Thompson Pacific Construction v. Franklin Reinforcing Steel

Filed 10/10/07 Thompson Pacific Construction v. Franklin Reinforcing Steel CA2/2

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION TWO

APPEAL from orders of the Superior Court of Los Angeles County. John P. Farrell, Judge. Reversed and remanded with directions.

McInerney & Dillon, Robert L. Leslie and Alexander Bannon for Plaintiffs and Appellants.

Gladych & Associates, Inc., John A. Gladych and Darren B. Landie for Defendant and Appellant.

____________________

This litigation concerns a construction project. Franklin Reinforcing Steel Co., Inc. (Franklin), the party who prevailed on its cross-complaint after a jury trial, challenges the trial courts order awarding it attorney fees, claiming that the trial court abused its discretion in ordering a reduced amount of attorney fees. In the cross-appeal, Thompson Pacific Construction, Inc. (Thompson), objects to (1) the trial courts orders imposing monetary sanctions against it and dismissing its complaint, and (2) the judgment entered against it. Additionally, Thompsons attorneys, Robert L. Leslie and McInerney & Dillon, appeal the trial courts order imposing monetary sanctions against them.

The cross-appeal is meritorious. We agree that the trial court erred when it imposed monetary sanctions against Thompson and its counsel and when it dismissed Thompsons complaint for failing to attend a settlement conference. Thus, the trial courts orders imposing monetary sanctions against Thompson and its counsel and the trial courts order dismissing Thompsons complaint are reversed.

Moreover, as for Thompsons challenge to the judgment on the cross-complaint, we conclude that the special verdict is inconsistent and cannot be upheld. Accordingly, the judgment in favor of Franklin on the cross-complaint is reversed, and the matter is remanded for a new trial.

Because the judgment in favor of Franklin is reversed, it follows that Franklin is not entitled to attorney fees. Thus, Franklins appeal challenging the reduced award of attorney fees is dismissed as moot.

FACTUAL AND PROCEDURAL BACKGROUND

This appeal arises out of the construction of the Valley New High School in Northridge, California (the project) for the Los Angeles Unified School District. Thompson, the general contractor, entered into a subcontract with Franklin in November 2002 under which Franklin agreed to furnish and install rebar in part of the projects reinforced concrete structures for a price of $609,284.

The complaint; three attempts at settlement; trial court orders another settlement conference

On September 15, 2003, Thompson filed its complaint against Franklin, alleging that Franklin failed to properly manage, staff, and perform the subcontract, causing delays, which in turn caused Thompson to incur additional monetary costs. Franklin responded by filing a cross-complaint for breach of contract against Thompson.

On June 28, 2004, the parties participated in a full day of mediation. Later, on July 29, 2004, and October 21, 2004, the trial court held mandatory settlement conferences. None of these efforts resulted in a settlement.

At the February 24, 2005, status conference, the trial court ordered the parties to attend another settlement conference on April 15, 2005. The parties were not advised that a failure to attend could result in any sanctions, let alone dismissal.

Thompson and its counsel fail to attend the April 15, 2005, settlement conference; monetary sanctions are imposed

Thompsons attorney miscalendared the April 15, 2005, settlement conference date, mistakenly believing that it was scheduled for May 16, 2005, a date previously set by the trial court for a pretrial conference. Neither Thompson nor its counsel appeared at the settlement conference.

On April 22, 2005, Thompson received a notice of ruling prepared by Franklins counsel, informing Thompson that it and its attorneys had been sanctioned $1,000 for failing to attend the settlement conference. The notice also indicated that an order to show cause regarding the striking of Thompsons complaint was set for May 16, 2005.

Only Thompsons counsel appears at the May 16, 2005, conference; Thompson and its attorney object to sanctions

On May 16, 2005, only Thompsons counsel appeared at the settlement conference. Through counsel, Thompson objected to the order imposing monetary sanctions, arguing that the trial court improperly awarded sanctions without notice or an opportunity to be heard. Moreover, its failure to attend the April 15, 2005, settlement conference was the sole result of its counsels inadvertent calendaring error. Finally, Thompsons counsel also pointed out that this was his first missed court appearance in 30 years of practice. Nevertheless, Thompson and its attorneys paid the $1,000 in sanctions.

