Opinion
A138573 A139717
01-29-2018
WATERS CONTRACTING, INC., Plaintiff and Appellant, v. POINT ARENA JOINT UNION HIGH SCHOOL DISTRICT et al., Defendants and Respondents.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Napa County Super. Ct. No. 26-53657)
Plaintiff Waters Contracting, Inc. (Waters) appeals from the trial court's judgment in favor of defendant Point Arena Joint Union High School District (the District) (Case No. A138573) and from a post-judgment order awarding attorney fees to the District (Case No. A139717). The judgment followed the trial court's orders granting summary adjudication and later summary judgment in favor of the District. We conclude that the construction contract between the District and Waters was entered in disregard of the District's prescribed method of contracting and, thus, is void, that Waters is not otherwise entitled to further compensation for work it performed on the underlying construction project, and that the attorney fees award was proper. Accordingly, we affirm both the judgment and the post-judgment attorney fees order.
On the court's own motion, we hereby consolidate the two appeals for the purposes of decision.
FACTUAL AND PROCEDURAL BACKGROUND
The instant dispute arises out of the construction of a new auditorium at Point Arena High School, a public high school in the District. The construction project was subject to both competitive bidding requirements and plan approval by Department of General Services. (Pub. Contract Code, § 20111, subd. (b); Ed. Code, § 17297.) The District, in consultation with its architect, Aspen Architects, Inc. (Aspen), put the project out for bid based on architectural plans dated September 19, 2005, and April 28, 2005, and structural plans dated September 19, 2005, and August 30, 2005. The plans were marked "FOR PLAN REVIEW ONLY."
On January 12, 2006, the bidding process was completed and the bids were opened. Waters, which had submitted the lowest bid of $1,910,000, was awarded the construction project. Significantly, however, the District and Waters did not enter the actual construction contract for several more months. In the interim, several important developments relating to the construction project occurred. First, revised architectural plans dated April 24, 2006, and March 19, 2006, were prepared. Second, the construction project was split into two phases or increments, the first consisting of site work and utilities (phase one) and the second consisting of the auditorium building structure and related mechanical, plumbing, and electrical systems (phase two). In a letter from Waters's president to Aspen dated May 5, 2006, Waters allocated $245,300 of the original bid of $1,910,000 to phase one and the balance of $1,664,700 to phase two. Third, in the same letter, which was entitled "Revised Cost Proposal for Point Arena High School," Waters set forth "our revised costs breakdown for the Point Arena High School Auditorium project, resulting from both value engineering and the recent DSA [(Department of the State Architect)] changes." The letter enumerated the two revisions, both of which related to phase two, as follows: (1) a cost decrease of $73,100 described as "Value Engineering (telescoping seating remains)" and (2) a cost increase of $275,609 described as "DSA Changes." As set forth in the letter, these two revisions increased the total project cost from the original bid of $1,910,000 to $2,112,609 and the total amount allocated to phase two from the original bid allocation of $1,664,700 to $1,867,309. Finally, on May 9, 2006, the phase one plans were approved by the Department of General Services, Division of the State Architect (DSA).
As a result of an apparent mathematical error, it appears that the revised totals are overstated by $10.
On May 23, 2006, the District and Waters entered into a general construction contract, executed by the District's superintendent and Waters's president. Notwithstanding the intervening developments just described, Section 3 of the contract stated: "CONTRACT PRICE: The District agrees to pay and [Waters] agrees to accept, in full payment for the work above agreed to be done, the sum of $245,300 for Phase 1 and $1,664,700 for Phase 2 (if authorized by the District) subject to additions and deductions as provided in the Contract Documents. All other Alternate Propositions are rejected by District, and are not included in this Contract. Said contract price amount may be altered consistent with Section 2(b) herein."
The total of these two sums is $1,910,000, the amount of Waters's original bid.
