Unpublished Disposition, 884 F.2d 1394 (9th Cir. 1989)

Annotate this Case
US Court of Appeals for the Ninth Circuit - 884 F.2d 1394 (9th Cir. 1989)

Harry E. EAKIN, Indiana Insurance Commissioner, asLiquidator of Allied Fidelity Insurance Company,an Indiana Corporation, Plaintiff-Appellantv.The CITY OF SOUTH GATE, a California Municipal corporation,and Don Greek and Associates, a CaliforniaPartnership, Defendants-Appellees.

No. 88-6270.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted May 4, 1989.Decided Sept. 1, 1989.

C.D. Cal.


Appeal from the United States District Court for the Central District of California; J. Spencer Letts, District Judge, Presiding.

Before FLETCHER, NELSON and WILLIAM A. NORRIS, Circuit Judges.


Plaintiff-appellant Eakin appeals from the district court's denial of his motion for summary judgment and from the district court's order granting defendant-appellees' motion for summary judgment. Appellant, successor-in-interest to a bond surety, contends that (1) the City of Southgate ("City"), the bond principal, made premature progress payments for defective work to the bond obligee, Faith Construction Company ("Faith"), and thus exonerated the surety; (2) the progress payments were in violation of California Public Contract Code Sec. 20103; and (3) DON GREEK AND ASSOCIATES ("DGA"), the City's agent, is liable to him for its negligence in supervising the project.

(1) Premature Payments

Appellant equates defective work with work that was never performed. We acknowledge the force of those cases that hold that progress payments for work never performed are premature. We find no California cases, however, that hold that progress payments for work are premature if the work was performed even though portions of the work were defective.

The contract clearly provides that progress payments would be made prior to the pressure testing. The contract allowed the contractor to request partial payments twice a month beginning in January--long before pressure testing would be possible. The contract indicates that the parties contemplated that progress payments would be made even if the pressure testing revealed defects in the systems. Appellants even concede that there were no express provisions in the contract that payments could only be made after testing. Therefore, because the contract contemplated that progress payments were to be made prior to and independent of testing, the district court correctly ruled that the testing was not a condition for prepayment, and thus the prepayments were not premature.

(2) Violation of Cal.Pub.Code Sec. 20103

This statute prohibits municipalities from making progress payments "in excess of 95% of the percentage of actual work completed plus a like percentage of the material delivered." Appellant argues that defective work cannot constitute "actual work completed," i.e. that "actual completed work" must be work that has been tested and is free of defects. Such an interpretation fails for two reasons. First, it is inconsistent with other provisions of the statute. The statute clearly allows progress payments and progress payments often must be made before public works can be completed and tested.

Second, appellant's interpretation varies from the definition of "actual work completed" given by the California courts. The California courts have not interpreted that phrase in the context of Public Contract Code Sec. 20103. They have, however, interpreted a similarly worded statute, Public Contract Code Sec. 10261 (previously Government Code Sec. 14402). The difference between the statutes is that Sec. 20103 applies to municipalities and Sec. 10261 applies to state agencies. In Harsco Corp. v. Department of Public Works, 21 Cal. App. 3d 272, 98 Cal. Rptr. 337 (1971), the California Court of Appeals interpreted the statute's language of "actual work completed" as "estimated value of labor and materials." Harsco, 21 Cal. App. 3d at 276-77. In this case, there is no doubt that the labor was expended and that the materials were used. By analogy, then, we are confident that California law does not define as premature the City's progress payments to Faith made on the basis of its agent's reasonable estimates of the work performed, even if that work was untested and/or defective.

(3) Negligence of DGA

Under California law, professionals may be liable to third parties who suffer damage proximately caused by the professional's negligence as an independent contractor, even though the professional lacks privity of contract with the injured party. Huber, Hunt & Nichols, Inc. v. Moore, 67 Cal. App. 302, 136 Cal. Rptr. 603, 617 (1977).

Nonetheless, this argument is of no avail to appellants in this case. A professional's negligence in failing to adhere to the standards of his profession may be established only by expert testimony. Huber, 67 Cal. App. at 314, 136 Cal. Rptr. at 625. Unless the matter is within common knowledge, expert evidence is conclusive. Huber, 136 Cal. Rptr. at 625. Here the appellees submitted expert evidence that the City and DGA had acted in accordance with custom and practice in making progress payments upon estimate. Appellants did not controvert this evidence. Therefore, appellant's argument for negligence fails.

The decision of the district court is AFFIRMED.


This disposition is not appropriate for publication and may not be cited to or by the courts of this circuit except as provided by Ninth Circuit Rule 21