Opinion
NOT TO BE PUBLISHED
Contra Costa County Super. Ct. No. C0300195
Siggins, J.
Liberty Union High School District (the District) appeals from a judgment in favor of Tricon Construction, Inc. (Tricon) for damages awarded to Tricon due to the District’s breach of a contract to build a swimming pool. The District argues that an erroneous jury instruction foreclosed the jury’s consideration of its affirmative defenses based on avoidable consequences and mitigation of damages. The District also contends the trial court incorrectly calculated damages for weather-related delays, and erroneously awarded statutory penalties, interest, and attorney and expert fees. We vacate the penalties, interest, and attorney fees awarded pursuant to Public Contract Code sections 7101 and 20104.50 and the expert fees awarded pursuant to Code of Civil Procedure section 998. We otherwise affirm the judgment.
Unless otherwise noted all further statutory references are to the Public Contract Code.
FACTUAL AND PROCEDURAL BACKGROUND
The District hired Tricon, as a general contractor, to build a high school swimming pool. The District issued a notice to proceed on April 2, 2001, and the project was to be completed by September 28, 2001. After construction commenced, the project had to be redesigned due to concerns of the county health department that were overlooked until after construction was underway. In mid-May 2001, the architects began work to redesign the project to conform to county requirements. On June 1, 2001, the District notified Tricon to stop construction. Later that month, the county health department approved the redesigned plans. District trustees met on June 27, 2001, and approved a resolution declaring an emergency due to hazards caused by the incomplete and suspended nature of the swimming pool construction. The declaration of emergency allowed the District to negotiate construction of the redesign with Tricon and avoid the possibility that, due to the scope of the redesign, the contract was again subject to competitive bidding.
Negotiations over the cost and timing of work on the redesigned project commenced in July 2001. On July 13, Tricon advised the District it could do the work as redesigned for an additional $349,762.00. The parties continued to discuss a price for the redesigned work. Tricon later indicated it could do the work for $338,000, but the parties were unable to agree on whether that amount would represent a fixed sum or a maximum cost. On July 25, the District board approved an emergency change order to the Tricon contract. The board agenda item stated: “Amount of change order is $338,000.” On July 26, the District directed Tricon to proceed on the revised design. Tricon was notified of the District’s decision in a letter from the District’s architects that attached a proposed change order form specified in the contract, and a letter from the District’s construction manager. Neither the proposed change order nor the letter from the District construction manager reference any price, terms of payment for the change or time for completion. Tricon declined to resume the work because the parties had not agreed on the price and terms of payment.
On October 19, the District and Tricon agreed to a price of $235,000 for the project changes and to extend the project completion date to March 1, 2002. Tricon resumed work on the redesign on October 24. The District trustees approved the change order for the redesigned pool in the amount of $235,000 (the November change order), at their November 14, 2001, meeting.
But the project was not completed by March 1, 2002, as specified in the November change order. A particularly wet winter caused significant delays and damage to the excavation. Tricon substantially completed its work on the project in mid-September 2002, except for certain disputed punch list items, and the District recorded a notice of completion on December 13, 2002.
Witnesses for both sides later testified that wet weather caused more than 120 days of delay on the project.
Tricon president Thomas Reid testified that the construction consumed 179 days of actual work, but Tricon spent 532 days on the project due to delays involved in redesigning the project, negotiating the additional work, and coping with the unusually heavy rainfall.
In January 2003, Tricon applied for its final payment. In response, the District notified Tricon that no amount was due because the District’s liquidated and other damages, including back charges and stop notices filed by subcontractors, exceeded the balance owed for the project.
When Tricon applied for its final payment, the District had paid all but $322,456.45 of the amount owed under the contract. The District withheld $22,500 for punch list items that were not completed, $40,247.56 to cover a stop notice filed by a subcontractor, and $276,000 as liquidated damages. The amount retained by the District totaled $338,747.56, which exceeded the $322,456.45 balance that Tricon said was owed under the contract.
