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East West Bank v. Rio School District

California Court of Appeals, Second District, Sixth Division

April 1, 2015

EAST WEST BANK, Plaintiff and Respondent,
v.
RIO SCHOOL DISTRICT, Defendant and Appellant.

[CERTIFIED FOR PARTIAL PUBLICATION[*]]

Superior Court County of Ventura Nos. CIV201015, 01CC05901, 01HL05281, 204779, 205936, 207742, 207744, 207994, 208016, 223403 William Q. Liebmann, Judge Mark S. Borrell, Judge

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[Copyrighted Material Omitted]

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COUNSEL

Baute Crochetiere & Gilford, David P. Crochetiere, Andrew Michael Gilford; Negele & Associates, James R. Negele and Jonathan R. Hickman for Defendant and Appellant.

Kronick, Moskovitz, Tiedemann & Girard, Christian M. Keiner, Chelsea R. Olson and James P. Wiezel for Education Legal Alliance of the California Schools Board Association as Amicus Curiae on behalf of Defendant and Appellant.

Raisin & Kavcioglu, Bradley A. Raisin, Armenak Kavcioglu, Aren Kavcioglu; Cox, Castle & Nicholson, Kenneth B. Bley, Randy P. Orlik and Susan S. Davis for Plaintiff and Respondent.

OPINION

GILBERT, P. J.

Public Contract Code section 7107 (section 7107) allows a public entity to withhold funds due a contractor when there are liens on the

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property or a good faith dispute concerning whether the work was properly performed. Here we conclude that a dispute over the contract price does not entitle a public entity to withhold funds due a contractor.

We disagree with Martin Brothers Construction, Inc. v. Thompson Pacific Construction, Inc. (2009) 179 Cal.App.4th 1401 [102 Cal.Rptr.3d 419] (Martin Brothers), which holds otherwise. We also conclude the doctrine of unclean hands does not apply to section 7107.

This case arises from a contract for the construction of a school. After the school was completed, the school district and its general contractor engaged in a decade-long legal battle. The result was a judgment for the contractor FTR International, Inc. (FTR) against the Rio School District (District) exceeding $9 million. District appeals.

We conclude: the trial court properly assessed penalties against District because it did not timely release retained funds required by section 7107. [[/]][*]

..................................................................................................

We also conclude [[/]]* the trial court erred in awarding fees for work not solely related to FTR's cause of action pursuant to section 7107.

We reverse and remand with instructions in the instances where the trial court erred and affirm in all other respects.

FACTS

FTR has constructed buildings for public entities, including schools, courthouses and libraries for 15 years. In 1999, FTR submitted the winning bid in the amount of $7.345 million to construct a school for District.[2]

During construction, FTR submitted approximately 150 proposed change orders (PCO). FTR claimed some of the PCOs were necessary because the plans provided by District were inadequate or misleading. District denied most of the PCOs on the grounds that the work was covered under the basic ...


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