Filed 1/21/15 Takata Corp. v. Cal. Dept. of Corrections etc. CA1/3
                      NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
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              IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                                       FIRST APPELLATE DISTRICT

                                                DIVISION THREE



JON K. TAKATA CORPORATION,
         Plaintiff and Respondent,
                                                                     A136794
v.
CALIFORNIA DEPARTMENT OF                                             (Marin County
CORRECTIONS AND                                                      Super. Ct. No. 1002716)
REHABILITATION,
         Defendant and Appellant.


         Defendant California Department of Corrections and Rehabilitation (DCR)
appeals from a judgment entered after the trial court granted in part and denied in part
DCR’s motion for summary judgment/adjudication and granted in part, denied in part a
motion for summary judgment/adjudication brought by plaintiff Jon K. Takata
Corporation, doing business as Restoration Management Company (RMC), and found in
favor of RMC after a court trial. DCR contends the judgment must be reversed because
RMC’s claims were barred for failure to file a government claim in the manner
prescribed by the Government Claims Act (Gov. Code, § 910 et seq.). We affirm the
judgment.




                                                             1
                      FACTUAL AND PROCEDURAL BACKGROUND1
       In the fall of 2007, RMC learned that San Quentin State Prison (San Quentin) was
soliciting bids for “emergency hazardous material clean-up services” to be performed at
the prison. RMC and at least one other contractor submitted a bid and RMC was
awarded the contract. RMC began performing the work in November 2007. On or about
February 28, 2008, DCR and RMC entered into a contract in which they set forth in
writing their agreement that RMC would clean up lead-containing dust that had
accumulated in San Quentin’s four cell block buildings. The contract was a State of
California form entitled “STANDARD AGREEMENT” and included a section for
“Contract Disputes” that set forth a dispute resolution process for any disputes that arose
relating to the contract. The contract provided that the term of the agreement was
November 7, 2007 through June 30, 2008, and that the amount to be paid was $4.329
million. RMC successfully completed the work and DCR paid RMC in full by
remittance dated June 30, 2008.
       After RMC completed the work, one of its workers who had worked on the project
filed a complaint with the Department of Industrial Relations (DIR) alleging that RMC
should have paid—but did not pay—him prevailing wages for work removing old paint
from walls contaminated with lead. DIR investigated the matter and determined the
workers performed work that fit within the job classification of Lead Removal Worker
and were therefore entitled to prevailing wages under Labor Code sections 1771 and
1774. DIR found that RMC violated those statutes by not paying prevailing wages for
the classification and issued a civil wage and penalty assessment (the assessment) against
RMC on December 19, 2008, for a total amount of $765,150.82, consisting of back
wages of $619,005.82 and a $146,145.00 penalty. In the assessment, DIR informed
RMC of its right to a review with the Labor Commissioner and of the option of
requesting a settlement meeting. RMC sought review of the assessment before the Labor
Commissioner and also requested a settlement meeting.


       1
        The following facts are not in dispute.


                                             2
       Shortly after receiving the assessment, RMC, through its Chief Financial Officer
Dave Glover, contacted Bob Sweeny, then-San Quentin State Prison’s Associate Warden
of Business Services, to discuss the assessment. In an email dated February 2, 2009,
Sweeny told Glover that he was going to contact “our legal division in Sacramento and
the environmental compliance unit” and that he “look[ed] forward to meeting [Glover]
and hopefully resolving this issue.” In an email to Sweeny dated July 31, 2009, Glover
stated: “As you know, in order to avoid the potential of a significant increase to the
prevailing wage liability we were facing, we agreed to settle with the DIR last month. As
dictated by this resolution, we are now at the point where we need to fund.” Glover
informed Sweeny that the agreed upon amount was “in the neighborhood of
$750,000.00” and stated, “you were going to check with your team in regards to any
allowance/indemnification/subsidy which San Quentin might be able to provide. As soon
as you get a moment, can you call me with any information you have?” RMC then
settled the matter with DIR on or about June 12, 2009, and paid an amount less than the
full amount assessed ($736,711.84) by check dated August 3, 2009.
       On August 18, 2009, Glover sent Sweeny an email stating he had spoken with an
attorney about the legal grounds for asserting and obtaining reimbursement of the
settlement amount of $736,711.84 from San Quentin. Glover reported that under Labor
Code sections 1773, 1773.2, and 1781, “public agencies, like San Quentin,” were
required to “specify in the call for bids for the contract, in the bid specifications, and in
the contract itself, what the general rate of per diem wages is and whether this job is a
prevailing wage job, or not.” Citing legal authority, Glover further stated that a
contractor is entitled to reimbursement from the public agency where the public agency
fails to inform the contractor that the work to be performed is a prevailing wage job.
Glover noted that San Quentin did not specify anywhere in its solicitation for bids,
specifications, or contract that this was a prevailing wage job.
       On October 28, 2009, Ronald Peck, counsel for RMC, wrote to Kathy Harker,
counsel for DCR, “concerning [RMC’s] claim against [DCR] for the sum of $740,000.00
relating to increased wages and benefits they were required to pay as a result of work


