CERTIFIED
FOR PARTIAL PUBLICATION [*]
APPEAL
from a judgment of the Superior Court of Merced County. No.
CV002754 Brian L. McCabe, Judge.
Ralls
Gruber & Niece, John W. Ralls and W. Samuel Niece for
Defendant and Appellant.
Lax
& Stevens and Paul A. Lax; McCormick, Barstow, Sheppard,
Wayte & Carruth and Todd W. Baxter for Plaintiff and
Appellant.
OPINION
FRANSON, J.
INTRODUCTION
RGW
Construction, Inc. (RGW) was the successful low bidder on a
California Department of Transportation (Caltrans) project
for the construction of a Highway 99 overpass near Merced.
RGW entered into a contract with Watson Bowman Acme Corp.
(Watson) for the delivery of 146 sealed expansion joints for
use on the overpass. Caltrans rejected Watson’s
two-cell expansion joint but subsequently approved
Watson’s larger, four-cell expansion joint for the
project.
Watson
and RGW disagreed on the compensation owed Watson for
delivery of the four-cell expansion joints. Watson filed a
breach of contract action, contending it was entitled to an
adjustment of the price on RGW’s original purchase
order because the items ordered were changed. Watson argues
that RGW’s purchase order was ambiguous as to exactly
what was ordered because the references to Caltrans’s
specifications were not consistent with the specific
description that used the two-cell expansion joint’s
model number. Watson argues parol evidence showed it advised
RGW that the two-cell expansion joint would not be approved
by Caltrans and, despite this warning, RGW specifically
requested a quote from Watson for the less expensive two-cell
model. Thus, Watson argues that its subsequent delivery of a
four-cell expansion joint to satisfy Caltrans’s
specifications should be regarded as a change order that
entitles it to an adjustment of the contract price. RGW
disagrees, arguing that the price quoted for the two-cell
expansion joint was the applicable price because the purchase
order, which Watson signed, unambiguously stated the
expansions joints would conform to all of Caltrans’s
specifications.
The
trial court concluded that RGW’s purchase order was
ambiguous and allowed the jury to decide what the contract
meant and what price was appropriate. The jury decided in
favor of Watson, finding the amount of the subject agreement
was $605, 990. After deductions for the amounts RGW
previously paid on the contract and the amount owed RGW on
its cross-complaint, the jury awarded Watson damages of $383,
032.
On
appeal, RGW contends its purchase order unambiguously
included Watson’s warranty that the proposed expansion
joints would conform to Caltrans’s specifications and,
based on the unambiguous contract language, this court can
reverse the jury’s verdict and direct the entry of
judgment in favor of RGW. In its cross-appeal, Watson
contends the trial court erroneously denied its request for
prejudgment interest under Civil Code section 3287.
We
conclude the trial court correctly (1) determined that
RGW’s purchase order was ambiguous and (2) allowed the
jury to evaluate the conflicting parol evidence before
deciding the meaning of the contract. We further conclude
that the price adjustment owed to Watson for the change in
the order was sufficiently certain to meet the statutory
requirements for an award of prejudgment interest.
We
therefore affirm the judgment, except for its failure to
award prejudgment interest to Watson.
FACTS
Parties
Plaintiff
Watson designs, manufactures and supplies expansion joint
components to the construction industry. Watson is owned by
BASF Corporation.
Defendant
RGW is a general contractor licensed by the State of
California. About 90 percent of RGW’s work is on public
contracts. Robert Purdy, one of the principals of RGW,
testified RGW had built more bridges than he could count and
estimated the total volume at over $1.5 billion.
Caltrans
is not a party to this litigation. It is an agency of the
State of California that contracts for the construction of
highways and related structures. In 2009, Caltrans presented
to the public for competitive bidding a project located in
Merced County and referred to as the Route 99 Undercrossing
to Black Rascal Canal Bridge. Caltrans selected RGW as the
qualified firm with the lowest, complete bid for the project.
The contract between Caltrans and RGW was designated
“Contract No. 10-0K0204.”
The
trial court described the relationship among Watson, RGW and
Caltrans by telling the jury that Caltrans was the owner of
the project, RGW was the prime contractor, and Watson was a
supplier to RGW.
Bid
Documents
The
notice to bidders issued by Caltrans consisted of four layers
of documents: (1) the “STANDARD SPECIFICATIONS”
issued by Caltrans in July 1999; (2) the standard plans dated
2004; (3) the project plans approved March 9, 2009; and (4)
the bid book dated July 13, 2009. Section 51 of the Standard
Specifications addressed concrete structures and stated that
joints must be constructed in conformance with (1) the
requirements of that section’s provision addressing
expansion joints and (2) the details shown on the plans.