Tricon sued the District for breach of contract. The operative third amended complaint alleged the District provided defective construction plans, failed to timely obtain required approvals and permits, delayed the work, and failed to grant time extensions or pay all monies due under the contract. The complaint sought damages including the unpaid contract balance, damages for delay, and statutory penalties and interest. The case was tried in three phases.
The complaint also alleged causes of action for reformation of the contract, rescission of the November change order, declaratory relief and estoppel. The District cross-complained and asserted causes of action for breach of contract and breach of the implied covenant of good faith and fair dealing.
The first phase was tried to the court and the issues presented were whether the original contract between Tricon and the District was modified, and if it was, what were the terms and conditions of the modified contract. The court found the parties’ original contract was modified by the November change order. The court rejected Tricon’s claim that the contract was modified by the proposed change order issued in July. The July change, the court concluded, was simply one of a series of offers and counteroffers between the parties. The court concluded the price for the November change order was $235,000. The November change order also revised the scope of the project work, and extended the project completion date to March 1, 2002.
The second phase was tried to a jury and the issues were whether either of the parties breached the contract, and, if so, what were the injured parties’ damages. In a three-part special verdict, the jury found the District breached the contract, and caused 354 days of delay, all of which were excusable and 40 of which were unreasonable and unanticipated. The jury found the District had already compensated Tricon for 75 calendar days under the change order, leaving a total of 279 uncompensated delay days. The jury also found the District breached the implied covenant of good faith and fair dealing. The jury absolved Tricon of any liability for breach of its contract and its duties under the implied covenant. The jury also found a dispute existed between the parties with regard to liquidated damages when the District withheld those funds, and that while the District acted in good faith, the liquidated damages were wrongfully withheld.
During the third phase of trial, the court determined the monetary amount of Tricon’s damages, and awarded certain statutory penalties, interest, and attorney fees and costs. The District timely appealed from the judgment and the subsequent order setting attorney fees and costs.
We granted the District’s motion to consolidate the appeals.
DISCUSSION
A. Jury Instruction Regarding Date of Effective Change Order
In its decision following the first phase of trial, the court concluded, as urged by the District, that the contract was modified by the November change order, and that the proposed change order issued in July was of no effect. In accord with this finding, the trial court instructed the jury during the second phase of trial that “the only effective change order for the required redesign work for the swimming pool was the change order authorized and approved by the district board at its November 14th, 2001, meeting. Tricon had no obligation under the contract to proceed with work on the pool prior to the time the November 14th, 2001, change order [was] authorized and approved.” The District argues the court erred in giving this instruction because doing so negated the District’s defenses based on the doctrines of avoidable consequences and mitigation of damages. We disagree and conclude there was no error.
The District argues the court instructed the jury on this issue sua sponte, although the record reflects Tricon’s request for a special jury instruction that: “Tricon was under no contract obligation to perform the redesign change order before November 14, 2001, because the School Board did not approve the contract modification until November 14, 2001.”
The defenses the District sought to invoke are well settled. “Under the avoidable consequences doctrine as recognized in California, a person injured by another’s wrongful conduct will not be compensated for damages that the injured person could have avoided by reasonable effort or expenditure. [Citations.] The reasonableness of the injured party’s efforts must be judged in light of the situation existing at the time and not with the benefit of hindsight. [Citation.] ‘The standard by which the reasonableness of the injured party’s efforts is to be measured is not as high as the standard required in other areas of law.’ [Citation.] The defendant bears the burden of pleading and proving a defense based on the avoidable consequences doctrine.” (State Dept. of Health Services v. Superior Court (2003) 31 Cal.4th 1026, 1043-1044.)
“The doctrine of mitigation of damages holds that ‘[a] plaintiff who suffers damage as a result of either a breach of contract or a tort has a duty to take reasonable steps to mitigate those damages and will not be able to recover for any losses which could have been thus avoided.’ [Citations.] A plaintiff may not recover for damages avoidable through ordinary care and reasonable exertion.” (Valle de Oro Bank v. Gamboa (1994) 26 Cal.App.4th 1686, 1691.) But “[t]he duty to mitigate damages does not require an injured party to do what is unreasonable or impracticable. [Citation.] ‘The rule of mitigation of damages has no application where its effect would be to require the innocent party to sacrifice and surrender important and valuable rights.’ ” (Ibid; see also 11 Corbin on Contracts (rev. ed. 2005) § 57.11, p. 311 [“[t]he wronged party need not act if the cost of avoidance would involve unreasonable expense”].)
