Case Name: Mike Payne & Associates, Inc. v. The Namm Group d/b/a Artistic Aggregate Services, et al.

Case No.: 17CV315190

Motion of Plaintiff/Cross-Defendant Mike Payne & Associates, Inc. for an Order, Pursuant to Code of Civil Procedure §437c, Seeking Summary Judgment or Summary Adjudication Dismissing with Prejudice Defendant/Cross-Complainant The Namm Group d/b/a Artistic Aggregate Services’ First Amended Cross-Complaint and the Six Cross-Claims Asserted Therein

Factual and Procedural Background

Plaintiff Mike Payne & Associates, Inc. (“MPA”) specializes in terrazzo and stone installation, and is an industry leader in ceramic and mosaic tile related work and materials, including polished concrete floors, cementitious overlays, corrective grinding and epoxy flooring for commercial, retail, governmental, and residential facilities. (First Amended Complaint (“FAC”), ¶1.)

In connection with the construction of defendant Apple Inc.’s (“Apple”) new 175 acre signature campus and headquarters known as Apple Park (“Project”), Apple entered into a written prime contract with defendant Rudolph & Sletten, Inc. (“Rudolph”) in or around June 10, 2015 to act as general or prime contractor for the construction of all or a portion of the Project. (FAC, ¶11.)

Rudolph entered into a written subcontract with defendant The Namm Group d/b/a Artistic Aggregate Services (“Artistic”) on or about June 22, 2015 pursuant to which Artistic agreed, among other things, to furnish and install all necessary work for the main staircases terrazzo for the Project. (FAC, ¶12.)

In 2015 and through 2016, defendant Harvey Namm (“Namm”) and Shelly Katz (“Katz”), Artistic’s then Executive Manager, on behalf of Artistic contacted and solicited MPA’s assistance to act as subcontractor for Artistic, including installation of precast terrazzo staircases, precast tread and riser combinations, base board, and stringers, and installation of the poured in place landings, for the Project. (FAC, ¶13.) Namm and Katz made various representations to James Michael Payne, COO of MPA. (Id.)

In reliance on those representations, MPA agreed to act as subcontractor to Artistic and Namm for the installation of the precast terrazzo staircases and certain related work for the Project pursuant to a written subcontract dated April 28, 2016 (“Subcontract”). (FAC, ¶14 and Exh. A.)

Artistic and Namm did not perform in accordance with their written and verbal promises, representations, and agreements. (FAC, ¶15.) The Project was delayed multiple times by the actions and omissions of defendants Apple, Rudolph, Artistic, and Namm. (Id.) To address the delays, MPA requested Artistic and Namm amend the Subcontract to increase the price from $2,390,000 to $3,526,900, but Artistic and Namm never responded to MPA’s requests as required by the Subcontract. (Id.) Instead, Artistic and Namm tried to cover up their own delays and blamed MPA for their and Rudolph’s errors, omissions, and lack of performance. (Id.)

Artistic and Namm failed to furnish proper precast parts to MPA for installation as required by the Subcontract causing delays on site and additional work not contemplated under the Subcontract. (FAC, ¶¶16 and 20.) Artistic and Namm improperly modified approved shop drawings which substantially increased the cost and impacted MPA’s work without furnishing MPA change orders for additional compensation. (FAC, ¶17.) Artistic and Namm failed to properly coordinate the work and made unwarranted requests that MPA add additional staff at the Project. (FAC, ¶18.) Artistic and Namm improperly requested MPA perform coordination and communication functions beyond the scope of the Subcontract. (FAC, ¶19.)

Despite challenges caused by Artistic and Namm, MPA faithfully performed its work and obligations at the Project in accordance with the Subcontract. (FAC, ¶21.) MPA remained ready, willing, and able to complete its obligations under the Subcontract but by letter dated November 28, 2016, Artistic and Namm purported to terminate the Subcontract. (Id.) Artistic and Namm blamed MPA for delays and defective work rather than accept responsibility for their own failures. (Id.) Artistic and Namm have failed to pay MPA for work, labor, and materials furnished to the Project or for delays and extra work performed. (Id.)

