Ayala Boring, Inc. v. HPS Mech., Inc.

AYALA BORING, INC., Plaintiff, Cross-defendant and Appellant, v. HPS MECHANICAL, INC., Defendant, Cross-complainant, and Appellant.

D076054

COURT OF APPEAL, FOURTH APPELLATE DISTRICT DIVISION ONE STATE OF CALIFORNIA

March 19, 2021

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

(Super. Ct. No. 37-2011-00092049-CU-CO-CTL)

APPEALS from a judgment of the Superior Court of San Diego County, Joel R. Wohlfeil, Judge. Affirmed in part, reversed in part, and remanded with directions.

Klein, Denatale, Goldner, Cooper, Rosenlieb & Kimball and Catherine E. Bennett; Eastman McCartney Dallmann, N. Thomas McCartney and Matthew C. McCartney for Defendant and Appellant.

Thomas Lucas, Timothy D. Lucas; Mahoney & Soll and Paul M. Mahoney for Plaintiff, Cross-defendant and Appellant.

This is the second appeal in this case and it is based on the same underlying facts as the first appeal in Ayala Boring, Inc. v. HPS Mechanical, Inc. (Sept. 17, 2018, D070176) [non.pub. opn.] (Ayala I).) On remand after Ayala I, the trial court denied the motion filed by HPS Mechanical, Inc. (HPS) for an award of its attorney fees and denied the motion filed by Ayala Boring, Inc. (Ayala) to tax certain costs requested by HPS. On appeal, HPS challenges the court's denial of its attorney fees. In its cross-appeal, Ayala challenges the court's denial of its motion to tax certain of HPS's costs.

FACTUAL AND PROCEDURAL BACKGROUND¹

HPS entered into a contract with the City of San Diego (City) to serve as the prime contractor for City's South Mission Valley trunk sewer project (Project). HPS entered into a subcontract (Subcontract) with Ayala, an underground pipeline boring contractor, for Ayala to install casings and sewer lines under Interstate 8 (I-8) at two locations that were part of the Project. One location was near the interchange of I-8 and Interstate 15 (I-15), at which Ayala was to bore a tunnel under I-8, install a casing, and then install a customer-furnished sewer pipe through that casing. When Ayala encountered unanticipated larger rocks, boulders, or other materials at that location, it requested additional compensation for the different site conditions and ultimately City, HPS, and Ayala agreed to a change order to pay Ayala an additional $203,000 for its extra work. Also, during Ayala's work at that location, a rising, or "heaving," of the lanes of I-8 was discovered immediately above the area where Ayala was boring and grouting for installation of the casing. Believing that Ayala's work caused that heaving, HPS demanded that Ayala repair the heaving damage and informed Ayala it would withhold its payment of the $203,000 change order amount until suchrepairs were made. When Ayala refused to repair that damage, HPS made the repairs at a cost of $199,559.34.

Ayala filed a complaint against HPS and its bonding companies alleging a breach of contract cause of action and seeking payment for its extra work performed for the different site conditions and payment of other amounts that HPS wrongfully retained. HPS filed a cross-complaint against Ayala alleging a breach of contract cause of action that sought reimbursement of its costs to repair the heaving damage. The trial court granted Ayala's motion to amend its complaint to conform to proof and add a common count for money had and received. The jury returned special verdicts finding: (1) in favor of HPS on Ayala's breach of contract cause of action; (2) in favor of Ayala on its common count for money had and received; and (3) in favor of Ayala on HPS's breach of contract cause of action. The jury calculated Ayala's damages to be $249,470, which the court awarded to Ayala. The court subsequently awarded Ayala prejudgment interest, attorney fees and costs as the prevailing party on its complaint, and costs for prevailing on HPS's cross-complaint.

In the first appeal in this case, we reversed the judgment to the extent it found in favor of Ayala on its common count for money had and received, and, because of the then-mixed results obtained by the parties, we also reversed the court's awards to Ayala of attorney fees and costs.² (Ayala I, supra, at pp. 28, 40-41.) We remanded the matter with directions that the trial court conduct further proceedings and enter a new judgment consistentwith our opinion. (Id. at p. 40.) Also, because HPS prevailed on its appeal, we concluded that HPS was entitled to its costs on appeal. (Id. at p. 41.)

