FNB v. Mountain Cascade

• Decision Date: 24 January 2000
• Citation: 77 Cal.App.4th 871,92 Cal.Rptr.2d 145
• Parties: (Cal.App. 1 Dist. 2000) FIRST NATIONWIDE BANK, et al., Cross-Complainants and Respondents, v. MOUNTAIN CASCADE, INC., Cross-Defendant and Appellant. A085802 Filed
• Court: California Court of Appeals Court of Appeals

92 Cal.Rptr.2d 145 (Cal.App. 1 Dist. 2000)

FIRST NATIONWIDE BANK, et al., Cross-Complainants and Respondents, v. MOUNTAIN CASCADE, INC., Cross-Defendant and Appellant.

A085802

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA, FIRST APPELLATE DISTRICT DIVISION TWO

Filed 1/24/00

(Solano County Super. Ct. No. L001759)

Trial Judge: Hon. James F. Moelk

Attorneys for Appellants, Richard Capella, Deborah Broom, Knopfler & Robertson

Attorneys for Respondents, Kevin J. Senn, Michael J. Kerins, Senn, Palumbo, Meulemans, LLP

CERTIFIED FOR PARTIAL PUBLICATION¹

Haerle, J.

PUBLISHED PART

I. INTRODUCTION

After entering a judgment in favor of respondents in this construction defect dispute, the trial court granted respondents' request for prejudgment interest, expert fees, and attorney fees. Appellant Mountain Cascade, Inc. (Mountain Cascade) contends these post-judgment awards were error, arguing: (1) the trial court should have applied recent case law retroactively to bar respondents' award of prejudgment interest; (2) the trial court should have deducted respondent First Nationwide Bank's ^B attorney fees from the total attorney fee award because it was not entitled to recover fees under the contractual attorney fees provision; and (3) the trial court should have refused to award expert witness fees to respondents because they are expressly disallowed by statute.

We disagree with Mountain Cascade's first contention, but we are persuaded by its second and third points. Accordingly, we affirm the prejudgment interest award and reverse the award of attorney fees and expert witness fees. The attorney fees matter is remanded to the trial court with instructions to apportion the fees between FNB and Southampton Company, and award attorney fees solely to the latter in a manner consistent with this opinion.

II. BACKGROUND

FNB owned land in Benicia, California, that was the site for a subdivision project called "The Villas." The developer for the project was respondent Alma Associates dba Southampton Company (Southampton). Southampton entered into a contract with Mountain Cascade to install a storm drain and a corporation stop² at The Villas. Under the heading "Progress Payments," this contract contained the following provision: "Based upon applications for payment submitted to the Owner by the Contractor, the Owner shall make progress payments on account of the Contract Sum to the Contractor as provided below . . . . Should Owner fail to pay Contractor the monies called for under this agreement when they become due, then such unpaid sum shall bear interest at the maximum legal rate until payment in full has been received. In the event that it becomes necessary for Contractor, by lien or other action, to enforce collection of any amount, payable by Owner hereunder, Owner agrees to pay Contractor all necessary expenses, including attorney's fees, incurred by Contractor in the institution and prosecution of such action."

After the project was completed, the owners of The Villas townhouses filed suit against FNB and Southampton alleging damage to their units caused by severe differential soil settlement. FNB repurchased the units from the owners, and arranged to have the soil re-engineered and re-compacted so that new townhouses could be constructed on the site. Thereafter, the homeowners settled their claims with FNB, and assigned any further rights they might have to recover under their sales agreements to FNB.

On November 22, 1993, Southampton filed a cross-complaint against Mountain Cascade and certain other contractors, asserting causes of action for express indemnity, breach of contract, implied contractual indemnity, breach of implied warranties, equitable indemnity, contribution, declaratory relief, breach of warranty, and negligence. The next day, FNB filed a cross complaint against the same entities asserting claims for comparative equitable indemnity and declaratory relief.

Approximately three years before trial, FNB and Southampton decided to employ the services of the same counsel to prosecute their cross-complaints.

On May 22, 1998, the jury returned a special verdict in favor of respondents based on the following theories: (1) negligence; (2) breach of contract, and (3) breach of warranty. The jury awarded respondents $1,875,000 in damages, and determined that Mountain Cascade was responsible for 97% of these damages. The remaining 3% was apportioned to another cross-defendant who is not a party to this appeal.

