Lewis Jorge Const. v. Pomona Unified Sch. 11/26/02 CA2/5

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State: California

Court: 1st District Court of Appeal 1st District Court of Appeal

Docket No: B143162

Case Date: 02/20/2003

Preview:Filed 11/26/02 Lewis Jorge Const. v. Pomona Unified Sch. Dist. CA2/5

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 977(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 977(b). This opinion has not been certified for publication or ordered published for purposes of rule 977.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA SECOND APPELLATE DISTRICT DIVISION FIVE LEWIS JORGE CONSTRUCTION MANAGEMENT, INC., Plaintiff, Respondent and Appellant, v. POMONA UNIFIED SCHOOL DISTRICT et al., Defendants, Appellants and Respondents. B143162 (Super. Ct. No. KC 023186)

APPEAL from a judgment of the Superior Court of Los Angeles County. Harold Cherness, Judge. Affirmed in part, reversed in part, and remanded. Case, Ibrahim & Clauss, Brian S. Case, F. Albert Ibrahim, and Michael A. Peters for Plaintiff, Respondent and Appellant. Best, Best & Krieger, Howard B. Golds, Piero C. Dallarda; Horvitz & Levy, Mitchell C. Tilner, and John A. Taylor, Jr. for Defendants, Appellants and Respondents. _______________

Pomona Unified School District (the "District") appeals the judgment entered in favor of Lewis Jorge Construction Management, Inc. ("Lewis Jorge") in the latter's lawsuit for breach of a construction contract, claiming the trial court committed instructional error and other errors of law. Lewis Jorge filed a cross-appeal, claiming that the trial court wrongly precluded its recovery of certain categories of damages. We find merit in several of the arguments proffered on appeal, and so affirm in part and reverse in part. FACTS In 1994, the District solicited bids for construction of the Vejar Elementary School (the "Project"). Lewis Jorge, a private building contractor owned and operated by Robert Lewis, was the lowest bidder. On or about August 18, 1994, the District awarded the construction contract (the "Contract") to Lewis Jorge. The total contract amount was $6,029,000. The Contract required Lewis Jorge to finish the School within 425 days after the District issued a "Notice to Proceed." The District issued the Notice to Proceed on September 30, 1994, which fixed the initial construction deadline at December 2, 1995. After factoring in 51 days of delay due to rain, the parties agreed to a new completion date of January 22, 1996. The Contract also included a liquidated damages clause, requiring Lewis Jorge to pay the District $500 for each day of delay. On June 5, 1996, the District terminated the Contract with Lewis Jorge. Lewis Jorge sued, claiming that the District's termination of the Contract after the Project was essentially complete breached the Contract. After a bifurcated trial, and pursuant to two special verdicts, the jury awarded Lewis Jorge $362,671 for sums due under the Contract, and $3,148,197 in lost profits due to Lewis Jorge's loss of bonding capacity following the termination. The jury awarded an additional $399,669 for claims CNA, Lewis Jorge's surety, asserted against Lewis Jorge. The jury found in favor of

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Lewis Jorge on the District's cross-complaint for breach of contract and breach of the covenant of good faith and fair dealing. Lewis Jorge also sued Christopher Butler, a District employee, who was the District's project manager on the Project. The jury rejected Lewis Jorge's theory of liability based on Butler's fraud and/or malice, but found that Butler was negligent, and held him jointly and severally liable for $3,510,868, consisting of the $362,671 in benefits Lewis Jorge would have received under the Contract but for the District's breach, and $3,148,197 in Lewis Jorge's lost profits. In post-trial motions, the trial court awarded Lewis Jorge $696,778 in attorney fees and costs and $167,186 in pre-judgment interest, and denied Lewis Jorge's motion for penalties and interest under Public Contract Code section 7107. All parties appealed. DEFENDANTS' APPEAL 1. Butler's liability Butler contends that the judgment against him must be reversed, because he owed no duty to Lewis Jorge to protect it from economic injury. Lewis Jorge argues that, under the authority of Biakanja v. Irving (1958) 49 Cal.2d 647 and its progeny, Butler is liable for his negligent performance of professional services which were intended to benefit Lewis Jorge. Butler's contention is well taken. Under California law, "[t]he threshold element of a cause of action for negligence is the existence of a duty to use due care toward an interest of another that enjoys legal protection against unintentional invasion. . . . Whether this essential prerequisite to a negligence cause of action has been satisfied in a particular case is a question of law." (Adelman v. Associated International Insurance Co. (2001) 90 Cal.App.4th 352, 360.) In Biakanja v. Irving, supra, 49 Cal.2d 647, our Supreme Court undertook to create a checklist of factors to consider in assessing the existence of a legal duty of one party to another in the absence of privity of contract between them. In Biakanja, the defendant notary public had prepared the will of the plaintiff's brother which left the entire estate to 3

the plaintiff. Due to the defendant's negligence, the will was improperly attested and could not be admitted to probate. As a result, the plaintiff received only her in testate share of the estate. The Court concluded that the defendant owed a duty of reasonable care to the plaintiff which he had clearly breached. In reaching this conclusion, the Court was careful not to declare an unlimited scope of liability in favor of any person who might have received a benefit under a contract but for its negligent performance. The Court emphasized that the "end and aim" of the will transaction was to benefit the plaintiff, and the injury to her from the defendant's negligence was clearly foreseeable. (Id. at p. 650.) Biakanja has no direct application to the facts of this case. Here, Lewis Jorge asserts that Butler negligently performed the prime construction contract entered into by and between Lewis Jorge and the District. However, Butler was not a party to that contract, and had no contractual obligations to anyone by reason of that contract. Rather, the District promised to perform certain duties, as specified in the contract, by and through its "Construction Manager." While Biakanja disposes of the impediment of lack of privity of contract in certain third party beneficiary situations, it does not hold that one can be liable for negligent performance of a contract to which one is not a party. In order to fit the Biakanja rubric, Lewis Jorge must seek to hold Butler liable for negligent performance of his employment contract with the District. Lewis Jorge has never framed its negligence allegations in this manner. Moreover, there is no authority for holding an employee liable to a third party for economic injury based on negligent performance of his job. The District goes to great lengths to explain how Ratcliff Architects v. Vanir Construction Management, Inc. (2001) 88 Cal.App.4th 595 is dispositive of this issue, while Lewis Jorge goes to equal lengths to distinguish that case. Both parties are well off the mark. Aside from the fact that both Ratcliff and the instant case concerned the construction of a school project, the two cases have nothing in common. The issue in Ratcliff was the architect's rights under a contract between the school district and the 4

defendant construction manager. The Court of Appeal acknowledged that "Courts sometimes impose a duty to prevent pure economic loss when there is no privity of contract when the injured party is an intended beneficiary of a contract between the defendant and another party. (E.g., J'Aire Corp. v. Gregory [(1979)] 24 Cal.3d [799,] 804-805.)" (Ratcliff Architects v. Vanir Construction Management, Inc., supra, at p. 605.) Here, however, Lewis Jorge does not claim rights under a contract between the District and Butler. Rather, it claims rights vis-

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