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P&D Consultants, Inc v. City of Carlsbad

December 16, 2010

P&D CONSULTANTS, INC., PLAINTIFF, CROSS-DEFENDANT AND APPELLANT,
v.
CITY OF CARLSBAD, DEFENDANT, CROSS-COMPLAINANT AND APPELLANT.



(Super. Ct. No. GIN052850) APPEALS from a judgment of the Superior Court of San Diego County, Michael B. Orfield, Judge. Reversed in part and affirmed in part.

The opinion of the court was delivered by: Mcconnell, P. J.

opn. on rehearing

CERTIFIED FOR PUBLICATION

This breach of contract action arises from a written agreement between P&D Consultants, Inc. (P&D) and the City of Carlsbad (the City) for services pertaining to a redesign of the City's municipal golf course. In its appeal, the City contends that as a matter of law, the jury's award of $109,093.81 to P&D for extra work cannot stand because there was no written change order, in violation of provisions of the contract and public contract law (Gov. Code, § 40602). In conjunction with this contention, the City asserts the court erred by instructing the jury that the contract could be modified orally or through the parties' conduct. Alternatively, the City challenges the sufficiency of the evidence to support the award.

We reverse the judgment on the first amended complaint (hereafter complaint) based on the contract's requirement of a written change order. Unlike private contracts, public contracts requiring written change orders cannot be modified orally or through the parties' conduct. Thus, even if P&D's evidence pertaining to the oral authorizations of a city employee for extra work is fully credited, P&D cannot prevail. The court erred by submitting the matter to the jury; it should have granted the City's motion for non-suit. Because the contract issue resolves the matter, we need not address Government Code section 40602*fn1 or the sufficiency of the evidence.

Additionally, as to its cross-complaint against P&D for defective and incomplete work, the City contends the court erred by excluding certain testimony of a nonretained expert, and a retained expert. To any extent there was error, however, the City has not satisfied its burden of showing any miscarriage of justice to warrant reversal.

In its appeal, P&D concedes we should affirm the judgment of $6,614.69 against it on the City's cross-complaint for defective or incomplete work. Insofar as P&D's complaint is concerned, it contends the court erred by granting non-suit on the complaint's causes of action for quantum meruit and breach of implied contract, by granting a directed verdict on the cause of action for violation of prompt payment statutes, and by denying it leave to amend to allege causes of action for breach of the implied covenant of good faith and fair dealing and "breach of the duty to negotiate in good faith." P&D asserts that if we reverse the judgment on the complaint, we must remand the matter to the trial court for a new trial to include these claims. We conclude remand on the complaint is not warranted under any theory.

FACTUAL AND PROCEDURAL BACKGROUND

A. Contract Documents

On April 9, 2004, the parties entered into a written contract under which P&D was to provide civil engineering and other services for the redesign of the City's municipal golf course project to satisfy numerous conditions the California Coastal Commission imposed. The contract defines the scope of work and specifies a contract price of $556,745. The contract also provides that no amendments, modifications, or waivers of contract terms will be allowed absent a written agreement signed by both parties. Further, the contract includes an integration clause that states the contract and any written amendments thereto embody the parties' entire agreement.

At the City's initiation, the parties entered into written "Amendment Nos. 1 through 4," which increased the contract price by a total of $63,525.50 for extra work. In each instance, P&D submitted a proposed change order with a fixed price to the City's project manager, John Cahill, and he provided the City with the information for its preparation of an amendment. The City typically took several weeks to execute an amendment, and Cahill frequently authorized P&D to begin extra work before it received an executed amendment.

Written "Amendment No. 5" arose from the parties' negotiations. P&D's project manager, Charles Moore, raised concerns about work he believed was beyond the scope of work delineated in the written contract documents. In early 2005, Cahill notified Moore that the City had "finally reached resolution on what we expect to be the final changes for the golf course per the Coastal Commission." Cahill asked Moore to "prepare a complete and final projected scope of work and scope of cost to finish out all of the activities to complete the plans and specs." P&D sought an additional $209,956, which included $69,073 for extra work already performed and $139,833 for the cost "to complete services for final plan submittal and City approval."

