Underground Construction v. City of
Oakland
Filed 5/15/13
Underground Construction v. City of Oakland CA1/4
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 This opinion has not been certified for
publication or ordered published for purposes of rule 8.1115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
FIRST
APPELLATE DISTRICT
DIVISION
FOUR
UNDERGROUND
CONSTRUCTION CO., INC.,
Plaintiff and Appellant,
v.
CITY OF
OAKLAND,
Defendant and Appellant.
A130752
(Alameda County
Super. Ct. No. RG07363440)
I. Introduction
Underground
Construction Co., Inc. (Underground) worked on a construction project in
Oakland (the Project) that included relocating existing overhead electrical,
telephone, and cable television lines into conduit laid in underground
trenches; removing and replacing sidewalks and adding ramps; and installing
utility boxes and street light foundations.
During the course of the Project, disputes arose between Underground,
the City of Oakland (the City), and the owners of the affected utility lines
regarding how much Underground was owed for certain aspects of the work. Ultimately, Underground sued the City and the
Utilities (collectively the Owner Parties) for additional sums it alleged were
due under the contract for the Project.
Underground
and the Owner Parties participated in a mediation, which resulted in a
settlement as between Underground and the Utilities. Underground took the position that the City
had also agreed to a settlement.
However, the trial court denied Underground’s motion to enforce the
settlement agreement against the City, and the case between Underground and the
City went to jury trial.
The jury
rendered a verdict in favor of Underground on most of its claims, but ruled in
the City’s favor on Underground’s statutory claim for prompt payment. The trial court declined to reduce the amount
of the verdict against the City by the amounts Underground had received from
the Utilities under the settlement
agreement. In postjudgment orders,
the trial court denied Underground’s motion for attorney fees, and granted
Underground’s motion to strike the City’s cost bill.
The City
timely appealed from the judgment. The
City did not file a separate notice of appeal from the trial court’s
postjudgment orders, but argues that the trial court should have awarded it
attorney fees. Underground appealed from
the denial of its motion for attorney fees.
Underground also filed a protective cross-appeal from the trial court’s
denial of its motion to enforce the settlement agreement against the City. We affirm the judgment, affirm the denial of
Underground’s postjudgment motion for attorney fees, deny the City’s purported
claim for attorney fees, and dismiss Underground’s protective cross-appeal as
moot.
II. Facts and Procedural Background
A. The Project and the Contract
Although
each of the Utilities participated in the design and planning of the Project,
the City took the lead in obtaining competitive bids for the work.
of the Project would require adjustment during the course of the work, the City
used a unit price system to facilitate comparing bids. Under that system, the City divided the work
into various categories (such as trenches and sidewalk concrete paving), and
provided an estimate of the number of units of work to be done within each
category (such as linear feet for trenches, or square feet for sidewalk
concrete paving). The contractors
bidding on the contract were required to provide a price per unit for each
category of work. This enabled the City
to compare bids by multiplying the price per unit times the estimated number of
units, even though the City did not know the exact number of units of work that
ultimately would be required (and, by the same token, the bidders did not know
exactly how much they ultimately would receive).
Underground
was initially the second lowest bidder, but the lowest bidder withdrew its bid,
so the Project was awarded to Underground.
Work on the Project was delayed for over a year after that, due to
disagreements between the Utilities and the City regarding the terms of the
contract for the Project.
Ultimately,
Underground and the City (but not the Utilities, except for Comcast) signed a
contract (the Contract), which incorporated by reference a voluminous package
of contract documents, including a set of standard specifications referred to
as the “Green Book†or “greenbook†(the Green Book). The Utilities that did not actually sign the
Contract nonetheless paid for portions of the work based on a billing formula
established under the Contract.
During the
course of the work on the Project and after its completion, disputes arose
among the Parties regarding the amount Underground was entitled to be paid for
various aspects of the work. Some of
these disputes were resolved before the trial underlying this appeal. We briefly outline the remaining disputes in
the next two sections.
B. Underground’s Claims for Additional Payment
1. Additional Sidewalk Concrete
Removal
Portions of
the trenches included in the Project ran underneath sidewalks, which had to be
removed for construction of the trench, and then replaced. The Contract’s express terms required that
when a portion of sidewalk was removed and later replaced, this had to be done
along the “score lines†dividing the sidewalk into “flags†(rectangles of
concrete bounded by visible lines).
Thus, Underground’s bid contemplated that whenever the trench
construction required removal of any part of a sidewalk flag, the entire flag,
approximately two and one-half feet wide, would have to be removed and
replaced.
As the
Project progressed, the amount of sidewalk that Underground had to remove and
replace on either side of the trenches turned out, in many areas, to be
considerably wider than the contemplated two and one-half feet. This occurred for at least two, and possibly
three reasons. First, the existing
sidewalks in the area of the Project proved to be in poor condition. As a result, the City required Underground to
remove and replace not only the flags situated immediately above the trenches,
but also additional adjacent portions of the sidewalks. Second, the City had a rule (the six-foot
rule) requiring that when the sidewalk above a section of trench was less than
six feet wide, the entire sidewalk had to be removed and replaced. The six-foot rule was not referenced in the
Contract, and apparently was not disclosed to Underground prior to its
bid. Third, according to the City,
Underground damaged portions of the existing sidewalks during the course of the
work, which it was obligated under the Contract to remove and replace, and
removed other portions for its own convenience, which it also had to
replace. As a result, Underground
removed and replaced areas of sidewalk beyond the scope necessary for the
Project itself. Ultimately, Underground
had to remove and replace over three times the square footage of sidewalk the
City had estimated the Project would include.
The estimate was 40,992 square feet, but the actual work comprised
133,485 square feet.
The unit
used in the Contract for the price of sidewalk concrete paving—that is, replacement
of sidewalk that had been removed—was square feet. Thus, the City paid Underground for all of
the sidewalk concrete paving it performed, including the additional square
footage replaced due to the poor condition of the sidewalks and the six-foot
rule.
