Opinion
D039451.
11-12-2003
BRH-GARVER, INC., Plaintiff, Cross-defendant and Appellant, v. CITY OF SAN DIEGO, Defendant, Cross-complainant and Respondent; SEABOARD SURETY COMPANY, Cross-defendant and Appellant.
Plaintiff and cross-defendant BRH-Garver, Inc. (BRH-Garver) appeals a judgment for defendant and cross-complainant City of San Diego (the City), entered after the court granted nonsuit on the complaint for breach of contract and related causes of action. BRH-Garver contends the trial court erred by determining that as a matter of law a geological report prepared for the City was not included in the contract documents for the construction of a sewer tunnel, and there was no evidence from which the jury could conclude the City materially misrepresented site conditions.
Additionally, BRH-Garver and cross-defendant Seaboard Surety Company (Seaboard) appeal a postjudgment order denying them attorney fees under Civil Code section 1717 as the prevailing parties on the performance bond cause of action of the Citys cross-complaint. Seaboard contends the court erred by determining apportionment between recoverable and nonrecoverable fees was required, and alternatively, by refusing to apportion fees itself without assistance from Seaboard. BRH-Garver contends it is entitled to attorney fees even though the performance bond was the source of contractual fees, and it was not a party to the performance bond cause of action. BRH-Garver and Seaboard also challenge the courts denial of costs, and the award of costs to the City. We affirm the judgment and the order.
FACTUAL AND PROCEDURAL BACKGROUND
In March 1998 the City invited bids for the construction of the Alvarado Trunk Sewer Realignment Project (the project), which involved several hundred linear feet of trenchless excavation, or "microtunneling," through rock. The City awarded the contract to BRH-Garver, which submitted the lowest acceptable bid.
The contract stated the work must be done in accordance with the "Standard Specifications for Public Works Construction," a publication referred to as the "Green Book." The Green Book required the City to provide any subsurface information it had to bidders. Accordingly, in section 2-7.1 of the contract the City advised bidders that Ninyo & Moore Geotechnical and Environmental Sciences Consultants (Ninyo & Moore) had prepared a geotechnical report they should review. However, the same section of the contract cautioned as follows: "Since [the Ninyo & Moore] subsurface investigations were made for design purpose and are not part of this contract, the Contractor shall perform his own soil investigations along the entire alignment. [¶] Cost for the soil investigations shall be included in the price of linear foot of pipe." (Italics added.)
Section 306-8.1 of the contract stated: "The Contractor shall demonstrate that the jack/tunneling equipment that will be used [is] . . . capable of handling and cutting through the various soil conditions along the identified alignment. The Contractor shall be responsible for the performance and reliability of the proposed tunneling equipment while tunneling through geologic condition[s] referenced in the [Ninyo & Moore] geotechnical report . . . . The soil report is available for review at the City . . ., refer to section 2-7.1 of these specifications for information, conditions and restrictions." (Italics added.)
Additionally, the Ninyo & Moore report stated "[w]e recommend that the contractor perform his own subsurface evaluation along the entire pipeline alignment to satisfy himself as to the subsurface conditions." The report also advised it was intended exclusively for the Citys use, and any reliance on the report by a third party was undertaken at its sole risk.
BRH-Garver viewed the site, but performed no subsurface investigation of its own. In determining the strength of rock underlying the projects alignment, and the type of tunnel boring machine required, BRH-Garver relied on the Ninyo & Moore report.
Shortly after commencing work on June 11, 1998, BRH-Garver encountered difficulties such as drill breakdowns and slow progress. On June 29, BRH-Garver received test results showing rock strengths substantially higher than those shown in the Ninyo & Moore report. BRH-Garver, however, continued working. On October 8, 1998, it notified the City in writing that it had "taken core samples of the material being mined on the . . . project and the results have come back with a considerably higher PSI rating than shown on the soils reports provided by the plans and specs," and would "be evaluating our increased costs and the impact of these changed conditions on our operations."
BRH-Garver stopped tunneling in January 1999. The following April the City deleted the remaining tunneling, or more than 30 percent of the original work, from BRH-Garvers contract.
BRH-Garver sued the City for breach of contract, breach of the implied covenant of good faith and fair dealing, breach of warranty and violation of Public Contract Code section 7107 (requiring timely payment of retention). BRH-Garver alleged the Ninyo & Moore report was part of the parties contract, and by providing the report the City warranted its accuracy, and actual site conditions of the project differed materially from those represented in the report (changed conditions claim).
The City filed a cross-complaint against BRH-Garver and Seaboard. The second amended cross-complaint included a cause of action against BRH-Garver for breach of contract, causes of action against both cross-defendants for declaratory relief, and a cause of action against Seaboard on the performance bond it issued BRH-Garver. The City alleged BRH-Garver breached the contract by, among other things, failing to complete the project within the specified time, and failing "to maintain the line and grade of the tunnel as provided in the . . . plans and specifications and as a result, installing the pipe at a slope which has caused [the City] to lose hydraulic capacity" (loss of capacity claim).
The City also named Ninyo & Moore as a cross-defendant, but it was dismissed from the action before trial.
Before trial, the City and BRH-Garver reached a partial settlement. The City agreed to pay BRH-Garver $400,000 "for retention withheld, any Prompt Payment Act penalties incurred, the value of the deleted work from [the] contract and any interest and attorneys fees that were recoverable on those amounts, if any." That amount was to be offset by $200,000, which BRH-Garver agreed to pay the City in liquidated damages for the late completion of the contract.
