Opinion
NOT TO BE PUBLISHED
Superior Court County of Santa Barbara, Super. Ct. No. 01263876, James W. Brown, Judge
Haws, Record & Magnusson, David W. Magnusson, for Defendants and Appellants.
Haight Brown & Bonesteel, Michael Parme, for Plaintiff and Respondent.
COFFEE, J.
Homeowners, Cindy Jacobs Soto and Ruben Soto, appeal from judgment awarding respondent Ruben Carmona doing business as R.I. Design & Construction, $90,750 plus prejudgment interest on a home improvement construction contract, foreclosing on respondent's $77,650 mechanic's lien, and awarding appellants nothing on their cross-complaint.
Appellants contend that (1) the trial court entered judgment against them as an unauthorized penalty for their witness' license violations; (2) that no substantial evidence supported denial of their cross-claim for corrective electrical work; (3) that the trial court erroneously compensated respondent for work he performed after the City issued a stop work order; (4) that the court erroneously awarded damages for breach of an April 22, 2007, document that was an unenforceable billing request; (5) that Ruben Soto has no personal liability on the construction contract because only his wife signed it; and (6) that prejudgment interest from April 27, 2007, was not authorized because the amount was uncertain. We modify the interest award, but otherwise affirm.
FACTUAL AND PROCEDURAL BACKGROUND
Ruben and Cindy Soto obtained permits from the City to remodel their house based on plans designed by Joaquin Ornellas. Respondent is a general contractor. The Sotos retained respondent to construct the remodel.
In July 2006, Cindy Soto signed a construction contract with respondent. The contract price was $165,000 to complete Ornellas' plans with five specified changes. According to Carmona, these changes were necessary because Ornellas' plans contained errors. According to Cindy Soto, she agreed to the changes because Carmona said they would reduce costs.
The contract provided for a series of payments upon completion of construction phases, and provided that work would stop until receipt of each phase of work payment. Respondent began work in the summer of 2006. Carmona used workers, including his son, to perform labor.
Carmona testified that he soon discovered additional problems with the plans and brought them to Ornellas' attention. Ornellas provided revised plans in August 2006. Carmona encountered more problems with the revised plans. For example, the plan dimensions did not accommodate Cindy Soto's wheelchair. The dimensions of the existing house were not correctly represented and the actual size of the remodel was twice that represented. A new shower and plumbing had to be jack-hammered and rebuilt to useable dimensions. In November, Ornellas provided a third set of plans in which respondent found further errors. Carmona sent an email to Soto in which he stated that he could no longer spend free time reviewing and correcting Ornellas' plans, and suggested that Soto hire his company to prepare a set of useable plans.
On December 8, 2006, Carmona summoned the City's job inspector (Jimmy Rivera) and the City's chief building official (George Estrella) to the site to go over the problems with the approved plans and to obtain permission to continue construction while revising plans. Cindy Soto and Ruben Soto were present at the house.
Following the site visit, the City issued a correction notice that states, "1. Project cannot be built according to plan. Please submit revised plans showing new structure changes with accurate dimensions. 2. Work may continue with inspections called for." The correction notice did not provide any deadline for submission of redesigned plans. Respondent continued work from December 2006, through April 2007. The Sotos were aware of the construction activity. The City continued to inspect and approve work on six occasions between December 13, 2006 and February 28, 2007.
Cindy Soto testified that, after the December 8 meeting, Carmona sent her some e-mails with rough sketches and asked her to pay him $6,500 to create new plans, but she was not willing to pay that. She testified that she did not retain respondent to prepare new plans.
The original contract provided that any extra work requested would be performed at $65 per man hour with a 20 percent charge on materials for overhead and profit. Between December 2006 and February 2007, Carmona submitted three invoices for extra work totaling $50,150: (1) in December, he billed $6,500 for additional work that Cindy Soto requested in the garage; (2) in January 2007, he billed $42,450 for "correct[ions] due to plan discrepancy and changing of the floor plan, " including relocating plumbing, reframing, and relocating existing windows and furring up the existing roof to accommodate new roof plans; and (3) in February 2007, he billed $1,200 for a door change and new exhaust fans. Carmona noted that there was no additional charge for substituting marble installation for tile installation in the bathroom.
Cindy Soto did not sign or pay the extra work invoices. A space for "homeowner approval" remained blank. The Sotos did continue to make all phase of work payments as they came due, until April 2007. By then, the Sotos had paid $144,000 of the $165,000 original price, but had not paid the $50,150 in outstanding extra work invoices. Carmona testified that he had completed the revised plans. He was never paid for them and never submitted them to the City.
