LOWY v. UNITED PACIFIC INSURANCE COMPANY

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Court of Appeal, Second District, Division 1, California.

Marcus LOWY and josef Weber, Plaintiffs and Appellants, v. UNITED PACIFIC INSURANCE COMPANY and Arnold Wolpin, Defendants and Respondents.

Civ. 30133.

Decided: December 29, 1966

Adelman & Schwartz, Beverly Hills, Ball, Hunt & Hart, Joseph A. Ball and Joseph D. Mullender, Jr., Long Beach, for appellants. Milton Zerin and Morton Minikes, Beverly Hills, for respondents.

At the times here in question plaintiffs were the owners and subdividers of certain real property in the San Fernando Valley area of Los Angeles. In December of 1962 they entered into a written contract with defendant Wolpin, a licensed grading and engineering contractor, which called for the performance of certain excavation and grading work to be followed by street improvements on the areas thus graded. The contract never having been completed, an action for its breach was instituted by plaintiffs against Wolpin and United Pacific as Surety under its surety bond. An answer was filed by both Wolpin and the surety. Wolpin also cross-complained against the owners claiming a breach by them of the agreement and damages for unpaid work performed; and by way of a common count, reimbursement for reasonable services was also asked. The trial court found against plaintiffs on their complaint; on his cross-complaint, Wolpin was given damages for grading work only ($17,836.50) and reasonable attorney's fees ($4,000) as provided in the contract. Form such judgment plaintiffs appeal.

The trial court found that under the contract two phases of work were to be performed: (1) grading and (2) street improvement; that Wolpin performed all the terms and conditions thereof relating to grading, except work which could be completed for $1,470.00 being 2% of the total grading costs contracted for ($73,500); that Wolpin performed additional grading work, reasonably worth the sum of $7,200.00, necessitated by changes in plans on the part of plaintiffs and not attributable to Wolpin, which additional work was also authorized by plaintiffs through their superintendent; that plaintiffs breached the subject agreement by employing others to do the street improvement (or second phase) work and by not making payments to Wolpin for grading work done by him when due, thereby excusing further performance by Wolpin; that damages be computed as follows:

It is here contended that the evidence does not support the above findings and the principles of law upon which such factual determinations were made; it is also urged that since Wolpin is not entitled to recover on the contract, he is not entitled to the attorney's fees awarded pursuant thereto.

Invoked by Wolpin, and held applicable here by the trial court, is the doctrine of substantial performance. Usually applied to building contracts, as here material it states that “Where a person agrees to do a thing for another for a specified sum of money to be paid on full performance, he is not entitled to any part of the sum until he has himself done the thing he agreed to do, unless full performance has been excused, prevented, or delayed by the act of the other party, * * *' [Citation.]' (Thomas Haverty Co. v. Jones, 185 Cal. 285, 288–289, 197 P. 105, 107.) The leading case just cited further states that ‘in the case of building contracts where the owner has taken possession of the building and is enjoying the fruits of the contractor's work in the performance of the contract, that if there has been a substantial performance thereof by the contractor in good faith, where the failure to make full performance can be compensated in damages, to be deducted from the price or allowed as a counterclaim, and the omissions and deviations were not willful or fraudulent, and do not substantially affect the usefulness of the building for the purposes for which it was intended, the contractor may, in an action upon the contract, recover the amount unpaid of his contract price less the amount allowed as damages for the failure in strict performance.’ (Supra, p. 289, 197 P. p. 107.) Reference to the computation of items, both debit and credit and set forth in the findings, reveals an almost literal compliance with the formula approved in Haverty. Of importance, therefore, is the existence of evidence supporting the court's further finding that plaintiffs themselves breached the contract and thus made impossible full performance on Wolpin's part.

