Court Opinion

ID: 9369424
Source: CourtListenerOpinion
Date Created: 2023-02-08 20:02:00.164839+00
Date Added: 2024-06-11T17:16:14.922095
License: Public Domain

Filed 2/8/23 L.A. Unified School Dist. v. FH Paschen/S.N. Nielsen CA2/3

 NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 opinion has not been certified for publication or ordered published for purposes of rule 8.1115(a).

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                        SECOND APPELLATE DISTRICT

                                     DIVISION THREE

 LOS ANGELES UNIFIED                                            B300332
 SCHOOL DISTRICT,
                                                                Los Angeles County
      Plaintiff and Appellant,                                  Super. Ct. Nos.
                                                                BC579782 & BC485294
      v.

 FH PASCHEN/S.N. NIELSEN,
 INC., et al.,

      Defendants and Appellants.

      APPEALS from a judgment of the Superior Court of Los
Angeles County, Richard L. Fruin and Victor E. Chavez, Judges.
Reversed and remanded with directions.
      Orbach Huff Suarez & Henderson, David M. Huff, Kelly
Houle-Sandoval; Mark A. Miller for Plaintiff and Appellant Los
Angeles Unified School District.
      Pine Tillett Pine, Norman Pine, Scott Tillett; Troutman
Pepper Hamilton Sanders, Marion T. Hack, and Erica R. Graves
for Defendants and Appellants FH Paschen/S.N. Nielsen, Inc.,
Continental Casualty Company, and Safeco Insurance Company
of America.
     Watt, Tieder, Hoffar & Fitzgerald, Robert C. Niesley, and
Robert C. Shaia for The Surety & Fidelity Association of America
as Amicus Curiae on behalf of Defendants and Appellants
Continental Casualty Company and Safeco Insurance Company
of America.
            _______________________________________

                       INTRODUCTION

       It has been said throughout this litigation that estimating
the cost of a construction project is not an exact science. The
dispute at hand relates to estimated project costs submitted by
FH Paschen/S.N. Nielsen, Inc., (Contractor) to the Los Angeles
Unified School District (the District) which formed the basis of
agreements to renovate cafeterias at 30 schools as part of the
District’s Café LA program. The District and Contractor entered
into eight contracts (master job order contracts) which set most of
the terms and conditions of the work to be provided by
Contractor. When the District required work at a school site, it
requested a job order proposal, i.e., an estimate of the cost to
complete the project, from Contractor. Those job order proposals
disclosed every detail of the estimate—the items to be used, the
per item cost, the quantities proposed, and the mark-up to be
applied.
       Because the individual projects were not competitively bid,
Contractor was required to use pricing formulas contained in the
master job order contracts when it prepared its job order
proposals. In addition, the prices the District would pay for
construction tasks were generally fixed by a catalog published by

                                 2
the District. And the District was required to obtain an
independent estimate for each project before deciding whether to
accept Contractor’s job order proposals. Armed with all this
information, the District exercised its discretion to enter into 74
firm, fixed-price, lump sum job orders with Contractor, divided
into three phases of work. Contractor fully performed each of the
job orders and the District was satisfied with Contractor’s work.
It later described Contractor’s work on the projects as “an
excellent and transformative success.”
       Years after the projects were completed, however, the
District audited the job order contracting program generally and
Contractor’s work on the Café LA projects in particular.1 One
audit found, among other things, that the District’s staff had
misused the job order process to order equipment and materials
(as it did in the first two phases of work at issue here) and failed
to administer the job order contract program properly. Another
audit concluded that Contractor had “overpriced” numerous job
orders, i.e., had failed to properly apply the pricing formulas
contained in the master job order contracts when it prepared its
job order proposals. This extensive litigation ensued.
       The District sued Contractor and its sureties, Continental
Casualty Company (Continental) and Safeco Insurance Company
of America (Safeco) (collectively, Sureties), for breach of the
master job order contracts. The case was resolved in a series of
proceedings—a bench trial, motions for summary adjudication,
piecemeal rulings on damages and prejudgment interest, and,

1Other Café LA contractors were also audited. (See, e.g., Los Angeles
Unified School Dist. v. Torres Construction Corp. (2020) 57 Cal.App.5th
480 (Torres).)

                                  3
finally, a jury trial on the remaining unresolved claims. In total,
the District was awarded damages and interest in excess of
$5 million.
       As we will explain, the court’s findings that Contractor
failed to properly apply the pricing formulas contained in the
master job order contracts in its job order proposals for Phases I
and II are sound, but the awards of damages and prejudgment
interest are not, and so we will remand for further proceedings.
We also agree with the court’s determination that Sureties are
liable to the same degree as Contractor pursuant to the bonds
they issued. Finally, we conclude that the District’s theory of
liability in the Phase III jury trial is not supported by the
applicable contractual and statutory provisions and therefore
Contractor and Sureties are entitled to judgment in their favor as
a matter of law on those claims.2

       BACKGROUND: JOB ORDER CONTRACTING

      “Public works contracts are a unique species of commercial
dealings.” (Roy Allan Slurry Seal, Inc. v. American Asphalt
South, Inc. (2017) 2 Cal.5th 505, 510.) The Public Contract Code
contains a host of statutes governing the procurement of
construction contracts by public entities and they generally
require competitive bidding and the award of the contract to the
lowest responsible bidder. (See Kajima/Ray Wilson v. Los
Angeles County Metropolitan Transportation Authority (2000) 23
Cal.4th 305, 313 [“In California, competitive bidding is largely

2 Because we conclude that the verdict against Contractor and in favor
of the District for the Phase III job orders must be reversed, the
District’s cross-appeal from the judgment in favor of Sureties with
regard to Phase III is moot.

                                  4
governed by statute.”]; Pub. Contract Code, §§ 20162 [city
contracts], 20128 [county contracts], 10180 [state contracts]; 9
Miller & Starr, Cal. Real Estate (4th ed. 2022) § 31:26 [“In most
instances, a public agency is required by law to procure contracts
for public works pursuant to competitive bidding statutes that
require the award of the contract to the lowest responsible
bidder.”].) “[B]idding requirements must be strictly adhered to in
order to avoid the potential for abuse in the competitive bidding
process. [Citation.]” (Domar Electric, Inc. v. City of Los Angeles
(1994) 9 Cal.4th 161, 175–176 (Domar Electric).)
       “ ‘Statutes and ordinances that authorize or require
competitive bidding in the letting of public contracts ordinarily
serve the purpose “ ‘of inviting competition, to guard against
favoritism, improvidence, extravagance, fraud and corruption,
and to secure the best work or supplies at the lowest price
practicable.’ ” Such measures “are enacted for the benefit of
property holders and taxpayers, and not for the benefit or
enrichment of bidders, and should be so construed and
administered as to accomplish such purpose fairly and reasonably
with sole reference to the public interest. These provisions are
strictly construed by the courts, and will not be extended beyond
their reasonable purpose.” ’ [Citation.]” (Hensel Phelps
Construction Co. v. Department of Corrections & Rehabilitation
(2020) 45 Cal.App.5th 679, 691 (Hensel Phelps); accord Domar
Electric, supra, 9 Cal.4th at p. 173 [same]; Pub. Contract Code
§ 100, subds. (b)–(d) [noting that by enacting the Public Contract
Code, the Legislature intended to “ensure full compliance with
competitive bidding statutes as a means of protecting the public
from misuse of public funds,” “provide all qualified bidders with a
fair opportunity to enter the bidding process, thereby stimulating

                                5
competition in a manner conducive to sound fiscal practices,” and
“eliminate favoritism, fraud, and corruption in the awarding of
public contracts”].)
       In 2003, California adopted an alternative construction
procurement procedure for the District called job order
contracting. (Assem. Bill No. 14 (2003–2004 Reg. Sess.) § 1,
codified at former3 Pub. Contract Code4 §§ 20919–20919.15.)
Generally, “[a] job order contract is a competitively-bid contract
for performance of minor construction, renovation, alteration,
painting and repair work, and typically involves a variety of
tasks such as roofing, electrical, and plumbing renovation and
repair. The agreement is based on a unit price book which sets
forth detailed pricing of various tasks, and a contractor’s bid is
usually expressed in terms of a percentage of the specified
charges, such as 115 or 125%.” (Acreta & Perrochet, Cal. Constr.
L. Manual (2021–2022) § 7:32, pp. 1145–1146.)5
       The District used job order contracting to implement the
Café LA program. The job order contracting procedure allowed
the District to retain multiple contractors to undertake a variety

3The code sections at issue have been repealed and recodified at Public
Contract Code section 20919.20 et seq. (See Stats. 2015, ch. 753, §§ 1
and 2, both operative as of Jan. 1, 2016.)
4All undesignated statutory references are to the former Public
Contract Code, as it existed prior to January 1, 2016.
5Section 20919.1, subdivision (e) provides, “ ‘Job order contract’ means
a competitively bid contract between the [District] and a licensed,
bonded, and general liability insured contractor in which the
contractor agrees to a fixed period, fixed unit price, and indefinite
quantity contract that provides for the use of job orders for public
works or maintenance projects.”

                                   6
of tasks in accordance with pre-set prices and pricing formulas.6
After entering into a master job order contract with a contractor,
the District would issue project-specific job orders, directing the
contractor to perform a detailed scope of work for a firm, fixed
price, lump sum.7 That fixed price would be proposed by the
contractor in a job order proposal and would be calculated using
pre-priced construction tasks and the formulas provided by
statute and the contract documents.8 The District could then
accept, reject, or ask the contractor to modify the proposal.9

6Section 20919.4, subdivision (b)(1) allows the District to award
multiple job order contracts.
7 Section 20919.1, subdivision (d) provides, “ ‘Job order’ means a firm,
fixed price, lump-sum order issued by the [District] to a job order
contractor for a definite project scope of work as compiled from the
catalog of construction tasks to be performed pursuant to a job order
contract. No single job order may exceed one million dollars
($1,000,000) in value.”
8 Section 20919.1, subdivision (l) provides, “ ‘Proposal’ means the job
order contractor prepared documents quoting those construction tasks
listed in the catalog of construction tasks that the job order contractor
requires to complete the project scope of work, together with the
appropriate quantities of each task. The pricing of each task shall be
accomplished by multiplying the construction task unit price by the
proposed quantity and the contractor’s competitively bid adjustment
factor. The proposal shall also contain a schedule for the completion of
a specific project scope of work as requested by the [District.] The
proposal may also contain approved drawings, work schedule, permits,
or other documentation as the [District] may require for a specific job
order.”
9The District was not required to accept the contractor’s job order
proposal: “In the event that the contractor’s proposal for a given job
order is found to be unreasonable, not cost effective, or undesirable, the

                                    7
      As may be apparent, job order contracting has some
inherent risks. Unlike traditional competitive bidding in which
the public entity must award the contract to the lowest qualified
bidder, in job order contracting the public entity exercises its
discretion to determine whether to accept a contractor’s job order
proposal, which is not competitively bid. To counteract the risks
attendant to that exercise of discretion by the District, the
Legislature included several safeguards in the job order
contracting statutory scheme. First, as noted, the unit prices for
construction work are fixed by the District in a construction task
catalog.10 Second, the contractor is required to develop the
proposed job order price using items from the construction task
catalog and applying the pricing formulas contained in the
statute and the contract documents.11 Third, the contractor’s job
order price proposal is transparent: it lists every task the
contractor projects may be required for the work, the applicable
unit price from the construction task catalog, and its
competitively bid adjustment factor. In other words, the
contractor not only estimates the price for a detailed scope of
work but also discloses to the District how it formulated its
estimate. Fourth, the District obtains an independent estimate
for each job order and compares that estimate to the contractor’s
proposed job order price to help determine whether the

[District] is under no obligation to issue the job order to the job order
contractor, and may instead utilize any other available procurement
procedure.” (§ 20919.11, subd. (a).)
10We may refer to the construction task catalog occasionally as the
catalog or the CTC.
11   Section 20919.1, subdivision (l).

                                         8
contractor’s price is reasonable.12 Fifth, and finally, all job orders
are reviewed and approved by at least two levels of District
management.13 With these safeguards in place, the District
should be well-positioned to evaluate the reasonableness of a
contractor’s job order proposal.
      Importantly, both the competitive bidding and job order
contracting processes lead to the same result—a firm, fixed-price,
lump sum contract in which the contractor is obligated to perform
a detailed scope of work for the agreed-upon price.14

        FACTS AND PROCEDURAL BACKGROUND

1.    The Café LA Project
      The District implemented a program called Café LA
designed to modernize cafeterias at 64 high schools and middle
schools. The District elected to use the job order contracting
process for this work and, as pertinent here, awarded eight

12 Section 20919.11 provides, in pertinent part, “In order to prevent
fraud, waste, and abuse, the [District] adopting job order contracting
shall … :[¶] (a) Prepare for each individual job order developed under a
job order contract an independent [District] estimate. The estimate
will be prepared prior to the receipt of the contractor’s offer to perform
work [i.e., the job order proposal] and will be compared to the
contractor’s proposed price to determine the reasonableness of that
price before issuance of any job order.”
13 Section 20919.11, subdivision (b) provides, “The [District] may not
issue a job order until the job order has been reviewed and approved by
at least two levels of management.”
14 Section 20919.1, subdivision (d), defines “job order,” in pertinent
part, as “a firm, fixed price, lump-sum order issued by the [District] …
for a definite project scope of work … .”

                                    9
master job order contracts to Contractor.15 Each of those
contracts included Contractor’s competitively bid adjustment
factor. The job order contracts also incorporated a construction
task catalog16 and a set of General Conditions17 setting forth
many of the terms and conditions applicable to Contractor’s work
for the District.18 As pertinent here, the General Conditions
included two formulas to be used by Contractor in pricing its

15 The contracts are designated as follows: (i) Contract No. 0530003
signed on or about April 6, 2005; (ii) Contract No. 0530014 signed on or
about July 19, 2005; (iii) Contract No. 0530017 signed on or about
July 14, 2005; (iv) Contract No. 0530020 signed on or about July 19,
2005; (v) Contract No. 0630021 signed on or about July 19, 2006;
(vi) Contract No. 0630028 signed on or about July 19, 2006;
(vii) Contract No. 0830022 signed on or about February 6, 2008; and
(viii) Contract No. 0830030 signed on or about September 16, 2008.
16The construction task catalog is a lengthy document that lists a wide
variety of frequently used construction tasks and the fixed price the
District will pay for those tasks.
17The District’s job order contracting process is governed under both
statutes and contract documents, including the General Conditions. If
any conflict arises between these two governing schemes, the statute
controls over the General Conditions.
18The early job order contracts incorporate the District’s 2005 General
Conditions and the later ones incorporate the 2007 General
Conditions. We will note material differences between the two versions
as necessary. All citations to “Art.” refer to the Articles of the General
Conditions.

                                   10
project-specific job order proposals: the CTC pricing formula19
and the NPP pricing formula20.21
      The District entered into 74 job orders with Contractor
covering three phases of work. In Phase I, the District directed
Contractor to obtain kitchen equipment for 30 schools. In
Phase II, the District directed Contractor to obtain additional
kitchen equipment for 30 schools. And in Phase III, the District
directed Contractor to perform electrical work and install the
previously obtained kitchen equipment at 14 schools.

19 For line items found in the construction catalog, the following
formula (CTC pricing formula) applies: “Prepriced Work requirements
will identify the type and number of Work units required from the
CTC. The price per unit set forth in the CTC shall serve as the base
price for purpose of the operation of this provision. The Proposal price
shall be the sum of the cost of each applicable CTC task, which is
calculated according to the following formula: [¶] A= Number of Units
Required for CTC Task [¶] B= Applicable Adjustment Factor [¶]
C= CTC Price per Unit [¶] Cost of CTC task [¶] A x B x C[.]”
(Art. 6.61.3.4.1 (2005).) The 2007 General Conditions include the same
formula. (Art. 6.28.4.1.)
20For non-prepriced items, i.e., items not found in the construction
task catalog, the formula (NPP pricing formula) has seven factors. As
pertinent here, the NPP pricing formula is the subcontractor cost to
Contractor plus either five percent of the subcontractor cost
(Art. 6.61.3.4.3.4 (2005)) or 15 percent of the subcontractor cost
(Art. 6.28.4.2 (2007).)
21 As required, Contractor obtained performance bonds from Sureties.
The bonds are numbered, respectively, (i) 929357019/6327968,
(ii) 929357032/6327987, (iii) 929367735/6328023,
(iv) 929367736/6328024 (v) 929400409/6384251,
(vi) 929400408/6384250, (vii) 929445812/6494368, and
(viii) 929460287/6577070. The first number is from Continental and
the second is from Safeco.

