FLOWRITE, INC. VS. 801 FASSLER, LLC, ET AL.

BACKGROUND

Defendant/Cross-Complainant 801 FASSLER, LLC (“Fassler”) is the owner and developer of a townhome development project in Pacifica, California (“Property”). (UMF 1.) AK Construction contracted with Fassler to be the general contractor for the Project. (UMF 2.) In February 2021,

August 11, 2026 Law and Motion Calendar PAGE 4 Judge: HONORABLE NANCY L. FINEMAN, Department 04 ________________________________________________________________________ AK Construction subcontracted with Plaintiff Flowrite, pursuant to which, Flowrite would perform “civil sitework” for the Project. (UMF 3.) The Subcontract included a “Termination” clause, stating, in part:

SECTION 8. TERMINATION. ... (ii) Contractor may at any time and for any reason terminate Subcontractor's services hereunder at Contractor's convenience. In the event of termination for convenience, Subcontractor shall recover only the actual cost of work completed to the date of termination, in approved units of work or percentage of completion, plus fifteen percent (15%) of the actual cost of the completed work for overhead and profit. Subcontractor shall not be entitled to any claim or lien against Contractor, Owner, or anyone else for any additional compensation or damages in the event of such termination.

(May 14, 2026 Sharma Decl., Ex. B.) On about June 8, 2021, AK Construction terminated the Subcontract with Flowrite. (UMF 6.) Thereafter, Flowrite recorded a Mechanic’s Lien against the Project, claiming that AK Construction still owed Flowrite $195,456.21 for work that Flowrite had completed. (UMF 7.)

On November 24, 2021, Flowrite filed this lawsuit. Flowrite’s Complaint asserts claims against AK Construction for: (1) breach of contract [breach of the Subcontract]; (2) quantum meruit; (3) foreclosure of Mechanic’s Lien; (4) violation of Prompt Payment statute; and (5) breach of the implied covenant of good faith and fair dealing. AK Construction moves for summary judgment on Flowrite’s Complaint, or alternatively, for summary adjudication of the Third and Fifth Causes of Action. (May 14, 2026 Notice of Motion.)

LEGAL STANDARD

A motion for summary judgment shall be granted if the papers submitted show there is no triable issue as to any material fact and that the moving party is entitled to judgment as a matter of law. (Code Civ. Proc., § 437c, subd. (c).) A defendant has met its burden of showing that a cause of action has no merit if defendant shows that one or more elements of the cause of action cannot be established, or that there is a complete defense to that cause of action. (Id., § 437c, subd. (p)(2). If a defendant meets this burden, the burden shifts to plaintiff to show that a triable issue of one or more material facts exists to that cause of action, or a defense thereto. (Id.) “A triable issue of material fact exists if, and only if, the evidence would allow a reasonable trier of fact to find the underlying fact in favor of the party opposing the motion, in accordance with the applicable standard of proof.” (Aguilar v.

Atlantic Richfield Co. (2001) 25 Cal.4th 826, 850 (Aguilar).)

Because summary judgment denies the adverse party a trial, it should be granted with caution. (Assilzadeh v. California Fed. Bank (2000) 82 Cal.App.4th 399, 409.) Summary judgment law turns on issue finding rather than issue determination. (Diep v California Fair Plan Ass’n (1993) 15 Cal.App.4th 1205, 1207.) The court does not decide the merits of the issues, but merely discovers whether there are issues to be tried and whether the parties possess evidence that demands the analysis of a trial. (Melamed v City of Long Beach (1993) 15 Cal.App.4th 70, 76.) An MSJ is not a substitute for a bench trial. (Assilzadeh, supra, at 409.) The trial court’s role

August 11, 2026 Law and Motion Calendar PAGE 5 Judge: HONORABLE NANCY L. FINEMAN, Department 04 ________________________________________________________________________ involves no findings of fact. (Raghavan v. Boeing Co. (2005) 133 Cal.App.4th 1120.) Declarations of the moving party are strictly construed, those of the opposing party are liberally construed, and doubts as to whether a summary judgment should be granted must be resolved in favor of the opposing party. (Aguilar, supra, 25 Cal.4th at pp. 843-856.)