On April 22, 2007, Carmona e-mailed a document to Cindy Soto with the subject line, "Payment Schedule." Carmona wrote that he and Soto needed to sit down and go over a game plan for presenting the revised plans to the City, that the plans were done, and that he was waiting for Cindy to decide how to proceed. He wrote that he would help her with a lawsuit against Ornellas, but he could not wait any longer for payment on the outstanding invoices. He wrote, "I need to redo the payment schedule of the original contract." He testified that he intended to "start from scratch" because the scope of work described in the original contract had changed so dramatically.
The April 22 document set forth the balance of $71,150, consisting of $21,000 remaining on the original contract price plus $50,150 in extra work invoices ($6,500, $42,450, and $1,200). Carmona set forth a new phase of work payment plan with a first payment of $36,150 to be due "[a]fter stone is installed in your bathroom and before plumbing begins in your bathroom." The total payments equaled $71,150. The final payment would not be due until one year after the work was finished.
The April 22 document is initialed on both pages in spaces indicating homeowner approval and the initials appear to match those of Cindy Soto on the original contract. At trial, she denied ever agreeing to it or initialing it. Carmona testified that she initialed it his presence at her house on April 23. The trial court credited Carmona's testimony.
After April 22, respondent continued construction. When the stone installation in the bathroom was completed, Carmona requested the $36,150 phase of work payment under the terms of the April 22 document and began the next phase, working until April 27. During that time, Carmona called Cindy Soto several times, but she did not return his calls. On Friday, April 27, Carmona called one of his workers at the site who tried to hand the phone to Cindy Soto. She refused to take it. Carmona then told the crew to leave the job. Respondent did no further work on the project.
After Carmona stopped work, Soto retained Mike Waggoner to complete the construction and Allen Jenks to complete the electrical work. The City issued a stop work notice on May 1, 2007. Ornellas eventually submitted revised plans, which were approved, and the job was completed.
After stopping work, respondent attempted for several months to collect payment, then recorded a mechanic's lien on June 19, 2007, for $77,650 plus interest from April 30, 2007. Respondent filed suit to foreclose on the mechanic's lien, for breach of contract (based on the original July 11, 2006, contract plus $50,150 in extra work invoiced), for quantum meruit, and for recovery on an open book account. The complaint did not mention the April 22, 2007 document.
The Sotos cross-complained against respondent for breach of contract, negligent construction, and fraudulent inducement. They alleged that respondent's work did not comply with approved plans and was un-workmanlike, that Carmona fraudulently induced them to retain him as a substitute designer by falsely representing that the original designer's plans were inadequate, and that he failed to submit new plans to the City as agreed.
At trial, Waggoner and Jenks testified that respondent's work was substandard and they had each performed corrective work. Waggoner conceded that he had not obtained worker's compensation for his crew, as required by law.
Carmona sought at trial to recover $90,750 consisting of (1) $50,150 for the extra work invoiced plus $36,150 for the first phase payment under the April 22 document; (2) $2,450 in lost profit for the unfinished phases of work described in the April 22, document; (3) $2,000 in quantum meruit for work performed from April 22 through 27; and (4) pre-judgment interest. Over appellants' objection, the court allowed respondent to amend his complaint to conform to proof and allege that the April 22 document was a novation or a modification of the original contract. Alternatively, he argued that he was entitled to quantum meruit relief to the extent of his detriment or the benefit conferred upon the Sotos.
The court awarded Carmona $90,750.00 on the complaint with prejudgment interest from April 27, 2007, and authorized foreclosure on the mechanic's lien for $77,650 plus interest from April 30, 2007. The court awarded nothing to appellants on the cross-complaint, and awarded Carmona costs as the prevailing party.
DISCUSSION
Impact of Waggoner's License Violation on Cross-Complaint
Appellants contend that the trial court denied their cross-complaint as an unauthorized penalty for Waggoner's failure to obtain worker's compensation insurance in violation of State licensing requirements. We reject the contention, which does not accurately represent the ruling.
The court denied the cross-complaint because it did not credit the testimony of appellants' substitute contractors and because they did not identify work attributable to correcting respondent's errors, as compared to work that was either attributable to completion of the remaining phases of work, or was outside respondent's scope of work. In its tentative decision, the court wrote that appellants "did not offer sufficient evidence to show that Waggoner was a licensed contractor whose hired workers were covered by workers compensation insurance or the dollar amount attributable to corrective repairs." (Italics added.) In its subsequent statement of decision, the court found that "none of the invoices that Waggoner provided to the Sotos for work performed, in the amount of approximately $90,000[] identified corrective work or separated the cost of corrective work from the additional work performed." (Emphasis omitted.) The court also found that Waggoner's claims of errors by respondent were contradicted by other more credible evidence, which it identified in detail.
