Regency Midland Construction, Inc. v. Legendary Structures Inc. ( 2019 )


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  • Filed 11/7/19
    CERTIFIED FOR PUBLICATION
    IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
    SECOND APPELLATE DISTRICT
    DIVISION EIGHT
    REGENCY MIDLAND                      B292602
    CONSTRUCTION, INC.,
    (Los Angeles County Super. Ct.
    Plaintiff and Respondent,      No. BC629322)
    v.
    LEGENDARY STRUCTURES INC.,
    Defendant and Appellant.
    APPEAL from a judgment of the Superior Court of Los
    Angeles County, Howard Halm, Judge. Affirmed.
    The Soni Law Firm, M. Danton Richardson, Leo E.
    Lundberg, Michael A. Long for Defendant and Appellant.
    Law Office of Parham Hendifar, Parham Hendifar, Michael
    Diaz for Plaintiff and Respondent.
    __________________________
    A general contractor named Regency Midland
    Construction, Inc. hired subcontractor Legendary Structures, Inc.
    to do the concrete work for a new apartment building. Legendary
    quit halfway through. Regency and Legendary sued each other.
    Their dispute turns on the “retention” clause in the contract. The
    trial court properly granted summary judgment for Regency and
    dismissed Legendary’s cross-claims. We affirm.
    First is background. The deal was for about $2 million of
    concrete work for a new 71-unit apartment building. After
    Legendary quit, Regency got ANM Construction to finish the
    concrete job. Regency and Legendary fell to feuding about who
    owed whom what.
    The fight was about retention. Regency withheld money
    from Legendary, citing the retention clause. Before Legendary
    quit, Regency had paid Legendary about $1 million for its work.
    That sum was 90% of Legendary’s billings because the contract
    allowed Regency to withhold 10% of the amount due Legendary
    as security to ensure Legendary properly completed the job.
    Regency withheld from Legendary about $125,000, which we call
    the retention sum. Regency insisted on keeping that sum.
    Legendary demanded it. That is the main dispute.
    The trial court granted Regency’s motion for summary
    judgment, thus allowing Regency to keep the retention sum.
    Legendary appeals, saying the contract language entitles it to the
    sum.
    Our review of this summary judgment ruling is
    independent. (Conroy v. Regents of University of California
    (2009) 
    45 Cal. 4th 1244
    , 1249.) Summary judgment is not
    disfavored, but rather a good way to test the merits without the
    burdens of trial. (Perry v. Bakewell Hawthorne, LLC (2017) 2
    2
    Cal.5th 536, 542.) The usual rules governing this procedure
    apply. (See, e.g., Code Civ. Proc., § 437c, subds. (c) & (p)(2).)
    This summary judgment appeal is purely a duel over
    contract interpretation, with no disputed issues of fact. The key
    sentence in the contract between Regency and Legendary
    specified “Ten percent (10%) of Subcontractor’s contract amount
    shall be withheld and will be released 35 days after completion of
    subcontractors work.” This 10% withholding created the
    retention sum.
    Felix Frankfurter reputedly said the three rules of
    statutory interpretation are to read the statute, read the statute,
    and read the statute. The same wise counsel applies to
    interpreting every text. So we read read read the contract, which
    we now describe.
    The contract is two pages, with a two page attachment. It
    begins by listing the date as “AUGUST/13/2015.” (The oddity of
    this usage will later assume significance.) The contract lists the
    lending bank and other preliminary information for the
    construction project. It then announces the agreement is
    between Regency “hereafter called ‘CONTRACTOR’” and
    Legendary “hereafter called ‘SUBCONTRACTOR’ . . . .” It
    specifies the concrete work for Legendary to perform. Next it
    states the total sum of $2,165,000 for the whole project is “TO BE
    PAID EACH MOTH [sic] ACCORDING TO THE PROGRESS OF
    THE WORK ACCORDING TO THE BANKS [sic] SCHEDULE.”
    We pause to emphasize that these preliminary lines of text
    contain odd stylistic usages and spelling and punctuation errors,
    some of which we have just noted. There also is a varying and
    apparently random pattern of capitalization, with some words in
    3
    all capitals, some words with initial capitals, and some words
    with no capital letters. These points too later become significant.
    Now comes the vital sentence: the retention clause. This
    clause is one of the primary recitals of the contract. It is one
    sentence long. It includes strikeout wording, a typed substitute
    insertion that replaces the strikeout words, and two sets of
    handwritten initials in the margin to show approval of the
    wording change.
    Together with the strikeout words, the original retention
    clause reads: “Ten percent (10%) of Subcontractor’s contract