THE MSJ IS DENIED BECAUSE THE EVIDENCE RAISES A TRIABLE ISSUE AS TO WHETHER AK CONSTRUCTION STILL OWES MONEY TO FLOWRITE UNDER THE SUBCONTRACT

Any triable issue relevant to any of the five causes of action asserted against AK Construction necessarily defeats summary judgment. For purposes of the MSJ, it does not matter whether AK Construction owes Flowrite the entire claimed $195,456.21. The MSJ must be denied if the evidence raises a triable issue as to whether Flowrite is owed any amount of money under the Subcontract. The Court finds that the evidence raises a fact dispute on this question. Thus, the MSJ is denied. (See disputed Fact No. 26 [“Flowrite was paid all compensation it was entitled to receive, as required by Section 8, Subsection (ii) of the Subcontract, as of the date the Subcontract was terminated.”)

First, the evidence raises a triable issue as to whether AK Construction paid Flowrite for all completed work under the base contract.

Flowrite contends that AK owes Flowrite $195,456.21 for completed work, consisting of both base contract work, and work performed pursuant to “Change Orders” and “Extra Work tags.” Specifically, Flowrite contends that AK owes payment for the following invoices: Invoice 21- 0501 for $59,316.25; Invoice 21-0601 for $73,410; Invoice 21-0602 for $39,672.96 (for "Change Order to Clear & Grubb Existing Road";); Invoice 21-0604 for $63,360.69 ("Extra Work Tags"); and Invoice 21-0605 for $6,050. (AMF 13; Giacalone Decl. ¶ 26; Barnard Decl. ¶ 9.)

AK Construction explains that Bridge Bank, a construction lender for the Project, periodically assessed, by way of a third-party consultant, Cardinal Consulting, Inc. (“Cardinal”), whether Flowrite had actually completed the work that Flowrite claims to have completed/performed. AK offers evidence that Cardinal periodically inspected the site to assess/verify work progress (including Flowrite’s work progress) (UMF 16), and that Cardinal thereafter provided reports and recommendations to Bridge Bank regarding the completed work. (See Sharma Decl., ¶¶ 7, 11.)

With respect to Flowrite, Cardinal concluded/opined that Flowrite had overstated/inflated the progress of its work on the Project. AK explains that based on Cardinal’s opinion/assessment of Flowrite’s work progress, Bridge Bank authorized smaller/lesser payments to Flowrite, and in turn, AK Construction credited (and paid) Flowrite for less work than Flowrite claimed to have completed.

AK Construction’s Fact No. 24 states:

UMF 24. AK Construction did not withhold payments to Flowrite for its work on the Subject Project, rather, Bridge Bank reduced the amounts it approved for disbursement to

August 11, 2026 Law and Motion Calendar PAGE 6 Judge: HONORABLE NANCY L. FINEMAN, Department 04 ________________________________________________________________________ Flowrite for its monthly Draw Requests, because Cardinal Consulting, Inc. verified the percentages of completed work reported by Flowrite were artificially inflated.

(See also Sharma Decl., ¶¶ 7, 11 [same].)

But the conflicting evidence regarding how much work Flowrite completed under the base contract (and in turn, the dispute over whether Flowrite has been paid for all work it performed under the base contract), raises a classic factual dispute that prevents the Court from granting summary judgment. While AK apparently adhered to Cardinal’s and Bridge Bank’s opinion that Flowrite had completed less work than Flowrite claims to have completed, and accordingly, paid Flowrite a lesser amount, Flowrite offers conflicting evidence. (Giacalone Decl., ¶¶ 21-32; Barnard Decl., ¶¶ 1-13; see also Carney Decl., ¶ 5 [Mr.

Carney, a Project Manager hired by AK Construction, who was familiar with Flowrite’s work on the Project, testifying that he never observed Flowrite submitting invoices for work that Flowrite had not completed, and never observed Flowrite seeking payment for work that had not been performed].)

The evidence also creates a fact dispute about who determined the amount that Flowrite would be paid for its work. AK Construction seems to suggest that Bridge Bank, based on Cardinal’s recommendations, determined the percentage completion of Plaintiff’s work, and in turn, determined the amounts that Flowrite would be paid. But Flowrite offers evidence that AK’s Project Manager, Mr. Sharma, “coordinated” the “payment draw requests” for AK Construction. (Carney Decl., ¶ 7.) If Flowrite is entitled to payment for of its work completed prior to termination, then it presumably is not a defense for AK to argue that a lender did not “approve” payments for some of that work.

