Court Opinion

ID: 3192389
Source: CourtListenerOpinion
Date Created: 2016-04-07 20:02:26.688526+00
Date Added: 2024-06-11T14:20:00.723626
License: Public Domain

Filed 4/7/16 Mulitz v. L.A. Stucco, Inc. CA2/4
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           IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                                   SECOND APPELLATE DISTRICT

                                                DIVISION FOUR

LAURA MULITZ et al.,
                                                                     B260314 c/w B262387
           Plaintiffs and Respondents,                               (Los Angeles County Super.
                                                                     Ct. No. BC485588)
            v.

L.A. STUCCO, INC.,

           Defendant;

UNITED SPECIALTY INSURANCE
CO.,

            Intervener and Appellant.

         APPEAL from a judgment and orders of the Superior Court of Los Angeles
County. Barbara A. Meiers, Judge. Affirmed.
         Archer Norris, W. Eric Blumhardt and Namvar A. Mokri for Intervener and
Appellant.
         Weintraub Tobin Chediak Coleman Grodin, Marvin Gelfand and Brittany J.
Shugart for Plaintiffs and Respondents.
         Gaglione, Dolan & Kaplan and Jeffrey S. Kaplan for Defendant.
      In the underlying action, respondents Laura and Tom Mulitz asserted claims
against L.A. Stucco, Inc. (L.A. Stucco) and respondent Building Dreams
Construction, Inc. (Building Dreams), alleging that they renovated a home in a
defective manner.1 Appellant United Specialty Insurance Company (United)
intervened in the action as L.A. Stucco’s insurer. After initiating a cross-action
against L.A. Stucco for indemnity and breach of contract, Building Dreams
entered into a settlement with the Mulitzes stating Building Dream’s intention to
assign its cross-claims to them. Following a jury trial, the court entered a
judgment in favor of the Mulitzes against L.A. Stucco, issued contract-based
attorney fee awards to the Mulitzes, and denied United’s request for a contract-
based award of attorney fees as the prevailing party on Building Dreams’s cross-
complaint.
      United has appealed from the judgment and fee award rulings, contending
the trial court erred in finding the Mulitzes to be third party beneficiaries of
Building Dreams’s contract with L.A. Stucco, declining to apply the economic
loss rule to the Mulitzes’ negligence claim, limiting the testimony of United’s
expert, and denying United’s attorney fee request. We reject United’s contentions,
and affirm the judgment and fee award rulings.

1      Because the Mulitzes share a surname, we generally refer to them by their
first names.

                                           2
                 RELEVANT FACTUAL AND PROCEDURAL
                                 BACKGROUND
      A. Events Preceding Action
      The underlying action concerns a house located on Hercules Drive in Los
Angeles. Laura lives in the house, which is owned by the S.A.G.M. Trust. Laura
is the trust’s grantor and beneficiary, and her mother Shelley Mulitz is its trustee.
The trust bought the house with funds provided by Laura.
      In April 2010, Laura’s stepfather Tom entered into a construction contract
with Building Dreams to repair and remodel the house. Building Dreams, acting
as general contractor, engaged L.A. Stucco as a subcontractor to apply new stucco
to the house.

      B. Complaints and Settlement
      In May 2012, Laura and Tom initiated the underlying action against
Building Dreams and L.A. Stucco.2 Their complaint alleged that the stucco work
performed on the house was defective, and contained claims for negligence and
breach of contract. Among those claims was a cause of action predicated on
allegations that L.A. Stucco violated its contract with Building Dreams, which had
been made “for the benefit of” Laura and Tom. Building Dreams filed a cross-
complaint against L.A. Stucco, asserting claims for declaratory relief, equitable
contribution, and indemnity.

2     The complaint also named as defendants Daniel Batres and Daniel
Fitzgerald, who were identified as “principal[s]” of, respectively, Building Dreams
and L.A. Stucco.

                                          3
       In September 2012, United sought to intervene in the action on the ground
that it had issued commercial general liability policies to L.A. Stucco, which was
then a dissolved corporation. The trial court granted United leave to intervene on
behalf of L.A. Stucco as defendant and cross-defendant.
       In March 2013, Shelley Mulitz, as trustee of the S.A.G.M. Trust, assigned to
Laura and Tom “all of the claims and rights that . . . the [t]rust[] . . . would and
does otherwise have against any party with respect to the construction,
remodeling, and any other work performed at [the house].”
       In July 2013, Building Dreams filed a first amended cross-complaint against
L.A. Stucco, to which United filed an answer. The complaint asserted a claim for
breach of contract, along with claims for declaratory relief, equitable contribution,
and indemnity.
       Shortly before trial, Laura and Tom entered into a settlement with Building
Dreams.3 Under the terms of the settlement, Building Dreams stated that it “will
assign” to Laura and Tom all its claims against L.A. Stucco and United, including
those asserted in the first amended cross-complaint. On July 18, 2014, the trial
court found that the settlement had been made in good faith (Code Civ. Proc.,
§ 877.6).

       C. Trial
       During his opening statement, United’s counsel informed the jury: “L.A
Stucco doesn’t dispute that it did a really bad job . . . , and we don’t dispute that
[the Mulitzes] are in fact entitled to damages for our poor work. . . . [¶] So the
issue that’s going to be before you . . . is what are [the Mulitzes] entitled to . . . .”

3      Daniel Batres was also a party to the settlement.

                                            4
             1. Laura and Tom’s Evidence
      Laura pursues a career as a professional entertainer under a stage name.
Tom, who has worked as a building contractor, assisted her in finding a suitable
house to purchase. Laura provided the funds used to buy the house, and
established the trust to hold it in order to enhance her safety and security.
      Before Laura moved into the house, Tom noticed that it needed repairs. In
February 2010, shortly after the house was purchased, Tom discussed renovations
to the house with Building Dreams, including redoing the stucco, which exhibited
cracking. According to Laura, in working with Building Dreams, Tom “basically
did everything for her” because she knew nothing regarding construction. When
Tom entered into an oral agreement with Building Dreams to perform the
renovations, Laura funded the project.
      Daniel Batres, a project manager for Building Dreams, testified that after he
agreed to renovate Laura’s house, L.A. Stucco submitted a $44,000 bid to
Building Dreams to perform the stucco work on the house. Building Dreams and
L.A. Stucco executed a written contract dated April 15, 2010 regarding the work.
According to Batres, L.A. Stucco’s scope of work required it to sandblast existing
stucco down to the house’s original stucco, apply new stucco, and install moldings
around windows in order to “tie in” the new stucco. In addition, L.A. Stucco was
to repair water stains under a balcony.
      Tom testified that a few months after the completion of work, significant
cracking and “ballooning” appeared in the new stucco, and pieces of stucco began
falling off the house. Tom asked Building Dreams and L.A. Stucco to resolve the
problems, but was dissatisfied with their proposals to cure the defects in the new
stucco. He hired Michael Roberts to examine L.A. Stucco’s work, and later
engaged McCormick Construction to replace it. The repairs required Laura to

                                           5
move out of the house into a rented residence and store her furniture and
belongings. Her rent and moving expenses totaled approximately $131,000.
      Roberts, a plastering and stucco expert, testified regarding the features of
properly applied stucco and the defects in L.A. Stucco’s work. According to
Roberts, the term “stucco” refers to a system involving three bonded layers of
plaster: a foundational “‘scratch coat’” on lath wire affixed to a wall, an
intermediate “‘brown coat,’” and a “‘finish coat.’” Underlying the scratch coat is a
layer of building paper, which renders the system water-resistant. Water
penetrates the plaster but is blocked by the building paper, which forces it to flow
down and exit the system through a “weep screed.”
      At Tom’s invitation, Roberts investigated L.A. Stucco’s work on the house.
According to Roberts, L.A. Stucco applied the new stucco in a manner that was
never “advisable.” He discovered that L.A. Stucco had sandblasted away only the
existing finish coat, and applied an excessively thick three-layer stucco system to
the original brown coat. That coat could not bear the weight of the new stucco,
which “delaminat[ed],” cracked, and fell off the house. In addition, L.A. Stucco
had conducted the sandblasting in an inadequate manner, resulting in “huge divots
and pockets” in the original brown coat.
      Roberts also found water intrusion inside the house at least partially
attributable to L.A. Stucco’s work. That intrusion was located at a sliding door,
around some windows, and near a balcony. Regarding the sliding door, Roberts
concluded that L.A. Stucco had improperly attached lath wire to the original
stucco with concrete nails, which penetrated the original stucco and caused water
intrusion. According to Roberts, the nails “went through the stucco system and
through the black building paper, which was the weather-resistant barrier . . . .”
Regarding the windows, he determined that L.A. Stucco had not remediated

                                           6
excessive cracking in the original stucco, and instead applied new stucco over
those cracks. Roberts stated: “If you’re doing a system correctly, water should
not be penetrating it . . . .” Regarding the balcony, Roberts stated that although the
water intrusion probably predated L.A. Stucco’s work, its system ought to have
resolved the problem.
      Roberts opined that it was necessary to “remove[] and replace[] the entire
stucco system” due to the holes in the building paper below the stucco. He
rejected an alternative method of repair called the “omega system,” which involves
the application of special materials over the existing stucco. According to
Roberts, the omega system is intended solely to remediate cracking, and is “not
designed to weatherproof a house.” He asserted that using the omega system
would have violated the applicable building code, which requires exterior
openings exposed to the weather to be weatherproofed.
      Roberts further testified that he recommended to Tom that Laura vacate the
house until repairs could be completed. According to Roberts, the potential for
falling stucco then rendered the house unsafe, and the necessary repairs would
render it uninhabitable.
      Steven McCormick, a principal of McCormick Construction, described the
repairs McCormick Construction performed on the house, and provided expert
testimony regarding the damage to the house from L.A. Stucco’s work.
McCormick found that L.A. Stucco had driven concrete nails through the
“flashing” around windows and doors -- which provides waterproofing in those
areas -- and thus had put holes in the house’s “waterproof membrane.” According
to McCormick, absent that membrane’s “solid integrity,” application of the omega
method to the house would not stop water leaks. The scope of the repair work
undertaken by McCormick Construction included removing and replacing the

                                          7
house’s stucco system, as well as the flashing surrounding 28 windows and 5
sliding doors. McCormick Construction was paid $364,359 to remediate L.A.
Stucco’s work.

