Court Opinion

ID: 2800936
Source: CourtListenerOpinion
Date Created: 2015-05-14 21:04:18.404315+00
Date Added: 2024-06-11T11:29:38.109865
License: Public Domain

Filed 5/14/15 Arkius v. Yeh CA2/1
                  NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.

              IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                                     SECOND APPELLATE DISTRICT

                                                  DIVISION ONE

ARKIUS, INC.,                                                        B248115

         Plaintiff and Appellant,                                    (Los Angeles County
                                                                     Super. Ct. No. BC415114)
         v.

CHARLES YEH, et al.,

         Defendants and Appellants.

         APPEAL from a judgment of the Superior Court of Los Angeles County. Michael
P. Linfield, Judge. Affirmed in part, reversed in part, and remanded with directions.
         Moon & Dorsett and Dana M. Dorsett for Plaintiff and Appellant.
         David M. Browne for Defendants and Appellants Charles Yeh and Christine Yeh.
                                   _______________________________
       Plaintiff Arkius, Inc. and defendants Charles Yeh and Christine Yeh (collectively,
Yeh) both appeal from a judgment entered in favor of Arkius after a court trial on
Arkius’s action to recover on multiple construction contracts for repairs to a commercial
building owned by Yeh. The trial court awarded Arkius $7,329.50 out of the
approximately $280,000 it sought in damages for alleged unpaid work. Arkius contends
the court erred in declining to award more, and the judgment must be reversed. Yeh
contends the court erred in awarding Arkius anything at all, and this court must reverse
the damages award as well as the award of attorney fees and costs to Arkius as the
prevailing party. As explained below, we affirm in part, reverse in part, and remand the
matter with directions.
                                     BACKGROUND
       At all relevant times, Yeh owned Ardmore Plaza, a commercial building located
on Sixth Street in Los Angeles. In addition to two floors of office/commercial space, the
building had a small equipment room on the third floor. On the first floor, Yeh operated
Hyundae Health Center, a Korean men’s spa, and related businesses. Yeh rented out the
offices on the second floor to multiple tenants.
       In March 2006, a fire, which began on the second floor, caused damage to
significant portions of Ardmore Plaza. According to Yeh, 90-95 percent of the first and
second floors sustained either smoke damage from the fire, water damage from the fire-
fighting efforts, or chemical damage from the fire-fighting efforts. Yeh hired engineers
to prepare architectural plans depicting proposed repairs to the fire-damaged areas of the
           1
building. Then Yeh solicited bids for the repair work. Arkius was one of the contractors
who submitted a bid.
       On or about October 13, 2008, Yeh accepted the written proposal for repair work
at Ardmore Plaza, which Arkius prepared. Both parties signed the agreement, which was
referred to in this litigation as Contract No. 1. Under this contract, Arkius agreed to

       1
        These architectural plans were admitted into evidence as exhibit 71 at trial.
Arkius lodged exhibit 71 with this court.

                                             2
perform certain enumerated work “per the plan”—the architectural plans referenced
above (exhibit 71)—for a total price of $164,535. Arkius also agreed to complete the
work in 65 days. Arkius did not complete the work in 65 days. It conceded at trial it
never completed all work it agreed to perform under Contract No. 1. Notwithstanding
that, Arkius claimed at trial that Yeh still owed money on Contract No. 1, and Yeh
disputed this claim.
       On or about December 31, 2008, Arkius prepared another written proposal for
repair work to Ardmore Plaza. Arkius proposed to complete the enumerated repairs for a
total cost of $158,382. Arkius did not specify the number of days it would take to
complete this work. Neither party signed this proposal, which was referred to in this
litigation as Contract No. 2. At trial, Arkius claimed Contract No. 2 represented
additional repairs Yeh asked Arkius to perform, above and beyond those enumerated in
Contract No. 1. Arkius stated it performed work under Contract No. 2 for which Yeh did
not pay. Yeh countered that Contract No. 2 was duplicative of the repairs already
required under Contract No. 1, and Arkius was seeking an additional $158,382 to
complete the same repairs it already had agreed to complete for a total price of $164,535
in Contract No. 1.
       In January 2009, the parties entered into two additional contracts under which
Arkius agreed to repair water damage caused when it was performing roof repairs under
Contract No. 1 and failed to cover the roof properly before a rainstorm. Water flooded
into the building through cracks in the makeshift plywood frame Arkius installed to cover
the open roof. On or about January 13, 2009, Yeh accepted the first of Arkius’s two
written proposals regarding repair of water damage for a total price of $156,034. This
agreement, signed by both parties, was referred to in this litigation as Contract No. 3. On
or about January 19, 2009, Yeh accepted Arkius’s second written proposal regarding
repair of water damage for a total price of $51,847. This agreement, signed by both
parties, was referred to in this litigation as Contract No. 4. Contract No. 4 covered water
damage repairs for a different portion of the building than Contract No. 3. According to
Yeh, Arkius represented it would submit Contract Nos. 3 and 4 to its liability insurance

