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Watson Bowman Acme Corp. v. RGW Construction, Inc.

California Court of Appeals, Fifth District

August 9, 2016

WATSON BOWMAN ACME CORPORATION, Plaintiff and Appellant,
v.
RGW CONSTRUCTION, INC., Defendant and Appellant.

         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. ...


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