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Bradley Construction, Inc v. Clark & Sullivan Builders

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA THIRD APPELLATE DISTRICT (Sacramento)


October 11, 2011

BRADLEY CONSTRUCTION, INC., PLAINTIFF AND APPELLANT,
v.
CLARK & SULLIVAN BUILDERS, INC., DEFENDANT AND RESPONDENT.

(Super. Ct. No. 06AS02256)

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

Bradley Construction v. Calrk & Sullivan Builders

CA3

NOT TO BE PUBLISHED

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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

Defendant Clark & Sullivan Builders, Inc. (Clark) was the general contractor on the construction of a new transportation maintenance and operations relocation facility for a school district. Plaintiff Bradley Construction, Inc. (Bradley) entered into a subcontract with Clark to provide site preparation, clearing, and earthwork for the project.

Bradley filed a complaint for breach of contract and other equitable claims seeking additional compensation under the subcontract. Clark filed a motion for summary judgment, arguing Bradley's claims were time barred. The trial court granted the motion. Bradley appeals, arguing the subcontract provision relied on by the court is ambiguous and unreasonable. We shall affirm the judgment.

FACTUAL AND PROCEDURAL BACKGROUND

Clark served as general contractor on the construction of a transportation maintenance and operations relocation facility for the Tahoe Truckee Unified School District (District). Bradley was one of Clark's subcontractors, responsible for site preparation, clearing, and earthwork.

The Bradley subcontract provided for a lump sum payment of $258,400. Modifications of the subcontract were through approved written change orders, sometimes called "back charges." The base contract plus net total approved change orders totaled $309,341.07.

Sections 2 and 3 of the subcontract provided: "Section 2. Scope of Work. . . . Subcontractor also acknowledges that it has carefully reviewed and examined this contract with all of its contract documents, and all other documents directly or indirectly relating to this contract; and that any and all prior ambiguities and discrepancies have previously been clarified and corrected.

"Section 3. Contract Price and Payment. The Contractor agrees to pay the Subcontractor for furnishing the materials and performing the work as specified herein the sum of Two Hundred Fifty-Eight Thousand Four Hundred Dollars ($258,400.00). . . . Partial payments will be made to the Subcontractor in an amount equal to 90 percent of the value of work and materials incorporated in the construction as estimated by the Contractor . . . less the aggregate of previous payments, but such partial payments shall not be due or paid to the Subcontractor until the 15th of the month or three (3) days after the Contractor receives payment for such work and materials from the Owner, whichever event occurs later. Subcontractor waives all right of action until said monies are received by the Contractor. Final payment shall be due when work described in the Contract is complete and final payment for said work is received by Contractor from Owner. The acceptance by Subcontractor of final payment shall constitute a release by the Subcontractor in favor of Contractor and its surety of all claims against Contractor and its surety arising under or by virtue of this Subcontract other than those claims excepted with the written consent of the Contractor. . . ."

Section 12 of the subcontract states: "Legal Forum. Any dispute or claim arising out of this contract, or from a breach of this contract, and which is not resolved by the terms and provisions of this contract, shall be submitted to the judicial court within the county and state of Contractor's designated principal place of business for decision. . . . Any claim or action by the Subcontractor must be commenced within two years of the date of the cause of action accrued, but in no event later than one year after substantial performance of this Contract, and in no event after final payment to the Subcontractor. . . ." (Italics added.)

Bradley finished work on the project on or before September 1, 2003. On September 2, 2003, a certificate of substantial completion for the project was issued. The District, on December 12, 2003, recorded the notice of completion for the project.

Clark made numerous requests to Bradley for backup documents for Bradley's invoices that exceeded the amount authorized under the subcontract. These requests spanned the time period of June 2003 through February 2004.

On February 17, 2004, Clark notified Bradley that the project manager would not recommend additional money without the requested backup documentation. On February 27, 2004, Clark informed Bradley that the project was being closed out and that the required backup documentation still had not been received. In the letter, Clark stated: "Bradley Construction must provide the information immediately or all opportunity will be lost."

Clark again wrote Bradley on March 8, 2004, stating that the District had denied consideration of all outstanding potential change orders on behalf of Bradley, and "[n]o further change orders will be forthcoming on behalf of Bradley Construction." The letter also stated "[t]he above listed project will close the Subcontract Agreement and prepare for Final Payment to Bradley Construction."

On June 4, 2004, Clark again notified Bradley that the project was to be closed out immediately and final payment of $23,012.94 would "constitute a Final Agreement for monies due Bradley Construction from Clark and Sullivan . . . no further amounts will be forthcoming to Bradley Construction." Clark, on June 9, 2004, submitted its final pay request to the District. On June 24, 2004, the District made its final payment to Clark.

On June 29, 2004, Clark issued its final change order for Bradley, which back-charged Bradley for a direct payment by Clark to a Bradley supplier in the amount of $3,780. Clark, on July 15, 2004, wrote a final check to Bradley for $19,232.94. On August 18, 2004, Bradley requested an additional $263,523.74 in compensation from Clark.

