Prevailing Party, Special Fee Shifting Statutes: Trial Court’s Determination That There Was No Prevailing Party Under Civ. Code Section 8800 In Prompt Payment Action Affirmed, But Reversal For Same Determination Under Code Civ. Proc., Section 1032

Determination Of Prevailing Party Under Section 8800 Is Left To The Trial Court’s Broad Discretion, But The Trial Court Abused Its Discretion In Determining There Was No Prevailing Party Under Section 1032 Where Plaintiff Was The Only Party With A Net Monetary Recovery.

            Civil Code section 8800 is a prompt payment statute governing progress payments that an owner shall pay the direct contractor.  Section 8800(c) entitles the prevailing party in an action for collection of the amount wrongfully withheld to costs and reasonable attorney’s fees. 

            In Vought Construction Inc. v. Stock, Case No. A164823 (1^st Dist., Div. 4 October 24, 2022) (published), plaintiff sought the balance due for renovations it performed on defendant’s home, an additional amount for a change order, and penalties for Civil Code section 8800 violations (prompt payment statute).  Defendant agreed with the balance due, but disputed the additional amount sought by contractor, and also claimed a liquidated damages offset for delay.  The parties’ contract did not contain an attorney’s fees provision, so the parties relied on the fees/costs recovery allowed pursuant to section 8800.

            Following a four-day bench trial, the trial court found that each party had acted in good faith, and that contractor failed to prove homeowner had violated section 8800.  Additionally, the trial court found that contractor was entitled to roughly half of the additional amount it sought for a change order, and homeowner was entitled to roughly half of the liquidated damages offset he sought.  Based on the trial court’s findings, it also determined that neither party achieved prevailing party status for recovery of fees and costs under either section 8800 or costs under Code Civ. Proc., section 1032.

            Contractor argued on appeal that based on a practical evaluation of the litigation as a whole, the trial court abused its discretion by not finding it to be the prevailing party under section 8800.  The appellate panel disagreed.  Section 8800 does not define prevailing party and, contrary to contractor’s argument, section 1032 does not govern as to the definition of prevailing party.  Rather, determination as to whether a party has achieved prevailing party status under section 8800 is left to the trial court’s broad discretion which is made on a practical level.  Given the outcome in the case – with the trial court’s determination that section 8800 had not been violated as each party had acted in good faith, and with each party achieving roughly one-half of what they sought – the 1/4 DCA found no abuse of discretion with the trial court’s ruling on prevailing party as to section 8800.

            However, the appellate panel disagreed with the trial court’s ruling under section 1032.  Section 1032’s definition of prevailing party includes “the party with a net monetary recovery.”  In this case, contractor was the only party with a net monetary recovery, and was therefore entitled to recover its costs.  The trial court erred in considering homeowner’s setoff claim in determining the prevailing party under section 1032 as the homeowner had no net monetary recovery.