Under the
Contract, however, the cost of removing
sidewalk paving was included in the price for trench construction. For this category of work, the Contract used
construction to which Underground was entitled under the Contract was the same,
no matter how wide a swath of concrete Underground was required to remove on
either side of a given length of trench.
For this reason, the City initially disputed Underground’s claim for the
additional sidewalk concrete removal—that is, the cost of removing additional sidewalk beyond the flags located immediately
above the trenches.
Ultimately,
after Underground filed a claim under the Contract’s claim procedures, the City
agreed that Underground should be paid $25,911 for additional sidewalk concrete
removal. However, the City claimed
setoffs in excess of this amount, and therefore did not actually pay it. This claim was included among those presented
at the jury trial.
2. Utility Box Related Paving
As already
noted, the City instructed bidders on the Project, including Underground, to
include in their bids a cost per square foot for sidewalk concrete paving. In addition, the bidders were told to set a
price per unit for the installation of utility boxes. The price per unit for installing utility
boxes that Underground included in its bid did not include any of the cost of
sidewalk concrete paving adjacent to the utility boxes (utility box related
paving). Rather, Underground understood
that utility box related paving would be billed as part of general sidewalk
concrete paving, and paid for at the same price per square foot.
During the
course of Underground’s work on the Project, a dispute arose between
Underground and the City as to whether utility box related paving was to be
paid on a per square foot basis like other sidewalk concrete paving. The City took the position that it was not
required to pay separately for sidewalk concrete paving immediately adjacent to
a utility box installed by Underground, because utility box related paving was
included in the per unit price for utility box installation. Based on this position, the City declined to
pay $33,395.11 of the amount billed by Underground for sidewalk concrete
paving.
Underground
filed a claim for this amount under the Contract’s claim procedures. The City declined to pay this claim, and it
was included among those presented at the jury trial.
3. Overpaid Inspection Fees
The
Contract provided that Underground would pay $95 per hour for inspection fees
charged by the City, and estimated that inspection time would amount to about
two or three hours per working day. In
fact, the City charged Underground for an average of eight hours per day of
inspection time, which Underground paid under protest.
Underground
sought reimbursement for the overpaid inspection fees through the contractual
claims process. The hearing officer
found that the City should only have charged Underground as stated in the
Contract, and that the overpaid inspection fees should be refunded. The City initially agreed to pay Underground
$22,840.33 for the overpaid inspection fees, but later contended that the
amount it owed was only $5,710.08, which was more than offset by other claims
by the City. The issue of overpaid
inspection fees was included in the claims tried to the jury.
4. Suspension of Work
Work on the
Project began in the fall of 2005.
However, on March 23, 2007, the City directed Underground to stop work,
and did not permit Underground to resume work until May 29, 2007. Underground protested the suspension, and
filed a claim under the Contract’s claim procedures for costs resulting from
the delay. Part of Underground’s claim
was for costs in the amount of $15,684.24 incurred in protecting the job site
during the suspension of work.
name="_ftnref4" title="">[4] The City did not pay Underground for these
costs, and the claim was included in the issues tried to the jury.
5. Unpaid Retention
As is not
uncommon in construction projects, the Contract included a retention clause
providing that the City was only obligated to pay 90 percent of the amount
billed by Underground during the course of the work. The City retained the remaining 10 percent
(the retention). By the end of the work
on the Project, the retention amounted to $207,054.65. Under the Contract, Underground was entitled
to be paid this amount once the Project was completed to the City’s
satisfaction.
On July 10,
2007, the City accepted Underground’s work as complete and satisfactory. Nonetheless, the City paid Underground only
$6,657.14 of the retention, based on the setoff claims discussed in the next
section. Underground protested, but the
City declined to pay the balance.
Underground’s claim for the unpaid retention was submitted to the jury.
C. City’s Set-off Claims
1. Reduction of Unit Price for
Sidewalk Concrete Paving
The
Contract set a unit price for sidewalk concrete paving, which was $7.50 per
square foot. The City had estimated that
the Project would require 40,992 square feet of sidewalk concrete paving, but
Underground actually paved 133,485 square feet of sidewalk in the course of the
Project. Thus, the actual number of
square feet of sidewalk concrete paving that Underground performed was more
than 125 percent of the City’s original estimate.
The
Contract provided that if the number of actual units of a particular type of
work was 125 percent or more than the City’s estimate, the per unit price for
the units in excess of 125 percent could be adjusted under a specified
procedure. Based on this provision, the
City took the position that the unit price for 82,215 square feet of sidewalk
concrete paving should be reduced to $6 per square foot, and withheld
$123,322.50 from the retention on that basis.
Underground, however, took the position that the City had not followed
the procedure for the price adjustment, and was not entitled to impose it
unilaterally.
Before the
jury trial began, Underground filed a motion in limine to preclude the City
from arguing or introducing evidence that the unit price for sidewalk concrete
paving should be anything other than the original contract price of $7.50 per square foot. The trial court granted the motion, holding
that the City’s reduction of the unit price was a breach of contract as a
matter of law. The issue whether the
City’s position was taken in good faith was submitted to the jury, however.
2. Other Amounts Withheld from
Retention
The City withheld
additional amounts from the retention, as follows: (a) $96,000 for permit
fees on the utility boxes that Underground had installed for AT&T;
(b) $5,370.40 for damages Underground had allegedly caused to the City’s
poles and signs during the course of construction; and (c) $6,270.95 for
the cost of testing for contaminants in the City’s soil. Whether Underground was entitled to these
amounts, and whether the City withheld them on the basis of a good faith dispute,
were issues submitted to the jury.
D.
Trial Court Proceedings and Partial
Settlement
Underground
sued the Owner Parties for breach of contract on December 28, 2007. The City cross-complained against the
Utilities.
