R.J. Land & Associates Construction Co. v. Kiewit-Shea

subcontractors from the evils of “bid shopping and bid peddling.” In “bid shopping,” a prime contractor uses the bid of the listed subcontractor' to pressure other subcontractors to do the work for even less, to the contractor’s profit. In “bid peddling,” conversely, other subcontractors undercut the known bid of the listed subcontractor. (Southern Cal. Acoustics, supra, 71 Cal.2d 719 , 726, fn. 7; Valley Crest Landscape, Inc. v. City Council (1996) 41 Cal.App.4th 1432 , 1438 [ 49 Cal.Rptr.2d 184 ].) The Legislature has expressly found, “the practices of bid shopping and bid peddling in connection with the construction, alteration, and repair of public improvements often result in poor quality of material and workmanship to the detriment of the public, deprive the public of full benefits of fair competition among prime contractors and subcontractors, and lead to insolvencies, loss of wages to employees, and other evils.” (§ 4101.)

To achieve the legislative purpose, the act: (1) requires the prime contractor to list in its bid each subcontractor who will perform work in an amount in excess of one-half of 1 percent of the prime contractor’s bid, to describe the work which will be done by each subcontractor, and to list only one subcontractor for each portion as defined in the prime contractor’s bid (§ 4104); (2) requires the prime contractor itself to perform any work for which the prime contractor either fails to specify a subcontractor or specifies more than one subcontractor for the same portion of work (§ 4106); and (3) prohibits the prime contractor to substitute any other subcontractor for the subcontractor listed in the original bid, except in specified narrow circumstances (§§ 4107, 4107.5). Section 4107 permits the awarding authority to consent to substitution of a different subcontractor under specified conditions, all but one of which relate to the unwillingness or inability of the listed subcontractor to perform the work. (§ 4107, subd. (a) [(1) subcontractor refuses to execute subcontract, (2) subcontractor becomes bankrupt or insolvent, (3) subcontractor fails or refuses to perform, (4) subcontractor fails or refuses to meet bond requirements, (6) subcontractor not licensed, (7) awarding authority determines subcontractor’s work is substantially unsatisfactory or not in substantial accordance with the specifications, or is substantially delaying or disrupting the progress of the work].) The other condition, in section 4107, subdivision (a)(5), occurs when the prime contractor demonstrates to the awarding authority that the name of the subcontractor listed in the original bid was an inadvertent clerical error, but this condition is “subject to the further provisions set forth in Section 4107.5.” Section 4107.5 requires that a prime contractor’s claim of inadvertent clerical error in the listing of the subcontractor be made “within two working days after the time of the prime bid opening by the awarding authority,” with timely notice to both the listed subcontractor and the intended subcontractor, and

provides for a public hearing if the listed subcontractor timely objects. “The two-day written notice provision of section 4107.5 fosters [the legislative purpose of the act] by forcing the prime contractor to assert its error in short order, and on the record, thus minimizing the time in which the contractor can shop for lower bids and limiting the room for deceptive maneuver.” (Cal-Air Conditioning, Inc. v. Auburn Union School Dist. (1993) 21 Cal.App.4th 655 , 668 [ 26 Cal.Rptr.2d 703 ].)

Any violation of the act subjects the prime contractor to statutory penalties (§ 4110) and disciplinary action by the Contractors State License Board (§ 4111). These penalties do not limit or diminish any legal or equitable rights or remedies a subcontractor may have against the prime contractor. (§ 4103, subd. (a).)

The fact that the prime contractor has listed a subcontractor in the prime contractor’s bid does not create a contract between them. (Southern Cal. Acoustics, supra, 71 Cal.2d at pp. 722-723.) But section 4107 creates a statutory duty of the prime contractor toward the subcontractor, because unless the statutory exceptions are satisfied, the prime contractor “ha[s] no right to substitute another subcontractor in place of’ the listed subcontractor; the statute “confers the right on the listed subcontractor to perform the subcontract unless statutory grounds for a valid substitution exist. Moreover, that right may be enforced by an action for damages against the prime contractor to recover the benefit of the bargain the listed subcontractor would have realized had he not wrongfully been deprived of the subcontract.” (Southern Cal. Acoustics, supra, 71 Cal.2d at pp. 726, 727, & fn. 9.)

Factual and Procedural Background

The Metropolitan Transportation Authority (MTA) invited bids for construction of a subway station at Vermont Avenue and Santa Monica Boulevard in Los Angeles. Defendant/respondent Kiewit-Shea, a joint venture, is the prime contractor, and plaintiff/appellant RJ. Land and Associates Construction Company (Land) is the listed subcontractor claiming to have been wrongfully substituted out with respect to performing the “glass paver panel” work.