When the court informed counsel that it intended to instruct the jury that the November change order modified the contract, the District claimed it should be allowed to argue that Tricon could have mitigated damages and avoided delay-caused losses by starting work on the redesigned project in July. The court told counsel that “the [D]istrict is estopped from taking that position since the litigating position of the [D]istrict has been throughout that there was no enforceable change order. Essentially the [D]istrict position at this point seems to be that despite the absence of any enforceable contract, that Tricon should have, at its peril, without an enforceable contract nevertheless commenced work, and that is not the law . . . .” The court also recognized that “the evidence is uncontradicted that Tricon did resume its work and did undertake work on the project commencing on October 24th of 2001.”
“ ‘ “ ‘Judicial estoppel precludes a party from gaining an advantage by taking one position, and then seeking a second advantage by taking an incompatible position. [Citations.] . . . .’ ” [Citation.] The doctrine [most appropriately] applies when: “(1) the same party has taken two positions; (2) the positions were taken in judicial or quasi-judicial administrative proceedings; (3) the party was successful in asserting the first position (i.e., the tribunal adopted the position or accepted it as true); (4) the two positions are totally inconsistent; and (5) the first position was not taken as a result of ignorance, fraud, or mistake.” ’ [Citations.] [¶] ‘ “ ‘The doctrine’s dual goals are to maintain the integrity of the judicial system and to protect parties from opponents’ unfair strategies. [Citation.]’ ” ’ ” (MW Erectors, Inc. v. Niederhauser Ornamental & Metal Works Co., Inc. (2005) 36 Cal.4th 412, 422.)
During the first phase of trial, the District argued successfully that the July proposed change order did not create a binding agreement, and the contract was not modified until the November change order was approved by the District’s board of trustees. Based upon the District’s position taken in the first phase, the trial court concluded that the District was estopped from asserting during the second phase of trial that Tricon was legally obligated to begin work before the November change order became effective. It had already been determined in phase one that there had been no binding modification of the contract before November 2001.
The District now argues that “[t]here is nothing ‘totally inconsistent’ with the District’s position in trial phase one that the November Change Order constituted the operative modification to the parties’ Contract, but that it was unreasonable for Tricon not to proceed on the Project in July 2001 to avoid and mitigate anticipated future delays and damages based on the parties’ existing agreement in July 2001.” But as determined in phase one, there was no existing agreement regarding performance of the redesigned work until November 2001. The court also made a specific finding that “the July Change Order was never accepted or operative.” The District does not challenge this finding, and in fact advocated for it during the first phase of trial. Thus, the District was not entitled to argue to the jury that Tricon was legally obligated to perform the redesigned work under the July change order. (See MW Erectors, Inc. v. Niederhauser Ornamental & Metal Works Co., Inc., supra, 36 Cal.4th at p. 422; see also California Amplifier, Inc. vs. RLI Ins. Co. (2001) 94 Cal.App.4th 102, 118 [“[j]udicial estoppel may be applied in the trial court’s discretion].)
Even if we assume for the sake of argument that the District’s two positions are not totally inconsistent, we conclude the jury instruction given by the court did not result in prejudicial error. “When deciding whether an instructional error was prejudicial, ‘we must examine the evidence, the arguments, and other factors to determine whether it is reasonably probable that instructions allowing application of an erroneous theory actually misled the jury.’ ” (Kinsman v. Unocal Corp. (2005) 37 Cal.4th 659, 682.) A failure to properly instruct the jury is not “ ‘necessarily or inherently prejudicial,’ ” and reversal “is warranted only where the reviewing court concludes ‘ “the error complained of has resulted in a miscarriage of justice.” ’ ” (Whiteley v. Philip Morris, Inc. (2004) 117 Cal.App.4th 635, 655-656.)
