Where a homeowner sued contractor for failing to honor an alleged oral contract to build a house, the contractor submitted Requests for Admissions (RAFs) asking Owner to admit there was no oral contract and to grant other admissions. Owner failed to make the admissions requested. The matter went to trial and the jury found in favor of the contractor – there was no oral contract. The contractor then filed a motion to recover all its attorneys’ fees on the basis that the plaintiffs had no reasonable ground to deny the RFAs because substantial evidence known to the plaintiffs indicated that Contractor never agreed to build their house for a fixed price. Court granted the Motion, and this was affirmed on appeal. Spahn v. Richards, 702 Cal. App.5th 208 (2021).
In this peculiar case, the homeowner was found to have been negotiating with the contractor to get a fixed price contract to build a house. The homeowner and the contractor signed a written contract to demolish an existing house on the lot, and the contractor fulfilled that contractual obligation sometime in the early part of the month of July. On the date the demolition contract was signed, the homeowner emailed its architect stating that “assuming … we select [Contractor] to the job, fingers crossed, the bank will still take 45 days to vest the loan and begin.” The architect a few days later emailed the contractor stating that the architect and homeowner were “waiting” for the contractor’s bid. On that same date, the homeowner advised the architect that it was “looking into other options to hire contractors we like. [B]udget on this now should be well under $500k.”
During this time period, the homeowners solicited bids from a number of contractors and obtained quotes ranging from $600,000 to $800,000. One contractor told the homeowners that their $500,000 budget was “ridiculous.”
Early August, the homeowner asked the Contractor to come to his office and during a meeting there presented the contractor with a written contract with the $500,000 budget. The contractor stated he was “flabbergasted” over the “fake budget” and refused to sign the contract. When he refused to build the house, the homeowner hired another firm to build the house at a cost exceeding $1 million.
At trial, the contractor asked the court to grant a directed verdict. The court concluded it was a “close call” but allowed the matter to go to the jury which found in favor of the contractor – that there was no contract to build the house. During pre-trial discovery the contractor submitted RFAs. Under an applicable state statute, if “the requesting party proves the truth of an RFA previously denied by the other party, the requesting party may move the court for an order requiring the other party pay the reasonable expense incurred in making that proof, including reasonable attorneys’ fees.”
In determining whether to grant such a motion the court must determine whether “good reason” exists for the party to deny a request to admit. It must hold a “a reasonably entertained good faith belief that the party would prevail on the issue at trial.” And that belief must be ground in the evidence; it cannot be based merely on ‘hope or a roll of the dice.’”
The owner and its architect were in ongoing communication at that time to get a fixed price quote from the contractor to build the new home. When the contractor ultimately refused to build the house for the $515,000 fixed-price they allege that he orally committed to, they hired another contractor who built the house for a far greater amount.
Based on the facts in this particular case, the appellate court concluded “the trial court could reasonably conclude the claimed oral contract lacked essential and sufficiently definite terms that would establish the existence of a meeting of the minds.” The court noted that although the plaintiffs asserted that the contractor entered into an oral contract by mid-June, the plaintiffs were in fact still getting quotes from a number of contractors a month later, and the homeowners had acknowledged in July that they “were not certain whether [Contractor] was a ‘committed contractor.’”
On this record, the appellate court concluded it was reasonable for the trial judge to conclude the plaintiffs didn’t have a reasonable belief they would be able to prove the existence of an oral contract.
About the author: Article written by J. Kent Holland, Jr., a construction lawyer located in Tysons Corner, Virginia, with a national practice (formerly with Wickwire Gavin, P.C. and now with ConstructionRisk Counsel, PLLC) representing design professionals, contractors and project owners. He is founder and president of a consulting firm, ConstructionRisk, LLC, providing consulting services to owners, design professionals, contractors and attorneys on construction projects. He is publisher of ConstructionRisk Report and may be reached at Kent@ConstructionRisk.com or by calling 703-623-1932. This article is published in ConstructionRisk Report, Vol. 24, No. 3 (March 2022).
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