On August 18, 2017, MPA filed a complaint against Artistic, Namm, Rudolph, and Apple asserting various causes of action.

On October 12, 2017, MPA filed a FAC adding defendant Capitol Indemnity Corporation (“Capitol”) and now asserting the following causes of action:

(1) Breach of Subcontract
(2) Recovery Against the Mechanic’s Lien Release Bonds
(3) Breach of California Prompt Payment Statutes
(4) Fraud
(5) Negligent Misrepresentation
(6) Quantum Meruit
(7) Account Stated
(8) Breach of the Covenant of Good Faith and Fair Dealing
(9) Violation of California’s Unfair Business Practices Act, Business and Professions Code Section 17200 et seq.
(10) Declaratory Relief

On November 28, 2017, defendants Artistic and Namm filed a demurrer to the eighth cause of action of MPA’s FAC. On February 13, 2018, the court issued an order overruling the demurrer.

On March 1, 2018, defendants Artistic, Namm, Rudolph, and Capitol filed a joint answer to MPA’s FAC. Also on that date, Artistic filed a cross-complaint against MPA.

On March 9, 2018, Artistic filed a first amended cross-complaint (“FAXC”) against MPA asserting causes of action for:

(1) Breach of Contract
(2) Breach of Implied Covenant of Good Faith and Fair Dealing
(3) Express Indemnity
(4) Breach of Implied Warranty
(5) Breach of Express Warranty
(6) Declaratory Relief

On April 13, 2018, MPA filed an answer to Artistic’s FAXC.

On July 17, 2019, MPA filed the motion now before the court, a motion for summary judgment/ adjudication of Artistic’s FAXC.

Discussion

I. Cross-defendant MPA’s motion for summary judgment/adjudication is DENIED.

A. Business and Professions Code section 7031.

Cross-defendant MPA moves for summary judgment/adjudication of Artistic’s cross-claims by asserting an affirmative defense, namely Business and Professions Code section 7031 which “states that one may not sue in a California court to recover ‘compensation’ for ‘any act or contract’ that requires a California contractor’s license, unless one ‘alleges and proves’ he was duly licensed at all times during the performance.” (Hydrotech Systems, Ltd. v. Oasis Waterpark (1991) 52 Cal.3d 988, 991 – 992 (Hydrotech); see also California Mechanics Liens’ and Related Construction Remedies (CEB 2006) §2.14, pp. 47 – 49 and §2.23, pp. 54 – 56.) “An unlicensed contractor may not recover compensation.” (10 Miller & Starr, California Real Estate (3rd ed. 2001) Mechanics’ Liens, §28:18, p. 67; see also Acret, et al., California Construction Contracts and Disputes (3rd ed. 2006) §1.79, p. 64 citing Bus. & Prof. Code §7031, subd. (a).)

Business and Professions Code section 7031 , subdivision (a) states, in relevant part:

no person engaged in the business or acting in the capacity of a contractor, may bring or maintain any action, or recover in law or equity in any action, in any court of this state for the collection of compensation for the performance of any act or contract where a license is required by this chapter without alleging that he or she was a duly licensed contractor at all times during the performance of that act or contract regardless of the merits of the cause of action brought by the person, except that this prohibition shall not apply to contractors who are each individually licensed under this chapter but who fail to comply with Section 7029.

“California’s strict contractor licensing law reflects a strong public policy in favor of protecting the public against unscrupulous and/or incompetent contracting work. As the California Supreme Court recently reaffirmed, ‘The purpose of the licensing law is to protect the public from incompetence and dishonesty in those who provide building and construction services. … The licensing requirements provide minimal assurance that all persons offering such services in California have the requisite skill and character, understand applicable local laws and codes, and know the rudiments of administering a contracting business.’” (Vallejo Development Company v. Beck Development Company, Inc. (1994) 24 Cal.App.4th 929, 938 citing Hydrotech, supra, 52 Cal.3d at p. 995.) “Section 7031 represents a legislative determination that the importance of deterring unlicensed persons from engaging in the contracting business outweighs any harshness between the parties, and that such deterrence can best be realized by denying violators the right to maintain any action for compensation in the courts of this state.” (MW Erectors, Inc. v. Niederhauser Ornamental & Metal Works Co. (2005) 36 Cal.4th 412, 423 (MW Erectors).)

