Integrated Enterprises v. Kang
Filed 6/24/13 Integrated Enterprises v. Kang CA4/3
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Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or
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as specified by rule 8.1115(b). This
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IN THE COURT OF
APPEAL OF THE STATE OF CALIFORNIA
FOURTH
APPELLATE DISTRICT
DIVISION THREE
INTEGRATED ENTERPRISES, INC.,
Plaintiff and Respondent,
v.
YING KANG,
Defendant and Appellant.
G046745
(Super. Ct. No. 30-2011-00453100)
O P I
N I O N
Appeal from a judgment
of the Superior Court
of
County, Franz E. Miller, Judge. Affirmed in part, reversed in part, and
remanded.
Rogers, MacLeith &
Stolp and Douglas R. MacLeith for Defendant and Appellant.
Law Offices of Jessica
Rachelle Blair and Jessica R. Blair for Plaintiff and Respondent.
* * *
Contractor
Integrated Enterprises, Inc., doing business as Integrated Artisan Builders,
sued restaurant franchise owner Ying Kang (Kang), for damages incurred due to
breach of contract and Kang cross-complained.
The court awarded damages to Integrated Enterprises, Inc. and nothing to
Kang. On appeal, Kang claims Integrated
Enterprises, Inc. was entitled to nothing because it was unlicensed during the
performance of the contract, the court erred in admitting into evidence an
exhibit itemizing Integrated Enterprises, Inc.’s estimated damages, and the
evidence did not support the damages award in any event.
Substantial evidence
supports the trial court’s findings that the party who contracted with Kang was
sole proprietor Paul Yakel (Yakel), doing business as Integrated Artisan
Builders, and that Yakel was properly licensed at all times from the date of
contract to the date of termination of contract. Yakel’s undisputed testimony shows that
Integrated Enterprises, Inc. assumed the contract between Integrated Artisan
Builders and Kang, and Kang has failed to show that Integrated Enterprises,
Inc., having assumed that contract, cannot enforce it. We hold that to the extent of any error in
the admission of the exhibit into evidence, the error was harmless error. However, we also hold that the trial court
erred in awarding to Integrated Enterprises, Inc. an amount of damages
exceeding the benefit of the bargain.
Consequently, we affirm in part, reverse in part, and remand.
I
FACTS
In October 2010,
H-Salt—Ying Kang entered into a contract with Integrated Artisan Builders for
the design of tenant improvements on restaurant premises. The total amount paid for the work was more
than $4,500.
On November 16, 2010, H-Salt—Ying Kang and
Integrated Artisan Builders entered into a contract for the construction of the
tenant improvements. Kang signed as
owner of the H-Salt franchise and Yakel signed as owner of Integrated Artisan
Builders. The cost of the construction
work was $65,000.
After the construction
contract was signed, Kang asked for a number of changes to the design and
equipment. Yakel prepared change orders
to accommodate Kang’s requests. The
total cost of three change orders dated November 24, 2010 was approximately $27,000.
Although Yakel prepared
the change orders on November 24,
2010 and explained to Kang that he could not move forward on the
project until she signed and returned the change orders, she was slow to return
them. He sent various e-mails to Kang
and her business associate, Bruce Beckman (Beckman), trying to impress upon
them the necessity of returning the change orders quickly so he could get
started on the work. Getting the change
orders signed was a slow process because Kang and Beckman wanted to pick some
of the vendors or subcontractors themselves and Kang kept making changes to
what equipment she wanted to use. Yakel
could not complete the engineering work and plan preparation until Kang decided
about the equipment.
In early December 2010,
Beckman contacted Yakel about involving an attorney, who wanted to make some
changes to the existing construction contract.
A proposed addendum was forwarded to Yakel on December 8, 2010.
Among other things, that addendum would have added a completion date of January 31, 2011. Yakel testified that he did not sign the
addendum because he could not commit to a completion date when he could not get
answers to questions necessary to proceed.
Kang did not return the signed change orders to Yakel until December 9,
2010.