Section 2(b), in turn, provided: "It is understood and agreed to between the parties that the Project will be divided into two phases. Phase 1 consists of the Project's site work ('Phase 1') and is fully described in Exhibit A attached hereto and incorporated herein by reference. Phase 2 consists of all remaining work necessary to complete the Project ('Phase 2') and is fully described in Exhibit B attached hereto and incorporated herein by reference. Notwithstanding anything contained herein, Phase 2 is contingent on the District receiving DSA approval of the Phase 2 Plans and the District issuing a Notice to Proceed for Phase 2. In the event DSA approval for Phase 2 is not received by June 30, 2006, the District shall be under no obligation to authorize Phase 2 and [Waters] shall complete any work authorized by the District for Phase 1 and shall not be entitled to any compensation, damages, or any other amount related to Phase 2."
Under section 2(a) of the contract, Waters agreed "to furnish all tools, equipment, apparatus, facilities, labor, transportation, and material necessary to perform and complete in a good and workmanlike manner, the Auditorium (the 'Project') as called for, and in the manner designated in, and in strict conformity with, the Drawings and Specifications prepared by Aspen Street Architects and adopted by the District, which the Drawings and Specifications are entitled, respectively, [enumerated list] (dated 4/24/06) (the 'Phase 1 Plans') and [second enumerated list] (date pending DSA approval) and which Drawings and Specifications dated 09/19/05 are identified by the signatures of the parties to this Contract." The two strikethroughs reflect handwritten deletions and the double underscore reflects a handwritten addition to the typed text of the contract. These handwritten changes were initialed by Waters's president.
About a month and a half later, on July 5, 2006, the DSA approved the phase two plans. Almost immediately thereafter, on July 24, 2006, Waters proposed two change orders, the first reflecting a $73,100 cost decrease described as "Value Engineering changes" and the second reflecting a $311,516.85 cost increase described as "DSA changes." The two proposed change orders were signed by the District's superintendent on July 26, 2006 and by Waters's president on August 4, 2006, increasing the total contract amount from the original bid of $1,910,000 to $2,148,416.85. Construction on the project proceeded under architectural plans dated April 24, 2006 and March 19, 2006, and structural plans dated July 5, 2006. Over the course of the project, the District paid Waters a total of $1,719,941.94 for its work.
Eventually, a dispute arose between the parties, and on January 15, 2010, Waters filed a complaint against the District seeking, among other things, an additional $1,800,000 in damages. On April 9, 2010, the District answered the complaint and filed its own cross-complaint against Waters, Aspen, and David Carpenter & Associates (Carpenter), the structural engineer for the project. On August 9, 2010, pursuant to Code of Civil Procedure section 428.70, cross-defendant Carpenter filed a special answer denying the allegations of Waters's complaint. On April 19, 2012, the trial court granted motions for summary adjudication filed by the District and Carpenter, ruling that the underlying construction contract was void based on the parties' failure to comply with competitive bidding requirements.
Following the grant of summary adjudication, the trial court entered judgment in favor of Carpenter and against Waters. Notwithstanding this judgment, and the lack of a timely appeal therefrom, Carpenter continued to participate, without apparent objection, in the subsequent proceedings below. Carpenter also filed a respondent's brief in this court in Case No. A138573.
Following the grant of summary adjudication, Waters filed amended complaints against the District. As pertinent here, the amended complaints allege that even if the underlying construction contract is void, under Public Contract Code section 5110 (section 5110), Waters "is entitled to recover its costs plus the costs of any and all approved change orders which sum exceeds $1,600,000.00." On February 5, 2013, the trial court granted motions for summary judgment filed by the District and Carpenter, ruling Waters was not entitled to relief under section 5110. Waters timely appeals from the resulting judgment in favor of the District (Case No. A138573). Subsequently, on July 24, 2013, the trial court granted the District's motion for attorney fees and ordered Waters to pay $113,216 in attorney fees to the District, a ruling from which Waters also timely appeals (Case No. A139717).