                                   11
       The District was satisfied with Contractor’s work. For
purposes of the bench trial, for example, the District stipulated as
follows: “The District admits for the purposes of this trial that
[Contractor] performed the work of the detailed scope of work to
the satisfaction of the District’s authorized representatives and
inspectors. The District admits that the cafeteria revitalization
work at Burroughs and Birmingham resulted in an excellent and
transformative success for providing food services for the
District’s students attending those schools. …”
       The District’s Office of Inspector General audited the job
order contracting program and concluded, among other things,
that District staff had misused the job order process to order
equipment and materials (as it did in the first two phases of work
at issue here) and failed to administer the job order contract
program properly. Another audit concluded that Contractor had
inflated the prices on numerous job orders in violation of the
master job order contracts. This litigation ensued.
2.    The Operative Complaints
       The operative fourth amended complaint contained four
causes of action. The first two causes of action against Contractor
alleged breaches of the eight master job order contracts used to
issue job orders for Contractor’s work on the Café LA program.
Generally, the District asserted that Contractor failed to price its
job order proposals as required under the General Conditions by,
for example, applying the CTC pricing formula when the NPP
pricing formula was required, or by applying the NPP pricing
formula using an inflated mark-up instead of the authorized five
or 15 percent mark-up. More particularly, the District alleged
Contractor breached the master job order contracts by “(1) failing
to submit proposals using the pre-determined contractual

                                12
formula for non-prepriced items of work;[22] (2) proposing
inappropriate quantities for items of work; (3) failing to install
proposed items of work called for in its job orders; (4) charging for
work never performed; (5) charging excessive and inappropriate
mark-ups; and (6) failing to provide monetary credit for
overpriced and inappropriately marked-up items and non-
performed work.”
      The third cause of action against Sureties alleged that
Contractor failed to comply with all of its obligations under the
master job order contracts and asserted that under the terms of
the performance bonds, Sureties were liable for the District’s
damages for breach of contract as well as the District’s litigation
costs and attorney’s fees. The fourth cause of action, for money
had and received, was subsequently dismissed.
      For reasons not relevant to this appeal, the parties agreed
at some point to split the action into two separate cases—the
original case which would now relate only to Phases I and II23
and a new case relating only to Phase III.24 In April 2015, the
District filed its new complaint directed only to the 14 Phase III
job orders.25 The new complaint named Contractor and Sureties

22   This allegation was only asserted with respect to Phases I and II.
23Los Angeles Unified School District v. FH Paschen/S.N. Nielsen,
Inc., et al. (Super. Ct. Los Angeles County, No. BC485294)
24Los Angeles Unified School District v. FH Paschen/S.N. Nielsen,
Inc., et al. (Super. Ct. Los Angeles County, No. BC579782)
25The job order contracts and schools at issue for Phase III are
#0630021: Adams Middle School, Belvedere Middle School, Berendo
Middle School, Burbank Middle School, Emerson Middle School, King
Middle School, Nightingale Middle School, and Virgil Middle School;

                                     13
as defendants and reasserted the causes of action and theories of
liability found in the operative complaint. Specifically, the first
three causes of action alleged Contractor breached the master job
order contracts by “(1) failing to submit proposals with Work
units and quantities that were reasonable for the tasks to be
performed; (2) proposing inappropriate quantities for items of
work; (3) failing to install proposed items of work called for in its
job orders; (4) charging for work never performed; and (5) failing
to provide monetary credit for overpriced and inappropriately
marked-up items and non-performed work.”
       The District further alleged that Contractor’s “job orders
and proposals also included quantities and pricing for work that
[Contractor] never performed, but nevertheless billed the
DISTRICT for and received payment in full. [Contractor] also
over-billed the DISTRICT for certain items, and there were great
variations in quantities and units between the As-Built and the
A/E project drawings and specifications. The DISTRICT further
found that some required materials and equipment were
improperly substituted by [Contractor]. For example,
[Contractor] billed the DISTRICT for copper transformers but
supplied the DISTRICT with more inexpensive aluminum
transformers. The DISTRICT believes that as a result of
[Contractor’s] job orders and proposals including quantities and
pricing for work that was never performed, [Contractor] was

#0630028: Banning High School, Henry Middle School, Kennedy High
School, Marina Del Rey Middle School, and North Hollywood High
School; and #0830030: Berendo Middle School (second job order.)
Contract #0830030 is governed by the 2007 General Conditions. The
other contracts are governed by the 2005 General Conditions.

                                 14
overpaid a sum in excess of the jurisdictional minimum of this
Court.”
      The fourth cause of action against Sureties alleged that
Contractor failed to comply with all of its obligations under the
master job order contracts and asserted that under the terms of
the performance bonds, Sureties were liable for the District’s
damages for breach of contract as well as the District’s litigation
costs and attorney’s fees. The fifth cause of action, for money had
and received, alleged that Contractor had become indebted to the
District for a sum in excess of $2,100,000.
3.    Bench Trial Regarding Two Schools
       The parties agreed to conduct a bench trial as to two
schools—Birmingham High School and Burroughs Middle
School—to resolve legal issues common to all the District’s
claims. The court issued its final statement of decision on
April 25, 2014, and it was subsequently incorporated into the
final judgment.
     3.1.   Phase I
      In Phase I, the District ordered Contractor to procure
kitchen equipment for the new cafeterias. No construction work
was required for Phase I. Initially, the District required
Contractor to obtain the equipment from a company called
Duray. Because the equipment requested by the District was not
found in the construction task catalog, Contractor submitted job
order proposals using the NPP pricing formula set forth in the
2005 General Conditions, i.e., Contractor’s cost plus a five
percent mark-up. The District rejected those proposals. The
District then directed Contractor to obtain the equipment from a

                                15
company called TriMark. The total cost of the equipment from
TriMark for Phase I was $170,777 per school.
       The TriMark equipment requested by the District was not
included in the construction task catalog. But the District gave
Contractor a copy of a job order proposal (Torres proposal) from
another contractor working on Phase I of the Café LA project and
told Contractor to “mirror it.” The Torres proposal used the CTC
pricing formula. Contractor understood that by asking it to
“mirror” the Torres proposal, the District wanted Contractor to
submit job order proposals using the CTC pricing formula with
the same or a very similar proposed price. Although the TriMark
equipment was not found in the construction task catalog,
Contractor’s job order proposals applied the CTC pricing formula.
Essentially, Contractor created its job order proposals using
artificial quantities of items found in the construction task
catalog that were in some cases similar to the TriMark
equipment to reach the desired proposal price: $244,999
(Birmingham) or $245,000 (Burroughs).26 Contractor referred to
this methodology as “closest to CTC.”
       Contractor never intended to supply the District with the
construction task catalog items listed on the job order proposals
and that fact was evident on the face of the proposals. Every line
item in Contractor’s job order proposals cross-referenced an item

26 The Birmingham and Burroughs job orders were issued under
different master job order contracts (0530014 and 0530003,
respectively) and the construction task catalogs contained different
pricing. Although the Birmingham and Burroughs job order proposals
were not identical, the proposals used the same methodology, i.e.,
artificial quantities of catalog items that were never intended to be
used on the projects.

                                 16
of equipment on the TriMark purchase order issued to Contractor
and indicated that the TriMark item would be provided instead of
the listed item from the construction task catalog. In the
Burroughs job order proposal, for example, Contractor included a
line item for “Three Drawer, 36 Roll Capacity Food Warmer.”
That line item included a note stating, “Used for Item #12-Mobile
Rack w/ Insulated Cover, Model #PR-Combo-X (2 units),” the
same item number and descriptor used in one line item of the
TriMark purchase order. The quantities of items were also
artificial. The Burroughs proposal included a line item for “Bread
Dispenser, Counter Top.” Contractor proposed a quantity of 3.61
dispensers even though a bread dispenser was not available in
fractional quantities. The bread dispenser line item was filling in
for another item contained in the TriMark purchase order—four
condiment organizer bin racks. These obvious irregularities
notwithstanding, the District accepted the job order proposals,
Contractor procured the TriMark equipment requested by the
District, and the District paid the agreed-upon price.
       At trial, the District presented testimony by an auditor
retained by the District’s Office of Inspector General to perform a
cost audit relating to Contractor’s work on the Café LA program.
The auditor concluded that Contractor breached the master job
order contracts by failing to price its job order proposals as
required under the General Conditions, i.e., by applying the CTC
pricing formula to fictional quantities of construction task catalog
items that would not be used on the project rather than using the
required NPP pricing formula and applying it to its actual cost to
procure the TriMark equipment. If Contractor had used the NPP
pricing formula properly, the District urged, each of the job order
proposals for Phase I would have been priced at $179,316 rather

                                17
than $249,999 or $245,000, resulting in damages of $65,684 for
Birmingham and $65,685 for Burroughs.
      Contractor maintained that its “closest to CTC”
methodology was valid and that Café LA program manager
Charlene Franck had specifically directed Contractor to use that
methodology when she said to “mirror” the Torres proposal.
      Following the bench trial, the court found in favor of the
District on its Phase I claims. Specifically, the court summarized
the two formulas from the General Conditions—the CTC pricing
formula and the NPP pricing formula—and noted that Contractor
did not properly apply either of those formulas in its Phase I job
order proposals. Instead, in an effort to mirror the Torres
proposal provided by the District, Contractor purported to use the
CTC pricing formula and selected items from the construction
task catalog even though the TriMark equipment was not found
in the catalog. It also applied a 24 percent adjustment factor
across the board rather than its competitively bid adjustment
factors which varied among the master job order contracts, and
used fictitious (and sometimes fractional) quantities of the
catalog items, all in order to reach a proposed job order price of
approximately $245,000.27
      The court concluded that Contractor’s methodology
breached the applicable statute as well as the master job order

27Each of Contractor’s master job order contract bids included three
adjustment factors that applied to work performed during regular
school hours (weekdays 7:00 a.m. to 3:00 p.m.), overtime hours
(weekdays 3:00 p.m. to 11:00 p.m.), and premium overtime hours
(weekdays 11:00 p.m. to 7:00 a.m., weekends, and holidays.) In the
master job order contracts at issue, Contractor’s adjustment factors
range from 0.9911 to 1.4000.

                                  18
contract pricing provisions. By statute, Contractor’s job order
proposal should have been based on the construction task catalog
and proposed appropriate quantities of the necessary tasks.
(§ 20919.1, subd. (l).) The General Conditions also required
Contractor to use the specific pricing formulas contained therein.
But as to the Phase I proposals, the court found, Contractor did
not follow the procedure required by statute or contract: “For
Phase I contracts, [Contractor] applied a CTC adjustment factor,
when it should have applied the NPP factor for non-CTC TriMark
equipment, and [Contractor] manipulated the unit quantities in
its proposals so as to obtain payment from the District for never-
delivered, never-installed quantities and, moreover, to apply the
CTC adjustment factor on the phantom quantities.”
       The court rejected Contractor’s contention that the
District’s approval of the job order proposals and issuance of
notices of completion after the work was complete barred it (due
either to waiver or estoppel) from seeking damages for breach of
contract. With respect to estoppel, the court concluded that
Contractor’s claim failed both as a factual and as a legal matter.28
First, the court found that Franck’s directive to “mirror” the
Torres proposal did not mean that she wanted Contractor to
match the price on that proposal or to use fictional quantities of
catalog items to inflate its job order proposal prices. “These were

28As the court noted, four elements are required for an equitable
estoppel defense: the party to be estopped was aware of the facts, the
party to be estopped intended to induce reliance, the party asserting
estoppel was ignorant of the facts, and the party asserting the estoppel
suffered injury. (See, e.g., Alameda County Deputy Sheriff’s Assn. v.
Alameda County Employees’ Retirement Assn. (2020) 9 Cal.5th 1032,
1072 (Alameda).)

                                  19
decisions that [Contractor’s] executives made on their own and
not in reasonable reliance on any direction given by Franck or
any other District representative.” Second, and in any event, the
court concluded Contractor failed to establish any of the
necessary elements of an equitable estoppel defense. In
particular, the court noted, Contractor could not prove that it was
ignorant of the true facts: “[I]t was aware of the correct pricing
mechanism for its revised proposals: NPP pricing is required [by
the General Conditions] and bidding of only ‘appropriate
quantities [for] each task’ is required by Section 20919.1.”
       As to waiver resulting from the District’s acceptance of the
job order proposals, the court noted that the General Conditions
included a provision stating that any action or inaction by the
District did not constitute a waiver of a right, remedy, or duty
under the contract. Finally, the court rejected Contractor’s notion
that the District’s recording of notices of completion on the
projects constituted a “ratification” that absolved Contractor of
any liability for breach of contract because the General
Conditions provided that Contractor’s duty to perform in
compliance with the contract document was absolute and that
acceptance of the work by the District did not release it from
liability.
     3.2.   Phase II
      In Phase II, the District required Contractor to procure
additional kitchen equipment from TriMark. Again, no
construction work was required. TriMark provided Contractor
with a purchase order for each of the two schools. The total price
for the additional equipment needed for Birmingham was
$166,787 and for Burroughs, the price was $166,543.

                                20
       For each of its Phase II job order proposals, Contractor
purported to use the NPP pricing formula. Each line item in the
job order proposals specified the number of units of TriMark
equipment to be provided and designated the line item as a non-
prepriced item as required under the General Conditions. The
unit prices set forth in the job order proposal, however, reflected
a 25 percent mark-up over the actual cost of the TriMark
equipment. For example, Contractor’s Phase II job order proposal
for Birmingham included a line item for “Night Cover.” The cost
to purchase that item from TriMark was $790 per unit but the
price listed in the job order proposal was 25 percent higher:
$987.50 per unit. Every line item in the job order proposals for
the two schools was calculated and presented in the same
manner—designated as non-prepriced but the price listed was
25 percent higher than Contractor’s cost to obtain the item. The
total bid for Birmingham was $208,458.75 and the total bid for
Burroughs was $208,166.25.29
       The District contended at trial that Contractor breached
the master job order contracts by failing to properly apply the
NPP pricing formula in its job order proposals. According to the
District’s auditor, if Contractor had applied the appropriate five
percent mark-up found in the NPP pricing formula, the proposed
job order price for Birmingham would have been reduced by
$33,332 and for Burroughs, the reduction would have been
$33,296.

29 The job order proposals were identical with the exception of one line
item. Birmingham required two LCD monitors with speakers while
Burroughs required only one. Those line items, together with
applicable tax, account for the price differential between the two
proposals.

                                   21
      Contractor’s Vice-President Timothy Stone testified that
the District’s regional project manager, Paul Metoyer, had agreed
to a 25 percent mark-up over cost for the TriMark equipment
needed for Phase II. Stone stated that when he heard there would
be a second phase of procurement of non-prepriced equipment, he
contacted Metoyer to negotiate the mark-up. Stone explained to
Metoyer that the generally applicable five percent mark-up did
not even cover Contractor’s overhead, which was 16 percent, and
that Contractor would prefer that the District select another
contractor if they could not negotiate a reasonable solution.
Metoyer denied making such an agreement, however.
      The court again ruled in favor of the District. As the court
noted, it was undisputed that Contractor created its Phase II job
order proposals by applying the NPP pricing formula but with a
25 percent mark-up to the equipment purchased from TriMark.
The NPP pricing formula contained in the 2005 General
Conditions, however, required Contractor to apply a five percent
mark-up over its cost.30 The court rejected Contractor’s
contention that Metoyer agreed to a 25 percent mark-up. First,
Metoyer denied making such an agreement and Stone did not
make any record of the telephone conversation in which he
claimed that such an agreement was reached. Second, the
General Conditions state that verbal communications are not
binding. Third, and in any event, the court concluded that
Metoyer lacked the authority to modify the contract documents in
a manner that would allow Contractor to apply a 25 percent
mark-up to non-prepriced items. Contractor, as a party

30As noted, the 2007 General Conditions permitted Contractor to
apply a 15 percent mark-up when using the NPP pricing formula.

