Michael VINER, et al., Plaintiffs, Respondents, and Cross–Appellants, v. Donald BROCKWAY, et al., Defendants, Appellants, and Cross–Respondents.
Defendants appeal from a judgment entered in favor of plaintiffs after special jury verdict finding defendants negligent and awarding damages in the amount of $893,419. The jury found that 67 percent of the liability was with appellants Brockway/Leighton and 33 percent was with appellants Williams/McCutchan. The trial court refused to enforce contractual limitation of liability clauses; refused to offset respondents' independent inverse condemnation settlement against damages awarded herein; and, denied appellants' motions for recovery of attorney fees.
Plaintiffs cross-appeal. The trial court granted cross-respondents' motions for nonsuit with respect to cross-appellants' breach of contract cause of action and denied cross-appellants' motions for attorney fees.
Respondents (cross-appellants) Viner and Cousins are each the owners of residences on Eden Place in the City of Los Angeles. Respondents' properties are on hillside lots. Eden Place is down slope from respondents' residences.
In 1956, the City of Los Angeles graded and constructed Eden Place as a public street project. The street grading created steep slopes on and in the vicinity of the lots which were later purchased by respondents.
The parties are in accord that the City's 1956 grading cuts to create Eden Place were a substantial contributing cause, if not the only cause, of the recurrent landsliding problem on respondents' slopes. The City's grading for Eden Place was legal and complied with applicable code requirements in 1956, although such code provisions were subsequently changed.
On numerous occasions between 1959 and 1980, during years of heavy rainfall, slope failure or earth slippage was evident on and in the immediate vicinity of respondents' properties.
In 1978, the City of Los Angeles served respondents Viner with a compliance order compelling repair of the unstable slope. Initially, respondents Viner and Cousins personally dealt with the City and sought professional, expert consultation. Respondents consulted with a geotechnical engineering firm, Geolabs, which had performed testing and analysis of the slopes, including subsurface work, commencing in 1975. Geolabs recommended a very costly reconstruction of the slope with a large retaining wall and drains. Respondents did not accept the expensive Geolabs' solution and sought other more economical alternatives.
Both respondents retained legal counsel to represent them in dealing with the City of Los Angeles and in negotiating with and retaining the necessary expert consultants for the repair project. Respondent Viner personally consulted with appellant Williams/McCutchan, including receiving assurances from said appellant with respect to the efficacy and reliability of the proposed gabion blanket repair system. Respondent Cousins had some personal contact with appellants. For the most part, respondents Cousins relied upon legal counsel to deal with the expert consultants regarding their retainer contracts and the repair project itself.
There is no evidence indicating that any of the attorneys were qualified to act or that any of them did in fact act as experts in the technical, soils/civil engineering, design or construction phases of the repair project. The evidence is uncontradicted that, throughout this transaction, appellants held themselves out as qualified experts in civil and/or soils engineering; represented themselves as qualified to engineer and design solutions for respondents' landslide problems; and, that appellants' proposed gabion blanket system would achieve the desired results.
In 1980, acting through their legal counsel, respondents retained appellants McCutchan and Leighton to provide civil/soils engineering services and project management for the planning, design and construction of a “remedial repair” of the unstable slope condition. Respondents' legal counsel negotiated the retainer agreements for the professional, expert services to be rendered in the project, including liability limitation clauses. It is noted that, for unexplained reasons, respondents Viner did not sign their contract with appellant Leighton. Leighton was, however, authorized to proceed on the Viner property and the proposed work was performed. In accordance with the unsigned agreement terms, Viner paid Leighton for services rendered.
Respondents' retainer agreement with appellant Leighton contained the following clause:
“8. Limitation of Liability and Disclaimer of Warranties:
Unless otherwise negotiated in writing, client agrees to limit any and all liability, claim for damages, cost of defense, or expenses to be levied against Consultant on account of design defect, error, omission, or professional negligence to be a sum not to exceed $25,000 or Consultant's fees, whichever is greater․ No warranty, express or implied, of merchantability or fitness, is made or intended in connection with the work to be performed by Consultant or by the proposal for consulting or other services or by the furnishing of oral or written reports or findings by Consultant.” (As noted above, respondents Viner did not sign this agreement.)