DISCUSSION
The Summary Adjudication Ruling
Before turning to the merits of the trial court's summary adjudication ruling, we briefly address two procedural issues raised by the parties. First, Waters summarily asserts that the ruling must be set aside because the trial court failed to rule on its evidentiary objections. While Waters correctly recites the general principle that evidentiary objections are preserved notwithstanding a trial court's failure to rule on them (Reid v. Google, Inc. (2010) 50 Cal.4th 512, 517), the fact that objections are preserved for appeal does not excuse a party from its obligation to address them in its appellate briefing. Having failed to offer any argument whatsoever on either the nature or the merits of its objections below, Waters has forfeited the issue on appeal. (Salas v. Department of Transportation (2011) 198 Cal.App.4th 1058, 1074.) Second, Carpenter maintains that when, following the summary adjudication ruling on the breach of contract related causes of action, Waters filed amended complaints substituting in their place a cause of action under section 5110, Waters "in effect admitted that the order granting summary adjudication was correct and that the contract had violated competitive bidding." Carpenter is mistaken. (Burch v. Superior Court (2014) 223 Cal.App.4th 1411, 1416-1417 [plaintiff need not reallege in an amended complaint causes of action to which summary adjudication has been granted in order to challenge the summary adjudication ruling on appeal], disapproved on another ground in McMillin Albany LLC v. Superior Court (Jan. 18, 2018, S229762) ___ Cal.5th___.)
Having resolved these two procedural issues, we turn to the merits of the trial court's summary adjudication ruling. It is undisputed that the District's construction project was subject to competitive bidding requirements, which required that the project be awarded to "the lowest responsible bidder." (Pub. Contract Code, § 20111, subd. (b).) Moreover, with one exception not relevant here, "before letting any contract for any construction or alteration of any school building, the written approval of the plans, as to safety of design and construction, by the Department of General Services, shall be first had and obtained." (Ed. Code, § 17297.) The process employed in the present matter ran squarely afoul of these mandatory competitive bidding and DSA approval requirements.
At the outset, the District solicited bids based on architectural and structural plans clearly marked "FOR PLAN REVIEW ONLY." At the conclusion of the bidding process, on January 12, 2006, many months before the DSA's approval of what later became the phase one and phase two plans, the District awarded the construction project to Waters, which had submitted the lowest bid of $1,910,000 based on the draft plans. Subsequently, as reflected in the May 5, 2006 letter from Waters's president to Aspen, after the project had been awarded to Waters but before the contract had been executed, Waters advised the District that its initial bid would have to be increased by $275,609 as a result of "the recent DSA changes."
Despite this knowledge, in their May 23, 2006 written contract, the parties purported to disavow the "Alternate Propositions" reflected in the letter, going so far as to cross out a reference to the more recent April 24, 2006 architectural plans and replace it with a handwritten reference to the earlier September 19, 2005 bid set of plans. They then proceeded to execute a contract in the original bid amount of $1,910,000 knowing full well—and even reciting—that the DSA had not yet approved the phase two plans and further that, if it ultimately did so, significant changes to the bid set of plans and a corresponding increase to the original bid would inevitably be required. Then, almost immediately after the DSA approved the phase two plans, Waters proposed and the parties executed what they denominated a "Change Order" reflecting a cost increase of $311,516.85 attributed to "DSA changes," almost $36,000 more than the earlier estimate of $275,609 for "DSA changes" reflected in Waters's May 5, 2006 letter. Finally, the construction project proceeded not under the bid set of plans but rather under architectural plans dated March 19, 2006 and April 24, 2006 (the date crossed out in the parties' written contract) and structural plans dated July 5, 2006.
There is simply no authority, statutory or otherwise, for the District to have bid the construction project based on unapproved plans and subsequently to have awarded the project to Waters, the lowest bidder on those unapproved plans. Nor is Waters the innocent victim of the District it portrays itself as in its appellate briefing. Rather, by the time the parties executed their written contract in the original bid amount of $1,910,000, both the District and Waters knew that significant increases in the stated contract price would be required when and if the phase two plans were ultimately approved, deliberately failed to account for these anticipated cost increases in the written contract, and later attempted to address them by way of a "change" order, thereby circumventing the self-evident need to send the entire project out for a proper round of competitive bidding based on the final plans approved by the DSA.
