2 Cal. App. 5th 279
Cal. Ct. App.2016Background
- RGW (prime contractor) issued a purchase order to Watson for 146 joint seal assemblies for a Caltrans bridge job; RGW typed a quote number and model (STM600) on the purchase order, and Watson countersigned.
- Watson had earlier quoted a different, larger four-cell model (BET-1200) at a much higher price; Watson also provided a lower-priced two-cell STM600 quote after RGW asked for a quote based on movement rating only.
- Caltrans rejected the two-cell (STM600) shop drawings; Watson resubmitted drawings for the four-cell BET-1200, which Caltrans approved; Watson manufactured and delivered four-cell units.
- Watson demanded payment at the higher Quote 02 price ($605,990); RGW paid only the lower purchase order price (net ~$222,958) and claimed defects (cross-complaint). The jury awarded Watson net damages; trial court denied Watson prejudgment interest as untimely.
- On appeal the court addressed: (1) whether the purchase order unambiguously incorporated Watson’s quote and Caltrans specifications (contract interpretation / parol evidence), (2) whether RGW’s actions created a change order entitling Watson to the higher price, and (3) whether prejudgment interest was required and at what rate.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether purchase order incorporated Quote 06 and is ambiguous | Watson: Quote 06 was described on the PO and incorporated; PO ambiguous about which specs govern | RGW: PO unambiguously bound Watson to conform to Caltrans specs; Quote not part of contract | Court: PO incorporated Quote 06; contract was ambiguous and parol evidence properly admitted |
| Whether RGW’s conduct required a change order entitling Watson to higher price | Watson: RGW requested movement-rating quote, later rejected STM600 drawings and directed conforming product → change under PO ¶16; entitled to Quote 02 price | RGW: No modification; PO required compliance with Caltrans specs and price in PO controls | Court: Jury reasonably found a change/order and awarded $605,990; verdict supported by substantial evidence |
| Whether prejudgment interest under Civ. Code §3287(a) was timely sought and mandatory | Watson: Complaint and postjudgment filing sought interest; amount was certain/ascertainable → mandatory interest | RGW: Request untimely and amount uncertain; contract bars interest (¶2) | Court: Watson’s postjudgment request was timely (within motion-for-new-trial period), damages were sufficiently certain, so prejudgment interest must be awarded; remand to calculate interest |
| Whether contract bars interest or allows a higher contractual interest rate | RGW: PO ¶2 (no interest) precludes prejudgment interest; zero is a legal rate | Watson: Incorporated Quote 06 provided a 1.5%/month service charge which controls | Court: Ambiguity exists; resolved as a matter of law that Quote 06 (incorporated) controls and its service charge conflicts with ¶2, but Watson forfeited claim to the higher 1.5%/month rate by not seeking it below; prejudgment interest awarded at statutory rate (10%) as requested below |
Key Cases Cited
- Pacific Gas & Electric Co. v. G.W. Thomas Drayage & Rigging Co., 69 Cal.2d 33 (parol evidence may show latent ambiguity)
- Bank of the West v. Superior Court, 2 Cal.4th 1254 (contract construed to protect objectively reasonable expectations)
- Olson v. Cory, 35 Cal.3d 390 (prejudgment interest certainty: absent when amounts turn on disputed facts)
- Leff v. Gunter, 33 Cal.3d 508 (prejudgment interest where damages closely approximated plaintiff’s claims and were calculable)
- Parsons v. Bristol Development Co., 62 Cal.2d 861 (trier of fact resolves extrinsic evidence credibility on contract meaning)
- Chesapeake Indus., Inc. v. Togova Enters., Inc., 149 Cal.App.3d 901 (test for whether defendant knew or could compute amount owed for §3287 purposes)