The District instructed Tricon to stop work on the pool on June 1, 2001. It was not until late October 2001 that the District and Tricon agreed on a price for performance of additional work in accordance with the redesigned plans. The trial court was properly concerned that Tricon would have acted “at its peril” had it begun such work in the absence of an enforceable contract. (See Amelco Electric v. City of Thousand Oaks (2002) 27 Cal.4th 228, 234 [contractor may not be paid for work performed under void public contract and acts “at his peril,” nor may contractor recover in quantum meruit “for extra work performed beyond the contract requirements”]; Katsura v. City of San Buenaventura (2007) 155 Cal.App.4th 104, 108-110 [denying recovery for extra work performed by contractor who failed to obtain required authorization from public entity].)
The court found during the first phase of trial “there was a series of offers and counteroffers between Tricon and District staff regarding the work on the redesigned pool,” beginning in July 2001 and concluding with the Board’s approval of the November change order.
Under these circumstances, no reasonable jury could have concluded that Tricon was required to mitigate damages by starting the redesigned work without a binding contract. (See Valle de Oro Bank v. Gamboa, supra,26 Cal.App.4th at p. 1691 [“ ‘The rule of mitigation of damages has no application where its effect would be to require the innocent party to sacrifice and surrender important and valuable rights’ ”]; see also Barthelemy v. Orange County Flood Control Dist. (1998) 65 Cal.App.4th 558, 572 [“ ‘[i]t is never necessary to expend time or money in an effort to avoid injurious consequences unless the advantage to be derived from such expenditure is almost certain’ ”].)
The District argues the jury instruction was in conflict with the proposed change order procedure specified in the contract that entitled the District to compel Tricon to perform the redesigned work before a change order was approved. But the July 25, 2001, proposed change order request lacked terms required by the contract. It did not specify the amount to be paid for the additional work or the time for performance. On July 30, 2001, Tricon wrote the District: “Your notice to proceed dated 7/26/01 is invalid. We will be unable to proceed until dollar amounts and terms for payments are agreed upon.” Under these circumstances, the District has not shown that Tricon was obligated to perform the work in July 2001 as a “reasonable” effort to mitigate damages under the original contract.
Section eight of the Contract Administration Manual provided: “All changes to the Contract Documents will be by written Change Order signed by the OWNER and the CONTRACTOR. The ARCHITECT will prepare and communicate documentation leading up to the OWNER’s approval of a change order using a Proposed Change Order (PCO) form. The ARCHITECT may issue a work directive authorizing the CONTRACTOR to proceed with the change before receipt of the approved Change Order with the OWNER approval. Such directive will be followed by the approved Change Order form.” Section 7.3.4 of the contract, part of a subsection that specified “limitations [that] shall apply in the calculation of the costs of changes,” stated: “The Contractor, provided he received a written order to do so, shall proceed with the work, and he shall keep and present in such form as the Architect may direct, a correct amount of the cost of labor and materials, together with vouchers.” By letter dated July 26, 2001, the architect informed Tricon it was “authorized to proceed with the change order work per DSA and CCHS approved change order drawings and specifications per attached PCO #5 [dated July 25, 2001].” The District’s letter of July 26, 2001, directed Tricon to proceed on the revised design for the pool, and to “provide the total cost with all details as soon as possible.”
The District also argues that instructing the jury that Tricon did not have to proceed with work until November 14, 2001, contravened the court’s earlier finding that the District ordered Tricon to proceed in July 2001, but Tricon refused. In making this argument, the District selectively reads the statement of decision and neglects to include the first sentence of the paragraph to which it refers. There the court found: “The District’s Board’s approval of the July Change Order at its meeting of July 25, 2001 did not constitute an unconditional acceptance of Tricon’s offer to do the work on the redesigned pool for $338,000.” These findings were made in the context of the court’s determination that the parties’ original contract was modified in November 2001, and did not constitute a ruling on the validity or enforceability of the District’s direction to Tricon to proceed in July.
