Wiley v. Garcia

Filed 9/15/06 Wiley v. Garcia CA4/1

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 977(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 977(b). This opinion has not been certified for publication or ordered published for purposes of rule 977.

COURT OF APPEAL, FOURTH APPELLATE DISTRICT

DIVISION ONE

STATE OF CALIFORNIA

APPEALS from orders of the Superior Court of San Diego County, Michael N. Anello, Judge. Affirmed.

Harvester Wiley (Wiley) entered a contract to perform rehabilitation work on a home owned by Santos Garcia and Elizabeth Szubart (together Owners) pursuant to a Department of Housing and Urban Development (HUD) program administered by City of Oceanside (City) as the "local entity." Under the contract, Wiley was entitled to progress payments after City approved the work for which payment was sought. Wiley applied for payment for the first segment of work he performed, but neither Owners nor City approved the work and Owners declined to pay him. Wiley then ceased further work and filed this action. The matter was tried to a jury, which found in favor of Wiley.

Owners moved for judgment notwithstanding the verdict (JNOV) or alternatively for a new trial. The court denied the JNOV motion but granted the motion for a new trial. Wiley appeals from the new trial order, and Owners cross-appeal from the JNOV order.

I

THE LAWSUIT

A. Undisputed Facts

Owners own a home in Oceanside, California. Owners applied to City seeking to obtain low interest financing for a residential rehabilitation. Under the program, administered by City's Housing Department, HUD funds are used to fund low- or no-interest loans to homeowners to allow them to rehabilitate their homes for specific types of improvements. Under the program, when the loan is approved City holds the funds in escrow and does not disburse payment until inspectors from City's Housing Department inspect and approve the work for which the payment is sought. Mr. Grana, a Senior Housing Specialist with City and a former general contractor, was responsible for Owners' file. Grana evaluated the condition of Owners' residence and helped draft a "Scope of Work Write Up" (describing the improvements eligible under the HUD program), which Owners could then use to obtain bids. Owners sought bids based on the Scope of Work Write Up and Wiley was the low bidder.

Wiley and Owners entered a written contract that provided Wiley would be paid "pursuant to the conditions set forth in section 1.06." Section 1.06, subdivision (a), provided:

"Upon application for payment submitted by the Contractor, and approved by [City] inspectors, and based on job progress, Owner[s] shall make, or cause to be made, progress payments to the Contractor in accordance with the schedule set forth in Exhibit "A" . . . ."

In July 2003 Wiley applied for payment for the first segment of work performed. The first segment, which called for Wiley to obtain a permit to perform the work and to complete the termite work, the roof, the fence, and front yard landscaping, entitled Wiley to a progress payment of approximately $7300. However, Owners declined to pay Wiley because neither Owners nor City approved the first segment work. Wiley terminated his work and filed this action.

B. The Lawsuit and Verdict

Wiley's lawsuit alleged all work to be done and conditions to be performed had been satisfied and Owners had breached the agreement by not paying him.[1] At trial, Owners asserted Wiley was not entitled to payment because a condition to payment under the contract was approval of the work by City, and because the quality of the work performed was substandard, Wiley did not obtain City's approval. Wiley contended the work was properly performed and the approval condition was excused because Owners and City unreasonably withheld approval. The jury returned a verdict in Wiley's favor.

C. The Posttrial Motions and Rulings

Owners moved for a JNOV. Owners argued the evidence, viewed most favorably to Wiley, could not permit a trier of fact to find City approved Wiley's work, and therefore the condition to payment could not be satisfied and Owners were entitled to judgment as a matter of law. Owners alternatively moved for a new trial, arguing the court, after weighing the evidence, should conclude City properly refused to approve the work and therefore the approval-by-City condition was not satisfied.

Wiley opposed both motions by arguing that, when approval is a condition to payment, the condition is excused when approval is unreasonably withheld. Wiley argued that JNOV would be improper because the evidence submitted by Wiley, viewed most favorably to him, could permit a trier of fact to conclude City unreasonably withheld approval of his work. Wiley argued the new trial motion should be denied because Wiley's evidence was credited by the jury and, based on such evidence, the court could not find the jury "clearly" should have reached a different conclusion.

The court granted the motion for a new trial. The court found the explanation for City's refusal to approve the work--that Wiley's work was incomplete and shoddy--was "forceful and persuasive testimony" and that "the clear import of the photograph[ic evidence]" showed City's conclusion was justified. Accordingly, the court found (after evaluating and weighing the evidence) the jury should have reached a different verdict.

However, the court denied the motion for JNOV. The court recognized that, unlike the new trial motion, it could not assess the credibility of City's inspectors or weigh their evidence against the evidence submitted by Wiley and his expert to determine whether City unreasonably withheld approval of Wiley's work. The court found that, because there was some evidence (if credited) to support a jury finding that Owners and City acted unreasonably in withholding their approval, thereby excusing the condition precedent to payment, JNOV against Wiley's claim (on the basis of noncompliance with the approval condition) would be improper.