On February
4, 2009, the parties participated in a mediation. The mediation resulted in a conditional
settlement as between Underground and the Owner Parties (the settlement), the
terms of which were memorialized in a brief handwritten agreement (the
settlement agreement). The settlement agreement
provided that each of the Owner Parties would pay a specified sum “on or before
the 10th business day after City Council approval. The City of Oakland expects City Council
approval within three months.†It also
provided: “Should there be no City Council approval of this settlement within
three months, this agreement is null and void.â€
The agreement was signed by all parties; the signature on behalf of the
City of Oakland was provided by Eric Angstadt, the City’s “Deputy Director of
CEDA.â€
By May
2009, three months after the settlement agreement was reached, the Oakland City
Council (City Council) had not approved the settlement. Nonetheless, Underground and the Utilities
agreed to settle for the amounts the Utilities had agreed to pay under the
settlement agreement, provided that the trial court determined the settlements
were in good faith. The trial court
granted the Utilities’ good faith settlement motions, and in June 2009,
Underground dismissed its complaint as against the Utilities. The trial court also issued orders dismissing
the City’s cross-complaint against the Utilities.
Meanwhile,
the City declined to proceed with the settlement because the City Council had
not approved it. In January 2010,
Underground moved to enforce the settlement under Code of Civil Procedure section 664.6. The trial court declined to enter judgment in
accordance with the settlement agreement, but ordered the City to present the
settlement to the City Council for approval, and continued the trial to give
the City time to do so. On March 16,
2010, the City Council voted not to approve the settlement. Underground then renewed its motion under
Code of Civil Procedure section 664.6, but the trial court denied it.
The case
went to trial in July 2010. It was
submitted to the jury on August 5, 2010, and the jury returned its special
verdicts on August 10, 2010. On
September 2, 2010, the City filed a posttrial motion to reduce the verdict
(discussed in more detail post). On October 1, 2010, the trial court denied
the City’s motion to reduce the verdict, and partially granted Underground’s
motion for prejudgment interest. On
October 25, 2010, the trial court entered a judgment awarding Underground
$718,911.93, plus prejudgment interest in the amount of $85,022.41. The judgment included a provision awarding
Underground its costs, but in the blank provided for the amount of costs, the
trial judge wrote “per cost memo.â€
On November
1 and 2, 2010, respectively, Underground filed a cost bill and a motion for
attorney fees under Public Contract Code section 7107. In response, the City filed an opposition to
Underground’s attorney fee motion; a motion to tax Underground’s costs; and its
own cost bill. The City’s cost bill, filed
on November 15, 2010, indicated that attorney fees would be sought by separate motion. In fact, the City never filed such a motion.
On November
18, 2010, Underground filed a motion to strike the City’s cost bill. On November 30, 2010, the trial court denied
Underground’s motion for attorney fees.
On December 14, 2010, the court granted Underground’s motion to strike
the City’s cost bill in its entirety, and partially granted the City’s motion
to tax Underground’s costs. On December
21, 2010, the City filed a notice of appeal from the judgment entered on
October 25, 2010.
title="">[6] The notice of appeal does not indicate that
the City was appealing from any postjudgment order, and does not mention the
trial court’s order striking the City’s cost bill.
Having
resolved the disputes over costs and attorney fees, the trial court entered an
amended judgment on January 3, 2011. The
amended judgment was substantively identical to the original judgment except
that the amount of the cost award to Underground was filled in. The City did not file a notice of appeal from
the amended judgment. On January 7,
2011, Underground filed a document constituting both a notice of appeal from
the order denying its motion for attorney fees, and a notice of protective
cross-appeal from the judgment.
III. The City’s Appeal
A. Consideration of Evidence Regarding Mediation
As already noted, in January
2010, Underground filed the first of two motions to enforce the settlement
agreement against the City. In support
of the motion, Underground submitted declarations from its counsel setting
forth the substance of communications between Underground’s counsel, counsel
for the City, and City representatives, concerning whether the persons
representing the City at the mediation would have authority to agree to a
settlement on the City’s behalf. These
communications (the mediation-related communications) occurred prior to and
during the mediation. In addition to the
mediation-related communications, Underground also submitted the settlement
agreement itself, as well as correspondence exchanged after the mediation concerning the fact that the settlement
agreement had not been presented to the City Council for approval.
In its
order on Underground’s motion, the trial court “accept[ed] [Underground’s]
position that the City breached the implied covenant of good faith and fair dealing
by failing to obtain City Council approval [of the settlement] within three
months of February 4, 2009.†Later, in
its order denying the City’s motion for leave to file a cross-complaint, the
trial court referred to this finding as one of the reasons why the interests of
justice did not require it to grant the motion.
On appeal,
the City contends that the trial court erred in considering mediation evidence
rendered inadmissible by Evidence Code section 1119 (section 1119),
and in relying on it to find that the City acted in bad faith in rejecting the
settlement. The City contends that the
trial court should not even have entertained Underground’s motion to enforce
the settlement, because “the proposed settlement was, by its terms, ‘null and
void.’ †This proposition is not
supported by any citations to the record or authority. The City further asserts, also without giving
details or citing authority, that the trial court’s “error†in considering
Underground’s evidence regarding the mediation “likely led to the adverse
rulings that are the subject of this appeal.â€
Section 1119
precludes the admission into evidence of “anything said or any admission made
for the purpose of, in the course of, or pursuant to, a mediation or a
mediation consultation,†or any “writing . . . that is prepared for
the purpose of, in the course of, or pursuant to, a mediation or a mediation
consultation . . . .â€
(§ 1119, subds. (a), (b).)
In its
opposition to Underground’s January 2010 motion to enforce the settlement, the
City objected under section 1119 to the trial court’s consideration of the
mediation-related communications submitted by Underground in support of the
motion. What the City’s opening brief
fails to acknowledge is that the trial court sustained the City’s objection to the admission of the
mediation-related communications. Thus,
the City’s argument that the trial court erred by admitting this evidence is
belied by the record. The trial court
admitted into evidence only the settlement agreement itself, and the
post-mediation communications concerning the City’s decision not to present the
agreement to the City Council for approval.
As for the
settlement agreement itself, the rule is that “a settlement agreement reached
through mediation and signed by the settling parties is exempt from [the]
general rule [of mediation confidentiality], if it satisfies a requirement of
[Evidence Code] section 1123.
