Amelco Electric v. City of Thousand Oaks

• Decision Date: 04 February 2002
• Docket Number: No. S091069.,S091069.
• Citation: 27 Cal.4th 228,115 Cal.Rptr.2d 900,38 P.3d 1120
• Court: California Supreme Court
• Parties: AMELCO ELECTRIC, Plaintiff and Respondent, v. CITY OF THOUSAND OAKS, Defendant and Appellant.

115 Cal.Rptr.2d 900

27 Cal.4th 228

38 P.3d 1120

AMELCO ELECTRIC, Plaintiff and Respondent, v. CITY OF THOUSAND OAKS, Defendant and Appellant.

No. S091069.

Supreme Court of California.

February 4, 2002.

Rehearing Denied March 13, 2002.

Mark G. Sellers, City Attorney; Negele & Associates, James R. Negele, Los Angeles; Lascher & Lascher and Wendy C. Lascher, Ventura, for Defendant and Appellant.

Parker, Milliken, Clark, O'Hara & Samuelian, Brown, Winfield & Canzoneri, Nowland C. Hong, Michael M. Mullins and Michael S. Simon, Los Angeles, for the League of California Cities as Amicus Curiae, on behalf of Defendant and Appellant.

Watt, Tieder, Hoffar & Fitzgerald, Michael G. Long, Gregory J. Dukellis, Irvine, and Dwight C. Hirsh, Newport Beach, for Plaintiff and Respondent.

Kamine, Steiner & Ungerer, Kamine Ungerer, Bernard S. Kamine, Los Angeles, Matt Steiner, Cerritos, and Joseph M. Rossini, for Engineering Contractors' Association, as Amicus Curiae on behalf of Plaintiff and Respondent.

Monteleone & McCrory, Thomas P. McGuire, Santa Ana, and Joseph C. Malpasuto, Glendale, for Southern California Contractors Association, as Amicus Curiae on behalf of Plaintiff and Respondent.

Crowell & Moring, Donald E. Bradley, Irvine; Rogers Joseph O'Donnell & Phillips, Neil H. O'Donnell and Aaron P. Silberman, San Francisco, for the Associated General Contractors of California, as Amicus Curiae on behalf of Plaintiff and Respondent.

Perkins & Miltner, San Diego, and Timothy E. Salter, Modesto, for the National Electrical Contractors Association, District Nine, as Amicus Curiae on behalf of Plaintiff and Respondent.

Case, Ibrahim & Clauss, Brian S. Case, F. Albert Ibrahim, Costa Mesa, and Charles W. Losness, Irvine, for Associations of Specialty Contractors, as Amici Curiae on behalf of Plaintiff and Respondent.

BROWN, J.

In this case we determine whether the abandonment theory of liability applies against a public agency, and whether plaintiff public works contractor, which sued for breach or abandonment of the public works contract, is entitled to compensation under a total cost method of measuring damages. The jury found the contract was breached and abandoned, and awarded total cost damages. The Court of Appeal affirmed. We conclude the theory of abandonment does not apply against a public entity, and that Amelco Electric failed to adduce sufficient evidence to warrant instructing the jury on total cost damages for breach of contract. We therefore reverse the judgment of the Court of Appeal.

I. FACTUAL And PROCEDURAL BACKGROUND

In 1992, defendant City of Thousand Oaks (City) solicited bids for electrical work to be performed in the construction of the Civic Arts Plaza, a project including a civic center or office building, a dual-purpose 400-seat council chamber and forum theater, an 1,800-seat civic auditorium or performing arts theater, and an outside area (the project). Instead of a general contractor, the project was managed by Lehrer McGovern Bovis, Inc. (LMB), and the City solicited bids for the various prime contracts. City received five electrical work bids. Amelco Electric (Amelco), one of the largest electrical contractors in the United States, bid $6,158,378, and was awarded the contract. All five bids came within 10 percent of each other and the three lowest bids were within 3 percent of each other.

During the two-year construction process, City furnished 1,018 sequentially numbered sketches to the various contractors to clarify or change the original contract drawings, or to respond to requests for information. The vast majority of the changes were to one building, the civic center or office building, and to the outside lighting. Of the sketches issued, 248 affected the electrical cost. Amelco requested 221 change orders, and City and Amelco agreed upon 32 change orders encompassing these change order requests. As a result of these change orders, City paid Amelco $1,009,728 above the contract price, an increase of nearly 17 percent.

