Culbertson v. Cizek

• Decision Date: 12 March 1964
• Citation: 37 Cal.Rptr. 548,225 Cal.App.2d 451
• Parties: Fred CULBERTSON and Nell I. Culbertson, Plaintiffs and Appellants, v. Frank CIZEK and United Pacific Insurance Company, a Washington corporation, Defendants and Respondents. Civ. 21070.
• Court: California Court of Appeals Court of Appeals

Page 548

37 Cal.Rptr. 548

225 Cal.App.2d 451

Fred CULBERTSON and Nell I. Culbertson, Plaintiffs and Appellants, v. Frank CIZEK and United Pacific Insurance Company, a Washington corporation, Defendants and Respondents.

Civ. 21070.

District Court of Appeal, First District, Division 1, California.

March 12, 1964.

Edwards, Friborg & Duda, Oakland, for appellants.

Eugene K. Lawlor, Oakland, for respondent Frank Cizek.

Weinstock, Anderson, Maloney & Chase, San Francisco, for respondent United Pac. Ins. Co. SULLIVAN, Justice.

Plaintiffs appeal from portions of an adverse judgment entered in an action for declaratory relief brought against a contractor, the surety on his performance bond and certain materialmen and subcontractors who are lien claimants. ¹

Plaintiffs Fred and Nell Culbertson own improved real property in Oakland. On August 12, 1958, they entered into a written 'Builder's Contract' with Cizek under the terms of which Cizek agreed to construct thereon three stores with two apartments above them and to convert an existing beauty shop into two apartments 'as Per Plans and Specifications' and to furnish all necessary labor and materials in connection therewith for the sum of $27,500 which plaintiffs agreed to pay. The above contract contained provisions governing alterations, additions and omissions. ² In compliance with the requirement of the Bank which was financing the work, Cizek and United furnished a performance bond in the sum of $27,500. Plaintiffs thereupon obtained a $30,000 loan from the bank, $2,500 of which was paid to them forthwith, the balance thereof to be disbursed by the lender in specified progress payments. However neither the contract nor the bond was filed in the office of the county recorder (see Code Civ.Proc. § 1185.1).

Cizek began work about September 3, 1958, and abandoned the job about March 24, 1959. During these seven months plaintiffs requested many additions to the original plans and specifications and made arrangements with Cizek for deviations therefrom. Nevertheless the valuation of these changes and extra work was never agreed upon in writing by the parties as specified by the contract. (See footnote 2, ante.) By March 27, 1959, four progress payments of $5,500 each had been made to Cizek by the bank. However Cizek owed substantial sums of money to his subcontractors and materialmen who during May and June 1959 filed claims of lien against plaintiffs' property.

On July 16, 1959, plaintiffs commenced the instant action against Cizek, United and a number of the above lien claimants, alleging the existence of a controversy among all the parties to the action as to their legal rights and duties under the contract and the bond. The core of the dispute as alleged in the complaint is this: plaintiffs claimed that they owed Cizek $5,500; Cizek claimed that they owed him $19,857.14 of which $15,739.14 was for extras; plaitiffs claimed that the $19,857.14 was for work and materials called for by the contract; United claimed it was not required by its bond to pay the lien claimants and complete the construction work; and plaintiffs claimed a credit for work not completed by Cizek the amount thereof being in dispute. Plaintiffs further alleged that their property was threatened with the foreclosure of the various liens filed by the lien claimants.

Cizek filed an answer admitting that he had executed the builder's contract but alleging that it had been abandoned by the parties as the result of the numerous alterations and deviations from the plans and specifications. In addition, he filed a cross-complaint seeking recovery of the above sum of $19,857.14 and the foreclosure of his contractor's lien theretofore filed for such amount. The theory of both the answer and the cross-complaint is that the written contract had been abandoned and therefore did not define the rights of the parties; that the total claims against the property amounted to $43,257.14 which included a reasonable overhead and profit for Cizek in the sum of $2,448.52; and that plaintiff having paid Cizek $23,400, the balance of $19,857.14 was due. As we point out infra, the concept of the reasonable value of the work and materials is echoed in the court's findings, despite the fact that the court found that the written contract was not abandoned.

United filed a separate answer denying all liability to plaintiffs and asserting, inter alia, that the alteration and modification of the builder's contract by plaintiffs and Cizek without United's consent had released the surety from any obligations under the performance bond. ³

The trial court made copious and detailed findings of fact. So far as is here pertinent the court found: that the 'Builder's Contract' was a valid contract under which the parties thereto intended that there would be changes and additions to work for which a reasonable amount would be paid in addition to the contract price; that after the commencement of the work, some changes, additions and alterations of the plans and specifications were made by plaintiffs and Cizek without the actual knowledge of United or the Bank but that they were not of such a nature as to be material or substantial, being in the nature of amendments to the original plans; that the plaintiffs and Cizek therefore had not abandoned the written contract and that United was liable on its performance bond; and that some of the work, labor and materials supplied and done by Cizek was not done in a substantially good and workmanlike manner.