Pursuant to section 51 of the Standard Specifications, joints
in concrete structures shall be sealed with “joint
seals” or “joint seal assemblies.” Joint
seal assemblies have a higher movement rating (over 50 mm)
than the various types of joint seals. Joint seal assemblies
shall consist of metal or metal and elastomeric assemblies
that are anchored or cast into a recess in the concrete over
the joint. A joint sealed by an assembly must resist the
intrusion of foreign material and water and must provide
traffic with a bump free passage. Pursuant to section
51-1.12F(3)(c) of the Standard Specifications, joint seal
assemblies “shall be furnished and installed in joints
in bridge decks as shown on the plans and as specified in the
special provisions.”
On
August 28, 2009, Caltrans issued “Addendum No. 2”
for the project, which revised certain special provisions,
including the special provision in section 10-1.57 for the
joint seal assemblies. The addendum also revised the
“Bid Item List” in the bid book to include
“Item 133, ” which was described as “JOINT
SEAL ASSEMBLY (MR 101 MM - 160 MM).”[1]
Revised
section 10-1.57 of the special provisions was a page and a
half long and required the contractor to submit complete
working drawings for each joint seal assembly to the Offices
of Structure Design in conformance with the provisions of the
Standard Specifications addressing plans and working
drawings. “The Contractor shall allow
[Caltrans’s] Engineer 28 days to review the drawings
after a complete set has been received.” After final
working drawing approval, the contractor was required to
provide a set of corrected prints of all working drawings to
Caltrans’s engineer.
Watson’s
September Quotation
September
23, 2009, was bid day for the project. Watson sent RGW its
quotation number 092698-02 for 146 units described as
“JOINT SEAL ASSEMBLY (MR 101-106MM) [¶]
WaboModular BET-1200 Strip Seal” at a unit price of $3,
940, with estimated shipping and handling of $29, 750 and one
day of field service at $1, 000 (Quote 02). Quote 02’s
total quote price was $605, 990.
The
second page of Quote 02 identified items or services included
in the price and stated curb cover plates were excluded from
the price. That page also stated: “Documents utilized
to develop this quote: [¶] - plans and specs with
addenda 1-4.”
Phone
Discussions
In
early October 2009, Caltrans awarded the contract to RGW, the
low bidder. When Paul Biesinger, Watson’s sales manager
for the region that included California, learned RGW was the
successful bidder, he contacted RGW to see if Watson would be
selected to furnish joint seal assemblies for the project.
Biesinger was directed to John Pitsch, a grading and paving
estimator for RGW.
During
the telephone conversation between Pitsch and Biesinger,
Pitsch said that Watson’s quote was very high or about
twice the low number submitted. Biesinger tried to get more
information from Pitsch about who the competitors were and
what numbers they quoted, but Pitsch would not provide
specific information. Biesinger thought the other quotes
might be low because a skew angle was involved, which changes
Caltrans’s interpretation of the width of the
joint’s gap, and the competition might not have been
aware of that fact. Skew refers to the angle of the joint
seal assemblies in relation to the direction of vehicle
travel. Biesinger described skew using a comparison to the
hypotenuse of a right triangle. Measuring the gap created by
a joint using a hypotenuse (i.e., a diagonal line across the
gap) will yield a larger dimension than measuring straight
across the gap. Biesinger testified that Caltrans treats the
size of a joint as being bigger when the angle is skewed.
Biesinger stated that he had been involved in jobs with one
degree of skew and that small amount of skew was enough for
Caltrans to change the size of the joint seal system. For
this project, the skew angle was 61 degrees.[2]
Biesinger
tried to explain skew to Pitsch and raised the possibility
that the competitors were quoting a system that would be too
small. Biesinger stated that Pitsch did not seem to
understand the issue and did not want to listen to
Biesinger’s explanation, despite Biesinger’s many
past experiences with the issue.
Biesinger
testified that Pitsch requested another “quote based on
the description of the joint alone without skew angle
involved, without the spec involved.” In this context,
“description” referred to the joint’s
movement rating of 101 to 160 millimeters-roughly 4 to 6
inches. Biesinger testified that he then made a further
attempt to explain skew and that a joint based on the bid
item description would not be approved by Caltrans. Biesinger
testified that Pitsch asked specifically for a quote based on
the bid item-that is, based on the movement rating. Biesinger
testified, “I gave him what he wanted. I went to my
boss, asked for permission, explained the situation to him,
which I’ve done many times.” Biesinger’s
boss gave him permission to submit another quote.