[Citation.] [¶] Section
1123 provides: ‘A written settlement agreement prepared in the course of, or
pursuant to, a mediation, is not made inadmissible, or protected from
disclosure, by provisions of this chapter if the agreement is signed by the
settling parties and any of the following conditions are satisfied:
[¶] (a) The agreement provides that it is admissible or subject to
disclosure, or words to that effect. [¶] (b) The agreement provides
that it is enforceable or binding or words to that effect.
. . .’ †(
1608, 1619.) In the present case, the
settlement agreement both was signed
by representatives of all parties, and
expressly provides that “the Parties intend this agreement to be enforceable,
binding and admissible pursuant to [Code of Civil Procedure]
Section 664.6.â€
The City
nonetheless contends that the settlement agreement was inadmissible under the
provision rendering it “null and void†if not approved by the City Council
within three months. The City does not
cite any authority, however, for the proposition that a settlement agreement
otherwise admissible under Evidence Code section 1123 may be rendered
inadmissible by the failure of a condition subsequent. The City also does not provide any authority
for the proposition that the mediation privilege applies to post-mediation,
post-settlement communications between opposing parties’ counsel regarding the
implementation (or lack of implementation) of a settlement agreement that is
itself admissible under Evidence Code section 1123. We therefore decline to consider these
arguments. (People v. Williams (1997) 16 Cal.4th 153, 206 [“Points
‘perfunctorily asserted without argument in support’ are not properly
raisedâ€].)
In short,
the settlement agreement and the post-settlement communications were admissible
under Evidence Code section 1123, and City has not persuaded us that the
trial court erred in considering them.
Even if this were not the case, however, we are not persuaded that the
City was prejudiced in any way by the court’s consideration of that evidence. The trial court ultimately
agreement against the City, and we find no support in the record for the City’s
argument that the trial court became biased against the City as a result of
Underground’s contention that the City had acted in bad faith in failing to
consummate the settlement.
B. Amounts Alleged to Be Utilities’ Liability
1. Credit for Utilities’
Settlement Payments
After the
Utilities reached their settlement with Underground, they filed good faith
settlement motions under Code of Civil Procedure section 877.6 (section 877.6),
seeking a ruling from the trial court that the settlements were arrived at in
good faith and that cross-claims against them were therefore barred. Underground supported the motions, and the
City filed no opposition.
The trial
court granted the Utilities’ good faith settlement motions. As a consequence of those rulings, the trial
court dismissed the City’s cross-complaints against the Utilities, and entered
a judgment barring the City from seeking indemnity or contribution against the
Utilities in connection with any judgment against the City on Underground’s
claims arising from the Project. (See
§ 877.6, subd. (c) [“A determination by the court that the settlement
was made in good faith shall bar any other . . . co-obligor from any
further claims against the settling . . . co-obligor for equitable
comparative contribution, or partial or comparative indemnity, based on
comparative negligence or comparative faultâ€].)
As already
noted, after the return of the jury’s verdict, and before the entry of
judgment, the City filed a posttrial motion to reduce judgment under Code of
Civil Procedure section 877 (section 877
against the judgment for the $455,000 that Underground had received from the
Utilities under the settlement.
Underground opposed the motion to reduce the judgment. The trial court concluded the City was not
entitled to any credit against the judgment based on the settlement, and
therefore denied the City’s motion to reduce the judgment. On appeal, the City contends this was error.
The City
contends that it is entitled to a credit based on the language of
subdivision (a)(1) of section 877.6, which provides that “Any party to an
action in which it is alleged that
two or more parties are . . . co-obligors
on a contract debt shall be entitled to a hearing on the issue of the good
faith of a settlement entered into by the plaintiff . . . and one or
more alleged . . .
court granted the Utilities’ motions under this section, the trial court
thereby implicitly found true the allegations in the City’s cross-complaints
that the Utilities were co-obligors with the City on its debt to Underground
under the Contract. This implicit
finding, the City argues, is inconsistent with the court’s subsequent order
denying the motion to reduce the judgment, which ruled that under the express
terms of the Contract, the City and the Utilities were “severally liable for
their own breaches and debts . . . and [were] not . . .
co-obligorsâ€â€”i.e., that the City’s contractual liability to Underground was
separate from that of the Utilities.
We are not
persuaded that the trial court’s two rulings are inconsistent. Under the plain language of
subdivision (a)(1) of section 877.6, the good faith settlement motion
procedure may be invoked by a party alleged
to be a co-obligor under a contract, whether or not the allegation is factually
or legally valid. Thus, the trial
court’s grant of the good faith settlement motions, and ensuing dismissal of
the City’s cross-complaints, did not necessarily imply either a factual finding
or a legal conclusion that the Utilities and the City were in fact joint obligors under the Contract. Rather, it was an adjudication that
the City “for equitable comparative contribution, or partial or comparative
indemnity,†any and all such liability was extinguished by the settlement under
the terms of section 877.6, subdivision (c).
Underground
argues that the trial court’s good faith settlement rulings were merely
advisory, citing Bailey v. Reliance Ins.
Co. (2000) 79 Cal.App.4th 449 (Bailey). In that case, the plaintiff was injured in a
car accident while on the job. The
plaintiff received workers’ compensation benefits from his employer’s
insurer. The plaintiff and his wife also
jointly filed a tort action against the driver of the other car. The workers’ compensation insurer intervened
in the plaintiff’s tort action to enforce its subrogation rights. The plaintiff and his wife settled with the
other driver, allocating the entire settlement to the wife’s claim for loss of
consortium. The workers’ compensation
insurer then filed a motion, purportedly under section 877.6, seeking a
determination that the settlement was not
in good faith, because its terms were designed to frustrate the workers’
compensation insurer’s statutory right to a credit against future benefits on
account of the settlement. The Court of
Appeal held that because the workers’ compensation insurer “was not a joint
tortfeasor or co-obligor on a contract debt†with the driver of the other car
(or with his employer or his employer’s liability insurer), the workers’
compensation carrier was not a proper party to bring a motion under
section 877.6. The court noted that
under the statutes governing the subrogation rights of workers’ compensation
carriers, “[t]he section 877.6 motion, whether granted or denied, had no impact
on the liabilities of the parties in the litigation,†and went on to say that
given those circumstances, “the trial court’s determination that the settlement
was in bad faith was tantamount to an advisory opinion which should not have
been rendered.†(Id. at p. 458.)
