirements of paragraphs 7.1 and 7.2 supports Contractor’s interpretation of
the contract, namely that its fee was to be based on all of the costs of the
project, including those amounts that Owners paid directly to vendors.

Based on this analysis, we conclude
that the language of the contract was “reasonably susceptible” to “either one
of the two interpretations contended for.”
(PG & E, supra, 69
Cal.2d at pp. 37, 40.)
Consequently, extrinsic evidence relevant to prove either meaning was
admissible. (Ibid.; DVD Copy Control, >supra, 176 Cal.App.4th at p.
712.) It is well settled that “when a
contract is ambiguous, a construction given to it by the acts and conduct of
the parties with knowledge of its terms, before any controversy has arisen as
to its meaning, is entitled to great weight, and will, when reasonable, be
adopted and enforced by the court.” (>Universal Sales Corp. v. California Press
Mfg. Co. (1942) 20 Cal.2d 751, 761; Bohman
v. Berg (1960) 54 Cal.2d 787, 795 [“when a contract is ambiguous or
uncertain the practical construction placed upon it by the parties before any
controversy arises as to its meaning affords one of the most reliable means of
determining the intent of the parties”]; DVD
Copy Control, supra, at p.
712.) As the California Supreme Court
stated more recently, “A party’s conduct occurring between execution of the
contract and a dispute about the meaning of the contract’s terms may reveal
what the parties understood and intended those terms to mean. For this reason, evidence of such conduct,
. . . , is admissible to resolve ambiguities in the contract’s
language.” (City of Hope National Medical Center v. Genentech, Inc. (2008) 43
Cal.4th 375, 393.)

The court admitted extrinsic
evidence on the question whether Contractor was entitled to profit and overhead
on costs Owners paid directly to vendors, including a series of e-mails. Owners did not object to this evidence on the
ground that it was inadmissible because the contract was unambiguous,href="#_ftn11" name="_ftnref11" title="">[11] and
they do not challenge the admission of this evidence on appeal.

Contractor presented evidence that
on March 7, 2007, almost four weeks before Contractor left the job, Silva sent
Cricchio an e-mail questioning a $5,000 “contractor’s fee” in the draw
request. Cricchio responded that it was
Kelso’s monthly salary.href="#_ftn12"
name="_ftnref12" title="">[12] The following day, Silva sent Cricchio an
e-mail stating “our agreement is time and materials . . . plus 15% of the
project cost (profit), not plus a $5000.00 salary??” (Punctuation in original.) Notably, Silva’s statement did not limit
Contractor’s profit and overhead to amounts that Contractor paid.

That same day, Cricchio sent Silva
an e-mail stating that Contractor would make an adjustment for the $5,000 fee
in the next draw request. She also
stated “we need ALL the bills for the concrete, the contract for the plumber,
and all other costs to calculate our profit and overhead. The contract is for all costs of the job
regardless if you pay for them or if [Contractor] pays for them. As you are aware, because we are the General
Contractor on record, we are exposing our license to lots of liability and
additional insurance cost. Thus, we need
all the numbers to correctly calculate the true time and materials job costs to
date.” Silva responded that he had over
$29,000 in invoices for concrete, but asked why he should “pay 15% profit for
materials before he pays for the materials themselves.” He stated that he was “not disputing the
material to the job. [Contractor] gets a
profit of 15% off of these and others that are incurring,” for example Granite
Construction, but stated that he would not pay Contractor’s profit and overhead
until he actually paid the vendors.
“[T]hat is when the cost is realized on my books and [I] will pay 15% to
Kelso along with that.” And six days
later, in an e-mail dated March 14, 2007, Silva agreed once again that
Contractor was entitled to profit and overhead on amounts billed by the
concrete subcontractor.href="#_ftn13"
name="_ftnref13" title="">[13] These e-mails support the conclusion that
weeks before Contractor left the job—and almost a year and a half before the
litigation was filed—Owners agreed with Contractor’s interpretation of the
contract that the parties intended that Contractor’s fee be based on all costs
of the job, including those that Owners ended up paying directly.