                                 22
contracting with a public entity, was chargeable with knowledge
of the restrictions on Metoyer’s authority.
     3.3.   Phase III
       In Phase III, the District directed Contractor to install
equipment purchased during the first two phases and to perform
the electrical work required to support the new equipment. The
District did not assert, as it did with respect to Phases I and II,
that Contractor failed to use the pricing formulas required by the
General Conditions. Instead, the District argued that the General
Conditions required every item included in a job order proposal to
be “reasonable and necessary.” The District chose five line items
from the Birmingham and Burroughs job order proposals and
offered expert testimony, based in large part on visual
inspections made years after job completion, that Contractor
either did not use line items included in its job order proposals or
used a lesser quantity of those line items than Contractor
estimated might be required. On that basis, the District argued
that Contractor’s proposals were “overpriced.” And although the
job orders were firm, fixed-priced lump sum contracts, the
District claimed that a document retention and audit provision in
the General Conditions allowed the District to recover damages
for “overpricing.”
       The District’s electrical engineering expert reviewed the
design drawings, conducted a site visit, and “came up with what
[he] evaluated as a reasonable cost of the work to accomplish this
scope that is defined in the scope of work and on the design
drawings, and then as we confirmed in the field, contrasted to
what was the cost proposed by the contractor proposal
document.” As to Burroughs, for example, he opined that a
reasonable cost for the work as completed was $51,145.35

                                23
whereas the job order price was $139,748.53. He addressed
several line items specifically and opined that the quantities
listed in Contractor’s job order proposal were substantially
greater than the quantities he estimated had actually been used.
He acknowledged several times, however, that cost estimating is
not an exact science.
       On cross-examination, the District’s expert rejected the
idea that Contractor’s actual cost to perform the work was
relevant to his analysis of whether Contractor’s proposed job
order prices were reasonable. For example, although Contractor
paid its subcontractor $77,000 for the electrical work performed
at Burroughs, the expert maintained that the reasonable value of
the work was only $51,000. He conceded, however, that his cost
estimates were significantly lower than the independent
estimates obtained by the District prior to construction. The
independent estimate for electrical work at Burroughs, for
example, was $94,839.
       The District presented testimony from a second expert
regarding the non-electrical work performed during Phase III.
That expert also opined that the reasonable value of the work
performed by Contractor was substantially less that the agreed-
upon price. As to Birmingham, for example, he calculated the
reasonable value of the work was $51,237 as compared to the job
order price of $117,267. He also examined specific line items and
compared the proposal to the work actually performed. For
example, the Burroughs job order proposal included a line item
for 16 hours of “investigative engineering,” which could include
an inspection for asbestos or investigative work by another
specialized consultant. But the expert did not see any records

                               24
indicating that Contractor actually utilized any investigative
engineering services.
       Contractor argued that the District determined the
proposed job order prices were reasonable when it accepted the
job order proposals. The District had received transparent
proposals that disclosed every line item, quantity, and price
proposed by Contractor, and it also had received job order
estimates from an independent party. Under the contract terms,
the District was required to (and did) assess the reasonableness
of the proposed price at the time it was submitted and in
connection with its decision to accept or reject the job order
proposal. Nothing in the master job order contracts or in the
applicable statute (§ 20919.11), Contractor contended, permitted
the District to change its mind years later and claim that the
agreed-upon job order prices were unreasonable.
       Contractor also presented an electrical engineering expert
to evaluate the job order proposals for Phase III. The expert
reviewed the materials available to Contractor at the time it
generated its job order proposals—the plans and specifications
and the construction task catalogs—as well as the District’s
independent estimates, which were prepared prior to
construction. The expert generally concluded that Contractor’s
proposed prices were reasonable. He also visited both schools and
opined that Contractor completed the detailed scope of work and
that the projects were in good working order. The expert noted
that there were variances between the plans, the job order
proposals, and what was actually installed. But he indicated that
some degree of variance was expected, and he observed variances
in both directions, i.e., the use of greater quantities than
proposed and the installation of items not proposed as well as the

                                25
use of lesser quantities and the elimination of some proposed
items. As a whole, however, he concluded that Contractor’s job
order proposals were reasonable. He also noted that the
independent estimates obtained by the District were higher than
Contractor’s proposed price for both Birmingham and Burroughs,
while the calculations performed by the District’s trial experts
were far lower—“there is a huge discrepancy.” The expert also
compared Contractor’s costs, i.e., the amounts billed by
subcontractors, to the District’s experts’ estimates of the
reasonable value of the work and determined that the District’s
estimates were not credible.
      Contractor representative Timothy Stone also testified to
some of Contractor’s actual costs to perform the Phase III work.
Stone said that if the court awarded damages based on the
District’s estimates of the reasonable value of the work,
Contractor would lose $126,000 on the job orders for the
Phase III work at Birmingham and Burroughs.
      The court ruled in favor of Contractor. The court noted that
the work required for Phase III was substantially different from
Phases I and II, as Phase III involved demolition and
construction work to be performed on a compressed time
schedule. In addition, the court found that the District had set its
own standard to assess the reasonableness of Contractor’s job
order proposals. Specifically, if the job order proposal price did
not exceed the independent estimate by more than 20 percent,
the District was authorized to accept Contractor’s proposal
without special senior management approval and proceed with
the project.

                                26
       The District had urged that the “appropriate quantities”
requirement found in section 20919.1, subdivision (l),31 applied to
individual line items (rather than the proposals as a whole) and
could be evaluated retrospectively, i.e., by comparing the job
order proposal line items to the items and quantities ultimately
used on the project. The court rejected that argument and noted
that, in any event, the District only offered evidence as to five
line items out of the 174 line items (Birmingham) or 161 line
items (Burroughs) contained in the job order proposals at issue.
The court concluded that this small number of variances was
insufficient to establish a breach of the master job order
contracts.
       The court also rejected the District’s reading of the
applicable statutes: “[U]nder the District’s interpretation,
[Contractor] breached the Phase III Burroughs Job Order
Contract because it did not actually use these particular
components in the construction: Wiremold 6000, RGS 2” Conduit
with coupling, and the RGS Fire Stop Fittings. This is an entirely
too narrow reading of the statute. The statute envisions that in
proposing work for a construction [project] the contractor shall
itemize the materials and quantities in good faith to complete the
design. During the course of construction, quantities of the bid
materials may be changed or other materials that are
functionally equivalent for the project may be substituted for the
bid materials. [Contractor’s] subcontractors did not install

31 That section provides in pertinent part: “ ‘Proposal’ means the job
order contractor prepared documents quoting those construction tasks
listed in the catalog of construction tasks that the job order contractor
requires to complete the project scope of work, together with the
appropriate quantities of each task.”

                                   27
Wiremold 6000, but they did, according to the evidence, install
quantities of Wiremold 4000 (a material not even found in
[Contractor’s] proposal) as a functional substitute of Wiremold
6000.”
       Finally, the court questioned the District’s theory of
liability generally: “If the governing standard for ‘reasonableness’
is the price paid by the District, how is that reasonableness to be
determined. The court’s recollection is that the experts from both
sides concluded that [Contractor’s] proposal was within 20% of a
reasonable estimate to accomplish the Phase III construction
required by the [detailed scope of work] and the proposal. It is
unlikely that the court could conclude that individual line items
were overpriced if the price for the entire remodeling project was
reasonable.” But the court did not address that issue further, as
the District had focused solely on five line items at trial.
     3.4.   Sureties
      Following the bench trial, the court heard argument
regarding the liability of Sureties for Contractor’s breach of
contract as to Phases I and II. It was undisputed that Sureties
issued bonds covering Contractor’s work on the two schools at
issue in Phases I and II. Sureties contended, however, that the
operative complaint only attempted to recover from Sureties as to
Phase III, and that they had no notice the District planned to
assert claims against them as to Phases I and II. Sureties also
argued the bonds had been exonerated by the District’s negligent
overpayments to Contractor.
      The Court found Sureties liable for Contractor’s breaches of
contract as to Phases I and II. The court noted that the bonds

                                28
incorporated all the contract documents32 and set out the possible
actions to be taken by Sureties in the event of Contractor’s
default. The bonds provided that “[w]henever
Contractor/Principal is declared by [the District] to be in
breach/default/deficient under the Contract and/or the Owner
exercises its right to terminate the CONTRACTOR’S right to
proceed, [the District] having given Notice to the CONTRACTOR
and Surety as required by the Contract, if any, the Surety shall
do one or more of the following: [¶] 1. Promptly remedy, and/or
start to remedy, the declared default/breach/deficiency …; and/or
[¶] 2. Complete the Contract in accordance with its terms and
conditions; and/or [¶] 3. Pay to the Owner an amount not less
than one hundred percent (100%) of the Contract Amount … to
fully and completely compensate [the District] for any and all
damages, losses and injuries suffered by [the District] as a result
of [Contractor’s] breach(es) of the Contract.”
       The court concluded that under the circumstances, the
third option—payment of funds to compensate the District for

32The District’s 2005 General Conditions define “Contract Documents”
as “The Bid and Acceptance Form, Addenda, bid (including
documentation accompanying the bid and any post bid documentation
submitted after the Notice of Intent to Award) when attached as an
exhibit to the Bid and Acceptance Form, the Notice to Proceed, the
bonds, these General Conditions, the Supplementary Conditions, the
Specifications and the Drawings, together with all Job Orders, Change
Orders, Construction Directives, Written Option Agreements, and
ARCHITECT or [Owner Authorized Representative] written
interpretations and clarifications issued pursuant to Article 9.4.” The
bid and acceptance form, once it is accepted by the District, sets
Contractor’s adjustment factor for job orders subsequently issued
under the master agreement. The 2007 General Conditions contain a
similar definition.

                                  29
damages—was applicable. The court also rejected Sureties’
argument that they had no notice of the District’s claims against
the bonds because it was undisputed that the District served
Sureties a response to their Bill of Particulars which listed the
Phase I and II claims. Sureties had also argued that the District’s
knowledge (or at least suspicion) of irregularities in Contractor’s
job orders barred liability of the Sureties. The court found,
however, that the language of the bonds and the General
Conditions did not support that a conclusion. Finally, the court
confirmed that Sureties were liable for all Contractor’s breaches
of contract, not solely those breaches relating to the performance
of construction tasks. The court relied on the bond language
stating that all the contract documents were incorporated into
the bonds and the contract requirements that included
Contractor’s accurate use of the pricing formulas set forth in the
General Conditions. The court further found that Sureties were
liable, under the language of the bonds, for the District’s
attorney’s fees.
     3.5.   Damages and Prejudgment Interest
      The court served its final statement of decision on
April 25, 2014. As to Birmingham High School, the court awarded
$65,683 damages for Phase I and $33,314 for Phase II. Similarly,
the court awarded damages of $65,684 for Phase I and $33,314
for Phase II relating to Burroughs Middle School. The damages
award was made jointly and severally against Contractor and
Sureties. The court also concluded that the District was entitled
to prejudgment interest under Civil Code sections 3287,
subdivision (a) and 3289, subdivision (b), in an amount to be

                                30
determined.33 The court found in favor of Contractor and Sureties
as to the District’s Phase III claims. And, the court noted,
attorney’s fees could be recovered under a reciprocal provision in
the bonds in an amount to be determined by posttrial motions.34
4.    Summary Adjudication Regarding Phase I and
      Phase II Job Order Proposals for Remaining Schools
      After the bench trial, the District moved for summary
adjudication of its remaining breach of contract claims relating to
Contractor’s job order proposals for Phases I and II.35 The court’s
statement of decision, dated December 19, 2014, was
incorporated into the final judgment.

33On March 11, 2015, the court granted the District’s motion for
prejudgment interest and set forth the formula to be used to calculate
the interest, subject to offset relating to funds withheld by the District
due to Contractor on other projects. On May 19, 2015, the court
granted the District’s motion for prejudgment interest against
Sureties. Those rulings were incorporated into the final judgment.
34The court’s award of attorney’s fees and costs to the District is the
subject of Los Angeles Unified School District v. FH Paschen/S.N.
Nielsen, Inc. (B303169, app. pending), which we have stayed pending
the resolution of this matter.
35 In its briefing below and on appeal, and again at oral argument, the
District claimed the parties agreed to be bound by the court’s factual
findings from the bench trial. No evidence supports that contention.
The citation relied upon by the District in its appellate briefing, and
provided to this Court at oral argument, is a stipulation that relates to
the filing of a complaint in case No. BC579782 regarding the District’s
Phase III claims and has nothing whatsoever to do with the binding
effect of factual findings made during the bench trial.

                                    31
     4.1.   Phase I
       The job order proposals for the remaining 2736 Phase I
schools related to three master job order contracts (0530014,
0530017, 0530020), each of which incorporated the 2005 General
Conditions. The same set of kitchen equipment procured for
Birmingham and Burroughs was procured from TriMark for the
other 27 schools. And as it did for Birmingham and Burroughs,
TriMark charged Contractor $170,777 for each set of equipment
required in Phase I. As before, the TriMark equipment was not
found in the construction task catalogs.
       Contractor used the same pricing methodology it used for
Birmingham and Burroughs in its job orders proposals for the
other 27 Phase I schools, i.e., it purported to apply the CTC
pricing formula, selected items from the construction task catalog
that it did not plan to use, and manipulated the quantities of
those items to reach the desired proposal price. Indeed,
Contractor prepared one template for the Phase I job order

36 The District issued Contractor job orders relating to 30 schools in
Phase I. The bench trial resolved the claims relating to Birmingham
High School and Burroughs Middle School. The District withdrew its
claim regarding Banning High School. The remaining 27 schools at
issue were: Chatsworth High School, Crenshaw High School, El
Camino Real High School, Hamilton High School, Kennedy High
School, Los Angeles High School, North Hollywood High School,
Northridge Academy High School, Sylmar High School, Taft High
School, University High School, Van Nuys High School, Venice High
School, Emerson Middle School, Hale Middle School, Henry Middle
School, Lawrence Middle School, Maclay Middle School, Marina del
Rey Middle School, Mulholland Middle School, Nobel Middle School,
Palms Middle School, Portola Middle School, San Fernando Middle
School, Sepulveda Middle School, Wright Middle School, and Laces
Magnet.

                                  32
proposals and used it for every Phase I school. The total job order
price proposal for each school was either $249,998.90 (as
Birmingham) or $245,000 (as Burroughs.) As it asserted at the
bench trial, the District argued Contractor breached the master
job order contracts by failing to use the NPP pricing formula as
required under the General Conditions. The District also claimed
the same damages of $65,683 or $65,684 per school, which totaled
$1,773,460 for the 27 schools.
       In opposition, Contractor argued that certain disputed
material facts precluded summary adjudication. Specifically, one
of the contractual pricing provisions had not been at issue during
the bench trial because that trial related only to two schools. But
the General Conditions contained a provision that applied after
non-prepriced items were used three times. Article 6.61.3.4.3.7 of
the 2005 General Conditions (repeated use provision) states:
“After using a non-prepriced item on three separate Work orders,
the unit price for the work item will be negotiated and fixed as a
permanent pre-priced item, which will no longer require price
justification.” In other words, when a non-prepriced item was
used repeatedly, the parties were required to negotiate a
mutually-agreeable, CTC-equivalent price for that item.
Contractor would then use the parties’ negotiated price for the
item in future job order proposals, applying the CTC pricing
formula. According to Contractor, because the court had not
considered the evidence presented at the bench trial in the
context of the repeated use provision, it could not resolve the
issue as a matter of law on a motion for summary adjudication.
       Contractor’s Vice-President Timothy Stone, who testified
during the bench trial, submitted a declaration in support of
Contractor’s opposition to the motion for summary adjudication.

                                33
With regard to the repeated use provision, Stone attested to the
following: “The District insisted that all Phase I job orders be
priced using the Torres proposal as the template for all of the
pricing of the equipment. This order by the District was part of
the negotiations between the parties for the pricing of the
equipment. I participated personally in the negotiations for
Phase I, where the equipment was all priced based on the
District’s choice to use the prices found in the Torres template.
Specifically, the District insisted on the specific prices found in
the Torres template as the negotiated price for the Phase I
equipment.” In short, he contended, the parties had negotiated
prices for the TriMark equipment and those negotiated prices
were reflected in Contractor’s job order proposals.
      The District contended, however, that Contractor was
barred from relying on the repeated use provision with respect to
Phase I because it had not actually used the NPP pricing formula
to develop its job order proposal prices. It had instead purported
to use the CTC pricing formula. Further, and even if the court
determined that the repeated use provision was applicable, the
District asserted that no binding action could have been taken by
the District’s staff with respect to a price adjustment because any
contract amendment had to be approved by the District’s board.37
      The court ruled in favor of the District. As the court noted,
almost all of the material facts were undisputed and consistent

37The District seemed to suggest that a modification of the NPP
pricing formula contained in the master job order contracts would be
required and would, moreover, require Board approval. But that is not
what the General Conditions contemplate. They contemplate a price
negotiation regarding specific, repeatedly-used non-prepriced items,
not a wholesale revision of the NPP pricing formula.

