Opinion
NOT TO BE PUBLISHED
APPEAL from a judgment of the Superior Court of San Diego County, No. GIC836110 David B. Oberholtzer, Judge.
NARES, Acting P. J.
In this second appeal in this construction contract dispute, plaintiff Erreca's, Inc. (Erreca's) asserts the court erred in confirming an arbitration award in favor of defendants Real Estate Collateral Management Co., Inc. (RECM) and Safeco Insurance Company of America (Safeco) and denying Erreca's motion to correct, vacate and/or modify the arbitration award.
The arbitration agreement allowed the superior court to review errors of law by the arbitration panel, and in Erreca's, Inc. v. Safeco Insurance Company of America (Mar. 3, 2009, D051491) (nonpub. opn.) (Erreca's I), we held the superior court erred in refusing to review any alleged errors of law asserted by Erreca's. On remand, the court considered Erreca's motion to correct, vacate and/or modify the arbitration award on the merits and, except for correcting the award to provide that only RECM, and not Safeco, was entitled to attorney fees, it denied Erreca's motion and entered judgment in favor of RECM and Safeco.
On this second appeal Erreca's asserts the court erred in failing to correct certain alleged legal errors in the arbitration award. Specifically, Erreca's asserts (1) the arbitration panel erred in not determining it was the prevailing party because it recovered money and attorney fees on its Civil Code section 3260 cause of action for a wrongful failure to return retention amounts; (2) the court erred in failing to correct the attorney fee award to reduce those amounts attributable to Safeco; (3) the arbitration panel erred in failing to consider its arbitration fees as part of its recovery in determining if that recovery exceeded RECM and Safeco's Code of Civil Procedure section 998 offer; and (4) the arbitration panel failed to make the required findings of fact and conclusions of law. RECM cross-appeals, asserting the judgment should be modified to award it prejudgment interest from the date of the award until judgment was entered.
All further statutory references are to the Civil Code unless otherwise specified.
We conclude on Erreca's appeal that (1) the arbitration panel properly found RECM to be the prevailing party; (2) the court did not err in refusing to reduce the attorney fee award to reflect attorney fees attributable to Safeco; (3) the arbitration panel did not err in refusing to consider the arbitration fees incurred by Erreca's in calculating its total recovery; and (4) the arbitration panel made all necessary findings of fact and conclusions of law. On RECM's appeal, we conclude the court properly found that RECM was not entitled to prejudgment interest from the date of the award until entry of judgment.
FACTUAL AND PROCEDURAL BACKGROUND
A. The Contract and Dispute
Erreca's, an engineering contractor, entered into a construction contract with RECM to perform grading work for a large residential development project. The contract required the parties to submit all disputes to binding arbitration.
Of relevance to this appeal, the contract provided that RECM could withhold a percentage of the contract price (commonly known as a "retention"):
"Retainage. Contractor shall be paid ninety percent (90%) of the amount approved for such Work, less all preceding payments with respect thereto. The remaining ten percent (10%) for the Work shall constitute the retainage for such Work performed by Contractor. The retainage shall be held by [RECM] until all Work covered by the Contract Documents has been fully completed, and accepted by [RECM] and all governmental agencies in accordance with the Contract Documents, a Notice of Completion having been recorded by [RECM], and all other statutory timeframes for filing lien claims has expired."
The contract also allowed RECM to withhold that retention, without interest, where, among other things, there are claims pending against the contractor: "Payment otherwise due by Owner to Contractor may be withheld by Owner, without interest, on account of defective Work not remedied by Contractor, unpaid labor or materials bills, or Claims for which Contractor is responsible under the Contract Documents...."
After Erreca's completed the construction work, a dispute arose relating to the work performed and payment for the work.
Erreca's filed a complaint against RECM, seeking $7 million for extra work performed under the contract. In the first eight causes of action, Erreca's alleged contract and other common law claims, asserting it suffered the increased performance costs because of the changed conditions and/or RECM's failure to disclose the true conditions. The alleged extra work was (1) blasting of more underground rock than Erreca's anticipated in its bid; (2) bulking of excavated material in excess of estimates provided in a geological report; and (3) having to handle excess material on the site because the site did not "balance."
In the ninth cause of action, Erreca's alleged a statutory claim under section 3260, which entitles a contractor to a penalty of interest and attorney fees on funds retained by an owner beyond the statutory time and without cause. Erreca's asserted that RECM had withheld a retention of $515,351.96 and that, under section 3260, it was "entitled to payment of the retention amount plus a charge of two percent per month in lieu of interest otherwise due on the improperly withheld retention plus attorney's fees in an amount according to proof."
Safeco was named as a defendant only on the fourth cause of action to enforce the mechanic's lien release bond.
B. Arbitration of Erreca's claims
Six weeks after Erreca's filed an amended complaint, the parties entered into an agreement entitled "Arbitration Submission Agreement" (submission agreement) that modified the arbitration provision in the construction contract. In the submission agreement, the parties agreed their dispute would be submitted to Judicial Arbitration and Mediation Services (JAMS) under JAMS rules and that Safeco would also be a party to the arbitration.