On June 2, 2006, Bradley filed a complaint for breach of contract and other equitable claims seeking additional compensation under the subcontract in the amount of "not less than $295,317.00." Clark filed a motion for summary judgment, arguing Bradley's claims were time barred and the equitable claims were superseded by the existence of a written contract.

Following a hearing, the trial court granted summary judgment on all causes of action. The court stated: "It is also undisputed that substantial performance by Plaintiff was completed on September 1, 2003, when Plaintiff left the project. [Citation.] The final payment was made by Defendant C&S to Plaintiff Bradley on July 15, 2004. [Citation.] The limitations period expired on July 15, 2004 according to the terms of the Subcontract. The complaint was not filed until June 2, 2006. [Citation.] Defendant therefore met its burden of proof that Plaintiff filed its complaint on June 2, 2006, more than one year after the completion of its Subcontract performance on September 1, 2003, and after it received its final payment on July 15, 2004."

Following entry of the judgment of dismissal, Bradley filed a timely notice of appeal.

DISCUSSION I

A trial court properly grants summary judgment where no triable issue of material fact exists and the moving party is entitled to judgment as a matter of law. We review the trial court's decision de novo, considering all the evidence the parties offered in connection with the motion, except that which the court properly excluded, and the uncontradicted inferences the evidence reasonably supports. In the trial court, once a defendant has shown that one or more elements on the plaintiff's cause of action cannot be established, the burden shifts to the plaintiff to show the existence of a triable issue. To meet that burden, the plaintiff may not rely upon the mere allegations or denials in his pleadings but instead must set forth the specific facts showing a triable issue of fact exists as to that cause of action. (Merrill v. Navegar, Inc. (2001) 26 Cal.4th 465, 476-477.)

In reviewing a grant of summary judgment, we may consider only those facts that were before the trial court, disregarding any new allegations made for the first time on appeal. Unless facts are factually presented, fully developed, and argued to the trial court, potential theories that could theoretically create a triable issue of fact may not be raised for the first time on appeal. (Ashdown v. Ameron Internat. Corp. (2000) 83 Cal.App.4th 868, 874.)

II

The subcontract between Bradley and Clark was for the lump sum of $258,400. Various change orders increased the costs of work to a total of $309,341.07. Clark paid that amount. However, Bradley claims that, at Clark's request, it performed services beyond the scope of the original subcontract and filed suit to recover an additional $295,317 in compensation for work performed beyond the scope of the approved change orders.

Section 4 of the subcontract governing changes provides the contractor may "make changes in, additions to, or omissions from the work to be performed and materials to be furnished under this Subcontract." Subdivision (c) of section 4 governs the price of the changed work if the parties disagree on the price: "The Subcontractor shall in no event be entitled to, nor shall it receive any compensation or allowance for any change order in an amount greater than that which the Contractor actually receives from the principal, less a reasonable deduction for work performed by the Contractor, as well as the Contractor's overhead and profit."

Section 6 covers claims for additional compensation or extension of time and states in part: "It is expressly understood and agreed in connection with the determination of such claims or disputes that . . . as to any and all materials or services furnished or agreed to be furnished by the Subcontractor in connection with this project, Contractor shall never be liable to Subcontractor to any greater extent than Owner is liable to Contractor." Under the terms of the subcontract, Clark's liability to Bradley is linked to the District's liability. Clark cannot pay Bradley until Clark receives payment from the District. Final payment is due when the subcontract is complete and final payment is received from the District. The subcontract places control over the final payment in the District.

Section 3 sets forth the subcontract price and payment schedule. It states, in part: "The acceptance by Subcontractor of final payment shall constitute a release by the Subcontractor in favor of Contractor and its surety of all claims against Contractor and its surety arising under or by virtue of this Subcontract other than those claims excepted with the written consent of the Contractor." This provision renders acceptance of payment a waiver of any claim unless the claim is excepted with the consent of the District.

Section 12 discusses the legal forum for disputes and claims arising under the subcontract. Under section 12 of the contract, "Any claim or action by the Subcontractor must be commenced within two years of the date of the cause of action accrued, but in no event later than one year after substantial performance of this Contract, and in no event after final payment to the Subcontractor. . . ." Section 12 cuts off liability, not based on the passage of a prescribed length of time, but based on when the District has determined the final amount it will pay the general contractor for the work performed, and when, in turn, the general pays the subcontractor.

III

In challenging the court's interpretation of section 12, Bradley argues the provision is ambiguous because it includes three possible dates for limitations of actions, any ambiguity should be held against the drafter, and the provision imposed an unreasonable hardship on Bradley. In addition, Bradley claims the trial court never addressed the ambiguity of section 12.

