Estoppel/Fee Clause Interpretation: Winning Subcontractor In Contractual Litigation Not Entitled To Fee Recovery Where Contract Clause Only Applied To Arbitration

 

Contract Crystal Clear, Meaning $172,850.02 Fee Award Went POOF!

     This one had to hurt.

     In Ponce v. Philco Construction, Inc., Case No. G049097 (4^th Dist., Div. 3 Jan. 21, 2014) (unpublished), contractor Philco subcontracted work out on a Moreno Valley auto service store to subcontractor Ponce, who was not paid for all of his services. Subcontractor sued contractor and owner when he was not paid in full on the contract price, winning a $92,023.04 jury verdict. After that, the lower court awarded him interest, costs, and $172,850.02 in attorney’s fees based on a contractual fees clause in the subcontract with contractor.

     The fee award went POOF! on appeal.

     How did that happen? Simple, the subcontract fees clause specified that all parties shall reserve controversies under the subcontract to arbitration and that the arbitrator had authority to award fees. Here, there was no arbitration; hence, no fees. The contractual fees clause was “crystal clear” in leading to this result. Also, the appellate court rejected the theory that the parties’ respective pleadings of fee recovery created an estoppel as an independent basis for fee entitlement, relying on Blickman Turkus, LP v. Downtown Sunnyvale, LLC, 162 Cal.App.4^th 858, 898 (2008) for not accepting such a theory.

    Justice Ikola penned the 3-0 panel decision.