The District contends the jury instruction was inconsistent with evidence that Tricon proceeded with certain other changes in work without prior signed change orders and without prior agreement on the amount to be paid. But the evidence in that regard was not conclusive, and the amounts involved in those change orders were relatively minor (ranging from approximately $3,000 to $23,000 dollars).
The parties also differ as to whether the other changes to the work took place under the force account/time-and-materials provisions of the contract, but their citations to the record are not dispositive of that issue.
The District has not shown that the court’s instructions to the jury erroneously deprived the District of its defenses based on avoidable consequences and mitigation of damages. Moreover, under the circumstances of this case, no reasonable jury would have concluded that to reasonably mitigate damages, Tricon was obliged to perform the substantial work required by the redesigned plans without a contractual right to payment.
B. Contractual Provisions Regarding Calculation of Delay Damages
In addition to the unpaid balance of the contract price and some emergency repair charges for extra work, the trial court awarded Tricon damages for delay in performance of the contract. In all, the court awarded damages for 279 days of delay. In this appeal, the District challenges only the portion of delay-related damages it contends were awarded for bad weather. All the interruptions of contract performance due to bad weather took place between Tricon’s resumption of work on October 25, 2001, and the completion of the project on September 16, 2002. The jury’s verdict specifically determined that the District caused 150 days of excusable construction delays during that time. Of those 150 days, 40 days of delay were unreasonable and not within the contemplation of the parties.
Under the terms of the contract, District caused delay was compensable and weather caused delay was not, but weather caused delay could allow the contractor to extend the time for its performance. The District argues there was thus no basis for the court to award damages for 110 days of the 150-day delay because there was testimony that 110 days of the delay was due to bad weather. Tricon does not dispute that 110 days of delay occurred because bad weather prevented work on the project, but Tricon disputes that the delay was in fact caused by the weather. Tricon has the better argument.
Section 9.3.2 of the contract designates delay caused by abnormal weather conditions to be “excusable,” and section 9.3.3 states that an extension of time for completion is the contractor’s sole remedy for excusable delay. Section 9.3.3 also provides that in addition to an extension of time, where excusable delay is due to the District’s actions, Tricon would be entitled to “reimbursement of its reasonable direct, out-of-pocket, additional general conditions costs resulting therefrom; provided, however, that in no event will [Tricon] be entitled to recover any damages, additional profit or fee, or any other costs, other than the foregoing additional general conditions costs.” The parties stipulated that the amount owing under section 9.3.3 for delay due to the District’s actions was $331 per day.
The most significant flaw in the District’s argument is that the jury concluded the District was responsible for all 150 days of delay. The District’s argument ignores this finding by special verdict. Another problem with the District’s position is that the loss of 110 days of work due to weather can be reconciled on this record with the claim that the delay was attributable to the District. The District’s expert testified that “the redesign was the cause of the need for the contract modification,” and “the contract modification negotiation period was the cause of the work being delayed into the winter weather.” Thus, it is neither illogical nor contrary to the record to conclude, as the trial court did, that the weather-related delay was due to the District’s actions. The jury’s apparent conclusion that the delays were caused by the District’s breach of contract and that the breach and negotiations on the modified contract pushed the project into the rainy season is supported by substantial evidence. (See Whiteley v. Philip Morris, Inc., supra, 117 Cal.App.4th at pp. 694-695 [jury’s causation finding must be upheld if supported by substantial evidence].) The District has not shown that the trial court erred when it awarded Tricon damages for 110 days of District-caused delay when the project was suspended due to bad weather between October 25, 2001 and September 16, 2002.
We disagree with the District’s assertion in its reply brief that “to follow Tricon’s suggestion that the Contract’s limitation of remedies for Weather Delays does not apply to District-Caused Delays would unlawfully make the Contract’s District-Caused Delay provision useless surplusage.” Because we have rejected the District’s argument on the merits, we will not address the claim that this issue was waived.