The present
case, however, is not on all fours with Bailey,
supra, 79 Cal.App.4th 449. In Bailey,
the plaintiff did not allege that the workers’ compensation carrier was jointly
liable with the defendant driver. Here,
Underground did allege that the City
and the Utilities were co-obligors on
the Contract, and thus were jointly and severally liable to Underground. We recognize that the City denied this
throughout the litigation, and that the trial court ultimately found in favor
of the City in this regard, ruling that the City’s liability was separate from
that of the Utilities. However, at the
time the Utilities’ good faith settlement motions were made and granted, that
issue was not yet resolved. Accordingly,
the Utilities were entitled to bring the motions on the basis of their status
as alleged co-obligors, and the
rulings granting the motions were not purely advisory as they were in
The City
also argues that by not granting the City’s motion to reduce the judgment, the
trial court allowed Underground a double recovery. The trial court itself recognized, however,
in its order denying the City’s motion to reduce the judgment, that the
Contract expressly provided that the Owner Parties would not be liable to
Underground for work performed for another Owner Party. Thus, the trial court was fully aware that
the City should not be held liable to Underground for amounts owed by the
Utilities, and its denial of the City’s motion did not rest on a contrary
view. Therefore, the City’s general
argument that the trial court allowed Underground a double recovery by not
reducing the judgment is belied by the trial court’s own analysis.
Additionally,
we are not persuaded by the City’s alternative argument that it should be
credited for the Utilities’ settlement as a matter of equitable indemnity. The City cites Fassberg Construction Co. v. Housing Authority of City of Los Angeles
(2007) 152 Cal.App.4th 720 (Fassberg)
for the proposition that the trial court should have awarded the City an
equitable setoff in the amount paid in settlement by the Utilities. That case arose from a construction dispute
involving only two parties: a city housing authority, and its general
contractor. After the construction project
was completed, the housing authority refused to release any of the amounts it
had retained from payments due during the course of construction, and the
contractor sued the housing authority.
The housing authority cross-complained against the contractor for breach
of contract, fraud and misrepresentation, and violations of the California
False Claims Act. The housing authority
prevailed at trial. On appeal, the court
held (among other things) that the contractor was entitled, under general
principles of equitable setoff, to reduce the judgment against it by the amount
still retained by the housing authority from the payments otherwise due to the
contractor. (Id. at pp. 762-764.)
This result
is unsurprising; it is well established that when two parties mutually owe
debts to one another, the two debts may be set off against one another, so that
the party owing the greater debt need only pay the net amount. (See Fassberg,
supra, 152 Cal.App.4th at
p. 762.) This principle has no
bearing, however, on whether the City in the present case is entitled to a
setoff against its liability to Underground based on the amounts paid to
Underground by the Utilities. The City
has not cited any authority for the proposition that a debtor is entitled to an
equitable setoff on account of payments made to the creditor
court’s denial of the City’s motion to reduce the judgment.
2. Encroachment Permit Fees
The
Contract required Underground to obtain and pay for encroachment permits for
AT&T utility boxes that were installed as part of the Project, and as to
which such permits were “applicable.â€
The Contract provided that Underground would advance the fee for these
permits to the City, and then be reimbursed by AT&T.
After the
Project was complete, the City withheld $96,000 from the retention owed to
Underground on account of encroachment permit fees which the City contended had
been incurred but had not been paid to the City by Underground. The jury found that Underground’s failure to
pay this amount was not a breach of the Contract, and thus denied the City’s
claim that it was entitled to set off this amount against what it owed
Underground.
On appeal,
the City contends that the trial court erred in denying its motion in limine
number 2 (MIL 2) seeking to exclude evidence of Underground’s claim that the
$96,000 was improperly withheld.
name="_ftnref11" title="">[11] In MIL 2, the City argued that it could not
be held liable to reimburse Underground for the encroachment permit fees,
because AT&T, not the City, was responsible for reimbursing Underground for
those costs. Thus, the City argues that
the trial court’s denial of the motion in limine was based on an error of law,
in that the ruling failed to recognize that the City’s liability to Underground
was separate rather than joint, and that the fees were the responsibility of
AT&T, not the City. The City also
contends that the jury’s verdict awarding the retained amount to Underground
was not supported by substantial evidence.
Underground
responds that the trial court’s denial of MIL 2 was not premised on the theory
that the City was jointly liable with AT&T for this portion of
Underground’s damages, that is, the damages stemming from the City’s retention
of the allegedly unpaid permit fees. We
agree. In Underground’s opposition to
MIL 2 in the trial court, it did not argue that the City was jointly liable
with AT&T for the “applicable†encroachment permit fees. Rather, Underground argued that no
encroachment permits had been required in connection with the AT&T utility
boxes. Moreover, as already noted, the
record (including the trial court’s rulings and jury instructions, as well as
the parties’ opening statements and closing arguments) makes clear that the
trial court understood, and the jury was told, that the City was liable to
Underground only for the damages caused by the City’s own conduct, and not for
damages attributable to the Utilities.
The problem
with the City’s position on this issue is that the claim which put the $96,000
in encroachment permit fees at issue was not a claim by Underground that it had
paid those fees, and that the City breached the Contract by failing to
reimburse Underground for them. If
Underground had made such a claim, the City would have been correct in
maintaining that under the terms of the Contract, Underground should seek
recovery against AT&T rather than the City.
Instead,
the issue arose due to the City’s
claim that the fees were owed and had not
been paid, and that the City was therefore entitled to a setoff in that amount against the retention otherwise owed to
Underground under the contract. A party
asserting the affirmative defense of setoff bears the burden of proving its
entitlement to the setoff. (See
TIG Specialty Ins. Co. (2002) 29 Cal.4th 189, 197-198 [“a setoff claim may
only be used defensively, being in nature a defensive pleading asserting that
the claim constituted prior payment for the amount sought in the plaintiff’s
complaintâ€]; Western Land Office, Inc. v.