As of December 16, 2010,
Kang and Beckman were still sending Yakel e-mails about changing equipment and
plans. Yakel finally wrote, “You are
killing me slowly with changes.â€
A letter from Attorney
Douglas MacLeith, dated December 17, 2010, informed Yakel that Kang was in an
awkward position because her existing lease was expiring and she needed to be
able to relocate her business as soon as possible. He stated that Kang had a right to terminate
the contract and that she was seeking replacement contractors.
Nonetheless, as of
December 20, 2010, Kang was still e-mailing Yakel about further changes. Late that afternoon, Yakel informed Kang and
Beckman that he had incorporated all the new items into the blueprints and he
would be submitting them to the City of Orange and the county health department
the following day. He had spent about 60
hours preparing the plans. The plans
were received by the county health department no later than December 22,
2010. On December 28, 2010, Yakel
informed Kang and Beckman that the city was closed for the week and only
limited work could be done on the site without the authorizations from the city
and the health department. Two days
later, Kang replied that she was tired of Yakel’s delays, was looking for
another contractor, and was going to complain about Yakel to the Contractors
State License Board.
Kang terminated Yakel on
about January 6, 2011. She and Beckman
began working with another contractor, Alfredo Rodriguez, in December 2010 or
January 2011. However, Kang did not sign
an agreement with Rodriguez’s company, AED Contractors, until April 4,
2011. The contract price was $85,000. However, Kang ultimately paid about $143,000
for the project. She opened her
restaurant in July 2011.
Integrated Enterprises,
Inc., doing business as Integrated Artisan Builders, filed a complaint against
Kang for, inter alia, breach of contract.
Kang filed a cross-complaint against Integrated Enterprises, Inc. for
breach of contract and reimbursement of funds paid to an unlicensed
contractor. The court awarded Integrated
Enterprises, Inc. damages in the amount of $20,498.28 and costs in the amount
of $2,737.11, for a total award of $23,235.39, and ordered that Kang take
nothing. Kang appeals.
II
DISCUSSION
A. Unlicensed Contractor:
(1) Business and
Professions Code section 7031—
Business
and Professions Code section 7031, subdivision (a) provides: “Except as provided in subdivision (e), no
person engaged in the business or acting in the capacity of a contractor, may
bring or maintain any action, or recover in law or equity in any action, in any
court of this state for the collection of compensation for the performance of
any act or contract where a license is required by this chapter without
alleging that he or she was a duly licensed contractor at all times during the
performance of that act or contract, regardless of the merits of the cause of
action brought by the person . . . .â€
Kang
asserts that Integrated Enterprises, Inc. is not entitled to recover any monies
under the contract because it was unlicensed at all times that work was
performed under the contract. We
disagree, for reasons we shall show.
(2) Evidence—
The November 16, 2010
construction contract described Integrated Artisan Builders as a licensed
corporation. However, when the contract
was signed, Yakel was actually a licensed contractor doing business as Integrated
Artisan Builders, a sole proprietorship.
He signed as “owner†of Integrated Artisan Builders.
Yakel had formed a new
corporation, Integrated Enterprises, Inc., in about June 2010 and had submitted
paperwork to the Contractors State License Board in August or September 2010 to
transfer his license to the new corporation, which would then do business as
Integrated Artisan Builders. Yakel
believed it would take three or four weeks from the date of submission to
transfer the license, so he drafted the construction contract to reflect that
Integrated Artisan Builders was a corporation.
After he had prepared
the contract, however, he realized that the license had not yet been
transferred to the new corporation. So,
he sent Kang an explanatory notice stating that, notwithstanding the fact the
contract identified the contractor as a corporation, Integrated Artisan
Builders was then still a sole proprietorship.
He explained that Integrated Artisan Builders was in the process of being
“consumed†by Integrated Enterprises, Inc., and that the contractor’s license
would be transferred to the new corporate entity.
Yakel’s license was
reassigned to Integrated Enterprises Inc. doing business as Integrated Artisan
Builders on January 6, 2011. Yakel, as
responsible managing officer of Integrated Enterprises, Inc., then executed a
claim of lien for monies owing.