MPA goes on to submit evidence that Artistic lacked a valid and proper contractor’s license during the entire course of the Project. The Project is a private work of improvement involving a state-of-the art signature 175-acre worldwide business headquarters of Apple at the Property, which will house more than 12,000 employees. In or around June 10, 2015, Apple, as owner, entered into a written prime contract with defendant [Rudolph] to act as prime contractor for the construction of all or a portion of the Project. Despite not being licensed as a contractor in California, [Artistic] bid for and entered into a written subcontract dated June 22, 2015[“RS Subcontract”] to furnish and install necessary work and materials for the four story main building staircases terrazzo for the Project. The RS Subcontract’s scope of work required [Artistic] to install precast terrazzo staircases, including precast tread and riser combinations, base board, stringers, and installation of poured in place landings. After bidding for the Project, entering into the RS Subcontract and performing work at the Project, [Artistic] purported to obtain a contractor’s license on August 7, 2015 in California as a C-61 limited specialty/D-6 “concreate related” contractor. Artistic entered into a written subcontract dated April 28, 2016 with MPA [“MPA Subcontract”] for the supply of labor for the installation of precast terrazzo staircases for the Project.

Artistic’s opposition raises a preliminary question as to whether section 7031 even applies under the circumstances involved here. Artistic emphasizes that the prohibition of section 7031 applies only to an action “for the collection of compensation for the performance of any act or contract where a license is required by this chapter.” Artistic contends its FAXC does not seek “compensation,” but rather its FAXC seeks “damages.” Apple hired Rudolph as its general contractor who, in turn, hired Artistic. Thus, if Artistic were to seek “compensation,” Artistic would have to seek compensation from Rudolph but its FAXC does not assert any claims against Rudolph. Artistic contracted with MPA and agreed to compensate MPA for terrazzo work. MPA’s action seeks compensation from Artistic, but not the other way around.

Artistic cites several decisions which purportedly support its position. In Davis Co. v. Superior Court (1969) 1 Cal.App.3d 156, 158 (Davis), “Essex Chemical Corporation sued Davis Company and others to recover the value of material furnished to and used by Davis in the performance of a subcontract in connection with the construction of San Diego stadium. Davis cross-complained for breach of warranty claiming the material furnished was not suitable for the purpose intended, as a result of which it sustained a loss in the sum of $23,405.02 because the defective material had to be removed and other material installed in its place. Essex moved for a summary judgment on the cross-complaint on the ground Davis was not a licensed contractor and thus was seeking recovery on an ‘illegal and void contract.’ The [trial] court granted the motion.” Davis Company sought writ review of the trial court ruling and the appellate court granted the writ explaining:

In the case before the trial court Davis, by its cross-complaint, is not seeking compensation for the performance of its illegal contract with the prime contractor. That contract has been performed by all parties. When Davis removed the defective material supplied him by Essex and replaced it with adequate material, its action comported with that expected of a licensed contractor. The cause of action alleged in the cross-complaint arose out of the transaction between Davis as a purchaser and Essex as a seller of material; is premised upon the warranty by Essex the material furnished by it to Davis was fit for the purpose intended; and does not involve a transaction contemplated by the licensing requirements imposed upon contractors. The contract between Davis and the prime contractor is material to the case in the cross-complaint only as proof of circumstances under which Essex furnished and defendant received defective materials. (Cf. Grant v. Weatherholt, supra, 123 Cal.App.2d 34, 43.) The situation is not within the scope of the purpose of the licensing requirement.

(Davis, supra, 1 Cal.App.3d at p. 159.)