MTA gave certain plans and specifications for the project. Among the categories of work in MTA’s plans and specifications were the following: (1) concrete unit masonry, item No. 4220, consisting of furnishing materials and performing work to complete the concrete unit masonry installation as indicated; (2) precast concrete, item No. 3410, consisting of furnishing and installing precast covers for walkways, train control and communication

trenches and steps, using lightweight concrete, precast concrete manholes, access hatches and crossover structures using normal weight concrete, precast concrete edge pavers and benches, and custom precast concrete platform base benches; and (3) precast glass paver panels, item No. 4275, consisting of furnishing and installing precast glass paver panels composed of glass paver units, mortar, concrete, joint reinforcement, sealant and other items required for a finished installation.

Prior to submitting its prime bid due July 15, 1993, Kiewit-Shea received hundreds of proposals from subcontractors. As customary, some of these proposals were received just minutes before the deadline for submission of sealed prime bids. As customary, Kiewit-Shea maintained telephone contact with an agent located near where the prime bid was to be submitted, for the purpose of making last-minute adjustments. Kiewit-Shea listed many subcontractors tentatively, but left a few blanks for the purpose of making last-minute adjustments in the total bid.

Kiewit-Shea received from Land a bid for “Concrete Unit Masonry,” item No. 4220, in the amount of $272,162, and for “Glass Block Panels,” item No. 4275, in the amount of $425,739. Kiewit-Shea tentatively used Land’s prices of $272,000 for concrete masonry units (abbreviated CMU) and $426,000 for “Precast Glass Panels.” In its list of proposed subcontractors submitted to MTA as required by section 4104, Kiewit-Shea listed Land as the subcontractor for “CMU” and “Glass paver” in the total amount of $698,000 (i.e., $272,000 plus $426,000).

At the last minute, but before submitting its prime bid, Kiewit-Shea received from Willis Construction Co., Inc. (Willis) a proposal for “precast concrete items” including $161,000 relating to item No. 3410, precast concrete, and $311,000 for item No. 4275, glass paver panels.

Before submitting its prime bid, Kiewit-Shea modified its bid to reduce the total bid by $115,000. Kiewit-Shea’s intention was to use Willis’s bid of $311,000 for glass paver panels, in place of Land’s bid of $426,000 for glass paver panels, a difference of $115,000. In its list of proposed subcontractors filed pursuant to section 4104, Kiewit-Shea listed and circled Willis as subcontractor for “PC Concrete” in the amount of $311,000. Kiewit-Shea circled its previous listing of Land as the proposed subcontractor, intending to use Land for concrete masonry units only, but neglected to cross out “glass paver,” or to change the amount as to Land, so that the listing of Land continued to describe the work to be done by Land as “CMU” and “Glass paver” in the amount of $698,000. Kiewit-Shea did not discover nor move to

correct these errors within the two-day time limit provided in section 4107.5 for seeking correction of inadvertent clerical errors. Kiewit-Shea contends it did not discover the errors until sued by Land in the present case.

Kiewit-Shea’s bid was accepted by MTA. On or about September 1, 1994, Kiewit-Shea signed a subcontract with Land for the CMU work only, on the assumption Willis would do the glass paver panel work. Land completed the CMU contract and was fully paid for it. There is no dispute as to Land’s CMU contract; the dispute here is that Land contends it was also listed as the subcontractor for the glass paver panel work but was not given the subcontract for glass paver panel work.

In May 1996, Willis informed Kiewit-Shea that Willis was unable to perform the glass paver panel work. In June 1996, Kiewit-Shea obtained consent from MTA (presumably pursuant to section 4107, subdivision (a)(1) or (a)(3)) to substitute Glass Block Installers (not Land) in place of Willis to do the glass paver panel work.

In February 1998, Land filed the present action for breach of statutory duty, contending that Land was listed as the subcontractor for the glass paver panel work and was wrongfully substituted out. Land sought its lost profits which it calculated as $185,739 (the difference between its subcontract bid of $425,739, and $240,000, the amount Land claimed it would have cost Land to perform the subcontract).

Kiewit-Shea answered the complaint, generally denying the allegations of the complaint and asserting affirmative defenses that (1) Land has no “right to perform the glass paver work,” because Kiewit-Shea had inadvertently listed two subcontractors to perform glass paver panel work, and (2) Land’s claim is barred by the statute of limitations.

Land moved for summary judgment for $185,739, supported by the declaration of Roderick J. Land (Mr. Land) that Land’s profit would have been $185,739. Land amended its motion to request, in the alternative, summary adjudication that Kiewit-Shea’s first affirmative defense (no right to perform the work) and second affirmative defense (statute of limitations) were without merit.

