Filed 12/20/19 Avalos v. Andrade CA5

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIFTH APPELLATE DISTRICT

FRANCISCO JAVIER AVALOS,

Plaintiff and Respondent,

v.

SERGIO ANDRADE,

Defendant and Appellant.

F077780

(Super. Ct. No. BCV15101427)

OPINION

APPEAL from a judgment of the Superior Court of Kern County. Stephen D. Schuett, Judge.

Thomas W. Casa for Defendant and Appellant.

Law Offices of William H Slocumb and William H. Slocumb for Plaintiff and Respondent.

-ooOoo-

Appellant Sergio Andrade appeals from a jury verdict finding him liable to respondent Francisco Javier Avalos following a construction dispute related to work done to reconstruct Andrade’s house. In this appeal, Andrade attacks the jury’s determination a contract existed by which Avalos would reconstruct Andrade’s house for $255,000 on grounds the contract was illegal and the jury’s determination was not supported by substantial evidence. Andrade also contests the jury’s damages award on the grounds Avalos failed to mitigate his damages and the award was not supported by substantial evidence. For the reasons set forth below, we affirm. Having reached this conclusion, we vacate the stay previously issued in this case.

FACTUAL AND PROCEDURAL BACKGROUND

The facts underlying this case were heavily contested at trial. At a general level, however, the case arose following a fire that destroyed Andrade’s house around March 6, 2014. The house was insured, and Andrade received a large insurance payment based on the reconstruction costs. Shortly after the fire, Andrade received a written reconstruction bid from a company called Crestline Builders, Inc. for approximately $250,000. Andrade, however, felt he could reconstruct the house for less money and in a manner that allowed him to pocket the difference. It appears he began searching for someone who could reconstruct the house for substantially less money without informing the mortgage company of this fact. His search led him to two individuals, Jesus Herrera and Avalos, the owner of Double AA Construction. It is at this early point, however, where the parties’ views on this case diverge.

To understand the differences, a brief timeline related to the main reconstruction project (the project) is helpful. Around May or June 2014, after the insurance money was received by the mortgage company, a contractor’s lien waiver and written $255,000 fee estimate were submitted to the mortgage company showing the reconstruction costs for Andrade’s house would be $255,000 and the reconstruction would be managed by “Fransico J Avalos” via “Dobble AA Const.” company. Shortly thereafter, the mortgage company released the first of three progress payments to Andrade and Avalos jointly. Thus, on June 9, 2014, Andrade received a check for approximately $82,000. He provided this check to Herrera and it was deposited into Avalos’s account. From this amount, Avalos received approximately $55,000 and Andrade received $27,000 in cash. On October 14, 2014, a second progress payment of approximately $82,000 was provided to Andrade and Avalos. This payment was again deposited into Avalos’s account. From that amount, three checks of $10,000 were written to Andrade, although only one was eventually cashed. Avalos kept the remainder of the funds. The third progress payment of approximately $90,000 arrived on March 4, 2015. Andrade kept the majority of this payment, providing Avalos with approximately $22,000 of it.

The parties each testified how these facts fit their understanding of the agreement.

Andrade’s Testimony

Although his testimony was a bit unclear at times, Andrade testified the amount of money retained by Avalos was consistent with an agreement the two had reached to complete the project for $155,000 rather than the $255,000 fee estimate submitted to the mortgage company. Andrade explained he first talked with Herrera about the project and believed Herrera and Avalos were partners. Andrade had provided Herrera with the $255,000 contract for Avalos to sign so it could be sent to the mortgage company. Herrera took the document and returned with it signed, although Andrade did not see Avalos sign the document and did not believe he had met Avalos at that time. Around the same time, Herrera also provided Andrade with the signed version of the contractor’s lien waiver. At this time, Andrade considered Herrera to be running the project.

At some point, Andrade and Herrera came to an agreement the project would be completed for $155,000. Andrade provided a “contract” he had hand written in June 2014, allegedly detailing this agreement. As with the contractor’s lien waiver and original contract, Andrade provided the written agreement to Herrera who then took it and returned with it purportedly signed by Avalos. Andrade admitted he never saw Avalos sign the $155,000 agreement.

The plan was to pay Herrera $155,000 in three roughly equal payments coinciding with the progress payments from the mortgage company. When the first progress payment arrived, Andrade gave the check to Herrera and Herrera returned $27,000 in cash to Andrade. However, it appears there were problems with the pace of the project at this time, resulting in Andrade receiving notice his house was not being completed according to the schedule expected by the mortgage company. As a result, Andrade sought out Avalos, who he knew was the owner of the construction permit, and discussed with him the need for Avalos to complete the project on time instead of Herrera.