Respondents' retainer agreement with appellant McCutchan contained the following clause:
“28. The client agrees to limit the consultant's liability to the client and to all contractors and subcontractors on the project, due to professional negligent acts, errors or omissions of the consultant to the sum of ($50,000 for Viner) ($132,029 for Cousins) or the consultant's fee, whichever is greater.” (As between respondent Cousins and McCutchan, counsel for Cousins negotiated the higher liability limitation amount.)
Appellant McCutchan recommended installation of a “remedial repair” known as a gabion blanket. Appellant Leighton provided geotechnical consulting expertise in the project design and construction. The gabion blanket system was not code complying and was a significantly less expensive alternative. Installation of the gabion blanket system was completed in or about March, 1981. Appellants were paid for their services. The City of Los Angeles accepted the work and rescinded its compliance order.
In early 1983, the Los Angeles area, including the respondents' neighborhood, received unusually heavy rainfall. There was evidence that failure of the gabion system began on or before February 10, 1983. On or about March 1, 1983, large amounts of rain fell upon the general area of respondents' properties. In addition, the drainage system on respondent Viners' property malfunctioned and discharged runoff water onto the slope area. The gabion blanket system designed, planned and installed by appellants failed. The ensuing slope failure caused damage to the city street (Eden Place) below.
Various schemes for repair and/or modification of the gabion system were proposed. Appellant Leighton and respondents Viner agreed to equally share the costs of the proposed repair. Appellant McCutchan agreed to provide project coordination and supervision at no cost. The repair was to be at no expense to respondent Cousins. Appellant Leighton memorialized this agreement by letter which did not contain a clause limiting liability nor did it refer to or incorporate the original 1980 agreement.
Appellants sought City approvals of the gabion repair/modification plans and negotiations with the City Department of Public Works continued into 1986. The City of Los Angeles, Department of Public Works, would not approve repair and/or modification of the gabion blanket system. The Department would only approve a solution which contemplated complete removal and reconstruction of the slope meeting then applicable code requirements. The estimated cost of the solution demanded by the City was approximately $600,000. The Department of Public Works would not change its demands, regardless of cost.
Respondents demanded that appellants install and pay for a code-complying repair. Appellants refused contending that such a project was outside the scope of the original remedial repair agreement.
The parties agreed that for purposes of this case appellant Leighton was liable for the acts and omissions of its employee, appellant Brockway, and that appellant McCutchan was liable for the acts and omissions of its employee, appellant Williams.
Respondents filed their complaint on January 15, 1987. Respondents' complaint was amended. Answers were filed. Some discovery was accomplished. The mandatory dismissal provisions of Code of Civil Procedure section 583.310, the so-called “five-year statute,” would have become effective on January 15, 1992. Respondents filed a Motion to Specially Set Trial Date on October 25, 1991. The motion for special trial setting was granted on November 14, 1991.
Trial and jury selection began March 10, 1992 and continued thereafter until March 20, 1992. Percipient and expert witnesses were called by all sides. An abundance of photographs, charts and diagrams were received into evidence. The cause was submitted to the jury, which returned a special verdict finding appellants negligent and awarding damages in the amount of $893,419; 67 percent attributable to appellant Brockway/Leighton; 33 percent attributable to appellant Williams/McCutchan.
Judgment was entered in favor of respondents and against appellants. Respondents, contending they were the prevailing parties, made a motion for the recovery of attorney's fees. Appellants, contending they were the prevailing parties on the contract issues, made a motion for the recovery of attorney's fees. The attorney's fees motions were denied. Appellants' motions to tax costs were granted with respect to attorney fees, expert witness fees, exhibit costs and miscellaneous costs. All other post trial motions were denied.
Respondents brought separate, distinct inverse condemnation actions (later consolidated) against the City of Los Angeles. Respondents claimed in excess of $2 million as total damages for the diminution in value of their respective properties. The cost of repairing the slope instability created by City's construction of Eden Place was an important element considered by respondents' appraisal expert in assessing the loss of or diminution in value. That cost, however, was not the only element of damage considered by the appraiser.
In February 1991, City and respondents entered into an overall settlement of the consolidated actions for a total of $1,470,000 without any allocation between respondents or specification of funds for particular elements of damage, costs or attorney fees.