A jury trial was held on BRH-Garvers changed conditions claim. After BRH-Garver presented its case, the City moved for nonsuit on the grounds the Ninyo & Moore report was not part of the parties contract, and in any event, the changed condition provision of the contract was inapplicable because BRH-Garver failed to give the City timely notice. The court granted the motion, finding as a matter of law that the contract did not include the Ninyo & Moore report, and the City made no material misrepresentation.
Trial proceeded on the Citys loss of capacity and performance bond claims. Initially, the jury found BRH-Garver breached the contract, but awarded the City no damages. The court advised the jury that damages were a necessary element of the Citys claim, after which the jury returned a verdict for BRH-Garver and Seaboard. Judgment was entered on January 9, 2002.
In a postjudgment order, the court denied BRH-Garvers motion for contractual attorney fees, as it was not a prevailing party; denied Seaboards motion for attorney fees, as Seaboard presented no basis for allocating fees between recoverable and nonrecoverable fees; granted the Citys motion to strike BRH-Garvers memorandum of costs, and granted, in part, BRH-Garvers motion to tax the Citys memorandum of costs.
DISCUSSION
I
Nonsuit
A
Standard of Review
"`A motion for nonsuit or demurrer to the evidence concedes the truth of the facts proved, but denies as a matter of law that they sustain the plaintiffs case. A trial court may grant a nonsuit only when, disregarding conflicting evidence, viewing the record in the light most favorable to the plaintiff and indulging in every legitimate inference, which may be drawn from the evidence, it determines there is no substantial evidence to support a judgment in the plaintiffs favor. [Citations.] [Citation.]" (Mechanical Contractors Assn. v. Greater Bay Area Assn. (1998) 66 Cal.App.4th 672, 677.) We review the ruling on a motion for nonsuit independently, employing the same standard that governs the trial court. (Saunders v. Taylor (1996) 42 Cal.App.4th 1538, 1541-1542.)
B
Contract Claims
1
BRH-Garver contends the court erred by determining the Ninyo & Moore report was not included in the contract documents. BRH-Garver relies particularly on the fact that section 306-8.1 of the contract stated the successful bidder was "responsible for the performance and reliability of the proposed tunneling equipment while tunneling through geologic condition[s] referenced in the [Ninyo & Moore] geotechnical report." The City counters that the court correctly ruled, since section 2-7.1 of the contract expressly excluded the Ninyo & Moore report from the contract documents, and section 306-8.1 cross-referenced section 2-7.1. The City asserts that since the Ninyo & Moore report was not a contract document, the City did not warrant subsurface site conditions included in the report. We agree with the City.
"`The paramount rule governing the interpretation of contracts is to give effect to the mutual intention of the parties as it existed at the time of contracting, so far as it is ascertainable and lawful [citation]. The [intention] of the parties must, in the first instance, be derived from the language of the entire contract." (City of Chino v. Jackson (2002) 97 Cal.App.4th 377, 382-383.) Section 2-7.1 of the contract plainly states the Ninyo & Moore report was excluded from the contract documents. Further, section 306-8.1 of the contract expressly cross-referenced section 2-7.1.
BRH-Garver suggests sections 2-7.1 and 306-8.1 conflict, rendering the contract ambiguous, and the court should have construed the ambiguity against the City as the drafter. BRH-Garver, however, develops no particular argument and cites no supporting authority. "Where a point is merely asserted by counsel without any argument of or authority for its proposition, it is deemed to be without foundation and requires no discussion." (People v. Ham (1970) 7 Cal.App.3d 768, 783, disapproved on another ground in People v. Compton (1971) 6 Cal.3d 55, 60, fn. 3; People v. Sierra (1995) 37 Cal.App.4th 1690, 1693, fn. 2.)
Even without waiver, BRH-Garvers position lacks merit. "If the contract is capable of more than one reasonable interpretation, it is ambiguous [citations], and it is the courts task to determine the ultimate construction," based on parol evidence. (Badie v. Bank of America (1998) 67 Cal.App.4th 779, 798-799.) BRH-Garver, however, did not argue the contract was ambiguous. Rather, it conceded the contract was unambiguous and its interpretation was a matter of law for the court. Further, given the express exclusion of the Ninyo & Moore report from the contract documents, the contract is not reasonably susceptible to the interpretation the report was included in the contract documents. Indeed, although the court did not allow parol evidence to aid in interpretation of the contract, the BRH-Garver employee responsible for bidding the project, Michael Arme, admitted in his testimony that the parties intended to exclude the Ninyo & Moore report from the contract documents.