As stated above, the contract called for the performance of two kinds of work, excavation and grading to be followed by the second ‘phase’ consisting of street improvements (curbs and gutters). The owners point to a finding (Finding VII) that Wolpin repudiated that portion of the contract relating to street improvements and is not entitled to recover for loss of profits thereunder; they accordingly argue that such finding is inconsistent with the further finding (Finding VI) that the written contract with Wolpin was breached by not making payments to him for grading performed by him when due and by employing persons other than Wolpin to do the street improvement work. While the court found that there were ‘two phases of work to be performed pursuant to said written contract,’ it made no determination that the contract was, or was not, a severable one. If severable, Wolpin could claim substantial performance of the severable part, to wit, grading and excavation, which he was prevented from fully completing through the fault of the owners. If, however, the agreement was entire and indivisible, his repudiation of an inseverable part thereof bars recovery under the doctrine by him invoked.

‘Generally speaking, the test of whether a contract is divisible is that if the consideration is single, the contract is entire, but if the consideration is apportioned, the contract may be regarded as severable. [Citation.]’ (Simmons v. Cal. Institute of Technology, 34 Cal.2d 264, 275, 209 P.2d 581, 587.) In a subsequent case, the Supreme Court declared: “The rule is well settled that where several things are to be done under a contract, if the money consideration to be paid is to be apportioned to each of the items to be performed, the covenants are ordinarily regarded as severable and independent.' [Citation.]' (Keene v. Harling, 61 Cal.2d 318, 323, 38 Cal.Rptr. 513, 517, 392 P.2d 273, 277.) And finally, there is this statement of the law: ‘Where the consideration is not apportioned and there is no basis or scale furnished by the contract to determine an apportionment, the contract must be regarded as entire.’ (12 Cal.Jur.2d § 150, p. 366.)

The contract, erroneously entitled ‘Subcontractor's Agreement’ states that Wolpin ‘agrees to provide and pay for all materials, labor, tools, equipment, light, transportation and other facilities necessary for the execution, in a good and workmanlike manner, of all the following described work: Excavation, Grading and Street Improvement in Tracts No. 26589 and 19517 in accordance with plans and specifications approved by the City of Los Angeles and Exhibit ‘A’ attached hereto * * *.' Under ‘Price to be Paid’ the instrument makes reference Exhibits ‘A’ and ‘B’ attached thereto, and payments are to be made as follows: ‘90% payable 10th of each month following receipt of invoices for completed work, and 10% payable when all work has been completed, inspected and passed by VA and/or FHA and/or City and/or County.’ Under Exhibit ‘A’ Wolpin agrees to ‘furnish all equipment, labor and materials necessary for street improvements, onsite and offsite grading, grade and excavation and erosion control on Tracts 26589 and 19517 * * * for the lump sum price of Seventy—Three Thousand, Five Hundred Dollars ($73,500.00) including without limitation, all grading compaction, cleaning, grade and erosion control and dumping, all of which are to be performed to the satisfaction of Builder, Builder's Soils Engineer, City of Los Angeles, F.H.A. and V.A.’ Exhibit ‘A’ further provides that ‘The terms of payments shall be as set forth in Subcontractor's Agreement.’ Under Exhibit ‘B’ there is listed a schedule of unit prices for the street improvements, the total of which is not set forth.

If we apply the principles of law, previously quoted, to the recitals above set forth, we can come to no other conclusion than that the contract in suit was an entire contract for the performance of the several types of work therein specified. As the instrument explicitly declares, Wolpin agreed to do the job ‘for the lump sum price’ ($73,500) thereafter stated without any apportionment of the items of work he engaged to perform; nor is there any basis upon which this court can divide such lump sum and say that a specific portion thereof was allocated to grading with the (See Perry v. Ayers, 159 Cal. 414, 418, 114 P. 46.)

Since the trial court found that Wolpin repudiated the second ‘phase’ of the contract, presumably without fault on the owner's part, and since we have determined that the ‘phase’ so repudiated was an indivisible part of an indivisible contract, recovery under the doctrine of substantial performance becomes unavailable to him. None of the cases relied on by Wolpin holds to the contrary. As the Haverty case (supra, 185 Cal. 285, 288–289, 197 P. 105) points out, there is an element of good faith required of the contractor who seeks refuge in this doctrine; and this requirement is not met by the repudiation found to have existed here.

There being no other theory or ground, mentioned or argued, upon which the judgment can be sustained, we reverse the judgment.

LILLIE, Justice.

WOOD, P. J., and FOURT, J., concur.