The submission agreement also contained a provision entitled "Governing Law, " which stated: "This Agreement and the conduct of the arbitration proceedings shall be governed by the laws of the State of California. In rendering the Award, the Arbitrators will determine the rights and obligations of the Parties in accordance with the substantive laws of the State of California, as though acting as a court in a civil action in California. The Arbitrators shall not have the power to commit errors of law or legal reasoning and the award may be vacated or corrected pursuant to [Code of Civil Procedure sections ] 1286.2 or 1286.6 for any such error.... The Arbitrators are not empowered to render any award that is not in accord with California law. Except as otherwise modified by this Agreement, the procedural rules shall be set forth in the [Code of Civil Procedure] and California Rules of Court, including [Code of Civil Procedure section] 998...." (Italics added.) The arbitration agreement also stated the arbitrators "shall issue a written award setting forth the Arbitrators' findings of fact and conclusions of law and the reasoning for their decision."
The parties stipulated to an arbitration panel consisting of three retired superior court judges: the Honorable Robert May, the Honorable Judith Ryan, and the Honorable Luis Cardenas. The parties then engaged in extensive discovery and prearbitration briefing. During the 20-day arbitration hearing, the parties called approximately 25 witnesses and submitted hundreds of exhibits.
C. Interim Award
The arbitration panel then issued a 29-page "Interim Award." In this interim award, the panel majority (Judges May and Ryan) found Erreca's did not prove any of its claims except for the ninth cause of action seeking recovery for RECM's failure to pay retention amounts. In an eight-page dissenting/concurring decision, Judge Cardenas disagreed with the majority on its findings in RECM's favor, stating he believed an equitable analysis of the contract claims entitled Erreca's to one-half of its claim.
In the majority opinion, the panel stated that it considered "all facts and evidence" in making its determinations. The interim award contained 15 pages of factual analysis of Erreca's claims. The interim award then had four pages of findings and conclusions.
In making its findings, the panel considered witness testimony and analyzed test results, technical data and expert testimony regarding soil conditions, project estimating, and what was relied upon by Erreca's in preparing its bid.
The panel found that Erreca's did not prove there were changed site conditions. The panel found that the data provided to Erreca's was not in error and that under the construction contract Erreca's was responsible for verifying subsurface conditions.
The panel determined that an aerial analysis or "flyover" of the property by the parties allowed them to ascertain the quantity of material that had been excavated, and was to be excavated, and whether the project was "long" or if there would be excess material. In response to discovering the site was "long, " RECM paid Erreca's for the work associated with moving excess material on the site identified from the flyover. The panel found that Erreca's did not suffer damages due to the excess material on the site because RECM arranged for disposal of the excess material and compensated Erreca's for the extra costs associated with that work.
The panel also found that Erreca's had not complied with a clause in the construction contract that required it to notify RECM before performing extra work. The panel determined that Erreca's was therefore not entitled to compensation for the extra work associated with more blasted rock than it anticipated and the fact the excavated material was bulking more than expected.
Because all of Erreca's first eight causes of action were based upon the same factual allegations, it applied its findings of fact and law to each of those claims.
D. Final Award
Erreca's then filed briefs requesting the panel to reconsider and/or correct its decision. After considering these arguments, the arbitration panel issued a 33-page final award in which the majority reaffirmed the interim award, but made several corrections and changes in the explanation of its decision. One such clarification addressed Erreca's concern that the panel had not addressed in its interim award all eight causes of action based upon alleged changed site conditions. The final award clarified that the panel considered all causes of action and disposed of them on identical grounds.
The arbitration panel also addressed fee and cost issues and found, this time in a unanimous decision, that RECM was the prevailing party on all causes of action, except the ninth cause of action for violation of Civil Code section 3260, as to which the panel found Erreca's had partially prevailed. The panel awarded a portion of the withheld retention and awarded it $785,083.37 on that claim.
However, the panel found RECM had not breached the construction contract by withholding the retained funds.
The panel noted that Erreca's took the position, for the first time, "post hearing, " that its claim under section 3260 for wrongfully withheld retention amounts was actually encompassed within the first cause of action for breach of contract, and therefore it was the prevailing party on the contract. The panel rejected this argument.
The panel first found that "the failure to pay the retention was not [pleaded] and was not encompassed within the First Cause of Action." In doing so, the panel noted that in the first cause of action for breach of contract, Erreca's identified the claimed breaches, and "[n]one of those specific breaches were alleged to be the failure to pay the retention as was specifically [pleaded] pursuant to the Ninth Cause of Action." As the panel noted, "[A]t no time during the course of these proceedings was it ever alleged or argued that the claimed damages under the First Cause of Action included the withheld retention."