Yakel filed his
complaint in the name of Integrated Enterprises, Inc., doing business as
Integrated Artisan builders. At trial,
Yakel acknowledged that the work actually had been performed by Integrated
Artisan Builders as a sole proprietorship, before the license was transferred
to Integrated Enterprises, Inc. He also
testified that he filed a complaint in the name of Integrated Enterprises,
Inc., rather than in the name of the sole proprietorship, “because the
corporation inherited everything, the license number, the name, everything as
totally seamless . . . .â€
At the conclusion of
trial, the court stated: “Mr. Yakel, if
you look at both of these contracts, never purports to enter into an agreement
on behalf of the corporation even though the corporation was in existence at
the time. He signed as owner, Integrated
Artisans—in that Integrated Artisan Builders was effectively a dba of his sole
proprietorship. [¶] . . . The evidence
is unrebutted that he was licensed at all times during the time he entered into
the contract up till the time that he was terminated . . . . The court further found: “The contracting party in this case was Mr.
Yakel . . . . The issue in this case is
can Integrated Enterprises, Inc., sue and recover under the contract. And the unrebutted testimony . . . was that
Integrated essentially assumed all the . . . assets of the sole proprietorship,
and, therefore, assumed this particular contract.â€
Substantial evidence, as
discussed above, supports these findings.
Kang disagrees. In presenting her
argument, she first draws our attention to several paragraphs of the complaint.
Paragraph 1 of the
complaint provides: “Plaintiff
INTEGRATED ENTERPRISES, INC. dba INTEGRATED ARTISAN BUILDERS (‘Integrated
Artisan Builders’) is a California corporation in active status . . . . Plaintiff is, and at all times relevant to
this action was[,] engaged in the business of design and construction, and is licensed
under license number 688841 by the State of California to perform work as
described in this complaint.â€
Paragraphs 18 through 20
of the complaint read as follows:
“18. On or about November 16,
2010, Plaintiff Integrated Artisan Builders and defendants H-Salt and Ying Kang
entered into a written agreement (‘Written Contract’) . . . whereby Plaintiff
Integrated Artisan builders agreed to perform design and construction work for
the benefit of defendants H-Salt and Ying Kang.
[¶] 19. Plaintiff Integrated
Artisan Builders performed design and construction work for the benefit of
defendants H-Salt and Ying Kang until defendants H-Salt and Ying Kang
instructed Plaintiff Integrated Artisan Builders to cease work on or about
January 6, 2011. [¶] 20. Therefore, Plaintiff Integrated Artisan
Builders performed all conditions, covenants and promises required by it to be
performed in accordance with the terms and conditions of the Written Contract
until on or about January 6, 2011.â€
According to Kang, by the
wording of the complaint, Integrated Enterprises, Inc. admits that it was the
one who, doing business as Integrated Artisan Builders, entered into the
construction contract with her on November 16, 2010 and performed all work
under the contract up until the date of termination. Because Integrated Enterprises, Inc. was not
in fact licensed as represented, she argues, it is barred from collecting
monies under the contract.
Kang also draws our
attention to the fact that the February 1, 2011 claim of lien was in the name
of Integrated Enterprises, Inc., doing business as Integrated Artisan Builders
and was signed by Yakel, as responsible managing officer of Integrated
Enterprises, Inc. She also cites certain
of Yakel’s somewhat contradictory testimony.
He admitted that he when he prepared the contract he described
Integrated Artisan Builders as a corporation because he thought the corporation
would be entering into the contract.
However, when he realized that he had made a mistake in prematurely
describing the entity as a corporation, he sent out a notice dated November 13,
2010 captioned “General memorandum, contract modification,†wherein he
disclosed that Integrated Artisan Builders was still a sole proprietorship,
although it was “in the process of being ‘consumed’ by corporate entity
Integrated Enterprises, [I]nc.†Yakel
admitted that when he came to realize he had made a mistake in preparing the
contract, he sent a notice to that effect to Kang, but did not seek to revise
the contract document. He explained that
he thought the notice he sent out took care of any questions and he had
confirmed it with Kang in a telephone conversation. He ultimately signed the contract as “ownerâ€
of Integrated Artisan Builders and at trial, he affirmed his belief that the
sole proprietorship was performing the contract.