             2. United’s Evidence
      West Harrington, a stucco expert, opined that the cracking in L.A. Stucco’s
work was due to its failure to prepare the underlying surface and use a bonding
agent. He further opined that those defects caused no damage to other parts of the
house, asserting that L.A. Stucco appropriately used concrete nails around the
windows and doors. According to Harrington, such nails would not create water
intrusion, even though they penetrated the house’s water-resistant barrier.
Harrington further testified that the scope of L.A. Stucco’s work did not include
repairs to existing water leaks, and that its application of a new stucco system was
not intended to eliminate any such leaks. He maintained that the defects in L.A.
Stucco’s work would have been appropriately remediated by the application of an
omega system, at an estimated cost of $116,547.

             3. Verdict
      Following the presentation of evidence at trial, the court dismissed Building
Dreams’s first amended cross-complaint. The jury returned special verdicts in
favor of Laura and Tom on their claims for negligence and breach of contract, and
found that they had suffered $403,827 in damages.

      D. Judgment and Post-Judgment Rulings
      On September 16, 2014, the trial court entered a judgment in favor of Laura
and Tom and against L.A. Stucco awarding $403,827, less a setoff of $110,000

                                         8
reflecting prior settlements. Laura and Tom sought an award of contractual
attorney fees pursuant to a fee provision in the contract between Building Dreams
and L.A. Stucco, and United filed a motion for a new trial. After denying the new
trial motion, the court granted Laura and Tom a fee award of $516,725, and a
supplemental $49,100 award reflecting fees incurred in litigating the post-
judgment matters. The court also denied United’s request for an award of
contractual attorney fees as the prevailing party with respect to Buildings
Dreams’s cross-complaint against L.A. Stucco. United noticed appeals from the
judgment and post-judgment rulings, which were consolidated.

                                  DISCUSSION
      United contends (1) that Laura and Tom’s breach of contract claim and fee
request were fatally defective because they were not third party beneficiaries of
the contract between Building Dreams and L.A. Stucco, (2) that the economic loss
rule barred the recovery of damages under their negligence claim, (3) that the trial
court erroneously limited its expert Harrington’s testimony, and (4) that L.A.
Stucco was entitled to a fee award as the prevailing party on Building Dreams’s
cross-complaint. For the reasons discussed below, we reject those contentions.

      A. Third Party Beneficiaries
      United asserts several contentions linked to a common theme, namely, that
Laura and Tom were not third party beneficiaries of the contract between Building
Dreams and L.A. Stucco. As Laura and Tom entered into a pre-trial settlement
with Building Dreams, the breach of contract claim they litigated at trial was
predicated on the contract between Building Dreams and L.A. Stucco, to which the
Mulitzes were not signatories. United challenges that claim, arguing that Laura

                                         9
and Tom were neither third party beneficiaries of the pertinent contract nor
assignees of a tenable breach of contract claim possessed by the S.A.G.M. Trust.
On similar grounds, United argues that the attorney fee provision in the contract
supported no fee award to Laura and Tom.

             1. Governing Principles
      United’s contentions implicate the principles applicable to third party
beneficiaries, the ownership interests in a trust, and the assignment of claims.
Civil Code section 1559 provides: “A contract, made expressly for the benefit of a
third person, may be enforced by him [or her] at any time before the parties thereto
rescind it.” Here, “‘“‘[e]xpressly,’ . . . means “in an express manner; in direct or
unmistakable terms; explicitly; definitely; directly.’” [Citations.] “[A]n intent to
make the obligation inure to the benefit of the third party must have been clearly
manifested by the contracting parties.”’ [Citation.] Although this means persons
only incidentally or remotely benefited by the contract are not entitled to enforce
it, it does not mean both of the contracting parties must intend to benefit the third
party: Rather, it means the promisor . . . ‘must have understood that the promisee
. . . had such intent. [Citations.] No specific manifestation by the promisor of an
intent to benefit the third person is required.’ [Citations.]” (Schauer v. Mandarin
Gems of Cal. Inc. (2005) 125 Cal.App.4th 949, 957-958.)
      Determination of that intent “is a question of ordinary contract
interpretation,” (Hess v. Ford Motor Co. (2002) 27 Cal.4th 516, 524), the primary
goal of which “is to give effect to the parties’ intent as it existed at the time of
contracting” (Spinks v. Equity Residential Briarwood Apartments (2009) 171
Cal.App.4th 1004, 1023 (Spinks)). “Intent is to be inferred, if possible, solely
from the language of the written contract.” (Ibid.) Nonetheless, other factors may

                                           10
be relevant to whether a contract was intended to benefit a third party. (Ibid.) “In
determining the meaning of a written contract allegedly made, in part, for the
benefit of a third party, evidence of the circumstances and negotiations of the
parties in making the contract is both relevant and admissible.” (Garcia v. Truck
Ins. Exchange (1984) 36 Cal.3d 426, 437.) Although the determination regarding
the existence of a third party beneficiary ordinarily presents a question of fact, the
issue can be resolved when the contract and the circumstances surrounding its
negotiation are not in dispute. (Prouty v. Gores Technology Group (2004) 121
Cal.App.4th 1225, 1233.)
      As discussed below (see pt. A.3. of the Discussion, post), the question of
contractual interpretation presented here hinges in part on the ownership interests
relating to a trust. “Under general principles of trust law, trust beneficiaries hold
‘an equitable estate or beneficial interest in’ property held in trust and are
‘“regarded as the real owner[s] of [that] property.”’ [Citation.] The trustee is
‘“merely the depositary of the legal title”’ to the property (ibid.); ‘“the legal
estate”’ the trustee holds ‘“is . . . no more than the shadow . . . following the
equitable estate . . . .”’ [Citation.]” (Steinhart v. County of Los Angeles (2010) 47
Cal.4th 1298, 1319, quoting Title Ins. & Trust Co. v. Duffill (1923) 191 Cal. 629,
647-648.)
      The issues presented here also involve principles governing the assignment
of claims. “An assignment carries with it all the rights of the assignor.
[Citations.] ‘The assignment merely transfers the interest of the assignor. The
assignee ‘stands in the shoes’ of the assignor, taking his rights and remedies,
subject to any defenses which the obligor has against the assignor prior to notice
of the assignment.’ [Citation.] Once a claim has been assigned, the assignee is the
owner and has the right to sue on it. [Citations.]” (Johnson v. County of Fresno

                                           11
(2003) 111 Cal.App.4th 1087, 1096 (Johnson), italics omitted; 1 Witkin, Summary
of Cal. Law (10th ed. 2005) Contracts, § 735, pp. 819-820.)
      Generally, Civil Code section 954 “permits an owner of a chose in action to
assign it to another person where it arises ‘out of the violation of a right of
property, or out of an obligation.’ Such types of choses in action include, for
example, breach of contract or damage to personal or real property. [Citations.]
Exceptions to the general rule of assignability . . . are choses in action for wrongs
done to the person, the reputation or the feelings of the injured party, and to
contracts of a purely personal nature, like promises of marriage. [Citation.]”
(Martin v. Bridgeport Community Assn., Inc. (2009) 173 Cal.App.4th 1024, 1032.)