Artistic apparently cites Davis for the proposition that section 7031 applies only to contracts between a contractor and its principal and because its FAXC does not assert any claims against Rudolph, then section 7031 does not apply. Artistic ignores its own pleading and the undisputed facts in this case which involve multiple principal-contractor relationships. By its own allegation, Apple is the owner of the Project and hired Rudolph as the general contractor. “Artistic entered into a $6,937,581.00 Subcontract with … [Rudolph] … pursuant to which Artistic contracted to complete all the terrazzo stair work in the Project’s four-story main building.” (FAXC, ¶2.) “Artistic and [MPA] entered into a $2,390,000 Subcontract Agreement … pursuant to which [MPA] agreed to supply the material, equipment, and competent skilled labor to complete certain construction work related to the installation of precast terrazzo staircase at the Project.” (FAXC, ¶3.) There are multiple levels of principal and contractor relationships in this case. At one level, Apple is a principal with Rudolph as the general contractor. At another level, Rudolph is a (principal) prime contractor with Artistic as its subcontractor. At yet another level, Artistic is a principal sub-contractor with MPA as its sub-subcontractor. Section 7031 did not apply in Davis because it did not involve such a relationship. On that basis, Davis is clearly distinguishable. Although Artistic alleges that its subcontract with MPA included the provision of “material[s],” it is unlike Davis because the subcontract also contemplates “competent skilled labor to complete … installation of precast terrazzo staircases.” (FAXC, ¶3 and Exh. 1—“MPA agrees to provide labor services and equipment to perform the installation of the precast terrazzo staircases on the AC2 project….”)

Artistic’s reliance on McCarroll v. Los Angeles County District Council of Carpenters (1957) 49 Cal.2d 45 (McCarroll) is entirely misplaced as the plaintiffs brought an action based on a union’s violation of a collective bargaining agreement. “Plaintiffs are engaged in the contracting business in the Los Angeles area. They brought the present action against defendant labor unions and their officers for damages and injunctive relief against strikes allegedly called by defendants.” (McCarroll, supra, 49 Cal.2d at p. 51.)

There is no merit in defendants’ contention that because plaintiffs did not have the contractor’s license required by sections 7025-7031 of the Business and Professions Code, they are barred from maintaining the present action by section 7031 or the common-law rule that illegal contracts will not be enforced. Section 7031 bars actions ‘for the collection of compensation’ for contracting work, not actions to enforce collective bargaining agreements. Plaintiffs do not seek to enforce an illegal contract; their labor contract is not prohibited by the licensing statute and its validity is unrelated to the question whether plaintiffs can legally enter into construction contracts.

(Id. at p. 69.)

Artistic asserts section 7031 does not apply because Artistic “seeks damages caused by [MPA’s] failure to supply Artistic with sufficient numbers of skilled and competent workman [sic].” McCarroll does not support Artistic’s position as a collective bargaining agreement is not alleged or at issue in this case.

Finally, Artistic relies upon Gaines v. Eastern Pacific (1982) 136 Cal.App.3d 679 (Gaines) and Ranchwood Communities Limited Partnership v. Jim Beat Construction Co. (1996) 49 Cal.App.4th 1397 (Ranchwood). The court looked closely at these two decisions. In Gaines, a subcontractor sued a contractor for breach of contract and the contractor “cross-complained for damages it allegedly incurred because the subcontractor did not perform properly, and the contractor was compelled to hire others to redo much of the work.” (Gaines, supra, 136 Cal.App.3d at pp. 680 – 681.)

In its cross-complaint respondent alleged that it was appellant who breached the contract, by refusing to perform the work properly, and that after said breach respondent was required to discharge bills and charges for labor, materials, mechanic’s liens, and other demands made by material men and other subcontractors, which were in fact the obligations of appellant, but which obligations appellant had failed or refused to meet. Further, respondent incurred additional expenses for completion of the project after appellant was ordered to stop work.

(Id. at pp. 681–682.)