    amount shall be withheld and will be released 30 days after final
    completion of the building.”
    The typed insertion for the strikeout is this: “35 days after
    completion of subcontractors [sic] work.” We note the drafters’
    omission: there is no possessive apostrophe, either singular or
    plural. We count this as a simple error. “Subcontracting work”
    would seem to be the phrase to use if one wanted to avoid an
    apostrophe. Below we return to the significance, or rather the
    insignificance, of this error.
    The pair of handwritten initials is next to this insertion.
    So the final and complete retention clause — striking the
    strikeout and inserting the insertion — reads like this, with our
    italics: “Ten percent (10%) of Subcontractor’s contract amount
    shall be withheld and will be released 35 days after completion of
    subcontractors work.”
    The central dispute boils down to the meaning of
    “subcontractors” in this sentence.
    There are many more words in the contract, including a so-
    called Article 13, but the retention clause is the key. The other
    words are either consistent or irrelevant.
    4
    We recite that key language (with our italics) once more,
    for coherence and emphasis: “Ten percent (10%) of
    Subcontractor’s contract amount shall be withheld and will be
    released 35 days after completion of subcontractors work.”
    Legendary’s argument is not crystalline but amounts to
    this: the italicized word “subcontractors” must mean any
    subcontractor, not just Legendary. Legendary itself did not
    complete the concrete subcontracting work, true, but the
    replacement subcontractor ANM did, so once ANM completed the
    work, Legendary should get the 10% Regency withheld from the
    payments for the work Legendary did before it abandoned the
    project. To do otherwise, Legendary protests, is “baseless and
    inequitable.” In sum, then, Legendary says subcontractor should
    be interpreted to mean any concrete subcontractor, not
    Legendary in particular.
    Regency’s position, by contrast, is subcontractor’s work
    means Legendary’s work specifically. Legendary’s work was the
    entire concrete job the contract specified — providing all the
    labor, materials, and equipment and ensuring the result was up
    to code and free of liens — which Legendary never completed.
    Thus Legendary is entitled to no further sums. The fact ANM
    substituted in to save the day does not matter, according to the
    language of the contract, says Regency.
    Regency is right and so was the trial court’s result.
    As a matter of literal interpretation, Regency wins. The
    contract defines “SUBCONTRACTOR” as “Legendary Structures,
    Inc.” Legendary’s attempt to expand this definition to include
    ANM violates the contractual language.
    There are two wrinkles, but they are inconsequential. The
    drafters made two textual errors. We repeat the key sentence
    5
    again, now with no italics: “Ten percent (10%) of Subcontractor’s
    contract amount shall be withheld and will be released 35 days
    after completion of subcontractors work.” First, as already noted,
    the drafters omitted the possessive apostrophe from the inserted
    word “subcontractors.” Second, the drafters did not place either
    “Subcontractor’s” or “subcontractors” in all capitals, as appeared
    earlier in the document, thus creating a triple inconsistency in
    the use of capital letters in this word. Legendary’s lawyers do not
    make anything of these drafting flaws, and neither do we. Given
    the pattern of spelling and capitalization errors elsewhere in this
    document, we ascribe these two errors to carelessness rather
    than intentionality. These careless errors are inconsequential.
    As a matter of purposive interpretation, Regency wins
    again. Purpose can be illuminating when interpreting any
    written directive, because understanding what the parties were
    trying to accomplish by means of their words can help make
    sense of those words. (See, e.g., Falkowski v. Imation Corp.
    (2005) 
    132 Cal. App. 4th 499
    , 509–515 (Falkowski); Rest.2d
    Contracts, § 202, subd. 1 & com. c, pp. 86 & 88.) The Falkowski
    opinion, for instance, exemplifies purposive interpretation when
    it rejected one party’s proposed interpretation because that
    interpretation “fail[ed] to further the purposes” for which the
    contract was created. 
    (Falkowski, supra
    , 132 Cal.App.4th at p.
    509.)
    A sense of purpose can be especially important when
    careless errors plague a text. If a purpose is clear, it can be an
    anchor in an error-ridden sea.
    What was the purpose of the retention language? What
    were the contract parties trying to accomplish by including this
    clause, which they amended so conspicuously with their
    6
    strikeouts and insertion? No party offered extrinsic evidence.
    We discern the contract’s purpose from the contract’s words. (Cf.
    
