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Douglas E. Barnhart, Inc v. Cmc Fabricators

November 20, 2012

DOUGLAS E. BARNHART, INC., PLAINTIFF AND RESPONDENT,
v.
CMC FABRICATORS, INC., DEFENDANT AND APPELLANT.



(Super. Ct. No. 37-2007-00075648-CU-BC-CTL) APPEAL from an order of the Superior Court of San Diego County, Judith F. Hayes, Judge.

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

CERTIFIED FOR PUBLICATION

Reversed.

In this appeal from an order denying a motion for an award of attorney fees, we must decide whether a defendant who defeats a claim for breach of contract but loses a related claim for promissory estoppel is entitled to recover attorney fees when the alleged contract provides the prevailing party in any dispute between the parties shall recover such fees. We hold such a defendant is entitled to recover the attorney fees reasonably incurred in defeating the breach of contract claim. We therefore reverse the trial court's order and remand for further proceedings.

I.

BACKGROUND

In preparing a bid for construction of a municipal library, Douglas E Barnhart, Inc. (Barnhart), a general contractor, solicited bids from subcontractors for certain decorative metal work. CMC Fabricators, Inc. (CMC) submitted a bid for the metal work dated November 5, 2005. CMC's bid provided it would "remain in force for thirty days from the above date unless accepted by [Barnhart] or withdrawn by [CMC]," and contained a space for Barnhart to indicate acceptance by signature. Although Barnhart never signed CMC's bid, it used CMC's price in preparing its own bid for the library project.

On December 14, 2005, Barnhart sent CMC a letter of intent that included price and scope-of-work terms that differed from those of CMC's bid. Six days later, Barnhart sent CMC a proposed subcontract containing these altered terms. CMC did not sign Barnhart's proposed subcontract and, months later, sent its own proposed subcontract to Barnhart with terms consistent with those of CMC's original bid. Barnhart never signed CMC's proposed subcontract and, with the municipality's permission, substituted a new subcontractor to do the decorative metal work for the library.

Barnhart sued CMC on theories of breach of contract and promissory estoppel for $66,110, the amount in excess of CMC's bid that it had to pay the substitute subcontractor for the decorative metal work. In its breach of contract cause of action, Barnhart alleged that CMC offered to perform the decorative metal work for the price specified in its November 5, 2005 bid; that Barnhart accepted the offer; that a contract resulted; and that CMC refused to perform the work. In the promissory estoppel cause of action, Barnhart alleged that CMC submitted the November 5, 2005 bid to perform the decorative metal work; that Barnhart foreseeably and reasonably relied on the bid in obligating itself to construct the municipal library; that CMC refused to honor the bid; and that injustice could be avoided only by enforcing the bid. Barnhart attached a copy of CMC's bid to the complaint and incorporated its terms by reference into both the breach of contract and the promissory estoppel claims. Barnhart also asserted a cause of action to recover $7,500 against CMC's contractor's bond under Business and Professions Code section 7071.5, subdivision (c), based on CMC's "willful failure to prosecute work with reasonable diligence." In its complaint, Barnhart requested damages, interest and costs.

CMC filed an answer asserting a general denial and several affirmative defenses. It requested a judgment for costs and attorney fees.

After a bench trial, the court found Barnhart and CMC never entered into a contract and on that basis rejected Barnhart's breach of contract and contractor's bond claims. The court also found "Barnhart relied to its detriment on CMC's proposal, submitted its bid to the [municipality], and suffered actual damages compensable under the principles of promissory estoppel." The court awarded Barnhart $21,111 on its promissory estoppel claim and entered judgment accordingly.

CMC subsequently moved for an award of $150,484.77 in attorney fees based on the following provision of its November 5, 2005 bid: "In the event of any dispute that arise[s] between the parties, the prevailing party shall recover, in addition to any other damages, its attorney's fees and costs incurred in litigating or otherwise settling or resolving such dispute." Relying on Civil Code section 1717 and interpretive case law, CMC argued that because it defeated Barnhart's breach of contract claim, it was " 'the party prevailing on the contract' " and was therefore entitled to recover attorney fees as a matter of law.

Barnhart opposed CMC's attorney fees motion. Barnhart argued CMC was not entitled to any attorney fees because (1) CMC did not prove the contract Barnhart sued on -- "an oral or implied contract apart from [CMC's bid]" -- contained an attorney fees provision; and (2) Barnhart, having been awarded monetary relief on its promissory estoppel claim, was the party prevailing on the contract. Barnhart also argued the amount of fees CMC claimed was unreasonable.

The trial court denied CMC's motion for an award of attorney fees. In its order, the court stated Barnhart had prevailed on its promissory estoppel claim "and therefore received the net monetary award and achieved its objecti[ve]s in litigation." Citing a portion of CMC's briefing in which CMC argued attorney fees should not be apportioned because in defending against all the elements of Barnhart's breach of contract claim it necessarily defended against all the elements of its promissory estoppel claim, the court stated the parties had agreed "a cause of action for promissory estoppel is essentially a cause of action for breach of contract."*fn1 The court further stated Barnhart's promissory estoppel claim "was based on [CMC's b]id and therefore[] was an action that involved the contractual terms of the [b]id." In accordance with these statements, the court ruled Barnhart was the party prevailing on the contract, and CMC was not entitled to recover any attorney fees.

II.

DISCUSSION

CMC seeks reversal of the trial court's order denying its request for attorney fees. CMC asserts a right to an award of attorney fees under the express terms of its decorative metal work bid, which CMC claims Barnhart sought to enforce as a contract. According to CMC, "its unqualified 'win' against . . . Barnhart on Barnhart's . . . cause of action for breach of a written contract, the only contract cause of action between the parties," makes CMC "the party prevailing on the contract" entitled to fees as a matter of law. (§ 1717, subd. (a); undesignated section references are to the Civil Code.)

Barnhart counters that the trial court's order should be affirmed. Barnhart contends its breach of contract claim was based not on CMC's bid or any other "specific written document," but on "proposed form subcontracts" "the terms of which were uncertain due to ongoing disputes between Barnhart and CMC." "Without a defined, express written contract," the argument continues, there is no basis for an attorney fees award. Alternatively, Barnhart argues it was the "party prevailing on the contract" (§ 1717, subd. (a)) because it "prevailed on its promissory estoppel claim, which was contractual in nature, and therefore recovered a greater relief in the action on the contract."

This appeal thus requires us to resolve two issues: (1) whether there is a contractual basis for an award of attorney fees; and, if so, (2) whether CMC or Barnhart was "the party prevailing on the contract" (ยง ...


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