Pitsch’s
testimony provided a different version of the telephone
conversation with Biesinger. Pitsch stated that, as a result
of the conversation, he expected that Biesinger might submit
a new quote for the joint seal assemblies. Pitsch did not
expect Watson to submit a new quote for products that would
not meet all the plans and specifications. Instead, he
thought Watson would submit a quote for a joint seal assembly
that would be accepted by Caltrans.
Watson’s
November Quotation
On
November 12, 2009, Watson sent RGW a new quotation numbered
092598-06 (Quote 06). The quote offered to furnish 146 units
of “JOINT SEAL ASSEMBLY (MR 101-106MM) [¶]
WaboModular STM600 w/ bulkhead plates” at a price of
$1, 304 per unit, with an estimated shipping and handling
charge of $15, 867 and one day of field service at $1, 000.
The first paragraph of text in quotation began:
“We
are pleased to submit this quotation for your acceptance. Any
contract arising from this quotation shall be expressly
limited to the WBA terms and conditions of sale available
upon request or by visiting our website at www.wbacorp.com.
Your acceptance of this quotation shall be deemed an
acceptance of these terms and conditions unless otherwise
expressly consented to in writing by Watson.” (Some
capitalization omitted.)
The
second page of Quote 06 tracked language in Quote 02 by
stating: “Documents utilized to develop this quote:
[¶] - plans and specs with addenda 1-4.” The last
page of Quote 06 included a signature block below a line
stating “I have read and agree to all the terms of this
agreement.” The paragraph below the signature block,
stated in part:
“[Watson]
MAKES NO REPRESENTATIONS, WARRANTIES, OR GUARANTEES OF ANY
KIND, EITHER EXPRESS OR IMPLIED INCLUDING, WITHOUT
LIMITATION, ANY WARRANTIES OF MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE, OR OTHERWISE with respect thereto,
including, but not limited to, any inaccuracy or ambiguity,
or any results to be obtained therefrom.”
Biesinger
faxed Quote 06 to Pitsch and spoke with him by telephone.
Pitsch told Biesinger he was not the one making the decisions
on who RGW would use for expansion joints and told Biesinger
to deal with David Aboujudom from that point on. Aboujudom,
an estimating manager at RGW and a registered civil engineer,
was Pitsch’s superior. When Biesinger spoke with
Aboujudom, Aboujudom had both Watson’s Quote 02 for the
four-cell system and Quote 06 for the two-cell system.
Biesinger testified, “I started over again with the
fact that I did not feel that that two-cell system would be
approved. [¶] And he was in the same mindset as John
Pitsch was. He just wanted movement rating alone. He
didn’t seem to understand the skew angle part of it
changing the size of the system.”
Biesinger
testified that he spoke with Aboujudom twice and explained
both times about the skew angle, the difference between the
two products quoted, and his expectation that Caltrans would
not approve a two-cell joint. He stated that
Aboujudom’s response was to still want the quote based
on the joint movement rating without considering the skew. We
note that Aboujudom’s approach may have been rational:
Biesinger testified that his experience on Caltrans’s
projects included situations where a contractor took a joint
that Biesinger did not believe would meet the specifications
and, nevertheless, it was accepted by Caltrans. Thus,
Aboujudom may have decided to run the two-cell model by
Caltrans on the chance it might be approved, which would have
saved RGW almost $400, 000.
Aboujudom
testified about the telephone conversations with Biesinger.
When asked if he understood that Watson’s quote would
not meet all of the plans and specifications, Aboujudom
answered, “No. Absolutely not.” Aboujudom also
testified that he did not ask Biesinger why there was a $400,
000 difference between Quote 02 and Quote 06 and that he did
not recall discussing with Biesinger the skew involved in the
design of the project.
RGW’s
Purchase Order
On
November 15, 2009, Aboujudom signed a three-page purchase
order (trial exhibit 412). Pitsch sent two original purchase
orders to Biesinger, asking him to sign, initial and return
one original while retaining the other for Watson’s
files. The purchase order stated that Watson, as seller,
agreed to deliver 146 units of “Joint Seal Assembly (MR
101-106mm)” for a unit price of $1, 304. The total
amount of the purchase order, $222, 957.68, including
shipping, handling, field service and Merced County tax of
8.25 percent. Underneath the foregoing information, the
purchase order included the following:
“Quote
Number/Price confirmation Number - 092598-06
“Shop
drawings to be approved prior to fabrication.
