Appellant sanitary district, as owner, sought review from a money judgment entered by the Superior Court of Stanislaus County (California) in favor of respondent contractor in his action for breach of contract.
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Overview
The subject matter of the contract was the construction of a sanitary sewer. The controversy revolved around charges by the contractor that the owner through its engineer arbitrarily and in bad faith withheld progress payments due. The court held that the evidence supported the trial court’s finding that the owner, acting through its engineer, unreasonably and arbitrarily neglected and refused to certify or approve the proper amount for payments as provided by the contract. The court further held that the record supported that the owner knowingly withheld from the contractor greater amounts than was provided for by the contract because at the time that the payments were due it was without adequate funds to pay the contractor the sums which were justly due him. This finding so supported was tantamount to a finding that the owner and its engineer withheld money in bad faith and for an ulterior purpose and that the certificates issued were knowingly false and fraudulent. The court concluded that such conduct constituted a material breach of the contract and justified the contractor in ceasing further performance and bringing action in quantum meruit for the money earned.
Outcome
The court affirmed the judgment of the trial court entered against the sanitary district.