Robinson & Wilson, Inc. v. Stone

• Decision Date: 16 November 1973
• Citation: 110 Cal.Rptr. 675,35 Cal.App.3d 396
• Court: California Court of Appeals
• Parties: ROBINSON & WILSON, INC., etc., et al., Plaintiffs, Appellants, and Cross- Respondents, v. Vean STONE et al., Defendants, Respondents, and Cross-Appellants. Civ. 12359.

Page 675

110 Cal.Rptr. 675

35 Cal.App.3d 396

ROBINSON & WILSON, INC., etc., et al., Plaintiffs, Appellants, and Cross- Respondents, v. Vean STONE et al., Defendants, Respondents, and Cross-Appellants.

Civ. 12359.

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

Nov. 16, 1973.

Hearing Denied Jan. 31, 1974.

[35 Cal.App.3d 399] Fullerton, Morris & Yahnke and Robert V. Fullerton, San Bernardino, for plaintiffs, appellants and cross-respondents.

Acret & Perrochet, Byron D. Berg and James Acret, Los Angeles, for defendants, respondents and cross-appellants.

OPINION

TAMURA, Associate Justice.

This litigation arises out of a dispute over the interpretation of a contract for the construction of a medical building. Plaintiffs (general contractors) brought two actions against defendants (five medical doctors); one to foreclose a mechanic's lien and the other for damages for breach of contract. Defendants cross-complained against plaintiffs and their surety on the performance and materialman's bond for damages for alleged breaches by plaintiffs. Following a month long, consolidated, nonjury trial, the court found for defendants and judgment was entered that plaintiffs take nothing on their complaint and that defendants recover from plaintiffs and their surety $36,382 plus costs on the cross-complaint. Plaintiffs appeal from the judgment and defendants cross-appeal from an order denying their motion to amend their cross-complaint to include an allegation and prayer for recovery of attorneys' fees.

The basic facts necessary to an understanding of the issues presented by this appeal may be summarized as follows:

The project was initially conceived by a real estate broker (Carl Davis) and several others. Defendants later acquired the property to be developed, retained Carl Davis as their agent, and hired architects to prepare preliminary plans for a medical building. After obtaining a conditional construction loan commitment, the architects prepared working plans for a building containing 17,580 square feet of floor space. ¹ The plans contained detailed specifications for medical suites in 7,970 square feet of floor space to be occupied by defendants but contained no interior layout or design for the balance of 9,610 square feet which defendants intended to lease to other doctors.

In October 1966 the project was let out for bids and five contractors, including plaintiff Robinson & Wilson, Inc. (R & W, Inc.), submitted bids. The bids ranged from a high of $458,572 to a low of $429,918, R & W, Inc.'s bid being $436,440. In November 1966 all bids were rejected and the owners authorized Davis to negotiate with interested bidders to explore means of reducing costs. By letter dated November 23, 1966, plaintiff R & W, Inc. submitted a proposal based upon suggested modifications of the plans and performance on a cost plus basis with a guaranteed maximum price of $394,699. Following numerous meetings between Wilson (president of R & W, Inc.), Davis, and the owners, R & W, Inc. was ultimately selected to be the general contractor for the project. The architect prepared new plans incorporating the modifications agreed upon by the parties but the modified plans, like the first, contained no interior design or layout for the 9,160 square feet.

In December 1966 the owners' attorney prepared a proposed contract on an AIA form under the terms of which R & W, Inc. would complete the work shown on the plans and specifications on a cost plus basis with a guaranteed maximum price. The lender objected to closing the loan escrow because the contract made no provision for completion of the undesigned interior area of the building. Thereafter Davis prepared a draft of a proposed addition to the contract to meet the lender's objection and took it to the owners' attorney. The attorney suggested that Davis consult with the architects for more specific itemization of the work to be covered by the proposed amendment. According to the attorney, Davis returned shortly with a redraft, ² he (attorney) made a few changes and added it to the proposed contract as article 20. The article reads:

'ARTICLE 20. COMPLETION OF UNDESIGNED INTERIORS.