In addition, adopting Owner’s
interpretation of the contract would lead to an absurdity. In this case, there was substantial evidence
that Contractor coordinated the work of the vendors that Owners paid
directly. Although Silva provided heavy
machinery—an operator, and laborers from his father’s ranch for the excavation
of the pad and grading work at no cost to Owners or Contractor—Silva testified
that the site preparation, excavation and grading were done under the direction
of Contractor’s crew and the surveyor.
Silva did not direct any of that work.
Thus, Contractor directed the excavation work and incurred potential
liability for that work. Similarly,
although Owners selected and paid the concrete supplier directly, Owners did
not coordinate that work. Silva testified
that he did not order or schedule the concrete, that he told Kelso to pay the
concrete finishers in cash, and that Contractor’s crew directed the concrete
work.

In addition, Silva testified that
Owners did not supervise the plumber’s work.
And as part of the foundation work, Contractor needed to know the sizes
and locations of the windows. Contractor
and Owners met with Tuttle, who provided a preliminary bid for the
windows. Kelso testified that he spent
10 to 20 hours working to obtain this information. Months later, before Contractor left the job,
Owners purchased the windows directly from Tuttle through Direct Buy.

With respect to the work from
Granite Construction, the record does not indicate precisely how the rock was
used. There was evidence that it was
used in the construction of the foundation and concrete walls in the basement
and that Contractor paid for some of it.
But there was no evidence that Owners directed or coordinated the work
involving the rock.

Although there was href="http://www.mcmillanlaw.com/">conflicting evidence regarding who coordinated
some of the work described above, substantial evidence supports an implied
finding that Owners reaped the benefit of Contractor’s coordination services
related to materials and subcontract services they paid for directly.

Pursuant to the contract,
Contractor was to be paid on a “cost plus coordination basis” with its
“[c]onstruction coordination services charged at 15% of costs” and labor. Substantial evidence supported the conclusion
that it was Contractor, not Owners, who coordinated the work of the vendors
that Owners paid directly. Yet under
Owners’ interpretation of the contract, Contractor would not be able to charge
for its construction coordination services (profit and overhead) against that
work. As we have noted, one of the
characteristics of a cost plus construction contract is that is shifts all of
the risk of the project from the contractor to the owner. (Crowe,
supra, 184 Cal. at p. 135 [“the owner
accepts all risks, all costs, and receives the benefit of all favorable
conditions”].) If we interpret the
contract as Owners suggest, an owner could circumvent the requirements of the
contract and reduce the amount of the contractor’s coordination fee by paying
vendors directly, while reaping the benefit of the contractor’s coordination
services, thereby shifting the risk of the work back to the contractor.

The parties do not cite any
California cases that address the issue presented here. Owners cite five out-of-state cases, none of
which we find persuasive. In >Keever & Associates, Inc. v. Randall
(Wash.Ct.App. 2005) 119 P.3d 926 (Keever),
a Washington appellate
court affirmed the trial court’s finding that a general contractor “was not
entitled to levy” his 10 percent fee in a cost plus contract on costs paid
directly by the owner because those costs were not actual costs to the
contractor. (Id. at p. 930.) The
court did not analyze the language of the contract. It concluded instead that the contractor had
not met its burden on appeal of providing reasoned argument and citations to
the record and authority. (>Id. at pp. 929-930.) In Grothe
v. Erickson (Neb. 1953) 59 N.W.2d 368, 371 (Grothe), a case involving an oral cost plus contract, the Nebraska
Supreme Court held that a contractor was not entitled to charge a profit on
lumber purchased by the owner because the contractor incurred no financial
liability in connection with the purchase.
Grothe is distinguishable from
this case because it involved an oral, not a written, contract and because the
owner in Grothe purchased the lumber
before the parties entered into their contract.
(Ibid.) Although the other cases cited by Owners
involve cost plus contracts, they do not address the question whether the
contractor on a cost plus contract is entitled to profit and overhead on amounts
paid directly by the owner to vendors. (>Master-Built Construction Co. v. Thorne
(2005) 802 N.Y.S.2d 713, Continental
Copper & Steel Industries v. Bloom (Conn. 1953) 96 A.2d. 758, and >Kerner v. Keeney (Ill. 1948) 78 N.E.2d
252.)