Avalos agreed to complete the project. According to Andrade, he both explained and showed the $155,000 agreement to Avalos, who verbally agreed to complete the project for that price. This allegedly occurred sometime in late June 2014. When the second progress payment arrived in October 2014, Andrade believed it critical to complete the project by the end of the year. He testified he asked Avalos what it would take to complete the project in that time, as opposed to the normal pace, and that Avalos told him it would take approximately $70,000. Andrade explained that he returned, and thus did not cash, two of the $10,000 checks received after that second progress payment so that Avalos would receive the money needed to complete the project.

After this point, Andrade contends that Avalos confided in him that he was having family and financial troubles and, as a result, Andrade agreed to take over completion of the project. In line with this agreement, Andrade retained the majority of the third progress payment and utilized it to complete the reconstruction—allegedly paying several subcontractors that Avalos had failed to pay. Andrade stated that when adding the money paid directly to Avalos through the progress payments with the money paid to complete the house and pay off the subcontractors, he directly or indirectly paid Avalos not only all he was owed under the $155,000 agreement and any relevant change order agreements, but an additional $19,000. Andrade noted that he never received a bill for outstanding money owed to Avalos and, given the problems that arose, had to borrow his son’s credit card to complete the project. Although some aspects of the house were improved, Andrade testified the monies discussed above were spent completing Avalos’s responsibilities and not those additional projects.

Avalos’s Testimony

Avalos testified to a different understanding of the situation. According to Avalos, he did not become involved in the project at all until roughly June or July of 2014. He denied signing the contractor’s lien waiver, the $255,000 fee estimate, the $155,000 agreement, or an early permit request that were completed before that date. In support of this claim, Avalos pointed out that none of these documents contained his actual signature and that they regularly misspelled either his company’s name or his actual name, both being things he knows how to properly spell.

According to Avalos, he was contacted by Andrade to complete the reconstruction on his house. He and Andrade reached an oral agreement to complete the project for $255,000. While Avalos had not signed the $255,000 fee estimate, he testified that he had seen that document while working on the project and considered that to represent the scope of work the parties had agreed upon. Avalos testified that he never discussed an agreement for $155,000 with Andrade and, in fact, did not know the alleged agreement existed until it was shown to him during the pending litigation.

Avalos explained that his first work on the project was obtaining the necessary blueprints and permit for completing the work, and that he did no work on the project until that was completed around July 2014. Upon beginning work on the project, Avalos learned that work on the project had already been started. Although potentially inconsistent, Avalos explained both that he did not know why he willingly provided Andrade with portions of the payments needed to complete the reconstruction, and that Andrade had needed money to pay for work that had already been done before Avalos started and to pay subcontractors that had worked on the property. Avalos testified that Andrade had told him they would settle up when the project was complete, but when that point came, Andrade stated he owed Avalos nothing.

Avalos stated he had gone into debt to complete the project according to the terms he understood to apply. To calculate his losses, Avalos met with his bookkeeper and, reviewing his expenses over several jobs he was doing at the time, identified the costs spent on Andrade’s project. Avalos conceded he did not label all the relevant expenses as they were incurred. Avalos’s bookkeeper, Jesus Murillo, testified that the net loss experienced on the project based on subtracting Avalos’s expenses (as identified to him by Avalos and his recordkeeping) from the amount he kept of the progress payments was $80,794. He further testified that he expected Avalos’s profit to be 20 percent, or $51,000. No objection was raised to the admissibility of this testimony. Avalos testified he had wanted to make a 25 percent profit on the completed project, or roughly $64,000.

The Jury’s Verdict

After both parties’ cases were presented, including additional testimony from Herrera, the Crestline Builders, Inc. contractor that submitted the first bid, and the county building inspector, the case was submitted to the jury. The parties agreed upon the verdict form, which was approved without objection. Following the form of a special verdict, the verdict form asked the jury a series of factual questions relating to the three causes of action before them and damages. No questions were included relating to the specifics of the contract at issue or the basis for the calculation of damages. The court instructed the jury on the law generally, including the general requirements of mutual agreement, acceptance, and substantial compliance. No objections to these instructions have been raised.

Following deliberations, the jury reached the following verdict based on the questions presented to them:

“One, Francisco Avalos and Sergio Andrade enter into a contract? Jury answers yes.

“Question 2, did Francisco Avalos do all or substantially all of the things—the significant things that the contract required him to do? Jury answered yes.

