Myers Building Industries, Ltd. v. Interface Technology, Inc.

Decision Date24 February 1993
Docket NumberNo. B057751,B057751
Citation13 Cal.App.4th 949,17 Cal.Rptr.2d 242
CourtCalifornia Court of Appeals Court of Appeals
PartiesMYERS BUILDING INDUSTRIES, Limited, Cross-complainant and Respondent, v. INTERFACE TECHNOLOGY, INC., Cross-defendant and Appellant.

Cotkin, Collins & Franscell, Cotkin & Collins, James P. Collins, Jr., and Jeffrey L. Garland, Santa Ana, for cross-defendant and appellant.

John F. Watkins, Pasadena, and Marian H. Tully, West Covina, for cross-complainant and respondent.

GRIGNON, Associate Justice.

Appellant Interface Technology, Inc. appeals from a judgment after a jury trial by which respondent Myers Building Industries, Limited was awarded $1.1 million in punitive damages and $350,000 in attorney fees on Myers's cross-complaint against Interface. Those awards were made in connection with a special jury verdict which found that Interface had breached its contract with Myers, causing Myers $279,126 in net compensatory damages. The jury also found, by special verdict, that there had been "oppression, fraud or malice in the conduct of Interface toward Myers." Interface contends the punitive damage award is excessive as a matter of law and the result of judicial misconduct, and the attorney fee award is not authorized by statute or contract. We conclude the punitive damage award must be stricken because it is not based on a tort verdict. We conclude further the attorney fee award must be stricken because it is not authorized by contract or the provisions of Civil Code section 1717. We modify the judgment by striking the awards of punitive damages and attorney fees. As modified, we affirm the judgment.

FACTS AND PROCEDURAL BACKGROUND

The instant action is a multi-party lawsuit concerning the construction of an office building commissioned by Interface. On May 14, 1984, Interface entered into a written contract with Myers by which Myers, as general contractor, agreed to construct a 75,000-square-foot office building at a contract price of $3,628,050. Myers then entered into various contracts with subcontractors. Following the completion of the office building, certain of Myers's subcontractors filed mechanic's liens against the property and subsequently brought lawsuits against Interface to foreclose those liens and against Myers for failure to pay amounts due under the various subcontracts.

Interface filed a 28-count cross-complaint against Myers (and certain of the subcontractors) for breach of contract, negligence, breach of fiduciary duty, implied indemnity, breach of warranty, and common counts. Essentially, Interface alleged that Myers had failed to properly supervise or compensate the subcontractors pursuant to the written contract with Interface, and had caused Interface to be sued by certain of those subcontractors. Interface sought its attorney's fees in connection with each of the causes of action against Myers.

Myers filed a cross-complaint against Interface and others for breach of the construction contract, quantum meruit, account stated, tortious breach of the implied covenant of good faith and fair dealing, negligence, fraud, negligent misrepresentation, equitable indemnity, and declaratory relief. Additional causes of action were stated against various subcontractors and individuals.

The instant dispute concerned numerous plan changes which had been encountered in the course of the construction of the office building, and whether Interface had agreed to compensate Myers for the additional costs arising from those plan changes. Apparently, Myers was paid over $4 million on the contract. Myers alleged Interface had promised, in requesting those plan changes, to pay Myers's additional costs plus a fixed fee, and that the contract price had been revised to $4,421,653.35. Among the agreed changes asserted by Myers were: increase of the size of the building to 87,000 square feet, removal of 90,000 to 100,000 yards of dirt, and installation of trash enclosures, handrails, fire doors, and a false wall. Myers claimed damages of $763,597.43. 1 In addition, Myers alleged it was induced to execute releases of mechanic's liens in favor of Interface in exchange for Interface's oral promise to pay the amounts demanded by Myers and its subcontractors. Myers sought its attorney fees in connection with its prosecution of the cross-complaint pursuant to the terms of the construction agreement.

The matter proceeded to the first phase of the trial on liability and compensatory damages. The jury returned a special verdict in favor of Myers on its cross-complaint against Interface, finding that Interface had breached its contract with Myers and awarding Myers $279,126 2 in net compensatory damages. In addition, the jury found that Interface had acted with "oppression, fraud or malice" towards Myers. A trial on punitive damages followed. The jury returned a punitive damage verdict of $1.1 million.