Kiewit-Shea filed its motion for summary judgment. Kiewit-Shea’s motion for summary judgment was based solely on its contention that Land had no right to perform the subcontract. Kiewit-Shea also filed its opposition to Land’s motions for summary judgment and summary adjudication, contending that Kiewit-Shea’s first affirmative defense was meritorious for the same

glass paver panels; Kiewit-Shea had no lawful basis under the act to substitute any other subcontractor for the glass paver panel work, as there is no contention that Land was unable or unwilling to do the work, and Kiewit-Shea did not timely invoke the statutory procedure to claim that the listing of Land for the glass paver panel work was an inadvertent clerical error; therefore, pursuant to Southern Cal. Acoustics Land has a cause of action for breach of a statutory duty to award that work to Land.

The theory of the summary judgment for Kiewit-Shea, which is the same as Kiewit-Shea’s first affirmative defense, runs as follows: Kiewit-Shea’s bid should be interpreted as having (inadvertently) listed two subcontractors, Land and Willis, to do the glass paver panel work; under section 4106, if a prime contractor lists two subcontractors to do the same work, the prime contractor must do the work itself; therefore, unlike the circumstances in Southern Cal. Acoustics, supra, 71 Cal.2d at page 727, Land has no “right” to a subcontract.

We agree with Land that the relevant undisputed facts refute KiewitShea’s defense.

Kiewit-Shea has repeatedly asserted, below and on appeal, that it is “undisputed” Kiewit-Shea listed two subcontractors for glass paver panel work in its bid. It is not true that this assertion was undisputed by Land. Land’s separate statement of facts in opposition to Kiewit-Shea’s motion for summary judgment expressly disputed this alleged fact, and asserted to the contrary that Kiewit-Shea’s bid listed Willis only for “precast concrete,” not glass paver panels. Kiewit-Shea asserted in reply that Mr. Land admitted in his deposition that Kiewit-Shea’s bid listed Willis for glass paver panels. This argument gives unwarranted effect to Mr. Land’s testimony. Mr. Land conceded that the $311,000 amount listed under Willis for “PC Concrete” coincided with the amount Willis proposed to Kiewit-Shea for the glass paver panel work. Mr. Land was then asked, “Do you have any reason to doubt, based upon this information, that that was a listing of Willis Construction for the glass paver panels,” to which he responded “no.” Mr. Land’s counsel appropriately objected this was a mere legal conclusion. The doctrine that admissions made in depositions are given great weight does not apply to mere legal conclusions. (Weil & Brown, Cal. Practice Guide: Civil Procedure Before Trial (3 The Rutter Group 1998) ¶ 10:158.1, p. 10-57, rev, #1, 1998.)

Not only did Land “dispute” that Kiewit-Shea’s bid listed two subcontractors for glass paver panels, Land correctly contended, we hold,

Glass Block Installers. Under Kiewit-Shea’s interpretation, a prime contractor could list two subcontractors for the same item of work and then invite them to bid against each other to get the work, and neither subcontractor could complain. This would frustrate the policy of the act and the Southern Cal. Acoustics enforcement mechanism. (See Southern Cal. Acoustics, supra, 71 Cal.2d at p. 726, fn. 7 [“Subsequent to the award of the prime contract at a set price, the prime contractor may seek to drive down his own cost, and concomitantly increase his profit, by soliciting bids lower than those used in computing his prime bid. When successful this practice places a profit squeeze on subcontractors, impairing their incentive and ability to perform to their best, and possibly precipitating bankruptcy in a weak subcontracting firm.”].) Section 4106 itself provides a penalty (“[t]he prime contractor shall be subject to the penalties named in Section 4111 [discipline by Contractors State License Board]”) if, as here, the prime contractor nevertheless subcontracts the work after listing two subcontractors for the same work. Section 4106 should not be construed to defeat Land’s Southern Cal. Acoustics claim in the manner advocated by Kiewit-Shea. Section 4103 provides, “Nothing in this chapter limits or diminishes any rights or remedies, either legal or equitable, which: HQ (a) An original or substituted subcontractor may have against the prime contractor, his or her successors or assigns.” (See also § 4112 [“The failure on the part of a contractor to comply with any provision of this chapter does not constitute a defense to the contractor in any action brought against the contractor by a subcontractor.”].) Contrary to KiewitShea’s argument, we find nothing in Southern Cal. Acoustics, supra, 71 Cal.2d at page 727, which impliedly precludes a cause of action by a listed subcontractor when the prime contractor, claiming to have listed two, awards the subcontract to another.