ISSUES ON APPEAL
Sufficiency of the evidence is not a viable issue in this appeal. There is sufficient substantial, relevant evidence to support all of the jury findings in this case.
The issues presented involve various trial court rulings. Did the trial court correctly:
1. Refuse to enforce the contract clauses limiting liability?
2. Refuse to offset respondents' inverse condemnation settlement against damages awarded in this case?
3. Instruct the jury regarding cost of repair and comparative fault?
4. Deny attorney fees to appellant Leighton?
ISSUES ON CROSS–APPEAL
Did the trial court correctly:
1. Grant nonsuit on all contract causes of action?
2. Deny attorney fees to cross-appellants?
3. Grant cross-respondents' motions to tax costs?
Cross-appellants' Notice of Appeal is very tightly drawn and specific as to the issues on appeal. Only those issues specified in cross-appellants' Notice of Appeal will be considered. All other issues, even though addressed in the briefs, are beyond the scope of this appeal.
LIMITATION OF LIABILITY CLAUSES
The parties submitted the issue of liability limitation clause enforceability to the trial court for determination. The trial court ruled that the liability limitation clauses in the retainer contracts could not be enforced by appellants.
By enacting Civil Code Section 2782.5 in 1967, as amended in 1980, the legislature established a statutory public policy generally favoring negotiated and expressly agreed upon limitation of liability clauses in construction contracts. Markborough California Inc. v. Superior Court (1991) 227 Cal.App.3d 705, 277 Cal.Rptr. 919 [rev. den.], has interpreted Civil Code section 2782.5 and is persuasive in this case. Clearly, negotiated and expressly agreed upon allocations of liability are not prohibited by Civil Code section 2782.
Markborough, supra, at p. 714, 277 Cal.Rptr. 919 concludes that “negotiated”, as used in section 2782.5, only means: “․ that the parties have a fair opportunity to accept, reject or modify a liability limitation provision․” The Court determined that this definition is consistent both with legislative intent as to section 2782.5 and common law.
There is an essential factual distinction between Markborough, supra, and this case. In Markborough, supra, real party in interest (Glenn) was an engineering firm specializing in the design of manmade lakes. Markborough was a subsidiary of Markborough Properties, Ltd. of Toronto, Canada which is the real estate development arm of the Hudson Bay Company. There was no issue of disparity in bargaining position in Markborough, supra.
In this case, the contracts in question were for highly specialized services requiring expertise in the design, planning and construction of slope stabilization methods. Respondents themselves had no knowledge or experience on the subject of landslide stabilization. Respondents only knew that the slope on their lots was sliding and that the City of Los Angeles was compelling them to remedy the condition.
It is undisputed that both respondents Viner and Cousins were represented by legal counsel throughout the negotiations culminating in all of the 1980 retainer contracts. Clearly, there was an opportunity to accept, reject or modify each of the liability limitation clauses; and, in fact, negotiations resulted in a revised, higher liability limit in the Cousins/McCutchan contract. There is no evidence, however, that any of the attorneys were qualified technically in the fields of civil and/or soils engineering expertise.
Notwithstanding the parties' clear opportunity to negotiate expressly agreed upon liability limitation clauses, those clauses must withstand the common law tests of public policy and conscience. “․ although these provisions generally have been upheld as reasonable and valid, nonetheless, because they do in fact exculpate or insulate a party, at least to a certain extent, from liability for his or her own wrongful or negligent act, the law both before and after section 2782.5 was that such provisions may be declared unenforceable if the provision is unconscionable or otherwise contrary to public policy. (Tunkl v. Regents of the University of California (1963) 60 Cal.2d 92, 98–101 [32 Cal.Rptr. 33, 383 P.2d 441]; H.S. Perlin Co. v. Morse Signal Devices, supra [(1989)], 209 Cal.App.3d 1289, 1300–1301 [258 Cal.Rptr. 1].)” Markborough, supra, at pp. 714–715, 277 Cal.Rptr. 919. (Emphasis added.)