Interface moved for a new trial on punitive damages and for judgment notwithstanding the punitive damage verdict on the ground that the punitive damage verdict was not authorized by law, and, in the alternative, moved to reduce the punitive damage verdict as excessive. The motions were denied.

Myers submitted a memorandum of costs by which it sought $372,242 in attorney's fees. Interface moved to tax costs, contending that no statutory or contractual basis existed for an award of attorney's fees. The trial court ordered Interface to pay Myers $350,000 in attorney's fees. Interface timely appealed from the judgment, the order awarding attorney fees, and the order denying its motions for new trial and judgment notwithstanding the verdict. No cross-appeal was filed by Myers.

DISCUSSION
I. PUNITIVE DAMAGES

Interface contends the punitive damage verdict was the result of judicial misconduct and is excessive as a matter of law. We need not reach these issues, however, because we conclude the special verdict rendered by the jury cannot support any punitive damage award in light of the absence of a tort finding. 3

The relevant special verdict forms presented to the jury following the first phase of trial read as follows:

"We, the jury in the above entitled case, find the following special

verdict on the questions submitted to us:

"MYERS BUILDING INDUSTRIES (MBIL) CLAIMS

AGAINST INTERFACE TECHNOLOGY (IFT)

"No. 1. Do you find that INTERFACE breached its contract with [MYERS]?

"Yes X

------

"No ------

"No. 2. What amount of damages do you award against INTERFACE in favor of

[MYERS]?

"$683,983.00.

"No. 3. Does the amount of damages set forth in # 2 above contain any

offsets for damages arising from the storm drain?

"Yes ------

"No X

------

"No. 4. If so, what amount? $__________.

"No. 5. Does the amount awarded [MYERS] include any amounts paid by

[INTERFACE] on account of the following [subcontractors]? If so, please

set forth the amount opposite the name?

                                  "Heuler Tile                   $ 89,286.00
                                                                 ----------------
                                  "Brandon Plumbing              $ 26,405.00
                                                                 ----------------
                                  "Terre Corp.                   $ 23,630.00
                                                                 ----------------
                                  "Blue Diamond                  $  2,500.00
                                                                 ----------------
                                  "Koltavary                     $    792.00
                                                                 ----------------
                                  "Hillcrest                     $ 42,244.00
                                                                 ----------------
                                  "QES                           $ 90,000.00
                                                                 ----------------
                                  "Comaianni & Woller            $130,000.00
                                                                 ----------------
                

"No. 6. Do you find that there was any oppression, fraud, or malice in

the conduct of INTERFACE towards [MYERS]?

"Yes X

------

"No ------

No special verdict findings were submitted to the jury on any cause of action except breach of contract, even though Myers had pleaded a cause of action against Interface for fraud. The special verdict read, on its face, as a net award of compensatory damages for breach of contract with a special finding that Interface had acted with "oppression, fraud, or malice" towards Myers. The damages set forth in the special verdict appear to be the sums which Myers claimed it was owed under the contract. The overall amount was offset by amounts already paid by Interface to Myers's unpaid subcontractors.

After the special verdict on the first phase of the trial and prior to the trial on punitive damages, 4 Interface requested that the trial court read to the jury a modified version of BAJI No. 14.72.2. 5 BAJI No. 14.72.2 refers to damage suffered "as a result of the fraud." Interface requested that the instruction be modified to read, "as a result of the fraud, if any." The trial court refused this modification, finding that there had already been a finding of fraud by the jury. The trial court was referring to the fact that the jury had been instructed with BAJI No. 14.72.1 during the first phase of the trial. BAJI No. 14.72.1 provides: "If you find that any party suffered actual injury, harm or damage as a proximate result of [fraud or breach of fiduciary duty], you must decide, in addition, whether by clear and convincing evidence you find that there was oppression, malice or fraud in the conduct on which you base your finding of liability...."

In view of the confusion inherent in the first phase special verdict, Interface also requested the trial court to instruct the jury that if it had awarded compensatory "[A] special verdict is that by which the jury finds the facts only, leaving the judgment to ...

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