Kang maintains that the
evidence shows Integrated Enterprises, Inc. was the party to the contract, not
the sole proprietorship. However, we
conclude that substantial evidence supports the trial court’s findings. The contract on its face was between
Integrated Artisan Builders, and was executed by Yakel as owner thereof. He was a licensed sole proprietor doing
business as Integrated Artisan Builders at the time and was not barred by
Business and Professions Code section 7031 from seeking damages under the
contract. (Ball v. Steadfast-BLK (2011) 196 Cal.App.4th 694.) Although Yakel made a drafting error in
describing Integrated Artisan Builders as being a corporate entity, he sent
Kang a notice regarding that mistake three days before she signed the
contract. Yakel’s undisputed testimony
shows that Integrated Enterprises, Inc. assumed the contract after Yakel’s
license had been reassigned to it. Kang
cites no authority to the effect that Integrated Enterprises, Inc. had no right
to sue under the contract once it had assumed the same.
However, Kang does cite
case law, having nothing to do with the assumption issue, that she says shows
Integrated Enterprises, Inc. should be treated as an unlicensed contractor. She relies on Opp v. St. Paul Fire & Marine Ins. Co. (2007) 154 Cal.App.4th
71.
In that case, Mountain
Connection, Inc., a Montana corporation, executed a contract for certain
work. William Opp, as president of the
corporation, executed the contract. The
corporation did not have a California contractor’s license, although Opp
did. Opp’s license number was inserted
into various contract documents where a license number was required. When Mountain Connection, Inc. filed suit for
payment, the defendant observed that Mountain Connection, Inc. was
unlicensed. Thereafter, an amended
complaint was filed substituting in “William Opp dba Mountain Connection and
Mountain Connection, Inc.†as plaintiff.
(Opp v. St. Paul Fire & Marine
Ins. Co., supra,
The evidence was
undisputed that Mountain Connection, Inc. was the contracting party and that a
license was required for the work in question.
Consequently, its claim for payment was barred by Business and Professions
Code section 7031. Furthermore, the
court rejected Opp’s argument that there was a triable issue of fact whether
Mountain Connection, Inc. was a fictitious business name under which he
operated. The court observed that
Business and Professions Code section 17910.5 prohibited an individual from
adopting a fictitious business name that included the word “Inc.†(Opp v.
St. Paul Fire & Marine Ins. Co.,
supra, 154 Cal.App.4th at p. 75.)
The court in
Connection, Inc. had been in substantial compliance with Business and
Professions Code section 7031. It
observed, inter alia, that section 7031, subdivision (e) permits the
application of the doctrine of substantial compliance in limited circumstances,
where the contractor had been licensed in California prior to the performance
of the contract, had acted in good faith, had not known that his or her license
was invalid when the contract work commenced, and had acted promptly to
reinstate the license upon learning of the invalidity. Inasmuch as Mountain Connection, Inc. had
never been licensed in California, section 7031, subdivision (e) did not apply. (Opp v.
St. Paul Fire & Marine Ins. Co.,
supra, 154 Cal.App.4th at pp.
77-79.)
In the case before us,
however, the contracting party was Integrated Artisan Builders, and Yakel
signed the contract as the “owner†of Integrated Artisan Builders. At the time, Yakel held a valid contractor’s
license and did business as Integrated Artisan Builders. Although he anticipated that his license
would be transferred to Integrated Enterprises, Inc. and that Integrated
Enterprises, Inc. would assume the contract, this did not occur during the
performance of the contract. The evidence
supports the trial court’s determination that the contracting party was Yakel,
a sole proprietor, doing business as Integrated Artisan Builders, and that the
contracting party was properly licensed at all times during the performance of
the contract. Consequently, Business and
Professions Code section 7031 is no bar to recovery. (Ball
v. Steadfast-BLK, supra,
71, we do not have a situation where the contracting party was an unlicensed
corporation.