Cervantes (1985) 175 Cal.App.3d 724, 731 [“The burden is on the party
alleging an affirmative defense to prove itâ€].)
Thus, the City bore the burden of proving that encroachment permit fees
were due on the AT&T boxes. Unless
and until the City met that burden, the issue whether Underground or AT&T
was the party obligated to pay those fees did not arise.
Because the
City made a claim against Underground for a setoff in the amount of the
encroachment permit fees, Underground was entitled to present evidence, in defense
of this claim, that no encroachment permits were “applicable†to the AT&T
boxes that Underground installed, and thus that no fees for them were due. Accordingly, the trial court did not err in
denying MIL 2.
Moreover,
Underground did in fact introduce evidence that the encroachment permits were
not actually required. Richard
McLaughlin, Underground’s project manager, testified that the $96,000 withheld
by the City for the encroachment permit fees appeared to have been calculated
simply by multiplying the $600 fee by the total number of AT&T boxes
installed, yet the City never showed him any documentation establishing that
the charge for encroachment permits was “applicable†to each of those
boxes. McLaughlin also testified that
AT&T told him that the fee should not be paid. Ronald Ward, the City’s supervising civil
engineer, admitted on cross-examination by Underground’s counsel that the City:
(1) did not provide Underground with any documentation showing that
encroachment permits were required for the AT&T boxes; (2) allowed
Underground to proceed with the installation even though the permit fees had
not been paid; and (3) did not decide to withhold the $96,000 for the
permit fees until after the Project was complete, and the City had consulted
with counsel. This evidence is
sufficient to support the jury’s implied finding that no encroachment permits
were required for the AT&T boxes, and therefore that no fees were due for
such permits. We therefore find no basis
to overturn the jury’s verdict precluding the City from recovering on its
setoff claim for the encroachment permit fees.
3.
Overpaid Inspection Fees
In October
2006, in the course of the contractual claims process, the City’s hearing
officer found that Underground had paid inspection fees in an amount $22,840.33
greater than what Underground was required to pay under the Contract, and was
therefore entitled to a refund. The City
does not contest the hearing officer’s ruling that Underground was entitled to
the refund, and it initially agreed to refund the entire amount of the overpaid
fees.
However,
the City later changed its position, and contended that it was obligated to
refund to Underground only $5,710.08 for overpaid inspection fees, which it
applied as a credit against the setoffs it asserted against Underground. Prior to trial, in MIL number 4 (MIL 4), the
City sought a ruling that it was liable only for $5,710.08 in overpaid
inspection fees. As the basis for this
claim, the City argued that it was obligated to pay only its proportionate
share of the refund, and the remainder was the responsibility of the
Utilities. Underground opposed MIL 4,
and the trial court denied it. The jury
awarded the entire $22,840.33 in overpaid inspection fees to Underground.
On appeal,
the City argues that the trial court erred in denying MIL 4, and that the
jury’s verdict awarding Underground $22,840.33 for overpaid inspection fees is
not supported by substantial evidence.
As in MIL 4, the City’s basis for this argument is that its liability
for the refund of overpaid inspection fees is limited to its proportionate
share of the cost of the Project, as set by the Contract.
The City’s
argument is premised on a misunderstanding of the nature of Underground’s claim
on this issue. If Underground were arguing
that it had not been paid for some portion of the work on the Project, the City
would only be liable for its proportionate share of the additional sum due for
that work, and the Utilities would be liable for the remainder. But that is not Underground’s position. Rather, in seeking a refund of a portion of
the inspection fees that it paid to the City, Underground is contending that
the City received an amount of money from Underground to which the City was not
entitled. It is undisputed that this money
was paid only to the City, and only by Underground; the Utilities were not
involved either as payors or as recipients.
In support
of its contention that the cost of the refund was to be borne in part by the
Utilities, the City relies entirely on a letter from one of its employees,
project manager Paul Chan, to another City employee, dated December 1,
2006. Chan’s letter stated that
“inspection fees . . . are to be equally shared among the trench
occupants†(that is, the City and the Utilities); that the City was to bill
each party for 25 percent of the inspection fees; and that the cost of
refunding the excess inspection fees paid by Underground was also to be “shared
equally among the trench occupants.†But
this letter simply sets forth Chan’s self-serving interpretation of the
Contract.
There is
substantial evidence to support the jury’s implied finding that Chan’s
interpretation was incorrect. The
hearing officer’s decision stated that any “regular time inspection fee in
excess of [$104,500] shall be paid by the
City.†(Italics added.) It was entirely reasonable for the jury to
interpret this language to mean that any amounts over $104,500 that Underground
had paid for inspection fees were to be refunded by the City, which had received the overpayments from Underground
in the first place. Indeed, the contrary
interpretation now urged by the City is illogical, as it would require the
Utilities to bear part of the burden of refunding overcharges, even though the
Utilities neither charged nor received any portion of the overpaid
amounts. Thus, we find no merit in the
City’s position that its liability for the refund should have been limited to
its proportionate share of the overpaid amount.
C. Additional Sidewalk Concrete Removal
The City
presents several issues on appeal with respect to Underground’s claim for the
cost of additional sidewalk concrete removal.
In order to understand the City’s arguments, it is necessary for us to
explain Underground’s theory of damages on this issue, and how it evolved prior
to, and during, the course of the litigation.
During the
Project, on May 1, 2006, Underground wrote to the City requesting a change
order to cover the additional sidewalk concrete removal that Underground
expected to be asked to perform over the course of the Project, based on a
projection from its experience up to that point. Underground requested an additional payment
of $807,997 for this work. The City
rejected the request.
On
September 5, 2006, Underground requested a claims resolution hearing, under the
terms of the Contract, regarding the additional sidewalk concrete removal. A hearing officer was assigned to review the
claim; hearings were held in November 2006; and at the hearing officer’s
request, Underground supplied additional information on January 11,
2007. On February 8, 2007, the hearing
officer issued a decision. The decision
acknowledged that Underground had been required to remove more concrete than
anticipated by the Contract, and that this was extra work for which Underground
should receive payment. It nonetheless
recommended that the claim be denied, because Underground had not established
the specific amount of extra concrete involved.
