Westinghouse Electric Corp. v. County of Los Angeles

• Decision Date: 16 March 1982
• Citation: 129 Cal.App.3d 771,181 Cal.Rptr. 332
• Parties: WESTINGHOUSE ELECTRIC CORPORATION, dba Westinghouse Electric Supply Company, a corporation, Plaintiff, v. COUNTY OF LOS ANGELES, Sherwin Electric Service Co., a corporation, Defendants. SHERWIN ELECTRIC SERVICE COMPANY, Appellant, v. COUNTY OF LOS ANGELES, Respondent. Civ. 60740.
• Court: California Court of Appeals Court of Appeals

Page 332

181 Cal.Rptr. 332

129 Cal.App.3d 771

WESTINGHOUSE ELECTRIC CORPORATION, dba Westinghouse Electric Supply Company, a corporation, Plaintiff, v. COUNTY OF LOS ANGELES, Sherwin Electric Service Co., a corporation, Defendants.

SHERWIN ELECTRIC SERVICE COMPANY, Appellant, v. COUNTY OF LOS ANGELES, Respondent.

Civ. 60740.

Court of Appeal, Second District, Division 3, California.

March 16, 1982.

As Modified March 25, 1982.

[129 Cal.App.3d 773] Bernard S. Kamine, Los Angeles, for appellant.

John H. Larson, County Counsel, Jan A. Pluim, Deputy County Counsel, Los Angeles, for respondent.

GOLDIN, Associate Justice. ^*

This is an appeal from that part of a judgment denying prejudgment interest to the assignee of a stop notice claimant (public works) and allowing the public entity to retain the liquidated damages it assessed pursuant to a contract awarded by bid.

On December 10, 1973, Sherwin Electric Service Company ("Sherwin" or "contractor") as prime contractor, entered into a written public works construction contract with the County of Los Angeles ("County"). The contract, known as Security & Ballfield Lighting, Various County Parks, provides, in pertinent part, as follows:

"Payments:

Payments on account of the work comprising the original contract will be made upon demand of the Contractor as follows:

a. On or about the first of each calendar month, a payment equal to ninety percent (90%) of the labor performed and material actually installed in the work during the previous calendar month will be made to the Contractor.

b. Payment of the ten percent (10%) withheld from these monthly progress payments will be made to the Contractor upon completion and acceptance by the Board of Supervisors of all the work called for under said original contract, (including work of the plant maintenance period), regardless of any addition to the contract or any extension of completion time.

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e. When progress payments are to be made, no payments on account of the work at any time while the same is in progress shall be considered an acknowledgment that any or certain portions of the work have been done in accordance with the drawings and specifications; nor shall any portion of the work be accepted by the Board of Supervisors until the whole is completed. Should there by [sic] any balance due the Contractor at the time of acceptance of the work such balance shall be paid upon said acceptance.

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Time of completion:

The work to be done under the contract shall be completed within 120 calendar days for ballfield lighting and 240 days for the balance of the work, each period beginning with the date stipulated in the written notice to proceed issued by the County Engineer.

Liquidated damages:

All time limits stated in the contract documents are of the essence of the contract and should the Contractor fail to complete the work required to be done on or before the time of completion as set forth in these specifications, including any authorized extensions of time, it is mutually understood and agreed, by and between the County and the Contractor, that the use by the public of the contract work will be correspondingly delayed and that by reason thereof the County and the public will necessarily suffer great damages; that such damages from the nature of the case, will be extremely difficult and impractical to fix; that the County and the Contractor have endeavored to fix the amount of said damages in advance; that the sum of One Hundred Thirty Dollars ($130.00) a day, for each and everyday's delay in the completion of the work required to be done by the Contractor subsequent to the time of completion, including any authorized extensions of time, is the nearest and most exact measure of damages for such breach that can be fixed now or could be fixed at or after such breach and that, therefore, the County and the Contractor hereby fix said sum of One Hundred Thirty Dollars ($130.00) a day, for each and every such day's delay as liquidated damages, and not as a penalty or forfeiture for the breach of the agreement to complete the work required to be done by the Contractor on or before the time of completion and, in the case of such breach, the County shall deduct said amount from the amount due the Contractor under the contract. In the event the remaining balance due the Contractor is insufficient to cover the full amount of assessed liquidated damages, then the Contractor or the surety on the bonds shall pay the difference to the County."

These terms and conditions were included in the plans and specifications on which all bidders were required to base their bids for the project. There were no actual negotiations between County and Sherwin concerning them.

