Justia Construction Law Opinion Summaries

Articles Posted in California Courts of Appeal
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Caliber Paving Company, Inc. (Caliber) sued Rexford Industrial Realty and Management, Inc. (Rexford) for intentional interference with a contract between Caliber and Steve Fodor Construction (SFC). The trial court granted Rexford’s motion for summary judgment on the ground that Rexford, although not a party to the contract, had an economic interest in it and therefore could not be liable in tort for intentional interference with contract. Caliber appealed. In a case of first impression, the Court of Appeal held that under Applied Equipment Corp. v. Litton Saudi Arabia Ltd., 7 Cal.4th 503 (1994), a defendant who is not a party to the contract or an agent of a party to the contract is a noncontracting party or stranger to the contract and, regardless whether the defendant claims a social or economic interest in the contractual relationship, may be liable in tort for intentional interference with contract. Applied Equipment did not confer immunity for intentional interference with contract on noncontracting parties having a social or economic interest in the contractual relationship from liability. The Court also concluded Caliber submitted admissible evidence sufficient to meet its burden of raising a triable issue of fact as to whether Rexford interfered with the contract between SFC and Caliber. Judgment was reversed and the matter remanded for further proceedings. View "Caliber Paving Co. v. Rexford Industrial Realty and Management" on Justia Law

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Eisenberg filed suit alleging a claim under Section 7031 of the Business and Professions Code for disgorgement against Suffolk five years after Suffolk completed construction on Eisenberg's 108-unit assisted living facility. The trial court granted Suffolk's motion for summary judgment.The Court of Appeal held that the one-year statute of limitation applies to claims for disgorgement under section 7031(b). The court also held that the discovery rule does not apply, and that a section 7031(b) claim accrues upon the completion or cessation of the performance of the act or contract at issue. In this case, Eisenberg failed to bring its section 7031(b) claim within one year after the completion or cessation of Suffolk's performance, and thus its claim is time-barred. View "Eisenberg Village of the Los Angeles Jewish Home for the Aging v. Suffolk Construction Co., Inc." on Justia Law

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After the trial court sustained without leave to amend a demurrer to a building contractor's second amended cross-complaint for breach of contract and quantum meruit based on the ground that the contractor was not licensed during part of the contract, the contractor appealed.The Court of Appeal reversed and overruled the demurrer, holding that the contractor is entitled to an evidentiary hearing on whether it substantially complied with contractor licensing law. In this case, although the contractor cannot divide a single contract into segments and claim compensation for work performed during the segment for which it was licensed, the court held that the contractor acted reasonably and in good faith prior to the license's suspension and thus the contractor is entitled to a hearing under Business and Professions Code section 7031, subd. (a). View "C.W. Johnson & Sons, Inc. v. Carpenter" on Justia Law

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In 2014, plaintiffs filed suit against defendants Shappell Industries and Toll Brothers, Inc. (the Developer) for construction defects arising out of the construction of two residences in a community called San Joaquin Hills. The complaint also named Doe defendants, including two causes of action against unnamed engineers, Does 101-125. Plaintiffs claimed that in 2017, some two years and nine months after the suit was filed, the Developer produced discovery that identified Petra Geosciences, Inc. On August 2, 2017, while the matter was still stayed pending the judicial reference proceeding, plaintiffs filed an amendment to the complaint naming Petra as Doe 101. At the same time, it filed a certificate of merit as required by section 411.35 (certificate of merit required before serving the complaint in a malpractice action against an engineer). Plaintiffs personally served Petra with the summons and complaint on August 9, 2017, three years and 38 days after the complaint was filed. The trial court dismissed plaintiffs’ complaint against defendant Petra because plaintiffs had not served Petra with a summons and complaint within three years, as required by Code of Civil Procedure section 583.210. Plaintiffs appealed the subsequent dismissal, contending the court erred in computing the three-year period. The Court of Appeal found the trial court had stayed the matter for nine months while the parties engaged in a prelitigation alternative dispute resolution procedure mandated by a contract. The court did not exclude that period from the three-year calculation. The question was, did that stay affect service, thereby extending the time to serve Petra? The Court concluded it likely did, but that remand was necessary for further findings. View "Steciw v. Petra Geosciences, Inc." on Justia Law

