SBI Builders v. Hartford Fire Insurance CA6
H045715
| Cal. Ct. App. | Oct 22, 2021Background
- SBI Builders worked on the Third Street Apartments (affordable housing) and alleged it had a $2,168,216 concrete podium subcontract; the written subcontract was signed June 27, 2013 but Exhibit A (scope of work) was not attached.
- Disputes arose about the subcontract scope, prevailing wages, and unpaid pay applications; PWB/3rd Street paid some but withheld portions and later took back portions of work.
- Largo Concrete (a lower-tier subcontractor) sued SBI for nonpayment; SBI settled Largo’s claims for $96,346 before trial.
- After a bench trial the court found the podium subcontract unenforceable for uncertainty (no agreed scope), awarded SBI $489,026 as the reasonable value of services (quantum meruit), plus $96,346 for the Largo settlement, granted foreclosure on Hartford’s lien bond for $489,026, and denied prejudgment interest, statutory prompt-payment penalties, and SBI’s attorney fees.
- On appeal the court affirmed: it held the subcontract unenforceable (substantial evidence supports lack of agreed scope), upheld denial of prejudgment interest and prompt-payment penalties, denied contract-based attorney fees, but sustained the $96,346 award on equitable indemnity grounds.
Issues
| Issue | SBI's Argument | 3rd St/PWB's Argument | Held |
|---|---|---|---|
| Enforceability of concrete podium subcontract (scope uncertainty) | Subcontract is enforceable; parties’ conduct and pay applications show mutual intent and sufficient certainty | Subcontract is unenforceable because Exhibit A was omitted and parties never agreed on scope; substantial evidence supports that | Subcontract unenforceable for uncertainty; substantial-evidence review applies and supports trial court finding |
| Prejudgment interest (Civ. Code §3287(b)) | Entitled to interest on quantum meruit award and lien-recovery despite contract being unenforceable | Trial court’s denial was reasonable given uncertainty about costs and duplication with lien recovery | Denial affirmed; no abuse of discretion—trial court reasonably balanced fairness and uncertainty |
| Statutory prompt-payment penalties (Bus. & Prof. Code §7108.5, §§8814/8818) | PWB had no good-faith basis to withhold payments; penalties should apply | Withholding was justified by a good-faith dispute over scope and amounts; no enforceable subcontract | Denial affirmed; substantial evidence supports objective good-faith dispute and withholding was excused |
| Attorney fees under contract and Cal. Civ. Proc. §1717 | SBI (prevailing party) should recover fees under subcontract fee clause/§1717 because it defeated PWB/3rd St. contract claims and prevailed overall | No contract existed, so no contractual fee basis; no prevailing party on contract claims for §1717 | Denial affirmed; trial court did not abuse discretion—no prevailing party on the contract for §1717 purposes |
| Award of $96,346 (settlement of Largo) — 3rd St/PWB appeal | SBI: award proper as mitigation/equitable indemnity or part of quantum meruit recovery | 3rd St/PWB: settlement did not directly benefit them nor were they requested to reimburse; mitigation theory unavailable absent contract | Affirmed: award sustained on equitable indemnity theory—3rd St/PWB were equitably responsible for SBI’s settlement expense because their failure to pay caused SBI’s liability |
Key Cases Cited
- Denham v. Superior Court, 2 Cal.3d 557 (Cal. 1970) (presumption and appellate deference to support a trial court judgment)
- Bustamante v. Intuit, Inc., 141 Cal.App.4th 199 (Cal. Ct. App. 2006) (contract terms must be sufficiently certain to determine obligations and breach)
- De Anza Enterprises v. Johnson, 104 Cal.App.4th 1307 (Cal. Ct. App. 2002) (substantial-evidence review when extrinsic evidence resolves contract ambiguity)
- Bohman v. Berg, 54 Cal.2d 787 (Cal. 1960) (subsequent performance can cure indefiniteness where parties clearly understood the agreement)
- Patel v. Liebermensch, 45 Cal.4th 344 (Cal. 2008) (courts prefer to uphold contracts if essential terms are ascertainable)
- George v. Double-D Foods, Inc., 155 Cal.App.3d 36 (Cal. Ct. App. 1984) (quantum meruit may be treated as a contract cause for prejudgment interest purposes)
- United Riggers & Erectors, Inc. v. Coast Iron & Steel Co., 4 Cal.5th 1082 (Cal. 2018) (prompt-payment statutes and that timely payment may be excused by a good-faith dispute)
- Scott Co. v. Blount, Inc., 20 Cal.4th 1103 (Cal. 1999) (trial court discretion under §1717 to identify prevailing party on contract claims)
- Western Steamship Lines, Inc. v. San Pedro Peninsula Hospital, 8 Cal.4th 100 (Cal. 1994) (equitable indemnity requires actual monetary loss by settlement or judgment)