The contractor obtained a judgment on its cross-complaint. On appeal, the subcontractor argued the contractor was barred from recovery by section 7031 because the contractor did not have a license. The appellate court upheld the trial court judgment. The Gaines court rejected the subcontractor’s argument finding the contractor had substantially complied with the licensing requirements and also by stating:

Finally, it does not appear that the recovery on the cross-complaint was a recovery of “compensation for the performance” of acts called for in the contract. (Bus. & Prof. Code, § 7031.) Under remarkably similar circumstances, the United States District Court for the Eastern District of California so found in American Sheet Metal v. Em-Kay Engineering (E.D.Cal. 1979) 478 F.Supp. 809. There, subcontractors sued a contractor alleging breach of contract. The contractor counterclaimed for defective performance and sought damages it had incurred as a result of plaintiff’s breach. The court, applying California law, determined that section 7031 did not prohibit recovery by the counterclaimant because the cause of action was not within the scope or purpose of the code section; the contractor was not suing to recover compensation under the contract. The purpose of the statute is to protect the public, not to provide a shield against the satisfaction of obligations.

Therefore, the trial court properly concluded that the cross-complainant (respondent) was not barred from recovery by the provisions of Business and Professions Code section 7031.

(Id. at p. 683.)

Artistic acknowledges Gaines has been superseded by amendments to section 7031, but only with regard to its holding regarding substantial compliance. Otherwise, Gaines would appear to support Artistic’s position that section 7031 does not bar Artistic’s FAXC which alleges, essentially, that MPA breached by “completing defective and non-conforming work, and inexcusably delaying completion and/or correction of its work which jeopardized the Project’s overall construction schedule.” (FAXC, ¶4.) “Artistic seeks redress for the significant damages [MPA] caused Artistic as a result of the need to accelerate its performance and hire dozens of last-minute, qualified replacement laborers to remove and re-perform [MPA’s] non-conforming and rejected work.” (FAXC, ¶5.)

The Ranchwood decision, however, seems to be at odds with Gaines. In Ranchwood, homeowners associations of two different development projects brought suit against the developers/general contractors for construction defects asserting various claims including strict liability, breach of express and implied warranties, and negligence. The developers/general contractors responded with answers and cross-complaints against numerous subcontractors seeking equitable indemnity, implied contractual, express, and total indemnity, contribution, and recovery on theories of negligence, breach of contract, and warranties, strict liability against certain component suppliers, and declaratory relief regarding contractual duties. The subcontractors brought motions for summary judgment of the cross-complaints arguing that the developers/general contractors were not licensed general contractors and the entire cross-complaints were barred by section 7031. The trial court granted summary judgment dismissing the cross-complaints.

The Ranchwood court struggled in assessing the propriety of summary judgment and the trial court’s application of section 7031 because the facts did not give rise to a garden-variety situation in which a contractor seeks compensation for the work that it performed.

It is therefore necessary to inquire into the definition of “compensation” under the licensing law to see if indemnity and contribution sums fit within it. Under section 7031, these developer/contractors may not sue to recover compensation for their work from the property owners (here, themselves) or from the buyers of the property (plaintiff-homeowners). These cross-complaints, however, seek recovery from persons to whom these developer/contractors paid compensation for work, i.e., the subcontractors. The developer/contractors are now subject to being required by strict liability to pay damages to the plaintiff-homeowners, and are seeking to spread that loss among the subcontractors via indemnity. Obviously, this is not the normal “compensation” context, but its converse, which makes applying the licensing law bar particularly difficult here.

(Ranchwood, supra, 49 Cal.App.4th at p. 1410; italics original.)

The Ranchwood court recognized Gaines as one example “that the prohibition on actions for compensation by unlicensed contractors is subject to numerous theoretical exemptions.” (Id. at p. 1413.) In determining whether the developers/general contractors’ cross-claims for indemnity against the subcontractors were subject to section 7031, the Ranchwood court drew a distinction between equitable claims of indemnity and contractual based claims of indemnity and also drew a distinction between the cross-complainants’ roles as developer and general contractor. The Ranchwood court concluded:

the contract-based causes of action of the cross-complaint are inseparable from the construction subcontracts and recovery on those subcontracts in the form of express indemnity cannot be sought by the unlicensed general contractors. Express indemnity payments are very similar to breach of contract damages in this context, and the contracts here (construction subcontracts) are illegal due to the lack of a developer/general contractor license, so they may not be enforced and no compensation can be sought under them. (Lewis & Queen v. N. M. Ball Sons, supra, 48 Cal.2d at pp. 147-148, 152-154.) The causes of action for express indemnity, breach of contract, breach of warranties, and declaratory relief on contractual indemnity rights are accordingly barred by the section 7031 licensing requirements.

