Integrated, Inc. v. Alec Fergusson Elec. Contractors

• Decision Date: 20 April 1967
• Citation: 250 Cal.App.2d 287,58 Cal.Rptr. 503
• Court: California Court of Appeals Court of Appeals
• Parties: INTEGRATED, INC., a corporation, Plaintiff and Respondent, v. ALEC FERGUSSON ELECTRICAL CONTRACTORS, a corporation et al., Defendants and Appellants. ALEC FERGUSSON ELECTRICAL CONTRACTORS, a corporation, Plaintiff and Appellant, v. INTEGRATED, INC., etc., et al., Defendants and Respondents. Civ. 8231, 8232.

Page 503

58 Cal.Rptr. 503

250 Cal.App.2d 287

INTEGRATED, INC., a corporation, Plaintiff and Respondent, v. ALEC FERGUSSON ELECTRICAL CONTRACTORS, a corporation et al., Defendants and Appellants.

ALEC FERGUSSON ELECTRICAL CONTRACTORS, a corporation, Plaintiff and Appellant, v. INTEGRATED, INC., etc., et al., Defendants and Respondents.

Civ. 8231, 8232.

Court of Appeal, Fourth District, Division 2, California.

April 20, 1967.

[250 Cal.App.2d 289] Coombs & Friel and Hugh D. Friel, Rialto, for appellants.

James A. Poore, Jr., Los Angeles, for respondents.

OPINION

TAMURA, Associate Justice.

Integrated, Inc., general contractor for the construction of a state plant quarantine station at Yermo, California, subcontracted the electrical work to Alec Fergusson Electrical Contractors, Inc. Following commencement of construction a dispute arose over performance and progress payments. Fergusson gave written notice of rescission and refused to proceed unless Integrated agreed to certain terms and conditions. Thereupon Integrated re-subcontracted the uncompleted work and sued Fergusson for damages for breach of contract. Fergusson originally filed a cross-complaint but subsequently dismissed the cross-complaint and filed a cross action against Integrated for breach of contract naming as defendants, in addition to Integrated, the Department of Public Works which held funds under a stop notice filed by Fergusson and Firemans Fund Insurance Company, the surety on Integrated's labor and material bond. The cases were consolidated and tried by the court. In Integrated's action judgment was entered awarding it damages against Fergusson in the sum of $7,558.28, and in the cross action judgment was entered that Fergusson take nothing and that the Department of Public Works be authorized to release to Integrated funds withheld under the stop notice. Fergusson appeals from both judgments. Upon stipulation of the parties, the appeals were ordered consolidated for hearing and disposition.

The evidence may be summarized as follows: Integrated subcontracted the electrical work to Fergusson on January 28, 1963, for a fixed price of $15,840. Construction commenced in early March 1963. Fergusson had men on the job varying in numbers from one to three until June 11 on which date it withdrew its men. By that date 35 to 40 percent of the electrical work had been completed. On June 15 Fergusson's attorney notified Integrated by letter that Fergusson was rescinding the contract because Integrated (1) failed to make progress payments as required by the contract and (2) had caused delays by failing to coordinate the work of the subcontractors. The letter further informed Integrated that Fergusson would return to work only under a new contract which would provide that Integrated (1) deposit in escrow the entire contract price plus 10 percent for extras, (2) keep electrical work areas open and accessible, (3) hold Fergusson harmless for increased costs occasioned by future delays and (4) compensate Fergusson for additional 'move in and move out expenses.' An invoice for $9,136.29 purporting to be the 'fair value of work done to date' accompanied the letter. Integrated rejected the conditions and ordered Fergusson to resume performance. Fergusson refused and filed a stop notice with the Department of Public Works, claiming $5,556.37 for labor and materials furnished, and filed a claim in that amount with Firemans Fund Insurance Company.

Upon Fergusson's refusal to resume performance, Integrated entered into a costplus contract with F R B Electrical Corporation for completion of the work. ¹ F R B used materials which Fergusson had purchased but had not installed, Integrated paying an invoice therefor in the amount of $3,579.92, purchased additional materials and completed the job at a total cost to Integrated of $28,985.00.

On the issue of delays in the prosecution of the work, the evidence was conflicting. Fergusson testified that there were frequent delays because the plumbing contractor was tardy and, in addition, that electricians were hindered by threats of the masonry subcontractor to cover the area where electrical work was to be done. On the other hand, Integrated introduced testimony that prior to the attempted rescission there was frequently work to be done by electricians which was not done. It was generally agreed that the job did suffer delays which were caused primarily by the plumbing subcontractor.