“․ the courts have revealed a rough outline of the type of transaction in which exculpatory provisions will be held invalid. Thus the attempted but invalid exemption involves a transaction which exhibits some or all of the following characteristics. It concerns a business of a type generally thought suitable for public regulation. The party seeking exculpation is engaged in performing a service of great importance to the public, which is often a matter of practical necessity for some members of the public. The party holds himself out as willing to perform this service for any member of the public who seeks it, or at least for any member coming within certain established standards. As a result of the essential nature of the service, in the economic setting of the transaction, the party invoking exculpation ‘possesses a decisive advantage of bargaining strength against any member of the public who seeks his services.’ In exercising a superior bargaining power the party confronts the public with a standardized adhesion contract of exculpation, and makes no provision whereby a purchaser may pay additional reasonable fees and obtain protection against negligence. Finally, as a result of the transaction, the person or property of the purchaser is placed under control of the seller, subject to the risk of carelessness by the seller or his agents. [Citations.]” (Tunkl v. Regents of the University of California (1963) 60 Cal.2d 92, 98–101, 32 Cal.Rptr. 33, 383 P.2d 441.)
The transaction need exhibit some or all of the above characteristics. It need only fulfill some (not all) of the above outlined characteristics to be unenforceable. (Tunkl, supra, at 98, 101, 32 Cal.Rptr. 33, 383 P.2d 441.)
The essential question is whether or not the releasing party has really acquiesced voluntarily in the contractual shifting of the risk; and, that the releasing party has in fact received an adequate consideration for the transfer. (Tunkl, supra, at p. 101, 32 Cal.Rptr. 33, 383 P.2d 441.)
The trial court withheld ruling on the liability limitation clauses until all evidence had been concluded. This procedure was entirely within the sound discretion of the trial court. There was no abuse of that discretion.
The determination of unconscionability and public policy, i.e., the enforceability of a liability limitation clause, is a mixed question of law and fact for the court. (U.S. Roofing, Inc. v. Credit Alliance Corp. (1991) 228 Cal.App.3d 1431, 279 Cal.Rptr. 533; McCarn v. Pacific Bell Directory (1992) 3 Cal.App.4th 173, 4 Cal.Rptr.2d 109.)
The record is replete with substantial, relevant evidence, which when subjected to the test of the characteristics enumerated in Tunkl, supra, 60 Cal.2d at pp. 98–101, 32 Cal.Rptr. 33, 383 P.2d 441, sustains the trial court ruling that the liability limitation clauses are unenforceable. This conclusion makes it unnecessary to address the issues raised by respondent Viners' failure to sign the contract with appellant Leighton.
The compelling arguments of appellants and amici regarding commercial stability and certainty as well as the economic ramifications for engineering professionals are properly raised with the legislature. In the meantime, issues of public policy and (un)conscionability are alive, well and operative within the context of Civil Code section 2782.5 and liability limitation clauses.
OFFSET OF INVERSE CONDEMNATION SETTLEMENT
California Constitution Article 1, section 19, provides that: “Private property may be taken or damaged for public use only when just compensation ․, has first been paid to ․, the owner․” When private property is damaged for public use and the governmental entity causing that damage does not file a direct eminent domain action, the owner of the property thus damaged may seek redress through inverse condemnation. (Albers v. County of Los Angeles (1965) 62 Cal.2d 250, 42 Cal.Rptr. 89, 398 P.2d 129.)
“․ [I]nverse condemnation liability may be established where the public improvement constitutes a substantial cause of damage, albeit only one of several concurrent causes.” (Belair v. Riverside County Flood Control District (1988) 47 Cal.3d 550, 559, 253 Cal.Rptr. 693, 764 P.2d 1070 and cases cited therein.)
Paraphrasing Belair, supra, and cases cited therein, the only factor giving rise to inverse condemnation liability is that the public improvement constitute a substantial cause of the damage to private property. Fault is not a factor. Negligence is not a factor. Tort is not a factor. It is important to note that Belair, supra, involved damage to private property substantially caused by the failure of defendant/appellant's flood control facility. Under that fact situation, factors in addition to substantial cause must be present for there to be inverse condemnation liability.
The genesis of inverse condemnation liability is in the California Constitution, not tort. Code of Civil Procedure section 877, relied upon by appellants, is expressed in terms of a number of tortfeasors claimed to be liable for the same tort. The City of Los Angeles was not a tortfeasor in the grading incident to Eden Place. Code of Civil Procedure section 877 on its face is not authority for the offset sought by appellants herein.