             2. Underlying Proceedings
      Laura and Tom’s complaint asserts two claims against L.A. Stucco, namely,
a negligence claim and a breach of contract claim predicated on the allegation that
L.A. Stucco’s contract with Building Dreams was “for the benefit of” Laura and
Tom. Later, Shelley Mulitz, as trustee of the S.A.G.M. Trust, assigned to them
“all of the claims and rights” owned by the trust “against any party with respect to
the construction, remodeling, and any other work performed at [the house].”
      Prior to trial, United filed a motion in limine seeking to exclude all evidence
relating to any breach of contract claim “based on a third party beneficiary
theory,” arguing that Laura and Tom were merely incidental beneficiaries of the
contract between L.A. Stucco and Building Dreams. In support of that contention,
United pointed to deposition testimony from Ruben Sabata and Daniel Batres of
Building Dreams. Both stated that they did not understand the contract to be for
the benefit of Laura and Tom, and Sabata also asserted that he never discussed that
issue with them. United also observed that when deposed, Tom denied that he

                                          12
intended to be “part” of the contract, and Laura stated that she was unaware of that
contract.
      During the hearing on the motions in limine, the trial court questioned
whether Laura and Tom had standing to assert their claims, as the parties’ joint
factual statement indicated that they did not own the house. After Laura and
Tom’s counsel described the assignment of the trustee’s claims, the court
remarked, “So . . . I’m going to assume then that we don’t have a standing issue
and we need not amend?” When Laura and Tom’s counsel affirmed his
willingness to amend the complaint to reflect the assignment, United’s counsel
directed the court’s attention to the pending motion in limine regarding Laura and
Tom’s status as third party beneficiaries of L.A. Stucco’s contract with Building
Dreams. The court denied the motion in limine, and asked the parties to discuss
whether any amendment to the complaint was required to reflect the assignment.
When United’s counsel sought a continuance in order to submit briefing regarding
whether the complaint required an amendment, the court denied that request,
stating that United had long known that the trust owned the house.
      Although United never subsequently challenged the adequacy of the
complaint’s allegations, the parties attempted to elicit testimony from Daniel
Batres bearing on Laura and Tom’s status as third party beneficiaries. On direct
examination, Batres testified that Building Dreams and L.A. Stucco executed a
written contract “designed to benefit Laura.” When cross-examined, Batres
acknowledged that during his deposition, he denied that he had any understanding
that the contract was for the benefit of Laura and Tom.
      Following the close of presentation of evidence, the trial court concluded
that Laura and Tom were third party beneficiaries, relying primarily on Gilbert
Financial Corp. v. Steelform Contracting Co. (1978) 82 Cal.App.3d 65 (Gilbert

                                         13
Financial). Later, United sought a directed verdict on Tom’s claims, arguing that
there was no evidence he paid for the repairs to L.A. Stucco’s work or Laura’s rent
and moving expenses during those repairs. After hearing argument regarding the
scope and effects of the trustee’s assignment, the court denied the motion. The
parties then stipulated that “the assignment from the trust . . . is valid as to all
claims in issue, tort or contract.”
       Following the jury’s verdict, United sought a new trial, arguing that Laura
and Tom were not third party beneficiaries of L.A. Stucco’s contract with Building
Dreams, and that the trust had no viable breach of contract claim to assign to them.
In addition, United opposed Laura and Tom’s fee requests on the ground that they
were not third party beneficiaries with respect to the fee provision in the contract.
The trial court denied the new trial motion and issued fee awards to Laura and
Tom.

             3. The Mulitzes’ Breach of Contract Claim
       We begin with United’s contention that the breach of contract claim was
fatally defective because neither Laura nor Tom is a third party beneficiary of L.A.
Stucco’s contract with Building Dreams. As explained below, that contention fails
for two reasons: first, Laura is a third party beneficiary of that contract; second, as
assignees of the trust’s claims, both Laura and Tom were entitled to assert a breach
of contract claim because they stood in the shoes of the trustee, who also was a
third party beneficiary of the contract.
       Here, ascertaining the existence of third party beneficiaries under the
contract is properly resolved as a question of law by reference to the contract’s
terms themselves, as there is no relevant extrinsic evidence bearing on the
expressed intentions of the parties to the contract. (Parsons v. Bristol

                                           14
Development Co. (1965) 62 Cal.2d 861, 865.) Generally, the circumstances
surrounding the negotiation of a contract may be relevant to its interpretation
(1 Witkin, Summary of Cal. Law, supra, § 748, pp. 836-838), but not the private
and unexpressed views of participants in the negotiations (Edwards v. Comstock
Insurance Co. (1988) 205 Cal.App.3d 1164, 1169). Although the record discloses
potential evidence regarding several persons’ subjective understanding of the
contract, none suggested that he or she expressed that understanding to anyone
else when the contract was executed. That evidence is thus immaterial to the
question before us.4
      Our focus is therefore on the terms of the contract. To be an express third
party beneficiary, a person “‘need not be named or identified individually,’” as it
is sufficient that the contract shows he or she “‘is a member of a class of persons
for whose benefit it was made.’” (Spinks, supra, 171 Cal.App.4th at p. 1023.)
Here, the contract designates Building Dreams as the “GC” and L.A. Stucco as the
“[s]ub-[c]ontractor,” and sets forth their duties regarding the “[p]roject,” which is
identified by the address of the house. The contract also imposes duties on L.A.
Stucco directed toward “the owner,” stating: “The [s]ub-contractor warrants to the
owner that materials and equipment furnished . . . will be of good quality and new
unless otherwise required or permitted by the GC; that the work will be free from
defects not inherent in the quality required or permitted[;] and that the work will
conform to the requirements of the GC.” Those terms establish that the “owner” is
a third party beneficiary. (Gilbert Financial, supra, 82 Cal.App.3d at pp. 65, 69-

4     For that reason, we reject United’s contention that the trial court was
obliged to submit the third party beneficiary issue to the jury.

                                          15
71 [owner of building to be erected pursuant to a construction contract was third
party beneficiary of agreement between general contractor and subcontractor].)
      Under the circumstances of this case, Shelley Mulitz, as trustee of the trust,
and Laura, as the trust’s beneficiary, are members of the class of persons -- namely
the “owner” -- identified as the contract’s third party beneficiary, as the contract
identifies the project with the house. As explained above (see pt. A.1. of the
Discussion, ante), under the trust, Laura is the house’s “‘real owner,’” although
Shelley Mulitz holds its legal title and -- absent an assignment -- has exclusive
authority to litigate claims regarding it against strangers. Accordingly, Shelley
Mulitz and Laura were the contract’s third party beneficiaries.
      In view of the assignment of the trust’s claims to Laura and Tom, each
acquired standing to assert a breach of contract claim, as they stood in the shoes of
Shelley Mulitz. Although the complaint was not amended to reflect the
assignment as the basis for Laura and Tom’s standing, United never asked the
them to do so, despite repeated offers from their counsel, and instead entered into
a stipulation regarding the assignment’s validity. Any technical defect in the
complaint was therefore forfeited, as “the matter of pleading becomes unimportant
when a case is fairly tried upon . . . under circumstances which indicate that
nothing in the pleadings misled the unsuccessful litigant to his injury.” (Buxbom
v. Smith (1944) 23 Cal.2d 535, 543.) United’s challenge to the breach of contract
claim thus fails, insofar as it attacks Laura and Tom’s entitlement to assert the
rights of third party beneficiaries.
      United’s reliance on The H.N. & Frances C. Berger Foundation v. Perez
(2013) 218 Cal.App.4th 37 is misplaced. There, the plaintiff brought an action
against a county and other defendants to enforce the performance of agreements
and related instruments concerning the construction of a road. (Id. at pp. 41-42.)

                                          16
The trial court sustained a demurrer to the complaint without leave to amend,
concluding that the plaintiff was neither a party to the agreements and related
instruments, nor a third party beneficiary of them. (Id. at pp. 42-43.) On appeal,
the plaintiff contended that it was a member of a class for whose benefit the
agreements and other instruments were made, namely, the owners of property
adjoining the proposed road. (Id. at p. 44.) Rejecting that contention, the
appellate court emphasized that the agreements and other instruments contained no
provision referring to that class. (Id. at p. 45.) In contrast, the contract here
expressly set forth L.A. Stucco’s duties to the “owner.” In sum, Laura and Tom
were entitled to assert the breach of contract claim.

             4. Trust’s Breach of Contract Claim
      United contends the trust had no viable breach of contract claim to assign to
Laura and Tom, arguing that the trust suffered no damages because Laura -- not
the trust -- paid for the remediation of L.A. Stucco’s work, as well as for her rent
and moving expenses during the remediation. We disagree. Although the owner
of property is ordinarily the person entitled to assert claims for damages relating to
the property, in some instances the right to recover those damages may be vested
in a person other than the property owner. (See Vaughn v. Dame Construction Co.
(1990) 223 Cal.App.3d 144, 146-149 [in construction defects action, plaintiff who
asserted claims for breach of warranty, strict liability, and negligence retained
right to recover damages, even though she sold the property after initiating
lawsuit].) That is the case here. As explained above (see pt. A.3, of the
Discussion, ante), Laura was effectively the house’s real owner, and thus her
remediation-related payments reflected her interest in the house. However,
because the trustee had sole authority to assert claims relating to the house against

                                           17
strangers, damages to Laura’s interest in the house could be recovered only by the
trustee, absent an assignment. Accordingly, the trust had a viable breach of
contract claim to assign to Laura and Tom.