However, the trial court directly addressed the question of ambiguity: "Plaintiff contends that the limitations provision of the subcontract is ambiguous and unreasonable and therefore unenforceable. Plaintiff's tortured construction of the provision is not persuasive. Plaintiff's only evidence on this issue is that the subcontract was not negotiated or reviewed in its entirety. [Citation.] However, this evidence is irrelevant because failure to read a contract is not a defense to enforcing a valid contract. Therefore . . . plaintiff offered no evidence to create a triable issue of material fact regarding this issue."

Whether language in a contract is ambiguous presents a question of law. (Suarez v. Life Ins. Co. of North America (1988) 206 Cal.App.3d 1396, 1402.) Here, section 12 requires disputes arising out of the subcontract to be brought within two years of accrual of the cause of action, but in no event after final payment. This does not, as Bradley claims, create three confusing possible limitations periods.

Instead, section 12 provides three benchmarks for calculating the time period within which an action may be brought. First, no cause of action may be brought after acceptance of the final payment. Second, prior to final payment, a cause of action must be brought within one year after substantial performance of the contract. Finally, assuming final payment has not been made and accepted, or substantial compliance has occurred, a cause of action must be brought within two years of accrual of the cause of action.

Here, Bradley completed substantial performance on September 1, 2003, when it left the project. Clark made the final payment to Bradley, and Bradley accepted the final payment, on July 15, 2004. Bradley does not dispute Clark's assertion that Bradley failed to present any evidence that it did not accept Clark's final payment. Under the terms of the subcontract, when Bradley accepted the final payment, this act cut off Bradley's right to bring a cause of action on the subcontract. Therefore, Bradley's complaint, filed June 2, 2006, was untimely under the terms of the subcontract.

In addition, section 2 states, "Subcontractor also acknowledges that it has carefully reviewed and examined this contract with all of its contract documents . . . and that any and all prior ambiguities and discrepancies have previously been clarified and corrected."

We find no ambiguity in the language of section 12. Section 12 unequivocally states no claim on the subcontract can be brought after final payment is made and accepted.*fn1

IV

Bradley argues the subcontract's provision that allows no claims after final payment is made by the contractor and accepted by the subcontractor is unreasonable. We disagree.

In construing a contract, we must avoid an interpretation that will make the contract unusual, extraordinary, harsh, unjust, inequitable, or that would result in absurdity. (Hertzka & Knowles v. Salter (1970) 6 Cal.App.3d 325, 335.) Our interpretation must be fair and reasonable and not lead to absurd conclusions. (Transamerica Ins. Co. v. Sayble (1987) 193 Cal.App.3d 1562, 1566.) While seeking a reasonable interpretation and one that effectuates the parties' purposes as discerned from the entire agreement, we cannot rewrite a contract to avoid difficulty or hardship. (Wyandotte Orchards, Inc. v. Oroville-Wyandotte Irrigation Dist. (1975) 49 Cal.App.3d 981, 986-987.)

The subcontract unambiguously states acceptance of the final payment ends the subcontractor's ability to challenge the amount. In addition, the subcontract bluntly states that acceptance by the subcontractor of final payment shall constitute a release by the subcontractor in favor of the contractor of all claims arising under the subcontract.

Bradley acknowledges that on June 4, 2004, Clark informed Bradley it would send a final payment of $23,012.94, which was subsequently reduced by $3,780.00 for a payment made by Clark directly to one of Bradley's suppliers. Bradley contends this rendered the June 4, 2004, notification of final payment "premature--as negotiations and adjustments were still be[ing] made."

The June 4, 2004, letter states Clark will send Bradley a final payment and that this "payment will constitute a Final Agreement for monies due Bradley Construction from Clark and Sullivan Builders, Inc., no further amounts will be forthcoming to Bradley Construction." The June 29, 2004, change order simply reduced the amount of the final payment; it did not contemplate or discuss further negotiations.

Bradley argues the final payment limit on claims "is patently unreasonable and flies in the face of reality because it would not allow a party a reasonable time to file suit for payment even if payment was sent in an amount much less than that owed. For instance, [Clark] could have sent Bradley a check for $5.00 and called it a 'final payment' and by doing so would have foreclosed Bradley's right to sue even if Bradley contends that it was owed $500,000.00!" However, if Bradley disputed the amount of the final payment, it could refuse final payment and preserve its ability to bring a claim against Clark for money it believed it was owed.

Even if we found the final payment provision unreasonable, Bradley's filing of its complaint on June 2, 2006, almost three years after the project's completion, runs afoul of the one-year provision of section 12. Under this provision, Bradley had one year to file claims following the date of substantial completion. Here, Clark substantially completed the project when it finished work on September 1, 2003, and a certificate of substantial completion for the project was issued. Under either provision of section 12, Bradley's claims were untimely.

DISPOSITION

The judgment is affirmed. Clark shall recover costs on appeal. (Cal. Rules of Court, rule 8.278(a)(1), (2).)

We concur: NICHOLSON , J. BUTZ , J.


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