For these reasons, we conclude that
under the terms of the contract, Contractor was entitled to profit and overhead
on all costs incurred for the project, including amounts Owners paid directly
to vendors. Consequently, the trial
court did not err when it awarded Contractor profit and overhead on those
amounts.

E.
Modification of the Contract

Even if we were to conclude that
the contract unambiguously provides that Contractor is entitled to profit and
overhead only on costs it paid and not the costs that Owners paid directly,
another analysis supports the trial court’s judgment. Prior to oral argument, we requested
supplemental briefing from the parties on the questions of whether the evidence
supports implied findings that the parties modified the original written
contract or otherwise waived the requirement that costs be “incurred by the
contractor.”

The modification of a written
contract is governed by section 1698, which provides: “(a) A contract in writing may be
modified by a contract in writing. [¶] (b) A contract in writing may be
modified by an oral agreement to the extent that the oral agreement is executed
by the parties. [¶] (c) Unless the contract otherwise
expressly provides, a contract in writing may be modified by an oral agreement
supported by new consideration. The
statute of frauds (Section 1624) is required to be satisfied if the contract as
modified is within its provisions.
[¶] (d) Nothing in this
section precludes in an appropriate case the application of rules of law
concerning estoppel, oral novation and substitution of a new agreement,
rescission of a written contract by an oral agreement, waiver of a provision of
a written contract, or oral independent collateral contracts.” Assuming the contract unambiguously required
that costs be paid for by Contractor before they may be used to calculate its
profit and overhead, the evidence here supports a conclusion that the parties
modified that requirement under subdivision (a) of section 1698 or waived it
under subdivision (d) of that section.

Under subdivision (a) of section
1698, a “contract in writing may be modified by a contract in writing.” The written exchange of e-mails in this case
may be construed as a writing modifying the contract requirement that costs be
“incurred by the contractor.” In >Texas Co. v. Todd (1937) 19 Cal.App.2d
174, 185, the parties disputed the amount of a discount to be applied to a
certain grade of gasoline under a written contract to purchase gasoline. The court concluded that the parties’ telegrams
and letters indicated that they recognized that there was a dispute and
“compromised that dispute and modified the contract or enlarged its terms so as
to cover the omission” and “settled the dispute regarding that feature of the
contract. That compromise agreement
merged in the contract and became a part of it.
There is no doubt the law authorizes such a modification or addition to
a written executory contract by a written stipulation evidenced by the
subsequent telegrams or letters.” (>Ibid.)
The e-mails in this case had the same effect as the telegrams and
letters in Texas Co. v. Todd.

Furthermore, subdivision (d) of
section 1698 provides “Nothing in this section precludes in an appropriate case
the application of rules of law concerning estoppel, oral novation and
substitution of a new agreement, rescission of a written contract by an oral
agreement, waiver of a provision of a written contract, or oral independent
collateral contracts.” The evidence
supports the conclusion that as the project progressed, the parties mutually waived
the requirements in paragraph 4.1 that costs be “incurred by the contractor”
and in paragraphs 7.1 and 7.2 that Owners not have any contact with the vendors
or control over methods of construction.
Owners insisted on using their own subcontractors and material suppliers
and paying some of the vendors directly.
Although Contractor argued at trial that Owners had breached paragraphs
7.1 and 7.2 of the contract, there was evidence that Contractor allowed Owners to
communicate with and contract with the subcontractors. For example, although Contractor planned to
hire Granite Construction to supply the concrete, it allowed Owners to obtain a
bid from Chapin and ultimately agreed to hire Chapin to provide the concrete. There was a similar agreement regarding BG
Plumbing. And in the e-mail exchange
between Cricchio and Silva on March 8, 2007, after describing materials
Contractor had purchased from Granite Construction, Cricchio stated, “If you
would like to open an account at [G]ranite under your name and have everything
put on that account and billed to you, we can do that!” In addition, in our view, Contractor’s
agreement to allow Owners to contract with some of the vendors directly to save
costs was sufficient consideration for an agreement by Owners to waive the
contract requirement that costs be “incurred by the contractor.”