                                             3
carrier, and use the money it expected to receive from the insurance company to complete
the water damage repairs covered under Contract Nos. 3 and 4. Contract Nos. 3 and 4
also covered work outside the scope of the water damage repairs including certain
electrical work.
       On or about March 20, 2009, Arkius stopped performing repair work at Ardmore
Plaza. Arkius’s controller testified at trial that Arkius ceased work because Yeh did not
pay what it owed under the contracts and Arkius did not have the funds to complete the
work. Yeh countered that it paid Arkius what it owed for the work Arkius performed and
did not owe anything further. Arkius concedes it did not complete all work described in
signed Contract Nos. 1, 3 and 4, but maintains it completed all work described in
unsigned Contract No. 2. Arkius claims it could not complete the work described in
Contract No. 1 because Yeh failed to make certain repairs he had agreed to make, and
some of Arkius’s work was contingent upon these repairs Yeh had agreed to make.
       On about March 23, 2009, Arkius sent Yeh (through Hyundae Health Center, Inc.)
four invoices, one for each contract, stating Yeh owed $35,868 on Contract No. 1,
$158,382 on Contract No. 2, $72,880 on Contract No. 3, and $40,861 on Contract No. 4.
                                                      2
On June 4, 2009, Arkius filed this action against Yeh, seeking to recover these amounts.
       On or about July 10, 2009, Charles Yeh and Christine Yeh each filed an answer to
Arkius’s complaint, and Charles Yeh filed a cross-complaint against Arkius and its
principal, Pius Kim. The cross-complaint alleged cross-defendants were liable for
damages for failing to perform all agreed-upon repair work at Ardmore Plaza and for
negligently causing the flooding and resulting water damage by failing to cover the roof
properly before a rainstorm while conducting roof repairs. On June 17, 2010, Charles
Yeh, Christine Yeh and Hyundae Health Center, Inc. entered into a release and settlement
agreement with Arkius and Pius Kim under which they agreed to release all claims

       2
         Other defendants originally named in this action, including Hyundae Health
Center, Inc., defaulted. Charles and Christine Yeh are the only defendants who are
parties to this appeal.

                                            4
against Arkius and Kim in exchange for a payment of $35,000. In the general release,
which includes a waiver of rights under Civil Code section 1542, Yeh agreed the $35,000
was “in full payment and satisfaction of any and all claims that Charles Yeh, Christine
Yeh, and Hyundae Health Center, Inc. have against Arkius, Inc. and Pius Kim regardless
of their nature and kind, including those arising out of The Cross-Action and its subject
matter, as well as those claims which are known or unknown, suspected or unsuspected,
or which do or may exist against Arkius, Inc. and Pius Kim regardless of their nature
and/or arising out of or with respect to the work performed at the property located at 3625
W. Sixth Street, Los Angeles, California, including the decision to repair, replace,
complete or not to repair, replace, or complete any portion of the same.” On June 21,
2010, Charles Yeh dismissed with prejudice his cross-complaint against Arkius and Kim.
         After the trial court granted Yeh’s motion for nonsuit, and this court reversed on
                                      3
grounds not relevant to this appeal, Arkius filed a first amended complaint on July 11,
2012, revising the amount it alleged Yeh owed on Contract No. 1 from $35,868 to
                4
$13,629.50. The alleged amounts owed on the other three contracts remained the same.
         Before trial, Arkius filed motions in limine seeking an order prohibiting Yeh from
introducing evidence “based upon the previously dismissed Cross-complaints and the
written settlement agreement executed by all defendants,” among other things. On
                                                                         5
September 14, 2012, the trial court denied Arkius’s motions in limine.

