Court Opinion

ID: 3182463
Source: CourtListenerOpinion
Date Created: 2016-03-03 18:15:01.298309+00
Date Added: 2024-06-11T14:19:52.232659
License: Public Domain

Filed 3/3/16 Santa Barbara Design & Build v. Pollack CA2/6

             NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been
certified for publication or ordered published for purposes of rule 8.1115.

         IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                               SECOND APPELLATE DISTRICT

                                             DIVISION SIX

SANTA BARBARA DESIGN & BUILD,                                                2d Civil No. B259076
                                                                            (Super. Ct. No. 56-2012-
     Plaintiff and Respondent,                                              00425452-CU-BC-VTA)
                                                                               (Ventura County)
v.

GARY POLLACK et al.,

     Defendants and Appellants.

                   Appellants Gary Pollack and Claudia Davidovich and respondent
Santa Barbara Design & Build (SBDB) became embroiled in a billing dispute
regarding SBDB’s remodel of appellants’ beach home. The trial court ruled in
favor of SBDB on all issues and entered a judgment of foreclosure on the
property to satisfy SBDB’s mechanic’s lien. Appellants contend that no
evidence supports the trial court’s finding that SBDB did not pad its labor rates.
We need not reach this issue, however, because we interpret the contract
differently than the trial court. We conclude that the contract required appellants
to pay the labor rates set forth in the attachment.1 Accordingly, we affirm.

         1
          Following submission of this matter, the parties provided supplemental
letter briefs on this issue at our request.
                    FACTS AND PROCEDURAL HISTORY
              Appellants hired SBDB to remodel and renovate their beach house
in Ventura’s Pierpont neighborhood. The contract called for appellants to pay
SBDB a $58,000 project management fee plus reimbursement for its “direct ‘cost
of work,’” defined as “cost necessarily and reasonably incurred in the
performance of the work and actually paid by the contractor . . . .” An
attachment to the contract (attachment) contained a list of workers whom SBDB
employed and their hourly rates. Appellants became concerned about the
amounts they were being charged for labor after discovering a pay stub for one of
the workers showing that he was being paid an hourly rate of $19 when SBDB
was charging them an hourly rate of $29 for his work.
              SBDB performed the agreed-upon work and appellants paid all
amounts billed by SBDB—approximately $500,000—except for the final
$8,511.60 payment, which appellants withheld on the ground that they had been
overcharged for labor. SBDB sued appellants to recover the amount of the final
bill. Appellants counterclaimed, alleging among other things that SBDB inflated
its labor rates above what it actually paid its workers. After a bench trial, the
court ruled that SBDB was entitled to bill not only for the hourly wages it paid to
its employees (the base rates), but also for “necessary other costs such as workers
compensation, payroll taxes, safety training and the like.” The trial court found
that SBDB’s “loaded rates”—the base rates plus an additional amount per hour to
cover its other labor-related costs—were not padded.
                                   DISCUSSION
              Appellants contend that no evidence supports the trial court’s
finding that the labor rates for which SBDB billed them did not exceed its actual
costs. We review this factual finding for substantial evidence. (Schmeer v.
County of Los Angeles (2013) 213 Cal.App.4th 1310, 1316.) The contractual
interpretation upon which it rests, however, is an issue “to which we apply de

                                          2
novo review.” (Judicial Council of California v. Jacobs Facilities, Inc. (2015)
239 Cal.App.4th 882, 907.) “[W]e may affirm the trial court’s ruling ‘on any
basis presented by the record whether or not relied upon by the trial court.’
[Citation.]” (McClain v. Octagon Plaza, LLC (2008) 159 Cal.App.4th 784, 802.)
              The trial court concluded that the contract attachment contained
SBDB’s “anticipated labor rate[s],” noting that Don Gragg, SBDB’s owner and
general contractor, “conceded that the rate on the contract attachment was
intended as an estimate.” To the contrary, Gragg’s “testimony [was] that these
labor rates were intended to be and were accepted by [appellants] to be the
agreed upon rates that would be paid regardless of what [he] actually paid” his
employees. He referred to the rates as an “estimate” not in the sense of what he
anticipated his labor rates would be but rather what he approximated his labor
costs were when allocated per employee per hour.
              Ultimately, what the parties subjectively thought about the rates’
significance is irrelevant. “The terms of a contract are determined by objective
rather than subjective criteria.” (Tribeca Companies, LLC v. First American
Title Insurance Company (2015) 239 Cal.App.4th 1088, 1111.) We conclude
that the contract objectively required appellants to pay the labor rates set forth on
the attachment.
              The contract required SBDB to provide appellants with a billing
statement every two weeks, accompanied by “a copy of all back-up
documentation including material procurement invoices, payrolls for the labor
(see [attachment]) and all receipted bills for which payment is due.” The
attachment listed various employees, their number of hours worked, their loaded
rates, and the “Amount Due”—the hours multiplied by the rate. The “Hours”
and “Amount Due” columns were zeroed out but the “Rate” column had specific
rates listed for each employee, suggesting that these were the actual rates that
would be used in the billing statements.

                                           3
              It is true that appellants agreed to pay only costs “necessarily and
reasonably incurred” and “actually paid by the contractor.” However, in the
labor context, this clause merely guaranteed that SBDB would not bill appellants
for too many hours, whether due to inefficiency or fraud. It did not give
appellants license to scrutinize whether SBDB’s calculation of its loaded rates
was reasonable. By signing the contract, appellants agreed that the rates on the
attachment were reasonable. It would have been impossible for SBDB to
calculate the loaded rates with exactitude because they included fixed labor costs
allocated on a variable basis, which necessarily involved a certain amount of
discretion. Appellants’ interpretation of the contract is unreasonable because it
would render a material term—the loaded rates—indefinite. (See Civ. Code,
§ 1643 [“A contract must receive such an interpretation as will make it lawful,
operative, definite, reasonable, and capable of being carried into effect, if it can
be done without violating the intention of the parties”].)
              Two of SBDB’s employees at issue, Juan Gudino and Luis Ortega,
did not appear on the attachment. Appellants presented no evidence at trial
showing that the rates billed for these employees did not fairly represent SBDB’s
labor costs attributable to them.2 The ratios of their loaded rates to base rates
were in line with those of SBDB’s other employees. Therefore, substantial
evidence supports the trial court’s finding that Gudino’s and Ortega’s loaded
rates were not padded.

       2
         Appellants assert that they were billed hourly base rates of $21 for
Gudino and $16 for Ortega but that SBDB actually paid Gudino only $17 and
Ortega only $12. This assertion is incorrect in two respects. First, SBDB billed
appellants using loaded rates, not base rates. Second, the page appellants cite in
the record to support their assertion lists SBDB’s estimated base rates for certain
employees, but Gudino and Ortega are not among them.

                                          4
                               DISPOSITION
             The judgment is affirmed. Costs to respondent.
             NOT TO BE PUBLISHED.

                                          PERREN, J.

We concur:

             GILBERT, P. J.

             YEGAN, J.

                                      5
                                 Henry J. Walsh, Judge
                            Superior Court County of Ventura
                          ______________________________

             James P. Thompson for Defendants and Appellants.

             Lowthorp, Richards, McMillan, Miller & Templeman and Cristian R.
Arrieta for Plaintiff and Respondent.