The evidence also raises a fact dispute as to whether Flowrite was not fully paid due to funding limitations rather than any genuine dispute over how much work Flowrite had completed. Mr. Carney’s declaration states that funding issues significantly impacted the Project and payments to contractors, and that “[f]unding limitations continued to affect both the timing and amount of the payments made on the project, often with no explanation.” (Carney Decl., ¶ 3, 7.) See also Wheeler Decl., Ex. A [Giacalone Tr. at 62, testifying that AK Construction’s budget was “very tight”].)

Viewing the evidence favorably to Flowrite (the non-moving party), at least for purposes of a motion for summary judgment, it suggests that AK Construction, not Bridge Bank, controlled payments to Flowrite, that AK Construction decided to pay Flowrite for less than the work that Flowrite claimed to have completed, and that budget concerns may have played a role in Flowrite’s alleged underpayment. These are triable issues not amenable to summary judgment.

Further, the evidence raises a triable issue as to whether Plaintiff is owed money for Change Orders and/or “extra work items.”

Flowrite offers evidence that, as of the June 8, 2021 Subcontract termination date, AK Construction purportedly owed $111,000 for work done pursuant to Change Orders. (Giacalone Decl., ¶ 13.) AK Construction contends that it had no contractual obligation to pay for Change

August 11, 2026 Law and Motion Calendar PAGE 7 Judge: HONORABLE NANCY L. FINEMAN, Department 04 ________________________________________________________________________ Order work, because (1) the Subcontract was “fully integrated,” and it does not require payment for Change Orders in the event of termination (Reply at 5-6); (2) at the time of termination, the Change Orders only totaled $111,000, and Mr. Giacalone purportedly agreed that no payment would be due unless and until the total reached $150,000; and (3) § 5 of the Subcontract precluded compensation for additional work unless set forth in writing. The Court, however, finds a triable issue as to whether Flowrite is owed money for the Change Orders/extra work tags.

First, AK Construction’s argument that the Subcontract was “fully integrated” ignores that AK’s purported agreement regarding the Change Orders occurred after the subcontract was executed. Thus, the merger/integration clause that pertains to prior or contemporaneous agreements does not apply.

Second, whether the parties agreed that AK Construction would not pay the Change Orders unless (and only if) they reached a total of $150,000 point is unclear/debatable. Mr. Giacalone’s declaration states:

8. As those field conditions arose, Flowrite prepared and transmitted change orders, work orders, and extra work documentation to AK. I personally prepared or directed the preparation of many of those change-order and extra-work requests. AK and I agreed that we would not collect on any Change Orders until the amount reached $150,000, at which time we would meet and discuss payment and a resolution.

(Giacalone Decl., ¶ 8.) An agreement to refrain from discussing payment until the Change Orders totaled $150,000 is very different than an agreement that AK Construction would owe nothing unless and until they totaled $150,000. Viewing the evidence favorably to Flowrite, it raises a fact dispute about the nature of this alleged verbal agreement. Notably, although Mr. Giacalone states that he discussed the Change Orders with both Mr. Sharma and “AJ” Schultz (Giacalone Decl., ¶ 6), Mr. Shulz has not provided any declaration, and Mr. Sharma’s declaration does not even address the Change Orders. One might infer that if they never agreed to pay the Change Orders, they would have said so.

AK Construction’s reliance on § 5 of the Subcontract (“CHANGES IN WORK”) does not change the Court’s conclusion. AK argues that although Flowrite submitted about ten (10) Changes Orders in writing, AK never signed them, which precludes any obligation to pay them under § 5. Even assuming § 5 required signed Change Orders, the evidence here raises a question as to waiver. The evidence suggests that (1) Flowrite submitted about ten written Change Orders; (2) AK knew Flowrite was performing additional work; (3) the parties had an ongoing working relationship; (4) the parties discussed the Change Orders; (5) after execution of the Subcontract, the parties (arguably) agreed that once the Change Orders totaled $150,000, the parties would discuss payment; and (6) Flowrite performed all of the work described in the Change Orders, with AK’s knowledge. (Giacalone Decl., ¶¶ 9-13.)