It follows that the summary judgment in favor of Kiewit-Shea must be reversed, and also that Land was entitled to summary adjudication of Kiewit-Shea’s first affirmative defense.

Other Issues

In its motions below, Land sought more than the mere defeat of KiewitShea’s motion for summary judgment or the mere summary adjudication in favor of Land as to Kiewit-Shea’s first affirmative defense.. Land, as plaintiff, sought an entire summary judgment in Land’s favor. Land offered the declaration of Mr. Land claiming the specific amount of $185,739 as damages. Land contended there was no material issue of fact as to Land’s lost profits, thus the issue of damages could be summarily adjudicated in Land’s favor. Land further contended that Kiewit-Shea’s other affirmative defense,

statute of limitations, could also be summarily adjudicated in Land’s favor. In opposition to Land’s motion for summary adjudication of the damages and statute of limitations issues, Kiewit-Shea raised issues of fact as to both. (Kiewit-Shea’s own motion for summary judgment was based solely on the issue of Land’s right to the subcontract; Kiewit-Shea did not contend that it was entitled to summary judgment based on the statute of limitations defense.)

Land’s requests for summary adjudication of the statute of limitations and damages issues may be reviewed upon appeal from the summary judgment (White Motor Corp. v. Teresinski (1989) 214 Cal.App.3d 754 , 764, fn. 17 [ 263 Cal.Rptr. 26 ]), but in this case they require only brief discussion. These issues clearly involve triable issues of fact rendering summary adjudication inappropriate.

Damages.

In support of Land’s motion for summary judgment, Mr. Land declared that the “cost to plaintiff to [sic] the glass block paver work would have been in the sum of $240,000.00 as set forth on the calculation of costs prepared by plaintiff and attached hereto as Exhibit ‘C.’ ” Exhibit C was an unsigned, undocumented, simple tabular calculation which listed five different entries under “labor,” totaling $13,000. In opposition to Land’s motion, KiewitShea objected to Land’s conclusory declaration and submitted impeaching evidence from Mr. Land’s deposition and application to MTA in connection with the owner controlled insurance program, in which Land estimated its payroll costs to perform the glass paver panel work would be $127,721. Mr. Land explained this in his deposition by asserting the latter figure was just something he “fabricated” because, “[b]asically you are required to turn in something to the M.T.A., and I just fabricated a figure to give to them to suffice for the insurance program.” On motion for summary adjudication, the trial court was not required to accept Mr. Land’s declaration. (Code Civ. Proc., § 437c, subd. (e).) There was a substantial basis upon which to doubt the estimate of lost profits in exhibit C. The issue of damages is ordinarily a triable issue of fact.

Statute of limitations.

Land’s complaint was filed on February 19, 1998. As described in Southern Cal. Acoustics, Land’s cause of action is for “breach of a statutory duty” pursuant to section 4107. (71 Cal.2d at pp. 722, 727.) The applicable statute of limitations is therefore three years, for “[a]n action upon a liability created by statute.” (Code Civ. Proc., § 338, subd. (a).) But the record is full of

factual conflicts and ambiguities as to when Land’s cause of action arose. The declaration of Douglas Duplisea, Kiewit’s area manager, submitted in support of Kiewit-Shea’s motion for summary judgment suggests that Kiewit-Shea’s bid was submitted to MTA on July 15, 1993. The declaration of Mr. Land in support of Land’s motion for summary judgment says, without further explanation, that MTA awarded the contract to Kiewit-Shea “[b]e-tween July 15, 1993 and October 7, 1993.” Mr. Land’s declaration stated that Land entered a subcontract with Kiewit-Shea for the CMU work on September 1, “1994” (sic), but that Land was “not further contacted by defendants with regard to the glass block paver work,” and that Land “discovered the fact that [Gjlass [Bjlock [Ijnstallers did the glass block paver work approximately November 15, 1997.” In opposition to Land’s motion for summary adjudication of the statute of limitations issue, KiewitShea pointed out that Mr. Land admitted in his deposition that, shortly after July “1993” (sic), when Land was given the CMU subcontract, Mr. Land telephoned and inquired “if we were going to do the glass block panels,” and was told “No,” whereupon he “just let it go at that point.”

This ambiguous and conflicting evidence does not permit summary adjudication in favor of Land on the statute of limitations.

Disposition

The judgment is reversed. The cause is remanded for such further proceedings as may be necessary, consistent with the views expressed in this opinion. The parties shall bear their own costs on appeal.

Hastings, J., and Curry, J., concurred.

Respondent’s petition for review by the Supreme Court was denied April 21, 1999.