The panel also concluded that Erreca's "did not prove that the failure to pay the retention was a breach of contract pursuant to the First Cause of Action." Citing paragraph 4.1.6 of exhibit C to the contract (quoted, ante), the panel noted that the contract "specifically provides that the owner has the right to withhold funds otherwise due the Contractor, without the payment of interest...." "Under the plain terms of the contract, [RECM] clearly did not breach this provision." Citing section 3260, the panel noted, "Although there must be a contract that allows for retention for the statute to apply, there is nothing in the statute or the case law cited that would suggest that recovery is dependent upon a claim for breach of contract." The panel noted that even Erreca's understood the difference between the statutory claim and the contract provision for retention when it argued in support of its motion for attorney fees, " 'section 3260 supersedes the timing and conditions the contract may provide for the return of the retention.' "
The panel noted that "[i]n order to recover the penalty and attorney fees under the statute, the contractor must establish the owner withheld retention proceeds or payments.... [Citation.] Once this has been shown, the contractor is entitled to the funds already earned and the penalty if those funds are not paid within the statutory time. This is totally different from the elements to prove a cause of action for breach of contract and, as set forth above, the analysis required for the determination of the measure of damages as a result of such proven breach. In sum, the amounts withheld were sums already earned by the contractor absent proof by the owner of third party claims that would allow for offsets pursuant to the terms of the contract." As the panel concluded, Erreca's "did not prevail on the First Cause of Action [for breach of contract] and cannot use the Ninth Cause of Action, based on the statute, to boot strap entitlement to whatever remedies might otherwise be available as a prevailing party on the contract cause of action."
The panel found that for purposes of an award of attorney fees under section 1717, RECM and Safeco were the prevailing parties because they prevailed on the breach of contract claim and thereby avoided potential liability of $7 million. The panel concluded that RECM and Safeco were entitled to their fees and costs on the first eight causes of action and that Erreca's, under section 3260, was entitled to its fees and costs on the ninth cause of action.
The panel found RECM incurred fees and costs of $3,228,939.70 pertaining to the contract claims on which it prevailed. The panel awarded Erreca's $1,220,785.01 on the ninth cause of action, which included the improperly retained amounts, interest, attorney fees, and costs. The panel concluded therefore that RECM would have a net recovery of $2,008,154.69.
The panel thereafter issued a revised final award, upholding the interim award, but correcting two numerical typographical errors.
E. Superior Court Confirms Award
RECM and Safeco then filed a motion in the superior court seeking a judgment confirming the award. Erreca's opposed this petition and filed its own petition seeking an order vacating and/or correcting the award. Erreca's claimed the panel majority had made legal errors in reaching its conclusions. Erreca's acknowledged the applicable statutes did not permit a court to review contractual arbitration awards for legal or factual errors, but sought a broader judicial review based on the "Governing Law" provision in the parties' submission agreement that allowed courts to consider legal errors made by the panel.
RECM and Safeco opposed Erreca's petition, arguing there was no statutory basis for vacating or correcting the arbitration award and the proposed expanded judicial review violated contractual arbitration statutes.
After conducting a hearing, the court denied Erreca's' petition. Relying on Crowell v. Downey Cmty. Hosp. Found. (2002) 95 Cal.App.4th 730, 739, the court stated it had no statutory authority to review the merits of the binding arbitration award and the parties could not expand the scope of review by agreement. After correcting the award for a typographical mistake, the court entered a judgment confirming the final arbitration award and awarded RECM and Safeco costs and fees incurred in bringing the petition to confirm.
F. Erreca's First Appeal
Erreca's appealed, asserting that under the parties' submission agreement, the court had the authority to review the final award for legal errors. (Erreca's I, supra, D051491, at p.1.) After the matter was briefed, the California Supreme Court issued its decision in Cable Connection, Inc. v. DIRECTV, Inc. (2008) 44 Cal.4th 1334 (Cable Connection), which held that under California law an agreement to permit judicial review of the legal merits of an arbitration award is enforceable. (Erreca's I, supra, at p. 2.)
Based upon the Cable Connection decision we reversed the judgment, concluding because the arbitration submission agreement expressly allowed courts to review the award for legal errors, "the superior court erred in failing to reach the merits of Erreca's legal challenges to the arbitration award." (Erreca's I, supra, D051491, at p. 2.) We further concluded that because the submission agreement required the panel to set forth findings of fact and conclusions of law, the court "also erred in failing to address Erreca's contentions regarding the adequacy of the arbitrator's explanation of its factual and legal findings." (Erreca's I, supra, at p. 8.)
G. Remand and Confirmation of Award
Following remand, RECM and Safeco again sought to confirm the final award. Erreca's opposed confirmation and sought to correct, vacate or modify the award.
In its motion, Erreca's asserted the arbitration panel (1) erred in concluding Erreca's did not prevail on its breach of contract claim based on its prevailing on its statutory claim for retained amounts under section 3260; (2) erred in awarding Safeco its attorney fees on the fourth cause of action to enforce the mechanic's lien release bond; (3) erred in concluding Erreca's recovery did not exceed RECM and Safeco's Code of Civil Procedure section 998 offer by omitting the arbitration fees from Erreca's recovery; and (4) erred by failing to adequately explain its factual and legal conclusions.
The court granted RECM and Safeco's motion to confirm the award, with the exception of the award of attorney fees to Safeco. In doing so, the court first found that the "panel did not err by finding RECM was the prevailing party on the contract." The court concluded the panel made "no misapplication of law" in reaching that conclusion. The court further noted that "a breach of the contract is one factor among others in determining the prevailing party." Thus, the court concluded that the panel could still find RECM the prevailing party even if the fact Erreca's prevailed on its section 3260 claim demonstrated RECM breached the contract as to the retained amounts.