                                               3
performed by [RMC] that was later determined by [DIR] to be work for which prevailing
wages were to be paid.” Peck reiterated the facts and legal grounds for seeking
reimbursement of the amount RMC paid DIR in settlement of the assessment.
       Over the course of the next several months, Peck and Harker exchanged
communications regarding RMC’s request for assessment, and Peck provided Harker
with additional requested documents. On February 10, 2010, Peck stated that RMC was
“anxious to resolve this matter one way or the other” and sent Harker a letter entitled
“Amended and Restated Claim for Damages” in which he set forth in detail—and
attached documents—relating to the claims RMC was asserting against DCR.
       On March 2, 2010, Harker wrote Peck to say that DCR’s investigation of RMC’s
request for reimbursement was still ongoing. She added, “please understand that your
client may have obligations to perfect its claim pursuant to Government Code section 910
et seq. and any steps taken by [DCR] to evaluate your request within this department
should not be considered a waiver of any defense available to [DCR] in another forum.”
       On March 4, 2010, Peck mailed a letter, a claim form, and a $25 fee to the
California Victim Compensation and Government Claims Board (Claims Board) seeking
reimbursement of the amount RMC paid in settlement of the assessment. Peck stated,
“Claims and an Amended Claim were previously filed with the Department of
Corrections on August 18, 2009, October 28, 2009 and February 10, 2010. We have been
advised that they are still investigating the matter. [¶] Out of an abundance of caution,
we are also filing a Claim with your office.” On March 5, 2010, Peck mailed an amended
claim form to the Claims Board stating the same claim but seeking attorney fees and
costs in addition to the amount paid for the assessment.
       On March 10, 2010, the Claims Board wrote to Peck, sating in part: “The claim
does not include the date you were served with the complaint, which resulted in your
claim for equitable indemnity. Please provide the exact date the complaint was served on
you. If your claim was presented to the Board more than six months from the date of
incident, it will be returned for not being presented within six months after the event or



                                             4
occurrence as required by law. If the claim is not presented within the time allowed by
law, no action will be taken.”
       On March 18, 2010, Peck wrote the Claims Board, stating: “In response to your
request for additional information, there was no Complaint that resulted in our client’s
claim for indemnity. [¶] Further, our client’s claim, although similar to an indemnity
claim, is actually statutory. Labor Code § 1781 requires a State Agency, like San
Quentin, to pay any increased costs incurred by a contractor (like [RMC]) as a result of a
decision” by the [DIR].”2 Peck stated that “the Labor Commissioner initially asserted
that this was a prevailing wage job on December 19, 2008” and that the claim was settled,
and payment was made by RMC to DIR in August 2009.
       On March 29, 2010, the Claims Board denied RMC’s claim, stating in part,
“Based on its review of your claim, Board staff believes that the court system is the
appropriate means for resolution of these claims, because the issues presented are
complex and outside the scope of analysis and interpretation typically undertaken by the
Board.” The Claims Board stated it had considered the claim only to the extent it
asserted allegations that arose from facts or events that occurred in the six months prior to
the date it was presented to the Board. On May 11, 2010, the Claims Board issued a
“corrected notice” in which it stated that because RMC’s claim “was filed more than one
year from the date of the incident that is the basis of the claim, . . . it is too late for the
Board to consider an application to present a late claim.” The Claims Board stated: “It
has been determined that the date of the incident that is the basis of this claim is
December 19, 2008. As such, this claim was filed more than one year from the date of
incident.”
       2
        Labor Code section 1781 provides in part: “(a)(1) Notwithstanding any other
provision of law, a contractor may . . . bring an action . . . to recover from the body
awarding a contract for a public work . . . any increased costs incurred by the contractor
as a result of any decision by the body, the [DIR], or a court that classifies, after the time
at which the body accepts the contractor’s bid . . . the work covered by the bid or
contract as a ‘public work,’ . . . if that body, before the bid opening or awarding of the
contract, failed to identify as a ‘public work’ . . . in the bid specification or in the contract
documents that portion of the work that the decision classifies as a ‘public work.’ ”