                                 34
with the evidence presented at the bench trial. The court reached
the same overarching conclusions it had reached during the
bench trial: Contractor violated the master job order contract
pricing provisions with respect to its Phase I proposals by using
the CTC pricing formula, selecting construction task catalog
items never intended to be used, creating fictitious unit
quantities, and applying a 24 percent adjustment factor across
the board. Contractor should have used the NPP pricing formula,
as required under the General Conditions.
       The court rejected Contractor’s contention that the parties
had negotiated pursuant to the repeated use provision and
agreed to the prices set forth in the Phase I job order proposals.
Specifically, the repeated use provision required the parties to
negotiate a fixed price for repeatedly used items (such as the
TriMark equipment) not found in the construction task catalog.
From that point forward, Contractor would apply the CTC pricing
formula in its job order proposals, using the negotiated fixed
price. But Contractor’s Phase I job order proposals did not follow
that pattern and instead improperly used items from the catalog
that were not intended to be used on the projects and applied a
24 percent adjustment factor rather than Contractor’s
competitively-bid adjustment factor. In other words, the court
found that Stone’s representation concerning the alleged
negotiation did not match Contractor’s actual pricing method.
The court awarded damages of $1,773,460.
     4.2.   Phase II
      The job order proposals for the 27 Phase II schools at issue
related to four master job order contracts (0530014, 0530020,
0630021, 0630028) that incorporated the 2005 General

                                35
Conditions and one master job order contract (0830022) that
incorporated the 2007 General Conditions.38
      Unlike Phase I, in which an identical set of equipment was
ordered for each of the schools, the equipment procured in
Phase II varied somewhat from school to school. As with
Birmingham and Burroughs, the TriMark equipment procured
for the additional Phase II schools was not found in the
construction task catalog. Contractor’s job order proposals
properly listed the TriMark equipment required for each school
and designated every line item as a non-prepriced item. But
Contractor did not properly apply the NPP pricing formula. In
some of the job order proposals, Contractor used its cost for the
TriMark equipment but did not use the five or 15 percent mark-
up used in the NPP pricing formula. In the job order proposal for
Emerson Middle School, for example, the line item unit prices
matched the TriMark purchase order prices and Contractor
applied an adjustment factor of 1.2472 (approximately a 25
percent mark-up over cost.) In other job order proposals, no

38The District issued job orders under the 2005 General Conditions for
17 schools: Chatsworth High School, Crenshaw High School, Emerson
Middle School, Hale Middle School, Henry Middle School, Hamilton
High School, King Middle School, Lawrence Middle School, Marina del
Rey High School, Mulholland Middle School, Nobel Middle School, San
Fernando Middle School, University High School, Wright Middle
School, Van Nuys High School, Venice High School, and Virgil Middle
School. It issued an additional 10 job orders under the 2007 General
Conditions for the following schools: Banning High School, El Camino
Real High School, Kennedy High School, Los Angeles High School,
North Hollywood High School, Northridge Academy High School,
Portola Middle School, Sepulveda Middle School, Sylmar High School,
and Taft High School.

                                 36
mark-up was applied but the line item unit prices in the job order
proposal reflected a 25 percent mark-up over Contractor’s cost to
obtain the equipment from TriMark.
      The District argued, as it had during the bench trial, that
Contractor breached the master job order contracts when it
formulated its job order proposals for Phase II. Although
Contractor purported to use the NPP pricing formula, it applied a
25 percent mark-up over its cost to obtain the equipment from
TriMark, rather than the five or 15 percent mark-up permitted
under the General Conditions.39 The District also relied on Paul
Metoyer’s trial testimony that he had not negotiated a 25 percent
mark-up with Contractor, as Timothy Stone had claimed.
Moreover, the District asserted, Metoyer did not have the
authority to alter or amend the master job order contracts to
increase the percentage in the NPP pricing formula. The District
further argued that the repeated use provisions40 did not assist
Contractor because any job order contract modification would
have needed to be approved by the District’s Board. The District
claimed damages for the 27 schools in the amount of $700,597.
      Contractor’s opposition to the District’s Phase II motion for
summary adjudication asserted the same arguments presented in

39 Article 6.61.3.4.3.4 of the 2005 General Conditions provided for a
five percent mark-up on non-prepriced items. Article 6.28.4.2 of the
2007 General Conditions provided for a 15 percent mark-up.
40Article 6.27.6 of the 2007 General Conditions also contains a
repeated use provision which states, in pertinent part, “After using a
Non-Prepriced item on three separate Work orders, a base unit price,
equivalent to the price of Work units contained in the Gordian Group
Construction Task Catalog …, will be negotiated and treated as a CTC
unit priced item that does not require further price justifications.”

                                   37
its Phase I opposition. Contractor again noted that the repeated
use provisions of the 2005 and 2007 General Conditions required
the parties to negotiate a mutually-agreeable CTC-equivalent
price for the TriMark equipment and then apply the CTC pricing
formula after the equipment had been used on three job orders.
According to Contractor, the court had not considered the
evidence of negotiations presented at the bench trial in the
context of the repeated use provision and could not resolve the
issue as a matter of law on a motion for summary adjudication.
       Contractor’s Vice-President Timothy Stone, who testified
during the bench trial, submitted a declaration in support of the
opposition to the motion for summary adjudication. With regard
to the repeated use provision, Stone attested to the following:
“The District insisted that all Phase II job orders be priced using
NPP. This order by the District started the negotiations between
the parties for the pricing of the equipment. I participated
personally in the negotiations for Phase II. As evidenced by the
email of the District employees …, [Contractor], as well as the
other contractors, negotiated pricing that was a 25% mark-up on
top of NPP as the value of the items to be provided by
[Contractor].” In short, Contractor asserted that Stone had
negotiated a mark-up for the non-prepriced TriMark equipment
with now-unnamed District employees and that the agreed-upon
price was reflected in its job order proposals.
       The court ruled in favor of the District. As the court noted,
almost all of the material facts were undisputed and consistent
with the evidence presented at the bench trial. The court reached
the same overarching conclusions it had reached following the
bench trial: Contractor violated the master job order contracts
with respect to its Phase II proposals by using the NPP pricing

                                 38
formula with a mark-up of approximately 25 percent instead of
the contractually authorized mark-up of five or 15 percent. The
court rejected Contractor’s contention that the parties had
negotiated pursuant to the repeated use provisions and agreed to
the prices set forth in the Phase II job order proposals.
Specifically, the court found that Stone’s representation
concerning the alleged negotiation, together with an internal
email drafted by District staff member Edwin Cartagena, failed
to raise a triable issue of fact on that point. The court remarked
that Stone’s declaration was fatally vague, as it did not identify
any person that he negotiated with nor did he provide any facts
suggesting that the unnamed District representative had the
authority to make such an agreement. And Cartagena’s email,
which referenced a 24 to 25 percent contractor mark-up, was also
vague and failed to establish (or even suggest) that any such
agreement was made by a person with authority to do so. The
court awarded damages of $700,597.
5.    Jury Trial Regarding Remaining Phase III Schools41
      Pursuant to a stipulation of the parties, the District’s
claims regarding the remaining Phase III schools were tried to a
jury.
     5.1.   Motion in Limine
      Contractor and the District filed a number of motions in
limine prior to trial. As pertinent here, the District moved to
exclude all evidence of Contractor’s actual cost to perform the job
orders at issue in Phase III. The District urged that Contractor’s

41 Although Judge Richard L. Fruin made most of the rulings in this
litigation, the jury trial was conducted by Judge Victor E. Chavez.

                                 39
cost to perform the job orders was irrelevant. Specifically, the
District noted that section 20919.1, subdivision (l), required
Contractor to include only “appropriate” quantities of each
construction task in its job order proposals. Similarly, the District
asserted, the General Conditions obligated Contractor to propose
items that were “reasonable,” “required,” and “necessary” to
accomplish the work. The District explained its theory of liability
as follows: “The District contends [Contractor] instead included
units and quantities of work in its Phase III proposals that were
not required, necessary or reasonable for the tasks to be
performed, resulting in an overpricing of the proposals and as a
result, the Job Orders.” The District argued that evidence of
Contractor’s actual cost to perform the work would be confusing
to the jury and highly prejudicial: “After the [job order contract]
has been awarded based upon the adjustment factor bid by the
contract[or], the contractor’s subsequent, actual profit or loss
from one job order to another is irrelevant and immaterial to
whether the contractor followed the contractual pre-priced
formula in pricing its Job Order Proposals.”
       Contractor opposed the motion and agreed that the central
question in the litigation concerned the “reasonableness” of its job
order proposals. But Contractor asserted that it could “only be
held to what any reasonable person could estimate at the time[.]”
In other words, “reasonableness” could not be determined in a
vacuum or with reference to some objective standard created by
the District’s experts. Instead, Contractor noted, pursuant to
statute and the master job order contracts, the District
determined whether the job order proposals were reasonable at
the time it reviewed the proposals and decided whether to accept
them. In any event, Contractor urged, to the extent some external

                                 40
measure might be used to evaluate the reasonableness of its job
order proposals, its actual cost to perform the work was the best
evidence. And that evidence would show that if the District’s
experts’ post hoc assessment of “reasonableness” was applied,
Contractor would suffer substantial losses on the work it
performed during Phase III.
      In reply, the District emphasized that Contractor was
statutorily and contractually required to price its job order
proposals in accordance with the pricing formulas set forth in the
General Conditions, which in turn allowed Contractor to include
only “appropriate quantities” of construction tasks (§ 20919.1,
subd. (l)) that were “reasonable and necessary” for the work to be
performed (Art. 6.61.3.4).
      The court granted the District’s motion.42
     5.2.   Trial
      The jury trial regarding the remaining Phase III schools
proceeded much as the bench trial did. The heart of the District’s
case was presented through the testimony of the same experts
who testified at the bench trial. The electrical engineering expert
again explained that he was hired to determine the reasonable
value of the work performed at each of the 13 schools at issue. He
prepared a packet of information evaluating the work required at
each of the 13 schools which included a spreadsheet examining
150 to 200 line items relating to electrical work proposed and
apparently performed, based on what he could see during his site
inspection. Over the course of four days, the expert testified in

42Contractor filed a motion during the trial essentially requesting that
the court reconsider its ruling. The court summarily denied the
request.

                                  41
detail to his opinion about the items and quantities that were
required to perform the detailed scope of work as compared to
(a) what appeared to have been installed and (b) what was
contained in Contractor’s job order proposals. He concluded that
each of Contractor’s job order proposals was substantially
overpriced and that the District’s damages per school ranged
from approximately $50,000 to $150,000. In total, the expert
concluded that the District’s damages on the 13 Phase III schools
amounted to $1,448,646.88.
       The District also presented testimony by its expert in non-
electrical construction work. As he did at the bench trial, that
expert opined that Contractor’s job order proposal prices were
inflated. He based his opinion on his review of the contract
documents, including plans and drawings, as well as site visits he
conducted or which were conducted by another person in his
office. Over the course of several days’ testimony, the expert
compared his estimate of the reasonable cost of the work required
to complete the detailed scope of work with (a) what appeared to
be installed at the schools, (b) Contractor’s expert’s opinion on the
matter, and (c) what was contained in Contractor’s job order
proposals. Overall, he concluded that as to non-electrical work
items, Contractor’s proposed prices were inflated and the
damages to the District amounted to $124,459.39.
       According to the District, the pricing provisions and the
audit provision, when read together, meant that Contractor was
“contractually obligated to price its proposals with only the
required quantities from the CTC necessary to do the work, and if
[Contractor] breaks that deal, it is subject to audit for
overpricing.” The District noted that the General Conditions
required Contractor to use the pricing formulas set forth therein.

                                 42
It also cited the audit provision contained in the General
Conditions, which required Contractor to retain documents and
records relating to all job orders and work performed under them.
The 2005 audit provision provides, in pertinent part, “If an audit,
inspection and/or examination under this Article 6.55 discloses
overpricing or overcharges of any nature by the CONTRACTOR
to OWNER in excess of one percent (1%) of the Total Contract
Amount, then, in addition to all other OWNER rights and
remedies, and in addition to making adjustments for the
overcharges and/or overpricing, the reasonable actual cost of the
OWNER audit, inspection, and/or examination shall be
reimbursed to OWNER by CONTRACTOR.”
       Contractor, by contrast, focused mainly on the meaning of a
firm, fixed-price lump sum contract. In its view, it was entitled to
be paid the agreed-upon job order price if it performed the
detailed scope of work. And it was undisputed that Contractor
had fully performed the detailed scope of work under each job
order at issue.
       Contractor also presented its own experts, who had
testified at the bench trial, regarding construction costs. The
electrical engineering expert created his own detailed estimates
for each of the 13 schools and compared his estimates to
Contractor’s job order proposals as well as the District’s
independent estimates obtained at the time of the job order
proposal. As a general matter, all three sets of estimates were in
a similar and reasonable range. When compared to the District’s
trial experts, however, a large discrepancy appeared. For
Belvedere Middle School, for example, Contractor’s job order
proposal price was $159,013, compared to Contractor’s expert’s
estimates of $139,836 and $104,943 using two methodologies, as

                                43
well as the District’s independent estimate of $186,681. The
District’s trial expert’s estimate was $45,783—less than 25
percent of the independent estimate the District obtained at the
time it evaluated Contractor’s job order proposal.
       Contractor’s other expert evaluated the non-electrical
components of the scope of work and he reviewed the contract
documents, Contractor’s job order proposals, and the District’s
independent estimates. He also concluded that, when compared
to his own estimates, Contractor’s job order proposals and the
District’s independent estimates were both similar in amount and
reasonable. But given the large differential between the District’s
trial experts’ estimates and all the other estimates (Contractor’s,
the defense experts, and the District’s independent estimate), he
concluded that the District’s trial experts’ estimates were not
credible.
       The jury found in favor of the District on its claims relating
to 13 of the 14 job orders43 and awarded lump-sum damages of
$855,000.
     5.3.   Contractor’s Post-trial Motions
      5.3.1. Motion for New Trial
      Contractor moved for a new trial under Code of Civil
Procedure section 657 on the grounds of excessive damages,
insufficiency of the evidence to justify the verdict, verdict

43 The jury found in favor of Contractor as to #0830030, regarding
Berendo Middle School. The jury also found in favor of Sureties as to
all 14 Phase III schools.

                                  44
contrary to law, and prejudicial legal error during the trial.44 As
pertinent here, Contractor argued that the reasonableness of its
job order proposals should be evaluated as a whole, and not on
the basis of line item variances, as argued by the District.
Specifically, Contractor cited section 20919.11, which provides, in
pertinent part, “In order to prevent fraud, waste, and abuse, the
[District] adopting job order contracting shall … :[¶] (a) Prepare
for each individual job order developed under a job order contract
an independent [District] estimate. The estimate will be prepared
prior to the receipt of the contractor’s offer to perform work [i.e.,
the job order proposal] and will be compared to the contractor’s
proposed price to determine the reasonableness of that price before
issuance of any job order.” (Italics added.) The General
Conditions contain a similar directive in Article 6.61.3.4.3.5: “The
OWNER will evaluate the entire proposal and proposed Work
units and compare these with the OWNER’s estimate of the scope
of Work to determine the reasonableness of approach, including
the nature and number of Work units proposed. The OWNER will
determine whether the CONTRACTOR’s Proposal is in line with
its own estimate.” (Italics added.) Finally, Contractor noted that
the District’s training manuals instructed that a job order
proposal did not require the approval of senior management if its
total price was within 20 percent of the price of the independent
estimate. Contractor urged that these governing standards did
not permit a retroactive assessment of the reasonableness of

44One of Contractor’s main arguments was that the court erred by
excluding all evidence of Contractor’s actual cost to perform the work.
Due to our resolution of the issues relating to the Phase III job orders,
we need not address that issue.