With respect to Thompsons absence at the May 16, 2005, conference, counsel represented to the trial court that Thompsons president did not attend because he was in Northern California; apparently, his plane had had engine trouble, and inclement weather followed. Without hearing any oral argument, the trial court sanctioned Thompson $1,500 for failing to appear. Then, after entertaining oral argument, the trial court struck Thompsons complaint, although it did allow Thompson to assert its claim against Franklin via its offset defense.

Trial and judgment; Thompsons motion to set aside the judgment is denied

On June 6, 2005, the parties proceeded to a jury trial on Franklins cross-complaint. After considering the evidence, the jury returned its responses to the special verdict. Specifically, in response to the first question, Did Franklin substantially perform its subcontract (contract) with Thompson, the jury responded Yes. In response to the next question, Did Franklin fulfill the conditions precedent to payment, the jury responded No. Despite answering question number two in the negative, the jury still determined that Thompson breached its contract with Franklin and Franklin was damaged in the amount of $116,758. The jury also determined that Thompson had established its offset defense, finding that Franklin had caused Thompson damages in the amount of $39,470. Judgment was entered in favor of Franklin in the amount of $77,288.

Following the entry of judgment, Thompson moved to set aside the judgment and/or enter a new judgment in favor of it. It argued that because the jury found that Franklin did not fulfill the conditions precedent to payment, Thompson was entitled to judgment. In support of its motion, Thompson reminded the trial court that it had objected to the special verdict form that was provided to the jury and had proposed the trial court use the special verdict form that contained the Judicial Council of California Civil Jury Instructions (CACI) instruction to the jury on what to do depending upon how the jury answered question number two.[1]

The trial court denied Thompsons motion.

Franklins motion for attorney fees

Franklin then moved for attorney fees, in the amount of $203,312.13, and costs. Thompson filed a motion to tax costs and opposed Franklins motion for attorney fees. After oral argument, the trial court granted Thompsons motion to tax costs in part and granted Franklins motion for attorney fees in part, awarding Franklin $85,000 in attorney fees.

Notice of appeal

On March 23, 2006, Franklin filed its notice of appeal, challenging the trial courts reduced award of attorney fees. Thompson and its counsel timely filed their notice of cross-appeal, challenging the trial courts (1) judgment against Thompson, (2) orders of monetary sanctions against Thompson and its counsel, and (3) order striking Thompsons complaint.

DISCUSSION

Because resolution of the cross-appeal moots the issues raised in Franklins appeal, we consider Thompsons cross-appeal first.

I. Standards of review regarding sanctions

Traditionally, we review a trial courts order imposing sanctions for abuse of discretion. (20th Century Ins. Co. v. Choong (2000) 79 Cal.App.4th 1274, 1277.) To the extent we engage in statutory interpretation, our review is de novo. (See, e.g., Argaman v. Ratan (1999) 73 Cal.App.4th 1173, 1176.)

II. The trial court erred in imposing sanctions against Thompson and its counsel

A. April 15, 2005, order imposing $1,000 in monetary sanctions against Thompson and its counsel

Due process requires that prior to sanctions being imposed, the party to be sanctioned must be given notice of the basis for the sanctions and an opportunity to respond, including a hearing. (In re Marriage of Flaherty (1982) 31 Cal.3d 637, 651652; see also Reid v. Balter (1993) 14 Cal.App.4th 1186, 1193; Cal. Rules of Court, rule 2.30(b) (formerly rule 227) [the court may order a person, after written notice and an opportunity to be heard, to pay reasonable monetary sanctions to the court or an aggrieved person, or both, for failure without good cause to comply with the applicable rules]; Cal. Rules of Court, rule 2.30(c) [Sanctions must not be imposed under this rule except on noticed motion by the party seeking sanctions or on the courts own motion after the court has provided notice and an opportunity to be heard].) That notice must be given before findings are made and at a time preceding the trial judges decision whether, in fact, to impose sanctions. [Citation.] [The] adequacy of notice should be determined on a case-by-case basis to satisfy basic due process requirements. The act or circumstances giving rise to the imposition of expenses must be considered together with the potential dollar amount. [Citation.] (Barrientos v. City of Los Angeles (1994) 30 Cal.App.4th 63, 70.)

