The Year 2010 In Review: Prompt Payment

This article is the fourth in a series summarizing construction law developments for 2010.

1. Yassin v. Solis, 184 Cal. App. 4th 524 (2d Dist. May 2010)

Homeowners entered into an agreement with a contractor for home improvement work. The agreement called for the contractor to be paid fixed amounts upon reaching specific milestones on the project, with the final payment of $7,500 due once the work was complete and a certificate of occupancy issued. The homeowners became dissatisfied with the contractor's work, terminated him from the project, and hired another to complete the work.

The contractor filed suit to recover amounts he claimed were owed, including the $7,500 due upon completion. The homeowners cross-complained to recover amounts they spent to correct the contractor's deficient work. The trial court awarded the contractor nothing and awarded the homeowners $50,000, plus $36,000 in attorneys' fees under Civil Code Section 3260(g), which governs payment of retention proceeds. The trial court reasoned that the homeowners were entitled to recover attorneys' fees because they were the prevailing party on the contractor's claim for the last payment of $7,500, which the court determined to be retention....

2. Hinerfeld-Ward Inc. v. Lipian, 188 Cal. App. 4th 86 (2d Dist. Sept. 2010)

A contractor on a substantial, multi-year home remodeling project sued the homeowners for unpaid amounts claiming breach of an oral contract. The homeowners cross-complained for, among other things, negligence and fraud, and defended against the contractor's affirmative claims by citing Business and Professions Code Section 7159, which requires home improvement contracts to be in writing. At trial, the contractor obtained a judgment for $200,000 for earned but unpaid progress payments and was awarded 2% per month on the unpaid amount, plus another $200,000 in attorney's fees, under the prompt pay provisions of Civil Code Section 3260.1. Meanwhile, the homeowners were awarded $1,000 on their negligence claim against the contractor....