On May 26, 1998, judgment on the cross-complaints was entered in favor of respondents. The judgment awarded costs to respondents in an amount to be determined after respondents submitted a memorandum of costs. On June 9, 1998, respondents filed a timely memorandum of costs which included a request for prejudgment interest. The next day, North Oakland Medical Clinic v. Rogers (1999) 65 Cal.App.4th 824 (North Oakland) appeared in the advance sheets of the legal newspaper, the Daily Journal. In North Oakland, a panel from this Division determined that a cost bill is not the appropriate vehicle for requesting prejudgment interest. (Id. at p. 830.)

By letter dated June 11, 1998 and served on all parties, respondents requested clarification and instructions from the trial court regarding the impact of North Oakland on their request for prejudgment interest. The court responded on June 26, 1998, stating that, in light of the absence of any correspondence or objection from Mountain Cascade's counsel, it had decided to accept respondents' request for prejudgment interest despite their failure to follow the procedure announced in North Oakland. It also advised the parties that if there was an objection "to the interest as calculated, an appropriate motion may be filed and the court will entertain arguments on all sides of the question."

On July 7, 1998, Mountain Cascade filed a motion to tax costs in which it moved to strike the request for prejudgment interest. On July 22, 1998, respondents filed a motion to recover attorney fees and expert costs associated with the litigation. The court denied Mountain Cascade's motion to tax costs on December 10, 1998, and granted respondents' motion for attorney fees and expert costs. The court entered an amended judgment awarding respondents $345,126 in attorney fees, $561,416.60 in prejudgment interest, $59,111.27 in expert fees, and $25,092 in court costs. This appeal challenging the award of attorney fees, prejudgment interest, and expert fees followed.

END PUBLISHED PART

III. DISCUSSION

A. Prejudgment Interest

Mountain Cascade contends the trial court should have applied the holding of North Oakland, supra, 65 Cal.App.4th 824 retroactively, and refused to award respondents prejudgment interest based on their failure to follow the procedure outlined in that opinion.³ We disagree.

In North Oakland, we held that a successful plaintiff must seek an award of prejudgment interest either by motion prior to entry of judgment, or by a timely motion for a new trial based on inadequate damages. (North Oakland, supra, 65 Cal.App.4th at pp. 829-831.) The court expressly rejected the argument that a cost bill is an appropriate vehicle for requesting prejudgment interest. (Id. at p. 830.)

This holding was applied retroactively to the North Oakland plaintiffs based on their "egregious conduct together with the extreme lateness of [their] request . . . ." (North Oakland, supra, 65 Cal.App.4th at p. 831.) The North Oakland court described this egregious conduct as follows: "After the verdict in their favor, plaintiffs did not move for an award of interest before entry of judgment. Nor did they seek an award of prejudgment interest at any of the post judgment proceedings which followed. They never sought interest in their request for an award of costs. Rather, at virtually the last minute, plaintiffs inserted an interest award in the order awarding costs which they presented to the court, in clear violation of Roger's due process right to notice and an opportunity for hearing. [Citations.]" (Ibid.)

Thus, the court explained: "Because no statute, rule of court, or case authority has heretofore established a particular procedure or time frame for requesting an award of prejudgment interest after the jury returns a verdict for the plaintiff and because the existing state of the law indicated the request might follow entry of judgment, in other circumstances we might conclude it unfair to penalize plaintiffs for failing to make their request in accordance with the procedure we adopt in this case. However, under the circumstances here, we are convinced the uncertain state of the law concerning the appropriate timing and procedure for requesting prejudgment interest did not contribute significantly to plaintiffs' lapse and warrant retroactive application of the rule we adopt." (North Oakland, supra, 65 Cal.App.4th at p. 831.)

Unlike the plaintiffs in North Oakland, however, respondents in this case neither engaged in egregious conduct, nor presented an untimely prejudgment interest request. Instead, shortly after the judgment was entered, they requested prejudgment interest via a timely, duly-noticed memorandum of costs. Had the North Oakland opinion been available at that time, respondents could have complied with the procedure outlined therein, because the time had not yet passed to submit a timely motion for new trial. ( 659.) Moreover, once the North Oakland opinion appeared in the advance sheets, respondents diligently sought clarification from the trial court to determine how to proceed, and were reassured by the trial court that their request for prejudgment interest contained in the cost memorandum was still valid. By the time Mountain Cascade filed its motion to tax costs, the opportunity to assert the right to prejudgment interest in a timely motion for new trial had passed.

Given these circumstances, we conclude that respondents' failure to follow the...