                                   45
either the total proposed price in Contractor’s job order proposals
or specific line items contained therein.
       Contractor also cited a portion of the statement of decision
from the bench trial and urged that the court had previously
rejected the District’s application of a reasonableness standard at
the line item level. Instead, the court had concluded, the statutes
and contractual provisions indicated that the District was
required to assess whether a job order proposal’s price, as a
whole, was reasonable before accepting a job order proposal.
Contractor argued, in summary, that the jury’s verdict was
contrary to law because the District’s “overpricing” theory was
invalid and fully inconsistent with the concept that the job orders
were firm, fixed-price lump sum contracts.
       Contractor also asserted that the jury’s damages award
was excessive because it did not represent the bargain the parties
had agreed to. The parties agreed to firm, fixed-price, lump sum
job orders in which Contractor was entitled to payment in full if
it completed the detailed scope of work, which it undisputedly
did. The jury’s damages award effectively reformed those
contracts and reduced the agreed-upon price to an extent that
was not bargained for by the District and would never have been
agreed to by Contractor.
       The court denied Contractor’s motion for new trial.
Regarding any legal error, the court focused solely on evidentiary
rulings not at issue here and concluded that Contractor had not
identified an error in law that would justify a new trial. The court
also found sufficient evidence to support the jury’s verdict,
stating simply that the District claimed Contractor had
overpriced its proposals and the jury awarded damages of
$855,000 caused by the overpricing. The court also rejected

                                46
Contractor’s claim that damages were excessive and reiterated
that the District claimed Contractor had overpriced its proposals
and the jury awarded damages of $855,000 caused by the
overpricing.
      5.3.2. Motion for Judgment Notwithstanding the
             Verdict
       Contractor also moved for judgment notwithstanding the
verdict and asserted arguments similar to those advanced in its
motion for new trial. Primarily, Contractor argued that the
District had not proved either that Contractor breached the job
order contracts in pricing its job order proposals or that the
District had been harmed by any failure to comply with the job
order contract provisions. Contractor again noted that the
applicable statute (§ 20919.11) and contract provisions
(Art. 6.61.3.4.3.5) required the District to determine whether
Contractor’s job order proposal was reasonable before accepting
the proposal. The District made that determination with the
assistance of independent estimates and it had the ability to
direct Contractor to remove any items from the job order that it
found to be unreasonable. After the District determined that the
job order proposal was reasonable and accepted it, the job order
was a firm, fixed-price lump sum contract that could only be
adjusted by change order. In other words, the fact that the
District accepted the job order proposals was conclusive evidence
that the proposals were reasonable. Thus, the District had no
right to damages because it was undisputed that Contractor
performed the detailed scope of work, as agreed, on every job
order. Additionally, Contractor argued at length that the
District’s breach of contract theory was essentially a claim for
rescission or reformation in disguise.

                               47
      The court denied the motion. The court rejected
Contractor’s claim that the District was seeking to reform or
rescind the contract. Instead, the court stated, the District
claimed Contractor breached the contract by overpricing its
proposals, the jury found the District had proved its case, and
substantial evidence supported that conclusion.
6.    Judgment and Appeals
      On July 2, 2019, the court entered a final judgment
incorporating its prior rulings and the jury’s verdict. For case
No. BC485294, the judgment awarded the District damages of
$2,672,052 and prejudgment interest of $2,167,359.63 for Phase I
and Phase II work. After accounting for offsets relating to the
District’s withholding of payments due to Contractor on
unrelated projects in the amount of $517,612.78, the total award
in favor of the District and against Contractor and Sureties was
$4,321,798.85. For case No. BC579782, the judgment in favor of
the District and against Contractor was an additional award of
$855,000 for Phase III work; judgment was entered in favor of
Sureties on the District’s Phase III claims.
      The District, Contractor, and Sureties timely appeal.

                  STANDARDS OF REVIEW

        Most of the issues before us involve statutory construction
and contract interpretation—issues we review independently.
“ ‘ “In statutory construction cases, our fundamental task is to
ascertain the intent of the lawmakers so as to effectuate the
purpose of the statute. [Citation.] ‘We begin by examining the
statutory language, giving the words their usual and ordinary
meaning.’ [Citations.] If the terms of the statute are
unambiguous, we presume the lawmakers meant what they said,

                                48
and the plain meaning of the language governs. [Citations.] If
there is ambiguity, however, we may then look to extrinsic
sources, including the ostensible objects to be achieved and the
legislative history. [Citation.] In such cases, we ‘ “ ‘select the
construction that comports most closely with the apparent intent
of the Legislature, with a view to promoting rather than
defeating the general purpose of the statute, and avoid an
interpretation that would lead to absurd consequences.’ ” ’
[Citation.]” [Citation.]’ [Citation.]” (Hensel Phelps, supra, 45
Cal.App.5th at p. 691.)
       “ ‘Under statutory rules of contract interpretation, the
mutual intention of the parties at the time the contract is formed
governs interpretation. (Civ. Code, § 1636.) Such intent is to be
inferred, if possible, solely from the written provisions of the
contract. (Id., § 1639.) The “clear and explicit” meaning of these
provisions, interpreted in their “ordinary and popular sense,”
unless “used by the parties in a technical sense or a special
meaning is given to them by usage” (id., § 1644), controls judicial
interpretation. (Id., § 1638.) Thus, if the meaning a layperson
would ascribe to contract language is not ambiguous, we apply
that meaning.” (Santisas v. Goodin (1998) 17 Cal.4th 599, 608;
see Mountain Air Enterprises, LLC v. Sundowner Towers, LLC
(2017) 3 Cal.5th 744, 752.)
       In addition, “[o]n appeal from a judgment based on a
statement of decision after a bench trial, we review the trial
court’s conclusions of law de novo and its findings of fact for
substantial evidence. (Thompson v. Asimos (2016) 6 Cal.App.5th
970, 981.) Under the deferential substantial evidence standard of
review, we ‘liberally construe[ ]’ findings of fact ‘to support the
judgment and we consider the evidence in the light most

                                49
favorable to the prevailing party, drawing all reasonable
inferences in support of the findings.’ (Ibid.) ‘We may not reweigh
the evidence and are bound by the trial court’s credibility
determinations.’ (Estate of Young (2008) 160 Cal.App.4th 62, 76.)
Testimony believed by the trial court ‘may be rejected only when
it is inherently improbable or incredible, i.e., “ ‘unbelievable per
se,’ ” physically impossible or “ ‘wholly unacceptable to reasonable
minds.’ ” ’ (Oldham v. Kizer (1991) 235 Cal.App.3d 1046, 1065.)
‘ “The ultimate determination is whether a reasonable trier of fact
could have found for the respondent based on the whole record.” ’
(Estate of Young, at p. 76.)” (McPherson v. EF Intercultural
Foundation, Inc. (2020) 47 Cal.App.5th 243, 257 (McPherson).)
        We review a trial court’s ruling on a motion for summary
adjudication de novo. (See Benson v. Superior Court (2010) 185
Cal.App.4th 1179, 1184–1185.) On appeal, we independently
assess the correctness of the ruling, applying the same legal
standard as the trial court to determine if there are genuine
issues of material fact. (See, e.g., AMN Healthcare, Inc. v. Aya
Healthcare Services, Inc. (2018) 28 Cal.App.5th 923, 934.)

                          DISCUSSION

1.    Introduction
      To establish a claim for breach of contract, the District
needed to demonstrate “(1) the existence of the contract, (2) [its]
performance or excuse for nonperformance, (3) [Contractor’s]
breach, and (4) the resulting damages.” (Oasis West Realty,
LLC v. Goldman (2011) 51 Cal.4th 811, 821.) Many of the
material facts were, as noted, undisputed. The central question
for our consideration is whether the process Contractor used to
develop its job order proposals constitutes a breach of the master

                                50
job order contracts—an issue as to which the parties
fundamentally disagree.
       Stated simply, Contractor asserts that once a job order
proposal is approved and accepted by the District, Contractor is
entitled to payment in full if it completes the detailed scope of
work required under the job order. Because the job order is a
firm, fixed-price, lump sum contract, the District cannot attack
the agreed-upon price later, as it has purportedly done in this
litigation, in the absence of fraud or mistake. The District, by
contrast, claims it may recover damages for breach of the master
job order contracts to the extent Contractor “overpriced” its job
order proposals, its own acceptance of those proposals and the
definition of a job order as firm, fixed-price, lump sum contract
notwithstanding. The District relies primarily on audit provisions
in the General Conditions that make reference to “adjustments”
for “overpricing” or “overcharging” revealed by an audit.
       The court adopted the District’s position incrementally and
it accepted the District’s interpretation of the contractual and
statutory provisions that relate to its “overpricing” theory. As we
explain, we agree with the court’s findings that Contractor
breached the master job order contracts as to Phases I and II but
we conclude that the court erred in granting the District’s
motions for summary adjudication because disputed issues of
material fact exist concerning the District’s damages. Further,
and as to Phase III, we reject the court’s interpretation of the
applicable statutes and contractual provisions underlying the
District’s theory of liability.

                                51
2.    Phases I and II
     2.1.   Relevant Contractual Provisions
      The District’s job order contracting process is governed in
part by statute, as discussed, ante, and in part by District-
prepared master job order contract documents that include a
lengthy set of General Conditions. The contractual provisions at
issue are contained in the General Conditions.
      As already explained, the District and Contractor entered
into a number of master job order contracts by which Contractor
committed to perform work for the District as needed and under
the terms and conditions set forth in the contract documents.
When the District wanted Contractor to perform work under a
master job order contract, it used the multi-step procedure
outlined in the General Conditions.45 First, the District notified
Contractor in writing that work was necessary. (Art. 6.61.3.1.)
Contractor was required to respond within one day and
participate in a “joint scope meeting” with the District at the
project site. The purpose of the meeting was to flesh out the
details of the proposed project. (Art. 6.61.3.2.) After the detailed
scope of work was determined, the District issued a request for
proposal to Contractor. (Art. 6.61.3.3.)
      Contractor was required to develop the job order proposal
in the specific manner dictated by the job order contract
documents. As noted, ante, the transparent job order pricing
method, the use of pre-priced work units (i.e., a construction task
catalog), and the application of the pricing formulas contained in

45We refer to the 2005 General Conditions here. Similar provisions are
found in the 2007 General Conditions unless otherwise noted.

                                 52
the General Conditions are critical components of the job order
contracting method.46 (Art. 6.61.3.4.) As noted, a job order
proposal lists the materials and tasks Contractor projects may be
needed to complete the detailed scope of work and calculates a
proposed price for the job order project. And as conceived, the
CTC pricing formula should apply to most line items. (§ 20919.1,
subd. (l).) Ideally, Contractor would select most of its tasks and
equipment from the construction task catalog and apply the CTC
pricing formula in its job order proposal: the price of the catalog
item multiplied by the number of units needed multiplied by
Contractor’s competitively bid adjustment factor. (Art. 6.61.3.4.1.)
If Contractor identified, or the District requested, a task that was
not included in the construction task catalog, Contractor was
required to designate it as a non-prepriced item in its job order
proposal. Contractor would also apply the NPP pricing formula:
the cost of the item multiplied by the number of units needed
plus a mark-up of five or 15 percent.47 (Arts. 6.61.3.4.1,
6.61.3.4.3.)
      While Contractor assembled its job order proposal, the
District was required (both by statute and under the General
Conditions) to obtain an independent estimate for the detailed

46In most cases, a contractor would be required to exercise its
professional judgment about the construction task catalog items to be
used and the quantities that might be required for a specific project. A
contractor is essentially preparing an estimate to perform the detailed
scope of work. As to Phases I and II, however, the District told
Contractor exactly what it wanted. No discretion on Contractor’s part
was required in the selection of items to be included in the job order
proposal.
47   The 2007 General Conditions allow for a mark-up of 15 percent.

                                    53
scope of work.48 If Contractor’s price was not in line with the
District’s estimate—or if the District decided for any reason that
it was not in its interest to proceed as Contractor proposed—the
District could reject the job order proposal. (Art. 6.61.4.6.) If the
District accepted the job order proposal, the job order was a firm,
fixed-price, lump sum contract. (Arts. 1.25, 6.61.4.6; § 29019.1,
subd. (d)49.)
     2.2.   Breach of Contract
      The court found in connection with the bench trial and the
District’s motions for summary adjudication that Contractor
violated the pricing provisions of the master job order contracts
with respect to its Phase I and II job order proposals. Contractor’s
attacks on these findings are unavailing.
      2.2.1. Failure to comply with the pricing provisions of
             the master job order contracts constitutes a
             breach of contract.
       As an initial matter, Contractor repeatedly emphasizes
that job orders are defined by contract and statute as firm, fixed-

48 Section 20919.11 provides, in pertinent part, “In order to prevent
fraud, waste, and abuse, the [District] adopting job order contracting
shall … : [¶] (a) Prepare for each individual job order developed under
a job order contract an independent [District] estimate. The estimate
will be prepared prior to the receipt of the contractor’s offer to perform
work [i.e., the job order proposal] and will be compared to the
contractor’s proposed price to determine the reasonableness of that
price before issuance of any job order.”
49A job order is “a firm, fixed price, lump-sum order issued by
[LAUSD] to a job order contractor for a definite project scope of work
as compiled from the catalog of construction tasks to be performed
pursuant to a job order contract.”

                                    54
price, lump sum contracts and that it was entitled to be paid in
full if it completed the detailed scope of work of the job order. It
characterizes the District’s claims as retroactive price
adjustments to job orders that are not permissible in the absence
of fraud or mistake, neither of which the District has pleaded.
Contractor apparently misunderstands the basis of the District’s
breach of contract claims.
        As discussed, ante, the method a contractor uses to develop
and price its job order proposals is dictated by statute as well as
the master job order contracts. The required pricing method is
essential to the job contracting process: a proposal must generally
use the pre-set prices found in the construction task catalog, list
separately every line item and the corresponding quantity
proposed, and apply the pricing formulas found in the General
Conditions. These requirements, along with the other
mechanisms discussed ante, are designed to protect the public
from corruption, fraud, and waste of public funds. We see no
reason that a contractor’s failure to comply with these material
contract provisions should not constitute a breach of the master
job order contracts for which damages are recoverable. We
therefore reject Contractor’s general notion that completion of a
detailed scope of work for a specific job order effectively
immunizes it from liability for a breach of the master job order
contracts.
      2.2.2. Contractor improperly priced its Phase I job
             order proposals.
      As discussed in detail, ante, the material facts concerning
the District’s Phase I breach of contract claims were largely
undisputed at both the bench trial and in connection with the
District’s motion for summary adjudication. The undisputed

                                55
evidence showed that the District requested specific and identical
quantities of kitchen equipment for the 29 schools at issue and
directed Contractor to obtain the equipment from TriMark.
Although the TriMark equipment was not found in the
construction task catalog, Contractor did not use the NPP pricing
formula in preparing its job order proposals. Instead, Contractor
prepared the Phase I job order proposals for all the schools in an
identical manner using a contorted version of the CTC pricing
formula, i.e., it used fictional quantities of non-TriMark
equipment found in the construction task catalog and it applied a
24 percent mark-up across the board, rather than applying its
competitively bid adjustment factors. It was also undisputed that
Contractor paid TriMark $170,777 per school for the required
equipment and priced its job order proposals at $245,999 or
$245,000. If Contractor had applied the NPP pricing formula, its
job order proposals would have totaled $179,316. The court made
identical findings on these issues in the bench trial and in its
ruling on the District’s motion for summary adjudication and
Contractor asserts the same arguments as to both rulings.50
      The facts just summarized establish that Contractor
breached the master job order contracts in pricing its Phase I job
order proposals. As we have said, the pricing formulas contained

50 Contractor offers two additional arguments regarding the court’s
summary adjudication rulings. We address the court’s damages award
in section 2.3, post. We reject Contractor’s argument that the court
erred by not automatically admitting and relying upon the trial
evidence at the summary adjudication stage because Contractor fails
to explain how that purported error resulted in any prejudice to it. An
appellant has the burden not only to show error but prejudice from
that error. (See Cal. Const., art. VI, § 13 [judgment will not be reversed
on appeal in the absence of prejudicial error].)