             5. Right to Contractual Attorney Fees
      United maintains that Laura and Tom were not entitled to enforce the
contract’s attorney fee provision under a third party beneficiary theory. As
explained below, we reject that contention.
      Nonsignatories to a contract may be third party beneficiaries of certain
contract provisions, but not the contract as a whole. (Whiteside v. Tenet
Healthcare Corp. (2002) 101 Cal.App.4th 693, 709 (Whiteside).) Thus, third
party beneficiary plaintiffs seeking a contract-based fee award against a signatory
defendant must establish that they have the right to enforce the contract’s fee
provision. (Loduca v. Polyzos (2007) 153 Cal.App.4th 334, 341 (Loduca).) That
showing is ordinarily subject to the principles of contract interpretation. (Ibid.)
      We find guidance regarding United’s contention from Loduca and Real
Property Services Corp. v. City of Pasadena (1994) 25 Cal.App.4th 375, 380-383
(Real Property Services). In Loduca, the owner of a house sued a general
contractor and subcontractor as a third party beneficiary of their contract, and
prevailed on his breach of contract claim. (Loduca, supra, 153 Cal.App.4th at
pp. 337-338.) The trial court issued a fee award to the plaintiff under the
contract’s fee provision, which stated: “‘If a court action is brought, prevailing
party to be awarded attorneys fees . . . .’” (Id. at p. 337.) Affirming the award, the
appellate court concluded that the plaintiff was entitled to enforce the broad fee
provision, as it did not restrict awards to specific individuals, and the contract

                                          18
otherwise clearly identified the plaintiff as a third party beneficiary. (Id. at
pp. 343-344.)
      In Real Property Services, after a sublessee of commercial property
unsuccessfully sued the lessor for breach of the lease, the trial court denied the
lessor’s request for a fee award under the lease’s fee provision, which stated:
“‘[I]n the event of any action or proceeding brought by either party against the
other under this Lease, the prevailing party shall be entitled to recover for the fees
of its attorneys in such action or proceeding . . . in such amount as the court may
adjudge reasonable.’” (Real Property Services, supra, 25 Cal.App.4th at pp. 377-
378.) As the action was subject to Civil Code section 1717, which mandates
reciprocity with respect to fee awards in “any action on a contract” (Civ. Code, §
1717, subd. (a)), the appellate court focused its analysis of the ruling on whether
the sublessee, as a nonsignatory to the lease, would have been entitled to a fee
award had it prevailed against the lessor. (Real Property Services, supra, at pp.
382-383.) The court determined that the sublessee possessed that right, as the
lease expressly noted the sublessee’s occupation of the property, and it was
otherwise well established that any sublessee so recognized may sue the lessor for
breach of the lease as a third party beneficiary of the lease. (Ibid.) Because there
was “a sufficient nexus” between the lessor and sublessee to support a fee award
in favor of the sublessee had it prevailed, the court reversed the denial of the
lessor’s request. (Id. at pp. 383-384.)
      In view of the assignment of the trustee’s rights, we conclude that Laura and
Tom were entitled to enforce the contract’s fee provision under a third party
beneficiary theory. That provision states: “In the event of any arbitration or
litigation relating to the project, project performance or this contract, the
prevailing party shall be entitled to reasonable attorney fees . . . .” (Italics added.)

                                           19
As explained above (see pt. A.3. of the Discussion, ante), the contract otherwise
clearly designated the “owner” -- that is, the trustee and Laura -- as a third party
beneficiary with respect to L.A. Stucco’s performance under the contract. The
trustee’s and Laura’s status as third party beneficiaries, coupled with the broad
language of the fee provision, thus established their right to seek a fee award.
Furthermore, as the trustee assigned to Laura and Tom “all of the claims and
rights” owned by the trust “against any party with respect to the construction,
remodeling, and any other work performed at [the house],” the trust’s right to a fee
award was transferred to them. (Heppler v. J.M. Peters Co. (1999) 73 Cal.App.4th
1265, 1290-1291.)
      The decisions upon which United relies are distinguishable. In Sessions
Payroll Management, Inc. v. Noble Construction Co. (2000) 84 Cal.App.4th 671,
675-677, a general contractor entered into a written contract with a subcontractor,
which in turn employed a payroll services provider. Later, the payroll services
provider sued the general contractor for breach of its contract with the
subcontractor, alleging that it was a third party beneficiary of that contract. (Ibid.)
The trial court sustained a demurrer without leave to amend to the complaint
because the contract contained express exclusions regarding the existence of third
party beneficiaries, but nonetheless awarded attorney fees to the general contractor
pursuant the contract’s fee provision, which stated: “‘In the event it becomes
necessary for either party to enforce the provisions of this Agreement or to obtain
redress for the violation of any provision hereof, . . . , the prevailing party shall be
entitled to recover from the other party . . . reasonable attorney fees.’” (Id. at
p. 676.) Relying on the reciprocity requirement in Civil Code section 1717, the
appellate court reversed the award, concluding that the payroll services provider
would not have been entitled to an award had it prevailed, in view of the contract’s

                                           20
express exclusions regarding third party beneficiaries and the narrowly tailored fee
provision. (Sessions Payroll Management, Inc., supra, 84 Cal.App.4th at pp. 680-
681.) In contrast, the contract here establishes the trustee’s and Laura’s status as
third party beneficiaries, and contains a broad fee provision.
      In Whiteside, the plaintiff’s medical insurer executed a contract with a
hospital that regulated the hospital’s authority to bill the insurer’s customers for
medical services. (Whiteside, supra, 101 Cal.App.4th at pp. 698-700.) Although
the contract required the insurer and hospital to attempt to resolve disputes by
arbitration before engaging in litigation, it stated: “‘Nothing contained in this
Agreement requires [the] Hospital to arbitrate or otherwise handle in any
particular manner or dispose of any claim or action (malpractice or otherwise) by a
patient against Hospital arising out of services performed by Hospital.’” (Id. at
pp. 707-709.) After the patient unsuccessfully asserted claims against the hospital
as an alleged third party beneficiary of his insurer’s contract with the hospital, the
trial court awarded attorney fees to the hospital under the contract’s fee provision,
which stated: “‘If proceedings are necessary to enforce this Agreement, the
prevailing party shall be entitled to reasonable attorneys’ fees in addition to any
other relief it may obtain.’” Pointing to the reciprocity requirement in Civil Code
section 1717, the appellate court reversed the award, finding no “nexus” between
the patient and hospital sufficient to support a fee award in the patient’s favor as a
third party beneficiary of the provision. (Whiteside, supra, at pp. 706-710.) In so
concluding, the court determined that the fee provision fell within the contract
terms specifying the procedure for resolving disputes between the insurer and
hospital, from which the patient was expressly exempt. (Ibid.) Here, the contract
does not exempt the “owner” from the benefits of the fee provision.

                                          21
      In Super 7 Motel Associates v. Wang (1993) 16 Cal.App.4th 541, 544-545, a
buyer of real property initiated a fraud action against the seller and broker
involved in the sale. After the broker prevailed on the claims against him, he
obtained a contractual fee award against the buyer under a fee provision found in
the sales agreement between the buyer and seller. (Id. at pp. 547-548.) The
appellate court reversed the award, concluding that nothing in the sales agreement
rendered him a third party beneficiary of any of its provisions. (Ibid.) As
explained above, that is not the case here. In sum, Laura and Tom were entitled to
enforce the fee provision of Building Dreams’s contract with L.A. Stucco.

      B. Economic Loss Rule
      United asserts two contentions regarding the potential application of the
economic loss rule to Laura and Tom’s negligence claim, arguing that the rule
barred their recovery of tort damages, and that the jury instructions failed to reflect
the rule. For the reasons discussed below, those contentions fail.

             1. Governing Principles
      As our Supreme Court has explained, “the economic loss rule provides:
‘“‘[W]here a purchaser’s expectations in a sale are frustrated because the product
he bought is not working properly, his remedy is said to be in contract alone, for
he has suffered only “economic” losses.”’ . . . The economic loss rule requires a
purchaser to recover in contract for purely economic loss due to disappointed
expectations, unless he can demonstrate harm above and beyond a broken
contractual promise. [Citation.] Quite simply, the economic loss rule ‘prevent[s]
the law of contract and the law of tort from dissolving one into the other.’
[Citation.]” (Robinson Helicopter Co. v. Dana Corp. (2004) 34 Cal.4th 979, 988.)

                                          22
      The application of the economic loss rule in construction defect actions is
examined in Aas v. Superior Court (2000) 24 Cal.4th 627 (Aas) and Jimenez v.
Superior Court (2002) 29 Cal.4th 473, 477-481 (Jimenez). In Aas, a group of
homeowners asserted causes of action for negligence and related claims against
the builders of their homes, alleging that the homes suffered from multiple
construction defects. (Aas, supra, 24 Cal.4th at pp. 632-635.) After the trial court
granted the builders’ motions in limine to exclude evidence of any defect that had
not resulted in bodily injury or physical damage, the homeowners sought relief
through writ proceedings. (Id. at pp. 632-633.) In affirming the trial court’s
ruling, our Supreme Court explained that “appreciable, nonspeculative, present
injury is an essential element of a tort cause of action.” (Id. at p. 646.) The court
concluded: “Construction defects that have not ripened into property damage, or
at least into involuntary out-of-pocket losses, do not comfortably fit the definition
of ‘“appreciable harm ”’ -- an essential element of a negligence claim.” (Ibid.)
      In Jimenez, two window manufacturers supplied windows for mass-
produced homes in housing developments. (Jimenez, supra, 29 Cal.4th at pp. 476-
477, 479.) The trial court granted their motion for summary adjudication on strict
liability claims based on defects in the windows. (Ibid.) In concluding that the
grant of summary judgment was erroneous, our Supreme Court held that
manufacturers of component parts installed in mass-produced homes may be
subject to strict products liability in tort when their defective products cause harm.
(Id. at pp. 479-481.) The court further examined the extent to which the
economic loss rule may circumscribe that liability, explaining that the rule allows
a plaintiff to recover in tort “when a product defect causes damage to ‘other
property,’ that is property other than the product itself.” (Id. at p. 483, italics
omitted.) The court stated: “To apply the economic loss rule, we must first

                                           23
determine what the product at issue is. Only then do we find out whether the
injury is to the product itself (for which recovery is barred by the economic loss
rule) or to property other than the defective product (for which plaintiffs may
recover in tort).” (Ibid.)