Further, section 2-7.1 of the contract required bidders to perform their own site investigations along the projects entire alignment. "A provision in the contract that the bidder has examined or must examine the site cannot excuse active misrepresentation or concealment of conditions by the governmental agency." (1 Witkin, Summary of Cal. Law (9th ed. 1987) Contracts, § 88, p. 119, citing rule of City of Salinas v. Souza & McCue Construction Co. (1967) 66 Cal.2d 217, 223 (Souza), disapproved on another ground in Helfend v. Southern Cal. Rapid Transit Dist. (1970) 2 Cal.3d 1, 14.) "On the other hand, where the governmental agency makes statements honestly and only as suggestions, with warnings to the contractor to satisfy himself as to conditions, there is no basis for reliance, and the Souza rule of breach of implied warranty is inapplicable: `When there is no misrepresentation of factual matters within the [governments] knowledge or withholding of material information, and when both parties have equal access to information as to the nature of the tests which resulted in the [governments] findings, the contractor may not claim in the face of a pertinent disclaimer that the presentation of the information, or a reasonable summary thereof, amounts to a warranty of the conditions that will actually be found. [Citations.]" (Witkin, supra, at pp. 119-120, citing Wunderlich v. State of California (1967) 65 Cal.2d 777, 786 (Wunderlich).)
In Wunderlich, the Supreme Court held that in contracting for the construction of a highway the state effectively disclaimed the intention to warrant conditions. A special provision of the contract stated: "`Samples indicate that material of satisfactory quality for the production of imported base material, gravel blanket material, and mineral aggregate for plant-mixed surfacing and cement treated base, may be obtained left of approximate Station 615. Arrangements have been made for the Contractor to obtain material at the above location at a price not to exceed 3/4-cent per ton for material removed from the site and used in the work." (Wunderlich, supra, 65 Cal.2d at pp. 779-780.)
In Wunderlich section 6 of the contracts Standard Specifications stated: "`When sources of materials to be furnished by the Contractor are designated in the special provisions, the Contractor shall satisfy himself as to the quantity of acceptable material which may be produced at such locations, and the State will not assume any responsibility . . . as to the quantity of acceptable material at the designated location. [& para;] If tests have been made by the State of other locations in the vicinity, the results . . . are available to the Contractor . . . . This information is furnished for the Contractors . . . convenience only and the State does not guarantee such tests and assumes no responsibility whatsoever as to the accuracy thereof or the interpretation thereof stated in the test records." (Wunderlich, supra, 65 Cal.2d at p. 780.) Additionally, section 2 of the Standard Specifications required bidders to carefully examine the site, and stated it would be assumed bidders were satisfied as to the conditions to be encountered. (Ibid.)
The contractor who was awarded the job chose to use the "Wilder pit" for the source of specified materials. (Wunderlich, supra, 65 Cal.2d at p. 781.) At a prebid meeting, the state provided the contractor with the following memorandum: "`Submitted herewith is information concerning possible local material sources for the project. . . . This information has been developed during the investigation for borrow sites and possibly would be of value to the prospective bidders for this project." (Ibid.) As to the Wilder pit area, the memorandum stated: "`This hillside is composed of rather loosely compacted sand and gravel ranging from 4 inches to dust. A layer of blow sand covers the base of the hill and apparently exists in spots on the slope as some test holes encountered considerable coarse material while others were practically all sand. [¶] Tests indicate that after processing, to meet the grading requirements, the material is suitable for imported base material, cement-treated base aggregate, gravel blanket, and plant-mixed surfacing aggregate." (Ibid., italics in original.) The memorandum reproduced test results taken in the Wilder pit area, showing "`material has the following qualifications: . . . "Passing a No. 4 sieve . . . 55-88%."" (Ibid.)
After commencing work, the contractor found the necessary materials could not be produced at the bid price from the Wilder pit as it was composed of too much sand. The contractor sued the state for breach of warranty, alleging the information it provided on the Wilder pit was a representation and warranty that suitable material would be available there to complete the project, and the state misrepresented the actual conditions. The court reversed a judgment for the contractor, concluding the state made "no positive representation as to the material content of the Wilder pit," but rather "did little more than report the results of its testing." (Wunderlich, supra, 65 Cal.2d at p. 784.) Further, the court explained that "any representation as to the quantity of materials in any of the sources described by the state was explicitly and clearly disclaimed by an express provision of the Special Provisions. At the outset of the same paragraph in which the representation is found, the bidders are referred to section 6 of the Standard Specifications. That section provides expressly that when sources of material are designated, the contractor shall satisfy himself as to the quantity of acceptable material which may be produced at the source, and disclaims state responsibility for the quantity of acceptable material." (Id. at p. 785.) The court held the contractor did not justifiably rely on the states information regarding the Wilder pit. (Id. at p. 786.)
BRH-Garver asserts Wunderlich is inapplicable because here, the contract did not disclaim the accuracy of the Ninyo & Moore report. Although the contract did not state the City "will not assume any responsibility" (Wunderlich, supra, 65 Cal.App.2d at p. 780) for the report, such language was unnecessary. In light of the contracts express exclusion of the report from the contract documents, and BRH-Garvers admitted knowledge of the intended exclusion, it could not reasonably rely on the report on the ground the contract did not state the City "will not assume any responsibility" for the accuracy of the report.
BRH-Garver relies on E. H. Morrill Co. v. State of California (1967) 65 Cal.2d 787 (Morrill), for the proposition that a changed conditions clause in a contract supersedes a disclaimer. In Morrill, Special Condition 1A-12 of a contract for excavation work stated the soil was composed of, among other things, granite boulders from one foot to four feet in diameter, and the boulders were dispersed from six to twelve feet in all directions, including vertically. (Id. at pp. 789-790.) The contractor sued the state for the cost of additional excavation work, alleging the boulders were substantially larger and more concentrated than represented. (Ibid.)