As to the award to Safeco of attorney fees, the court agreed with Erreca's that as a surety, "Safeco had no right to recover its attorneys' fees on [the] mechanic's lien release bond cause of action." However, the court rejected Erreca's request to vacate the attorney fee award based on that conclusion, stating, "No evidence has been provided to suggest [the] attorney fee award to RECM would be reduced if the panel had not" awarded attorney fees to both Safeco and RECM.
As to the Code of Civil Procedure section 998 offer, the court concluded that the panel did not commit a legal error by failing to include Erreca's arbitration fees in calculating whether Erreca's recovery exceeded RECM's Code of Civil Procedure section 998 offer.
Finally, the court concluded that the panel's final award adequately set forth its findings of fact and law. In this regard, the court stated, "The conclusions in the Final Award (and the Interim Award incorporated [by] reference) are explained in detail, as is the logic the panel employed in reaching its conclusions."
The court confirmed the award and entered judgment in favor of RECM in the amount of $2,008,154.69.
This timely appeal follows.
DISCUSSION
I. STANDARD OF REVIEW
We review a court's order confirming an arbitration award de novo. (Advanced Micro Devices, Inc. v. Intel Corp. (1994) 9 Cal.4th 362, 376, fn. 9.)
II. ERRECA'S' APPEAL
A. The Submission Agreement Allows Challenges to the Panel's Legal Errors
Ordinarily, courts may not review an arbitration award for errors of fact or law. (Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 6.) However, the parties to an arbitration agreement may agree to allow courts to review an arbitration award for legal errors. (Cable Connection, supra, 44 Cal.4th at p. 1361.)
It is undisputed that the submission agreement here provided that the arbitrators did not have the power "to commit errors of law or legal reasoning." However, the submission agreement does not allow review of the arbitrator's factual findings. Thus, to the extent any of Erreca's challenges to the arbitration award are to the panel's factual analysis, the court was without power to review the merits of the panel's award. (Cable Connection, supra, 44 Cal.4th at pp. 1360-1361.)
We conclude that the issues raised by Erreca's are legal issues: Whether the panel erred as a matter of law by (1) determining RECM was the prevailing party on the contract claim; (2) failing to vacate the award to apportion fees as between RECM and Safeco; and (3) failing to consider Erreca's arbitration fees in assessing whether its recovery exceeded RECM's Code of Civil Procedure section 998 offer. Further, as we noted in Erreca's I, the challenge to the adequacy of the panel's findings is expressly allowed by the submission agreement. We address each of Erreca's contentions in turn.
B. RECM as Prevailing Party
The determination of what party is the prevailing party "is to be made 'on a practical level' after considering what each party accomplished via the litigation." (Computer Xpress, Inc. v. Jackson (2001) 93 Cal.App.4th 993, 1017.) "[I]n deciding whether there is a 'party prevailing on the contract, ' the trial court is to compare the relief awarded on the contract claim or claims with the parties' demands on those same claims and their litigation objectives as disclosed by the pleadings, trial briefs, opening statements, and similar sources. The prevailing party determination is to be made only upon a final resolution of the contract claims and only by 'a comparison of the extent to which each party ha[s] succeeded and failed to succeed in its contentions.' " (Hsu v. Abbara (1995) 9 Cal.4th 863, 876.)
Section 3260, subdivision (c) provides that "[w]ithin 45 days after the date of completion, the retention withheld by the owner shall be released." Subdivision (e) provides that "[i]f a bona fide dispute exists between a subcontractor and the original contractor, the original contractor may withhold from that subcontractor with whom the dispute exists its portion of the retention proceeds." Subdivision (g) provides that "[i]n the event that retention payments are not made within the time periods required by this section, the owner or original contractor withholding the unpaid amounts shall be subject to a charge of 2 percent per month on the improperly withheld amount, in lieu of any interest otherwise due. Additionally, in any action for the collection of funds wrongfully withheld, the prevailing party shall be entitled to his or her attorney's fees and costs." (Italics added.)
Erreca's asserts that because the panel found that RECM wrongfully withheld the retained amounts and because of this awarded it attorney fees under section 3260, it necessarily also found that RECM breached the retention provision of the contract. This assertion is unavailing.
The first cause of action for breach of contract, under which the court awarded RECM its attorney fees, was based upon damages for additional work based upon alleged changed site conditions, not a failure to pay retained funds. It is undisputed that RECM prevailed on that claim. As the panel found, "[T]he failure to pay the retention was not [pleaded] and was not encompassed within the First cause of Action." Erreca's sought the retained funds in a separate cause of action under the statutory remedy provided by section 3260. It never alleged that the failure to pay the retained funds in a timely manner was a breach of contract. Indeed, as Erreca's acknowledged, the statute at issue superseded the terms of the contract.