(Id. at p. 1418.)

However, with regard to the equitable based indemnity cross-claims, the Ranchwood court allowed those cross-claims to proceed.

Under all the circumstances, the primary relief sought here is not merely compensation for the work performed, but rather the spreading of the cost of a plaintiff’s damages incurred because of defective work by others. We do not believe a developer who is being held strictly liable for construction defects, and who also acted as an unlicensed general contractor, should be foreclosed from seeking relief from allegedly negligent subcontractors on theories of equitable indemnity, implied contractual and total indemnity, and contribution, in the form of an action brought in the capacity of a developer. Any total ban on subcontractor liability for equitable indemnity, arising from a too strict interpretation of the licensing law, would be a windfall and would not be within the protective purpose of the licensing statute. (Hydrotech, supra, 52 Cal.3d at p. 995.) Section 7031 does not clearly foreclose the cross-complaint in these respects. (Lewis & Queen v. N. M. Ball Sons, supra, 48 Cal.2d at pp. 150-151.)

(Id. at pp. 1420–1421.)

If this court were to apply Ranchwood, then Artistic’s FAXC would be subject to the bar of section 7031 as all of the cross-claims are contractually based upon the subcontract and recovery cannot be sought by an unlicensed contractor. However, this court finds the concurring/dissenting opinion in Ranchwood to be more correct in its application when the concurring/dissenting justice wrote, “appellants are not seeking compensation for unlicensed work. Rather, they are strictly liable to the plaintiffs [homeowners associations] for claimed damages based on the costs of repairing the alleged deficiencies or the diminution in value of the property, and are seeking to transfer these damages to other parties [subcontractors] who are allegedly at fault.” (Id. at p. 1423.)

Indeed, the Sixth District Court of Appeal shared this same opinion in UDC-Universal Development, L.P. v. CH2M Hill (2010) 181 Cal.App.4th 10, 26, fn. 5, where the court wrote:

In our view, none of the indemnity causes of action was barred by Business and Professions Code section 7031, as in them UDC was not seeking “collection of compensation” for contractor services. In that respect the cross-action calls for treatment similar to the equitable indemnity claims deemed viable in Ranchwood Communities Limited Partnership v. Jim Beat Construction Co. (1996) 49 Cal.App.4th 1397, 57 Cal.Rptr.2d 386. There the contractual indemnity claim was held to be precluded because it arose out of an illegal contract, but the claim of equitable indemnity was allowed to proceed. We depart from the Ranchwood majority’s suggestion that a claim based on contractual indemnity necessarily implies illegality if brought by an unlicensed contractor. In that respect we agree with the concurring and dissenting opinion in that case. (See Ranchwood, supra, 49 Cal.App.4th at pp. 1423–1424, 57 Cal.Rptr.2d 386, conc. and dis. opn. of McIntyre, J.)

Here, like in Ranchwood, Artistic is not seeking to recover compensation for its work from Apple or from Rudolph with whom it subcontracted, but rather seeks recovery from a subcontractor to whom Artistic paid compensation for work. Just as the Ranchwood court recognized, this is not the normal “compensation” context. It is this court’s opinion, similar to Gaines, that Artistic’s FAXC is not an action to recover “compensation” under the subcontract with MPA and, therefore, not subject to section 7031.

B. Terms of Subcontract.

Alternatively, MPA contends the cross-claims asserted by Artistic are all barred by the express terms of the Subcontract between Artistic and MPA.

1. Exhibit E, Section 12.4 of the Subcontract.

Exhibit E to the Subcontract between Artistic and MPA consists of purported standard terms and conditions from the previously terminated general contract, DPR Skanska’s contract for the Project. Section 12.4 of Exhibit E is entitled, “Termination for Convenience.” Artistic terminated the Subcontract with MPA pursuant to this section 12.4. According to MPA, this section 12.4 limits any remedy Artistic may have against MPA to termination and provides compensation only to the terminated party (MPA).