The trial court sustained the states demurrer to the complaint, finding the contractor did not justifiably rely on Special Condition 1A-12. The court cited section 4 of the contracts General Conditions, which required each bidder to "`examine carefully the site of the work and the plans and specifications therefor, and . . . satisfy himself as to the character, quality, and quantity of surface and subsurface materials or obstacles to be encountered." (Morrill, supra, 65 Cal.2d at p. 790.) Section 4 also stated, "`[i]nvestigations of subsurface conditions are made for the purpose of design, and the State assumes no responsibility whatever in respect to the sufficiency or accuracy of borings or of the log of test borings or other preliminary investigations." (Id. at p. 791.)
The Court of Appeal reversed the judgment, holding the trial court erred by construing section 4 of the General Conditions to be as a matter of law an effective disclaimer of the representation of site conditions in section 1A-12 of the Special Conditions. The court explained: "It is obvious that the entire set of plans and specifications, of which section 4 of the General Conditions was only a small part, was presented by the state to the bidders with the expectation that bids of necessity would be determined by consideration of such plans. Section 1A-12 did not purport merely to present the results of the states own tests and investigations, as in Wunderlich, but flatly asserts that the bidders could expect to confront only specified site conditions. It is clearly a `"positive material misrepresentation as to a condition presumably within the knowledge of the government," . . . [Citation.] [¶] . . . [N]othing in section 1A-12 of the Special Conditions . . . in any way draws the attention of the bidder to the purported disclaimer in section 4 of the General Conditions. Although, of course, the contract must be read as a whole, the absence of any cross-reference may be of significance in a determination by the finder of fact whether section 4 would justify the bidder in relying upon the unqualified representation of specified site conditions. It `would be going quite too far to interpret the general language of the other [sections of the contract] as requiring independent investigation of facts which the specifications furnished by the government as a basis of the contract left in no doubt. . . . In its positive assertion of the nature of this much of the work [the government]made a representation upon which the claimants had a right to rely without an investigation to prove its falsity. (Italics added.) [Citation.]" (Morrill, supra, 65 Cal.2d at p. 792, quoting Hollerbach v. United States (1914) 233 U.S. 165, 172.)
Here, in contrast to Morrill, the contract did not contain any positive assertion regarding subsurface site conditions. Rather, the City merely made the Ninyo & Moore report available to bidders, as the Green Book required. In fact, the contract states "[s]oil conditions . . . are unknown." Further, the requirement that bidders conduct their own site investigations along the entire alignment of the project appeared in section 2-7.1 of the contract, the same section that notified bidders of the Ninyo & Moore report. Additionally, section 306-8.1 of the contract stated its reference to the Ninyo & Moore report was limited by the disclaimer in section 2-7.1. The facts here are analogous to those in Wunderlich, supra, 65 Cal.App.2d, 777, and given the contracts conspicuous disclaimer and cross-referencing, BRH-Garvers reliance on the Ninyo & Moore report was unjustified.
BRH-Garver also cites Foster Construction C. A. & Williams Bros. Co. v. United States (Ct. Cl. 1970) 435 Fed.2d 873 (Foster), but it is unhelpful. In Foster, drawings attached to the contract represented the nature of subsurface conditions to be encountered during excavation for pier foundations, "`in the form of "logs of the drill holes" of "exploratory drillings conducted by the Bureau of Public Roads."" (Id. at pp. 881-882.) The actual conditions materially differed from the representations, and the court held the contractor was entitled to additional compensation notwithstanding a requirement that bidders perform their own site investigations.
The court explained that when a public agency includes its subsurface investigation "as part of a contract containing the standard changed conditions clause," "[b]idders are thereby given information on which they may rely in making their bids, and are at the same time promised an equitable adjustment . . . if subsurface conditions turn out to be materially different than those indicated in the logs." (Foster, supra, 435 Fed.2d at p. 887, italics added; see also Id. at p. 881 ["changed conditions claim . . . is entirely dependent on what is `indicated in the contents of the contract documents"].) The court further explained that in such situations "[r]eliance is affirmatively desired by the Government, for if bidders feel they cannot rely, they will revert to the practice of increasing their bids." (Id. at p. 887; see also Fattore Company, Inc. v. Metropolitan Sewerage Commission (7th Cir. 1971) 454 F.2d 537, 542 ["in the presence of a `Changed Conditions clause . . ., broad exculpatory clauses do not preclude the contractor-bidder from relying upon the existence of subsurface conditions of the nature indicated by the contract specifications"].) By excluding specifications regarding subsurface conditions at the project, the City left the matter open to bidders independent investigations. (See Foster, supra, 435 Fed.2d at p. 888.)
BRH-Garver submits the Citys conduct after execution of the contract, specifically citing the Ninyo & Moore report in support of its denial of a claim for extra work related to groundwater, shows the parties intended to include the report in the contract documents. BRH-Garver cites Oceanside 84, Ltd. v. Fidelity Federal Bank (1997) 56 Cal.App.4th 1441, in which the court explained that when "`an agreement [is] indefinite or uncertain in its inception, the subsequent performance of the parties will be considered in determining its meaning . . . . [Citations.]" (Id. at p. 1449.) Here, however, BRH-Garver agreed the contract was unambiguous and for the trial courts interpretation.