In her
Enterprises, Inc. is precluded from arguing that the sole proprietorship was
the contracting party inasmuch as that would be contrary to the wording of the
complaint, and the pleadings are conclusive on the pleader. We do not address this issue inasmuch as it
was raised for the first time in Kang’s reply brief. (Schubert
v. Reynolds (2002) 95 Cal.App.4th 100, 108.)
B. Evidence:
(1) Introduction—
Kang argues that the
complaint basically sought lost profits, but that the claimed damages were
entirely unsupported. She says the
“evidence†of damages “consisted entirely of Exhibit 21,†which was
inadmissible hearsay. We disagree on
several points.
Yakel testified
extensively as to his damages. His
testimony was evidence. Exhibit 15,
which Kang does not challenge, was a construction estimate including
calculations for overhead and profit.
That exhibit was also evidence.
Consequently, the claim that the only evidence was exhibit 21 is
spurious.
We turn now to the
assertion that exhibit 21 was inadmissible hearsay.
(2) Exhibit 21—
At trial, Yakel was
asked about his damages. On direct
examination, his attorney asked him to take a look at exhibit 21, an
itemization the two of them had worked on together. The exhibit showed that, with reference to
the original contract, a raw cost amount of $52,343.98 was added to an amount
of $11,842.83 for anticipated project management overhead and profit, to arrive
at a figure of $64,186.81 as the contract price.
the change orders were similarly calculated.
The exhibit contained an estimate of $15,232.88 in total lost project
management profits as part of damages.
It also showed how Yakel determined total lost profits of $15,265.40 for
markups on subcontracts and materials, broken down for each of the original
contract and the three change orders.
The exhibit also reflected $7,907.63 in costs for expenses Yakel had
paid. Adding the various figures
together, the exhibit showed $38,405.91 in estimated lost profits and expenses.
Ten thousand dollars,
representing money Kang had already paid,
was subtracted from the $38,405.91 figure.
The resulting figure of $28,405.91 was described on exhibit 21 as
“DAMAGES: LOST PROFITS PLUS EXPENSES MINUS PAYMENTS.â€
(3) Testimony concerning exhibit 21—
Yakel testified that the
exhibit provided his estimate of how much revenue the contract would have
generated. He explained that he had
invested a great deal of time for which he had not been paid. He also mentioned that the damages included
an estimate of what he would have made on subcontract and equipment
markups. He opined that his ultimate
figure was conservative, although he did not quote the figure off the exhibit.
On cross-examination,
Kang’s attorney elicited additional testimony from Yakel on exhibit 21. The attorney first asked Yakel about his
figure of $15,232.88 for “lost project management profits†and questioned about
making profits without having to do any construction work. Yakel explained that he did demolition work,
a lot of planning, organizing, “getting guys in order, [and] dealing with the
client.†He further explained that they
figured on how many man-hours the work would require.
Kang’s attorney then
referenced what he characterized as the “second $15,000 number,†for lost
profits on markups, as reflected in the exhibit. He asked Yakel, “That’s in addition to the
15,000 you’ve already listed, right?†He
also questioned, whether the “second $15,000 number†represented profits lost
on marking up subcontracts such as plumbing contracts and electrical contracts,
and equipment. Yakel responded
affirmatively to each question. He
emphasized that they did a great deal of planning work on the project and
remarked that most of the work was “front-loaded.†Yakel also indicated that he typically sought
about 25 percent over raw costs “to cover supervision, overheads, profits, and
everything.†He opined that that was
fair market value.
After extensive
questioning about what he called the “second $15,000 number,†Kang’s attorney
went on to ask about the $7,907.63 figure for “project expenses.†Yakel testified that the figure included
$1,200 to the city, $1,000 for a hood vendor, $300 for a sign company, and
overhead.
Yakel was asked further
questions about his itemization of damages on redirect examination. He then indicated that a portion of the
$7,907.63 figure was for demolition work performed by a subcontractor who owed
him money. Yakel also offered conceptual
explanations. For example, he explained
that he did not consider overhead to be part of profit. Rather, he said overhead consisted of “trips
out there for gas, rent, telephone conversation[s], many of them, fax machine,
paper, fax bills.â€
(4) Analysis—
Kang contends the court
erred in admitting exhibit 21 because it was inadmissible hearsay. In support of her argument, Kang cites
575 for the general proposition that writings and reports are inadmissible
unless an exception to the hearsay rule applies. She also cites Evidence Code section 1200,
subdivision (b). She cites each
authority in a cursory manner without any discussion or analysis.
