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Keywords

contractbreach of contractattorneystatuteappealtrialleasegood faithliens

contractbreach of contractattorneyappealtrialgood faithliens

Related Cases

East West Bank v. Rio School Dist., 235 Cal.App.4th 742, 185 Cal.Rptr.3d 676, 316 Ed. Law Rep. 965, 15 Cal. Daily Op. Serv. 3267, 2015 Daily Journal D.A.R. 3677

Facts

FTR International, Inc. was contracted to build a school for the Rio School District for $7.345 million. After completion, a decade-long legal battle ensued over the payment of change orders and retention funds. The District withheld payments, claiming disputes over the contract price and the validity of change orders submitted by FTR. Ultimately, FTR sued the District for breach of contract, leading to a trial that resulted in a judgment in favor of FTR for over $9 million.

FTR International, Inc. was contracted to build a school for the Rio School District for $7.345 million.

Issue

The main legal issues were whether the District was entitled to withhold funds from FTR based on a dispute over the contract price and whether the doctrine of unclean hands applied to the statutory penalties under Public Contract Code section 7107.

Rule

Public Contract Code section 7107 allows a public entity to withhold funds due to a contractor only in cases of liens on the property or a good faith dispute regarding the work performed. The statute mandates the release of retention funds within 60 days after project completion unless a legitimate dispute exists.

Public Contract Code section 7107 allows a public entity to withhold funds due to a contractor only in cases of liens on the property or a good faith dispute regarding the work performed.

Analysis

The court determined that the District's dispute over the contract price did not justify withholding funds under section 7107. It found that the purpose of retention is to secure against mechanics liens and ensure proper completion of work, and once the legitimate purpose for retaining funds ended, the District was required to release the funds or face penalties. The court also ruled that the unclean hands doctrine did not apply to FTR's claims under section 7107.

The court determined that the District's dispute over the contract price did not justify withholding funds under section 7107.

Conclusion

The Court of Appeal affirmed the trial court's judgment in favor of FTR for breach of contract and statutory penalties but reversed the award of attorney fees, instructing the trial court to limit the fees to those incurred solely in relation to FTR's cause of action under section 7107.

The Court of Appeal affirmed the trial court's judgment in favor of FTR for breach of contract and statutory penalties but reversed the award of attorney fees.

Who won?

FTR International, Inc. prevailed in the case because the court found that the District improperly withheld funds and failed to justify its actions under the applicable statute.

FTR International, Inc. prevailed in the case because the court found that the District improperly withheld funds.

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