On remand, the trial court denied HPS's motion for an award of attorney fees as the prevailing party on the contract, finding that there was no prevailing party on the contract claims. The court awarded HPS various trial costs and costs on appeal, including expert witness fees, mediator fees, reporter's fees, and surety bond premiums. The court then entered an amended judgment that found in favor of HPS on Ayala's complaint and ordered Ayala to pay HPS costs and disbursements totaling $205,095.63.

In its appeal challenging the amended judgment, HPS contends that the trial court erred by finding there was no prevailing party on the contract claims and that it should instead be awarded its actual attorney fees pursuant to the Subcontract's provision for awards to prevailing parties of their attorney fees and costs. In its cross-appeal, Ayala contends the court erred by awarding HPS: (1) its expert witness fees as the prevailing party on the contract claims; (2) its mediation fees incurred for mediation of a different case; (3) its reporter's fees for daily trial transcripts; and (4) its premiums for a stop notice release bond and a surety bond on appeal. Based on our reasoning post, we reverse the court's awards to HPS of its expert witness fees and mediation fees incurred for mediation of the different case and, in all other respects, affirm the amended judgment.³

DISCUSSION

HPS'S APPEAL

IOrder Denying HPS's Motion for Attorney Fees

HPS asserts that the trial court erred by denying its motion for attorney fees. In particular, it argues that the court erred by finding there was no prevailing party on the contract claims in this action and that the court should instead have awarded HPS its actual attorney fees pursuant to the Subcontract's attorney fee provision.

A

In March 2011, City, HPS, and Ayala agreed to a change order to pay Ayala an additional $203,000 for its extra work for the different site conditions for its boring work at the intersection of I-8 and I-15. City thereafter paid HPS $540,673.50, which amount included $203,000 for payment to Ayala for the different site conditions. However, believing that Ayala's work caused the freeway heaving at that site, HPS did not issue the $203,000 change order pursuant to the Subcontract and informed Ayala it would withhold its payment of the $203,000 change order amount until Ayalarepaired the heave damage. When Ayala refused to repair that damage, HPS made the repairs at a cost of $199,559.34.

In May 2011, Ayala filed a complaint against HPS and other defendants, alleging causes of action, inter alia, for breach of contract for failure to pay Ayala for all work it performed under the Subcontract and seeking $451,113.98 in compensatory damages. In July, Ayala filed a first amended complaint that realleged its breach of contract cause of action seeking $451,113.98 in damages. In October, Ayala filed its operative second amended complaint that realleged its breach of contract cause of action seeking $451,113.98 in damages and alleged other causes of action.⁴

In July 2012, HPS filed a cross-complaint against Ayala and City, alleging causes of action, inter alia, for breach of contract for Ayala's failure to repair the freeway heave and seeking recovery of the costs HPS incurred to repair the heave. In particular, paragraph 14 of the cross-complaint alleged: "Ayala breached the Subcontract by failing to perform all of the conditions, covenants, and promises required to be performed on its part under the Subcontract, in that it failed to repair its construction work which allegedly caused the [h]eaving, and for which HPS incurred costs to repair."

In March 2015, HPS filed a first amended cross-complaint, alleging causes of action for, inter alia, breach of contract for Ayala's failure to properly perform work under the Subcontract. In particular, paragraph 20 of the first amended cross-complaint alleged: "As a result of the aforesaid actsand/or omissions of Ayala, during the installation of the 36 inch casing, [Ayala] failed to properly control its grouting operating [sic] and injected excessive grout which caused or otherwise contributed to the heave, and caused the resulting damage to the Interstate freeway and underlying areas." HPS sought compensatory damages in an amount to be proved at trial and such other relief as the court considered proper.

In January 2016, a jury trial was conducted on the second amended complaint and first amended cross-complaint. During Ayala's opening statement to the jury, Ayala stated that City, HPS, and Ayala had agreed to a change order providing that Ayala would be paid $203,000 for the different site conditions that required extra work. Ayala stated that although HPS received the $203,000 amount from City, HPS had not yet paid that amount to Ayala.

In its opening statement, HPS stated that it had never disputed that there was a change order providing for $203,000 in additional compensation for Ayala or that HPS had received the $203,000. HPS stated that it had not paid Ayala the $203,000 amount because HPS believed Ayala had caused the heave of the I-8 freeway pavement by improper pressure grouting, but Ayala refused to repair the damage. HPS stated that it had the right to withhold money otherwise due Ayala...