The foregoing raises a fact question as to waiver—that is, whether AK Construction, through its conduct and its Project Manager(s), waived or modified the “written change” requirement in § 5

August 11, 2026 Law and Motion Calendar PAGE 8 Judge: HONORABLE NANCY L. FINEMAN, Department 04 ________________________________________________________________________ of the Subcontract. The questions of what the parties agreed to with respect to the Change Orders, and whether AK waived the requirements in § 5, is a fact-intensive inquiry.

Haul-tags. Flowrite and AK Construction also disagree as to whether Flowrite is owed for hauling that Flowrite purportedly performed with its trucks. (UMF 31; AMF 10-14; Giacalone Decl. ¶ 34.) Because the Court finds that other triable issues preclude summary judgment, the Court need not address this additional dispute.

DEFENDANT’S MSA OF THE THIRD CAUSE OF ACTION (“FORECLOSURE OF MECHANIC’S LIEN”) IS GRANTED

It is undisputed that on September 2, 2021, after AK Construction terminated the Subcontract, Flowrite recorded a Mechanic’s Lien against the Project, claiming that AK Construction owes Flowrite $195,456.21 for completed work. (UMF 7.) It is also undisputed that around March 1, 2022, 801 Fassler, LLC, the project/Property owner, pursuant to Civil Code section 8424, recorded a “Release Bond” to release Flowrite’s Mechanic’s Lien, in the amount of $244,320.27, or 125% of the lien amount [$195,456.21], as required to relieve the claim of lien from the Property. (UMF 8.)

Civil Code section 8424 provides:

(a) An owner of real property or an owner of any interest in real property subject to a recorded claim of lien, or a direct contractor or subcontractor affected by the claim of lien, that disputes the correctness or validity of the claim may obtain release of the real property from the claim of lien by recording a lien release bond. The principal on the bond may be the owner of the property, the direct contractor, or the subcontractor.

(b) The bond shall be conditioned on payment of any judgment and costs the claimant recovers on the lien. The bond shall be in an amount equal to 125 percent of the amount of the claim of lien or 125 percent of the amount allocated in the claim of lien to the real property to be released. The bond shall be executed by an admitted surety insurer.

(c) The bond may be recorded either before or after commencement of an action to enforce the lien. On recordation of the bond, the real property is released from the claim of lien and from any action to enforce the lien.

(d) A person that obtains and records a lien release bond shall give notice to the claimant. The notice shall comply with the requirements of Chapter 2 (commencing with Section 8100) of Title 1 and shall include a copy of the bond. Failure to give the notice required by this section does not affect the validity of the bond, but the statute of limitations for an action on the bond is tolled until notice is given. The claimant shall commence an action on the bond within six months after notice is given.

(Civ. Code, § 8424 (emphasis added).) Flowrite’s argument that Fassler’s recording of the “Release Bond” does not moot the Third Cause of Action is incorrect, because it ignores the

August 11, 2026 Law and Motion Calendar PAGE 9 Judge: HONORABLE NANCY L. FINEMAN, Department 04 ________________________________________________________________________ distinction between the lien itself, and Flowrite’s right to recover against the Release Bond. § 8424(c) unambiguously states that upon recording of the bond, the real property is released from the claim of lien “and from any action to enforce the lien.” § 8424(d) then explains what a lien claimant’s remedy becomes: after receiving notice of the bond, the lien claimant must then commence “an action on the bond” within six months.

Here, given the undisputed recordation of Fassler’s Release Bond, Flowrite’s cause of action seeking “foreclosure of Mechanic’s Lien” is moot. (See Hutnick v. U.S. Fid. & Guar. Co. (1988) 47 Cal. 3d 456, 463; RGC Gaslamp, LLC v. Ehmcke Sheet Metal Co. (2020) 56 Cal.App.5th 413, 424 [“Once a release bond is recorded, it becomes the lien claimant's sole recourse for collecting sums due.”]). As explained in Hutnick and RGC Gaslamp, once a release bond is recorded, the lien and foreclosure remedy against the Property disappear, the bond becomes security for the claim, and the claimant (Flowrite) must proceed against the bond. § 8424; Hutnick, supra, at 463; RGC Gaslamp, LLC, supra, at 424.

Plaintiff is correct that the bond does not extinguish the underlying claim. (Id.) But the bond takes the place of the Property as security. (Id.) The recording of the bond releases the Property from the lien and from any action to enforce the lien. (Id.) The bond is substituted for the lien, and the bond becomes the lien claimant’s sole recourse for collecting the sums due. (Id.)