                                   56
in the General Conditions are material contract terms and the
undisputed facts establish that Contractor should have but did
not use the NPP pricing formula in its Phase I job orders.
       Contractor offers several reasons it should not be held
liable for breaching the master job order contracts. First,
Contractor insists that the court misconstrued the contracts and
that the pricing methodology it used is permissible. Contractor
asserts that in addition to the two pricing formulas we have
discussed, there is a third pricing method called “closest to CTC.”
According to Contractor, if an item Contractor intended to use
was not in the catalog, the closest-to-CTC pricing method allowed
it to apply the CTC pricing formula, substituting items from the
construction task catalog in its job order proposals that were “the
next or closest line item.”
       Contractor repeatedly contends the court ignored
uncontroverted evidence supporting the validity of the “closest-to-
CTC” pricing method, citing testimony by District representatives
Paul Metoyer and Judith Herbert and a provision found in one of
the District’s job order contracting training manuals. Specifically,
Metoyer testified that “the decision was made by the Program to
utilize the – what they were calling the book price, which is the
one they did utilize. … Yes, the closest items in the book template
is what the Program Manager decided to – that they wanted to
use.” And during Herbert’s testimony, the following exchange
occurred: “Q: In other words, if you are using closest to CTC, you
are using the CTC. A: Correct. It needed to be something that
was equivalent to what was being proposed or close to.” Finally,
Contractor cites a line in a job order contracting training manual
which states, “It is appropriate to use tasks from the CTC that
are similar in specification and price when the exact task cannot

                                57
be found.” (The training manual is not part of the contract
documents, however.)
       Contractor offers this “extrinsic evidence” to clarify a
purported ambiguity regarding the pricing provisions in the
master job order contracts. “If a contract is ambiguous, parol
evidence is admissible to aid interpretation. [Citation.] We may
look at, among other things, course of dealings as a practical
construction of the terms. And it is permissible to consider the
meaning ascribed to language as a matter of custom and practice.
[Citation.]” (Dillingham-Ray Wilson v. City of Los Angeles (2010)
182 Cal.App.4th 1396, 1404 (Dillingham).) We find it
unnecessary, however, to consider whether the contracts are
ambiguous. As the court noted, Contractor did not simply
substitute a construction task catalog item for a similar TriMark
item in its proposals. It also used fictional quantities—in several
cases fractional quantities of indivisible items. And in some
instances the “closest-to-CTC” items were not even similar—a
bread dispenser from the catalog was substituted for a condiment
organizer rack from TriMark, for instance. In short, even if a
“like for like” item swap was permissible under the master job
order contracts, that is not what Contractor actually did in
preparing its job order proposals for Phase I. We have no
difficulty concluding, as the trial court did, that Contractor’s
failure to use the NPP pricing formula constitutes a breach of
contract.
       As an alternative strategy, Contractor argues that the
District is at least partially responsible for its improper use of the
CTC pricing formula. As Contractor notes, the District itself
concluded that it was improper to use the job order contracting
process for the sole purpose of procuring equipment, as it did in

                                 58
Phases I and II. Moreover, Contractor urges, the District
provided confusing and conflicting directives. Contractor initially
submitted multiple Phase I proposals using the NPP pricing
formula for kitchen equipment sourced from Duray which, like
the TriMark equipment, was not found in the construction task
catalog. But the District rejected those proposals—proposals that
used the very formula it now claims Contractor should have used
in its Phase I job order proposals. The District then told
Contractor to obtain the equipment from TriMark and to submit
proposals that “mirrored” the Torres proposal. That proposal
used the CTC pricing formula even though the TriMark
equipment was not found in the construction task catalog.
       There is ample evidence in the record pointing to
mismanagement of the job order contracting process on the part
of the District during the relevant time. Nevertheless, to the
extent Contractor suggests that the doctrine of equitable estoppel
should apply, we conclude the court’s findings against Contractor
at the bench trial on that point are supported by substantial
evidence. “ ‘ “The doctrine of equitable estoppel is founded on
concepts of equity and fair dealing. It provides that a person may
not deny the existence of a state of facts if he intentionally led
another to believe a particular circumstance to be true and to rely
upon such belief to his detriment. The elements of the doctrine
are that (1) the party to be estopped must be apprised of the
facts; (2) he must intend that his conduct shall be acted upon, or
must so act that the party asserting the estoppel has a right to
believe it was so intended; (3) the other party must be ignorant of
the true state of facts; and (4) he must rely upon the conduct to
his injury.” ’ [Citation.] Although equitable estoppel is a well-
accepted remedy among private parties, it has been applied

                                59
sparingly when the party sought to be estopped is a
governmental entity. ‘The government may be bound by an
equitable estoppel in the same manner as a private party’
[citation], but the doctrine is invoked only in ‘those “exceptional
cases” where “justice and right require” ’ [citation]—that is, when
‘the injustice which would result from a failure to uphold an
estoppel is of sufficient dimension to justify any effect upon public
interest or policy which would result from the raising of an
estoppel’ [Citation.] In short, ‘[e]quitable estoppel “will not apply
against a governmental body except in unusual instances when
necessary to avoid grave injustice and when the result will not
defeat a strong public policy.” ’ [Citation.]” (Alameda, supra,
9 Cal.5th at p. 1072.)
       The court concluded that Contractor had not proven the
third and fourth elements. Specifically, the court considered
testimony by several Contractor representatives who stated that
Charlene Franck told them to “mirror” the Torres proposal. Those
representatives said they interpreted Franck’s instruction to
mean that they should use items from the construction task
catalog and submit proposals that totaled $245,000. The court
rejected their explanations: “There is no evidence that District
representatives instructed [Contractor] to use a CTC adjustment
factor or to use made-up quantities to increase the final price on
the proposals by roughly $65,000 for each school. These were
decisions that [Contractor’s] executives made on their own and
not in reasonable reliance on any direction given by Franck or
any other District representative.” We decline Contractor’s
invitation to reweigh the evidence and credit the evidence
supporting its position. As we have said, with respect to the
court’s bench trial findings, our task is to determine whether

                                 60
substantial evidence supports the court’s factual findings51—not
whether the evidence could support a conclusion in favor of
Contractor.52
      2.2.3. Contractor improperly priced its Phase II job
             order proposals.
      Like Phase I, the material facts concerning the District’s
Phase II breach of contract claims are largely undisputed. As
explained in detail, ante, the District requested specific
quantities of kitchen equipment for the 27 schools at issue and
directed Contractor to obtain the equipment from TriMark. The
equipment needed varied to some extent from school to school but
again, none of the equipment was found in the construction task
catalog. This time, Contractor properly designated all the
TriMark equipment as non-prepriced in its job order proposals
and purported to apply the NPP pricing formula. But Contractor
did not use the five or 15 percent mark-up figure authorized in

51Contractor did not assert its waiver or estoppel arguments in
opposition to the motion for summary adjudication.
52 Because we reject Contractor’s argument regarding the validity of
“closest to CTC” pricing, we need not address Contractor’s additional
argument that Metoyer was empowered to approve the use of “closest
to CTC” pricing. We also decline to address Contractor’s argument that
the statutory definition of “proposal” does not create a private right of
action because that argument was not raised below. (See, e.g.,
Sander v. Superior Court (2018) 26 Cal.App.5th 651, 670 [“ ‘It is
axiomatic that arguments not raised in the trial court are forfeited on
appeal.’ ”].)

                                   61
the General Conditions for use in the NPP pricing formula.53
Instead, Contractor either increased the price of each line item by
25 percent and applied no mark-up, or it used its actual cost and
applied a mark-up of approximately 25 percent.54 Neither of these
pricing methods complies with the General Conditions.
       Contractor’s primary argument is that it did not breach the
master job order contracts because the pricing it used (a 25
percent mark-up over its cost) was negotiated with the District.
Contractor notes that although the contracts permit the use of
non-prepriced items, such usage is limited to some extent—at
least at the five or 15 percent mark-up provided. Article
6.61.3.4.3.7 of the 2005 General Conditions55 provides, “After
using a non-prepriced item on three separate Work orders, the
unit price for the work item will be negotiated and fixed as a
permanent pre-priced item, which will no longer require price
justification.” We agree with Contractor’s interpretation of the
contract in this regard and we address that issue, post, in
connection with the court’s adjudication of damages.
       Nevertheless, at the bench trial, the court considered
disputed evidence and found as a factual matter that the parties

53As noted, ante, some of the contracts were governed by the 2007
General Conditions, which permit a 15 percent mark-up on non-
prepriced work.
54 Because the equipment needed varied from school to school, the
damages resulting from the Contractor’s overpricing also vary from
school to school. Contractor does not dispute the District’s calculations
of the difference between the prices it proposed and the prices that
result from the proper application of the nonprepriced formula.
55Article 6.27.6 of the 2007 General Conditions contains a similar
requirement.

                                   62
did not negotiate a 25 percent mark-up for the Phase II TriMark
equipment and substantial evidence supports that finding. As
discussed, ante, Timothy Stone testified that the District’s
regional project manager, Paul Metoyer, agreed to a 25 percent
mark-up over cost for the TriMark equipment needed for
Phase II. Metoyer denied making such an agreement, however,
and the court was entitled to credit whichever testimony it found
to be more credible. (See McPherson, supra, 47 Cal.App.5th at
p. 257 [noting testimony believed by the trial court may be
rejected only when it is “ ‘unbelievable per se,’ ” physically
impossible, or “ ‘wholly unacceptable to reasonable minds’ ”].)
      Contractor argues, with respect to the summary
adjudication ruling, that the court impermissibly weighed the
evidence and improperly viewed the evidence in the light most
favorable to the District by finding again that the parties had not
negotiated a 25 percent mark-up over cost for Phase II.
Specifically, Contractor points to Timothy Stone’s declaration
that he “participated personally in the negotiations for Phase II”
and urges that Edwin Cartagena’s internal email shows that
District staff members negotiated a 25 percent mark-up with
Contractor on the TriMark equipment for Phase II. At a
minimum, Contractor urges, there is a dispute of material fact
that precluded summary adjudication.
      We tend to agree with the court’s assessment of this
evidence. Stone testified at trial that he and Metoyer agreed on a
25 percent mark-up for Phase II during a telephone call. Stone’s
subsequent declaration, which attempts to distance itself from
that trial testimony by suggesting that “District employees” other
than Metoyer negotiated the mark-up, contradicts his prior
testimony and the court was free to conclude that it did not

                                63
create a triable issue of fact. (Cf. Harris v. Thomas Dee
Engineering Co., Inc. (2021) 68 Cal.App.5th 594, 605 [observing a
declaration that conflicts with prior testimony may be given little
if any weight at the summary adjudication stage, particularly
where the “deponent testifies regarding a factual matter within
his or her personal knowledge and arguably contradicts the
testimony in a declaration”].)56
       In any event, even if we were to agree that there is a
dispute of fact as to whether Contractor and the District
negotiated an across-the-board mark-up of 25 percent for the
Phase II TriMark equipment, it would be of no consequence
because the master job order contracts do not permit such an
agreement. The repeated use provisions required the parties to
negotiate a fixed price for repeatedly used items not found in the
construction task catalog. After that point, the item was to be
treated similarly to the other items found in the catalog, i.e.,
Contractor was required to apply the CTC pricing formula using
the negotiated price multiplied by the number of units needed
and Contractor’s applicable adjustment factor. Contractor’s job
order proposals in Phase II did not use the CTC pricing formula
or apply Contractor’s adjustment factors. Instead, Contractor
either used the NPP pricing formula with a 25 percent mark-up,
or it used no mark-up and inflated its line item cost by 25
percent, neither of which is authorized under the General
Conditions. In short, Contractor contends the parties negotiated
an agreement that fails to comply with the master job order

56Because we defer to the court’s finding that Metoyer did not agree to
the 25 percent mark-up, we need not address Contractor’s additional
argument that Metoyer had the authority to make that agreement.

                                  64
contracts. Because such an agreement would be invalid, any
dispute about the nature of the agreement is immaterial.
     2.3.   Damages
       Although we agree with the court’s conclusion that
Contractor breached the master job order contracts in pricing its
job order proposals in Phases I and II, we cannot say the same for
the court’s adjudication of damages. We agree with Contractor
that the court misconstrued material terms of the master job
order contracts. Further, our interpretation of the contractual
pricing provisions reveals that triable issues of material fact exist
on the issue of damages. The court therefore erred in summarily
adjudicating the District’s breach of contract claims as to
Phases I and II.
       The general rule regarding damages for a breach of
contract is well settled. “Damages awarded to an injured party
for breach of contract ‘seek to approximate the agreed-upon
performance.’ (Applied Equipment Corp. v. Litton Saudi Arabia
Ltd. (1994) 7 Cal.4th 503, 515 (Applied).) The goal is to put the
plaintiff ‘in as good a position as he or she would have occupied’ if
the defendant had not breached the contract. (24 Williston on
Contracts (4th ed. 2002) § 64:1, p. 7.) In other words, the plaintiff
is entitled to damages that are equivalent to the benefit of the
plaintiff’s contractual bargain. (Id. at pp. 9–10; 1 Witkin,
Summary of Cal. Law (9th ed. 1987) Contracts, § 813, pp. 732–
733; [Citation.].) [¶] The injured party’s damages cannot,
however, exceed what it would have received if the contract had
been fully performed on both sides. (Civ. Code, § 3358.) This
limitation of damages for breach of a contract ‘serves to
encourage contractual relations and commercial activity by
enabling parties to estimate in advance the financial risks of

                                 65
their enterprise.’ (Applied, supra, 7 Cal.4th at p. 515.)” (Lewis
Jorge Construction Management, Inc. v. Pomona Unified School
Dist. (2004) 34 Cal.4th 960, 967–968.)
       As to Phases I and II, the District requested as damages for
each school, and the court awarded, the difference between
Contractor’s job order proposal price and the job order proposal
price calculated using the NPP pricing formula. As noted, ante,
the General Conditions provide for either a five or 15 percent
mark-up, depending on which version of the General Conditions
governs the specific job order. That calculation of damages was
appropriate for the bench trial, which involved only two schools.
But the court’s use of that same formula for all the remaining
schools fails to recognize and apply a material term of the
contracts and, moreover, results in an impermissible windfall to
the District.
       As we have already discussed, both the 2005 and 2007
General Conditions contain an NPP pricing formula that limits
Contractor’s mark-up on items not found in the construction task
catalog to five or 15 percent.57 Both sets of General Conditions
also provide that a new, CTC-equivalent price will be negotiated
after a non-prepriced item is used in three job orders. Article
6.61.3.4.3.7 of the 2005 General Conditions provides: “After using
a non-prepriced item on three separate Work orders, the unit
price for the work item will be negotiated and fixed as a
permanent pre-priced item, which will no longer require price
justification.” And Article 6.27.6 of the 2007 General Conditions

57 Article 6.61.3.4.3 of the 2005 General Conditions and Article 6.28.4.2
of the 2007 General Conditions, both quoted ante and referred to as the
repeated use provision.

                                   66
provides, in pertinent part: “After using a Non-Prepriced item on
three separate Work orders, a base unit price, equivalent to the
price of Work units contained in the Gordian Group Construction
Task Catalog item, will be negotiated and treated as a CTC unit
priced item that does not require further price justifications.”
       As discussed in the prior section, Contractor contended
below (and still contends here) that the prices contained in its job
order proposals were negotiated with and agreed to by the
District. And as we have said, the court was entitled to credit the
evidence offered by the District to the contrary and find as a
factual matter that no negotiation took place and no agreement
was reached. Nevertheless, the court was only permitted to
award the District damages that reflected the benefit of the
bargain between the parties. In other words, even if the court
disbelieved Contractor’s evidence about the negotiation it claimed
took place, the court was still required to award damages in
accordance with the contract terms, which required the parties to
negotiate a fixed, CTC-equivalent price for repeatedly used, non-
prepriced items.
       Because the court found that no negotiations took place, it
did not apply the repeated use provision and it awarded damages
based on the application of the NPP pricing formula on all job
orders at issue. This was error. As explained, ante, a contractor
bids its adjustment factor based on the prices contained in the
construction task catalog. And the construction task catalog is a
key component of the job order contracting system, as it fixes the
prices for work to be performed. Thus, the expectations of the
parties at the outset of the contractual relationship were that
Contractor would perform work at the prices set forth in the
construction task catalog and would apply its competitively bid

                                67
adjustment factor to those items as required by the CTC pricing
formula. Non-prepriced items were, according to the General
Conditions, to be used “from time to time.” Timothy Stone
testified that, in his experience, non-prepriced were used “for
odds and ends here and there.” Given that Contractor’s overhead
costs were 16 percent on its work for the District, Contractor
would lose money on a job that paid a five or even a 15 percent
mark-up. Contractor did not anticipate that it would be asked to
provide millions of dollars of equipment using the NPP pricing
formula. And the District itself determined that its
representatives misused the job order contracting process to
procure the equipment in that manner. In sum, the wholesale use
of the NPP pricing formula on all job orders for Phases I and II
does not remotely reflect the bargain between the parties.
       Taking into account the court’s factual findings, we are left
with a dispute of material fact that must be resolved before the
District’s damages can be determined. The parties should have,
but did not, negotiate CTC-equivalent prices for the TriMark
equipment procured in Phases I and II. (Art. 6.61.3.4.3.7 (2005),
Art. 6.27.6 (2007).) On remand, a trier of fact must determine
what the likely outcome of such negotiations—what we will call
the “adjusted per-unit price” for the TriMark equipment procured
by Contractor—would have been. We leave the nature and scope
of that inquiry to the sound discretion of the court.
       After the trier of fact sets the adjusted per-unit price for
each item of TriMark equipment utilized in Phases I and II, the
District’s damages should be calculated in the following

                                68
manner:58 For each job order at issue in the District’s motions for
summary adjudication regarding Phases I and II, an “adjusted
job order price” for the kitchen equipment should be calculated
using the CTC pricing formula and (a) the items of TriMark
equipment procured by Contractor for the project, (b) the
adjusted per-unit price for each item of equipment, as set by the
trier of fact, (c) the quantity of each item procured by Contractor
from TriMark, and (d) Contractor’s applicable competitively bid
adjustment factor. The District’s damages, if any, are represented
by the difference between the price it paid for the TriMark
equipment (i.e., the total agreed-upon job order price for kitchen
equipment) and the “adjusted job order price” for the TriMark
equipment actually installed.59
     2.4.   Prejudgment Interest
      Contractor also challenges the court’s award of
prejudgment interest on several grounds. In light of our
conclusion that triable issues of material fact exist regarding the

58The General Conditions contemplate that the NPP pricing formula
may be applied three times before a price adjustment is required. The
damages awarded for Birmingham and Burroughs reflect two
applications of the NPP pricing formula. One additional school may be
chosen in Phase I and Phase II and the District’s damages calculated
using the NPP pricing formula and Contractor’s cost rather than the
adjusted per unit prices.
59Contractor’s job order proposals contained items other than kitchen
equipment, including but not limited to sales tax, freight, storage,
staging, and installation. These additional items were not discussed by
the parties on appeal. On remand, the court should determine whether
any of these additional items should factor into the calculation of
damages.