In August 2007, the City acknowledged that Underground should receive
payment for the additional sidewalk concrete removal, but only in the amount of
$25,911, based on a cost of $1 per square foot.
In January
2010, the City took McLaughlin’s deposition.
McLaughlin had calculated that Underground was entitled to $639,668 for
the additional sidewalk concrete removal.
This figure was based on the assumption that each square foot of the
sidewalk concrete installed in the project corresponded to a square foot of
concrete removed, at a cost of $6.92 per square foot.
Just prior
to trial, Underground designated George Bradshaw as its expert
on the amount of damages Underground should receive for, among other items, the
additional sidewalk concrete removal. On
June 16, 2010, the City took Bradshaw’s deposition. Bradshaw testified that in analyzing the
issue of the additional sidewalk concrete removal, he performed a detailed
review of documents produced in the course of the litigation in order to
determine as accurately as possible the square footage of concrete that
Underground had actually removed, and the cost per square foot of that
work. Bradshaw explained that the
earlier figures given for the amount of the claim had been based on “the best
information available at the time,†but that he had been “asked to do an
independent analysis.â€
Bradshaw
testified, both at his deposition and at trial, that according to his
calculations, the City owed Underground $436,810.81 for the additional sidewalk
concrete removal. The jury evidently
credited Bradshaw’s opinion; its special verdict awarded Underground exactly
the amount that Bradshaw testified Underground should receive for this claim.
1. Motions to Bar Expert
Testimony and for Nonsuit on “New†Claim
Prior to
trial, the City filed a motion in limine
seeking to exclude Bradshaw’s expert testimony regarding the additional
sidewalk concrete removal on the ground that it amounted to an entirely new
claim, as to which Underground had followed neither the contractual claims
procedures nor the Government Claims Act (Gov. Code, § 900 et seq.).
partial nonsuit on the same grounds. The
trial court denied both motions.
The City
now argues that these rulings constituted errors of law. The City’s arguments are premised on the
contention that the trial court erred in concluding that Bradshaw’s analysis
was simply a new way of calculating Underground’s damages, rather than it being
a new claim. On this point, the City has
not presented any authority, and we are not persuaded by its arguments. As Underground points out, the essential
gravamen of Underground’s claim remained the same from beginning to end: in the
course of the Project, the City required Underground to remove more sidewalk
than contemplated by the Contract, and Underground was entitled to payment for
that work. The City does not identify in
its briefs on appeal any new facts or witnesses not previously disclosed in
discovery that were relied upon in Bradshaw’s analysis. Rather, by Bradshaw’s own account, he did a
more detailed analysis of the information available at the conclusion of the
Project in order to calculate more accurately the amount Underground should be
paid for the work. Indeed, Bradshaw’s
figure turned out to be less than
Underground had projected during the course of the work. The fact that Bradshaw recalculated the cost
of the additional sidewalk concrete removal does not mean that Underground was
making a new claim.
The City
also complains that Bradshaw’s analysis was not disclosed until shortly before
trial. The City does not contend,
however, that Underground failed to comply with the statutes governing expert
discovery. Moreover, the City presents
no authority for the proposition that it is an error of law (much less an abuse
of discretion) to permit a party’s expert to give an opinion at trial as to the
amount of damages that differs from the amount estimated by the same party in
the course of communications prior to or earlier in the litigation. Accordingly, we are not persuaded that the
trial court erred in permitting Bradshaw to testify regarding his analysis of
the additional sidewalk removal claim, or in denying the City’s motion for
nonsuit regarding that issue.
2. Failure to Instruct Jury on
Need to Comply with Claim Requirements
The City’s
next argument regarding the additional sidewalk concrete removal claim is that
the trial court erred in failing to instruct the jury with the City’s proposed
special instruction number 8, which stated that compliance with the contractual
claims process was an element of Underground’s cause of action with regard to
these damages. The propriety of jury
instructions is a question of law that we review de novo. (Mize-Kurzman
v. Marin Community College Dist. (2012) 202 Cal.App.4th 832, 845.) However, a judgment in a civil case will not
be reversed for instructional error unless it seems probable, based on the
record as a whole, that the error prejudicially affected the verdict. (Id.
at p. 546; accord, Soule v. General
Motors Corp. (1994) 8 Cal.4th 548, 580.)
In the
present case, as requested by both parties, the trial court instructed the jury
with California Civil Jury Instruction (CACI) No. 303, which explains that
a party seeking to recover damages for breach of contract must prove that it
performed or was excused from performing its own obligations under the
contract. In addition, the City proposed
special instruction number 8, stating that under the terms of the Contract,
Underground should be deemed to have waived any claims that were not presented
to the City in accordance with the contractual claims procedure. The trial court refused this
instruction. The City also requested the
trial court to modify CACI No. 303 to state explicitly that compliance with the
contractual claims procedure was one of the facts Underground had to prove in
order to establish its own performance under the Contract. The trial court declined to make this
modification.
As already
noted, the record shows that Underground did, in fact, comply with the
contractual claims requirement as to the additional sidewalk removal
claim. The City’s argument to the
contrary is premised entirely on its characterization of Bradshaw’s damages
analysis as constituting a new claim.
For the reasons discussed earlier, this premise fails. Accordingly, even if the trial court erred in
declining to give a more explicit instruction regarding compliance with the
contractual claims procedure (an issue we need not and do not reach), the City
is not entitled to any relief on that basis, because the record as a whole
makes clear that any such error could not have prejudicially affected the
verdict.
3. Jury Instruction on City’s
Response to Requests for Admissions
In January
2010, the City responded to several requests for admissions (RFAs) served on it
by Underground. Among these was RFA
number 14, which asked the City to admit that it “required Underground
. . . to remove and to dispose of concrete sidewalk beyond the score
lines of the trench for the Project.â€
(Original capitalization omitted.)