The court further found: that the unpaid bills of four of the defendant lien claimants amounted to $11,029.54; that the total cost of the work was $42,668.45 ⁴; that the reasonable cost of the work was $38,168.45 ⁵ and that plaintiffs 'should be entitled to a credit or offset from the said total cost of construction in the sum of $4,500.00.' The last 'finding' as well as several other related 'findings' on which we shall comment are actually conclusions of law. The court found that 'it would be inequitable' for either Cizek or plaintiffs to pay the full amount of the $11,029.54 due lien claimants but that $1,359.40 ⁶ thereof should be paid by Cizek and the balance of $9,670.14 ($11,029.54 less $1,359.40) should be paid by plaintiffs.

The court concluded ⁷ that all of the defendant lien claimants were entitled to a judgment of foreclosure against plaintiffs' property and a money judgment against Cizek and United; that such lien claimants should enforce their judgments of foreclosure first against plaintiffs' property and secondly against Cizek and United if the foreclosure sale did not produce sufficient funds to pay the claims in the proportion as explained by us above; that if United were compelled to pay any sums on the proportion found to be the obligation of plaintiffs (namely $9,670.14), it 'should have recourse' for such amount against plaintiffs and Cizek; and that '[p]laintiffs herein should recover nothing from defendants [and] [d]efendant FRANK CIZEK should recover nothing from plaintiffs.' ⁸ Judgment was entered accordingly.

We are presented here with two basic questions: First, did the trial court make a proper determination of the rights and duties of plaintiffs and Cizek in the light of the written contract entered into by such parties? Secondly, did the court make a proper determination of United's liability in the light of the contract bond furnished by it as surety?

Before we reach the merits of the first question, some preliminary matters require our attention. An action brought under section 1060 of the Code of Civil Procedure for declaratory relief is an equitable proceeding and the powers of a court thus invoked are as broad and as extensive as those exercised by such court in any ordinary suit in equity. (Adams v. Cook (1940) 15 Cal.2d 352, 362, 101 P.2d 484; City of Los Angeles v. City of Glendale (1943) 23 Cal.2d 68, 81, 142 P.2d 289; Rolapp v. Federal Building & Loan Ass'n. (1936) 11 Cal.App.2d 337, 342, 53 P.2d 974; Ho Gate Wah v. Fong Wan (1953) 118 Cal.App.2d 159, 165, 257 P.2d 674.) While the court in a declaratory relief action may properly detemine questions as to rights and duties arising out of an existing contract (Foster v. Masters Pontiac Co. (1958) 158 Cal.App.2d 481, 486, 322 P.2d 592; see 15 Cal.Jur.2d, Declaratory Relief, § 71, pp. 225-230), it may not make a new contract for the parties or, in lieu of construing an existing contract, incorporate new obligations into it. (Lyon v. Goss (1942) 19 Cal.2d 659, 673-674, 123 P.2d 11.) Its duty is to provide for a determination of the purposes intended by the instrument, and not for a modification of its terms. (Putnam v. Putnam (1942) 51 Cal.App.2d 696, 699, 125 P.2d 525; Flynn v. Flynn (1951) 103 Cal.App.2d 91, 96, 229 P.2d 5; Taliaferro v. Taliaferro (1954) 125 Cal.App.2d 419, 427, 270 P.2d 1036.) We cannot here embrace, as respondents urged upon us at oral argument, a philosophy which contemplates in this kind of proceeding a jural omnipotence unfettered by rules of law. '[E]quity is bound by rules of law. It is not above the law. It cannot controvert the law.' (Floyd v. Davis (1893) 98 Cal. 591, 601, 33 P. 746, 750; see also Boyce v. Fisk (1895) 110 Cal. 107, 112, 42 P. 473.) 'The general rule is this: Where a contract has been voluntarily, understandingly, and fairly entered into, and is free from fraud, accident, mistake, or any other circumstance recognized as a ground for equitable relief, a court of equity must, when its jurisdiction is properly invoked, give full force and effect to such contract; it cannot ignore, disturb, or alter the rights created by it, or grant relief against their enforcement. A court of equity cannot * * * make a contract for the parties, nor vary the terms of one made, nor substitute another one therefor, nor can it remedy a wrong by making in effect a contract between the parties with reference to the subject matter.' (30 C.J.S. Equity § 62, p....