Respondents did not seek damages from appellants as the cause of the landslide condition. The damages sought herein by respondents related entirely to the cost of the failed repairs planned and designed by respondents vis-a-vis the cost of a properly planned and designed repair project. Causation of the landslide itself was not an element of respondents' cause(s) of action against appellants.
The City of Los Angeles is the governmental entity responsible for the public use (Eden Place) which was the substantial cause of damage to respondents' property. Respondents' inverse condemnation cause of action against the City of Los Angeles depended entirely upon identifying the substantial cause of the landslide itself.
The measure of inverse condemnation damages sought was the diminution in value of respondents' property resulting from the landslide condition which was substantially caused by the City's public use (Eden Place). Undoubtedly, the cost of repair was an important element to be considered by an expert appraiser in opining the diminution in value; but, such cost of repair is simply one of many elements thus considered.
The trial court was correct in denying the offset requested by appellants.
INSTRUCTIONS RE MEASURE OF DAMAGES AND COMPARATIVE FAULT
Over appellants' objection, the trial court gave BAJI 14.00 (and 14.20, modified) that: “․ The amount of such award shall include: The reasonable cost of repairing the damage to plaintiff's property.”
Appellants' argument regarding the measure of damages is without merit. In light of the jury findings, appellants are in the following factual context: Appellants bargained for and agreed to undertake the planning, design and construction of a system intended to remedy a landslide condition on respondents' properties. The gabion blanket system, negligently designed and installed by respondents, failed. After passage of several years, the governmental agency with approval jurisdiction refused to permit repair of the failed system; and, would only allow a code-complying solution.
Appellants' negligence in the planning, design and installation of the gabion blanket system, places the onus of curing the situation, including the reasonable cost of repair, squarely on appellants.
The trial court correctly gave BAJI 14.00 and 14.20 (modified).
The trial court refused appellants' requested instruction regarding comparative negligence (BAJI 3.50).
There is substantial evidence in the record that there were malfunctions in the Viner property drainage facilities: Broken or clogged roof gutter and a clogged ground level drain. These malfunctions discharged runoff water directly onto the slope area where the gabion blanket first began to fail. There is also evidence which would directly and inferentially place the responsibility for maintaining these drainage facilities in good operating condition on the property owner, respondent Viner.
Appellants' expert witness, Robert A. Hollingsworth, testified to his opinions that:
1. The gabion blanket system was performing its intended function.
2. Runoff water from the malfunctioning Viner drainage facilities was a substantial contributing cause to the movement of the gabion blanket as constructed.
3. The gabion blanket system failed due to the combination of heavy rainfall and the malfunctioning Viner drainage facilities.
4. The gabion blanket system would not have failed without the combined effects of heavy rainfall and the malfunctioning Viner drainage facilities.
The Hollingsworth opinions relating to combined causation (Items 2, 3, 4, above) were not tested by respondents on cross-examination.
Respondents obtained a favorable jury verdict which was specifically based upon a negligence theory of liability. The jury made specific findings apportioning the negligence between appellants.
Comparative negligence is an entirely appropriate issue for jury consideration in a negligence cause of action for damage to real property. Each party has a right to have the jury instructed on all theories of the case which are supported by the pleadings and evidence. (Tint v. Sanborn (1989) 211 Cal.App.3d 1225, 259 Cal.Rptr. 902; citing and quoting from Li v. Yellow Cab Co. (1975) 13 Cal.3d 804, 828–829, 119 Cal.Rptr. 858, 532 P.2d 1226; Ng v. Hudson (1977) 75 Cal.App.3d 250, 254, 142 Cal.Rptr. 69; 7 Witkin, Cal. Procedure (3d ed. 1985) Trial, § 240, pp. 246–247.)
It was reversible error for the trial court to refuse to give BAJI 3.50 (modified) regarding comparative negligence.
BROCKWAY/LEIGHTON CLAIM FOR ATTORNEY FEES
The claim of respondents Brockway and Leighton for attorney fees on the contract cause of action is without merit. The trial court found on the merits that appellants were not the prevailing parties and were not entitled to an award of attorney fees.
The Brockway/Leighton contract with respondents provides that in any legal action arising out of said contract “․ the court shall award a reasonable attorney fee to the party justly entitled thereto.” It most assuredly was not an abuse of discretion for the trial court to find that appellant Brockway/Leighton was not justly entitled to an award of attorney fees.