                                                 5
       On May 25, 2010, following denial of the claim, RMC filed this action pleading
five causes of action. The first cause of action alleged a violation of Labor Code
sections 17263 and 1781. The second cause of action sought equitable indemnity, and the
third cause of action alleged negligence. The fourth cause of action alleged negligent
nondisclosure, and the fifth cause of action alleged a “tort of another.” The complaint
sought $736,711.84, attorney fees and costs including attorney fees under Labor Code
section 1726, and interest. DCR demurred to the complaint, asserting that all five causes
of action were barred for failure to file a government claim within one year of accrual of
the causes of action, that the second though fifth causes of action were barred to the
extent they sought reimbursement for attorney fees because the causes of actions for fees
exceeded the scope of the government claim that was filed, and that the second through
fifth causes action were non-statutory common law claims that could not be brought
against the State of California.
       RMC responded to the demurrer by filing a first amended complaint. The first
amended complaint dropped the third through fifth causes of action and alleged facts to
show that RMC had timely filed a government claim. In its first cause of action, RMC
alleged it paid a civil wage and penalty of $736,711.84 because DCR had failed to notify
RMC as required by Labor Code sections 1726 and 1781 that the work required the
payment of prevailing wages. In its second cause of action, RMC alleged that an
authorized employee of DCR had negligently failed to identify the contract work as a
“public work” in violation of the “Labor Code sections referred to above,” and that CDR
was vicariously liable for the employee’s actions. The first amended complaint prayed
for the same damages, interest, and fees that had been requested in the original complaint.


       3
        Labor Code section 1726, subdivision (c), provides that a contractor is entitled to
attorney fees and costs in addition to reimbursement for wages and penalties where the
public agency “affirmatively represented to the contractor in writing . . . that the work to
be covered by the bid or contract was not a ‘public work,’ ” or where the public agency
“received actual written notice from [DIR] that the work to be covered by the bid or
contract is a ‘public work,’ and failed to disclose that information to the contractor before
the bid opening or awarding of the contract.”


                                              6
DCR demurred to the first amended complaint on substantially the same grounds as the
demurrer to the original complaint, and the demurrer was overruled.
       The court stated in overruling the demurrer to the first amended complaint that the
first and second causes of action were not barred as a matter of law for failure to comply
with the government claims requirements. The court determined that RMC’s March
2010 claim was timely because the first cause of action was not a claim for indemnity
that accrued upon DIR’s presentation of the civil wage and penalty assessment, but rather
was a violation of statute that accrued when RMC incurred increased costs in August
2009. The court determined the second cause of action was authorized under
Government Code, section 815.6, which imposes liability on a public entity for injuries
caused by the entity’s failure to discharge a mandatory duty.
       DCR answered the first amended complaint on February 7, 2011. In its answer,
DCR asserted as a first affirmative defense that the complaint and all causes of action
were barred for failure to present a government claim within one year of accrual of the
cause of action. Following discovery, both parties moved for summary judgment or
adjudication. Both motions asked the trial court to decide as a matter of law whether the
first and second causes of action were barred for failure to file a timely government claim
within one year of accrual.
       In its ruling on the issue of whether a timely government claim was filed, the trial
court stated: “Judge Adams concluded in her December 2010 order on demurrer that:
‘The first cause of action is not a claim for indemnity that accrued upon presentation of
the civil wage and penalty assessment by the [DIR], but rather a violation of statute that
accrued when [RMC] “incurred” increased costs.’ Based on the plain wording of Labor
Code, section 1781, subdivision (a)(1), along with other authorities noted by the parties,
this court agrees with Judge Adams’s conclusion. If [RMC] had filed a government
claim based on the DIR’s initial notification, it would have appeared premature—given
[RMC’s] responsibility of avoiding or reducing any assessment through an administrative
appeal. The undisputed facts show that [RMC] only ‘incurred’ increased costs [on]
August 3, 2009 . . . Thus, [RMC’s] claim filed in March 2010 was timely.” The court