Garver further submits the court abused its discretion by excluding evidence that the City allowed the contractor it hired to complete the project to use blasting, and allowed increased time for the work. The evidence, however, was not germane to BRH-Garvers claims against the City related to the performance of their contract.
2
Alternatively, BRH-Garver contends the disclaimer in section 2-7.1 of the contract is ineffective because the City allowed insufficient time for bidders to conduct their own subsurface investigations. On March 12, 1998, the City issued a notice inviting bids, and the initial deadline for submitting bids was April 10. On April 8, the City extended the bid period to April 23.
BRH-Garver relies on Al Johnson Construction Co. v. Missouri Pacific Railroad Company (E.D. Ark. 1976) 426 F.Supp. 639, in which the court held ineffective a proviso that bidders were to conduct their own investigations into the subsurface conditions of a river. Bidders were given approximately one month to prepare bids, but the bid opening date "was at a time when the river was running at least 10 feet higher than normal." (Id. at p. 646.) The court explained that "in view of the abnormal height of the river during the time of bidding and the relatively short time . . . allowed for the preparation of bids, [the governmental agency] did not expect any of the bidders would make their own borings and subsurface survey." (Ibid.) Here, in contrast, there is no evidence of unusual circumstances that would hinder the bidders subsurface investigation.
BRH-Garver contends the trial court abused its discretion by excluding evidence, on relevancy grounds, of the time it took Ninyo & Moore to conduct its subsurface investigation and submit its report to the City, or the minimum time it would normally require to prepare such a report. BRH-Garver sought to show that if Ninyo & Moore took more than a month to prepare its report, the time the City allotted bidders was insufficient.
Only relevant evidence is admissible. (Evid. Code, § 350.) "`Evidence is relevant not only when it tends to prove or disprove the precise fact in issue, but [also] when it tends to establish a fact from which the existence or nonexistence of the fact in issue can be directly inferred." (Firlotte v. Jessee (1946) 76 Cal.App.2d 207, 210.)
Any arguable relevance of the proffered evidence depended on whether BRH-Garver knew of and relied on it before choosing to submit a bid without conducting a subsurface investigation. However, before BRH-Garver sought to introduce the evidence, Michael Arme, who bid the project for it, testified he did not contact Ninyo & Moore or any other geotechnical company to learn whether a subsurface investigation could be performed within the allotted time. BRH-Garver points to no evidence showing it knew the time a subsurface investigation would require, or that the City was aware it allotted insufficient time for such an investigation. Arme admitted he neither advised the City it allotted insufficient time to conduct an investigation, nor requested additional time to do so.
Additionally, it appears BRH-Garver would not have conducted a subsurface investigation regardless of the time factor. Arme testified that since BRH-Garver could recoup investigation costs only if it were the successful bidder, he would have conducted an investigation had the City "guaranteed me the job." On appeal, BRH-Garver states "that in its history [BRH-Garver] only conducted site investigations [on projects let for bid] when pooling together with other contractors," yet it cites no evidence of any effort to make such an arrangement here.
"`Discretion is abused whenever, in its exercise, the court exceeds the bounds of reason, all of the circumstances before it being considered." (Denham v. Superior Court (1970) 2 Cal.3d 557, 566.) Under the circumstances, we find no abuse of discretion.
3
BRH-Garver also contends the City concealed superior knowledge of site conditions, and the trial court erred by granting nonsuit on the issue of material misrepresentation. BRH-Garver asserts the City knew the project site contained rocks with substantially greater strengths than those discussed in the Ninyo & Moore report.
BRH-Garver asserts "the highest rock strength indicated in the [Ninyo & Moore] [r]eport is 17,160 psi." BRH-Garver does not cite us to a specific supporting reference in the report, but the City does not dispute the issue.
"It is the general rule that by failing to impart its knowledge of difficulties to be encountered in a project, the owner will be liable for misrepresentation if the contractor is unable to perform according to the contract provisions." (Souza, supra, 66 Cal.2d at p. 222.) A cause of action against a public agency for nondisclosure of material facts sounds in contract, not tort, and "may arise in at least three instances: (1) the defendant makes representations but does not disclose facts which materially qualify the facts disclosed, or which render his disclosure likely to mislead; (2) the facts are known or accessible only to defendant, and defendant knows they are not known to or reasonably discoverable by the plaintiff; (3) the defendant actively conceals discovery from the plaintiff." (Warner Constr. Corp. v. City of Los Angeles (1970) 2 Cal.3d 285, 294, fns. omitted.) "The underlying theory is that providing misleading plans and specifications constitutes a breach of the implied warranty of correctness." (Howard Contracting, Inc. v. G. A. MacDonald Construction Co. (1998) 71 Cal.App.4th 38, 55.)
BRH-Garver relies on undated handwritten notes of George Freiha, a City engineer involved in the project, that included the statement, "[i]nform the contractor about the 40,000 psi blue granite rock & large bolders [sic] presence." Freiha testified that during the design stage, he asked a tunneler working for the City on another project to visit this project site. Freihas notes were based on the tunnelers comment that rocks on the surface of the north side of the project "are something that can go up to 40,000 psi." The comment did not refer to the south side of the project, where BRH-Garver experienced its difficulties. The north side of the project was "all crops of rocks," but the alignment for the tunnel did not go through that area.