“Question 4, did all the conditions that were required for Sergio Andrade’s performance occur? Jury’s answer to that question is no.[ ]

“6, did Sergio Andrade fail to do something that the contract required him to do? Answer is yes.

“Did Sergio Andrade do something that the contract prohibited him from doing? Answer is yes.

“Answer to—Question Number 7, was Francisco Avalos harmed by Sergio Andrade’s breach of contract? The answer is yes.

“Question 8, what are Francisco Avalos’s damages? Past economic loss, $80,794; lost profits, $58,650. Total is $139,444.

“The answer to—Question 9, did Sergio Andrade make a false representation of a fact to Francisco Avalos? The answer is yes.

“10, did Sergio Andrade know that the representation was false or did he make the representation recklessly without regard for its truth? The answer is yes.

“11, did Sergio Andrade intend that Francisco Avalos relied on the representation? The answer is yes.

“12, did Francisco Avalos reasonably rely on the representation? Answer is yes.

“13, was Francisco Avalos’s reliance on Sergio Andrade[’s] representation a substantial factor in assuming harm to Francisco Avalos? The answer is yes.

“14, what are Francisco Avalos’s damages? Lost profits, $58,650; other past economic loss, $80,794. Total economic damages, $139,444.

“15, did Sergio Andrade, by clear and convincing evidence, act with malice, oppression or fraud? The answer is yes.

“16, did Sergio Andrade make a promise to Francisco Avalos? The answer is yes.

“17, did Sergio Andrade intend to perform a promise when he made it? The answer is no.

“18, did Sergio Andrade intend for Francisco Avalos to rely on his promise? Answer is yes.

“19, did Francisco Avalos reasonably rely on his promise? The answer is yes.

“20, did Sergio Andrade perform the promised act? The answer is no.

“21, was Francisco Avalos’s reliance on Sergio Andrade[’s] promise a substantial factor in causing harm to Francisco Avalos? The answer is yes.

“22, what are Francisco Avalos’s damages. Lost profits, $58,650. Other past [economic] loss 80,794 dollars. Total $139,444.

“23, did Sergio Andrade, by clear and convincing evidence, act with malice, oppression or fraud. The answer is yes.

“24, did Sergio Andrade receive money that was intended to be used for the benefit of Francisco Avalos? The answer is yes.

“25, did Sergio Andrade use the money for the benefit of Francisco Avalos? The answer is no.

“26, did Sergio Andrade fail to give the money to Francisco Avalos? The answer is yes.

“27, what is the amount of money Sergio Andrade received from Francisco Avalos that he did not pay to Francisco Avalos. The answer is $139,434.”

This timely appeal followed. While the case was pending, Andrade requested and, on September 30, 2019, this court granted a stay of proceedings to enforce the underlying judgment pending final determination of the appeal or further order of this court.

DISCUSSION

Andrade raises two legal and two factual attacks in this appeal, one of each relating to the formation of the alleged $255,000 contract and damages. With respect to the formation of the contract, Andrade argues the contract was illegal and thus unenforceable. Factually, Andrade argues there was not substantial evidence showing the formation of a $255,000 contract. On damages, Andrade argues Avalos failed to mitigate his damages and thus cannot prove his case. Factually, he again argues there is insufficient evidence to support the jury’s damages determination.

The Contract Is Not Illegal As A Matter of Law

Andrade argues, should this court accept a contract exists for $255,000, that contract was an illegal agreement and illegal agreements are unenforceable. Andrade admits he did not raise this issue before the trial court but contends this does not matter because the legality of a contract is not a waivable issue. Andrade contends the $255,000 contract is illegal because, as shown by the evidence, it was an agreement to divert funds to the homeowner and such conduct is both criminalized under Penal Code section 484b and contrary to public policy as stated in Business and Professions Code section 7108. We do not agree the evidence compels, as a matter of law, a finding the contract was illegal and thus reject Andrade’s arguments. As such, we do not resolve whether he waived this issue.

“As a general rule, if a contract can be performed legally, a court will presume that the parties intended a lawful mode of performance.” (Redke v. Silvertrust (1971) 6 Cal.3d 94, 102.) Whether a contract is illegal will thus often turn on the intent of the parties when entering into the agreement. Such “questions of ‘intent’ and ‘purpose’ are ordinarily questions of fact to be determined by the trial court.” (Id. at p. 103.) Further, as explained in Redke, “ ‘ “A bargain may be illegal by reason of the wrongful purpose of one or both of the parties making it. This is true even though the performances bargained for are not in themselves illegal and even though in the absence of the illegal purpose the bargain would be valid and enforceable. A party who makes such a bargain in furtherance of his wrongful purpose can not [sic] enforce it, even though it is enforceable against him by the other party if the latter is innocent of such a purpose.” ’ (Italics in original.)” (Id. at p. 104.)