                                  69
District’s damages as to all but three job orders in each phase, we
must also conclude that the court’s award of prejudgment
interest was erroneous as to all but three job orders in each
phase.
       The District sought and the court awarded prejudgment
interest under Civil Code section 3287, subdivision (a). That
section provides, “A person who is entitled to recover damages
certain, or capable of being made certain by calculation, and the
right to recover which is vested in the person upon a particular
day, is entitled also to recover interest thereon from that day,
except when the debtor is prevented by law, or by the act of the
creditor from paying the debt. This section is applicable to
recovery of damages and interest from any debtor, including the
state or any county, city, city and county, municipal corporation,
public district, public agency, or any political subdivision of the
state.” “ ‘[T]he court has no discretion, but must award
prejudgment interest upon request, from the first day there exists
both a breach and a liquidated claim.’ ” (Warren v. Kia Motors
America, Inc. (2018) 30 Cal.App.5th 24, 43 (Warren).) Because the
award of prejudgment interest involves the construction of
provisions in the Civil Code, our review is de novo. (See Crane v.
R. R. Crane Investment Corp. (2022) 82 Cal.App.5th 748, 756.)
       The court found that the District’s damages were calculable
as of the date of the final retention payment to Contractor on
each job order. “The amount of damages for which [Contractor] is
liable may be calculated with precision: the District’s damages
consist of overbilling on [Contractor’s] proposals to the District
and that amount was reasonably calculable from the moment
when the District in 2009 paid the bills that [Contractor]

                                70
submitted to the District.”60 The court’s finding is correct as to
three job orders in each phase. As to the remaining job orders,
however, that finding is erroneous in light of our conclusion that
there are triable issues of material fact regarding the District’s
claim for damages.
        “ ‘ “ ‘Damages are deemed certain or capable of being made
certain within the provisions of subdivision (a) of [Civil Code]
section 3287 where there is essentially no dispute between the
parties concerning the basis of computation of damages if any are
recoverable but where their dispute centers on the issue of
liability giving rise to damage.’ [Citations.]” [Citation.] Thus,
“ ‘ “[t]he test for recovery of prejudgment interest under [Civil
Code] section 3287, subdivision (a) is whether defendant actually
know[s] the amount owed or from reasonably available
information could the defendant have computed that amount.
[Citation.]” [Citations.] “The statute … does not authorize
prejudgment interest where the amount of damage, as opposed to
the determination of liability, ‘depends upon a judicial
determination based upon conflicting evidence and it is not
ascertainable from truthful data supplied by the claimant to his
debtor.’ [Citations.]” [Citation.] Thus, where the amount of
damages cannot be resolved except by verdict or judgment,

60The District withheld payments it owed to Contractor on unrelated
job orders and the parties agreed that those monies would be credited
against any recovery in this case. The court found that the District
“should not receive prejudgment interest on that part of the judgment
which is equal to the withheld funds that [the District] did not pay to
[Contractor] and for the period of time that the withheld funds were
not paid, i.e., through the date the judgment is signed … .”

                                  71
prejudgment interest is not appropriate. [Citation.]’ [Citation.]”
[Citations.]’ [Citation.]” (Warren, supra, 30 Cal.App.5th at p. 44.)
      As discussed, ante, in calculating the District’s damages,
the court should only have applied the non-prepriced formula to
three job orders in each phase. Those damages were, as the court
found, easily calculable and therefore subject to an award of
prejudgment interest under Civil Code section 3287,
subdivision (a). As to the remaining job orders, however, damages
cannot be calculated until a trier of fact determines the adjusted
per unit prices to be used to calculate the District’s damages, as
explained ante. The need for such a determination bars the
District’s recovery of prejudgment interest.
3.    Phase III
       Contractor repeatedly challenged the legal basis of the
District’s breach of contract theory as to Phase III including, as
pertinent here, in its opposition to the District’s motion in limine
to exclude evidence of Contractor’s actual costs of performance,
its mid-trial request to offer evidence of its actual costs, and its
post-trial motions. We conclude that the court erred in granting
the District’s motion in limine and in denying Contractor’s post-
trial motions.
     3.1.   Standard of Review
       We generally review orders granting or denying a motion
for a new trial for an abuse of discretion. (See Aguilar v. Atlantic
Richfield Co. (2001) 25 Cal.4th 826, 859 (Aguilar).) We typically
review orders granting or denying a motion for judgment
notwithstanding the verdict for substantial evidence. (See
Webb v. Special Electric Co., Inc. (2016) 63 Cal.4th 167, 192.)
And, generally, we review an order granting a motion in limine

                                 72
for an abuse of discretion. (See Dillingham, supra, 182
Cal.App.4th at p. 1403.) But “any determination underlying any
order is scrutinized under the test appropriate to such
determination.” (Aguilar, at p. 859.) Thus, to the extent the
court’s pre- and post-trial rulings concern issues of law, including
the construction of statutory or contractual terms, our review is
de novo. (E.g., id., at p. 860 [in appeal from order granting new
trial, issues of law are reviewed de novo]; Trujillo v. North
County Transit Dist. (1998) 63 Cal.App.4th 280, 284 [where
JNOV ruling based on “interpretation of a statute and
application of statutory language to the undisputed facts[,]
[r]eview of such issues [is] de novo”]; Dillingham, at p. 1403
[“ ‘[I]f the trial court’s in limine ruling was based upon a
misinterpretation of applicable law, an abuse of discretion has
been shown.’ ”].)
     3.2.   Analysis
       As noted, the court found in favor of Contractor as to the
Birmingham and Burroughs Phase III job orders in connection
with the bench trial. The District had attempted to prove that
Contractor “overpriced” its job order proposals by showing that
five specific line items (out of roughly 165 line items in total)
were either unused on the projects or were used in lesser
quantities than provided in Contractor’s proposal. But Contractor
argued the District determined the proposed job order price was
reasonable when it accepted the job order proposals. Contractor
had submitted transparent proposals that disclosed every line
item, quantity, and price, and the District had the job estimates
it obtained from an independent party. Under the contract terms,
the District was required to (and did) assess the reasonableness
of the proposed price at the time it was submitted and on that

                                 73
basis accepted the job order proposals. According to Contractor,
nothing in the master job order contracts or in the applicable
statute (§ 20919.11) permitted the District to change its mind
years later and claim that the agreed-upon prices were
unreasonable.
       In its statement of decision following the bench trial, the
court seemed to agree with Contractor’s point. “If the governing
standard for ‘reasonableness’ is the price paid by the District,
how is that reasonableness to be determined. The court’s
recollection is that the experts from both sides concluded that
[Contractor’s] proposal was within 20% of a reasonable estimate
to accomplish the Phase III construction required by the [detailed
scope of work] and proposal. It is unlikely that the court could
conclude that individual line items were overpriced if the price
for the entire remodeling project was reasonable.”
       The District, however, pursued the same line item theory at
the jury trial. As discussed, ante, this time its experts analyzed
all the line items in the job order proposals. And they opined, as
they had at the bench trial, that the “reasonable value” of the
work performed was far less than the price contained in
Contractor’s job order proposals. The result, according to the
District, was “overpricing.”
       This theory of liability generally, and the interpretation of
the term “reasonable” in particular, rest on an untenable
construction of the applicable statutes and contractual
provisions. Contractor repeatedly addressed the issue of
“reasonableness” during the proceedings below and, specifically,
addressed the issue in its opposition to the motion in limine
discussed ante as well as its post-trial motions. Contractor also
devotes a substantial portion of its appellate briefing to its

                                74
contention that the court misconstrued the contract in a manner
that affected the entire proceeding.
       We begin our analysis where the District begins—with
“overpricing.” The District grounds its analysis in audit
provisions contained in the General Conditions. Article 6.55 of
the 2005 General Conditions, titled “Right to Audit,” provides:
“The State Allocation Board (‘SAB’) and/or OWNER shall have
the right to review, obtain, inspect, audit and copy all the written
and electronically stored records of CONTRACTOR pertaining to
the Contract and/or Work and any Claim in connection with any
of the foregoing, and regarding all applicable laws and/or
regulations pertaining to the Contract and/or Work, in any way.
CONTRACTOR agrees to provide SAB and/or OWNER with
copies of records in computer readable format as well as hard
copies of all relevant information requested in writing within ten
(10) days of the request. CONTRACTOR shall also permit SAB
and/or OWNER access to all CONTRACTOR premises, within ten
(10) days of a written request, during normal business hours, for
the purpose of interviewing employees and inspecting and
copying such books, records, accounts and other material which
may be relevant to any dispute between OWNER and
CONTRACTOR and/or any matter under investigation for
purposes of determining compliance with this Contract and/or
determining compliance with applicable laws, such as, but
without limitation, Business and Professions Code § 7108.5,
Public Contract Code §§ 4104, 4107, 4107.5, Title 2, Subgroup 11,
California Code of Regulations §§ 1865.12, et seq. CONTRACTOR
agrees to maintain such records and allow such audits for a
period of up to four (4) years following the date the Notice of
Completion is recorded. This provision applies equally to

                                75
electronic records of the CONTRACTOR, including any records
under its possession, custody or control. The audits may be
performed by employees of OWNER and/or by an outside
representative engaged by the OWNER. CONTRACTOR records
as referred to in this Contract shall include, without limitation,
any and all information, materials and data of every kind and
character, such as, but not limited to, records, books, papers,
documents, subscriptions, recordings, agreements, purchase
orders, leases, contracts, commitments, arrangements, notes,
daily diaries, superintendent reports, drawings, receipts,
vouchers, memoranda, shipping invoices and/or tickets, delivery
tickets, bills of lading, cost reports, profit and loss statements, all
information provided by CONTRACTOR to any insurance and/or
surety company, and any other material and/or sources of
information that may in OWNER[’s] judgment have any bearing
on or pertain to any matters, rights, duties or obligations under
and/or covered by any Contract Document. Such records may also
include written policies and/or procedures, time sheets,
equipment and/or material inventories, payroll registers, payroll
records, cancelled payroll checks, subcontract files (including
proposals and/or bids of successful and unsuccessful bidders, bid
recaps, etc.), original estimates, estimating worksheets,
correspondence, Change Order/Change Order Proposal/ and/or
Change Order request files (including documentation covering
negotiated settlements), backcharge logs and supporting
documentation, invoices and related payment documentation,
general ledger entries detailing cash and trade discounts earned,
insurance rebates and dividends, and any other CONTRACTOR
records which may have a bearing on matters of interest to the
OWNER in connection with the CONTRACTOR dealings with

                                  76
the OWNER. CONTRACTOR shall require all of its payees (e.g.,
Subcontractors, suppliers, materialmen, employees, officers,
directors and others) to comply with provisions of this Article
6.55 by expressly including the requirements hereof in all written
contracts with all such payees. Such requirements are to include
that these flow-down right to audit provisions shall be included
by such payees in all of their contracts with their Subcontractors,
sub-Subcontractors, materialmen, etc. If an audit, inspection
and/or examination under this Article 6.55 discloses overpricing
or overcharges of any nature by the CONTRACTOR to OWNER in
excess of one percent (1%) of the Total Contract Amount, then, in
addition to all other OWNER rights and remedies, and in
addition to making adjustments for the overcharges and/or
overpricing, the reasonable actual cost of the OWNER audit,
inspection, and/or examination shall be reimbursed to OWNER
by CONTRACTOR. Any OWNER assessments shall be made no
later than ninety (90) days from the date that OWNER findings
are presented to CONTRACTOR. The fact that a Claim,
arbitration, and/or litigation under Article 16 is pending
involving the OWNER, CONTRACTOR, and/or others, shall not
in any way preclude, postpone, or impair, in any way, OWNER
rights to proceed under this Article 6.55.” (Italics added.)
       The 2007 General Conditions include a similar audit
provision in Article 6.21: “6.21.1 The State Allocation Board
(‘SAB’) and/or OWNER shall have the right to review, obtain,
inspect, audit and copy all the written and electronically stored
records of CONTRACTOR pertaining to the Contract and/or
Work, and any claim in connection with any of the foregoing, and
regarding all Applicable Laws and/or regulations pertaining to
the Contract and/or Work, in any way.

                                77
        “6.21.2 CONTRACTOR, in executing this Contract, agrees
without reservation to OWNER’s right to audit. Should
CONTRACTOR refuse to allow OWNER or its agents access to
any records, or delay or inhibit OWNER or its agents from
performing the audit or any portion of the audit, CONTRACTOR
may be subject to an adverse evaluation and/or removal from the
list of pre-qualified contractors.
        “6.21.3 CONTRACTOR shall include the right to audit
provisions, specifically providing the right of OWNER’s
representatives to examine their records, in the contracts of all
subcontractors, insurance agents, material suppliers, or any
other business entity providing goods and services.
        “6.21.4 If an audit, inspection and/or examination under
this Article 6.21 discloses overpricing and/or overcharges of any
nature by CONTRACTOR to OWNER then, in addition to all
other OWNER rights, remedies and adjustments for the
overcharges and/or overpricing, CONTRACTOR shall reimburse
OWNER for all reasonable actual cost of OWNER[’s] audit, legal
services, inspection, and/or examination. The cost of the audit
reimbursable to OWNER will be assessed and retained for all
overpricing and/or overcharges by CONTRACTOR that are found
to be in excess of $40,000.00.
        “6.21.5 Any OWNER assessments shall be made no later
than ninety (90) days from the date that OWNER findings are
presented to CONTRACTOR. The fact that a dispute, claim,
arbitration, and/or litigation under Article 16 is pending
involving OWNER, CONTRACTOR, and/or others shall not in
any way preclude, postpone, or impair in any way OWNER rights
to proceed under this Article 6.21[.]” (Italics added.)

                               78
       The term “overpricing” is found only in these audit
provisions and is not defined anywhere in the contract
documents. Accordingly, we consider the usual meaning of the
term: “to set too high a price on” or “charge too much for.”61 What
is “too high” or “too much,” however, cannot be considered in a
vacuum. Instead, it must be evaluated with respect to what the
contract and the statutes require. As already explained, the
contract documents require Contractor to select items for its job
order proposals from the construction task catalog (or to plainly
identify items not found in the construction task catalog) and
then properly apply the CTC or NPP pricing formulas. To the
extent Contractor failed to comply with those requirements and
the job order proposal price was higher than it would have been if
Contractor had properly applied the pricing formulas, as was
alleged with respect to the Phase I and II job order proposals, the
result can reasonably—and objectively—be classified as
“overpricing.”
       But the “overpricing” alleged with respect to Phase III is
materially different from what is alleged with respect to Phases I
and II, and it is based on subjective terms found in the statutory
and contractual provisions. Section 20919.1, subdivision (l),
states that a job order proposal should include “appropriate
quantities” of items from the construction task catalog. (Italics
added.) In addition, Article 6.61.3 of the 2005 General Conditions
and Article 6.28.4.3 of the 2007 General Conditions state that a
job order proposal should include “support documentation to

61(Merriam-Webster’s Unabridged Dict.  [as of Feb. 3, 2023], archived at
.)