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Pulte, a residential developer, was sued for construction defects by the owners of 38 homes. Many subcontractors worked on the projects, under contracts requiring each subcontractor to indemnify Pulte and to name it as an additional insured on the subcontractor’s commercial general liability insurance. Pulte cross-complained against subcontractors who worked on the homes. Travelers, the insurer for four subcontractors, provided a defense. The “Blanket Additional Insured Endorsements” to Travelers’s named insureds’ policies stated that the “person or organization is only an additional insured with respect to liability caused by ‘your work’ for that additional insured.Travelers filed a complaint in intervention against the insurers for seven subcontractors (respondents), who declined to provide a defense, seeking equitable subrogation. Pulte settled the homeowners’ claims and its claims against all the subcontractors. The court concluded that it “would not be just” to find respondents jointly and severally liable for the costs Travelers sought to recover. There was considerable variation in the number of homes each respondent worked on. The homeowners’ complaints did not indicate which subcontractor worked on which home, and no evidence was presented as to whether the work of any subcontractor was defective.The court of appeal affirmed. Pulte was entitled to indemnity and defense from each respondent only with respect to its own scope of work. Travelers was "not seeking to stand in Pulte’s shoes. It is seeking to stand in a different, more advantageous" shoes. View "Carter v. Pulte Home Corp." on Justia Law

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After defending the general contractor in two construction defect actions, general liability insurer St. Paul Mercury Insurance Company (St. Paul) sought reimbursement of defense costs under an equitable subrogation theory against six subcontractors (defendants) that had worked on the underlying construction projects and whose contracts required them to defend the general contractor in suits involving allegations related to their work. After a bench trial, the court denied St. Paul’s claim. Relying on Patent Scaffolding Co. v. William Simpson Constr. Co., 256 Cal.App.2d 506, 514 (1967), the trial court concluded St. Paul had not demonstrated it was fair to shift all of the defense costs to defendants because their failure to defend the general contractor had not caused the homeowners to bring the construction defect actions. St. Paul argued this conclusion misconstrued the law governing equitable subrogation and therefore constitutes an abuse of discretion. To this, the Court of Appeal agreed: (1) a cause of action based on equitable subrogation allowed an insurer to step into the shoes of its insured and recover only what the insured would be entitled to recover from the defendants; and (2) the appropriate inquiry should have been whether defendants’ failure to defend the general contractor caused St. Paul to incur the defense costs, not whether that failure caused the underlying lawsuits. Judgment was reversed and the matter remanded to the trial court to grant judgment in St. Paul's favor and for a determination of defense costs each defendant owed. View "Pulte Home Corp. v. CBR Electric, Inc." on Justia Law

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Carmel provided design and construction work for a luxury subdivision, Monterra, in Monterey County for more than 10 years under an oral contract with property owner Mills, the principal of Monterra LLC. Carmel recorded a mechanic’s lien and a site improvement lien against certain lots in Monterra after being informed that Monterra LLC would be unable to continue paying for the work. Carmel sued several of Monterra LLC’s investors with property interests in unsold lots in the development and Monterra LLC, alleging breach of contract and foreclosure of the mechanic’s and site improvement liens. Monterra stipulated to liability before trial; the investor defendants contested liability in a lengthy bench trial.The court of appeal reversed. Carmel applied the payments it received from Monterra LLC to debt that was not subject to liens, in effect increasing the amounts of the Water Lien and Site Improvement Lien. It was improper to allocate a water infrastructure lien only to certain benefited lots; the liens could not accrue contractual interest greater than the reasonable value of the improvements. The trial court applied an incorrect rate to calculate prejudgment interest. The court remanded with instructions to remove contractual interest from both liens, reapportion the water infrastructure lien, and recalculate prejudgment interest. View "Carmel Development Co., Inc. v. Anderson" on Justia Law