                                             7
also addressed RMC’s arguments that it was exempt from the claims filing requirements,
that RMC had substantially complied with any claims filing requirements, and that DCR
was estopped from raising the defense. The court expressed an opinion on each of those
claims but determined they were “merely alternative arguments,” and that in any event,
involved material facts so that they could not be resolved by way of a motion for
summary judgment.
       The trial court granted DCR’s motion for summary adjudication as to RMC’s
second cause of action (negligence), and the matter proceeded to court trial solely on the
merits of whether RMC was entitled to recovery under Labor Code section 1781.4 After
trial, the court found in favor of RMC and ordered DCR to pay $736,711.84, plus seven
percent interest per annum to accrue from August 3, 2009 (the date RMC paid the
settlement to DIR) through the date of judgment. The court awarded RMC costs of suit
as the prevailing party.
                                        DISCUSSION
       DCR contends the judgment must be reversed because RMC’s action was barred
for failure to file a government claim in the manner prescribed by the Government
Claims Act (the Act).5 We reject the contention.
                                  1. Summary Judgment
       We review summary judgment rulings de novo to determine whether the moving
party has met its burden of persuasion that there is no triable issue as to any material fact
and that the moving party is entitled to judgment as a matter of law. When the defendant
is the moving party, the defendant must show either: (1) the plaintiff cannot establish one

       4
          In its first cause of action, RMC also sought attorney fees and costs under Labor
Code section 1726. Because RMC did not allege facts sufficient to state a claim for
violation of Labor Code section 1726, i.e., that DCR affirmatively misrepresented or
recklessly failed to disclose that the work was a “public work,” the trial court allowed the
first cause of action to proceed to trial only as to RMC’s Labor Code section 1781 claim.
        5
          DCR does not dispute that it was required—and failed—to inform RMC that the
contract was for a public works project for which prevailing wages were due. DCR also
does not challenge the trial court’s determination on the merits of RMC’s claim that
RMC was entitled to reimbursement under Labor Code section 1781.

                                              8
or more elements of a cause of action, or (2) there is a complete defense. If that burden
of production is met, the burden shifts to the plaintiff to show the existence of a triable
issue of fact with respect to that cause of action or defense. (Aguilar v. Atlantic Richfield
Co. (2001) 25 Cal.4th 826, 850; Code Civ. Proc., § 437c, subds. (c) & (o)(2).)
       In deference to the strong public policy favoring a trial on the merits, appellate
courts are bound by the same principles governing the trial court’s determination: the
moving party’s papers are strictly construed and the opposing party’s papers are liberally
construed. All doubts as to the propriety of granting the motion (whether there is any
issue of material fact) are to be resolved in favor of the party opposing the motion, i.e., by
a denial of summary judgment. (Lonicki v. Sutter Health Central (2008) 43 Cal.4th 201,
206; Faust v. California Portland Cement Co. (2007) 150 Cal.App.4th 864, 877
[“[S]ummary judgment cannot properly be affirmed unless a contrary view would be
unreasonable as a matter of law in the circumstances presented”].) The proper
interpretation of a statute and the application of the statute to undisputed facts are
questions of law. (Lozada v. City and County of San Francisco (2006) 145 Cal.App.4th
1139, 1148–1149.)
                                 2. Government Claims Act
                          a. Applicability to Section 1781 Actions
       Government Code section 905 provides that subject to certain exceptions, “all
claims for money or damages against local public entities” must be presented to the
responsible public entity before a lawsuit is filed. Claims for personal injury and
property damage must be presented within six months after accrual; all other claims must
be presented within a year. (Gov. Code, § 911.2.) Failure to present a timely claim bars
suit against the entity. (Gov. Code, § 945.4; State of California v. Superior Court
(Bodde) (2004) 32 Cal.4th 1234, 1239.) The purpose of the claims statutes is “to provide
the public entity sufficient information to enable it to adequately investigate claims and to
settle them, if appropriate, without the expense of litigation. [Citations.] It is well-settled
that claims statutes must be satisfied even in face of the public entity’s actual knowledge
of the circumstances surrounding the claim.” (City of San Jose v. Superior Court (1974)