On December 18, 1973, Sherwin and Westinghouse Electric Supply Company (Wesco, or "stop notice claimant") entered into a contract under which Wesco agreed to supply certain equipment and materials for the project and Sherwin agreed to pay for them. Wesco performed as required pursuant to its contract with Sherwin. Sherwin duly performed pursuant to its contract with County, except that the project was not timely completed. Portions of the project were completed at different times and County took beneficial possession of each part upon its completion:

September 20, 1974 Mayberry Park ballfield lighting

October 25, 1974 Security lighting

November 6, 1974 Valleydale Park ballfield lighting

November 13, 1974 Whittier Narrows ballfield lighting

By January 1, 1975, Sherwin had made demand for payment of the entire contract amount, including the 10 percent retention. On February 7, 1975, Wesco served a stop notice on County for an amount in excess of $40,000, the balance owed Wesco under its contract with Sherwin. As Wesco had a direct contractual relationship with Sherwin, it was not required to serve a preliminary 20-day notice on County before filing its stop notice. The stop notice fully complied with the requirements of Civil Code sections 3103 and 3184. When the stop notice was filed $36,745.35 had not yet been paid by County to Sherwin on the prime contract.

On May 7, 1975, the action below to enforce the stop notice was commenced by Wesco. In its first cause of action Wesco sought the balance due under its contract with Sherwin; in its second cause of action it sought to enforce its stop notice for the same money against contract funds owed by County to Sherwin. County answered on September 26, 1975, admitting the prime contract and receipt of the stop notice and denying everything else. On March 23, 1976, County formally accepted the project. At the same time it extended the time for completion of the project because of delays, assessed liquidated damages of $17,680, deducted the liquidated damages from the balance of the prime contract and determined that $19,065.35 was due Sherwin. Sherwin did not challenge the validity of the liquidated damages assessment. Because of the stop notice, no payment was made to Sherwin. County simply retained the funds; it made no effort to interplead the undisputed sum in the action to enforce the stop notice.

In early 1978 counsel for Sherwin proposed an assignment and release so that the undisputed $19,065.35 held by County could be paid to Wesco and credited against the amount owed it by Sherwin. Counsel for Wesco agreed to consider the proposal and eventually sent a revised assignment and release to counsel for Sherwin. On May 30, 1978, counsel for Sherwin sent an unexecuted copy of the assignment and release to County Counsel for review. That was, apparently, the last communication among the parties concerning the assignment and release.

On March 4, 1980, all aspects of the litigation were settled except the original second cause of action to enforce the stop notice. Wesco assigned the second cause of action to Sherwin. Part of the consideration paid by Sherwin to Wesco in settlement of the first cause of action and the assignment represented the funds held by County pursuant to the stop notice and interest on the money.

The cause was tried on stipulated facts. The court below decided that Sherwin, as assignee of the stop notice claimant, was not entitled to interest on the undisputed money and that the liquidated damages assessment was valid. Accordingly, the court made findings of fact and conclusions of law and entered judgment in favor of Sherwin as Wesco's assignee in the principal amount of $19,065.35 only.

PREJUDGMENT INTEREST

It is well settled that a private stop notice claimant is entitled to interest on the unpaid balance due on its contract.

"Where the amount payable under a contract is fixed thereby, interest thereon is recoverable in an action against the promissor from the date the obligation becomes due. [Citations.] The 'equitable garnishment' effected through stop notice proceedings, like a mechanic's lien, 'is as extensive as the claim which it is intended to protect.' [Citation.] In the case at bar, this claim included [the claimant's] demand for the amount due him under his contract and also an award of interest in the event he brought an action to enforce such demand. Interest prior to judgment has been awarded in actions to foreclose mechanics' liens [citations], and also in actions to effect recovery under stop notice proceedings which have resulted in a personal recovery against the owner. [Citation.] By the same standard, interest is recoverable under the circumstances at bar." (Calhoun v. Huntington Park First Sav. & Loan Assn. (1960) 186 Cal.App.2d 451, 462-463, 9 Cal.Rptr. 479; see also A-1 Door & Materials Co. v. Fresno Guar. Sav. & Loan Assn. (1964) 61 Cal.2d 728, 737, 40 Cal.Rptr. 85, 394 P.2d 829; Idaco Lumber Co. v. Northwestern S. & L. Assn (1968) 265 Cal.App.2d 490, 500, 71 Cal.Rptr. 422.)

Interest may be assessed against the wrongdoing, personally liable, fundholder at the legal rate from the date the stop notice claimant's obligor should have paid (...