Procedural Posture

The parties consulted with several counsel which included labor law attorney and business counsel.Plaintiff lender and defendants, a land developer and its principals, both sought review of an order of the Superior Court of Orange County (California), which awarded damages to plaintiff in plaintiff’s action against defendant for breach of loan and guarantee agreements.

Table of Contents

Overview

Plaintiff lender foreclosed under loan agreements for a land development, and then obtained a judgment for damages against defendants, a land developer and its principals, for breach of contract and fraud. All parties appealed the trial court’s judgment, and the court affirmed. The court held that the trial court properly measured damages in view of property improvements that were not completed by defendants, and plaintiff suffered no damages due to an unrecorded mortgage. The court rejected defendants’ cross-appeals, holding that fraud was properly found and punitive damages awarded based upon defendant principals’ false promise that loaned funds would be used exclusively for offsite improvements. Plaintiff’s fraud action was not barred under the doctrine of election of remedies, nor on the basis of anti-deficiency statutes, and the attorney’s fees award was upheld. Defendant principals’ contentions that the breach of contract action was barred by waiver, mistake, and impossibility of performance were denied. Defendants’ cross-complaint for recission of the loan agreements was properly denied, and the parol evidence rule did not bar evidence on plaintiff’s fraud claim.

Outcome

The court affirmed the award of damages to plaintiff lender, holding that the trial court properly measured plaintiff’s damages in relation to uncompleted property improvements and no damages were suffered due to an unrecorded mortgage. The court held that the cross-appeals of defendants, a land developer and its principals, were without merit because fraud was properly found and punitive damages were awarded based upon defendants’ false promise.

Appellant contractor sought review of a judgment from the Superior Court of Santa Clara County (California), which, in a jury trial, awarded damages to respondent city for breach of the covenant of good faith and fair dealing and awarded statutory penalties to the city under the Subletting and Subcontracting Fair Practices Act, Pub. Contract Code, § 4100 et seq., and the California False Claims Act, Gov. Code, § 12651.

Overview

The city withheld part of the retention amount for a construction project that was delayed. The contractor sued, claiming that the plans and specifications were deficient. The city filed a cross-complaint alleging that the contractor was not diligent, improperly substituted subcontractors, and submitted pay requests for incomplete work. The court held that the trial court did not have jurisdiction to impose penalties under Pub. Contract Code, § 4110, for improper substitution of subcontractors because § 4110 gave the awarding authority, but not the courts, discretion to impose such penalties. The evidence was insufficient to support the damages awarded for breach of the covenant of good faith; however, the error was harmless because that amount was subtracted from the judgment. The trial court did not abuse its discretion under Code Civ. Proc., § 473, by allowing the city, after new documents came to light, to amend the cross-complaint to allege false claims. Instructions based on the language of Gov. Code, §§ 12650, 12651, did not mislead the jury. An award of attorney fees under Pub. Contract Code, § 7107, subd. (f), reflected a reasonable allocation under Civ. Code, § 1717.