                                              9
12 Cal.3d 447, 455.) The claims statutes also “enable the public entity to engage in fiscal
planning for potential liabilities and to avoid similar liabilities in the future.” (Baines
Pickwick Ltd. v. City of Los Angeles (1999) 72 Cal.App.4th 298, 303; Minsky v. City of
Los Angeles (1974) 11 Cal.3d 113, 123.)
       Although the parties spend the majority of their appellate briefs addressing the
timeliness of RMC’s March 4, 2010 claim with the Claims Board, they also present some
argument relating to the issue of whether the Act even applied to RMC’s cause of action
for a violation of Labor Code section 1781 (Section 1781). DCR asserts the Act applied
because claim filing requirements “are broadly construed to apply to any and all claims
for money or damages” and a claim for reimbursement under Section 1781 is a “claim for
money or damages.” RMC asserts it was not required to file under the Act for a violation
of Section 1781, “which by definition is a government claim,” and provides for the right
to reimbursement “[n]otwithstanding any other provision of law.” RMC also asserts that
even if the Act generally applies to Section 1781 actions, it did not apply in this case
because the contract the parties entered into contained an alternative dispute resolution
process, and the Act “authorizes a state agency . . . to substitute a contractual claim
procedure as an alternative to the statutory claims procedure set forth in [the Act].” RMC
further asserts that even if the Act applied, it applied only to the “prevailing wages”
portion—and not the “penalties” portion—of the assessment because Government Code
section 905, subdivision (k), specifically excludes “penalties” from the definition of
“money or damages.” We express no opinion on these arguments and need not—and
therefore will not—decide whether the Act applies to Section 1781 claims generally, or
whether it applied in this particular case, because even assuming the Act applied, we
conclude that RMC satisfied its obligation under the Act by filing a timely claim with the
Claims Board.
                               b. Timeliness of RMC’s Claim
       The Act requires that, for actions for injury to person or property for money or
damages, the plaintiff must present a claim to the Claims Board “not later than six
months after the accrual of the cause of action.” (Gov. Code, § 911.2, subd. (a).) “A


                                              10
claim relating to any other cause of action shall be presented . . . not later than one year
after the accrual of the cause of action.” (Ibid.) The parties do not dispute—and we
agree—that the one year period applies to RMC’s Section 1781 claim because the
damage suffered by RMC was not an injury to person or property. (Gov. Code, § 810.8
[“injury” is defined as “death, injury to a person, damage to or loss of property, or any
other injury that a person may suffer to his person, reputation, character, feelings or
estate”].) The dispositive question, therefore, is when the Section 1781 claim “accrued.”
       Government Code section 901 provides in pertinent part: “[T]he date of accrual of
a cause of action to which a claim relates is the date upon which the cause of action
would be deemed to have accrued within the meaning of the statute of limitations which
would be applicable thereto if there were no requirement that a claim be presented to and
be acted upon by the public entity before an action could be commenced thereon.
However, the date upon which a cause of action for equitable indemnity or partial
equitable indemnity accrues shall be the date upon which a defendant is served with the
complaint giving rise to the defendant’s claim . . . against the public entity.”
       Here, because RMC’s action was based on a statutory right to reimbursement
under Section 1781, and was not an action for “equitable indemnity” as DCR asserts6, the
cause of action accrued on “the date upon which the cause of action would be deemed to
have accrued” under Section 1781. (Gov. Code, § 901.) The court held in K.J. v.
Arcadia Unified School Dist. (2009) 172 Cal.App.4th 1229, 1239: “ ‘The date of accrual
of a cause of action marks the starting point for calculating the claims presentation
       6
        DCR asserts that the “special rule” for accrual of equitable claims set forth in
Government Code section 901 applies because RMC’s Section 1781 cause of action was
essentially an equitable indemnity claim. DCR states that because an equitable indemnity
cause of action accrues when “a defendant is served with the complaint giving rise to the
defendant’s claim,” the Section 1781 cause of action accrued on December 19, 2008,
when the original assessment was served. We disagree. Although Section 1781
embodies an indemnity principle, it provides a statutory right to reimbursement without
the weighing of equities, and is not an “equitable indemnity” action. Moreover, even if it
were to be considered an equitable indemnity action, we would conclude that the original
assessment issued on December 19, 2008, was not a final assessment, and cannot be
analogized to a civil complaint.


