Shea-Kaiser-Lockheed-Healy, SHEA-KAISER-LOCKHEED-HEALY

CourtCalifornia Court of Appeals
Writing for the CourtCOBEY; ALLPORT
Citation73 Cal.App.3d 679,140 Cal.Rptr. 884
Parties, 22 UCC Rep.Serv. 607 , a joint venture, Plaintiff, Cross-Defendant and Respondent, v. DEPARTMENT OF WATER AND POWER OF the CITY OF LOS ANGELES, Defendant, Cross-Complainant and Appellant. Civ. 49264.
Decision Date26 September 1977
Docket NumberSHEA-KAISER-LOCKHEED-HEALY

Page 884

140 Cal.Rptr. 884
73 Cal.App.3d 679, 22 UCC Rep.Serv. 607
SHEA-KAISER-LOCKHEED-HEALY, a joint venture, Plaintiff, Cross-Defendant and Respondent,
v.
DEPARTMENT OF WATER AND POWER OF the CITY OF LOS ANGELES, Defendant, Cross-Complainant and Appellant.
Civ. 49264.
Court of Appeal, Second District, Division 3, California.
Sept. 26, 1977.

[73 Cal.App.3d 682]

Page 886

Burt Pines, City Atty., Los Angeles, Edward C. Farrell, Chief Asst. City Atty., and J. David Hanson, Deputy City Atty., for defendant cross-complainant and appellant.

[73 Cal.App.3d 683] Monteleone & McCrory, David P. Yaffe, and William N. Cohen, Los Angeles, for plaintiff, cross-defendant and respondent.

COBEY, Associate Justice.

Defendant and cross-complainant, Department of Water and Power of the City of Los Angeles (DWP), appeals from a judgment against it and in favor of plaintiff, Shea-Kaiser-Lockheed-Healy, a joint venture (SKLH), made and entered following trial to the court. The judgment is in the principal amount of $225,152. and contains unchallenged awards of prejudgment interest and costs. The judgment also provides that DWP shall take nothing on its cross-complaint. 1

The damage award is made up of $211,152 for aggregate demanded and delivered in excess of the requirements of the contract between the parties and $14,000 for the disproportionate amount of three-fourth inch aggregate demanded and delivered.

Since for reasons hereafter stated we propose to affirm these two damage awards, we will not consider the alternate damage award of $128,700. 2

BACKGROUND

This litigation arises from the fact that during a 3 1/2 year contract between the parties the market value of the aggregate sold under the contract by SKLH to DWP increased to such a degree that it substantially exceeded the contract price.

[73 Cal.App.3d 684]

Page 887

As already mentioned, the case is before us on rehearing. In our vacated opinion herein we previously held that the judgment had to be reversed because the damage awards violated competitive bidding requirements. We now believe that since sucy requirements apply only to the procedure by which the price of goods purchased by a public entity is set (see Miller v. McKinnon, 20 Cal.2d 83, 87--88, 124 P.2d 34) and have no application As such to the determination of damages to be assessed against a public entity for breach of a purchase contract, they are irrelevant to the propriety of the damage awards before us. These awards were made for breach of contract; they were not made pursuant to contract. They do not represent a recovery of price by SKLH from DWP but instead a recovery of court-ordered damages from DWP. Accordingly they are not precluded by competitive bidding requirements. (Cf. Byson v. City of Los Angeles, 149 Cal.App.2d 469, 472--473, 308 P.2d 765; Lee C. Hess Co. v. City of Susanville, 176 Cal.App.2d 594, 598, 1 Cal.Rptr. 586; Bilardi Constr., Inc. v. Spencer, 6 Cal.App.3d 771, 778--779, 86 Cal.Rptr. 406.)
FACTS

On or about September 26, 1968, DWP formally invited bids for furnishing and delivering aggregate for concrete and other uses for its Castiac power project in accordance with its specifications #709. SKLH was the lowest responsibile bidder for this sales contract. On or about December 19, 1968, SKLH and DWP entered into a written contract under which SKLH agreed to furnish and deliver to DWP during an approximately 3 1/2-year period, ending on July 1, 1972, aggregate for the aforementioned purposes. The contract between the parties included detailed specifications and addenda. These specified that: (1) for the purpose of comparing bids to determine the lowest bidder, it would be assumed that specified quantities of five kinds of aggregate totalling 495,000 tons would be purchased by DWP under the contract; (2) DWP would purchase under the contract specified quantities of the same five kinds totalling 386,000 tons. Additionally the contract granted to DWP an option of purchasing 'additional quantities of aggregate up to the Department's maximum requirements for operation and storage during the contractual period.' Finally, the contract set the maximum rates of delivery at 1,700 tons per day and 6,800 per week.

