Jen-Mar Const. Co. v. Brown

• Decision Date: 03 January 1967
• Docket Number: JEN-MAR
• Citation: 55 Cal.Rptr. 832,247 Cal.App.2d 564
• Court: California Court of Appeals Court of Appeals
• Parties: CONSTRUCTION COMPANY, Plaintiff, Respondent and Appellant, v. Arnold S. BROWN et al., Defendants, Appellants and Respondents. Civ. 8136.

Page 832

55 Cal.Rptr. 832

247 Cal.App.2d 564

JEN-MAR CONSTRUCTION COMPANY, Plaintiff, Respondent and Appellant, v. Arnold S. BROWN et al., Defendants, Appellants and Respondents.

Civ. 8136.

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

Jan. 3, 1967.

[247 Cal.App.2d 566] Anderson, McPharlin & Conners and Robert C. Haase, Jr., Los Angeles, for defendants and appellants.

Hillyer, Crake & Irwin and Richard Crake, San Diego, for plaintiff and respondent.

OPINION

FINLEY, Justice pro tem.

This appeal is by defendants Brown, as principal, and United States Fire Insurance Company, as surety, from a judgment against them in favor of plaintiff Jen-Mar Construction Company for $33,262.47. Jen-Mar also noticed an appeal from that part of the judgment 'denying plaintiff's right to recover legal fees in the amount of.$12,069.76.' As part of his pleadings, Brown filed a cross-complaint which the court found to be without merit.

To simplify the discussion the parties shall be referred to as 'Jen-Mar' 'Brown' and 'Surety.'

Jen-Mar contracted with the U.S. Corps of Engineers to construct a missile assembly building at Vandenberg Air Force Base, and sublet certain earthwork to Brown. The subcontract, dated March 23, 1962, provided in part:

'It is mutually agreed that any and all work completed for the Sub-Contractor (Brown) by the Contractor (Jen-Mar) will be based on a mark-up of 15% General Overhead and 10% Profit, above all costs incurred by the Contractor.

'(Sub-Contractor agrees) not to assign this contract or sublet the same, or any part thereof * * * without first obtaining the written consent of the Contractor.'

'(Sub-Contractor agrees) that in case the Sub-Contractor * * * shall fail to complete or diligently proceed with this contract * * * the Contractor upon three days' notice to the Sub-Contractor shall have the right * * * to take over this contract and complete same, and to charge the cost thereof to the Sub-Contractor.'

'That if notification of any claims have been made against the Sub-Contractor or the Contractor arising out of labor or materials furnished the project covered by this agreement, or otherwise on account of any actions or failures to act by the Sub-Contractor * * * the Contractor may, at his discretion, withhold such amounts otherwise due.'

'* * * in the event of a dispute with respect to payment * * * the right of the Sub-Contractor to such payment will be subject to the determination of the Contracting Officer. * * *'

The subcontract also required Brown to deliver a surety bond. The bond was executed and delivered by Surety and required Jen-Mar to:

'* * * retain that portion, if any, which the sub-contract specified the Obligee (Jen-Mar) shall or may retain of the value of all work performed * * *.'

The bond also provided:

'That in the event of any default on the part of the Principal (Brown), written statement of the particular facts showing such default and the date thereof shall be delivered to the Surety * * * promptly and in any event within ten (10) days after the Obligee (Jen-Mar) or his representative, if any, shall learn of such default * * *.'

This bond was supplemented or superseded by another executed on April 24, 1962 which deleted the requirement of notice.

Brown commenced work on the project on March 27, 1962, and continued until he went into bankruptcy on June 29, 1962. During this period, the Corps of Engineers complained to Jen-Mar about the quality of Brown's work. Also, Brown failed to meet the Contractor's progress schedule. He presented Jen-Mar with his first monthly progress billing for percentage of work done in amount $15,047 on April 13, 1962. After he revised it downward to $6,450 net, Jen- Mar paid it. In early May 1962, Jen-Mar notified Brown he had insufficient equipment on the job and his creditors were complaining about unpaid bills. As of May 7, 1962, Brown had assigned his accounts receivable without Jen-Mar's consent to Standard Factors. He submitted his second monthly progress billing for $29,887.30 on May 14, 1962. Jen-Mar initially refused to pay this. On June 14, 1962, Brown notified Jen-Mar of the cancellation of the assignment to Standard Factors. On June 15, 1962, Brown submitted his third billing. On June 21, 1962, Brown notified Jen-Mar of an assignment of accounts receivable to Sierra Financial Company. Jen-Mar received payment from the government to cover the third billing on June 27, 1962, two days before Brown's bankruptcy.

Upon Brown's bankruptcy, Jen-Mar proceeded alone and by subcontract to complete Brown's work.