                                              11
period. [Citations.] “The general rule for defining the accrual of a cause of action sets
the date as the time ‘when, under the substantive law, the wrongful act is done,’ or the
wrongful result occurs, and the consequent ‘liability arises.’ [Citation.] In other words, it
sets the date as the time when the cause of action is complete with all of its elements
[citations]—the elements being generically referred to by sets of terms such as
‘wrongdoing’ or ‘wrongful conduct,’ ‘cause’ or ‘causation,’ and ‘harm’ or ‘injury’
[citations].” (Norgart [v. Upjohn Co. (1999) 21 Cal.4th 383,] 397 . . .; see also Mosesian
v. County of Fresno, supra, at p. 500 [“A cause of action normally accrues when under
the substantive law the wrongful act is done and the liability or obligation arises, that is,
when action may be brought”].) “A cause of action accrues for purposes of the filing
requirements of the Tort Claims Act on the same date a similar action against a nonpublic
entity would be deemed to accrue for purposes of applying the relevant statute of
limitations.” (John R. [v. Oakland Unified School Dist. (1989) 48 Cal.3d 438,] 444,
fn. 3 . . . accord, Santee v. Santa Clara County Office of Education (1990)
220 Cal.App.3d 702, 708.)’ ”
          As noted, Section 1781, subdivision (a)(1), provides in part that a contractor may
“bring an action . . . to recover from the body awarding a contract for a public
work . . . any increased costs incurred by the contractor as a result of any decision by the
body, the [DIR], or a court that classifies, after the time at which the body accepts the
contractor’s bid . . . , the work covered by the bid or contract as a ‘public work,’ . . . if
that body, before the bid opening or awarding of the contract, failed to identify as a
‘public work’ . . . in the bid specification or in the contract documents that portion of the
work that the decision classifies as a ‘public work.’ ” Section 1781, subdivision (c)(2),
defines “increased costs” as including “[L]abor cost increases required to be paid to
workers” for prevailing wages and “[P]enalties” for which the contractor is actually
liable.
          Thus, in this case, to prove the elements of Section 1781, RMC was required to
show that: (1) DCR, “the body awarding a contract for a public work”; (2) failed to
identify the work as a “public work” “in the bid specification or in the contract


                                               12
documents” “before the bid opening or awarding of the contract”; (3) the work was
determined by DCR, DIR, or the court, to be a “public work” “after the time at which
[DCR] accept[ed] [RMC’s] bid”; and (4) RMC “incurred” “increased costs” in the form
of wages and penalties “as a result” of that determination. Until those elements could be
established, RMC did not have a Section 1781 claim, and any statutory claim filing
period had not yet commenced. (See K.J. v. Arcadia Unified School Dist., supra,
172 Cal.App.4th at pp. 1238–1239.)
       On the issue of when RMC incurred “increased costs,” DCR asserts that RMC
incurred the costs when DIR served the assessment on December 19, 2008. RMC asserts
the action accrued when it “paid” the wages and penalties on August 3, 2009, or at the
earliest in June 2009, when “final determination was made” and it became “liable” or
“required to pay” $736.711.84 in wages and penalties. We conclude the action accrued
when the assessment became final and RMC became liable for paying the wages and
penalties.
       Section 1742, which sets forth the review process for DIR assessments, provides
that a contractor who receives an assessment may obtain administrative review of that
assessment “within 60 days after service of the assessment. If no hearing is requested
within 60 days after service of the assessment, the assessment shall become final.” (Lab.
Code, § 1742, subd. (a), italics added.) Subdivision (b) provides that if the contractor
makes a timely request for administrative review, “a hearing shall be commenced within
90 days before the director . . . [¶] Within 45 days of the conclusion of the hearing, the
director shall issue a written decision affirming, modifying, or dismissing the assessment.
The decision of the director shall consist of a notice of findings, findings, and an
order . . . Within 15 days of the issuance of the decision, the director may reconsider or
modify the decision to correct an error, except that a clerical error may be corrected at
any time.” (Id., subd. (b).) Subdivision (c) sets forth the means by which a contractor
may seek review by way of a petition for a writ of mandate with the superior court, and
provides that the director’s decision becomes final if no petition for a writ of mandate is
filed within 45 days of service of the decision. (Id., subd. (c).)