We conclude the court properly granted nonsuit on the misrepresentation element of the breach of contract claim. BRH-Garver viewed the project site and had an equal opportunity to observe the boulders. Moreover, the boulders were not even located in the area of the project in which the tunneling occurred, and BRH-Garver made no showing of a nexus between their presence and the difficulties it encountered. BRH-Garver asserts that because Freihas note stated, "inform the contractor about the 40,000 psi blue granite rock and large bolders [sic] presence," the blue granite rock and the boulders were not "one and the same," and Freihas testimony "only addresse[d] the location of the large boulders" and "provide[d] no information regarding the location of the 40,000 psi rock." Freiha, however, clearly testified that his note referred to surface conditions on the north side of the project. BRH-Garvers assertion is mere speculation. Indeed, it cites no evidence showing the rock in the tunnel was blue granite rock, or that the person with whom Freiha spoke had any knowledge of subsurface conditions.
Given our holding, we are not required to consider BRH-Garvers claim the court improperly denied its motion to amend its complaint to add a cause of action for breach of contract based on material misrepresentation. Additionally, we are not required to consider the Citys contention the nonsuit was proper on the alternative ground of BRH-Garvers lack of timely notice of changed conditions.
II
Attorney Fees
A
Seaboard
1
Seaboard, which issued BRH-Garvers performance bond, contends the trial court erred by denying it attorney fees as the prevailing party on the Citys cross-complaint. Seaboard relies on the performance bond, which required it to pay attorney fees should suit be brought to enforce the provisions of the bond, and Civil Code section 1717, which makes the provision reciprocal.
Civil Code section 1717, subdivision (a) provides in part: "In any action on a contract, where the contract specifically provides that attorneys fees and costs, which are incurred to enforce that contract, shall be awarded either to one of the parties or to the prevailing party, then the party who is determined to be the party prevailing on the contract, whether he or she is the party specified in the contract or not, shall be entitled to reasonable attorneys fees in addition to other costs."
The same counsel represented BRH-Garver and Seaboard. They moved together for an award of more than $201,949 in attorney fees, without any apportionment between recoverable and nonrecoverable fees. All invoices of counsel submitted in support of the fee request designate BRH-Garver as the sole client, and show a billing address for "C. M. Garver Investments," presumably an entity related to BRH-Garver.
At the hearing on the motion, Seaboard argued that if the court believed apportionment was necessary, it could perform the task itself. Seaboard claimed "the court certainly observed the lawyers [and] can make [a] rough apportionment." The court advised, "Im not going to do that." Seaboard contends the courts refusal was an abuse of discretion.
"Where a cause of action based on the contract providing for attorneys fees is joined with other causes of action beyond the contract, the prevailing party may recover attorneys fees under [Civil Code] section 1717 only as they relate to the contract action."
(Reynolds Metals Co. v. Alperson (1979) 25 Cal.3d 124, 129.) Seaboard relies on Abdallah v. United Savings Bank (1996) 43 Cal.App.4th 1101, 1111 (Abdallah), in which the court explained "[a]pportionment of a fee award between fees incurred on a contract cause of action and those incurred on other causes of action is within the trial courts discretion." Abdallah, however, does not suggest the court is required to search through attorney bills in an effort to calculate an apportionment, without any assistance from the moving party.
In Bell v. Vista Unified School Dist. (2000) 82 Cal.App.4th 672 (Bell), this court
reversed a statutory attorney fees award because there was no allocation between recoverable and nonrecoverable fees. (Id. at p. 686.) We noted the moving party made no attempt to apportion fees, and "the blocked-billing entries render[ed] it virtually impossible to break down hours on a task-by-task basis." (Id. at p. 689.) We held that on remand "[i]f counsel cannot further define his billing entries so as to meaningfully enlighten the court of those related to the Brown Act violation [the basis of statutory fees], then the trial court should exercise its discretion in assigning a reasonable percentage to the entries, or simply cast them aside." (Id. at p. 689.)
The court acted well within its discretion by refusing to apportion fees without any assistance from Seaboard. At the hearing, Seaboard sought the courts permission to file a supplemental brief on the apportionment issue, but the court refused the request. Seaboard does not challenge that ruling.
In its opposition to the motion for fees, the City argued "a thorough examination of the attorney fee bills submitted . . . reveals that . . . counsel had only three documented contacts with Seaboard," and "[t]his minimal amount of contact is entirely consistent with the level of involvement of Seaboard in the entire case." In reply, Seaboard did not dispute the accuracy of the Citys statements.
Further, there is no merit to Seaboards assertion it did apportion attorney fees by deducting approximately $34,000 for fees incurred before the City filed its cross-complaint. Seaboard, of course, incurred no recoverable fees before it became involved in the lawsuit.
2
Alternatively, Seaboard contends no apportionment of attorney fees was required because the contract and noncontract claims were inextricably intertwined. Whether an apportionment is necessary is a determination within the trial courts discretion. (Abdallah, supra, 43 Cal.App.4th at p. 1111.) "Attorneys fees need not be apportioned when incurred for representation on an issue common to both a cause of action in which fees are proper and one in which they are not allowed." (Reynolds Metals Co. v. Alperson, supra, 25 Cal.3d at pp. 129-130.) "Apportionment is not required when the claims for relief are so intertwined that it would be impracticable, if not impossible, to separate the attorneys time into compensable and noncompensable units." (Bell, supra, 82 Cal.App.4th at p. 687.) "For example, the holder of a note which provides for payment of fees incurred to collect the balance due is entitled to fees incurred in defending itself against `interrelated allegations of fraud." (Abdallah, supra, 43 Cal.App.4th at p. 1111.)