The City responded to RFA number 14 by asserting a number of objections;
stating that the request was admitted; and adding that “[t]he City required
Underground to do so as the result of damage caused by Underground.â€
During
trial, over the City’s objections, the trial judge instructed the jury, based
on CACI No. 210, that the City admitted it had required Underground to remove
and dispose of concrete sidewalk beyond the score lines of the trench. The judge did not mention in the instruction
that the City qualified the admission by asserting it had imposed these
requirements “as the result of damage caused by Underground.†The City argues on appeal that the jury
instruction was erroneous due to this omission.
The City’s
brief cites no authority for the proposition that jury instructions regarding
admissions made in discovery responses must include the responding party’s
explanations or qualifications regarding the scope of the matter admitted. Underground, on the other hand, cites
authority that the trial court has discretion to determine the scope and effect
of a party’s discovery admission, “ ‘so that it accurately reflects what
facts are admitted in the light of other evidence.’ [Citation.]â€
(Burch v. Gombos (2000) 82
Cal.App.4th 352, 360.) Accordingly, we
apply the abuse of discretion standard of review to the trial judge’s decision
as to what to include in the jury instruction on this issue.
Here, the
trial judge did not preclude the City from introducing evidence supporting its
contention that it required the additional sidewalk concrete removal because
Underground had damaged areas of sidewalk outside the score lines.
testified that Underground damaged large areas of sidewalk that did not need to
be removed for the purposes of the Project.
The City also introduced evidence that it documented all additional
sidewalk concrete removal that it ordered for its own benefit. Thus, the substance of the City’s explanation
of the reason for the additional sidewalk concrete removal was included in the
evidence considered by the jury.
Moreover,
as Underground points out, it would have confused the jury to include the
City’s explanation in the jury instruction as part of what the City
admitted. The City’s contention
regarding the reason for the
additional sidewalk concrete removal was not an admission on the City’s part,
but a disputed fact asserted as part of the City’s defense to Underground’s claim for payment.
The City’s
discussion of this issue in its opening brief fails to acknowledge the evidence
introduced by Underground that controverted the City’s explanation. One of Underground’s witnesses testified that
the sidewalks in the area of the Project were in poor condition when the
Project started, and that the City’s employees directed Underground to replace
them. One of the City’s own witnesses
acknowledged that “[f]or the most part,†Underground had consulted him before
removing any of the concrete. Also, Chan
acknowledged that he was unaware of the City’s six-foot rule (discussed
sidewalk concrete removal for the purpose of obtaining bids.
Thus, there
were factual disputes about the reasons for the additional sidewalk concrete
removal, making this a matter for the jury to evaluate.
his discretion in framing the instruction the way he did.
4. Jury Instruction Regarding
Contractual Duty to Track Extra Work
The City
requested that the trial judge give a special instruction (special instruction
number 7) stating that the Contract required Underground, “with respect to
disputed work . . . to keep records of cost and time incurred with
respect to such disputed work,†and that if Underground “failed to keep trackâ€
as required, it “waived any claims for protested, claimed, or disputed
work.†The trial judge declined to give
the requested instruction. The City
argues that this was error.
name="_ftnref16" title="">[16]
Once again,
the trial court did instruct the jury with CACI No. 303, which explains that a
party seeking to recover damages for breach
of contract must prove that it performed or was excused from performing its
own obligations under the contract. The
City’s opening brief on appeal cites no authority for the proposition that a
defendant is entitled to a supplemental, pinpoint instruction on one particular
aspect of the plaintiff’s duty to perform, merely because there is evidence
that the plaintiff failed to perform in that particular respect.
Underground,
on the other hand, cites authority to the effect that duplicative instructions
are not required, and that giving repetitious instructions is error when the
effect is to give undue emphasis to one particular issue. (City
of Los Angeles v. Retlaw Enterprises, Inc. (1976) 16 Cal.3d 473, 490;
Union of Machinists (1964) 227 Cal.App.2d 675, 718 [“it is error to give,
and proper to refuse, instructions that unduly overemphasize issues, theories
or defenses either by repetition or singling them out or making them unduly
prominent although the instruction may be a legal propositionâ€].) We find these cases persuasive, and note that
the same principles have been enunciated in more recent authorities as
well. (See, e.g., Major v. Western Home Ins. Co. (2009) 169 Cal.App.4th 1197, 1217;
Utility Dist. (2006) 143 Cal.App.4th 333, 359-360.) The City does not discuss or attempt to
distinguish any of these opinions in its reply brief. Accordingly, the City has not carried its
burden on appeal to convince us that the trial court erred in refusing to give
its proposed special instruction number 7.
D. Sidewalk Concrete Paving
With
respect to the placement (as opposed to removal) of sidewalk concrete paving,
the City raises two separate sets of issues on appeal. The first concerns the unit price Underground
was entitled to charge for each square foot of sidewalk concrete it paved. The second concerns whether Underground was
entitled to include in its bills for sidewalk concrete paving the areas of
sidewalk that Underground repaved in connection with the installation of
utility boxes, or whether that repaving was supposed to be included in the unit
price for utility box installation.
1. Unit Price for Sidewalk
Concrete Paving
Contract Interpretation
As already
noted, the City withheld the sum of $123,322.50 from the retention otherwise
payable to Underground. This amount was
based on the difference between the $7.50 per square foot that Underground
charged for all of the 133,485 square feet of sidewalk concrete paving that it
performed, and the reduced price of $6 per square foot that the City contended
was the Contract price for 82,215 square feet of that work.
It is not
disputed that the unit price f
| Description | Underground Construction Co., Inc. (Underground) worked on a construction project in Oakland (the Project) that included relocating existing overhead electrical, telephone, and cable television lines into conduit laid in underground trenches; removing and replacing sidewalks and adding ramps; and installing utility boxes and street light foundations. During the course of the Project, disputes arose between Underground, the City of Oakland (the City), and the owners of the affected utility lines[1] regarding how much Underground was owed for certain aspects of the work. Ultimately, Underground sued the City and the Utilities (collectively the Owner Parties) for additional sums it alleged were due under the contract for the Project. |
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