JMR Construction Corp. v. Environmental Assessment & Remediation Management, Inc.
198 Cal. Rptr. 3d 47
Cal. Ct. App.2015Background
- JMR Construction was prime contractor for a federal public-works dental clinic; EAR was subcontractor on separate electrical and plumbing subcontracts; SureTec issued performance bonds for EAR under each subcontract.
- Project completion was delayed (beneficial occupancy May 14, 2008) and JMR withheld approximately $121,893 in retention from EAR.
- JMR sued EAR and SureTec for breach of the two subcontracts and foreclosure on the performance bonds; EAR cross‑complained seeking withheld retention.
- After trial the court entered judgment for JMR of $315,631 (net after offsets), rejected EAR’s cross‑complaint, and reserved attorney fees; later the court awarded expert witness fees under CCP § 998 (order later challenged).
- On appeal the court (published part) affirmed use of the Eichleay formula for home‑office overhead, affirmed use of a modified total‑cost method for framing/drywall disruption damages, and held SureTec liable on the bonds without a prior formal default notice; (unpublished) reversed the award of expert fees under § 998 and remanded for further post‑judgment proceedings.
Issues
| Issue | Plaintiff's Argument (JMR) | Defendant's Argument (EAR / SureTec) | Held |
|---|---|---|---|
| Sufficiency of evidence that EAR caused delays | JMR relied on project managers, superintendent, scheduling expert, and documents showing EAR caused concurrent critical‑path delay | EAR argued its testimony showed JMR caused delays and that JMR’s proof was insufficient | Substantial evidence supported trial court: JMR’s witnesses and expert testimony credible; EAR’s contrary testimony rejected by trial court |
| Use of Eichleay formula for home‑office overhead | JMR: Eichleay is appropriate to allocate unabsorbed overhead where owner granted time but not compensable time due to concurrent subcontractor delay | EAR: California has no published adoption; Eichleay typically applies against government, not subcontractor; elements not proven (standby/unable to take other work) | Court held Eichleay is a legally permissible method in California contracts; elements (including inability to take other work) had substantial evidence |
| Use of modified total‑cost method for framing/drywall disruption | JMR: Modified total cost appropriate for the discrete framing/drywall phase; bid reasonable; actual costs reasonable; JMR not responsible for added costs | EAR: Total cost disfavored; JMR failed Amelco elements; coding miscoding errors undermined damages | Court held modified total cost permissible here; trial court reasonably found Amelco elements satisfied and rejected EAR’s alternative explanations |
| Liability of SureTec under performance bonds without formal notice of default | JMR: No written default declaration to surety not required; bonds and law do not make notice a condition precedent | SureTec: Obligee must declare principal in default and notify surety; default notice is implied condition precedent | Court held bonds and subcontracts lack clear language making notice to surety a condition precedent; civil code and suretyship principles mean surety liable upon principal’s default without prior default notice |
Key Cases Cited
- Crawford v. Southern Pacific Co., 3 Cal.2d 427 (Cal. 1935) (standard for substantial evidence review)
- Altmayer v. Johnson, 79 F.3d 1129 (Fed. Cir. 1996) (discussion of Eichleay and home‑office overhead)
- E.R. Mitchell Const. Co. v. Danzig, 175 F.3d 1369 (Fed. Cir. 1999) (Eichleay as exclusive method in federal circuit precedent)
- Wickham Contracting Co. v. Fischer, 12 F.3d 1574 (Fed. Cir. 1994) (steps of Eichleay calculation)
- Amelco Electric v. City of Thousand Oaks, 27 Cal.4th 228 (Cal. 2002) (four‑part test for total‑cost method)
- Cates Construction, Inc. v. Talbot Partners, 21 Cal.4th 28 (Cal. 1999) (performance bond interpretation and coextensive liability of surety with principal)
- Pacific Allied v. Century Steel Products, 162 Cal.App.2d 70 (Cal. Ct. App. 1958) (contract interpretation re: implied conditions precedent and forfeiture)