Cahill objected to the proposal on the grounds the amount was excessive, it included charges for work already specified in the written contract documents, and it exceeded the maximum sum the City had set for completion of the project. In an e-mail to Moore, Cahill wrote: "[W]e have limits for both our purchase order authority and this proposed Amendment No. 5. We are now at those limits. No further costs will be authorized nor should be to finish these design packages." Cahill indicated to Moore that "the breakdown of costs still needs to get below $100k [$100,000]."

As finally approved, Amendment No. 5 authorized work on a time and materials basis for a maximum of $99,810. As was customary, at Cahill's direction P&D began the work several weeks before the City executed the amendment.

Amendment Nos. 1 through 5 included this language: "All other provisions of the Agreement, as may have been amended from time to time, will remain in full force and effect." Additionally, Amendment No. 5 states: "It is the intent of the Parties that Amendment No. 5 shall provide all final and complete services by Contractor to City required to produce the final, approved, signed, and complete sets of plans, specifications, and estimates required by City to bid the Project. City will pay Contractor for all work associated with those services described in Exhibit 'A' on a time and material basis not-to-exceed . . . $99,810. Contractor will provide City, on a monthly basis, copies of invoices sufficiently detailed to include hours performed, hourly rates, and related activities and costs for approval by City. No additional compensation shall be requested by Contractor nor shall be approved by City related to this scope of work."

B. Complaint and Cross-complaint

P&D sought yet more pay from the City, ostensibly for work not included in Amendment No. 5. When the City refused to pay, P&D sued it for breach of written contract, breach of implied contract, quantum meruit and violation of prompt payment statutes (Pub. Contract Code, §§ 7107, 20104.50; Civ. Code, § 3320), seeking to recover $109,093.31. The City cross-complained against P&D for breach of contract on the ground of deficient and incomplete work.

C. Trial

P&D's trial theory was that the contract's written change order requirement was modified by Cahill's oral authorization of the extra work for which it sought payment, and by the parties' conduct in handling Amendment Nos. 1 through 5. The material evidence on the procedure followed for the written amendments was not in conflict. Since we decide this case on a legal issue, we only summarize the conflicting evidence as to whether Cahill orally authorized the extra work at issue.

Cahill testified as follows. After P&D submitted its proposal for Amendment No. 5 to the City, P&D began seeking payment for extra work it claimed was beyond the scope of that amendment. Moore threatened that if the City did not pay the additional amount, P&D would discontinue work. In Cahill's view, the work was not extra, but rather was included in Amendment No. 5. He believed Amendment No. 5 "was a complete, final projection of all costs and work by P&D and their sub-consultants to complete the project. [¶] That's what was negotiated." Cahill nonetheless told Moore, "[I]f you feel strongly . . . that you've got additional work outside of the contract and the amendments, put it together with the proper back-up and the City will evaluate it." Cahill denied preparing a sixth amendment, and he did not recall whether he told Moore he would do so.

Moore testified as follows. Cahill told him the City was running out of funds for the project, and when Moore objected to P&D continuing with extra work, he told Moore to keep working and that he would "take care of it." Per Cahill's request he provided the City with spreadsheets showing P&D's extra work costs, and Cahill told Moore he was in the process of preparing a sixth amendment to the contract. He phoned Cahill to check on the status of the amendment, and Cahill told him it had been prepared and "was in accounting." Moore phoned the City's accounting department and was told "there was no such item."

After the presentation of P&D's evidence, the City moved for non-suit on the ground that as a matter of law P&D could not recover for extra work without a written change order. The court granted the motion on the causes of action for quantum meruit and implied contract, but denied the motion on the causes of action for breach of contract and violation of prompt payment statutes. The court determined that while public contracting law typically ...


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