“Wabco
Modular STM600 w/bulkhead plates
“Price
firm for delivery up to 6 months from quote date”
(Italics in original.)
The
foregoing language, along with the line “Per Plans
and specifications with addenda 1-4, ” contained
in Quote 06, is relevant to the interpretation of the
contract formed by the parties and the dispute over what
precisely Watson agreed to provide-a particular model number
(STM600) or a product that complied with Caltrans’s
specifications.
The
first page of the purchase order contained signature blocks
at the bottom and, immediately above the signature blocks,
the following paragraph:
“Acceptance
copy must be signed and returned immediately. Seller by
signing this order, by acknowledging the order or by
delivering purchases described above, warrants that seller
has read and agrees to the terms and conditions on the face
of and attached to this order; that seller has read and is
familiar with the contract documents described above or
otherwise incorporated herein as fully as if written
herein; and that all purchases hereunder will be and are
furnished in accordance with the terms of this order, the
contract documents and seller’s samples (if any)
approved by the contractor.” (Some capitalization
omitted and italics added.)
Provisions
on the second and third page of the purchase order that are
relevant to interpreting the parties’ contract are in
paragraphs numbered 8, 16, 17, 21 and 24. The text of those
provisions is set forth in the parts of this opinion
analyzing their meaning.
On
December 18, 2009, Watson’s controller, Michael
Turchiarelli, countersigned and dated the purchase order.
Watson contends the signed purchase order was returned to RGW
with Watson’s “Terms and Conditions of
Sale” attached. Watson also contends its terms and
conditions of sale became part of the contract because the
purchase order incorporated Quote 06 and Quote 06 referred
Watson’s terms and conditions of sale and expressly
disclaimed warranties of fitness for a particular purpose and
warranties of merchantability.
Caltrans’s
Rejection of Two-Cell Model
After
the purchase order was signed, Watson prepared shop drawings
for submission to Caltrans for approval. In February 2010,
Caltrans sent RGW a letter rejecting the shop drawings for
the joint seal assembly and marking its reasons on the
returned drawings. Those reasons referred to a maximum width,
measured in the direction of vehicular traffic, of 75
millimeters and stated the submission was not adequate.
On
March 1, 2010, RGW returned the rejected drawings to Watson
with a cover letter directing Watson to revise and resubmit.
In RGW’s view, it simply was asking Watson to comply
with the contract and submit drawings for a product that
would satisfy Caltrans’s specifications. In contrast,
Watson now views the correspondence as written directions to
provide a product different from the one described in the
purchase order-in essence, a change order under paragraph 16
of the purchase order (see fn. 13, post [text of
paragraph 16]).
In
response to RGW’s direction, Watson resubmitted
drawings for the four-cell system described in Quote 02. RGW
presented the new drawings to Caltrans and the four-cell
system was approved.
In
September 2010, Watson resubmitted its Quote 02 and requested
a change to the purchase order to reflect the original price
in Quote 02 of $605, 990. Eventually Watson manufactured
four-cell joint seal assemblies for the project per the
specifications contained in Quote 2.
In May
2011, Watson again informed RGW that Watson needed a change
order before it would ship the joint seal assemblies. RGW
responded with a letter stating that it expected delivery of
the assemblies on or about June 1, 2011, at the executed
purchase order price of $207, 251. Watson did not deliver the
assemblies and, on June 2, 2011, a law firm representing RGW
sent Watson a letter stating: “If W[atson] continues to
maintain that it is entitled to additional money for
providing these joint seal assemblies, then W[atson’s]
claim should be arbitrated pursuant to Purchase Order Term
and Condition No. 16. As stated therein, W[atson]
‘shall not delay performance pending determination of
the amount of such an adjustment.’”
Watson’s
reply letter, dated June 8, 2011, stated its legal counsel
had advised shipping the assemblies based on the express
understanding the RGW would tender the amount of $222, 957.68
to its lawyer’s trust account and that amount would be
payable to Watson unconditionally upon RGW’s receipt of
the first shipment of assemblies. The letter also stated that
Watson was rescinding prior settlement offers and intended to
pursue payment in full. In accordance with its letter, Watson
shipped half of the assemblies in June 2011 and the rest in
August 2011. There were some problems with the assemblies
that resulted in project delays and repair costs, which RGW
addressed in its cross-complaint.