III

THE NEW TRIAL MOTION

A. Legal Standards

Wiley appeals from the order granting a new trial to Owners. He asserts it was an abuse of discretion to grant the order because there is evidence to support the jury's verdict.

When ruling on a motion for new trial, the trial court does not merely assess whether there is some evidence to support the verdict. Instead, the trial court evaluates the evidence as a whole and weighs the evidence sitting "as an independent trier of fact." (Neal v. Farmers Ins. Exchange (1978) 21 Cal.3d 910, 933.) The court may disbelieve witnesses and draw inferences contrary to those that might otherwise support the verdict. (Mercer v. Perez (1968) 68 Cal.2d 104, 112.) If the trial court, after weighing the evidence, is convinced the jury clearly should have reached a different conclusion, it may grant a new trial. (Russell v. Nelson (1969) 1 Cal.App.3d 919, 922.)

On appeal, our review of the trial court's order granting a new trial is "highly deferential" (Lane v. Hughes Aircraft Co. (2000) 22 Cal.4th 405, 411) and we must sustain the order on appeal "unless the opposing party demonstrates that no reasonable finder of fact could have found for the movant on [the trial court's] theory." (Jones v. Citrus Motors Ontario, Inc. (1973) 8 Cal.3d 706, 710.) When we review the trial court's order granting a new trial, "the presumption of correctness normally accorded on appeal to the jury's verdict is replaced by a presumption in favor of the [new trial] order." (Neal v. Farmers Ins. Exchange, supra, 21 Cal.3d at p. 932.)

The Lane court, articulating the reasons for this deferential standard of review, explained:

"The reason for this deference 'is that the trial court, in ruling on [a new trial] motion, sits . . . as an independent trier of fact.' (Neal, supra, 21 Cal.3d at p. 933.) Therefore, the trial court's factual determinations, reflected in its decision to grant the new trial, are entitled to the same deference that an appellate court would ordinarily accord a jury's factual determinations. [¶] The trial court sits much closer to the evidence than an appellate court. Even the most comprehensive study of a trial court record cannot replace the immediacy of being present at the trial, watching and hearing as the evidence unfolds. The trial court, therefore, is in the best position to assess the reliability of a jury's verdict and, to this end, the Legislature has granted trial courts broad discretion to order new trials. The only relevant limitation on this discretion is that the trial court must state its reasons for granting the new trial, and there must be substantial evidence in the record to support those reasons." (Lane v. Hughes Aircraft Company, supra, 22 Cal.4th at p. 412.)

B. Evaluation

The parties agree the condition precedent to payment--approval of Wiley's work by City--was not satisfied, and Wiley does not assert he was entitled to payment under the contract if City reasonably disapproved the quality of the work. Instead, the issue was whether the condition was excused because City unreasonably withheld approval of Wiley's work. (Coplew v. Durand (1908) 153 Cal. 278, 281 [approval as condition to payment is excused when approval unreasonably withheld]; cf. Patrick J. Ruane, Inc. v. Parker (1960) 185 Cal.App.2d 488, 504 [approval as condition to payment is excused when defendant's actions wrongfully prevented approval].)

There is substantial evidence to support the trial court's conclusion that City had bona fide reasons for not approving Wiley's work and therefore did not unreasonably withhold approval. The trial court, stating its reasons for granting the new trial, found City officials did not approve the work because it was incomplete and shoddy, and supported its finding by citing both the "forceful and persuasive testimony" of City officials (Mr. Grana and his supervisor, Ms. Pierce) as well as the photographic evidence of Wiley's workmanship. The evidence, viewed most favorably in support of the trial court's ruling (Neal v. Farmers Ins. Exchange, supra, 21 Cal.3d at p. 932), permits the conclusion City officials had bona fide reasons for refusing to approve Wiley's work. For example, Pierce and Grana both noted the shingles installed by Wiley were a "significantly different" color from the shingles of the adjoining half of the duplex, contrary to the contractual requirement, and Wiley admitted the roof shingles he installed did not match.[2] Pierce and Grana also noted the fence was substandard in materials, installation and finishing.[3] Pierce and Grana also noted Wiley's efforts to repair termite damage were substandard because portions of the roof fascia were nailed into rotting wood and other parts had been "nailed into thin air." Finally, the front yard landscaping was apparently unfinished. Mr. Grana, who had nearly 20 years experience in the construction industry before entering government service, testified Wiley's work was "about the worst I've ever seen."

On this record, the trial court's ruling was not an abuse of discretion. Although Wiley asserts the order was an abuse of discretion because his testimony (that Grana approved the work) and his expert's conclusory opinion (that the bulk of the work was within industry standards) supported the jury's verdict, the test is not whether a jury could have found in Wiley's favor. Instead, the issue is whether a "reasonable finder of fact could have found for the movant on [the trial court's] theory." (Jones v. Citrus Motors Ontario, Inc., supra, 8 Cal.3d at p. 710.) A reasonable trier of fact could have credited City's testimony (and rejected Wiley's contrary evidence) that the work was shoddy and incomplete, and therefore substantial evidence supports the trial court's grant of a new trial on the theory that the jury clearly should have reached a different conclusion on whether the approval condition was excused.