The court does not agree with MPA’s interpretation of section 12.4. In relevant part, section 12.4 states, “Contractor may upon written notice to Subcontractor, without cause and without prejudice to any other right or remedy, elect to terminate the remaining Work for Contractor’s convenience. … Contractor shall pay Subcontractor a termination payment as Subcontractor’s sole and exclusive remedy in connection with Contractor’s convenience termination.” Contractor is understood to refer to Artistic while Subcontractor is understood to refer to MPA. By its express terms, Contractor (Artistic) is allowed to terminate “without prejudice to any other right or remedy” while Subcontractor’s [MPA’s] sole and exclusive remedy is the termination payment. MPA’s interpretation contradicts the plain language of section 12.4.

2. Exhibit E, Section 19.6 of the Subcontract.

MPA next cites to section 19.6 of Exhibit E of the Subcontract as a further provision which precludes Artistic from asserting any cross-claims. Section 19.6 is entitled, “Damages Limitation,” and states, “In no event shall either party be liable to the other party, whether based on delay, contract, tort, negligence, warranty, indemnity, strict liability, error or omission or otherwise, for any consequential, special, incidental, indirect, exemplary, multiple or punitive damages or damages arising from or in connection with the loss of use or loss of revenue or profit, actual or anticipated or otherwise, and both parties hereby releases the other party from any such liability. … Notwithstanding the above, the specified waivers of consequential damages shall not apply to (1) Subcontractor’s liability for liquidated damages under Section 11.2; (2) any damages covered by a policy of insurance provided hereunder, but only to the extent of such insurance coverage (including limits) specified in Exhibit G, or (3) Subcontractor’s indemnification obligations under this Agreement with respect to claims brought by any third party not affiliated with or owned by the Contractor and their parent organizations.”

MPA invites this court to interpret the language of section 19.6 to broadly preclude Artistic from asserting any cross-claims asserted in the FAXC because the cross-claims are based on contract, tort, indemnity and delay seeking monetary and equitable relief.

“In order for a release of liability to be held enforceable against a plaintiff, it ‘must be clear, unambiguous and explicit in expressing the intent of the parties’ [Citation.].” (Sweat v. Big Time Auto Racing, Inc. (2004) 117 Cal.App.4th 1301, 1304–1305.) “A … provision will be considered ambiguous when it is capable of two or more constructions, both of which are reasonable.” (TRB Investments, Inc. v. Fireman’s Fund Ins. Co. (2006) 40 Cal.4th 19, 27.)

Here, the court has reviewed Exhibit E and finds section 19.6 to be ambiguous in light of other provisions found in Exhibit E. If section 19.6 is read to relieve each party from liability to the other, there would be no need to include sections such as 11.1 entitled, “Liability for Delays,” which states, “Subcontractor shall be liable to Contractor for any and all loss or damage Contractor sustains as a result of Subcontractor’s delay in the safe performance of the Work or delay to the Project attributable to Subcontractor, including any amounts due from Contractor to Owner under the Owner Contract. Permitting the Subcontractor to continue to perform its Work after the agreed time for performance has expired shall not be construed as or constitute a waiver by Contractor of any claims for loss or damage it may have against Subcontractor as a result of such delay.” The broad language of section 19.6 which limits liability for delay is in direct conflict with section 11.1 which states that the Subcontractor shall be liable for delay.

As a further example, section 17.5 states, “Subcontractor shall be liable for all Damages incurred by Contractor and its other contractors as a result of defects or deficiencies in the Work.” If, as section 19.6, there is “no event” in which one party will be liable to the other, then sections 11.1 and 17.5 should not state an event of liability. In light of such provisions, section 19.6 is, on its face, ambiguous and cannot serve as a basis for summary judgment or summary adjudication of Artistic’s FAXC. In light of the court’s finding, the court need not address MPA’s remaining argument(s) that the exceptions to section 12.4 do not apply.

Accordingly, cross-defendant MPA’s motion for summary judgment and/or summary adjudication of the cross-claims asserted in cross-complainant Artistic’s FAXC is DENIED.