Integrated Enterprises,
Inc. responds in equal fashion, broadly asserting that exhibit 21 was not
hearsay because it was demonstrative evidence.
In support of this retort it cites only Evidence Code section 1200, subdivision
(a), without analysis. It further
asserts that even if the exhibit were hearsay, any error in the admission of
the exhibit was harmless error, citing Baltayan
v. Estate of Getemyan (2001) 90 Cal.App.4th 1427 and People v. Murphy, supra,
We will devote as much
time to the issue as do the parties. We
agree that even if exhibit 21 constituted inadmissible
hearsay, the admission of the exhibit was harmless error. (Continental
Baking Co. v. Katz (1968) 68 Cal.2d 512, 525-527;
451, 467-468; People v. Murphy,
Yakel was questioned at
length about the exhibit, and by counsel for each party. Although he did not testify as to each dollar
figure on the exhibit, he testified as to “lost project management profits†of
$15,232.88 and a “second $15,000â€
name="_ftnref3" title="">[3]
for “lost profits on markups.†He also
testified concerning the $7,907.63 in project expenses paid and the $10,000
Kang had paid. The court’s determination
was based upon these figures and they are all the figures necessary to reach
the $28,405.91 total damages amount. Any
error was not prejudicial.
Amount of Damages:
Finally, Kang argues
that the court erred in awarding Integrated Enterprises, Inc. an amount
exceeding the benefit of the bargain, that is, exceeding the amount of money
that would have been earned if the contract had been fully performed. She also contends that it was improper to
award damages because the amount of damages was uncertain.
The court initially
found that Yakel’s exhibit 21 calculations showing “$28,405.91 for his benefit
of the bargain damages [were] correct and reasonable†and announced its
intention to award damages in that amount.
In response, Kang argued that Yakel was double dipping, seeking the
benefit of the bargain damages as reflected on exhibit 15 plus markups on top
of it. Kang also argued that the
$7,907.63 in damages for expenses was completely unsupported. The court ultimately concluded that to award
$7,907.63 for project expenses, which should already have been figured into the
contract pricing, was double dipping.
So, it reduced the $28,405.91 figure by that amount, for a damages award
of $20,498.28.
In reviewing the damages
award, it is exhibit 15 which is the most compelling. Exhibit 15 was the construction estimate for
the original construction contract, without change orders. The first five pages contained a detailed
description of costs for plans and permits, demolition, plumbing, fixtures,
electrical work, roofing, windows and doors, etc. The subtotal was $52,343.98, to which was
added overhead of 12.5 percent or $6,543, and profit of 9 percent, or
$5,299.83, for a total of $64,186.81.
The total was rounded up to $65,000 for the contract amount.
So, exhibit 15 shows us
that if the original construction contract had been performed without change
orders, Yakel would have made $11,842.83 in overhead and profits. This is the exact figure shown on exhibit 21,
which notes raw costs of $52,343.98 plus $11,842.83 in anticipated project
management overhead and profit, for a total amount of $64,186.81, before
rounding up. The $11,842.83 shows the
amount that would have been the benefit of the bargain under the original
construction contract, after payment for raw costs.
With respect to change
order No. 1, exhibit 21 shows raw costs of $15,210 and anticipated project
management overhead and profit of $1,263, for a total contract amount of
$16,473. With respect to change order
No. 2, exhibit 21 shows raw costs of $8,009 and anticipated project management
overhead and profit of $1,931.45, for a total contract amount of
$9,940.47. Finally, with respect to
change order No. 3, exhibit 21 shows raw costs of $764 and anticipated project
management overhead and profit of $195.60, for a total contract amount of
$960. The total anticipated project
management overhead and profit from the three changes orders is $3,390.05.