PROCEDURAL
HISTORY
Pleadings
In June
2012, Watson filed a complaint against RGW, Caltrans and an
unnamed surety company. In October 2012, Watson filed a first
amended complaint, which is the operative complaint in this
litigation. Watson asserted causes of action against RGW for
breach of contract and unjust enrichment.
Watson’s
breach of contract cause of action alleged that RGW revised
its order by changing the joint seal assemblies for the
project from the Model STM600 referred to in Quote 06-a quote
that RGW requested-to the Model BET 1200 that Watson
previously offered in Quote 02. Watson alleged RGW refused to
pay the price of $605, 990 quoted by Watson for the Model BET
1200 joint seal assemblies or any amount in excess of the
$207, 251 price quoted for the Model STM600 joint seal
assemblies. Watson alleged it was damaged in the amount of
$605, 990 as a result of RGW refusal to pay.
Watson’s
unjust enrichment cause of action alleged it provided 146
units of the Model BET 1200 joint seal assemblies based on
the reasonable belief that RGW had agreed to the quoted price
of $605, 990. Watson also alleged that RGW received a benefit
from and was enriched by the assemblies provided by Watson
and from withholding Watson’s compensation for the
assemblies. Watson estimated the benefit RGW received was no
less than $605, 990.
RGW’s
answer to Watson’s first amended complaint denied
liability. Also, RGW filed a cross-complaint alleging that
Watson breached its obligations under the purchase order by
delivering defective joint seal assemblies, which caused
$134, 810 in damages.
Jury
Trial
The
jury trial was held in April 2014. The special verdict
form’s sole question about Watson’s complaint
against RGW asked, “What was the amount of the subject
agreement?” The jury found the amount was $605, 990. On
RGW’s cross-complaint, the jury found that the joint
seal assemblies furnished by Watson were defective and that
RGW suffered $111, 771.08 in damages as a result of those
defects.[3] Based on these figures and the
parties’ stipulation that RGW previously paid Watson
$111, 186.60, [4] the jury determined the net amount
owed by RGW to Watson was $383.032.32.
RGW
challenged the jury’s verdict by filing a motion for
judgment notwithstanding the verdict, or alternatively for a
new trial. In June 2014, the court heard RGW’s motions
and Watson submitted a request to include prejudgment
interest of over $136, 000 in the final award.
In
August 2014, the trial court issued two written orders.
First, the court denied Watson’s request for
prejudgment interest, stating it was untimely because Watson
had not made a motion prior to the entry of judgment or,
alternatively, in the form of a motion for new trial. Second,
the court denied RGW’s motion for judgment
notwithstanding the verdict and its motion for a new trial.
Later
in August, RGW filed a notice of appeal from the judgment and
the order denying its motion for judgment notwithstanding the
verdict. Watson filed a notice of cross-appeal, challenging
the denial of prejudgment interest and protecting itself on
certain adverse evidentiary rulings made during the trial.
DISCUSSION
I.
BREACH OF CONTRACT[*]
A.
Contract Formation by Offer and Acceptance
1.
Basic Rules
Mutual
assent or consent is necessary to form a contract.
(Alexander v. Codemasters Group Limited (2002) 104
Cal.App.4th 129, 141; Civ. Code, § 1550, 1565.) The
outward manifestation of contracting parties’ mutual
consent often is accomplished through the process of offer
and acceptance. (Codemasters, supra, at p.
141; Rest.2d Contracts, § 22.) The process of offer and
acceptance was used by Watson and RGW to form the contract
involved in this appeal.
Generally,
the party receiving an offer may accept that offer and form a
contract or, alternatively, may reject the offer. (Rest.2d
Contracts, §§ 38 [rejection], 50 [acceptance].) In
certain situations, an offer is rejected and can no longer be
accepted when the other party makes a counter-offer. (Rest.2d
Contracts, § 39 [counter-offers]; 1 Witkin, Summary of
Cal. Law (10th ed. 2005) Contracts, § 163, p. 200.)
2.
Watson’s Offers
The
partially preprinted document Watson used for its quotations
included a box at the bottom of the first page with signature
lines for both the buyer and Watson. Immediately above the
buyer’s signature line, the form stated: “The
above proposal is accepted.” None of Watson’s
quotations were signed by RGW. Thus, the offers contained in
Watson’s quotations were not accepted by
RGW.[5]
3.
...