         3
             Arkius Inc. v. Hyundae Health Center, Inc. (Sept. 27, 2011, B228093) [nonpub.
opn.].
         4
        Arkius’s first amended complaint is not included in either appellant’s appendix
or Yeh’s appendix. We requested and received a copy of the first amended complaint
from Arkius. On the court’s own motion, we augment the record on appeal to include
Arkius’s July 11, 2012 first amended complaint.
         5
         The trial court’s September 14, 2012 minute order denying Arkius’s motions in
limine is not included in either appellant’s appendix or Yeh’s appendix. We obtained a
copy of this minute order from the Los Angeles Superior Court. On the court’s own
motion, we augment the record on appeal to include the September 14, 2012 minute
order.

                                               5
       A four-day court trial was held in this matter between October 31 and December
12, 2012, during which 10 witnesses testified, including Pius Kim and Charles Yeh.
Arkius sought $279,452.50 in damages: the revised amount of $7,329.50 on Contract
No. 1, plus the amounts listed in his complaints on Contract Nos. 2-4 (as outlined above).
Yeh disputed he owed Arkius any amount, but claimed, to the extent the court found
otherwise, he was entitled to a credit in the amount of a payment he made to settle a
claim on a mechanics lien that was recorded against Ardmore Plaza by a supplier who
provided materials for Arkius’s repair work.
       Despite Arkius’s repeated objections and references to the release and settlement
agreement, the trial court allowed Yeh to present evidence of Arkius’s negligence in
causing the flooding and resulting water damage by failing to cover the roof properly
before a rainstorm while conducting roof repairs. For example, Alex Valles, who
originally worked for Arkius but stayed on to work for Yeh after Arkius walked off the
job, testified at trial on behalf of Yeh. Valles testified rainwater entered Ardmore Plaza
and flooded the building because Arkius loosely placed plywood framing over the open
roof instead of drilling it down. According to Valles, the loose plywood slid around
during the rainstorm, leaving gaps where rainwater collected on a temporary plastic
covering and then leaked into the building.
       On January 2, 2013, the trial court issued a tentative decision. On January 9,
2013, Arkius filed a request for a statement of decision, asking the court to explain the
factual and legal bases for its decision with respect to 130 controverted issues listed in the
request.
       On January 25, 2013, the trial court issued an 11-page “Decision After Trial,”
awarding Arkius $7,329.50, the amount it requested at trial on Contract No. 1. The court
declined to explain the factual and legal bases for each of the 130 controverted issues
listed in Arkius’s request for statement of decision, but did set forth the factual and legal
bases for its decision. The court found Contract No. 1 incorporated the architectural
plans (exhibit 71) referenced above, and covered repairs to all fire-damaged areas of the
building, not just the 2,500 square-foot area Arkius claimed Contract No. 1 covered.