Diamond
Woodworks, Inc. v. Argonaut Ins. Co. (2003) 109 Cal.App.4th 1020 (>Diamond), overruled on another point as
stated in Bullock v. Philip Morris USA,
Inc., 198 Cal. App. 4th 543, 565, is instructive. Diamond
arose out of a breach of contract claim between an employee leasing company and
its client (Diamond). The >Diamond court explained, “The parties
mutually dispensed with the subject requirements of the contract by quid pro
quo conduct antithetical to the written terms of the contract, i.e., [the
leasing company] dispensed with the requirements regarding prehiring paperwork
and approval, and in turn Diamond performed the specified duties with regard to
new hires that were [the leasing company’s] obligation under the contract. No additional consideration was needed.” (Id.
at pp. 1038-1039.) The court stated
that the parties “not only abandoned or ignored the provisions dealing with the
processing of new employees, but, postagreement, substituted a course of
conduct wholly incompatible with those provisions. This is a textbook case of modification by
conduct. As our Supreme Court has held,
where the subsequent conduct of parties is inconsistent with and clearly
contrary to provisions of the written agreement, the parties’ modification
setting aside the written provisions will be implied. (Garrison
v. Edward Brown & Sons (1944) 25 Cal.2d 473, 479 . . .
[‘Before a contract modifying a written contract can be implied, the conduct of
the parties according to the findings of the trial court must be inconsistent
with the written contract so as to warrant the conclusion that the parties
intended to modify the written contract’]; [citation].)” (Diamond,
at p. 1038.)

Although this case does not support
a finding of an oral modification of the contract under section 1698,
subdivision (c), because the contract was subject to the statute of frauds,href="#_ftn14" name="_ftnref14" title="">[14]
nothing in section 1698 precluded the court from finding a mutual waiver of the
provisions of paragraphs 4.1, 7.1 and 7.2 of the contract based on the parties’
course of conduct and the e-mails. To
this end, we note that Contractor stated in its trial brief that one of Owners’
defenses was that they hired subcontractors “by mutual agreement.” In our view, the evidence supports a finding
of mutual waiver of the contract provisions enumerated above. As we have noted, since the court did not
make express findings on the contract interpretation question or the issue of
waiver and Owners did not raise these points in their request for statement of
decision or objections to the court’s statement of decision, we may imply such
findings in support of the judgment. (>SFPP, supra, 121 Cal.App.4th at p. 462.)

II.
Sufficiency of the Evidence

Owners
challenge the sufficiency of the evidence to support a number of items the
trial court awarded Contractor. After
describing our standard of review, we shall address each of Owners’ points.

A.
Standard of Review

The trial
court’s factual findings are subject to limited review on appeal and will not
be disturbed if supported by substantial
evidence. (Williams v. Saunders (1997) 55 Cal.App.4th 1158, 1162.) “When a trial court’s factual determination
is attacked on the ground that there is no substantial evidence to sustain it,
the power of an appellate court begins and ends with the determination as to
whether, on the entire record, there is substantial evidence, contradicted or
uncontradicted, which will support the determination.” (Bowers v. Bernards (1984) 150
Cal.App.3d 870, 873-874, original emphasis omitted.) As long as there is substantial evidence, the
appellate court must affirm, even if the reviewing justices personally would
have ruled differently if they had presided over the proceedings below and even
if other substantial evidence would have supported a different result. (Id. at p. 874.) An appellate court is “not in a position to
weigh any conflicts or disputes in the evidence. Even if different inferences can reasonably
be drawn from the evidence, [the appellate court] may not substitute [its] own
inferences or deductions for those of the trial court. [Its] authority begins and ends with a
determination of whether, on the entire record, there is any substantial
evidence, contradicted or uncontradicted, which will support the judgment. [Citations.]
Therefore, we must consider all of the evidence in the light most
favorable to the prevailing party, giving that party the benefit of every
reasonable inference from the evidence tending to establish the correctness of
the trial court’s decision, and resolving conflicts in support of the trial
court’s decision.” (Estate of Beard (1999) 71 Cal.App.4th 753, 778-779.)

B.
Amounts Charged for Labor

Owners
contend that there was insufficient evidence to support amounts awarded for
some of Dave Whent’s and Victor Jimenez’s labor. Regarding Whent, Owners challenge the awards
of $1,560 for work done from January 29 through February 5, 2007, and $3,542
for March 30 through April 3, 2007.
Regarding Jimenez, Owners challenge the award of $1,440 for work done
from December 7 through December 13, 2006.