                                79
indicate that adequate engineering and planning for the
requirement have been done, and that the Work units and
quantities proposed are reasonable for the tasks to be performed.”
(Art. 6.61.3.4.2 (2005), italics added.) With respect to the
Phase III job orders, the District claims that “overpricing” occurs
whenever a line item contained in Contractor’s job order proposal
is not used, or the specified quantity is not fully used, to complete
the detailed scope of work for a project. In so arguing, the District
equates “appropriate” and “reasonable” with “necessary” and
“actually used.”
       We reject this interpretation of the applicable statutory and
contractual terms. Neither “appropriate” nor “reasonable,” can be
construed to require such exactitude. “Appropriate” is defined as
“correct or suitable for some purpose or situation,” while
“reasonable” means “being or remaining within the bounds of
reason.”62 Neither of those terms supports a reading of the
contract that requires Contractor to foresee with 100 percent
accuracy what is needed to complete a detailed scope of work. Nor
could it. Multiple witnesses, including one of the District’s
experts, testified that estimating the cost of a construction project
is not an exact science and that an estimate is never a fully
accurate prediction of what will actually be required to complete
a project.
       Furthermore, the contract documents and the applicable
statute make clear that the “reasonableness” of a contractor’s job

62(Merriam-Webster’s Unabridged Dict.  [as of Feb. 3, 2023], archived at
,  [as of Feb. 3, 2023], archived
.)

                                 80
order proposal is a discretionary assessment made by the District
at the time it considers whether to accept the proposal.
Section 20919.11 provides, in relation to the prevention of fraud
and waste, that “[an independent] estimate will be prepared prior
to the receipt of the contractor’s offer to perform work and will be
compared to the contractor’s proposed price to determine the
reasonableness of that price before issuance of any job order.”
(Italics added.) The 2005 General Conditions also confirm that
the District makes that discretionary decision before accepting a
job order proposal: “The OWNER will evaluate the entire
proposal and proposed Work units and compare these with the
OWNER’s estimate of the scope of Work to determine the
reasonableness of approach, including the nature and number of
Work units proposed. The OWNER will determine whether the
CONTRACTOR’s Proposal is in line with its own estimate.”
(Art. 6.61.3.4.3.5, italics added.) Thus, as Contractor argued
throughout these proceedings, it is the District that determines
what is reasonable in the first instance and it necessarily follows
that the District is bound by that determination once it has
accepted a contractor’s job order proposal.
       As we have said, a contractor’s failure to use the pricing
formulas or its failure to properly designate items as non-
prepriced tasks may result in an objectively overpriced job order
proposal. Such conduct deprives the District of the transparent
process it bargained for and weakens one of the essential
statutory guardrails in the job order contracting procedure
designed to protect public funds. But nothing in the contract
documents or the statutes relating to job order contracting
suggests that the District is permitted to determine that a job
order proposal is reasonable, accept the proposal, and then

                                81
subsequently allege that a contractor breached the master job
order contracts by proposing a price that was unreasonable, i.e.,
“overpriced.” In the absence of fraud on the part of a contractor,
the District’s acceptance of a properly-developed job order
proposal, based on its discretionary determination that the price
is reasonable, is binding. Accordingly, Contractor and Sureties
are entitled to judgment as a matter of law on the District’s
breach of contract claims as to Phase III. (Code Civ. Proc., § 629,
subd. (c).)
4.    Liability of the Sureties
      As noted, ante, Continental and Safeco issued bonds
guaranteeing Contractor’s work under the eight master job order
contracts at issue. Nevertheless, Sureties contend they should not
be liable for damages relating to any of Contractor’s conduct at
issue in this litigation. We address their contentions in turn.
     4.1.   Legal Principles
       “A surety is ‘one who promises to answer for the debt,
default, or miscarriage of another, or hypothecates property as
security therefor.’ (Civ. Code, § 2787.) A surety bond is a
‘ “written instrument executed by the principal and surety in
which the surety agrees to answer for the debt, default, or
miscarriage of the principal.” ’ [Citation.]” (Cates Construction,
Inc. v. Talbot Partners (1999) 21 Cal.4th 28, 38 (Cates).)
       To evaluate Sureties’ arguments, we look to the job order
contracts and to the bonds. “It long has been settled in California
that where a bond incorporates another contract by an express
reference thereto, ‘the bond and the contract should be read
together and construed fairly and reasonably as a whole
according to the intention of the parties.’ [Citations.] To ascertain

                                  82
the nature and extent of the liability to which the surety has
bound itself, courts must ‘examine the language of the
undertaking by the light of the [construction] agreement, faithful
performance of the terms of which it guarantees.’ [Citations.] As
a general rule, ‘[t]he obligation of a surety must be neither larger
in amount nor in other respects more burdensome than that of
the principal … .’ (Civ. Code, § 2809.)” (Cates, supra, 21 Cal.4th
at pp. 39–40.)
       “Performance bonds, like all contracts of surety, are
construed with reference to the same rules that govern
interpretation of other types of contracts. [Citations.] To
ascertain the nature and extent of [a surety’s] liability, we look
first to the express terms of the performance bond. [Citation.]
Properly undertaken, construction of a performance bond ‘ “does
not mean that words are to be distorted out of their natural
meaning, or that, by implication, something can be read into the
contract that it will not reasonably bear; but it means that the
contract shall be fairly construed with a view to effect the object
for which it was given and to accomplish the purpose for which it
was designed.” ’ [Citations.]” (Cates, supra, 21 Cal.4th at p. 39.)
     4.2.   Analysis
      4.2.1. The bonds do not indemnify the District.
      Sureties state their first argument as follows: “Turning
both the Bonds and surety law upside down, the trial court found
the Sureties liable for [the District’s] conduct. This legal error
prejudiced the Sureties, who had only issued Bonds concerning
[Contractor’s] performance—not [the District’s].” As an initial
matter, we note that the court made no such finding at any time
during the proceedings and Sureties cite only generally to the

                                 83
court’s statement of decision following the bench trial in support
of their argument. Thus, the foundation of their argument is
dangerously unsound.
       In any event, in a lengthy section purporting to develop this
argument, Sureties cite a few blackletter surety law principles
and quote the portions of the bonds that state, “[t]he condition of
this obligation is that if the CONTRACTOR shall in a
workmanlike manner promptly, competently, and faithfully
perform all of the terms and conditions and provisions of the
Contract, in strict conformity therewith, then the obligations
under this bond shall be null and void … .” And they note,
correctly, that “[t]he Bond language is key.” Sureties then assert
that if the District had followed its own guidelines for approving
job order proposals, the District would only have accepted
proposals that complied with the master job order contracts and
it therefore would not have incurred any damages flowing from
“overpayments.”63 Sureties contend, rightly, that they did not
bond the District’s errors, omissions, neglect, or mistakes.
       As the language from the bonds reveal, Sureties bonded
Contractor’s “perform[ance] of all of the terms and conditions and
provisions of the Contract, in strict conformity therewith.”
(Emphasis added.) And we have already explained how
Contractor’s failure to apply the non-prepriced formulas properly
in its Phase I and II job order proposals caused damages to the
District. To the extent Sureties are attempting to argue that the

63 Sureties appear to use the term “overpayment” to refer to the
difference between the agreed-upon price paid by the District and the
price calculated using the contractually-mandated non-prepriced
formulas.

                                  84
District’s negligence was a contributing or superseding cause of
damages for breaches of its contracts with Contractor, which
somehow absolves Sureties of liability for Contractor’s actions,
they have not sufficiently developed that assertion. They have
therefore forfeited the point.64 (See, e.g., Keyes v. Bowen (2010)
189 Cal.App.4th 647, 655–656 [noting matters not properly
raised or that lack adequate legal discussion will be deemed
forfeited].)
      4.2.2. The District’s payments to Contractor did not
             exonerate Sureties.
      Sureties next argue that because the District’s
“overpayments” to Contractor were made knowingly, Sureties are
exonerated. Specifically, Sureties note that several members of
the District’s staff identified irregularities in Contractor’s job
order pricing as early as June 2008. Nevertheless, those staff
members and senior representatives from the District continued
to approve job order proposals from and pay bills submitted by
Contractor. Sureties contend the District’s “intentional silence—
while the alleged damages it was ‘suffering’ continued to mount
up as [the District] kept paying [Contractor] amounts that [the
District] did not believe were actually owed—exonerated the
Sureties.”
      In support of this argument, Sureties assert that “[u]nder
longstanding California law, an obligee’s payments to which the

64Because we do not construe the bonds to immunize the District’s
purported negligence, we need not address Contractor’s further
argument that such a construction would be unlawful under Civil Code
section 2782.

                                 85
principal[65] had no contractual right are a material alteration of
the surety agreement that exonerates a surety’s obligation.” (See,
e.g., Civ. Code, § 2819 [“A surety is exonerated, except so far as
he or she may be indemnified by the principal, if by any act of the
creditor, without the consent of the surety the original obligation
of the principal is altered in any respect, or the remedies or rights
of the creditor against the principal, in respect thereto, in any
way impaired or suspended. …”].) Sureties then urge that the
District, “[b]y voluntarily making alleged overpayments, …
improperly shifted risk onto the Sureties, materially altering the
risk that the Sureties had guaranteed. This exonerated the
Sureties as a matter of law.”
       Sureties cite several cases in support of this proposition,
including Pacific Coast Engineering Co. v. Detroit Fidelity &
Surety Co. (1931) 214 Cal. 384, 389–397 and County of Glenn v.
Jones (1905) 146 Cal. 518, 520–521. Their reliance on these cases
is inapt, however, because the cases discuss premature
payments, not “overpayments,” as Sureties have used that term.
“[P]remature payments occur when money which is intended to
be kept by one party until a specific milestone is reached, is
instead released before that milestone, which is often completion
of some phase of work. [Citations.]” (Torres, supra, 57
Cal.App.5th at p. 514.) Our Supreme Court has explained how
premature payments to a contractor impact a surety’s risk:
“Owners and contractors generally structure their contracts to
provide for installment payments to the contractor as the work
progresses, typically as the work reaches specified stages of
completion. [Citation.] ‘This payment system adds incentive for

65   The District is the obligee; Contractor is the principal.

                                      86
the contractor to complete the work and reduces the risk of
nonperformance for the owner. A percentage of funds held until
completion of all of the work is called retainage and is intended
both to reduce the risk of nonperformance by the contractor and
to assure the completion of the work in accordance with the
contract terms.’ [Citation.] Progress payments and retainage
serve to reduce both the owner’s and the surety’s risk. [Citation.]
[¶] Thus, if an owner avoids overpaying the contractor as the
project progresses, then the owner should have funds available to
apply toward completion of the project in the event of the
contractor’s default. Indeed, when the surety, pursuant to a bond,
undertakes to complete the project itself or expends funds to
enable another contractor to do so, the surety is entitled to
reimbursement from the retainage. [Citation.]” (Cates, supra, 21
Cal.4th at pp. 55–56.)
       The cases regarding premature payments do not readily
apply here because the District’s post-project-completion
discovery that Contractor had not properly priced its job order
proposals never placed Sureties at risk of needing to complete the
job orders without sufficient financial resources. We therefore
agree with our colleagues in Division Eight of this Court, who in
similar circumstances to the present case saw “no similarity
between an owner’s payment of an inflated price contained in the
contract documents, apparently made on the schedule set forth in
those documents, and the payment of a proper sum in disregard
of the payment schedule in the contract documents.” (Torres,
supra, 57 Cal.App.5th at p. 514.)

                                87
      4.2.3. The District was not required to give Sureties
             notice.
       Sureties also urge that the District’s claims against them
fail as a matter of law because the District failed to provide
Sureties with notice of Contractor’s breaches of contract. Again,
we turn to the language of the bonds and the master job order
contracts.
       The bonds provide that “[w]henever Contractor/Principal is
declared by [the District] to be in breach/default/deficient under
the Contract and/or the Owner exercises its right to terminate
the CONTRACTOR’S right to proceed, [the District] having given
Notice to the CONTRACTOR and Surety as required by the
contract, if any, the Surety shall do one or more of the following:
[¶] 1. Promptly remedy, and/or start to remedy, the declared
default/breach/deficiency …; and/or [¶] 2. Complete the Contract
in accordance with its terms and conditions; and/or [¶] 3. Pay to
the Owner an amount not less than one hundred percent (100%)
of the Contract Amount … .” The court, as noted, determined no
notice was required on these facts and we agree.
       Sureties assert that because Article 1.63 defines “Work” to
include Contractor’s preparation of its job order proposals,
Articles 15.5.10 and 15.5.12 required the District to give Sureties
notice of Contractor’s breach. It is unclear, however, whether
Sureties contend they were entitled to notice prior to the filing of
the complaint, or at the time of the contractual breaches.66 It

66Sureties assert that the District should have given them notice of
the breaches prior to filing the complaint, but also suggest they should
have had “the opportunity to correct or mitigate any contracting

                                   88
appears undisputed, however, that Sureties received no notice of
the District’s claims prior to the District’s filing of the complaint.
       In any event, Article 15.5.10 provides that if, in the opinion
of the District, a contractor “fails to adhere to any provision of
this Contract” then the District “shall give notice as required by
Article 15.5.11[67] or Article 15.5.12, as applicable.” Article 15.5.10
is broad and, in the abstract, could include Contractor’s failure to
follow pricing procedures. But notice to a surety is only required
if the circumstances in Article 15.5.12 occur and here, they did
not.
       Article 15.5.12 provides, in pertinent part: “[B]efore [the
District] can proceed under Articles 15.5.15 and/or 15.5.16, [the
District] shall first send a written notice to CONTRACTOR and
its performance bond surety … .” Articles 15.5.15 and 15.5.16, in
turn, relate to the District’s possible remedies in the event the
contractor fails to perform. Article 15.5.16, which involves
termination of the contractor’s services, is not applicable here.
That leaves only Article 15.5.15, which would require notice to
the bond surety if the District chose to “make good such
deficiencies … by whatever method [the District] deems most
expedient with the costs and expenses thereof being deducted,
and/or drawn down, and/or charged against the Contractor, the
Contract funds, including retention, and/or the performance
bond[.]” The impact of these provisions when construction work is
ongoing is plain: Before the District can take over the
construction work to remedy deficiencies by the contractor, it

issues—for example, by selling the TriMark equipment before it was
installed, purchasing new equipment, or settling the nascent dispute.”
67   Article 15.5.11 concerns safety violations and is not applicable here.

                                      89
must alert the bond surety so that the surety has the opportunity
to correct the deficiencies. But here, where the contractor’s
deficiency does not involve the ongoing construction of a project
and the District has taken no corrective action, Article 15.5.15
simply does not apply.
      4.2.4. Sureties are liable for prejudgment interest.
       Finally, Sureties argue that the District is not entitled to
prejudgment interest as against Sureties because Sureties had no
knowledge of the dispute or of facts that would have allowed
them to calculate the debt owed by Contractor to the District. As
discussed, ante, the bulk of the prejudgment interest awarded by
the court was improper. As to the portion of that award that
survives, Sureties’ argument is not well taken because Sureties’
liability is coextensive with and derivative of Contractor’s
liability. (Civ. Code, § 2807; 9 Miller & Starr, Cal. Real Estate
(4th ed. 2022) § 32:97 [“Under state law, the liability of a surety
generally is commensurate and coextensive with that of the
principal, whether or not the surety is fully aware of the
principal’s obligations.”].)

                         DISPOSITION

      The judgment is reversed. On remand, the court shall
conduct further proceedings consistent with this opinion
regarding damages and prejudgment interest to be awarded to
Los Angeles Unified School District as to the breach of contract
claims relating to Phase I and Phase II and presented in the
District’s motions for summary adjudication. The court shall
enter a judgment in favor of FH Paschen/S.N. Nielsen, Inc.,
Continental Casualty Company, and Safeco Insurance Company
of America on the breach of contract claims relating to Phase III.

                                90
In the interest of justice, all parties to bear their own costs on
appeal.

 NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

                                                           LAVIN, J.
WE CONCUR:

      EDMON, P. J.

      RICHARDSON (ANNE K.), J.*

* Judge of the Los Angeles Superior Court, assigned by the Chief
Justice pursuant to article VI, section 6 of the California Constitution.

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