In determining apportionment was required, the court referred to its trial minutes, which showed "the amount of time on the cross-complaint was miniscule compared to the amount of time on the remainder of the case." BRH-Garver admitted it failed to maintain the specified line and grade of the sewer tunnel. The court noted the principal issue on the Citys cross-complaint was whether the City was thereby damaged, and that issue "was dealt with by two experts, and they were fairly brief. They each testified whether it changed the volume of water that the tunnel could handle or not." The court determined the cross-complaints loss of capacity claim and the complaints changed conditions claim were not "hopelessly intertwined at all."
Seaboard relies on comments of its counsel during a discussion on jury instructions and in closing argument that it presented evidence BRH-Garvers installation of the tunnel "off the original line and grade" was caused by its reliance on the Ninyo & Moore report. The comments, however, do not refute the courts findings that the principal issue on the cross-complaint was whether BRH-Garvers failure to maintain the line and grade of the tunnel damaged the City, and the cost of litigating the damage issue was unrelated to the cost of prosecuting the complaint. (See Siligo v. Castellucci (1994) 21 Cal.App.4th 873, 880.) Indeed, the only evidence Seaboard cites is testimony of expert witnesses on the issue of the hydraulic capacity of the sewer line, an issue related only to the cross-complaint.
"`A trial courts exercise of discretion will not be disturbed on appeal unless, as a matter of law, an abuse of discretion is shown—i.e.,—where, considering all the relevant circumstances, the court has "exceeded the bounds of reason" or it can "fairly be said" that no judge would reasonably make the same order under the same circumstances. [Citations.]" (In re Marriage of Smith (1990) 225 Cal.App.3d 469, 480.) We find no abuse of discretion. Further, we deny Seaboards request that we apportion fees by searching through the lengthy appellate record. The onus was on Seaboard to present the trial court with a reasonable basis for apportioning fees.
Seaboard states in its reply brief:
"[S]hould this Court decide that . . . apportionment of Seaboards fees is required, the record on appeal provides ample information from which the apportionment may be made. Not only do the clerks transcript and the reporters transcript provide a full catalog of the trial, but also the clerks transcript includes copies of the invoices for Seaboards counsels services in this matter. The invoices provide narrative descriptions of the tasks performed. Further, the briefs on appeal provide an abundance of information concerning the nature of the matters at issue during the trial." (Some capitalization omitted.)
B
BRH-Garver
BRH-Garver contends it is entitled to its full attorney fees under the Citys cause of action against Seaboard on the performance bond, even though BRH-Garver was not a party to that claim. BRH-Garver relies on Code of Civil Procedure section 996.430, subdivision (a), which states the "liability on a bond may be enforced by civil action" and "[b]oth the principal and the sureties shall be joined as parties to the action." (See also section 996.460, subd. (a).) BRH-Garver asserts "the fact that [the] City failed to name BRH-Garver in the caption of the bond simply demonstrates [the] Citys failure to properly plead its claim. The flaw, in no way, obviates the fact that BRH-Garver, as principal, was a party to the performance bond action in conformity with the legislatures mandate." (Some capitalization omitted.)
Statutory references are to the Code of Civil Procedure except when otherwise specified.
We reject the notion that a party who should have been joined in an action, but was not, is entitled to attorney fees incurred in litigating other causes of action. The court correctly ruled that BRH-Garver is not entitled to fees on the ground it was not a party to the performance bond claim. Further, even if BRH-Garver were a party to the performance bond claim, attorney fees are unavailable because there was no allocation of fees between the complaint and cross-complaint.
III
Costs
A
BRH-Garver
BRH-Garver contends the trial court erred by denying its request for statutory costs as the prevailing party on the cross-complaint. "Except as otherwise expressly provided by statute, a prevailing party is entitled as a matter of right to recover costs in any action or proceeding." (§ 1032, subd. (b).) A "prevailing party" includes "a defendant where neither plaintiff nor defendant obtains any relief." (§ 1032, subd. (a)(4).) In McLarand, Vasquez & Partners, Inc. v. Downey Savings & Loan Association (1991) 231 Cal.App.3d 1450 (McLarand), the court rejected the argument that when a defendant files a cross-complaint against a plaintiff, and neither party prevails on its action, both parties are "prevailing parties" entitled to costs under section 1032. The court explained the "practical effect of such a result would be to conclude the prevailing party is the one who spends the most, for only that party would recover anything after the claims were offset. It is fundamental that a statute should not be interpreted in a manner that would lead to absurd results." (Id. at p. 1453.) The court held section 1032s definition of "prevailing party" as including "a defendant where neither plaintiff nor defendant obtains any relief" does not include the plaintiff as a cross-defendant. (Id. at p. 1455; see also Schrader v. Neville (1949) 34 Cal.2d 112, 115.)