Substantial evidence supports the court's finding that appellants did not prove their claims for corrective work. Waggoner testified that respondent had done a number of things differently than he would have done, but Waggoner was rarely able to state what was required by code or industry standard. He testified that he did not know what respondent's scope of work had been. He had lost his notes that tracked his corrective work and he struggled to recall which of his work was corrective. He conceded that his invoices did not delineate between corrective and other work and did not identify what work was performed, the number of hours worked, or the hourly rate charged.
Waggoner's credibility was undermined by his admission that he did not obtain worker's compensation for the four people working under him on the job, and he conceded that his contractor's license was not exempt from worker's compensation. A contractor's license is automatically suspended by operation of law if he or she does not obtain worker's compensation insurance as required. (Bus. & Prof. Code, § 7125.2.) The court was entitled to discredit his testimony that dust in the pipes indicated they had not been tested, because City records showed that plumbing had been approved on December 13, 2006, and inspector Cooper testified to its approval. Waggoner's testimony that windows had been poorly installed in the family room was countered by Carmona's testimony that they were only temporarily installed and would have been properly installed in a later phase when the family could move back into the bedrooms. Waggoner's testimony that respondent failed to obtain a private inspection of the tie-in between the old and new foundations was countered by the City inspector's testimony that the City inspected and approved the foundation and that City approval will suffice for private inspection where the tie-in is a minor aspect of the project. Carmona testified that he talked with the City inspector about the tie-in, because normally the homeowner has to call out a private inspector, but the City inspector told him, "No, it's such a small thing. I'll look at it when I inspect the foundation." The trial court was in the best position to assess this conflicting evidence and we will not disturb its resolution. (Whyte v. Schlage Lock Co. (2002) 101 Cal.App.4th 1443, 1450.)
Appellants' Cross-Claims for Corrective Electrical Work
Appellant contends that no substantial evidence supports the trial court's denial of its cross-claims for corrective electrical work because Carmona "lied" and his evidence concerning electrical work was impossible to believe when compared to testimony of Jenks that the work looked like it had been performed by an apprentice.
We review the evidence in the light most favorable to the judgment and determine whether substantial evidence supports it. (McRae v. Department of Corrections and Rehabilitation (2006) 142 Cal.App.4th 377, 389.) Substantial evidence is evidence of ponderable legal significance. (Ibid.) We must view the whole record in the light most favorable to the judgment, resolving all evidentiary conflicts and drawing all reasonable inferences in favor of the trial court's decision. (Ibid.) We do not resolve conflicts in the evidence, reweigh the evidence, or assess the credibility of witnesses on appeal. (Whyte v. Schlage Lock Co., supra, 101 Cal.App.4th at p. 1450.)
Substantial evidence supports the trial court's finding that appellants did not prove their claims for corrective electrical work. Jenks testified that he performed electrical work to correct respondent's work, but he did not know what respondent's scope of work was. Jenks' invoices included work that was neither described in the original plans nor in the April 22 document. Jenks' testimony that respondent should have run the electrical source underground, rather than overhead, was contradicted by evidence that power normally ran overhead in the neighborhood, that Carmona relied on a brochure from the utility that called for it to be overhead, and that Ornellas' plans did not call for underground power. Jenks testified that respondent had left the electrical work unfinished, but Carmona testified that he left the job before the electrical finishing phase and a City inspector testified that Carmona's rough electrical work had been accepted and approved by the City. Waggoner conceded that the City's inspector had approved Carmona's rough electrical work. The court did not share Waggoner's skepticism about the quality of City inspection and we defer to the trial court's assessment of the testimony. Substantial evidence supported its decision to deny the cross-claim for corrective electrical work.
Work Performed After December 8, 2006 Correction Notice
Appellant contends that Carmona should not have been awarded any compensation for work performed after December 8, 2006, because the correction notice was a stop work order. We disagree.
The only stop work order in evidence was issued by the City on May 1, 2007, after respondent left the job on April 27. Respondent was not compensated for any work performed after May 1. The correction notice that was issued December 8, 2006, was not a stop work order. It stated, "Work may continue with inspections called for." Substantial evidence supported the trial court's determination that the correction notice permitted respondent to continue working, subject to inspections, pending submission and approval of revised plans. Estrella testified that on December 8 he told Carmona that he wanted revised plans in two to three weeks and that only weatherproofing work should be performed in the meantime, but these restrictions did not appear on the notice or on any other City record. The City continued to inspect and approve non-weather-proofing work on six occasions between December 13, 2006 and February 28, 2007. The trial court was in the best position to weigh Estrella's testimony against the language of the correction notice and the testimony of Carmona and inspector Cooper. Its determination is supported by substantial evidence and we will not disturb it on appeal.