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Teed promoted himself online as a real estate agent with “over 25 years of experience as a building contractor” with “an extensive background in historic restorations.” Moore believed that Teed was a general contractor. Moore toured homes that Teed had renovated and retained Teed as his agent. Moore bought a large San Francisco fixer-upper house for $4.8 million. The home was built in 1912 and was last updated in the 1950s. Moore borrowed significantly. Teed received a commission from the sale. Teed was not a licensed contractor; his team of contractors gutted large parts of the house and excavated the lot but the foundation was defective. After Moore became aware of the defects, he halted all work and engaged consultants, who concluded, despite Teed's strong resistance, that the foundation had to be torn out and replaced. Teed’s structural engineer agreed and privately apologized to Moore. Moore had paid about $265,000 of the $900,000 promised cost for Teed’s renovations. A jury awarded Moore his out-of-pocket expenses for replacing the foundation and benefit-of-the-bargain damages for the additional cost he incurred in obtaining the promised renovations. Conceding liability, Teed challenged the award. The court of appeal affirmed that benefit-of-the-bargain damages are available to fully compensate a plaintiff for all the detriment proximately caused by a fraudulent fiduciary’s actions and the award of statutory attorney fees and costs based on the jury’s special verdict finding that Teed violated the Contractors’ State License Law. View "Moore v. Teed" on Justia Law

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North Edwards Water District (the District) selected Clark Bros., Inc. (Clark) as its general or direct contractor on a public works project to build an arsenic removal water treatment plant. Clark hired subcontractor Crosno Construction (Crosno) to build and coat two steel reservoir tanks. The subcontract contained a "pay-when-paid" provision that stated Clark would pay Crosno within a reasonable time of receiving payments from the District, but that this reasonable time "in no event shall be less than the time Contractor and Subcontractor require to pursue to conclusion their legal remedies against Owner or other responsible party to obtain payment . . . ." After Crosno completed most of its work, a dispute arose between the District and Clark halting the project. As Clark sued the District, Crosno sought to recover payments owed under the public works payment bond that Clark had obtained for the project. The issue this case presented for the Court of Appeal's review involved Crosno's claim against the bond surety, Travelers Casualty and Surety Company of America (Travelers). At issue was whether the pay-when-paid provision in Crosno's subcontract precluded Crosno from recovering under the payment bond while Clark's lawsuit against the District was pending. Relying on Wm. R. Clarke Corp. v. Safeco Ins. Co., 15 Cal.4th 882 (1997), the trial court found the pay-when-paid provision here unenforceable because it affected or impaired Crosno's payment bond rights in violation of Civil Code section 8122. With the facts largely undisputed, the court granted Crosno's motion for summary judgment and entered judgment in its favor for principal due plus prejudgment interest. Travelers argued the trial court misconstrued Wm. R. Clarke and erred in failing to enforce the pay-when-paid provision against the bond claim. After carefully considering the parties' arguments, the Court of Appeal agreed with the trial court's analysis and affirmed. View "Crosno Construction, Inc. v. Travelers Casualty etc." on Justia Law

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After Phelps was awarded a public works contract by the CDCR, another bidder successfully challenged the award, obtaining a ruling in a San Diego trial court that Phelps's bid was "non-responsive as a matter of law" due to its inclusion of "non-waivable mathematical/typographical errors." Phelps then filed suit against CDCR, seeking to recover the costs it expended on the project. The trial court held that the San Diego trial court's ruling was itself the result of a defect in the competitive bidding process caused solely by CDCR, and entered judgment in favor of Phelps.The Court of Appeal reversed, holding that judgment on the pleadings should have been granted. The court held that the language in Public Contract Code section 5110 provides that the parties to a challenged public contract may enter into that contract pending final resolution of the challenge, but if the challenge is resolved by invalidation because the public entity was at fault, the contractor may recover. Applying section 5110 in this case, the court held that the contract was invalidated for a material error in Phelps's bid, not for any defect in the competitive bidding process, much less a defect caused solely by CDCR. Therefore, section 5110 could not provide a basis for recovery. The court held that application of the doctrine of collateral estoppel would produce the same result, and rejected Phelps's late-raised alternative ground. However, the court affirmed the trial court's denial of recovery on CDCR's cross-complaint for disgorgement. View "Hensel Phelps Construction Co. v. Department of Corrections and Rehabilitation" on Justia Law