Here, the trial court disregarded these well-established principles. At the time the trial court ordered the parties to appear at the April 15, 2005, settlement conference, it did not advise the parties that a failure to attend would result in the imposition of sanctions. Thus, when it imposed monetary sanctions against Thompson and its counsel, it did so in violation of Thompson and its attorneys right to due process. Such an order is void and is reversed.

B. May 16, 2005, order imposing $1,500 in monetary sanctions against Thompson

For the same reasons, and pursuant to the same legal principles, the trial courts order imposing $1,500 in monetary sanctions against Thompson for failing to attend the May 16, 2005, settlement conference must be reversed. While the trial court indicated on April 15, 2005, that Thompsons complaint was subject to dismissal if Thompson did not appear at the May 16, 2005, settlement conference, it never suggested that Thompson would be subject to monetary sanctions for failing to appear.

In imposing monetary sanctions against Thompson, the trial court relied upon Code of Civil Procedure section 177.5. That statute provides, in relevant part: A judicial officer shall have the power to impose reasonable monetary sanctions, not to exceed fifteen hundred dollars ($1,500)) . . . for any violation of a lawful court order. . . .  [] Sanctions pursuant to this section shall not be imposed except on notice contained in a partys moving or responding papers; or on the courts own motion, after notice and opportunity to be heard. Because neither Franklin nor the trial court provided notice to Thompson that a failure to appear on May 16, 2005, would result in the imposition of monetary sanctions, the order must be set aside.

C. May 16, 2005, order dismissing Thompsons complaint

We further conclude that the trial courts May 16, 2005, order dismissing Thompsons complaint must be reversed.

California subscribes to the policy that less drastic sanctions should be imposed prior to the imposition of draconian sanctions, such as terminating sanctions or an order of dismissal. For example, in the context of noncompliance with discovery requests and orders, a decision to order terminating sanctions should not be made lightly. But where a violation is willful, preceded by a history of abuse, and the evidence shows that less severe sanctions would not produce compliance with the discovery rules, the trial court is justified in imposing the ultimate sanction. (Mileikowsky v. Tenet Healthsystem (2005) 128 Cal.App.4th 262, 279280.) Similarly, Government Code section 68609 confirms the intent of the Legislature that a dismissal sanction should be imposed only if it appears less severe sanctions would not be effective, taking into account the effect of previous sanctions or previous lack of compliance with court orders or deadlines in the case. This legislative approach is consistent with long-standing judicial policy, also adopted by Government Code section 68601(c), that cases should be resolved on their merits rather than on procedural grounds wherever possible. [Citation.] [Citation.] (Sigala v. Anaheim City School Dist. (1993) 15 Cal.App.4th 661, 674; see also Tliche v. Van Quathem (1998) 66 Cal.App.4th 1054, 10601061.) It follows that the ultimate sanction of dismissal is rarely, if ever, appropriate in the first instance. (Sigala v. Anaheim City School Dist., supra, at p. 673.)

Moreover, dismissal of a litigants action for attorney error is inappropriate. (See, e.g., Garcia v. McCutchen (1997) 16 Cal.4th 469, 475482 [dismissal for noncompliance with local rules is inappropriate if the noncompliance was the responsibility of the litigants counsel]; Tliche v. Van Quathem, supra, 66 Cal.App.4th at pp. 10611062.)