Where, as here, a public contract is entered in disregard of a public entity's prescribed method of contracting, that contract is unenforceable. (Amelco Electric v. City of Thousand Oaks (2002) 27 Cal.4th 228, 235.) "In general, under long-standing California law, if a public contract is declared void, a contractor may not be paid for work performed under that contract." (Id. at p. 234.) " 'Persons dealing with the public agency are presumed to know the law with respect to the requirement of competitive bidding and act at their peril.' " (Ibid.) Where " 'the contract is absolutely void as being in excess of the agency's power, the contractor acts at his peril, and he cannot recover payment for the work performed.' " (Ibid.) Based on this well-established case law and the undisputed facts set forth above, the trial court correctly concluded that the parties' construction contract was void and, therefore, properly granted summary adjudication on that issue.
Waters's argument that the District, having accepted the benefits of its work on the construction project, is estopped from claiming the contract is void fails for the same reason. "[W]hen a statute limits a [public entity's] power to make certain contracts to a certain prescribed method and impliedly prohibits any other method, a contract that does not conform to the prescribed method is void and no implied liability can arise for benefits received by the [public entity] or for damages caused by it to the other party to the void contract." (South Bay Senior Housing Corp. v. City of Hawthorne (1997) 56 Cal.App.4th 1231, 1235, italics omitted.)
Contrary to Waters's assertion, nothing in Public Contract Code section 20118.4, subdivision (a)(2), warrants a different conclusion. That section provides that after a competitively-bid construction contract has been properly awarded, a school district may authorize changes or alterations "without the formality of securing bids" where the agreed upon cost does not exceed "[t]en percent of the original contract price." (Pub. Contract Code, § 20118.4, subd. (a)(2).) As a preliminary matter, the amount of the change order necessitated by "DSA changes" ($311,516.85) exceeded 10 percent of the original contract price ($1,910,000). On a more fundamental level, for the reasons we have explained, the provision authorizing certain change orders is inapplicable because the parties entered the underlying contract itself in deliberate disregard of the District's prescribed method of contracting. To allow a public entity to bid and award a public construction project based on unapproved plans and later, in direct coordination with "the lowest responsible bidder," to increase the so-called "competitive bid" at will based on significant "changes" necessitated as a result of the ensuing approval process would make a mockery of the stringent and unambiguous competitive bidding and approval requirements.
Waters's contention that the "original contract price" should include the price of another contract between the District and an unrelated third party, thereby depressing the percentage of work attributable to the change order, is baseless.
The Summary Judgment Ruling
Waters contends that even if the construction contract itself is void, it is nevertheless entitled to recover the costs it incurred on the project pursuant to section 5110. That section provides: "(a) When a project for the construction, alteration, repair, or improvement of any structure, building, or road, or other improvement of any kind is competitively bid and any intended or actual award of the contract is challenged, the contract may be entered into pending final decision of the challenge, subject to the requirements of this section. If the contract is later determined to be invalid due to a defect or defects in the competitive bidding process caused solely by the public entity, the contractor who entered into the contract with the public entity shall be entitled to be paid the reasonable cost, specifically excluding profit, of the labor, equipment, materials, and services furnished by the contractor prior to the date of the determination that the contract is invalid if [several enumerated] conditions are met." (§ 5110.)
The parties dispute whether relief under this section is limited to situations in which a contract is challenged by an unsuccessful bidder and later determined to be invalid. We need not address the hypothetical scope of the statute in this case because, as set forth above, it is abundantly clear that the defects in the competitive bidding process were not "caused solely by the public entity" and, therefore, that Waters is not entitled to recovery under the statute.
The Attorney Fees Award
Waters's original, first amended, second amended, and third amended complaints each contained a cause of action for breach of Public Contract Code section 7107 (section 7107). The section 7107 cause of action in each complaint incorporated the allegations of the breach of contract cause of action and further alleged that "[t]he District has failed and refused to timely pay Waters' retention." The section 7107 and the breach of contract causes of action were addressed and disposed of together in the trial court's April 19, 2012 summary adjudication ruling on the ground that the underlying construction contract was void. The trial court subsequently granted the District's motion for attorney fees and ordered Waters to pay $113,216 in attorney fees to the District, the prevailing party on the section 7107 cause of action. Waters challenges the attorney fees award on three different bases. We address each of them in turn.
