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Standard of Review-Contract interpretation-Great Western Drywall v. Roel Construction

Great Western asserts the $26,287 backcharge imposes a new contract term to which it never agreed.  The subcontract includes an integration clause that required any amendments to be in writing and signed by the parties.  Paragraph 6j of the subcontract provides:  "Clean up shall be performed daily.  If the project superintendent determines adequate clean up is not being performed by this subcontractor, Roel . . . reserves the right to perform the clean up and issue a backcharge for a reasonable cost associated with such clean up."  (Italics added.)  Great Western submits that the term "this subcontractor" means "the question of clean-up must be considered on a subcontractor by subcontractor basis," and "[n]othing in the subcontract permits imposition of additional backcharges for work not directly attributable to the subcontractor itself."

            "Contract interpretation presents a question of law which this court determines independently.  [Citations.]  [¶]  A contract must be interpreted to give effect to the mutual, expressed intention of the parties.  Where the parties have reduced their agreement to writing, their mutual intention is to be determined, whenever possible, from the language of the writing alone."  (Ben-Zvi v. Edmar Co. (1995) 40 Cal.App.4th 468, 472-473.)  We agree with Great Western's assessment.  Under the plain language of paragraph 6j of the subcontract, Roel may assess backcharges for cleanup based only on the particular subcontractor's fault.  Accordingly, Roel's award must be reduced from $326,300.75 to $300,013.75.

            Roel asserts that section 15.4e of the subcontract supports its proration of cleanup charges among subcontractors.  It provides:  "Cleanup - At the end of every workday, Subcontractor shall be responsible to leave its work area clean and free of debris.  Within 24 hours notice by ROEL of an area that requires cleanup (for which Subcontractor is responsible in ROEL's reasonable opinion), Subcontractor shall cause the area to be cleaned.  If Subcontractor fails to perform such cleanup then ROEL may cause the area to be cleaned and back-charge Subcontractor for any costs associated therewith."  (Boldface omitted.)  This section, however, does not authorize backcharges for cleanup that are unconnected to subcontractor fault.  To the contrary, the section supports Great Western's position.

            Additionally, Roel claims proration was reasonable because "[o]n an $80 million jobsite with nearly 100 subcontractors, where a vast amount of overlap occurs in the work being performed by the subcontractors at any given time, it would be near impossible to accurately document each subcontractor's exact cleanup responsibilities."  Roel states that the problem was a "foreseen imbroglio."  Roel does not cite the record in support of this claim, but assuming its truth, it merely shows that Roel anticipated the problem and could have included a proration clause in the subcontract in place of section 6j, which would have given subcontractors the opportunity to accept or reject proration as opposed to it being unilaterally imposed on them.

            Further, Roel contends that even if its proration constituted an oral modification of the subcontract, Great Western waived its argument the integration clause prohibited the modification.  Roel cites Civil Code section 1698, subdivision (b), which provides that a "contract in writing may be modified by an oral agreement to the extent that the oral agreement is executed by the parties."  Under that provision, "an executed oral agreement may alter an agreement in writing, even though, as here, the original contract provides that all changes must be approved in writing."  (Miller v. Brown (1955) 136 Cal.App.2d 763, 775.)

            Roel relies on the minutes of a July 23, 2002 jobsite meeting, which show a Roel superintendent informed subcontractors that Roel had hired a person for trash cleanup and "[s]ubs will be charged on the basis of the number of personnel on the job."  Roel submits that since the minutes show that a Great Western superintendent, Bob Wasko, attended the meeting, but they do not show he made any objection, the company acquiesced in the proration of cleanup costs.

            " ' "[W]aiver is the intentional relinquishment of a known right after knowledge of the facts."  [Citations.]  The burden . . . is on the party claiming a waiver of a right to prove it by clear and convincing evidence that does not leave the matter to speculation, and "doubtful" cases will be decided against a waiver" [citation].'  [Citations.]  The waiver may be either express, based on the words of the waiving party, or implied, based on conduct indicating an intent to relinquish the right."  (Waller v. Truck Ins. Exchange, Inc. (1995) 11 Cal.4th 1, 31.)

            The evidence belies a waiver theory.  Stephanie Schulkamp, Great Western's chief operations officer at the relevant time, testified that Wasko had no authority to enter into agreements on behalf of Great Western.  Wasko also testified he had no authority to consent to a backcharge on behalf of Great Western, and he never agreed to a prorated backcharge for cleanup.  He also testified Great Western "had enough manpower to clean up anything."  Further, Roel never presented any evidence that Wasko had any authority to bind Great Western.  Also, there is no evidence Roel modified its behavior based on anything Wasko may have said, or on his mere silence.  At the July 23, 2002 jobsite meeting, Roel did not seek the input of subcontractors on the cleanup issue.  Rather, the evidence shows Roel informed subcontractors it unilaterally decided that "everybody's going to be backcharged based on the percentage of employees working on-site."  Accordingly, Roel did not meet its burden of showing an intentional relinquishment of a known right.

Great Western Drywall v. Roel Construction 8/13/08 CA4/1-D049191

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