Monday, May 10, 2010
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Court of Appeal Tosses $35,000 Attorney Fee Award
By SHERRI M. OKAMOTO, Staff Writer
This district’s Court of Appeal has thrown out a $35,000 attorney fee award in favor of two homeowners who prevailed on their contractor’s claim seeking payment of the last installment due under a construction contract.
In the published portion of its Thursday opinion, Div. Five ruled that the payment sought by Diaa Yassin was not a retention and therefore Vinicio and Sonia Solis were not entitled to recover attorney fees under Civil Code Sec. 3260(g). The statute allows the prevailing party in “any action for the collection of funds wrongfully withheld” from a progress payment to a contractor to recover attorney fees and costs.
The Solises hired Yassin, a licensed contractor, to construct an addition on their home and to do additional work for a total of $75,000. The contract between them provided for a down payment of $7,500 plus two progress payments of $22,500, followed by payment of $15,000 upon final inspection and $7,500 upon issuance of the certificate of occupancy.
After the city inspector signed off on the project, Yassin demanded payment of $30,000 but the Solises refused to pay, claiming the contractor’s work was deficient. Yassin then sued for payment and the Solises cross-complained for damages.
Los Angeles Superior Court Judge Dan Thomas Oki found Yassin was not entitled to payment on his claim and awarded the Solises $50,000 in damages on their cross-complaint. The Solises then requested attorney fees under Secs. 3260 and 3260.1(b).
In the event of a good-faith dispute between a property owner and a contractor, Sec. 3260.1(b) provides, the owner “may withhold from the progress payment an amount not to exceed 150 percent of the disputed amount,” but if any amount is wrongfully withheld, the contractor will be entitled to the penalty specified in Sec. 3260(g).
Sec. 3260(b), however, specifies that only retention proceeds withheld from any payment by the owner from the original contractor, or by the original contractor from any subcontractor, are subject to Sec. 3260’s provisions.
Oki awarded the Solises $36,205.14 in attorney fees under Sec. 3260(g) on the theory that the Solises prevailed on Yassin’s claim for $7,500 due and payable upon completion of the work and issuance of a certificate of occupancy, and that this amount was a retention.
Writing for the appellate court, Justice Richard M. Mosk explained that retention amounts “are a form of security generally retained by the owner from prior payments due for work previously performed,” reasoning that a sum payable on completion of the work “is not comparable to amounts held by the owner as security until the end of a lien or warranty period that might be viewed as a retention.”
He emphasized that a retention “has to be an amount that by contract has been retained from an amount owing,” and that a sum not to be paid until completion of the work, whether in an installment contract when no sums have been withheld from the installments or in a contract with no installments, would not be a retention.
“A retention cannot mean any unpaid sum,” the justice said. “If the last installment payment is considered a retention just because it is the last payment for the work already completed, then every progress payment would be a retention. This, of course, makes no sense.”
Mosk noted that the contract at issue “simply specified a time for a payment for work completed and did not provide for an amount to be withheld from any payment,” and so final payment under the contract was due at the completion of the work.
“Accordingly, a claim to recover such an amount is a simple breach of contract claim and not a claim to recover a retention” and the Solises were not entitled to attorney fees, Mosk concluded.
Justices Orville A. Armstrong and Sandy R. Kriegler joined Mosk’s opinion. Richard Allen Jorgensen and Jeffrey R. Salberg represented Yassin while Ashley D. Posner and Martin S. Rudoy represented the Solises.
The case is Yassin v. Solis, 10 S.O.S. 2419.
Copyright 2010, Metropolitan News Company