In other words, while they have the authority to dismiss a case, trial courts should only exercise this power in extreme situations, such as when the conduct was clear and deliberate, where no lesser alternatives would remedy the situation, the fault lies with the client and not the attorney, and when the court issues a directive that the party fails to obey. (Del Junco v. Hufnagel (2007) 150 Cal.App.4th 789, 799.)

Here, the trial court dismissed Thompsons complaint for failing to appear at two settlement conferences, namely those scheduled for April 15, 2005, and May 16, 2005. As set forth above, Thompsons failure to appear at the April 15, 2005, was solely the fault of Thompsons counsel, who mistakenly calendared the conference for a different date. Thompson cannot be penalized with dismissal for its counsels calendaring error. (Garcia v. McCutchen, supra, 16 Cal.4th at pp. 475482; Tliche v. Van Quathem, supra, 66 Cal.App.4th at pp. 10611062.) Thus, we are left with a litigant whose case was dismissed for failing to attend one settlement conference. This dismissal was inappropriate. Lesser sanctions, such as monetary sanctions, should have been attempted first.[2]

Moreover, there is no evidence that Thompsons failure to appear at the May 16, 2005, settlement conference was deliberate; in fact, all of the evidence indicates otherwise. Thompson did participate in prior settlement efforts, including by attending a full day of mediation and two prior mandatory settlement conferences. With respect to this settlement conference, as Thompsons counsel represented to the trial court, Thompsons principal had every intention of attending the settlement conference. Unfortunately, he was flying on a chartered plane that had mechanical difficulties and could not take off. When another airplane became available, inclement weather prevented that plane from leaving Northern California. There was nothing he could do.

The trial court apparently was not convinced by counsels arguments, instead insisting that Thompsons principal should have faxed a declaration regarding the foregoing at the time of the hearing. Such a demand was unreasonable, particularly given counsels offer that Thompsons principal either participate by telephone or submit a declaration at a later date. There was no reason for the trial court to disbelieve counsels representation and to question whether Thompsons principal was simply [l]ying around somewhere or sitting in a spa.

Finally, many of the trial courts comments appear unfounded. For example, while the trial court determined that it had not had any reasonable participation whatsoever by Thompson because it failed to appear on April 15, 2005, and May 16, 2005, the trial court apparently forgot that Thompson had participated in at least one full day of mediation and two prior settlement conferences. There is no evidence or argument that the parties inability to settle was Thompsons fault.

III. Because the special verdict form is inconsistent, we must reverse the judgment and remand the matter for a new trial

Thompson contends that the trial court erred in entering judgment for Franklin. According to Thompson, in light of the jurys finding that Franklin failed to perform the conditions precedent to payment, Franklin was not entitled to judgment.

Inconsistent verdicts are against the law, and the proper remedy is a new trial. (Shaw v. Hughes Aircraft Co. (2000) 83 Cal.App.4th 1336, 1344.) A verdict is also against the law where the findings are so ambiguous and uncertain that they are incapable of being reconciled and it is impossible to ascertain how a material issue is decided. (Bray v. Rosen (1959) 167 Cal.App.2d 680, 683.)

We apply a de novo standard of review of the trial courts ruling on the issue of the correctness of the verdict because a special verdicts correctness must be analyzed as a matter of law. (Mendoza v. Club Car, Inc. (2000) 81 Cal.App.4th 287, 303 (Mendoza).) A court reviewing a special verdict does not imply findings in favor of the prevailing party. (Trujillo v. North County Transit Dist. (1998) 63 Cal.App.4th 280, 285.) Where the inconsistency is between two questions in a special verdict, there is no presumption in favor of upholding a special verdict. (Mendoza, supra, 81 Cal.App.4th at pp. 302 303.) Both or all of the answers in an internally inconsistent special verdict are equally against the law, and we are not permitted to choose between inconsistent answers to uphold the verdict. (City of San Diego v. D.R. Horton San Diego Holding Co., Inc. (2005) 126 Cal.App.4th 668, 682.) This rule is based on the fundamental proposition that a fact finder may not make inconsistent determinations of fact based on the same evidence because if a correct determination of such issues is necessary to sustain the judgment, the inconsistency is reversible error. (Ibid.)