At trial, Andrade made no argument the $255,000 contract was illegal and, upon our review of the record, did not spend a significant amount of time marshalling evidence for this view. On appeal, he argues there were clear instances where funds were diverted and contends this means we must conclude the contract was illegal. But the fact illegal actions occurred under the contract does not necessarily mean the contract was illegal from the start. As noted above, Avalos testified the contract was simply to reconstruct Andrade’s house for $255,000 and provided testimony that suggests he released funds to Andrade in part to pay for work that had occurred on the house prior to the point he took over. Even if his testimony is properly viewed as not understanding why he released the funds, Avalos also testified he expected to be fully compensated for his work upon completion. Accordingly, absent a contrary factual finding of illegal intent by the jury—which was not requested via the verdict form—the $255,000 contract is, at its core, a basic and legal agreement to reconstruct Andrade’s house. We thus cannot conclude as a matter of law that it was an unenforceable illegal agreement. Like Redke, “having failed to prove such an intent at trial, defendants cannot prevail.” (Redke v. Silvertrust, supra, 6 Cal.3d at p. 102.)

Substantial Evidence Supports the Jury’s Verdict

Recounting the evidence presented at trial, Andrade argues the court should find there was no evidence of mutual intent to form a $255,000 contract and that the evidence can only be understood as showing the parties acted in conformity with the existence of a $155,000 agreement. Andrade contends this shows there was no substantial evidence supporting the jury’s verdict. We do not agree.

“ ‘In reviewing the sufficiency of evidence on appeal, we resolve all conflicts in favor of the prevailing party and we indulge all legitimate and reasonable inferences to uphold the verdict if possible. “It is an elementary, but often overlooked principle of law, that when a verdict is attacked as being unsupported, the power of the appellate court begins and ends with a determination as to whether there is any substantial evidence, contradicted or uncontradicted, which will support the conclusion reached by the jury.…” [Citation.]’ [Citation.] ‘ “[W]e have no power to judge of the effect or value of the evidence, to weigh the evidence, to consider the credibility of the witnesses, or to resolve conflicts in the evidence or in the reasonable inferences that may be drawn therefrom.” ’ ” (Behr v. Redmond (2011) 193 Cal.App.4th 517, 527 (Behr).)

In this case, the jury’s findings were an agreement was made between Andrade and Avalos, Avalos met the conditions needed under that agreement, Andrade did not, and Avalos suffered damages consistent with his claim that the contract was for $255,000. There was substantial evidence from both parties that supported the jury’s verdict. First, it is uncontested the testimony of a single witness is enough to constitute substantial evidence. (See Consolidated Irrigation Dist. v. City of Selma (2012) 204 Cal.App.4th 187, 201 [“The testimony of a single witness, even if that witness is a party to the case, may constitute substantial evidence. [Citation.] Furthermore, a trial court’s credibility findings cannot be reversed on appeal unless that testimony is incredible on its face or inherently improbable.”].) In this case, Avalos testified the parties were operating under an oral agreement to complete the reconstruction for $255,000, with a scope of work consistent with that figure. Avalos alleged he completed that work and understood based on Andrade’s actions that any debts would be settled upon completion. While Andrade testified to a different understanding, the jury was free to weigh the credibility of both witnesses and determine one version was, in fact, the correct understanding between the parties. On appeal, we will not reweigh a jury’s properly founded credibility determination. (Behr, supra, 193 Cal.App.4th at p. 527.)

We note, however, Andrade’s testimony concerning the contract and agreement at issue was not as unilaterally favorable to his position as his argument suggests. Andrade admitted he provided Herrera with a $255,000 contract for Avalos’s signature but never saw the contract signed. While he contends that contract was a sham, he provides no evidence Avalos understood the same and could not verify at all whether Avalos had reviewed that contract. Further, with respect to the $155,000 agreement, Andrade admits to reaching that agreement with Herrera, not Avalos, but contends he later told Avalos of the agreement and obtained Avalos’s oral agreement to proceed under that understanding. Contrasted with Avalos’s testimony of a singular understanding the contract was for $255,000, the jury was faced with a contractor acting somewhat consistently with a $255,000 contract and a homeowner possessing several potentially falsified contracts, one in his own handwriting, arguing everyone knew the agreement was for much less while at the same time admitting he was paying for upgrades to his house with the allegedly excess funds. Nothing in Andrade’s testimony or the conduct of the parties in transferring funds between themselves demonstrates an exclusive agreement in conformity with Andrade’s testimony. As such, the jury’s credibility determination was critical to this dispute and Andrade has presented no argument demonstrating this court should interfere with that determination.