[73 Cal.App.3d 685] By letter dated October 13, 1970, SKLH requested from DWP 'a schedule of estimated aggregate requirements to completion.' DWP replied by letter dated November 9, 1970, with an estimate of 400,000 tons (or 700,000 tons overall) but noted that contract #709 did not specify 'the ultimate quantity of aggregate to be purchased by the Department.' The following May SKLH requested a breakdown of the sizes of aggregate required as deliveries were not following the bid proportions in this respect. The next month SKLH informed DWP that it would not deliver aggregate beyond the 700,000 ton figure. After further exchange of correspondence between the parties SKLH notified DWP by letter dated July 27, 1971, that its attorneys had advised it that, under California Uniform Commercial Code section 2306, subdivision (1), and a comment thereto, the contract between the parties contained an implied maximum quantity of $604,000 tons which SKLH did not intend to exceed. At the time of this letter SKLH's deliveries had not reached 604,000 tons. DWP rejected this interpretation of the contract and SKLH then stated that it would continue delivery of aggregate under protest with an explicit reservation of all rights. About this time SKLH again called to DWP's attention that sand and three-fourth inch aggregate were being demanded and delivered in proportions greatly in excess of those bid.

About the beginning of January 1972 DWP directed SKLH to deliver aggregate at essentially the maximum contractual

Page 888

rates of delivery largely to a new stockpile area on the east side of Castiac Creek. SKLH replied that it would do so only under the aforementioned conditions of protest and reservation of rights and that it might cease delivery on two weeks notice. A few days later, SKLH asked DWP for estimates of the various sizes of aggregate that DWP would require to complete the contract. DWP furnished such estimates, but repeated that the contract did not specify 'the ultimate quantity of aggregate to be purchased by the Department.' 3 Toward the end of January 1972 SKLH advised DWP that it would continue 'to deliver material as required by the Department until July 1, 1972,' but that these deliveries would be made under protest and reservation of rights. By the end of the contract period on July 1, 1972, SKLH had delivered to DWP 795,957 tons of aggregate pursuant to DWP's demands therefor.
73 Cal.App.3d 686

DISCUSSION

1. The $211,152.00 Damage Award

The principal issue between the parties is whether the sales contract between them contains an implied maximum quantity of 604,000 tons as asserted by SKLH. The trial court so found and on this basis further found that DWP breached the contract by demanding and obtaining 191,957 tons in excess of this maximum to the damage of SKLH in the amount of $211,153. The trial court reached these conclusions by applying to the contract between the parties the median theory set out in Official Comment 3 to California Uniform Commercial Code section 2306, subdivision (1). 4

It seems clear that the applicable provisions of the California Uniform Commercial Code govern the sales contract before us. DWP, although a public entity, is subject to the Code in the sales transaction under review. (See §§ 2103, subd. (1)(a), 1201, subds. (28), (29), (30); see also Northern Helex Company v. United States (1972) 455 F.2d 546, 553, 197 Ct.Cl. 118.) The decisive questions, though, are whether section 2306, subdivision (1), applies to the contract between the parties and , if it does, whether the trial court was correct in using the median theory of Comment 3 in applying the subdivision. 5

[73 Cal.App.3d 687] The subdivision in pertinent part reads: 'A term which measures the quantity by . . . the requirements of the buyer means such actual . . . requirements as may occur in good faith, except that no quantity unreasonably disproportionate to any stated estimate . . . may be

Page 889

. . . demanded.' Under section 1201, subdivision (42), "(t)erm' means that portion of an agreement which relates to a particular matter.'

The portion of the agreement at issue is found in addendum No. 1 to the special conditions of the detailed specifications, and in an unmodified portion of those conditions. The portion is entitled 'Quantity' and first contains a statement that '(f)or the purpose of comparing bids to determine the lowest bidder, it will be assumed that the following respective quantities of aggregate will be purchased during the contractual period.' There follows specific quantities for the five kinds of aggregate covered by the contract. These total 495,000 tons, although this total is not expressly stated. Then '(t)he Department, however, agrees to purchase aggregate during the contractual period in the following respective quantities:' Five specific quantities for the various kinds of aggregate are then listed. These total 386,000 tons, but again the total of this minimum obligated purchase is not expressly stated.

The quantity condition then goes on to conclude as follows: 'In consideration of the agreed purchase and in addition thereto, the Department shall have the option of purchasing, from time to time during the contractual period, additional quantities of aggregate up to the Department's maximum requirements for operation and storage during the contractual period. Said option shall be exercised by the issuance and delivery to the Contractor of orders for any portion thereof by the Purchasing Agent or his duly authorized representatives.'

