2010 may have marked a year with historic lows in construction but it was quite the opposite in our busy appellate Courts. As has been the case in recent years, cases dealing with the interpretation of the Contractors License Law provisions were dominant, putting new spins of prompt payment penalties and Business and Professions Code §7031’s sword of disgorgement (Alatriste v. Cesar’s), that they may be waived (Martin Brothers v. Thompson Pacific), or discharged (In re Sabban) and what constitutes a retention payment under Civil Code §3260.1 (Yassin v. Solis.). The extra work cases, LAUSD v Great American and Ted Jacob Engineering v The Radcliff Group, too, are likely to be cited and distinguished by future and following cases on their facts but give inspiration to contractors who, in good faith, perform and are entitled to additional compensation yet have to overcome the burdens of complying with often one-sided and onerous contractual provisions.
Several other notable cases include a case solidifying the breath of the duty to defend under an indemnity clause (UDC-Universal Development v. CH2M)
2010 Construction Law Cases
LAUSD v. Great American Insurance Company; Hayward Construction Company (2010) 49 Cal.4th 739, 112 CR3d 230
A public entity may be required to provide extra compensation if it knew, but failed to disclose, material facts that would affect the contractor’s bid or performance. The Court found that a public entity may be found liable if the entity knew or had reason to know that a responsible contractor acting diligently would be unlikely to discover a condition that materially increases the cost of performance and allowed the contractor to recover additional compensation.
UDC-Universal Development, L.P. v. CH2M Hill (2010) 181 CA 4th 10
The Court found that a design professional had a duty to defend a developer against a homeowner’s association’s construction defect action, despite the jury finding that the design professional was not negligent. In school construction disputes this means that under the typical indemnity clause an architect could be required to pay for the cost of defense for a school district client, even if the architect ultimately is found not to be negligent. The Court noted that the duty to defend was much broader and arose at the time of tender of the claim, regardless of the lack of any specific allegations (let alone proof) of negligent acts or omissions.
Alatriste v. Cesar’s Exterior Designs, Inc. (2010) 183 CA4th 656, 108 CR3d 227
A homeowner was allowed to sue to recover all monies paid to a contractor who began performance unlicensed even though the contractor obtained its license during the performance or the work. The Court of Appeal held that the hiring party, the homeowner, is entitled to enforce the remedies under Business and Professions Code §7031 through both a defensive “shield” or an affirmative “sword”.
Hinerfeld-Ward, Inc. v. Lipian et. al. (2010) 188 CA4th 86, 115 CR3d 237
An oral contract between a contractor and homeowners in violation of Business and Professions Code §7159 is voidable, not void, depending upon “… the factual context and public policies involved…”. The homeowners sought to invalidate the claim on the basis of §7159, the Home Improvement Law. The contractor argued that §7159 was inapplicable as the homeowners did not necessarily need to be sophisticated relative to construction just sophisticated in general. The Court of Appeal agreed and held that the homeowners had significant involvement with their architect, who presumptively was sophisticated in construction.
Ted Jacob Engineering Group, Inc. v. The Ratcliff Architects (2010) 187 CA4th 945, 114 CR3d 644
A subcontractor was allowed to recover for extra work that the contractor directed it to perform even though the subcontractor did not obtain written authorization to perform, a requirement which the Court concluded, was waived and that the subcontractor could continue to perform (and was not required to walk off the job) when negotiations as to the amount of payment were unsuccessful.
Yassin v. Solis (2010) 184 CA4th 524, 108 CR3d 854
In an action to recover final payment under an installment contract, the Court concluded that a final payment is not an installment payment and the interest and attorneys’ fee penalties imposed under Civil Code §3260.1 for the wrongful withholding of a progress payment did not apply.
The Court notably also held that “there is no requirement that a party plead that it is seeking attorney fees, and there is no requirement that the ground for a fee award be specified in the pleadings.”
Martin Brothers Construction., Inc v. Thompson Pacific Construction, Inc. (2010) 179 CA4th 1401, 102 CR3d 419
The Court allowed the waiver by contract of the statutory right to prompt payment pursuant to Public Contract Code §7107 and Business and Professions Code §7108.5.
Force Framing, Inc. v. Chinatrust Bank (U.S.A.) (2010) 187 CA4th 1368, 114 CR3d 855
The court held that a subcontractor’s reasonable reliance upon an owner/general contractors’ representation regarding the identity of a construction lender as set forth in a “preliminary information” sheet when serving its preliminary notice was a question of material fact. The Court reversed a Summary Judgment in favor of a lender not named in the contractor’s preliminary notice and citing Brown Co. v. Appellate Department (1983) 148 CA3d 891, held that the contractor did not have to check the county records for the recorded construction deed of trust and could rely upon the fact that the lender was the “reputed construction lender” assuming the contractor had a good faith belief that the reputed lender was the actual lender.
In re Sabban (9th Cir. 2010) 600 F.3d. 1219
An unlicensed contractor’s obligation under a judgment including Business and Professions Code §7031(b) disgorgement in favor of a homeowner was found to be dischargeable in bankruptcy.
Mepco Services, Inc. v. SaddlebackValley Unified School District (2010) 189 Cal.App.4th 1027
A contractor may recover attorneys’ fees incurred in a suit against a public entity owner under a provision in a performance bond where contractor’s affirmative claim was intertwined with its defense to the public entity owner’s claim against the performance bond. The Court reasoned that the attorneys’ fee provision was reciprocal and under Civil Code §1717 the contractor could recover all of its attorneys fees, not just that portion incurred in defending itself, as the central dispute was which party breached the contract.
Thanks for that! It’s just the answer I neeedd.