Section 7107, subdivision (f), provides: "In the event that retention payments are not made within the time periods required by this section, the public entity or original contractor withholding the unpaid amounts shall be subject to a charge of 2 percent per month on the improperly withheld amount, in lieu of any interest otherwise due. Additionally, in any action for the collection of funds wrongfully withheld, the prevailing party shall be entitled to attorney's fees and costs."
First, Waters contends that where causes of action for which attorney fees may be awarded are joined with other causes of action, there must be apportionment between the fee and non-fee causes of action. While Waters correctly states the general rule, it is subject to the important caveat that "[a]ttorney's 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 (1979) 25 Cal.3d 124, 129-130.) "[A]llocation is not required when the issues are 'so interrelated that it would have been impossible to separate them into claims for which attorney fees are properly awarded and claims for which they are not.' " (Thompson Pacific Construction, Inc. v. City of Sunnyvale (2007) 155 Cal.App.4th 525, 555.) "Where fees are authorized for some causes of action in a complaint but not for others, allocation is a matter within the trial court's discretion." (Ibid.)
In this case, both the section 7107 cause of action and the breach of contract cause of action incorporated therein turned on the validity of the underlying construction contract. Thus, the trial court acted well within its discretion in concluding it was "impracticable or impossible to apportion work done in defending the cause of action for breach of Public Contract Code section 7107 from the other causes of action with the exception of the cause of action for misrepresentation." (Thompson Pacific Construction, Inc. v. City of Sunnyvale, supra, 155 Cal.App.4th at p. 556 [no abuse of discretion in denying further apportionment where the same proof supported public entity's defense to both section 7107 and breach of contract causes of action].)
Waters's repeated assertion that the trial court failed to engage in any apportionment and improperly awarded attorney fees for work performed after it granted summary adjudication as to the section 7107 cause of action is directly belied by the record. In fact, the trial court requested supplemental briefing on the issue of apportionment and, thereafter, expressly disallowed attorney fees related to the misrepresentation cause of action and all attorney fees incurred after the date of its April 19, 2012 summary adjudication ruling, with the sole exception of fees incurred on the attorney fees motion itself.
Second, in a scant two sentences, without any argument or citation to legal authority, Waters maintains that the District is estopped from recovering attorney fees under section 7107 because it was the District's conduct that led to the invalidation of the underlying construction contract. As set forth above, both parties were active participants in the conduct that violated competitive bidding and approval requirements. Moreover, the language of section 7107, subdivision (f) is mandatory, directing that "the prevailing party shall be entitled to attorney's fees and costs." Estoppel is not a defense to an award of attorney fees under the statute. (See East West Bank v. Rio School Dist. (2015) 235 Cal.App.4th 742, 752 [doctrine of unclean hands is not a defense to a section 7107 claim].)
Finally, Waters argues that the amount of attorney fees sought was excessive and should have been reduced. Again, this argument is based on the mistaken premise that the trial awarded the District nearly $60,000 in attorney fees for work performed after it granted summary adjudication as to the section 7107 cause of action. As noted, the trial court expressly disallowed all attorney fees incurred after the date of its summary adjudication ruling, except for fees incurred on the attorney fees motion itself. Nor does the mere fact that the attorney fees awarded is only slightly less than the amount of the retained funds at issue demonstrate that the trial court abused its discretion in setting the amount of the attorney fees award. The District's potential liability under the section 7107 cause of action was not limited to the amount of the retained funds but included exposure to both statutory penalties of two percent per month plus attorney fees. (See Thompson Pacific Construction, Inc. v. City of Sunnyvale, supra, 155 Cal.App.4th at pp. 557-558 [rejecting argument that an award of $377,799 in attorney fees under section 7107 to defend a $58,994 claim was excessive].)
DISPOSITION
The judgment and the post-judgment attorney fees order are affirmed with costs to the District.
/s/_________
McGuiness, Acting, P.J. We concur: /s/_________
Pollak, J. /s/_________
Siggins, J.
Retired Presiding Justice of the Court of Appeal, First Appellate District, Division Three, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.