As the trial court instructed, [t]o recover damages from Thompson, Franklin [was required to] prove all of the following: [] 1. That Franklin did all, or substantially all the significant things that the subcontract required it to do or that it was excused from having to do those things. [] 2. That all conditions required for Thompsons performance had occurred. [] That Thompson failed to do something that the subcontract required it to do; and [] 4. That Franklin . . . was harmed by that failure. (See also CACI No. 303.)

Here the jury made inconsistent findings. On the one hand, the jury determined that Franklin substantially performed its contract with Thompson. On the other hand, the jury also found that Franklin did not fulfill the conditions precedent to payment. Pursuant to the legal authority cited above, we cannot choose between these inconsistent findings; the matter must be remanded for a new trial.

Urging us to enter judgment in its favor, Thompson asserts that the special verdict is consistent. It claims that the jury could find that Franklin substantially performed the contract, namely by substantially perform[ing] the contracts covenants [and] construction work, yet also find that the Franklin did not satisfy the conditions precedent to payment, namely submission of the as-built drawings. Were we to agree with this interpretation of the special verdict, we would be forced to guess what the jury meant by its findings. As set forth above, it is well-established that we simply cannot do so.

In defending the verdict, Franklin argues that Thompson should be estopped from asserting the conditions precedent defense because it filed suit during the performance of the contract. This novel argument makes no sense and is unsupported by adequate legal argument or the citation to supporting legal authority. Accordingly, we reject it. (Reyes v. Kosha (1998) 65 Cal.App.4th 451, 466, fn. 6; Sprague v. Equifax, Inc. (1985) 166 Cal.App.3d 1012, 1050.)

Finally, Franklin contends that the trial court erred in refusing to instruct the jury on waiver of the condition precedents. Franklin has not satisfied its burden on appeal.

A party is entitled upon request to correct, nonargumentative instructions on every theory of the case advanced by him which is supported by substantial evidence. (Soule v. General Motors Corp. (1994) 8 Cal.4th 548, 572.) A reviewing court must review the evidence most favorable to the contention that the requested instruction is applicable since the parties are entitled to an instruction thereon if the evidence so viewed could establish the elements of the theory presented. [Citation.] [Citation.] (Logacz v. Limansky (1999) 71 Cal.App.4th 1149, 1157.)

California rules of court, rule 8.204(a)(1)(C) provides that every appellate brief must [s]upport any reference to a matter in the record by a citation to the volume and page number of the record where the matter appears. The reviewing court is not required to make an independent, unassisted study of the record in search of error or grounds to support the judgment. (Guthrey v. State of California (1998) 63 Cal.App.4th 1108, 1115.)

While Franklin correctly summarizes the law regarding jury instructions, it failed to demonstrate on appeal that the trial courts refusal to instruct on waiver constitutes prejudicial error. Specifically, Franklin neglects to identify the evidence that purportedly supported its theory of waiver and fails to cite to those portions of the appellate record that support its argument. As such, we deem this argument waived.

IV. Franklins appeal is moot

Given our conclusion that the judgment in favor of Franklin must be reversed, the trial courts order awarding attorney fees to Franklin is reversed as well. It follows that Franklins appeal, challenging the sufficiency of the fees awarded to it, is moot.

DISPOSITION

The April 15, 2005, and May 16, 2005, orders imposing monetary sanctions against Thompson and its counsel and dismissing Thompsons complaint are reversed. The judgment for Franklin is reversed. The matter is remanded for a new trial. Thompson is entitled to costs on appeal.

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS.

_____________________, J.

ASHMANN-GERST

I concur:

_____________________, J.

CHAVEZ

DOI TODD, Acting P.J.Dissenting

Because I would affirm the judgment based on the jury verdict in favor of Franklin, I dissent. The majority has found that the jurys answer of No to the question Did Franklin fulfill the conditions precedent to payment? entitles Thompson to judgment in this case. I do not agree.