Erreca's points out that in its first amended complaint it incorporated the terms of the construction contract, alleged that RECM had "breached the contract by failing to pay Erreca's money due under the contract, " and in the ninth cause of action realleged and incorporated by reference the allegations of the first cause of action. However, as the panel found, the first cause of action for breach of contract was solely based on the extra work it performed and specifically alleged damages in the amount of $6,919,651.01, the amount of its invoices for its alleged extra work. In the ninth cause of action Erreca's separately pled that RECM owed it $515,351.96 in retention amounts. The complaint clearly establishes that the two causes of action were independent claims, and Erreca's treated them as such throughout the arbitration proceedings.
Erreca's also argues that it identified the retention amount as part of its damages in its opening and closing briefs. However, as the panel found, this was "not with reference to damages for breach of the contract but as to the alleged balance due under the contract."
Finally, Erreca's points out that in a form interrogatory response it identified the failure to pay the retention amount as a breach of the construction contract. However, that interrogatory response was never submitted as evidence during the arbitration or even in the posthearing briefing.
In support of its contention that "a breach of contract is a necessary finding before a party may be awarded attorneys' fees and costs under section 3260, " Erreca's cites section 3260, Taylor v. Van-Catlin Construction (2005) 130 Cal.App.4th 1061 (Taylor), and Denver D. Darling, Inc. v. Controlled Environments Construction, Inc. (2001) 89 Cal.App.4th 1221 (Darling).
However, nothing in the text of section 3260 supports that position. In fact, the award of attorney fees and costs under section 3260 is a penalty provision imposed where a party withholds a retention beyond the statutory time period. (See Hinerfeld-Ward, Inc. v. Lipian (2010) 188 Cal.App.4th 86, 99-100; § 3260.1.) It is not a contractual fee shifting statute such as section 1717. Thus, it is not necessary to find a breach of contract in order to award fees under section 3260.
Erreca's focuses on the term "wrongfully, " distinguishing it from the term "improper" used in the preceding sentence concerning the interest penalty: "A wrongful withholding of retention amount, in contrast to an improper withholding, is a finding of breach of contract." However, the Darling case, cited by Erreca's in support of its argument, actually refutes this contention.
In Darling, a subcontractor sued the general contractor for retention. The general contractor withheld the retention because it claimed a concrete floor installed by the subcontractor did not meet certain specifications. (Darling, supra, 89 Cal.App.4th at pp. 1227-1229.) The superior court ruled that the subcontractor was not entitled to recover penalty interest or attorney fees under section 3260 because there was a "bona fide" dispute between the parties as to the meaning of the contract specifications. (Darling, supra, at p. 1240.) The subcontractor appealed, claiming, among other things, that it should be entitled to recover attorney fees under section 3260 even though it was not entitled to recover penalty interest because there was a bona fide dispute. (Darling, supra, at pp 1241-1242.)
The Court of Appeal rejected this contention, holding the terms "improperly withheld" and "wrongfully withheld" referred to the same conduct─keeping a retention when there was no justification under the statute. (Darling, supra, 89 Cal.App.4th at p. 1241.) As the court stated, "[T]he inclusion of the sentence regarding attorney fees in the same paragraph as the sentence imposing a charge of 2 percent per month on improperly withheld amounts, indicates the Legislature's intention that attorney fees are to be awarded only in cases in which the retention payments are not made within the required time periods, i.e., where a bona fide dispute does not exist." (Ibid.) The critical "sentence begins with the word 'additionally, ' and makes reference to 'funds wrongfully withheld, ' indicating that the attorney fees provision directly relates to the preceding provision imposing a 2 percent per month charge on the 'improperly withheld' amount." (Ibid.)
Taylor, supra, 130 Cal.App.4th 1061, also relied upon by Erreca's, does not support its position either. That case merely involved the issue of whether a party that properly withheld a retention under section 3260 could recover attorney fees─in other words, whether section 3260 was reciprocal. (Taylor, supra, at pp. 1069-1070.) The issue of whether there is a distinction between the terms "improperly" and "wrongfully" was not an issue in Taylor.
Erreca's also cites Martin Brothers Construction, Inc. v. Thompson Pacific Const., Inc. (2009) 179 Cal.App.4th 1401, 1411, footnote 5for the proposition that a "wrongful withholding" means not being faithful to one's duty or obligation under the contract. However, Martin does not so hold. Rather, Martin stated that a "bona fide dispute" means " ' " that state of mind denoting honesty of purpose, freedom from intention to defraud, and, generally speaking, means being faithful to one's duty or obligation." ' " (Ibid.) The Court of Appeal in Martin was not discussing the definition of "wrongful withholding."
Moreover, the panel explicitly found that by withholding the retention RECM did not breach the construction contract. This is because paragraph 4.1.6 of the construction contract allowed RECM to withhold the retention for numerous reasons, including when there were pending claims. Thus, RECM did not breach the construction by withholding the retention. Rather, it only exposed itself to the statutory remedies (and penalties) of section 3260.
Indeed, even if the section 3260 claim could be considered as based in contract, the panel did not abuse its discretion in determining RECM was the prevailing party on the contract. As the panel found, RECM and Safeco achieved their litigation goals by defeating Erreca's claim for $7 million of alleged extra work it performed. In finding that RECM obtained the "greater relief" under the contract, the panel stated, "it is hard to imagine that being found not liable for sums that could have exceeded $7,000,000, as opposed to having to pay retention sums that were ultimately due, was not achieving greater relief under the contract."