Brown and Surety assign five points of error as follows:

'1. Where the Surety's bond specified as a condition precedent to recovery thereon, that the obligee give 10 days written notice of any default on the part of the subcontractor, failure to give such notice--or any notice--for over two months while withholding all progress payments earned by the subcontractor due to alleged defaults, exonerates the Surety.

'2. If Brown was not in default, then Jen-Mar wrongfully withheld his monthly progress payments, exonerating the Surety and justifying Brown in abandoning the work.

'3. The charges against Brown's subcontract balance allowed by the court are excessive because they in large part do not relate to structural excavation which was virtually the only work retained by Jen-Mar after reletting the balance of the A. S. Brown work.

'4. Overhead and profit should not have been awarded on claims arising from Brown's work. That allowed was excessive, and in any event, the defendant Surety was not liable for overhead and profit under the terms of its bond.

'5. The error in setting grade stakes on the job was Jen-Mar's and the cost of removing the surplus dirt in the building resulting therefrom was improperly charged to A. S. Brown and his Surety.'

Point 1:

Surety contends that Jen-Mar should have given it notice within 10 days after its refusal to pay Brown's second monthly billing. Jen-Mar argues that there was only a delay for purposes of giving it time to investigate; that the original bond required notice to the surety only in case of Default and not upon each minor incident or departure from narrow interpretation of the instruments. It argues that 'default' means abandonment, requdiation of the duty to perform, failure of performance, or substantial breach which cannot be remedied (Bradbury v. Thomas, 135 Cal.App. 435, 443, 27 P.2d 402); that Brown's failure to have sufficient equipment on the job was remedied; that assignment of the accounts receivable was not required to be recognized by Jen-Mar; that the bond itself required Jen-Mar to retain funds if creditors were unpaid and that Jen-Mar merely withheld payment to Brown for a sufficient period to make an investigation of the obligations. Jen-Mar argues that Brown's claim that this temporary withholding rendered him unable to carry on is speculation, for among other things Brown had factored his accounts receivable. Jen-Mar urges that Brown's first default was his bankruptcy, of which Surety had timely notice.

Thus it will be seen that this court is being asked primarily to reweigh the evidence and arrive at conclusions contrary to those of the trial court. We are not bound by that court's interpretation of the written instruments involved. (Nicholson v. Wade, 236 Cal.App.2d 442, 447, 45 Cal.Rptr. 911; Noel v. Dumont Builders, Inc., 178 Cal.App.2d 691, 699, 3 Cal.Rptr. 220; Estate of Platt, 21 Cal.2d 343, 352, 131 P.2d 825; Continental Cas. Co. v. Pheonix Constr. Co., 46 Cal.2d 423, 429--430, 296 P.2d 801, 57 A.L.R.2d 914.) But where there is any substantial evidence to support its findings predicated upon non-documentary evidence, we cannot, outside of some obvious abuse of reason and discretion, substitute our findings and conclusions for those of the trial court. (Berniker v. Berniker, 30 Cal.2d 439, 182 P.2d 557; Primm v. Primm, 46 Cal.2d 690; Citizens Suburban Co. v. Rosemont Dev. Co., 244 A.C.A. 745, 761, 53 Cal.Rptr. 551.)

Here some of the questions involved depend not so much upon the interpretation of the instruments as upon a finding whether the parties in the course of their activities thereunder performed within reasonable limits. The principals here were both engaged in the construction business and therefore must have entered into their contract in the light of knowledge of pertinent practices or customs. Surety, a professional in the field of surety bonds, is charged with an awareness of such practices as are reasonably common in the field in which it issues bonds. It cannot prevail in its contention that regardless of capability of remedy, each departure from a strict construction of the terms must necessarily be interpreted by Jen-Mar as a default entitling Surety to notice, if indeed any were required by reason of the posting of the second bond.

The trial court found in part that Surety '* * * was not prejudiced in any way as a result of notice or as a result of any failure of plaintiff (Jen-Mar) to give information to said defendant (Surety) concerning the financial status of the defendant Arnold S. Brown.' The court also found that Jen-Mar was not at any time in possession of information concerning Brown's financial status or the performance of the sub-contract which would give rise to a duty to inform Surety. It further found that by an amendment to the original bond Surety had waived any requirement of notice.

There is ample evidence in the record to support these findings. Beyond this determination we need not go.

'When a finding of fact is attacked on the ground that there is not any substantial evidence to sustain it, the power of an appellate court Begins and Ends with the determination as to whether there is any substantial evidence contradicted or uncontradicted which will support the finding of fact.' (Primm v. Primm, 46 Cal.2d 690, 693, 299 P.2d 231, 233.)

Point 2:

As respondent points out in discussion of this...