                                               6
Accordingly, the court concluded Arkius was “not entitled to any extra money for work
done under Contract No. 2” because “Contract No. 1 already require[d] Arkius to do the
work that [was] envisioned in Contract No. 2.” Thus, the court denied Arkius’s request
for quantum meruit recovery under the unsigned Contract No. 2. The court also denied
Arkius any recovery under Contract Nos. 3 and 4, concluding Arkius could only recover
under Contract No. 1 because “the damage that was to be repaired under Contract[] Nos.
3 and 4 was due to Arkius’ negligence in completing Contract No. 1.” The court found
Arkius proved Yeh owed $7,329.50 on Contract No. 1. The court declined to give Yeh a
credit against that amount, either for payment of the supplier’s mechanics lien or for
Arkius’s failure to perform some of the work required under Contract No. 1 because (1)
“Charles Yeh was not a particularly credible witness” and “presented virtually no
documentary evidence for his claims,” and (2) Charles Yeh released all claims against
Arkius in the June 17, 2010 release and settlement agreement.
       On February 15, 2013, the trial court entered judgment in favor of Arkius and
against Yeh in the amount of $7,329.50, plus attorney fees and costs subject to proof.
                                      DISCUSSION
I. Arkius’s Appeal
       A. Contract Nos. 3 & 4
       Arkius contends the trial court erred in denying Arkius any recovery under
Contract Nos. 3 and 4 based on the court’s conclusion Arkius could only recover under
Contract No. 1 because the damage to be repaired under Contract Nos. 3 and 4 was due to
Arkius’s negligence in completing Contract No. 1. For the reasons explained below, we
agree with Arkius’s contention. Accordingly, we reverse the portion of the judgment on
Contract Nos. 3 and 4 and remand the matter for further proceedings.
       Although set forth in more detail above, we briefly summarize here the facts
relevant to the parties’ dispute regarding Contract Nos. 3 and 4. In or about late
November 2008, while Arkius was performing roof repairs under Contract No. 1, Arkius
failed to cover the roof properly before a rainstorm and water flooded into the building
through cracks in the makeshift plywood frame Arkius installed to cover the open roof.

                                             7
Ardmore Plaza sustained water damage as a result of Arkius’s negligence in failing to
cover the roof properly. In January 2009, understanding the manner in which the water
damage to Ardmore Plaza was sustained, Yeh signed Contract Nos. 3 and 4, agreeing to
pay Arkius to repair the water damage and to perform additional work not related to the
water damage (e.g., electrical work) enumerated in these two contracts. As Yeh has
acknowledged, Arkius performed some work under Contract Nos. 3 and 4. Arkius
concedes it did not complete all work required under Contract Nos. 3 and 4. In June
2009, Arkius sued Yeh for payment under Contract Nos. 1-4. Yeh cross-complained for
damages resulting from Arkius’s failure to complete all work required under Contract
Nos. 1, 3 and 4, and Arkius’s negligence in performing roof repairs under Contract No. 1.
In June 2010, in exchange for a payment of $35,000, Yeh settled and released all claims
against Arkius arising out of Arkius’s work at Ardmore Plaza, including Yeh’s claim that
Arkius’s negligence caused water damage to Ardmore Plaza, and dismissed the cross-
complaint with prejudice.
       Arkius and Yeh agree that the release and settlement agreement did not preclude
Yeh from presenting a defense to Arkius’s claims for payment under Contract Nos. 3 and
4. For example, Yeh could present evidence and/or argue that Arkius did not complete
all work required under Contract Nos. 3 and 4. Yeh also could present evidence—to the
extent such evidence exists—and/or argue that the work Arkius did perform under
Contract Nos. 3 and 4 was substandard or valueless, or any other defense to these
contracts. (See Walsh v. West Valley Mission Community College Dist. (1998) 66
Cal. App. 4th 1532, 1544-1547 [dismissal of cross-complaint with prejudice does not bar
defendant from denying plaintiff’s allegations in the complaint that plaintiff performed
the contract].) The trial court did not make any findings regarding the amount of work
Arkius performed under Contract Nos. 3 and 4 or the value of that work.
       Where Arkius and Yeh disagree is whether Yeh could assert as a defense to
Arkius’s claims for payment under Contract Nos. 3 and 4 that Arkius caused the water
damage and therefore Arkius cannot recover under Contract Nos. 3 and 4 at all. We
agree with Arkius on this issue and conclude the trial court erred in allowing Yeh to