As we have stated, ante, "in deciding whether there is a 'party prevailing on the contract, ' the trial court is to compare the relief awarded on the contract claim or claims with the parties' demands on those same claims and their litigation objectives as disclosed by the pleadings, trial briefs, opening statements, and similar sources. The prevailing party determination is to be made only upon a final resolution of the contract claims and only by 'a comparison of the extent to which each party ha[s] succeeded and failed to succeed in its contentions.' " (Hsu v. Abbara, supra, 9 Cal.4th at p. 876.) We cannot say the panel erred as a matter of law in determining this issue in RECM's favor.
C. Correction of Attorney Fee Award
Erreca's asserts that the court erred when it corrected the attorney fee award to provide that only RECM was entitled to attorney fees, but refused to vacate the award to determine how much in fees was attributable to RECM's defense alone. This contention is unavailing.
1. Background
Both sides acknowledge that it was error for the panel to refer to "respondents" as the prevailing parties. The superior court corrected the award to reflect that only RECM was entitled to fees because Safeco, as a surety, had no right to recover attorney fees on the mechanic's lien bond release cause of action. However, the court refused Erreca's request that the award be vacated because "[n]o evidence has been provided to suggest [the] attorney fee award to RECM would be reduced if the panel had not referred to both RECM and Safeco collectively as 'Respondents.' " This decision was not error.
2. Analysis
The law provides that "[a]pportionment of a fee award between fees incurred on a contract cause of action and those incurred on other causes of action is within the trial court's discretion." (Abdallah v. United Savings Bank (1996) 43 Cal.App.4th 1101, 1111.) This is particularly true where the claims are " ' "inextricably intertwined, " ' " [citation] "making it 'impracticable, if not impossible, to separate the multitude of conjoined activities into compensable or noncompensable time units.' " (Ibid.)
The fourth cause of action to foreclose on the mechanic's lien release bond was entirely derivative of the contract claim that asserted a right to additional monies due to changed site conditions. There were no separate or additional issues litigated under that cause of action. Rather, under that cause of action, if Erreca's had prevailed on its contract claim, Safeco would have had to pay to Erreca's the proceeds of the bond Safeco put up as surety. Indeed, Erreca's does not point to any evidence in the record that any of the attorney fees awarded should be, or could be, allocated to Safeco alone.
Erreca's asserts however, that the panel should have made findings of fact and conclusions of law on this issue, as required by the submission agreement. This contention is unavailing.
In support of its position, Erreca's cites Gorman v. Tassajara Development Corp. (2009) 178 Cal.App.4th 44, 67, asserting the absence of an explanation on reaching the attorney fee amount "may make it more difficult for an appellate court to uphold it as reasonable...." However, Erreca's omits the remainder of that sentence which states "but we will not presume error based on such an omission." (Ibid.) Erreca's also ignores the Court of Appeal's statement in the preceding sentence, "We find no California case law....requiring trial courts to explain their decisions on all motions for attorney fees and costs...." (Ibid.) The Court of Appeal also acknowledged that it is the burden of the party opposing the fee award "to identify the particular charges it considers objectionable." (Id. at p. 101.) There is nothing in the record showing that Erreca's ever has asserted or has evidence that some attorney fees were incurred exclusively for Safeco's defense of the fourth cause of action.
Moreover, although the submission agreement required the panel to issue findings of fact and conclusions of law, it also requires that the panel's award be based upon California law. Thus, because California law does not require a statement of reasons in an award of attorney fees, the panel was not required to do so here.
Erreca's reliance on Kaiser Foundation Hospitals v. Workers' Comp. Appeals Board (1979) 91 Cal.App.3d 501 is also misplaced. That case involved a written decision by the Workers' Compensation Appeals Board, which is governed by Labor Code section 5908.5, which requires by statute an explanation of the fee award calculation. (Kaiser, supra, at p. 506.) The Board did not explain its calculation, and the Court of Appeal held that apportionment of fees on a " 'secret' basis destroys the purpose of [Labor Code] section 5908.5." (Kaiser, at p. 506, fn. omitted.)
Here, however, a statutory mandate is not before us. As stated, ante, California law does not require a statement of reasons.
Because Safeco was a nominal party whose liability on the mechanics lien bond claim was entirely derivative of the breach of contract claim, there was no need to apportion fees. Further, the fees were awarded on the contract cause of action to which Safeco was not a party. As Erreca's can point to nothing in the record of the arbitration proceedings showing there is even an issue that some fees were incurred exclusively to defend the mechanics lien claim, the court did not err in refusing the vacate the attorney fee award.
D. Code of Civil Procedure Section 998 Offer
Erreca's contends the panel erred when it refused to apply the $222,253 in arbitration fees it incurred in determining the amount of Erreca's recovery in assessing whether Erreca's recovery exceeded RECM and Safeco's Code of Civil Proceduresection 998 offer. If it had done so, Erreca's asserts its recovery would have exceeded the Code of Civil Proceduresection 998 offer, and it "would have been entitled to further attorneys' fees and costs representing post-[Code of Civil Procedure section] 998 offer attorney's fees and costs."