    Falkowski, supra
    , 132 Cal.App.4th at pp. 509–510 [neither side
    offered extrinsic evidence; court relied only on contract language
    to determine contractual purpose].)
    The purpose of the retention clause was, as Legendary put
    it in oral argument, to “ensure proper performance.” This
    description is obviously correct.
    There are many dimensions to proper performance. Two
    are to finish the job and to finish it swiftly. But Legendary did
    not finish swiftly. It did not finish at all. So it justly must suffer
    the consequences of its contractual failing, which is loss of the
    10% withholding. The trial court’s ruling is consistent with this
    result and was correct.
    In other cases with other facts, other aspects of proper
    performance may be significant. In those other cases, the parties
    would do well to explain to judges the purpose of the contract
    language and how that purpose does or does not fit those facts.
    Legendary on appeal has formulated new arguments it
    never presented to the trial court. The arguments involve Civil
    Code sections 3275 and 8810. Legendary has forfeited the new
    arguments. Legendary claims its new arguments are strictly
    legal and therefore we have discretion to consider them. But
    Legendary’s reply brief at page 15 belies this “strictly legal” claim
    because Legendary faults Regency for failing to offer facts in
    response to the arguments Legendary never made in the trial
    court. And Legendary offers no good reason why we should
    exercise discretion to depart from the usual and usually sound
    forfeiture rule.
    7
    There is a second issue in this appeal. Legendary makes
    this second argument about attorney fees.
    A prevailing party is entitled to recover attorney fees by
    contract. (Butler-Rupp v. Lourdeaux (2007) 
    154 Cal. App. 4th 918
    ,
    923.) This contract had such a provision.
    Trial courts determine who is the prevailing party based on
    an evaluation of whether a party prevailed on a practical level.
    Among the factors the trial court should consider is the extent to
    which each party has realized its litigation objectives. We review
    for abuse of discretion the trial court’s assessment of which party
    prevailed. (Olive v. General Nutrition Centers, Inc. (2018) 30
    Cal.App.5th 804, 824 (Olive).)
    Legendary incorrectly argues the trial court erred by
    awarding attorney fees because Legendary, not Regency, was the
    prevailing party in the trial court. This is incorrect. Regency
    established Legendary was liable to it and not vice versa.
    Regency won a dollar judgment against Legendary. Regency
    prevailed. The trial court ruling was correct.
    Legendary notes Regency won less than it requested. This
    fact can be pertinent in a damages-only trial, where the
    defendant stipulates to liability. (E.g., 
    Olive, supra
    , 30
    Cal.App.5th at pp. 822–829.) This is not a case like that.
    8
    DISPOSITION
    The judgment is affirmed. Costs to Regency.
    WILEY, J.
    WE CONCUR:
    BIGELOW, P. J.
    GRIMES, J.
    9
    

Document Info

Docket Number: B292602

Filed Date: 11/7/2019

Precedential Status: Precedential

Modified Date: 11/7/2019