             2. Underlying Proceedings
      Prior to trial, United filed a motion in limine seeking to exclude all evidence
of alleged construction defects that had not caused “any present, appreciable
damage to ‘other property.’” In opposing the motion, Laura and Tom asserted
their intent to present evidence that L.A. Stucco used the “wrong kind of nails”
that “actually penetrated the waterproofing all around the house,” and thereby
“caused extensive damage.” The court denied the motion in limine, stating that
Laura and Tom would be limited to damages for breach of contract if they
demonstrated only “defects without damage.”
      At trial, Laura and Tom’s stucco experts, Roberts and McCormick, testified
that the house suffered some water intrusion that L.A. Stucco’s work should have
-- but did not -- eliminate. They further testified that L.A. Stucco had created a
new source of water intrusion. According to Roberts and McCormick, L.A.
Stucco had improperly used concrete nails that penetrated the house’s building
paper and flashings, which they described as the house’s “weather-resistant
barrier” or “waterproof membrane.” Roberts stated that when he conducted a
“water” or “trickle” test at a sliding door, water pooled inside the house. Roberts
and McCormick opined that the holes created by the concrete nails precluded the
use of the “omega system” to remediate L.A. Stucco’s defective work, and
required the removal and replacement of the entire stucco system.

                                         24
      In contrast, United’s stucco expert Harrington testified that L.A. Stucco had
appropriately used concrete nails around the windows and doors, and that the
defects in L.A. Stucco’s work were remediable through an application of the
omega system. He maintained there was no credible evidence that any water
intrusion was attributable to L.A. Stucco’s work.
       Following the close of presentation of evidence, at the trial court’s
invitation, the parties submitted additional briefing on the economic loss rule.
After concluding that the case was not subject to the rule, the trial court gave no
instruction regarding it.
      In closing argument, Laura and Tom’s counsel maintained that because L.A.
Stucco’s use of concrete nails necessitated the remediation work actually
undertaken, Laura and Tom were entitled to recover the $364,359 she paid for that
work, together with approximately $131,000 in rent and moving expenses.
United’s counsel contended there was no evidence that the nails had caused any
actual water intrusion. He thus asserted that Laura and Tom were entitled to
recover only the costs of installing an omega system -- which he estimated at
$116,547 -- plus approximately $19,500 in additional costs.
      The jury was presented with a special verdict form that required no findings
reflecting the economic loss rule, and no allocation of damages to the breach of
contract and negligence claims. The jury found that L.A. Stucco was negligent,
that it had breached its written contract with Building Dreams, and that Laura and
Tom had suffered $403,827 in damages.

             3. Entitlement to Tort Damages
      United contends the economic loss rule barred Laura and Tom from
recovering the $364,359 Laura paid to remediate L.A. Stucco’s work, arguing that

                                         25
there was no evidence of actual damage to other property beyond that work.
According to United, Laura and Tom demonstrated only defects within the work,
namely, delamination and cracking. Although the concrete nails pierced the
house’s pre-existing building paper and flashings, United maintains that the
penetrations do not constitute actual damage because Laura and Tom showed no
actual water infiltration attributable to them. The crux of United’s contention is
that creating numerous holes in the house’s water barrier did not constitute actual
damage until water intrusion occurred. We disagree.5
        United’s contention raises an issue regarding the application of the
economic loss rule, namely, whether an item of property with a designated
function -- here, the house’s pre-existing water barrier -- suffered actual damage
when its capacity to discharge that function was materially impaired, even though
that failure had not yet manifested itself. In Duarte v. Zachariah (1994) 22
Cal.App.4th 1652, 1660-1665 (Duarte), the appellate court addressed a closely
related issue regarding the existence of bodily injury. There, following a
mastectomy to remove a breast cancer, the plaintiff consulted with a doctor
regarding measures intended to reduce the chances of the cancer’s recurrence. (Id.

5      We note that the trial court concluded the economic loss rule was
inapplicable to the underlying action -- which it characterized as “a negligently
performed services case” -- because it regarded the rule as encompassing only
products liability actions. Although at least one appellate court has held that the
rule does not encompass certain negligence claims relating to defective services
(North American Chemical Co. v. Superior Court (1997) 59 Cal.App.4th 764,
777-779), our Supreme Court has criticized the rationale offered for that limitation
without resolving the extent to which the rule may be subject to it. (Aas, supra, 24
Cal.4th at pp. 643-653 & fn. 11.) Because United’s contentions fail for other
reasons (see pts. B.3 & B.4 of the Discussion, post), it is unnecessary to examine
the trial court’s determination.

                                         26
at pp. 1655-1656.) The doctor negligently administered excessive doses of a drug,
which impaired the ability of the patient’s bone marrow to produce blood platelets.
(Id. at pp. 1656-1657.) That impairment precluded any future use of
chemotherapy to treat cancer, as it rendered the plaintiff susceptible to
hemorrhaging while on chemotherapy. (Id. at pp. 1656, 1663.) Following a
recurrence of the plaintiff’s breast cancer, she initiated a malpractice action against
the doctor. (Id. at p. 1655.) The trial court granted nonsuit on her negligence
claim, concluding there was no evidence that the medication overdose caused the
recurrence of her cancer. (Ibid.)
      Although the appellate court agreed with that aspect of the ruling, it
determined that the injury to the plaintiff’s bone marrow was actionable regardless
of whether it caused her cancer. (Duarte, supra, 22 Cal.App.4th at p. 1655.) The
court determined that the reduction in the bone marrow’s capacity to produce
platelets constituted “‘actual damage,’” for purposes of recovery in negligence.
(Id. at pp. 1661-1663.) The court stated: “Such an impairment is a detrimental
change in the physical condition of [the plaintiff’s] body. The evidence shows that
platelets are the component of blood that causes the blood to clot in response to a
wound or cut. There is no testimony in the record whether the degree of that
impairment affected blood clotting in ordinary circumstances, e.g., cuts or

hemorrhage caused by trauma.[] However, there is testimony that the change in
[the plaintiff’s] bone marrow rendered her peculiarly susceptible to suppression of
the production of blood platelets if treated by chemotherapy, subjecting her to life-
threatening spontaneous hemorrhaging. This susceptibility prevented the renewal

of chemotherapy . . . before the detection of the recurrence of her cancer,[] and
precludes the present treatment of the cancer by this means. [¶] This evidence

                                          27
shows that the change in [the plaintiff’s] bone marrow was an appreciable
functional impairment . . . . ” (Id. at p. 1663, fns. omitted.)
      Under the rationale in Duarte, the physical impairment of an item’s capacity
to function may constitute actual damage even though no failure has yet occurred,
provided that the impairment is sufficiently material or significant. Here, Laura
and Tom’s experts testified that the concrete nails had injured the integrity of the
house’s “weather-resistant barrier” or “waterproof membrane,” and that testing at
a sliding door showed that water would, in fact, infiltrate through a nail hole. In
our view, that evidence established “an appreciable functional impairment” of the
house’s pre-existing water barrier (Duarte, supra, 22 Cal.App.4th at p. 1663,
italics omitted), thus showing damage to “property other than [L. A. Stucco’s]
defective product,” for purposes of the economic loss rule (Jimenez, supra, 29
Cal.4th at p. 479).6

                4. Instruction On Economic Loss Rule
      United contends the trial court erred in failing to instruct the jury regarding
the economic loss rule. As explained below, United has shown no error in the
instructions.

6      United’s reliance on Fieldstone Co. v. Briggs Plumbing Products, Inc.
(1997) 54 Cal.App.4th 357 and Casey v. Overhead Door Corp. (1999) 74
Cal.App.4th 112, disapproved on another ground in Jimenez, supra, 29 Cal.4th at
p. 481, fn. 1, is thus misplaced. In each case, the economic loss rule barred the
recovery of tort damages because there was no evidence of injury to property other
than the defendant’s own defective product. (Fieldstone Co., supra, 54
Cal.App.4th at pp. 363-366; Casey, supra, 74 Cal.App.4th at pp. 123-124.) That
is not the case here.