Recovery Under the April 22, 2007 Document
Appellants contend that the trial court erred by finding that the April 22 document was enforceable as an agreement to cancel the original contract and substitute a new contract, that the court awarded $36,150 in unauthorized extras under the April 22 document, and that the April 22 document was in fact an unenforceable billing request. Cindy Soto continues to deny that she initialed the April 22 document. We reject appellants' contentions because substantial evidence supported the trial court's determination that the April 22 document operated as a novation, it would nevertheless have been enforceable as a modification, and the award was authorized by its terms.
A written construction contract may generally be altered or modified by another written contract, an executed oral agreement, or an oral rescission or novation and substitution of another agreement. (Civ. Code, § 1654; Walnut Creek Elec. v. Reynolds Const. Co. (1968) 263 Cal.App.2d 511, 515.) A novation is the substitution of a new obligation for an existing one. (Civ. Code, § 1530.) Any alteration or modification must be supported by additional consideration, but the contractor's performance of additional work included in the change is sufficient consideration. (Western Lithograph Co. v. Vanomar Producers (1921) 185 Cal. 366, 369-371; Fairlane Estates, Inc. v. Carrico Const. Co. (1964) 228 Cal.App.2d 65, 71.)
The language of the April 22 document and Carmona's testimony are substantial evidence supporting the trial court's determination that the parties substituted a new obligation under the terms of the April 22 document for their existing obligations under the original contract. We accept as true the trial court's factual determinations that Cindy Soto agreed to the terms of the April 22 document and initialed it, and its finding of "intent by the parties to substitute a new obligation for an existing one."
A home improvement agreement must be in writing, must be delivered to the owner before work begins, must be signed by the parties, and must include certain notices and information. (Bus. & Prof. Code, § 7159.) The April 22 document did not include all of the required information and notices. The original contract suffers from similar defects and did not include a mandatory provision requiring prior written consent for extra work. (Ibid.) But noncompliance with section 7159 does not render an agreement unenforceable if enforcement would be equitable. (Asdourian v. Araj (1985) 38 Cal.3d 276, 289.) Enforcement is equitable where, as here, the homeowner does not require protection from an overreaching contractor and non-enforcement would result in a windfall to the homeowner. (Ibid.) The trial court did not err when it determined that equity required enforcement notwithstanding technical violations of section 7159.
Liability of Ruben Soto
Substantial evidence supports the trial court's determination that Ruben Soto was personally liable to respondent. Only Cindy Soto signed the original contract and only she initialed the April 22 document, but she testified that she "was authorized to" deal with Carmona herself and did not have to clear changes and modifications with her husband. As a co-owner of the remodeled house, Ruben Soto enjoyed the benefits of the remodel. Ruben and Cindy Soto owned the home as tenants in common, and lived there together for 17 years. Ruben lived in the home during the remodel, was aware of the work being performed, and occasionally dealt directly with Carmona. Substantial evidence supported the trial court's determination that he was personally liable on the original contract, the April 22 modification, and in quantum meruit for the value of services and materials conferred upon his home by respondent.
Pre-Judgment Interest
Appellant contends the court erred when it awarded prejudgment interest from the date of default, April 27, because the amount of damages was uncertain. (Civ. Code, § 3287, subd. (a).) Appellants argue that the sum was uncertain and points out that respondent sought $71,050 in the complaint based on the original contract and extra invoices, but recovered $90,750. Respondent concedes that prejudgment interest is not recoverable on the $2,000 awarded in quantum meruit for work from April 23 to April 27, but contends that the remaining $88,750 was reasonably ascertainable by appellants at the time of breach. We agree with respondent.
Prejudgment interest may be recovered when the defendant knows the amount owed or could have computed it from readily ascertainable information. (Cassinos v. Union Oil Co. (1993) 14 Cal.App.4th 1770, 1789.) Here, appellants could have readily ascertained from the April 22 agreement the agreed upon balance of $50,150 for previous extra work which Carmona testified he demanded on April 23, the amount of the $36,150 first phase payment which he invoiced, and the lost profit on items not completed. The $2,000 to be awarded in quantum meruit for work performed after April 22 was not readily ascertainable prejudgment interest should not have been awarded on that amount, as respondent concedes. We will modify the judgment accordingly.
DISPOSITION
The judgment is modified to reduce the award of prejudgment interest only and is otherwise affirmed. Respondent is entitled to pre-judgment interest on the sum of $88,750, per Civil Code section 3289, from April 27, 2007, through and including the date of judgment, at the rate of 10 percent per annum. Appellants shall pay respondent's costs on appeal.
We concur: GILBERT, P.J., PERREN, J.