'The total contract price includes the sum of $30,040 for the completion of the interior for portions of the building, approximating 9,610 square feet, for which work, plans and specifications will, in the future, be prepared by the architect for the tenants concerned. The Contractor will furnish all necessary labor and materials to complete and finish the said areas generally with the materials and to the standards fixed in the plans and specifications presently in existence for the other areas of the building and specifically may be required by the said tenant's architect and will, accordingly, furnish, construct, and install the following items: . . .' ³

Plaintiffs executed the contract on February 28, 1967. It provided for a guaranteed maximum cost of $394,806 ⁴ and included article 20. In order to enable R & W, Inc. to obtain a performance and labor and material bond, plaintiff Barney Wilkerson Construction Co. executed the contract as a joint venturer with R & W, Inc.

At the time the contract was executed, the owners had no tenants for the undesigned 9,610 square feet of the building. As work on the building progressed, the owners made commitments to various doctors to lease space in the undesigned area. Between May and July 1967, specific plans for several medical suites in the undesigned area for doctor tenants were forwarded to R & W, Inc. with a request for cost estimates. Following submission of cost estimates by R & W, Inc., a dispute arose over the contractor's obligation under article 20. Basically, the contractor's position was that under article 20 the $30,040 was intended to be an allowance against the ultimate cost of the work called for by the article and the owners or their tenants were obligated to pay all costs exceeding that amount. The owners on the other hand took the position that article 20 obligated the contractor to provide within the guaranteed maximum price all work and material necessary to complete minimum basic medical suites in the undesigned portion of the building, the work and material to be comparable in quantity and quality to that specified for the designed area except for 'extras' or 'embellishments' which were provided to meet the special needs of defendant owners. It was further the position of the owners that if the tenants of the undesigned area required any extras, they were to pay for them.

In August 1967 the owners transmitted to R & W, Inc. plans purporting to encompass only that work which they, the owners, conceived to be required to be performed by plaintiffs under article 20 for $30,040. R & W, Inc. responded by offering to perform the work called for by those plans for $140,000 or less. In October 1967 the owners ordered plaintiffs off the job and thereafter had the undesigned portion completed to the specifications of their tenants through other contractors.

The court found that plaintiffs failed and refused to perform the work called for by article 20 of the contract and that the reasonable cost of that work was $84,844. ⁵ It also found that defendants were damaged by plaintiffs' breach in other particulars set forth below. ⁶

The court found that at all times during negotiations leading up to the contract and at the time the contract was executed, there were no architectural plans in existence for the interior of the undesigned area and that the exact nature and scope of the improvements to be constructed by prospective tenants in the undesigned area were unknown. It found, however, that it was known 'the interiors would be constructed in conformity with the plans and specifications then in existence for the designed interior areas.'

The court rejected the contractor's contention that the parties orally agreed that the guaranteed maximum contract price contained an allowance of $30,040 for article 20 work and that the owners were to pay all amounts by which the cost of that work exceeded $30,040, or that such work was to be performed at a price to be later negotiated, or that the provisions of article 20 were so ambiguous and uncertain as to be unenforceable, or that the contractors 'were mistaken in executing the contract.'

The court found that while improvements eventually constructed in the undesigned portions of the building were more extensive and costly than comparable improvements in the designed area, the owners offered to pay plaintiff the cost of such extra work provided the contractor completed the work in the undesigned area; that the owners also offered to permit the contractors to complete the undesigned area in 'strict accordance' with article 20 with work and materials comparable in quantity and quality to the designed area; that the contractors refused to perform either in 'strict accordance' with article 20 for the contract price specified or as requested by the tenants for the contract price 'plus the reasonable value of any extra work requested by the tenants.' The court interpreted the provision in article 20 reading '(t)he contractor will furnish all necessary labor and materials to complete and finish the said areas generally with the materials and to the standards fixed in the plans and specifications presently in existence for the other areas of the building' to mean that the work and materials to be installed in the undesigned areas were 'to be comparable in quantity and quality of materials and workmanship, and in every regard, to the designed areas.'

PLAINTIFFS' APPEAL

Plaintiffs' attack upon the judgment is directed against the trial court's interpretation of article 20. The attack is basically twofold: (1) That the article is not reasonably susceptible to the interpretation placed upon it by the trial court and (2) that the article is so ambiguous and uncertain that it was unenforceable.

Prelimina...