                                           28
      Generally, “[a] party is entitled upon request to correct, nonargumentative
instructions on every theory of the case advanced by him which is supported by
substantial evidence.” (Soule v. General Motors Corp. (1994) 8 Cal.4th 548, 572,
(Soule).) However, “[i]n a civil case, each of the parties must propose complete
and comprehensive instructions in accordance with his theory of the litigation.”
(Downing v. Barrett Mobile Home Transport, Inc. (1974) 38 Cal.App.3d 519,
523.) “The trial court has no duty to instruct on its own motion, nor is it obligated
to modify proposed instructions to make them complete or correct. [Citations.]
Such instructions may be rejected without the trial court’s attempting to modify or
correct them. [Citation.]” (Maureen K. v. Tuschka (2013) 215 Cal.App.4th 519,
526.) Thus, “[i]n order to complain of failure to instruct on a particular issue the
aggrieved party must request the specific proper instructions. [Citations.]” (Hyatt
v. Sierra Boat Co. (1978) 79 Cal.App.3d 325, 335.)
      The application of the forfeiture principle hinges on the adequacy of the
instructions as given. “When a trial court gives a jury instruction which is correct
as far as it goes but which is too general or is incomplete for the state of the
evidence, a failure to request an additional or a qualifying instruction will waive a
party’s right to later complain on appeal about the instruction which was given.
[Citation.] However, when a trial court gives a jury instruction which is
prejudicially erroneous as given, i.e., which is an incorrect statement of law, the
party harmed by that instruction need not have objected to the instruction or
proposed a correct instruction of his own in order to preserve the right to complain
of the erroneous instruction on appeal. [Citation.]” (Suman v. BMW of North
America (1994) 23 Cal.App.4th 1, 9.)
      Here, United forfeited its contention of instructional error. During the
discussions on jury instructions, United directed the trial court’s attention to Aas

                                          29
and requested that the jury be instructed in accordance with that decision, but
proposed no specific instruction. As explained above, the trial court was not
required to create an instruction for United.
      In an apparent effort to avoid a forfeiture, United suggests that the jury
instructions as given were defective, arguing that they incorrectly stated that Laura
and Tom were entitled to the same damages under the claims for breach of
contract and negligence. We disagree.
      In construction defect actions, plaintiffs may recover “the cost of repairing
the home, including lost use or relocation expenses . . . .” (Erlich v. Menezes
(1999) 21 Cal.4th 543, 561; see Orndorff v. Christiana Community Builders
(1990) 217 Cal.App.3d 683, 687-691.) Those damages are available for
negligence, as well as for breach of contract, subject to the special restrictions
imposed on contractual damages. (See Erhlich, supra, 21 Cal.4th at p. 561;
Walker v. Signal Companies, Inc. (1978) 84 Cal.App.3d 982, 993; Amerson v.
Christman (1968) 261 Cal.App.2d 811, 824-825.) As our Supreme Court has
explained, “‘[c]ontract damages are generally limited to those within the
contemplation of the parties when the contract was entered into or at least
reasonably foreseeable by them at that time; consequential damages beyond the
expectations of the parties are not recoverable. [Citations.] . . . .’ [Citation.] ‘In
contrast, tort damages are awarded to [fully] compensate the victim for [all] injury
suffered. [Citation.]’ [Citation.]” (Id. at p. 550, quoting Applied Equipment
Corp. v. Litton Saudi Arabia Ltd. (1994) 7 Cal.4th 503, 515-516.)
      The instructions given to the jury accurately reflected these principles.
They informed the jury that upon proper proof, the Mulitzes were entitled to the
costs of repairing the house and Laura’s relocation expenses, but expressly stated
that contract damages were subject to the requirements stated above. In addition,

                                           30
the instructions asserted that “each item of damages may be awarded only once
regardless of the number of legal theories alleged.” We discern no error in the
instructions given.
      Furthermore, we would find no prejudice were there no forfeiture. The
improper rejection of a requested instruction is not reversible error unless the
omission was prejudicial, that is, it is “reasonably probable defendant would have
obtained a more favorable result” had the instruction been given. (Soule, supra, 8
Cal.4th at p. 570.) “A ‘reasonable probability’ in this context ‘does not mean
more likely than not, but merely a reasonable chance, more than an abstract
possibility.’” (Kinsman v. Unocal Corp. (2005) 37 Cal.4th 659, 682, italics
omitted, quoting College Hospital Inc. v. Superior Court (1994) 8 Cal.4th 704,
715.) To determine whether instructional error was prejudicial, we evaluate “(1)
the state of the evidence, (2) the effect of other instructions, (3) the effect of
counsel’s arguments, and (4) any indications by the jury itself that it was misled.”
(Soule, supra, at pp. 580-581.) In this regard, the evidence is viewed in the light
most favorable to the party claiming error. (Sesler v. Ghumman (1990) 219
Cal.App.3d 218, 223.)
      Here, there is no reasonable probability of an outcome more favorable to
United had the jury been instructed regarding the economic loss rule. As
explained above (see pt. B.1. of the Discussion, ante), the rule operates to bar the
recovery of tort damages only upon a threshold determination that there is no
damage to property other than “the defective product.” (Jimenez, supra, 29
Cal.4th at p. 483.) Thus, any instruction regarding the rule would have informed
the jury that Laura and Tom would not be entitled to damages for negligence if it
found no damage to property other than L.A. Stucco’s defective stucco work.
However, the record shows that the jury necessarily found damages to property

                                           31
that pre-existed L.A. Stucco’s work. In concluding that Laura and Tom were
entitled to full compensation for the remediation they undertook, the jury rejected
United’s theory that L.A. Stucco’s work created no damage to the house’s water-
barrier. For that reason, the jury would have rejected the application of the
economic loss rule had it been instructed regarding that rule. In sum, United has
shown no instructional error.7

      C. Expert Testimony
      United contends the trial court improperly barred its expert Harrington from
testifying regarding the bases of his opinion. As explained below, United has
forfeited its contention for want of a timely offer of proof, and in any event, the
late-proffered testimony would have constituted inadmissible hearsay.
      Generally, hearsay may underpin expert testimony, subject to certain
limitations. Expert opinions may be based on “hearsay information of a type
reasonably relied upon by professionals in the field in forming an opinion on the
subject may be used to support an expert opinion, even though not admissible in
court.” (Korsak v. Atlas Hotels, Inc. (1992) 2 Cal.App.4th 1516, 1524, italics

7      For similar reasons, we reject United’s related contention, namely, that the
special verdict form was defective because it requested the jury find the total
amount of damages without allocating them to a specific theory. Although a
special verdict form must allow the jury to resolve every material issue, any failure
to do so is subject to harmless error analysis. (Taylor v. Nabors Drilling U.S.A.,
LP (2014) 222 Cal.App.4th 1228, 1240, 1244-1247.) Here, the record establishes
that the jury accepted Laura and Tom’s theory of negligence in its entirety, as the
instructions regarding that theory were accurate, the jury found that L.A. Stucco
had engaged in negligence, and the jury awarded Laura and Tom all the damages
they sought. The record thus discloses no reversible error in the special verdict
form.

                                          32
omitted.) In contrast, expert opinion founded on unreliable hearsay is not
admissible. (Ibid.) Furthermore, “[w]hile an expert may state on direct
examination the matters on which he relied in forming his opinion, he may not
testify as to the details of such matters if they are otherwise inadmissible.”
(Grimshaw v. Ford Motor Co. (1981) 119 Cal.App.3d 757, 788-789.) The trial
court is authorized to exclude expert opinion founded on unreliable hearsay
(Korsak, supra, 2 Cal.App.4th at p. 1524), and regulate the recitation of the details
of reliable hearsay underlying an expert’s opinion (Grimshaw, supra, 119
Cal.App.3d at pp. 788-789).
      Ordinarily, in order to preserve an objection to the exclusion of testimony
during a witness’s direct examination, the evidence’s proponent must make an
offer of proof or its equivalent. (Evid. Code, § 354, subd. (a).) “[An] offer of
proof must be specific in its indication of the purpose of the testimony, the name
of the witness, and the content of the answer to be elicited.” (3 Witkin, Cal.
Evidence (5th ed. 2012) Presentation at Trial, § 414, p. 569; accord, Semsch v.
Henry Mayo Newhall Memorial Hospital (1985) 171 Cal.App.3d 162, 167.) In
addition, the offer of proof must be timely. (Malatka v. Helm (2010) 188
Cal.App.4th 1074, 1086 (Malatka).) The requirement for an offer of proof is
applicable to the exclusion of expert testimony. (McCleery v. City of Bakersfield
(1985) 170 Cal.App.3d 1059, 1073-1074.)
      On direct examination, Harrington testified that Building Dreams’s expert,
Gidon Vardi, had visited the house. Laura and Tom’s counsel then asserted
objections to the line of questioning, which the trial court sustained. When
United’s counsel inquired whether Harrington discussed with Vardi whether
complete removal and replacement of the house’s stucco system was appropriate,