With respect to progress payments the reverse side of the pre-printed form of the subcontract provided:

'2. The General Contractor will allow Subcontractor progress payments only at the interval, in the ratio, and to the extent such payments are made to the General Contractor by the Owner. All requests for progress payments must be delivered to the General Contractor on or before the first day of the month for processing payments due on the following fifteenth.'

A typewritten provision on the face of the contract, however, provided:

'Payments to be made in installments of 90% Of the work performed during the previous month and to be made immediately following payment to the General Contractor. Balance within forty-five (45) days after notice of completion and acceptance of the work by the Owner and General Contractor.'

There was evidence that prior to June 11 Fergusson had made oral demands for payment to Integrated's superintendent on the job. In addition, Fergusson submitted an invoice dated April 26, 1963, for $3,168.00, which invoice was received by Integrated on May 2.

Mr. Butler, president of Integrated, testified that on a state contract it was not the practice of contractors to bill the state for progress payments. He stated the state makes an inspection on the jobsite to determine the extent of completion and makes progress payments accordingly, transmitting with the check a 'payment schedule' showing the allocation of payment to the various jobs involved.

Integrated received its first payment from the state on May 3 of which $1,497.00 was allowed for electrical work and by June 6 it had received $2,993.00 allocable to electrical work. Integrated's accountant assumed the pre-printed provision of the contract relating to progress payments to be controlling and, therefore, recorded the invoice received on May 2 at the end of May for payment June 15 following. Some time during the second week of June, Integrated's superintendent informed Mr. Butler that Fergusson was threatening to withdraw from the job whereupon Butler directed payment of $1,000.00 and a check in that amount was mailed to Fergusson on June 14. Before the check was received by Fergusson, Integrated stopped payment because it had by then received the letter of rescission.

Integrated's accountant gave as an additional reason for withholding payment non-compliance by Fergusson with contract provisions requiring subcontractors to file certificates of insurance and 'submittals', the latter being plans and working drawings of articles installed by the subcontractor and material lists. Although representatives of Integrated testified that the certificates of insurance had not been received, a secretary of an insurance agency testified that Fergusson was covered and that the certificates had been mailed to Integrated. With respect to the 'submittals', the evidence discloses that there was substantial compliance by Fergusson.

In the action filed by Integrated, the court made general findings by reference to the pleadings and concluded that Integrated had 'performed all of the terms and conditions of the agreement', and that Fergusson, without legal or just cause, had refused to perform. Integrated had claimed $13,114.65 as damages, that amount being the approximate difference between its total cost to complete the work and the contract price with Fergusson. The court, however, by crediting Fergusson with the value of labor and material furnished before it withdrew ($5,556.37), found that Integrated had been damaged in the sum of $7,558.28 and entered judgment accordingly.

In the cross action by Fergusson, the court found untrue allegations that Integrated failed to make progress payments as required by the contract and failed to coordinate the work of the subcontractors thereby preventing performance by Fergusson. The court concluded that Fergusson was not entitled to rescind, but was itself in breach for nonperformance. It was ordered that Fergusson take nothing and that the Department of Public Works be authorized to pay Integrated amounts withheld under the stop notice.

Fergusson attacks the sufficiency of the findings and complains of the court's failure to make requested special findings relating to the issue of alleged failure to make progress payments. Its underlying contention, however, is that the finding and conclusion that it was not entitled to rescind were erroneous. It contends that the uncontradicted evidence shows that Integrated breached the contract by failing to make progress payments immediately upon its receipt of payment from the state and further that the finding that Integrated did not prevent performance by Fergusson by failing to coordinate the work of the subcontractors was not supported by substantial, competent evidence.

On the issue of progress payments, the court made a general finding that Integrated was not in default, thus implying that there was nothing due under the contract prior to the attempted rescission of June 15. That this was the court's reasoning is disclosed by its memorandum opinion wherein the court expressed the view that the only valid reason which would have justified rescission would have been the delay in making progress payments, which in turn depended upon the proper interpretation of the contract. ² In the court's view the printed and typewritten provisions of the contract were not inconsistent. It, therefore, concluded that no progress payment was due until June 15. Fergusson contends that the...