It seems clear that the subdivision applies to this quantity condition of the contract between the parties. It is that portion of their agreement which measures the quantity called for by the...

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11 practice notes
  • Lenape Resources Corp. v. Tennessee Gas Pipeline Co., No. 94-0278
    • United States
    • Texas Supreme Court
    • August 16, 1996
    ...v. Amerada Hess Corp., 59 A.D.2d 110, 397 N.Y.S.2d 814 (1977) (utility fuel oil); Shea-Kaiser-Lockheed-Healy v. Dep't of Water & Power, 73 Cal.App.3d 679, 140 Cal.Rptr. 884 (1977) (aggregate for concrete); Philadelphia Corp. v. Niagara Mohawk Power Corp., 207 A.D.2d 176, 621 N.Y.S.2d 237 (1......
  • Arcon Const. Co., Inc. v. South Dakota Cement Plant, Nos. 14139
    • United States
    • Supreme Court of South Dakota
    • May 2, 1984
    ...to a sales contract between the federal government and a private company; and Shea-Kaiser-Lockheed-Healy v. Dept. of W. & P., Etc., 73 Cal.App.3d 679, 140 Cal.Rptr. 884 (1977), which held that a municipal water department was subject to the UCC in a sales Third, the UCC grants a buyer speci......
  • Brigante v. Huang, No. B048731
    • United States
    • California Court of Appeals
    • December 14, 1993
    ...Nucleonics Corp. (1992) 3 Cal.App.4th 397, 401, 4 Cal.Rptr.2d 331; Shea-Kaiser-Lockheed-Healy v. Department of Water & Power (1977) 73 Cal.App.3d 679, 688, 140 Cal.Rptr. 884.) For these reasons, we regard the Reporter's Note as a valuable aid in construing the protective order provision. Es......
  • McKee Const. Co. v. Stanley Plumbing & Heating Co., No. 17630
    • United States
    • Court of Appeal of Missouri (US)
    • April 7, 1992
    ...goods demanded when the seller makes delivery under a reservation of rights. Shea-Kaiser-Lockheed-Healy v. Department of Water & Power, 73 Cal.App.3d 679, 690, 140 Cal.Rptr. 884, 890 (1977). There is no logical reason that payment as a term of the underlying contract should be excluded from......
  • Request a trial to view additional results
11 cases
  • Lenape Resources Corp. v. Tennessee Gas Pipeline Co., No. 94-0278
    • United States
    • Texas Supreme Court
    • August 16, 1996
    ...v. Amerada Hess Corp., 59 A.D.2d 110, 397 N.Y.S.2d 814 (1977) (utility fuel oil); Shea-Kaiser-Lockheed-Healy v. Dep't of Water & Power, 73 Cal.App.3d 679, 140 Cal.Rptr. 884 (1977) (aggregate for concrete); Philadelphia Corp. v. Niagara Mohawk Power Corp., 207 A.D.2d 176, 621 N.Y.S.2d 237 (1......
  • Arcon Const. Co., Inc. v. South Dakota Cement Plant, Nos. 14139
    • United States
    • Supreme Court of South Dakota
    • May 2, 1984
    ...to a sales contract between the federal government and a private company; and Shea-Kaiser-Lockheed-Healy v. Dept. of W. & P., Etc., 73 Cal.App.3d 679, 140 Cal.Rptr. 884 (1977), which held that a municipal water department was subject to the UCC in a sales Third, the UCC grants a buyer speci......
  • Brigante v. Huang, No. B048731
    • United States
    • California Court of Appeals
    • December 14, 1993
    ...Nucleonics Corp. (1992) 3 Cal.App.4th 397, 401, 4 Cal.Rptr.2d 331; Shea-Kaiser-Lockheed-Healy v. Department of Water & Power (1977) 73 Cal.App.3d 679, 688, 140 Cal.Rptr. 884.) For these reasons, we regard the Reporter's Note as a valuable aid in construing the protective order provision. Es......
  • McKee Const. Co. v. Stanley Plumbing & Heating Co., No. 17630
    • United States
    • Court of Appeal of Missouri (US)
    • April 7, 1992
    ...goods demanded when the seller makes delivery under a reservation of rights. Shea-Kaiser-Lockheed-Healy v. Department of Water & Power, 73 Cal.App.3d 679, 690, 140 Cal.Rptr. 884, 890 (1977). There is no logical reason that payment as a term of the underlying contract should be excluded from......
  • Request a trial to view additional results

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