                                          33
Laura and Tom’s counsel asserted an objection predicated on relevance and the
hearsay rule. The following colloquy then occurred:
      “The court: Sustained. Let’s not pursue this any further.
      “[United’s counsel]: An expert is allowed to rely --
      “The court: Excuse me. No. they’re not.”
Without offering a description of Harrington’s proposed testimony, United’s
counsel examined Harrington regarding other topics.
      United’s motion for a new trial challenged the exclusion of the proposed
testimony. Accompanying the motion was a declaration from Harrington, which
United offered as a description of Harrington’s proposed testimony. Harrington
stated that he had conferred several times with Vardi to “prepar[e] a joint defense
methodology.” He further stated: “[Vardi] and I agreed that L.A. Stucco’s work
was deficient but that the scope of repairs being performed by [Laura and Tom]
was excessive . . . . Specifically, we agreed that there were many existing
problems with [the house] that was built in the 1970’s, including, but not limited
to, water intrusion at decks and columns, that were included in [Laura and Tom’s]
repairs but completely unrelated to L.A. Stucco’s work.” According to
Harrington, he and Vardi had “jointly formulat[ed]” an alternative repair proposal.
      We conclude that United failed to preserve its contention regarding
Harrington’s testimony, as it first made an offer of proof in a post-trial motion,
almost two months after the jury returned its verdict. (Malatka, supra, 188
Cal.App.4th at p. 1087 [party forfeited contention regarding exclusion of evidence
because it made no offer of proof until post-ruling motion two months after
evidentiary hearing].) Furthermore, we would find no error were there no
forfeiture, as Harrington’s declaration established that his proposed testimony
constituted inadmissible hearsay. In Mosesian v. Pennwalt Corp. (1987) 191

                                          34
Cal.App.3d 851, 857, disapproved on another ground in People v. Ault (2004) 33
Cal.4th 1250, 1272, fn.15, an expert was permitted to testify that his opinion
regarding the toxicity of a pesticide was based in part on his consultation with six
other experts, all of whom shared his opinion. The appellate court concluded that
that portion of the expert’s testimony was inadmissible, stating: “The general and
well-settled rule prevents an expert from predicating an opinion upon the outside
opinion of another expert. [Citation.] The expert should base the opinion upon
facts personally observed or upon a hypothesis supported by the evidence.
[Citation.] [¶] The opinions of the six outside experts were unquestionably
hearsay opinions. Experts may rely upon hearsay in forming opinions. They may
not relate an out-of-court opinion by another expert as independent proof of fact.
[Citation.] It is proper to solicit the fact that another expert was consulted to show
the foundation of the testifying expert’s opinion, but not to reveal the content of
the hearsay opinion. [Citation.]” (Id. at p. 860.) Harrington’s proposed testimony
was thus properly excluded. In sum, United has established no error relating to the
limitation of Harrington’s testimony.

      D. United’s Fee Request
      United contends the trial court erroneously denied its request for an award
of attorney fees as the prevailing party on Building Dreams’s first amended
complaint (FACC), which was dismissed after the close of presentation of
evidence at trial. For the reasons discussed below, we reject the contention.

             1. Governing Principles
      Attorney fees are not recoverable as costs unless expressly authorized by
statute or contract. (Code Civ. Proc., §§ 1021, 1033.5.) Here, United sought a fee

                                          35
award as an item of costs pursuant to the attorney fee provision of L.A. Stucco’s
agreement with Building Dreams, which states: “In the event of any . . . litigation
relating to the project, project performance or this contract, the prevailing party
shall be entitled to reasonable attorney fees . . . .” That provision, viewed in
isolation, is sufficiently broad to support the prevailing party’s recovery of fees as
costs with respect to contract and non-contract claims. (Silver v. Boatwright Home
Inspection, Inc. (2002) 97 Cal.App.4th 443, 449 (Silver).)
      “Whether a party to litigation is entitled to recover costs is governed by
Code of Civil Procedure section 1032, which provides, in subdivision (b), that
‘[e]xcept as otherwise expressly provided by statute, a prevailing party is entitled
as a matter of right to recover costs in any action or proceeding.’ For the purpose
of determining entitlement to recover costs, ‘Code of Civil Procedure section 1032
defines “prevailing party” . . . .’” (Santisas v. Goodin (1998) 17 Cal.4th 599, 606
(Santisas).) In this regard, subdivision (a)(4) of section 1032 states: “‘Prevailing
party’ includes . . . a defendant in whose favor a dismissal is entered . . . .”
Generally, a party that falls squarely under this characterization is entitled to its
costs as a matter of right. (Crib Retaining Walls, Inc. v. NBS/Lowry, Inc. (1996)
47 Cal.App.4th 886, 890.)
      Nonetheless, the prevailing party under Code of Civil Procedure section
1032 may not qualify for a fee award under the tests for the designation of
prevailing party applicable to Civil Code section 1717 (Santisas, supra, 17 Cal.4th
at p. 619). That statute provides that “[i]n any action on a contract, where the
contract specifically provides that attorney’s fees and costs, which are incurred to
enforce that contract, shall be awarded either to one of the parties or to the
prevailing party, then the party who is determined to be the party prevailing on the
contract, whether he or she is the party specified in the contract or not, shall be

                                           36
entitled to reasonable attorney’s fees in addition to other costs.” (Civ. Code,
§ 1717, subd. (a).)
      Subdivision (b)(1) of Civil Code section 1717 further provides: “(1) The
court, upon notice and motion by a party, shall determine who is the party
prevailing on the contract, whether or not the suit proceeds to final judgment.
Except as provided in paragraph (2), the party prevailing on the contract shall be
the party who recovered a greater relief in the action on the contract. The court
may also determine that there is no party prevailing on the action for the purposes
of this section. [¶] (2) Where an action has been voluntarily dismissed or
dismissed pursuant to a settlement of the case, there shall be no prevailing party
for purposes of this section.” The latter exception includes the voluntary dismissal
of an action after the commencement of trial. (D & J, Inc. v. Ferro Corp. (1986)
176 Cal.App.3d 1191, 1193-1195 (D & J).)
      United’s fee request invoked the principles applicable to actions involving
contract and non-contract claims. The FACC contained claims for declaratory
relief, equitable contribution, and indemnity, together with a claim for breach of
contract. Only the breach of contract and declaratory relief claims were
potentially subject to Civil Code section 1717, as the remaining claims were not
based on contract. (Exxess Electronixx v. Heger Realty Corp. (1998) 64
Cal.App.4th 698, 713-716.)
      Under the circumstances of this case, the application of Civil Code section
1717 hinges on whether the dismissal of the FACC was voluntary. Code of Civil
Procedure section 581 contains two pertinent provisions regarding dismissal after
the commencement of trial. Subdivision (d) of Code of Civil Procedure section
581 (section 581(d)) states: “Except as otherwise provided in subdivision (e), the
court shall dismiss the complaint, or any cause of action asserted in it, in its

                                          37
entirety or as to any defendant, with prejudice, when upon the trial and before the
final submission of the case, the plaintiff abandons it.” Subdivision (e) of Code of
Civil Procedure section 581 (section 581(e)) states: “After the actual
commencement of trial, the court shall dismiss the complaint, or any causes of
action asserted in it, in its entirety or as to any defendants, with prejudice, if the
plaintiff requests a dismissal, unless all affected parties to the trial consent to
dismissal without prejudice or by order of the court dismissing the same without
prejudice on a showing of good cause.”
      As Witkin explains, dismissals under those provisions are voluntary, even
though the propriety of a dismissal under section 581(d) is consigned to the
court’s discretion. (6 Witkin, Cal. Procedure (5th ed. 2008) Proceedings Without
Trial, §§ 311-312, pp. 766-768; D & J, supra, 176 Cal.App.3d at pp. 1193-1195.)
Section 581(d) ordinarily requires “some affirmative action by the plaintiff in
abandoning his cause of action.” (6 Witkin, Cal. Procedure, supra, § 312, at
p. 767.) Section 581(e) permits the plaintiff to request a dismissal. (6 Witkin,
supra, § 311, at p. 766.) Under the provisions, a voluntary dismissal is “with
prejudice” unless all the affected parties agree to a dismissal without prejudice, or
the court finds “good cause” for such a dismissal. (Id., § 313, at p. 768.)
      In Silver, which involved a pretrial voluntary dismissal of a complaint
containing contract and noncontract claims, the appellate court set forth the
analysis appropriate for a contract-based fee request: “[W]hen a trial court is
presented with a contractual claim for attorney’s fees by a defendant who has been
voluntarily dismissed from a suit . . . , the court must deny such fees as are limited
to the parties’ contract claims. Regarding the noncontract claims, the court must
look to the parties’ contractual attorney’s fees provision to determine if it defines
who is a prevailing party or addresses voluntary . . . dismissals. If the contract

                                           38
does not provide such guidance, the court must utilize its discretion in determining
whether such defendant should be considered a prevailing party for the purpose of
recovering attorney’s fees as costs under section[] 1032 . . . .” (Silver, supra, 97
Cal.App.4th at p. 452.)

