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R & R Pipeline, Inc. v. Bond Safeguard Insurance Co.

California Court of Appeal, Second District, Fifth Division

January 27, 2014

R & R PIPELINE, INC., Plaintiff and Appellant,
v.
BOND SAFEGUARD INSURANCE COMPANY, Defendant and Respondent.

APPEAL from a judgment of the Superior Court of Los Angeles County, Stephen Pfahler, Judge. Reversed. (Los Angeles County Super. Ct. No. PC043627).

Page 439

COUNSEL

[167 Cal.Rptr.3d 281] Hathaway, Perrett, Webster, Powers, Chrisman & Gutierrez, Alejandro P. Gutierrez, Ventura; Miller, Starr, & Regalia and William Dennis Pahland, Jr., for Plaintiff and Appellant.

Katten, Muchin, & Rosenman, Stuart M. Richter and Noah R. Balch, Los Angeles, for Defendant and Respondent.

OPINION

KRIEGLER, J.

Page 440

Plaintiff R & R Pipeline, Inc. (R & R), appeals from the judgment after the order granting summary judgment in favor of defendant Bond Safeguard Insurance Company (Bond Safeguard) in this action to enforce a labor and material bond issued in connection with a subdivision project to develop a golf course and residences. R & R contends the trial court erred in applying the statute of limitations applicable to enforcement of labor and material bonds on " public work" projects. We agree with R & R that the work is performed under its contract with the developer was a " private work" of improvement, even though the work was required by a subdivision agreement with a public entity. The four-year statute of limitations to enforce written contracts applies to R & R's action to enforce the bonds under the circumstances of this case. The trial court erred in applying a shorter statute of limitations applicable to public works of improvement, and the order granting summary judgment must therefore be reversed.

BACKGROUND

R & R filed the operative first amended complaint (FAC) against various defendants on July 25, 2011. The FAC alleged that in May 2008, R & R entered into a written contract with Los Valles Company, LP (Los Valles) [1] for installation of a storm drain, sanitary sewer, and related improvements upon land in Castaic being developed by Los Valles as a golf course and

Page 441

residential community. R & R performed on the contract, but Los Valles breached the contract by failing to pay the sums due, resulting in damages to R & R of $1,085,858.64 under the contract and an additional $150,000 in restocking charges on materials ordered.

In the sixth and only cause of action against Bond Safeguard, R & R alleged Bond Safeguard executed labor and material bonds in connection with the improvements. The bonds provide that Bond Safeguard will pay for any work or labor performed by R & R under its contract with Los Valles, creating a right of action to recover on the bonds. Bond Safeguard filed an answer asserting 28 affirmative defenses, including a bar under the statutes of limitations set forth in Code of Civil Procedure sections 337-339 and former Civil Code sections 3249, 3239, and 3240.[2]

[167 Cal.Rptr.3d 282] Bond Safeguard's Motion for Summary Judgment

Bond Safeguard moved for summary judgment as to the sixth cause of action. Bond Safeguard argued the labor and material bonds it issued were for a public work of improvement and therefore subject to the notice requirements of former section 3247. R & R failed to provide notice of its work to the County of Los Angeles (the County) pursuant to former section 3098 and failed to provide the required special notice to Bond Safeguard under former section 3235. Bond Safeguard argued that as a result of these defects in notice, R & R is not entitled to recover on the bonds. Bond Safeguard relied heavily on the decision in California Paving & Grading Co., Inc. v. Lincoln General Ins. Co. (2012) 206 Cal.App.4th 36, 141 Cal.Rptr.3d 405 ( California Paving ). Bond Safeguard asked the trial court to focus on whether R & R had properly provided notice under the statutory scheme applicable to public work of improvement.

In its separate statement of undisputed facts, Bond Safeguard set forth the following. R & R was the contractor hired by the developer, Los Valles, to install a storm drain, sanitary sewers, and other improvements for a project consisting of a golf course, 209 residential lots, and public subdivision improvements. Los Valles entered into a Public Works Multiple Agreement (the Multiple Agreement) with the County in December 2006, which required Los Valles to complete subdivision improvements on the project, including the work contracted for with R & R, in order to receive a final map. Bond

Page 442

Safeguard issued labor and material bonds covering work on the public subdivision improvements. The County was the beneficiary under the bonds and Los Valles was the principal. The work was to be completed by Los Valles to the satisfaction of the County.

R & R's claims are for work performed up to, but not beyond, October 1, 2008. R & R first notified Bond Safeguard in writing of its claims on May 17, 2011. R & R did not give written notice of its work to the County. The FAC, naming Bond Safeguard as a defendant for the first time in the litigation, was filed on July 25, 2011. Copies of relevant documents were submitted in conjunction with the motion for summary judgment.

R & R's Opposition to Summary Judgment

R & R opposed summary judgment on the ground its contract with Los Valles was for private work, and therefore the statute of limitations for claims on public work was not applicable, and the four-year statute of limitations on written contracts applied. The Multiple Agreement between the County and Los Valles was not a contract for public work, as contract is defined in former sections 3088 and 3100, because the County was not an owner of the property being developed and Los Valles is not an original contractor. Under former section 3100, the County did not contract for any work, but instead it required the work as a condition of approval of a project on private land. California Paving, supra,206 Cal.App.4th 36, 141 Cal.Rptr.3d 405 was distinguishable because it involved an agreement to pave public streets. The Los Valles development was a private work of improvement, which at some point contemplated dedication of sewers ...


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