                                            8
assert such as affirmative defense. First, Yeh signed Contract Nos. 3 and 4 and agreed to
pay for the work, knowing that Arkius had caused the water damage. Second, Contract
Nos. 3 and 4 covered some work outside the scope of the water damage repair (e.g.,
electrical work). Third, Yeh already had brought a negligence claim against Arkius in a
cross-complaint, seeking damages resulting from Arkius’s failure to cover the roof
properly. Yeh accepted a payment from Arkius in exchange for the settlement and
release of all claims in Yeh’s cross-complaint and all other known or unknown claims
arising out of Arkius’s work at Ardmore Plaza. Yeh dismissed the cross-complaint with
prejudice. (See Alpha Mechanical, Heating & Air Conditioning, Inc. v. Travelers
Casualty & Surety Co. of America (2005) 133 Cal. App. 4th 1319, 1330 [dismissal of
cross-complaint with prejudice bars defendant from asserting an affirmative defense to
plaintiff’s breach of contract claims that is not responsive to plaintiff’s allegations of
contract performance].) Based on all of these factors, Yeh’s assertion that Arkius caused
the water damage is not a permissible defense to payment under Contract Nos. 3 and 4.
       We remand the matter for a retrial on Arkius’s claims against Yeh in its first
amended complaint for payment under Contract Nos. 3 and 4. Yeh may not defend
against these claims by asserting the affirmative defense that Yeh should not owe Arkius
any amount under Contract Nos. 3 and 4 because Arkius’s negligence in performing roof
repairs under Contract No. 1 caused the water damage to be remedied under Contract
Nos. 3 and 4. Except for this limitation, Yeh may assert any other breach of contract
defenses.
       The trial court must determine whether Yeh owes Arkius any amount on Contract
Nos. 3 and 4. If the court finds Arkius substantially performed under one or both of the
contracts, Arkius is entitled to the contract price and Yeh is entitled to an offset for costs
to correct any substandard work. (10 Miller & Starr, Cal. Real Estate (3d ed. 2011) §
27:103, pp. 27-378-379.) If the court finds Arkius did not substantially perform, Arkius
is entitled to compensation in quasi-contract for any benefit conferred on Yeh as a result

                                               9
of Arkius’s performance of work enumerated in Contract Nos. 3 and 4. (Id. at p. 27-
     6
382.)
         B. Quantum meruit claim under Contract No. 2
         Arkius contends the trial court erred in denying quantum meruit recovery under
the unsigned Contract No. 2 based on the court’s finding Arkius already was required to
perform the repair work enumerated in Contract No. 2 under the signed Contract No. 1.
         “We generally apply an independent, or de novo, standard of review to
conclusions of law regarding interpretation of [a contract]. ‘The precise meaning of any
contract . . . depends upon the parties’ expressed intent, using an objective standard.
[Citations.] When there is ambiguity in the contract language, extrinsic evidence may be
considered to ascertain a meaning to which the instrument’s language is reasonably
susceptible. [Citation.] . . . [¶] We review the agreement and the extrinsic evidence de
novo, even if the evidence is susceptible to multiple interpretations, unless the
interpretation depends upon credibility. [Citation.] If it does, we must accept any
reasonable interpretation adopted by the trial court.’” (ASP Properties Group, L.P. v.
Fard, Inc. (2005) 133 Cal. App. 4th 1257, 1266-1267.) Because the interpretation does
not depend upon credibility, we review the contracts and extrinsic evidence here de novo.
         At trial, Arkius claimed Contract No. 1 covered fire damage repairs on only a
portion of Ardmore Plaza (2,500 square feet), and Contract No. 2 covered fire damage
repairs throughout the rest of the building. Yeh countered that Contract No. 1 covered
the entire 7,500-square-foot-area that was damaged by fire.
         Arkius prepared Contract No. 1 (and the other three contracts). A note on the
bottom of the first page of Contract No. 1 states the proposal is based on the architectural
plans (exhibit 71). Contract No. 1 does not state it is limited to a 2,500-square-foot-area
of Ardmore Plaza. The architectural plans depict proposed repairs to fire-damaged areas

         6
          Based on our resolution of this issue, we need not address Arkius’s contention
the trial court improperly failed to issue a statement of decision addressing “the factual or
legal bases for offsetting Arkius’s recovery due to a negligence claim that had already
been settled and dismissed.”