Andrade Has Waived Any Mitigation Arguments

With respect to the damages aspect of this case, Andrade argues if a contract for $255,000 existed, Avalos was on notice of Andrade’s intent to breach that contract at the point Andrade asked for and obtained portions of the progress payments. Andrade contends Avalos failed to mitigate his damages at this time and should have engaged in an anticipatory breach to avoid further losses.

Whether Avalos was aware Andrade’s conduct constituted a breach of the $255,000 contract, warranting an anticipatory breach or other mitigation measures is an issue of fact. (See Gold Min. & Water Co. v. Swinerton (1943) 23 Cal.2d 19, 28.) However, neither mitigation nor any other defensive theory similar to this line of argument has been shown to be included in Andrade’s general denial answer, argued at trial, or submitted to the jury in the verdict form. As Avalos notes, the failure to plead and prove this affirmative defense waives it. (See Mass v. Board of Education (1964) 61 Cal.2d 612, 616 [general rule is that burden of proving mitigation is on defendant]; Candari v. Los Angeles Unified School Dist. (2011) 193 Cal.App.4th 402, 409 [failure to mitigate is an affirmative defense under well-established employment law].) In addition, given the special verdict nature of the verdict form, the failure to obtain a jury determination as to Avalos’s knowledge of the alleged breach by Andrade alone precludes Andrade’s argument on appeal. (See Behr, supra, 193 Cal.App.4th at p. 530 [it was incumbent upon defendant to include determinations relevant to defense in special verdict form, failure to do so waived argument].)

Even if we were to reach this issue however, we would still reject the claim. Andrade’s position relies on accepting Avalos knew of a $155,000 agreement and knew payments consistent with that agreement meant a breach of the $255,000 contract. However, Avalos testified he knew nothing of a $155,000 agreement until the lawsuit was filed and provided both a partial explanation for providing Andrade with portions of the funds and testimony that Andrade promised to settle up at the end of the project, both of which could be relied upon by the jury to determine that no obligation to mitigate arose based on an anticipatory breach theory.

Substantial Evidence Supports the Damages Findings

Finally, Andrade argues substantial evidence does not support the jury’s damages determination because the only evidence submitted consisted of check stubs that did not identify they were from work on Andrade’s house. Andrade argues the evidence only shows Avalos identifying damages after the lawsuit was filed, in that way failing to maintain adequate records as required by law during the project, and in a manner that leaves such actions open to abuse through contractors improperly inflating their damages figures as a result of shoddy record keeping. Again, we do not agree.

We note at the outset Avalos’s and Murillo’s testimony regarding damages was admitted without substantive objection from Andrade’s counsel. Both testified to substantially similar methods for determining damages—a process of reviewing regular bookkeeping records in light of Avalos’s experience with the project. This included Murillo’s testimony that all expenses are recorded in his general course of business as Avalos’s bookkeeper, but he does not keep receipts for each expense. When reviewing those records, he relied on Avalos’s memory regarding which recorded expenses were related to Andrade’s house. Both Avalos and Murillo were subject to cross-examination on their recollection regarding expenses for the project and, as a result, Murillo changed his calculations midtrial.

As discussed above, the testimony of a single witness can constitute substantial evidence regarding a fact. (Consolidated Irrigation Dist. v. City of Selma, supra, 204 Cal.App.4th at p. 201.) While Andrade may disagree with how damages were calculated, he provides no citation to any law precluding a witness from relying on their memory to identify which expenses relate to the action at hand. Further, the jury was presented with multiple ways to interpret the data before it, including that Avalos and Murillo could not accurately determine which expenses related to Andrade’s house, yet the jury accepted Avalos’s and Murillo’s testimony in total and awarded damages consistent with their calculations. As with Andrade’s attack on the substantive determination a contract existed, Andrade’s argument asks us to reweigh the evidence to counter a specific jury finding, an act which we cannot do on appeal. (Behr, supra, 193 Cal.App.4th at p. 527.)

DISPOSITION

The judgment is affirmed. The September 30, 2019 stay previously imposed pending the resolution of the merits of this appeal is lifted. Costs are awarded to respondent.

HILL, P.J.

WE CONCUR:

DETJEN, J.

SMITH, J.