As exhibit 21 shows, the
total amount of anticipated project management overhead and profit for the
original contract plus the three change orders is $15,232.88. That is the total amount Yakel would have
received for overhead and lost profits had the original contract and all three
change orders been performed. Of course,
his expenses would have been built into the contract as raw costs. So, $15,232.88 for overhead and profit, plus
$7,907.63 in expenses, equals $23,140.51 in damages. However, we subtract from this amount $10,000
that Kang had already paid. The bottom line
is $13,140.51.
“When the remedy given
for breach of contract is money damages, the amount awarded is determined with
the purpose of putting the injured party in as good a position as he would have
occupied had the contract been performed.â€
(Ajaxo Inc. v. E*Trade Group Inc. (2005)
135 Cal.App.4th 21, 56.) “‘In
determining the amount of compensation as the “damages†to be awarded, the aim
in view is to put the injured party in as good a position as he would have had
if performance had been rendered as promised.’
[Citation.] [¶] Thus, a [trier of
fact] ‘must determine what additions to the injured party’s wealth (expected
gains) have been prevented by the breach and what subtractions from his wealth
(losses) have been caused by it.’
[Citation.]†(
three changes orders was $15,232.88 and the losses caused by the termination of
the agreement were $7907.63, for a total of $23,140.51 in damages, minus the
$10,000 that Kang had already paid.
We agree with Kang that
to give Integrated Enterprises, Inc. another $15,265.40 in lost profits on
markups would be double dipping. With
respect to the original contract, for example, exhibit 21 shows raw costs of $52,343.98,
plus anticipated project management overhead and profit of $11,842.83, plus
$10,468.80 in lost profits on markups.
But the total of those figures exceeds the $65,000 contract price by
$9,655.61. Clearly, Yakel would not have
received that extra $9,655.61 from Kang had the work been fully performed.
Put another way,
Integrated Enterprises, Inc. sought $30,498.28 in lost profits for anticipated
project management overhead and profit and profits on markups, on a total
contract price of $91,560.28—the total negotiated price for the original
contract and the three change orders.
This is a profit exceeding 33 percent.
Yet Yakel himself testified that he typically sought about 25 percent
over raw costs “to cover supervision, overheads, profits, and everything.†And the contract itself built in 21.5
percent—12.5 percent for overhead and 9 percent for profit. In short, in seeking the “second $15,000†in
damages, as Kang’s attorney phrased it, Integrated Enterprises, Inc. was
striving to make more money on a damages lawsuit than it would have made had
the contract and change orders been fully performed. This amount would exceed the benefit of the
bargain measures of damages.
As a final word, we note
that Kang complains Yakel’s oral testimony concerning the $7,907.63 in expenses
he claimed to have paid was largely unsubstantiated. However, Yakel’s testimony was evidence and
the court made no finding that Yakel was lacking in credibility. Rather, the court found that his exhibit 21
calculations for the benefit of the bargain were fair and reasonable and that
he performed every obligation we was required to perform under the contract
until the time that Kang terminated him.
Indeed, the court specifically stated, when comparing exhibits 15 and
21, that Yakel did not appear to be “flimflamming anyone.†The reason the court subtracted the $7,907.63
in expenses was not because it found Yakel’s testimony on those expenses to be
lacking in credibility, but because the court concluded that to include that
amount in the final damages award would be double dipping. As we have already stated, however, the
double dipping comes in when seeking lost profits twice, not in seeking
compensation for expenses, which would fall into the category of unreimbursed
raw costs.
III
DISPOSITION
The
judgment is reversed only with respect to the amount of the damages award and
affirmed in all other respects. On
remand, the court shall enter a judgment in favor of Integrated Enterprises,
Inc. in the amount of $13,140.51, plus costs of suit. In the interests of justice, each party shall
bear its own costs on appeal.
MOORE,
ACTING P. J.
WE CONCUR:
FYBEL, J.
THOMPSON, J.
name="_ftn1" title="">[1] This figure was rounded up to $65,000
on the signed contract.
with a subcontractor, had performed some exploratory demolition on the
property, such as removing flooring and ceilings, relocating pipes, exploring
and noting any items that were not in compliance with building codes. He further testified that Kang had paid
$10,000 for that phase of the work.