There is no
merit to this contention. Contractor’s
invoices identified Whent as the job foreman and Jimenez as a laborer. Whent’s time was billed at $65 per hour and
Jimenez’s time was billed at $30 per hour in accordance with labor rates in the
contract. Contrary to Owners’ assertion
that Contractor “produced no time sheets for this labor,” Exhibit 12 contained
copies of the employees’ time cards for the periods at issue. The numbers of hours recorded on the time
cards support the amounts claimed.

Owners also
challenge amounts awarded for Telesforo Garcia’s labor. They contend there is no evidence supporting
“four entries for wages totaling $2,240” on page 3 of Exhibit 11. Contractor’s invoices describe Garcia as a
carpenter; pursuant to the contract, his work was charged at $45 per hour. Contrary to Owners’ assertions, Contractor’s
Exhibit 10 contains time cards for three of the four pay periods at issue. The only period for which there was no time
card was January 11 through January 24, 2007.
But, in addition to the time cards, Contractor’s invoices itemized all
of the labor claimed. According to
invoice no. 912, Garcia worked 88 hours between January 11 and January 24,
2007. The trial judge found Contractor’s
staff credible and reasonably concluded that invoice no. 912 sufficiently
described the work done and the amount claimed, even though there was no time
card. For these reasons, we reject
Owners’ contention that there was insufficient evidence to support the amount
awarded for Garcia’s labor.

C.
Rasmussen Land Surveying

Owners
challenge the award of $1,131.75 for amounts Contractor paid to Rasmussen Land
Surveying (Rasmussen) on Rasmussen’s invoice no. 5482, arguing that there was
no receipt or invoice from Rasmussen to support the claim. Owners did raise this claim at trial.

Generally,
“a party has the burden of proof as to each fact the existence or nonexistence
of which is essential to the claim for relief or defense that he is
asserting.” (Evid. Code,
§ 500.) “ ‘Burden of proof’
means the obligation of a party to establish by evidence a requisite degree of
belief concerning a fact in the mind of the trier of fact or the court.” (Evid. Code, § 115.)

On cross
examination, Cricchio agreed that the invoice was not in Contractor’s Exhibit
10, but testified that she had “turned it in.
It has been presented.”
Contractor’s claim included other invoices from Rasmussen with different
invoice numbers, which are not challenged on appeal. Cricchio testified that the entries on
Contractor’s spreadsheet were accurate and included the vendors’ invoice
numbers and the trial court found her credible.
Although Contractor’s evidence did not include a copy of the Rasmussen’s
invoice no. 5482,href="#_ftn15"
name="_ftnref15" title="">[15]
Contractor did itemize this expense on its spreadsheet and there was no
evidence that this cost was not incurred or that the amount claimed was
incorrect or duplicative. In our view,
there was substantial evidence that supported the court’s award of this line
item.

D.
Cost of Generator

Without
much argument or any citation to legal authority, Owners assert that the trial
court erred when it awarded $3,200 plus profit of $480 (15 percent of $3,200)
for the cost of a generator for eight weeks, “despite the fact that Kelso
agreed not to charge for it.” “In cost
plus contracts, as a general rule, . . . hauling, storage and
operating expenses resulting from the use of equipment are reimbursable
expenses and not overhead.” (>Vowels v. Witt (1957) 149
Cal.App.2d 257, 263.)

Substantial
evidence supports the award of this line item.
Cricchio testified that whenever Silva complained about items on
Contractor’s billing, Contractor agreed to temporarily remove those items from
the bill and “deal with [them] towards the end of the last billing.” She explained, for example, that Silva
complained about being billed for the generator and “kept saying he was going
to bring his own generator.” To move
forward on the project, she agreed not to bill for it “until the generator was
replaced.” She testified that she
subsequently billed for the generator in the final claim (Exhibit 11) because
the generator was on site for 12 weeks.href="#_ftn16" name="_ftnref16" title="">[16] Thus, substantial evidence supports the
court’s award of this line item.

E.
Credit for Lumber Deposit

Owners
argue that the trial court erred in not giving them a credit for $19,000 they
paid as a lumber deposit. At trial,
Kelso testifi