Respondents reliance upon Civil Code section 1717 overlooks the final sentence of paragraph (b)(1) of that section, to wit: “The court may also determine that there is no party prevailing on the contract for purposes of this section.” Clearly, the trial court so found. This finding as to appellant Brockway/Leighton is supported by substantial, relevant evidence.
CROSS–APPELLANTS' ATTORNEY FEES (CROSS–APPEAL)
The only cost item or related issue discussed in cross-appellants' briefs is that of attorney fees. None of the other cost items taxed by the trial court are addressed and are, therefore, deemed waived or abandoned on this cross-appeal.
Cross-appellants' briefs do not discuss or examine the trial court order granting nonsuit with respect to the breach of contract causes of action, except in the context of cross-appellants' claim for attorney fees. Therefore, the issues raised by the orders granting nonsuit per se need not be discussed herein.
Cross-appellants' understandable concern regarding their attorney fees is properly before this court. The trial court ruled:
“The court granted a nonsuit on the contract cause of action and the case proceeded on a tort theory. The verdict clearly reflects a requirement that the jury assess negligence. This case does not ‘arise out of contract’. Request for attorney fees denied.”
The Leighton retainer contracts contain the following attorney fees clause:
“11. Attorneys' fees. In the event that either party becomes involved in litigation arising out of this Contract or the interpretation or performance thereof, the court shall award a reasonable attorney fee to the party justly entitled thereto.” (Emphasis added.)
The McCutchan retainer contracts contain the following attorney fees clause:
“9. In the event client institutes a suit against consultant because of any failure or alleged failure to perform, error, omission, or negligence, and if such suit is not successfully prosecuted, or if it is dismissed, or if verdict is rendered for consultant, client agrees to pay consultant any and all costs of defense, including attorney's fees, expert witness fees and court costs․”
Paragraph 11 of the McCutchan contract provides for the payment of attorney fees “․ to the prevailing party.”
The measure and mode of compensation of attorneys is left to the agreement of the parties. Code of Civil Procedure section 1021. Section 1021 is not limited to contract actions alone. The parties to a contract can agree that the prevailing party will be awarded attorney fees whether the litigation sounds in tort or contract. (Xuereb v. Marcus & Millichap, Inc. (1992) 3 Cal.App.4th 1338, 1341, 5 Cal.Rptr.2d 154.)
Civil Code section 1717 requires reciprocity or mutuality of remedy where a contract contains a one-sided attorney fee provision. Thus, the attorney fee provisions of both the Leighton and McCutchan contracts apply in favor of the prevailing party, regardless of which is specified in that provision. For purposes of determining the applicability of section 1717, this case meets the tort-contract criterion thoroughly discussed in Perry v. Robertson (1988) 201 Cal.App.3d 333, 247 Cal.Rptr. 74. Civil Code section 1717 applies to the facts of this case.
The contract provisions cited above by their terms include litigation involving claims for negligence and the quality of performance. The decision reached herein would be the same with or without reference to Civil Code section 1717. The language of the attorney fees clauses themselves is sufficient. However, we do hold that Civil Code Section 1717, as interpreted by Perry v. Robertson, supra, requires reciprocity as between the contracting parties.
The record is crystal clear. This litigation arises from and cross-appellants' recovery is based upon cross-respondents' negligent performance of their professional, expert duties. Cross-respondents' professional, expert relationship with cross-appellants arises out of the retainer contracts which contain the attorney fees clauses quoted above. Cross-appellants are the prevailing parties in this litigation. Cross-appellants are entitled to recover their reasonable attorney fees, notwithstanding the fact that nonsuits were granted as to their breach of contract causes of action and their recovery is based upon a finding of negligence.
It was error for the trial court to deny cross-appellants request for reasonable attorney fees.
The judgment is reversed in part and remanded to the trial court only for consideration of:
1. Comparative negligence, if any, as between appellants and respondents Viner only; and,
2. An award of reasonable attorney fees to respondents (cross-appellants).
In all other respects, the judgment is affirmed.
The parties shall each bear their own costs on appeal, including attorney fees.
STOEVER, Associate Justice.** FN** Assigned by the Chairperson of the Judicial Council.
JOHNSON, Acting P.J., and FRED WOODS, J., concur.