Accordingly, Defendant’s MSA as to the Third Cause of Action (to foreclose on the Mechanic’s Lien) is granted.

DEFENDANT’S MSA OF THE FIFTH CAUSE OF ACTION (“BREACH OF IMPLIED COVENANT OF GOOD FAITH & FAIR DEALING”) IS GRANTED

The implied covenant of good faith and fair dealing cannot be construed to prohibit conduct that is expressly permitted by the parties’ agreement—and here, the Subcontract provides AK Construction with an unambiguous right to terminate the agreement at any time, for any reason. (Carma Developers (Cal.), Inc. v. Marathon Development Calif., Inc. (1992) 2 Cal.4th 342, 373 (Carma) [“We are aware of no reported case in which a court has held the covenant of good faith may be read to prohibit a party from doing that which is expressly permitted by an agreement. On the contrary, as a general matter, implied terms should never be read to vary express terms.”])

Plaintiff’s Complaint’s Fifth Cause of Action alleges:

35. AK breached this covenant of good faith and fair dealing when they, without any proper justification, terminated the Agreement for the sole purpose of shopping out the remaining work to be performed at the Subject Property for cheaper or less expensive subcontractors.

The parties’ Subcontract states, in part:

SECTION 8. TERMINATION. Contractor may at any time and for any reason terminate Subcontractor's services hereunder at Contractor's convenience ....

August 11, 2026 Law and Motion Calendar PAGE 10 Judge: HONORABLE NANCY L. FINEMAN, Department 04 ________________________________________________________________________ Plaintiff’s pleaded theory—that AK breached the implied covenant by terminating the Subcontract for the purpose of obtaining a cheaper subcontractor—would impose a restriction on AK’s express contractual right to terminate for any reason. Plaintiff therefore cannot maintain an implied covenant claim based upon AK Construction’s exercise of that express right.

Plaintiff points to Mr. Giacalone’s (Flowrite’s Principal) alleged agreement with AK that Flowrite “would not collect on any Change Orders until the amount reached $150,000” (Giacalone Decl., ¶ 8), and Flowrite argues that AK Construction breached the implied covenant by intentionally terminating the contract before the accumulated Change Orders reached the $150,000 amount, to avoid having to pay them. Even assuming, arguendo, that AK terminated the contract for that reason, the implied covenant claim would still fail, for two reasons.

First, as stated, the Subcontract gives AK the express right to do that. The contractual language stating that “Contractor may at any time and for any reason terminate Subcontractor's services hereunder at Contractor's convenience” is about as explicit as it gets. As the California Supreme Court has explained, the implied covenant ordinarily does not permit the Court to substitute its own notion of fair dealing for the parties’ express agreement. (Carma, supra, 2 Cal.4th at 373.) For this Court to find that AK Construction could terminate for any reason except for the purpose of trying to save costs by finding cheaper subcontractors would substantially rewrite the contract—which the Court generally cannot do.

This does not necessarily mean that Plaintiff is barred from seeking payment for the Change Orders as a purported breach of the Subcontract, but that is a breach of contract argument, not an implied covenant theory.

Second, and independently, Flowrite’s Complaint does not plead this factual theory of bad faith pertaining to the Change Orders. The Complaint alleges only that AK Construction breached the implied covenant by terminating the contract for the purpose of trying to find cheaper subcontractors. It alleges nothing about Change Orders or an agreed-upon $150,000 point at which the parties would discuss payment. This argument pertaining to the Change Orders is a materially different theory. Flowrite seeks to defeat summary adjudication by introducing evidence of an additional, un-pleaded factual theory of bad faith, which is generally not permissible. (FPI Development, Inc. v. Nakashima (1991) 231 Cal.App.3d 367, 381.)

Accordingly, the MSA as to the Fifth Cause of Action (implied covenant of good faith and fair dealing) is granted.

If the tentative ruling is uncontested, it shall become the order of the Court. Thereafter, counsel for defendant AK shall prepare a written order consistent with the Court’s ruling for the Court’s signature, pursuant to California Rules of Court, rule 3.1312, and provide written notice of the ruling to all parties who have appeared in the action, as required by law and the California Rules of Court.