Defendant Was Neither a Party to the Property Owner-HOA Settlement Nor Resulting Arbitration.
Owner hired contractor to convert a hotel it owned into apartments and retail space. A few years later, the apartments were converted to condos and sold to the public, with an HOA being formed. Owner had to disclose certain construction defects and make certain repairs (costing it money on condo sales), filing suit against contractor based on negligence, breach of contract and breach of warranty theories--seeking fee recovery on the contract-based claims. HOA sued both owner and contractor for construction defect damages, prompting owner to file a cross-complaint against contractor seeking defense and indemnity against HOA’s claims. Owner and HOA resolved their dispute by a settlement agreement to which contractor was not a party, but which produced a subsequent arbitration--again, to which contractor was not a party--ultimately resulting in an award by which $300,000 was given by contractor to HOA. The arbitration award was confirmed, and owner then sought to recover $1.26 million in fees, costs, and prejudgment interest against contractor based on a fee provision in the owner-contractor construction contract. The lower court awarded $901,085.27 in fees to owner, prompting an appeal by contractor.
Contractor won a total reversal of fortune in Janopaul + Block Companies v. Sundt Constr. Co., Case No. D059947 (4th Dist., Div. 1 Apr. 16, 2013) (unpublished).
On the costs issue, the appellate court found that owner’s action and cross-action against contractor were effectively dismissed pursuant to the settlements among owner, contractor, and HOA such that contractor had a dismissal in its favor--all meaning no costs to owner. (Chinn v. KMR Property Mgt., 166 Cal.App.4th 175, 188 (2008).) Because contractor was not a party to the settlement agreement or to the arbitration proceedings, the portion of the arbitrator’s award reserving costs recovery to owner was not a binding stipulation on contractor.
Then, with respect to the fee recovery issue, there could be no prevailing party given the settlement dismissal found above, relying on Santisas v. Goodin, 17 Cal.4th 599, 614-615 (1998) [one of our Leading Cases]. Because owner only sought fees under contract-based issues, Santisas governed--the negligence claim had no fee request and was actually a contract claim in “wolves’ clothing”.
Interestingly enough, owner argued that parties can waive Santisas for purposes of submitting a prevailing party question to the trial court for resolution, citing Jackson v. Homeowners Assn. Monte Vista Estates-East, 93 Cal.App.4th 773, 782 (2001). The 4/1 appellate panel questioned whether Jackson was consistent with Santisas, but found it did not apply because contractor never entered into the owner-HOA settlement agreement.
Note to our readers: We have added a new sidebar category to our blawg: “Construction.”
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