                                             10
of the building including but not limited to the 2,500-square-foot-area. Pius Kim
conceded in his trial testimony that the architectural plans depict proposed repairs to all
three floors of the building, both inside and outside of the 2,500-square-foot-area.
Moreover, Contract No. 1 lists certain work which is excluded because it is “not in the
plan.”
         Contract No. 1, which was executed by Yeh on October 13, 2008, was due to be
completed in 65 days. Pius Kim, Arkius’s principal, testified he knew Yeh wanted the
work under Contract No. 1 completed in this timeframe because he wanted to rent out the
space.
         Arkius did not prove that the work it claimed to have performed under the
unsigned Contract No. 2 was outside the scope of the work it was required to perform
under the signed Contract No. 1. Exhibits Arkius references depicting floor plans with
different areas shaded do not establish Contract No. 1 was limited to a 2,500-square-foot-
area rather than encompassing all fire-damaged areas. The trial court did not err in
denying quantum meruit recovery under the unsigned Contract No. 2 based on the court’s
finding Arkius already was required to perform the repair work enumerated in Contract
No. 2 under the signed Contract No. 1.
I. Yeh’s Appeal
         A. Credit for mechanics lien
         Yeh contends the trial court erred in declining to credit the amount it paid on a
supplier’s mechanics lien ($13,291.55) against the amount the court found Yeh owed
under Contract No. 1 ($7,329.50).
         In its decision, the trial court stated, “Yeh is not entitled to an additional credit for
payment of the mechanics liens” because he “released all such claims when he signed a
comprehensive release and settlement agreement with Arkius in June 2010.” We agree
with the trial court’s interpretation of the settlement and release agreement, which states
any mechanics liens are Yeh’s responsibility and will be paid by Yeh: “Charles Yeh,
Christine Yeh, and Hyundae Health Center, Inc. each certify to the best of their
knowledge that no liens exist against the proceeds of this settlement that are being paid to

                                                11
them, including, but not limited to, attorney’s liens, medical liens, mechanics liens,
contractor’s liens, insurance company liens, governmental liens and any other liens. To
the extent that any such liens do exist, Charles Yeh, Christine Yeh, and Hyundae Health
Center, Inc. and their attorneys each agree that they are the sole responsibility of Charles
Yeh, Christine Yeh, and Hyundae Health Center, Inc. and will be paid in full by Charles
Yeh, Christine Yeh, and Hyundae Health Center, and further agree to indemnify and hold
the Releasees and their respective agents, employees, insurers, attorneys, and insurance
companies free and harmless from any such liens and all damages, claims, and expenses
incurred with respect [to] same, including, but not limited to all actual court costs,
penalties and attorneys’ fees.”
       B. Offset of Arkius’s recovery for water damage not repaired
       Yeh contends Arkius’s recovery under Contract No. 1 should be offset against the
remaining work to be done to repair the water damage caused by Arkius’s negligence.
As discussed above, Yeh settled his claims for damages caused by Arkius’s negligence
for $35,000, and dismissed those claims with prejudice. He may not reassert those claims
in response to Arkius’s causes of action.
                                      DISPOSITION
       The portion of the judgment denying Arkius recovery on Contract Nos. 3 and 4
based on Arkius’s negligence in completing Contract No. 1 is reversed, and the matter is
remanded for further proceedings consistent with this opinion. In all other respects, the
judgment is affirmed. Arkius is entitled to recover its costs on appeal.
       NOT TO BE PUBLISHED.

                                                          CHANEY, J.

We concur:

              ROTHSCHILD, P. J.                           BENDIX, J.*

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

                                             12