IV

THE JNOV MOTION

A. Legal Standards

Owners appeal the order denying the motion for JNOV. They assert actual approval by City is an essential element of Wiley's claim, and because City never issued an approval, judgment was required in Owners' favor as a matter of law.[4]

In contrast to the trial court's role when ruling on a motion for new trial, when it acts as a thirteenth juror and may reweigh the evidence and evaluate credibility issues, the trial court's power on a JNOV motion is more constrained. A "trial court may grant judgment notwithstanding the verdict only if the verdict is not supported by substantial evidence. The court may not weigh evidence, draw inferences contrary to the verdict, or assess the credibility of witnesses. The court must deny the motion if there is any substantial evidence to support the verdict." (Begnal v. Canfield & Associates, Inc. (2000) 78 Cal.App.4th 66, 72.) The trial court must review all the evidence most favorably to the party against whom the motion is brought, resolving all conflicts and drawing all inferences in that party's favor and deferring to the implicit credibility determinations of the trier of fact. (Ibid.) If the evidence, viewed most favorably to the party in whose favor the jury found, supports the jury's verdict, the court must deny the motion. (Clemmer v. Hartford Insurance Co. (1978) 22 Cal.3d 865, 877-878.)

B. Evaluation

The parties agree that City officials did not approve the work. Owners appear to assert this fact bars Wiley from any recovery as a matter of law (whether on the contract or by quantum meruit) even if there was evidence to support the conclusion City's approval was unreasonably withheld. However, when a contract requires the work be approved by a third party, the approving party must exercise its judgment in good faith and may not reject work performed in a manner that would be satisfactory to a reasonable person. (Cf. 10 Miller & Starr, California Real Estate (3d Ed. 2001), Construction Contracts § 27:64.) When the approval is withheld arbitrarily or as a result of bad faith or gross mistake, there is no longer a need for the approval and the condition to payment is deemed excused. (See, e.g., Wyman v. Hooker (1905) 2 Cal.App. 36, 40-41.)

Viewed most favorably to Wiley, there was substantial evidence to support a jury's implied finding that Wiley's work was performed in a manner that would be satisfactory to a reasonable person and City unreasonably withheld approval. For example, the fact the shingles installed by Wiley were a different color from the shingles of the adjoining half of the duplex would not have precluded approval of payment if, as Wiley testified, Garcia in fact approved the color of the shingles (as was Garcia's contractual right) before they were installed.[5] Second, Wiley testified the front yard landscaping was incomplete at Garcia's request,[6] and Owners therefore waived satisfaction of that condition. On the third basis for City's refusal to approve payment, the inadequately performed termite repairs, the jury could have credited Wiley's testimony that Grana admitted the contracted-for termite repairs had been performed and the portions of the fascia as to which Grana noted at trial had been inadequately repaired were not contractually required repairs. Finally, the jury could have credited the testimony of Wiley's expert that the fence was, with minor and remediable exceptions, built according to industry standards.

Because there was some evidence from which a jury could conclude Wiley performed the work in a manner that would be satisfactory to a reasonable person, and therefore City withheld approval without proper cause, the trial court correctly refused to grant Owners' motion for JNOV.

DISPOSITION

The orders are affirmed. The parties shall bear their own costs on appeal.

McDONALD, J.

WE CONCUR:

NARES, Acting P. J.

McINTYRE, J.

Publication Courtesy of California attorney directory.

Analysis and review provided by Oceanside Property line attorney.

[1] Wiley also pleaded a claim for assault but that claim is not a subject of this appeal.

[2] There was a dispute whether Owners approved the color of the installed shingles, as permitted by the contract, before Wiley installed the shingles. Wiley claimed Garcia approved the shingles before they were installed. Garcia testified he did not approve the color, and did not even see the shingles until after they had been installed. The court on a new trial motion was entitled to credit Garcia's testimony and disregard Wiley's testimony on this matter.

[3] The fence was uneven and had gaps along the bottom. Many of the boards were split, the painting was uneven in both application and color, in parts it was unpainted, and the nailing "looked like you'd used a nail gun, stood away, closed your eyes . . . and shot nails randomly."

[4] Owners also appear to assert Wiley's claim necessarily fails because his work deviated from the contract and there were no written change orders as contractually mandated. This issue was not raised below and we do not further consider it here.

[5] Grana noted the contract required a 25-year shingle and, if a color match was unavailable in a 25-year shingle and Garcia had approved installation of a qualifying shingle in a different color, Grana would most likely have accepted Garcia's color choice and approved the roof.

[6] Wiley testified that Garcia asked Wiley to delay completing the front yard landscaping because Garcia wished to use the front yard as a staging area for materials he was planning to use to relandscape the back yard.