Section 1717 Still Allowed Recovery to the Prevailing Party.
The Fifth District, in Greg Opinski Construction, Inc. v. City of Oakdale, Case Nos. F060219/F060727 (5th Dist. Oct. 6, 2011) (certified for partial publication; fee discussion not published), affirmed a lower court decision finding that the city was entitled to recover from its general contractor $54,000 in liquidated damages for late completion, $3,266 for construction defect repairs, and $97,775 (out of a requested $104,478.67) in attorney’s fees, with the fee award being based on a reciprocal contractual fees clause.
On appeal, general contractor basically contended that city did not "prevail" because the amount it retained while the dispute was pending was more than enough to cover the merits judgment, meaning that city really received no net monetary recovery for purposes of a fee award.
The Fifth District, in a 3-0 opinion authored by Acting Presiding Justice Wiseman, did not buy it. Rather, it found Sears v. Baccaglio, 60 Cal.App.4th 1136 (1998) analogous, where a party did prevail by winning a positive monetary award even where he had been paid more than the award loss already from several other sources. City was still the "net" winner in this situation, with the appellate court refusing to apply routine costs principles when it came to determining the prevailing party in a fee context. Finally, policy reasons also prevailed: ". . . in our review it would make little sense to deem a contractor a prevailing party solely because the contractor obtained an order for release of retention funds. Public Contract Code section 7107, subdivision (c), makes it lawful for an owner to retain 150 percent of an amount in dispute. A determination at the end of the lawsuit that the owner must release some of the money does not mean the owner has acted wrongly. A court might find that the only breach of contract was a breach by the contractor. Retention money might still be owing to the contractor, since the damages the contractor caused might be less than 150 percent of the disputed amount. That would not show, however, that the owner had breached the contract or that the contractor had prevailed. That is the situation in this case. The city prevailed on its claim on the contract; [general contractor] failed in its claims on the contract; the amount of damages was less than the amount retained; and [general contractor] would have owed a portion of the retention funds if not for the attorneys’ fees award. The court had discretion to find that the city, not [general contractor], was the prevailing party in this state of affairs." (Slip Opn., pp. 27-28.)