                                              13
       Here, even though DIR’s original assessment of December 19, 2008, placed RMC
on notice that there may be an issue concerning the failure to pay prevailing wages, it was
not until RMC filed a request for a review with the Labor Commissioner and request for a
settlement meeting, and a final assessment was made in June 2009—in this case, by way
of a settlement—that RMC was liable for wages and penalties, and in what amount. We
conclude that the date the assessment became final was the date RMC incurred
“increased costs” within the meaning of Section 1781. (See Civ. Code, § 2778
[providing that in the context of a claim for indemnity under a contract, “the person
indemnified is entitled to recover upon becoming liable,” italics added].) Thus, RMC’s
claim with the Claims Board, filed March 4, 2010, was timely, within the applicable one
year limitation for filing a government claim under the Act.
       Relying on cases involving malpractice actions against accountants for faulty tax
advice, DCR asserts the Section 1781 cause of action accrued when RMC received the
original December 19, 2008 assessment: “Case law establishing the accrual date of
actions for injuries caused by tax assessments provides an instructive analogy here, the
rule being that the accrual date of an action triggered by a tax assessment is the date when
the government issues the tax assessment and notifies the taxpayer of the deficiency.”
(Citing, e.g., Moonie v. Lynch (1967) 256 Cal.App.2d 361, 364.) Moonie v. Lynch, and
related cases, however, actually support RMC’s position and our conclusion.
       In International Engine Parts, Inc. v. Feddersen & Co. (1995) 9 Cal.4th 606, 608,
the Supreme Court addressed the issue of when a cause of action against an accountant
for malpractice “accrues” for purposes of the statute of limitations. The Supreme Court
rejected the Court of Appeal’s determination that the action accrued upon receipt of an
assessment by the Internal Revenue Services (IRS), which was “preliminary” in nature,
and approved Moonie v. Lynch, supra, 256 Cal.App.2d 361, in which the Court of Appeal
“employed a different measure” and held “that actual injury in accountant malpractice
cases occurs on final tax deficiency assessment.” (International Engine Parts, Inc. v.
Feddersen & Co., supra, 9 Cal.4th at p. 608, italics added.) The Supreme Court noted
that the initial notice merely informed the client that his accountant “may [have caused]


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imposition of tax deficiencies.” (Ibid.) The Supreme Court held that such “potential
liability” could not amount to actual harm and the accrual of a malpractice claim against
the accountant until the final deficiency tax assessment issued. In so holding, the court
noted, “The foregoing rule both conserves judicial resources and avoids forcing the client
to sue the allegedly negligent accountant for malpractice while the audit is pending. It
also avoids requiring the client to allege facts in the negligence action that could be used
against him or her in the audit, without first allowing the accountant to correct the error
(or mitigate the consequences thereof) during the audit process.” (Id. at p. 620.)
       Similarly, here, the “potential liability” RMC faced upon issuance of the original
assessment of December 19, 2008, did not amount to actual harm and the accrual of a
Section 1781 claim against DCR. The above malpractice cases therefore do not support
DCR’s position.
                                       DISPOSITION
       The judgment is affirmed. Jon K. Takata Corporation, doing business as
Restoration Management Company, shall recover its costs on appeal.




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                                 _________________________
                                 McGuiness, P.J.


We concur:


_________________________
Pollak, J.


_________________________
Jenkins, J.




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