However, Erreca's total recovery, including the arbitration fees, were on the ninth cause of action, the only cause of action upon which Erreca's prevailed. In calculating Erreca's recovery of fees and costs on that cause of action, the panel determined that 12 percent of Erreca's fees and costs were attributable to the ninth cause of action. Erreca's total fees and costs (both pre- and post- the Code of Civil Proceduresection 998 offer) were approximately $3.288 million. The panel awarded Erreca's approximately $398,640, which is roughly 12 percent of that amount. Thus, the panel in fact awarded Erreca's all of its pre- and post-offer fees and costs.
Furthermore, although the submission agreement provided that the arbitration fees would be divided evenly between the parties and "shall be a part of taxable costs herein" (in other words, costs to which Erreca's would be entitled to after it prevailed on its ninth cause of action), that provision did not dictate that the panel consider them in assessing whether Erreca's recovery exceeded RECM and Safeco's Code of Civil Proceduresection 998 offer. As the panel noted, in calculating a recovery for purposes of analyzing a Code of Civil Proceduresection 998 offer, it was to consider those pre-offer costs specified by statute: "The costs allowable under [Code of Civil Procedure]section 1032 are as specified in [Code of Civil Procedure]section 1033.5 which is recognized by [Erreca's] in its breakdown of statutory costs as differentiated from the costs allowable pursuant to the Contract and Arbitration Submission Agreement. [Citation.] The majority of the Panel specifically determines that arbitration fees are not allowable costs for consideration under [Code of Civil Procedure]section 998." Because the parties agreed that arbitration fees could be part of the taxable costs in a post-arbitration claim for attorney fees and costs, does not mean the arbitrators were required to consider them in assessing the [Code of Civil Procedure]section 998 offer, which limited consideration to those specified by statute.
E. Adequacy of Findings of Fact and Conclusions of Law
Erreca's last contention is that the Panel erred by failing to "lay out findings of fact and conclusions of law" as required under the submission agreement. This contention is unavailing.
The panel's 29-page interim award provided detailed findings of fact and conclusions of law necessary to its decision to deny relief. And Erreca's does not claim that the findings of fact and conclusions of law were insufficient as to the first cause of action for breach of contract. Rather, Erreca's asserts that it was improper because it did not set forth detailed findings as to the second through eighth causes of action.
Erreca's first attacks the panel's findings as to the second and third causes of action for breach of express and implied warranties because it merely stated that Erreca's had not sustained its burden of proof on these claims. However, this ignores the fact that these claims were based upon the same allegations as the breach of contract claim. There is no requirement in the submission agreement that the panel had to repeat the same factual and legal findings as to each cause of action where they would be redundant.
Erreca's claim that there was an alleged breach of warranties was that (1) Erreca's could rely on the accuracy of the technical data and opinions in the construction contract documents, including the Geocon Soils report; and (2) could rely on the warranty that the site would balance. The panel found that "[t]here was no evidence that the test data provided by Geocon was in fact in error" and, even accepting "Erreca's definition" of "site to balance, " Erreca's "did not produce competent evidence that it was damaged because the site was long at some point[s] during the grading." Again, the breach of warranty claims were derivative of the breach of contract claim and Erreca's does not point to any factual or legal discussion that is missing from the award as to these claims.
Erreca's next asserts the panel erred by "failing to address each of Erreca's distinct claims for rescission presented in the Fifth, Sixth, and Seventh Causes of Action for mutual mistake, unilateral mistake, and negligent misrepresentation, respectively." However, each of those causes of action sought rescission on the same basis as the breach of contract claim, i.e., that it entered into the construction contract based upon its mistaken belief that the "project earthwork at the site would 'balance' as represented in the CONTRACT." This claim was rejected in the panel's analysis of the breach of contract claim, and no separate analysis was required as to these causes of action as it would be redundant.
Erreca's asserts the award was deficient for failing to set forth findings of fact and conclusions of law as to the eighth cause of action for quantum meruit. However, this cause of action alleged entitlement to additional compensation for extra work performed due to site balance and was dependent on rescission of the construction contract. Again, no separate analysis was required as to this cause of action as that claim was rejected when the panel rejected Erreca's breach of contract and rescission claims.
Further, the cases cited by Erreca's in support of its claim the form of the award was deficient do not support its position. In Gueyffier v. Ann Summers, Ltd. (2008) 43 Cal.4th 1179, 1187, our Supreme Court held that the arbitrator did not exceed his powers by making an award without particular findings because no such findings were required under the agreement to arbitrate. In Bank of Coronado v. Shreve (1921) 51 Cal.App. 353, 357, the Court of Appeal held the agreement only required a determination by the panel of the matters in controversy, and the panel's determination included all such matters. In Bonshire v. Thompson (1997) 52 Cal.App.4th 803, the Court of Appeal did not base its holding on a lack of factual findings. Rather, it held the arbitrator exceeded his powers by reforming the parties' contract when he was expressly not permitted to do so. (Id. at p. 811.)