             2. Underlying Proceedings
      After filing the FACC, Building Dreams entered into a settlement with
Laura and Tom, which stated that it “will assign” to them all its claims against
L.A. Stucco including those asserted in the FACC. Shortly before trial, the trial
court found that the settlement had been made in good faith (Code Civ. Proc.,
§ 877.6).
      The FACC was never amended to reflect any assignment, and at trial Laura
and Tom neither asserted the FACC’s claims nor presented evidence expressly
intended to support them. Following the close of presentation of evidence, but
before the jury was instructed, United sought a directed verdict regarding the
FACC’s breach of contract claim, stating that it was “still outstanding,” and had
“never been addressed as part of this lawsuit against L. A. Stucco.” After the
court responded that the FACC was being dismissed pursuant to the settlement,
the following colloquy occurred:
      “[Laura and Tom’s counsel]: “I agree with counsel. I did not present
anything on behalf of Building Dreams [in] this case. [¶] My understanding, now
that everything has been signed and a good faith settlement has been approved, all
of it is being dismissed. [¶] . . . [¶] I can’t imagine that it’s not going to be
dismissed as part of the settlement.
      “The court: I don’t know what you’re talking about. You have that as part
of this settlement. Tell them to file a dismissal --
      “[Laura and Tom’s counsel]: Well, it’s also --

                                           39
       “The court: But they also failed to show up for trial, and if they don’t show
up for trial and present their case, then I’m going to dismiss the cross-complaint,
so –
       “[United’s counsel]: That’s all we’re asking for, your honor.
       “[The court]: All right. You’ve got it.” (Italics added.)
       After the jury returned its verdict, the trial court entered a judgment stating
that the FACC had been dismissed “based on Building Dreams[’s] failure to
appear . . . .” United filed a motion for a fee award under Civil Code section
1717, arguing that the FACC’s dismissal was not voluntary, and that “Building
Dreams’s decision not to appear at trial and prosecute its claims constitutes a
complete abandonment of its claims.” United sought a fee award totaling
$302,769,46.
       In opposing the fee request, the Mulitzes and Building Dreams asserted
that the settlement had assigned the FACC’s claims to the Mulitzes. Laura and
Tom contended the FACC’s dismissal was voluntary, arguing that the court had
dismissed the FACC as an element of the settlement. Building Dreams
maintained that United was not the prevailing party on L.A. Stucco’s contract
with Building Dreams, arguing that the jury’s special verdicts established that
L.A. Stucco had breached that contract.
       United’s replies to the oppositions contended that the FACC’s dismissal
was not voluntary because it followed the grant of United’s motion for a directed
verdict. In the alternative, United argued that if no directed verdict was granted,
“the only other plausible interpretation” was that the dismissal was pursuant to
section 581(d), which United viewed as an involuntary dismissal. Later, in
supplemental briefing invited by the trial court, United declined to apportion its
requested fees between the Mulitzes’ claims and the claims contained in the

                                          40
FACC.
         The trial court denied the fee request on several grounds. In ruling, the
court observed that nothing established that the intended assignment of the
FACC’s claims to Laura and Tom -- as described in the settlement -- had, in fact,
occurred. Regardless of the identity of the owner of the FACC’s claims,
however, the court determined that United was not the prevailing party on the
contract, concluding that Laura and Tom had prevailed on their breach of contract
claim based on L.A. Stucco’s contract with Building Dreams. In addition, relying
on section 581(e), the court determined that the FACC had been voluntarily
dismissed without prejudice, stating: “Under the unique circumstances of this
case . . . there is ‘good cause’ for this court to find . . . that the dismissal . . . was
not with prejudice . . . .” In so concluding, the court stated that it had never ruled
on United’s motion for a directed verdict. The court also found there was
insufficient evidence that United had incurred any fees in litigating the FACC’s
claims, noting United’s failure to assist the court in apportioning United’s fees
between the Mulitzes’ claims and the FACC’s claims.

               3. Analysis
         In our view, United has shown no error in the trial court’s ruling. As
explained below, to the extent United sought a fee award as the prevailing party
on the contractual claims in the FACC under Civil Code section 1717, the record
supports the court’s determination that the FACC was voluntarily dismissed at
trial. Furthermore, to the extent United sought a fee award as the prevailing party
on the noncontractual claims in the FACC, United has forfeited any contention of
error.
         Our inquiry into the determination regarding a voluntary dismissal has a

                                             41
narrow focus. On appeal, “[w]e do not review the trial court’s reasoning, but
rather its ruling.” (J.B. Aguerre, Inc. v. American Guarantee & Liability Ins. Co.
(1997) 59 Cal.App.4th 6, 15.) Thus, we may affirm the trial court’s decision “on
any basis presented by the record whether or not relied upon by the trial court.”
(Day v. Alta Bates Medical Center (2002) 98 Cal.App.4th 243, 252, fn. 1.)
Furthermore, it is unnecessary to examine the determination that the dismissal
was without prejudice, as that aspect of the ruling is irrelevant to the propriety of
the fee award.
      We conclude that the record establishes a voluntary dismissal under section
581(d). Under that provision, a voluntary dismissal “must be predicated upon a
clear, unequivocal and express intent to abandon an action. Such intent must be
demonstrated to the court by way of a motion to dismiss, stipulation of the parties
or some other form of express intent on the record.” (Kaufman & Broad Bldg.
Co. v. City & Suburban Mortg. Co. (1970) 10 Cal.App.3d 206, 213.)
      Although the record does not conclusively show that the assignment
described in the settlement occurred, it establishes that Building Dreams and the
Mulitzes each intended to abandon any claims they might assert through the
FACC. In the settlement filed with the court, Building Dreams expressly stated
that it “will assign” the FACC’s claims to Laura and Tom. That statement
expressed Building Dreams’s intent not to further litigate those claims, as “once
the transfer [of a claim] has been made, the assignor lacks standing to sue on the
claim.” (Johnson, supra, 111 Cal.App.4th at p. 1095.) Indeed, as the trial court
noted, Building Dreams did not appear at trial to litigate them. Furthermore, when
United directed the trial court’s attention to the FACC, the Mulitzes’ counsel
acknowledged that they had not attempted to litigate the claims, and agreed that it
should be dismissed. Because Building Dreams and the Mulitzes manifested an

                                          42
express intent to abandon the FACC on the record, the trial court correctly
concluded that there was a voluntary dismissal of the FACC.8 For that reason, the
trial court properly denied United’s fee request, insofar as it sought fees as the
prevailing party on the FACC’s contract-based claims under Civil Code section
1717.9
      United suggests that the trial court’s determination regarding the existence
of a voluntary dismissal constituted an improper modification of the judgment,
which stated that the FACC had been dismissed “based on Building Dreams[’s]
failure to appear.” We disagree. Generally, “[t]he same rules apply in
ascertaining the meaning of a court order or judgment as in ascertaining the
meaning of any other writing. [Citation.]” (Mendly v. County of Los Angeles
(1994) 23 Cal.App.4th 1193, 1205.) “If a court order or judgment admits of two
constructions, that one will be adopted which is consistent with the judgment
required by the facts and the law of the case.” (Graham v. Graham (1959) 174
Cal.App.2d 678, 686.) Thus, “‘whe[n] it appears that an ambiguity is the result of
oversight and inadvertence, “the judgment as entered should be liberally construed

8     We recognize that on appeal, Building Dreams has expressly refrained from
arguing that there was a voluntary dismissal of the FACC. However, because
Building Dreams noticed no appeal, we must disregard any potential challenge it
may raise to the trial court’s ruling. (In re Estate of Powell (2000) 83 Cal.App.4th
1434, 1439.)
9       D & J, supra, 176 Cal.App.3d 1191, upon which United relies, is
inapposite. There, the plaintiff sued the defendant solely for breach of contract.
(Id. at p. 1193.) Following the commencement of trial, the plaintiff requested that
the action be dismissed with prejudice. (Ibid.) After granting that request, the
trial court denied the defendant’s motion under Civil Code section 1717. (D & J,
supra, at p. 1193.) Affirming the ruling, the appellate court concluded that the
dismissal was voluntary. (Id. at pp. 1194-1196.) D & J thus supports no
contention of error regarding the ruling at issue here.

                                          43
with a view of giving effect to the manifest intent of the court.”’ [Citation]”
(Southern Pacific Pipe Lines, Inc. v. State Bd. of Equalization (1993) 14
Cal.App.4th 42, 57, quoting People v. Landon White Bail Bonds (1991) 234
Cal.App.3d 66, 77.)
      Viewed in light of the proceedings relating to the FACC’s dismissal, the
judgment must be understood to reflect the trial court’s awareness that Building
Dreams’s nonappearance at trial was due to the settlement. As explained above, in
dismissing the FACC, the trial court was fully aware of the settlement. For that
reason, the judgment comports with the existence of a section 581(d) dismissal.
Indeed, before the trial court, United argued that the terms of the judgment
reflected such a dismissal.
      We further conclude that United has forfeited any contention of error
regarding the denial of fees relating to the noncontractual claims in the FACC,
which fall outside the scope of Code of Civil Procedure, as United has offered no
argument regarding that aspect of the ruling. (Horowitz v. Noble (1978) 79
Cal.App.3d 120, 138-139.) Furthermore, we would reject that contention were
there no forfeiture, in view of the trial court’s conclusion that there was no
evidence that United incurred fees independently attributable to the claims in
FACC. In view of that determination, nothing would support a fee award relating
to the noncontractual claims in the FACC. In sum, United has established no error
in the denial of its fee request.

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                                 DISPOSITION
      The judgment and orders of the court are affirmed. Respondents are
awarded their costs on appeal.
      NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

                                           MANELLA, J.

We concur:

EPSTEIN, P. J.

WILLHITE, J.

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