While it may be undisputed that Franklin did not submit as-built drawings to Thompson, the jury also found on the special verdict that Franklin substantially performed the subcontract and that Thompson had not acted in good faith in withholding progress payments due and owing to Franklin. I would conclude that those findings and a consideration of the evidence before the jury support the judgment in favor of Franklin.

Where special verdicts are at issue, it is a legal question whether there is inconsistency: [T]here is no . . . presumption in favor of upholding a special verdict. Rather, a special verdicts correctness must be analyzed as a matter of law. [Citation.] This is because a special verdict is far more susceptible to defect than a general verdict, which can be tested with special findings. (Mendoza v. Club Car, Inc. (2000) 81 Cal.App.4th 287, 303.) Nevertheless, when a court is called upon to interpret a special verdict, the verdict should be interpreted, if possible, so as to uphold it and give it the effect intended by the jury as well as one consistent with the law and the evidence. (All-West Design, Inc. v. Boozer (1986) 183 Cal.App.3d 1212, 1223.)

Here, Nathan Samuel Palmer, Thompsons project manager, testified that the only contract requirement not completed by Franklin was submission of the as-built drawings. Palmer explained that these drawings look like the approved rebar shop drawings except that they are highlighted to indicate where there have been deviations from the plans. There was no evidence that the installation of the structural rebar by Franklin deviated from the approved shop drawings. Palmer also testified that the as-built drawings are submitted to the project owner for future reference so that if additional work is required the owner would be aware of any deviations that had been made. Thompsons counsel argued to the jury that it was important for Thompson to pass on the as-built drawings to the owner because otherwise the owner would not pay Thompson. But there was no evidence that the owner ever requested the as-built drawings for the structural rebar or that the owner threatened to withhold payments from Thompson in the absence of the
as-built drawings. To the contrary, the evidence showed that Thompson was paid by the owner in full for the rebar work that Franklin performed. There was also no evidence that Thompson ever sought the as-built drawings from Franklin. Instead, the evidence showed that during the course of the project the paperwork requirements (or conditions precedent) were relaxed in order to process the progress payments.

In light of this evidence and the jurys other findings, a reasonable interpretation of the jurys special verdict is that although Franklin had not technically satisfied a condition precedent to payment, Franklin had substantially performed the conditions precedent to payment, just as Franklin had otherwise substantially performed the subcontract. The jury could very likely have found that even though Franklin did not submit the as-built drawings, neither Thompson nor the owner considered their receipt to be material prior to payment, particularly where Franklins work did not deviate from the plans. Such an interpretation is consistent with, and bolstered by, the jurys finding that Thompson did not act in good faith in withholding progress payments from Franklin.

Moreover, because the jury found that Thompson withheld payment from Franklin in bad faith, it necessarily found that Franklin was entitled to damages. As such, the finding that Franklin had not technically satisfied one condition precedent did not influence the jurys decision on damages. The jury necessarily found that satisfaction of the condition precedent was not of such significance to Thompson to permit Thompson to withhold payments and consider Franklin to be in breach. While the jury was clearly satisfied that Franklin was entitled to payment, it also considered the offsets to which Thompson was entitled. It does not appear, and Thompson has not argued, that the dismissal of its complaint in any way prejudiced its presentation of evidence to prove its own damages.

Accordingly, I would affirm the trial courts determination that the jurys special verdict should stand.

____________________________, Acting P.J.

DOI TODD

Publication courtesy of San Diego free legal advice.

Analysis and review provided by Santee Property line attorney.

[1] The special verdict proposed by Thompson asked question number two, Did Franklin fulfill each condition precedent to payment? It then instructed the jury: If your answer is no go to question 14. If your answer is yes, go to the next question.

[2] Given our conclusion that the monetary sanctions that were ordered on April 15, 2005, were imposed improvidently, no lesser sanction was attempted by the trial court.