Erreca's also asserts the award was deficient under the standards by Federal Rule of Civil Procedure 52(a) (Rule 52(a)). However, the submission agreement states that the arbitration must be in accordance with California law, not federal.
Further, Rule 52(a) does not assist Erreca's argument: "Rule 52(a) does not require a district court to set out its findings and conclusions in excruciating detail. As stated in the advisory committee notes to Rule 52, 'the judge need only make brief, definite, pertinent findings and conclusions upon the contested matters; there is no necessity for over elaboration of detail or particularization of facts.' " OCI Wyoming v. PacifiCorp (10th Cir. 2007) 479 F.3d 1199, 1204.) The award easily meets this standard.
II. RECM'S APPEAL
On its appeal, RECM asserts that in confirming the award, the court erred by failing to grant RECM prejudgment interest from the date the award was issued to the date of entry of judgment. This contention is unavailing.
A. Background
As part of RECM's motion to confirm the award, it sought interest "from the date of the Award." The court denied RECM's request, relying on Stockton Theaters, Inc. v. Palermo (1961) 55 Cal.2d 439 (Stockton), which held that interest does not run from the date of a judgment that is reversed by an appellate court. (Id. at pp. 442-443.) The court found that because in Erreca's I we reversed the judgment confirming the arbitration award, RECM was not entitled to prejudgment interest.
B. Analysis
Pursuant to section 3287, subdivision (a), "Every person who is entitled to recover damages certain, or capable of being made certain by calculation, and the right to recover which is vested in him upon a particular day, is entitled also to recover interest thereon from that day, except during such time as the debtor is prevented by law, or by the act of the creditor from paying the debt." As the Court of Appeal explained in Britz, Inc. v. Alfa-Laval Food & Dairy Co. (1995) 34 Cal.App.4th 1085, 1106, "As of the date of the [arbitration] award, [the prevailing party is] entitled to 'recover damages certain' through entry of judgment confirming the award." This is because the arbitration award itself results in a new and fixed liability for which section 3287, subdivision (a) interest is recoverable. (Pierotti v. Torian (2000) 81 Cal.App.4th 17, 27.)
Thus, ordinarily RECM would be entitled to prejudgment interest from the date of the award until the date the award is confirmed by the superior court.
However, in cases where the original judgment is reversed on appeal and a new judgment entered following remand, interest runs only from the date of the new judgment. (Stockton, supra, 55 Cal.2d at pp. 442-443.) As the high court in Stockton put it: "A judgment bears legal interest from the date of its entry in the trial court even though it is still subject to direct attack. [Citation.] When a judgment is modified on appeal, whether upward or downward, the new sum draws interest from the date of entry of the original order, not from the date of the new judgment. [Citations.] On the other hand, when a judgment is reversed on appeal the new award subsequently entered by the trial court can bear interest only from the date of entry of new judgment."(Ibid., italics added.)
Here, this court reversed the first judgment, holding that the trial court erred in not addressing Erreca's claims that the panel made errors of law. We directed the superior court to review the substantive merits of Erreca's claims. Following remand, had Erreca's prevailed on it's claims of legal error, the outcome of the case, including who was deemed the prevailing party, could have changed the entire outcome of the case. Thus, the reversal of the first judgment was not a mere modification, but rather, was a complete reversal. Accordingly, under Stockton, Erreca's was entitled to interest only from the date of the second judgment.
RECM relies on two federal cases, AT&T v. United Computer Sys. (9th Cir. 1996) 98 F.3d 1206 (AT&T) and Northrop Corp. v. Triad International Marketing S.A. (9th Cir. 1998) 842 F.2d 1154 (Northrop) in asserting it is entitled to interest from the date of the arbitration award, despite this court's reversal of the judgment in Erreca's I. These cases do not assist RECM's position and in fact support the court's decision denying interest.
As the federal court in AT&T itself noted, the general rule is that where a vacated judgment is restored after appeal, the prejudgment interest "runs through the date of the newly-entered judgment." (AT&T, supra, 98 F.3d at p. 1209.) Apparently RECM relies upon an exception to the rule noted by the federal court in AT&T: "[A]n exception to this rule is made when a legally sufficient determination of damages had been made at the time of some prior judgment, which the judgment upon remand essentially reinstates." (Ibid.)
In Northrop, the Ninth Circuit also noted this exception, holding that interest ran from the district court's first order refusing to enforce an arbitration award because the Ninth Circuit's reversal of the district court's order merely reinstated the award. (Northrop, supra, 842 F.2d at pp. 1155-1157.)
Here, the exception noted by the courts in AT&T and Northrop is not applicable because the first judgment was reversed by this court. This court's reversal did not reinstate the original judgment. Rather, we vacated the original judgment and directed the superior court to review the arbitration award for errors of law. As discussed, ante, if the superior court had accepted Erreca's claims of error, an entirely different result from the first judgment could have resulted. Thus, the court did not err in refusing to award RECM prejudgment interest from the time of the award until the entry of the first judgment.
DISPOSITION
The judgment is affirmed. RECM shall recover its costs on appeal.
WE CONCUR: HALLER, J., McINTYRE, J.