BRH-Garver ignores McLarand, supra, 231 Cal.App.3d 1450. BRH-Garver argues that because the judgment contains the statements that the City was the prevailing party on the complaint, and "costs in the amount of $____ be awarded to CITY," and BRH-Garver was the prevailing party on the cross-complaint, and "costs in the amount of $____ be awarded to BRH-GARVER," and the parties mutually drafted the judgment, they "stipulated to the procedure for awarding costs" and the court was bound by the stipulation. BRH-Garver cites section 1032, subdivision (c), which states "[n]othing in this section shall prohibit parties from stipulating to alternative procedures for awarding costs in the litigation pursuant to rules adopted under Section 1034 ." (Italics added.)
Section 1034 provides that "[p]rejudgment costs allowable under this chapter shall be claimed and contested in accordance with rules adopted by the Judicial Council." (§ 1034, subd. (a).) BRH-Garver does not refer to any rules established by the Judicial Council, or claim the supposed stipulation comported with any such rules.
Further, the language of the judgment does not show the parties stipulated to an award of costs to BRH-Garver, knowing it would ordinarily not be entitled to costs under section 1032 because it was not the prevailing party for purposes of the statute. (McLarand, supra, 231 Cal.App.3d at p. 1453.) Rather, the parties may have been mistaken on the law. The court was not required to ignore the law, and it ruled correctly.
B
Seaboard
Seaboard contends that although its name does not appear on the original or amended memoranda of costs filed by BRH-Garver, the trial court erred by denying Seaboard costs on that ground because the City did not raise the issue. Seaboard cites Douglas v. Willis (1994) 27 Cal.App.4th 287, 289, for the proposition the "`failure to file a motion to tax costs constitutes a waiver of the right to object. [Citations.] "The City, however, had no reason to move to tax Seaboards claimed costs, because Seaboard presented no memorandum of costs. "A prevailing party who claims costs shall serve and file a memorandum of costs . . . ." (Cal. Rules of Court, rule 870(a)(1).) Further, contrary to Seaboards assertion, it was not the courts responsibility to search the memorandum of costs BRH-Garver submitted to determine whether any of the costs it claimed were actually costs incurred by Seaboard. Again, the court ruled properly.
C
The City
The court awarded the City $14,136 in costs as the prevailing party on the complaint. BRH-Garver contends the award was improper, because by moving to tax the costs it shifted the burden to the City to prove the costs were recoverable, and the City did not meet its burden.
Section 1033.5 sets forth the costs the prevailing party may recover. "To recover a cost, it must be reasonably necessary to the litigation and reasonable in amount." (Thon v. Thompson (1994) 29 Cal.App.4th 1546, 1548.)
"[T]he mere filing of a motion to tax costs may be a `proper objection to an item, the necessity of which appears doubtful, or which does not appear to be proper on its face. [Citation.] However, `[i]f the items appear to be proper charges the verified memorandum is prima facie evidence that the costs, expenses and services therein listed were necessarily incurred by the defendant [citations], and the burden of showing that an item is not properly chargeable or is unreasonable is upon the [objecting party]. [Citations.]" (Nelson v. Anderson (1999) 72 Cal.App.4th 111, 131.) "[A] partys `mere statements in the points and authorities accompanying its notice of motion to strike cost bill and the declaration of its counsel are insufficient to rebut the prima facie showing [that the costs were necessarily incurred]." (Jones v. Dumrichob (1998) 63 Cal.App.4th 1258, 1266, quoting Rappenecker v. Sea-Land Service, Inc. (1979) 93 Cal.App.3d 256, 266.) Whether a cost item was reasonably necessary is a question of fact for the courts determination. (Jones v. Dumrichob, supra, at p. 1266.)
BRH-Garver does not assert the City failed to meet its prima facie burden. Rather, BRH-Garver faults the City for not producing evidence its costs were reasonable and necessary. However, the burden of proof did not shift to the City, because BRH-Garvers moving papers were not accompanied by any competent evidence to rebut the presumption the Citys costs were reasonable and necessary.
BRH-Garvers principal argument was that the City was not entitled to most of its claimed costs because it was being indemnified for costs. BRH-Garvers counsel submitted a declaration stating on information and belief that when Ninyo & Moore was a cross-defendant to the Citys cross-complaint, it agreed to indemnify the City for its costs in defending against the complaint. The declaration, however, was hearsay, and in any event, BRH-Garvers theory was unsound as "[c]osts are allowable if incurred, whether or not paid." (§ 1033.5, subd. (c)(1).) On appeal, BRH-Garver does not raise the indemnity issue.
The court disallowed $20,836 of the Citys claimed costs of $34,972, as follows: $23 for filing fees, presumably because as a public agency the City was not required to pay such fees; $16,440 for exhibits, on the grounds of excessiveness and lack of supporting documentation; $2,142 for reporter fees, which the City conceded were not statutorily authorized; and $2,231 in deposition costs, which the City conceded were duplicative. BRH-Garver faults the court for, among other things, not also disallowing costs to personally serve its employees with notices of deposition, when they could have been served by mail absent the Citys "dilatory conduct."
However, "[d]etermination of whether a cost is reasonable is within the trial courts discretion." (Thon v. Thompson, supra, 29 Cal.App.4th at p. 1548.) "[T]rial courts have a duty to determine whether a cost is reasonable in need and amount. However, absent an explicit statement by the trial court to the contrary, it is presumed the court properly exercised its legal duty." (Id. at pp. 1548-1549.) On this record, we find no abuse of discretion.
DISPOSITION
The judgment and order are affirmed. The City is awarded costs on appeal.
WE CONCUR, BENKE, J. and OROURKE, J.