Amelco claimed at trial that the project involved an unusually high number of sketches that were difficult to work with. Amelco further claimed that scheduling the various contractors' work became more difficult as a result of the changes. Amelco testified it was at times required to delay or accelerate particular tasks and to shift workers among tasks to accommodate work by other trades. While Amelco maintained daily records of its work activities, it was unable to produce documentation of instances in which its performance of a work directive or change order was delayed or interfered with by LMB's actions, and for which it was not compensated. The general foreman, the person responsible for actually recording the information, was given a hypothetical regarding recordkeeping practices: "[I]f you came to this courtroom to work today, .. . and the wall was moved, that would be something you would put in your daily log?" "No." "You wouldn't note that?" "I wouldn't put it down on my daily log."

Amelco's vice-president asserted the sheer number of changes made it "impossible" to keep track of the impact any one change had on the project or on Amelco, likening the effect to "death by 1,000 cuts." Amelco conceded it was inefficient in performing the work, but assigned responsibility for virtually all of that inefficiency to LMB.

In May 1993, Amelco wrote to LMB concerning "Work Directive 48, addendum No. 1," which Amelco asserted improperly shifted engineering documentation responsibilities to Amelco. Amelco also expressed concern that the electrical drawings being issued did not identify all revisions, or contain all prior revisions, and gave examples of how these omissions interfered with its performance. Amelco requested a change order and $203,759 in additional funds to hire a drafter to update the drawings, a foreperson, and a project engineer. LMB refused additional funds on the ground that these tasks were included in the original contract price. Amelco claimed at trial that it accepted this decision, did not hire any additional personnel to do the work, and signed a change order for zero dollars and zero additional time, because LMB verbally promised that "things are going to get better."

On July 29, 1994, over a year later, and approximately two months before the project was completed, Amelco sent a letter requesting a second change order be issued for Work Directive No. 48. Amelco asserted the executed change order did "not include any field productive labor impact or related problems," and that "[t]he price for this work will follow in the near future."

In January 1995, Amelco submitted a $1.7 million total cost claim for costs allegedly resulting from the noncaptured costs of the change orders. The testimony was in conflict whether LMB had requested that Amelco submit such a claim; in any event, the claim was rejected. Amelco filed this action, ultimately alleging abandonment and breach of the construction contract. By the time of trial, Amelco's claim had increased to $2,224,842 because of the discovery of additional costs.

The City asserted Amelco lost money on the project because it failed to start work promptly on the project, did not coordinate its work with other trades, such as by regularly attending mandatory coordination meetings, reduced its workforce so that it did not have enough workers to install the major electrical system components efficiently, did not have an organized manner of incorporating changes into the drawings (unlike other contractors on the project), performed work on the project under at least one subcontract for a different subcontractor during this period, and generally mismanaged its work.

After a five-week trial, the jury found the City had both breached and abandoned the contract, and awarded Amelco $2,134,586 respectively (but not cumulatively) for each claim.

The Court of Appeal affirmed. As relevant here, it concluded that as a matter of law a public works contract can be abandoned, and the jury was properly instructed on the measure of damages.

We granted the City's petition for review.

II. DISCUSSION

A. Does the Abandonment Theory of Liability Apply Against a Public Entity?

1. Background

In general, under long-standing California law, if a public contract is declared void, a contractor may not be paid for work performed under that contract. (Miller v. McKinnon (1942) 20 Cal.2d 83, 89, 124 P.2d 34 (Miller).) In Miller, we explained, "Persons dealing with the public agency are presumed to know the law with respect to the requirement of competitive bidding and act at their peril.... [¶] ... If, as we have seen, the contract is absolutely void as being in excess of the agency's power, the contractor acts at his peril, and he cannot recover payment for the work performed." (Miller, at p. 89, 124 P.2d 34.)

Similarly, this court has not generally allowed quantum meruit recovery for extra work performed beyond the contract requirements. (Zottman v. San Francisco (1862) 20 Cal. 96, 101, 105-106, 1862 WL 509 (Zottman).) In Zottman, the contractors were hired by the City of San Francisco to do work improving Portsmouth Square, including constructing a fence around the square. (Id at p. 99, 1862 WL at *3.) After the contract was entered into, the officials appointed by the city's common council, "in [the] presence of the City Attorney, the President of the Board of Aldermen, and of different members of the Board, ordered the contractors to perform ... extra work ... —that is, to construct a stone base in place of the one of wood, and to paint the iron of the fence—and assured them that the city would pay them therefor.... [A]U the members of the Common Council must have been aware of the order to the contractors, as the work was in full view from the windows of the Council chambers, and was the subject of general conversation and approval by the members at their various sessions and elsewhere, and no opposition to...