C. Section 7107 Penalties and Attorney Fees
“Retention proceeds” are generally “ ‘payments relating to work already done but which are not presently paid, which instead are withheld until completion of 100 percent of the [contractor’s] work.’ ” (McAndrew v. Hazegh (2005) 128 Cal.App.4th 1563, 1566 [interpreting Civ. Code, § 3260, on which § 7107 is modeled]; see also Murray’s Iron Works, Inc. v. Boyce (2008) 158 Cal.App.4th 1279, 1299, fn. 13 [“ ‘retention . . . is a percentage (usually 10 percent) of the amounts due the contractor but held by the owner as a type of security for the contractor’s full and complete performance and to satisfy potential lien claims at the end of the project’ ”].)
Section 7107 is a “prompt payment” statute that specifies a framework and consequences for a public agency that withholds retention proceeds from a general contractor. It provides in relevant part: “(c) Within 60 days after the date of completion of the work of improvement, the retention withheld by the public entity shall be released. In the event of a dispute between the public entity and the original contractor, the public entity may withhold from the final payment an amount not to exceed 150 percent of the disputed amount. . . . [¶] . . . [¶] (f) In the event that retention payments are not made within the time periods required by this section, the public entity . . . withholding the unpaid amounts shall be subject to a charge of 2 percent per month on the improperly withheld amount, in lieu of any interest otherwise due. Additionally, in any action for the collection of funds wrongfully withheld, the prevailing party shall be entitled to attorney’s fees and costs.” (§ 7107.)
Pursuant to section 7107, the judgment assesses a two percent penalty in the amount of $41,276.94, plus attorney fees and costs. The District contends it was error for the court to assess any penalty because the money it withheld from Tricon when the project was completed was not “retention” but instead was to cover stop notices, an incompleted punch list and liquidated damages. Moreover, the District argues that section 7107 should not apply because it withheld funds in a good faith dispute with Tricon. We determine that the withheld funds were retention proceeds, but that section 7107 does not apply in this case because the District withheld disputed funds.
The judgment in favor of Tricon awarded $114,000 in damages for sums due under the contract and $31,018 for extra work that was performed during periods of delay. Upon completion of the project, the District claimed offsets in excess of that amount against Tricon for money intended to cover stop notices, an incompleted punch list and liquidated damages, and withheld this amount from its final payments. The District contends that it would be improper to categorize these withheld payments as “retention.” But the trial court concluded that Tricon was entitled to recover for extra work and sums due under the contract that were withheld from the final payment. We thus have no difficulty concluding that the withheld amounts awarded as damages in the judgment were retention proceeds within the scope of section 7107.
But we do not read section 7107’s public entity penalty to apply to a disputed payment. The plain language of the statute generally requires a public agency to remit retention proceeds to a contractor within 60 days after a project is complete unless the agency has a dispute with the contractor. (§ 7107, subd. (c).) “In the event of a dispute between the public entity and the original contractor, the public entity may withhold from the final payment an amount not to exceed 150 percent of the disputed amount.” (Ibid.) We further read section 7107 to provide that if any payment is not made within 60 days, “the public entity . . . withholding the unpaid amounts shall be subject to a charge of 2 percent per month on the improperly withheld amount, in lieu of any interest otherwise due. Additionally, in any action for the collection of funds wrongfully withheld, the prevailing party shall be entitled to attorney’s fees and costs.” (§ 7107, subd. (f).)
Simply put, section 7107 allows a public agency to withhold beyond 60 days up to 150 percent of a disputed amount from the retention proceeds due a contractor. That is precisely what occurred in this case. The District disputed and withheld over $338,000 from the money owed to Tricon upon completion of the project. (See Denver D. Darling, Inc. v. Controlled Environments Construction, Inc. (2001) 89 Cal.App.4th 1221, 1242 [“the ‘disputed amount’ refers to the amount in dispute at the time the retention proceeds are withheld, not to the amount [a party] contends is in dispute at the time of trial”].
Tricon argues it is entitled to section 7107 penalties because substantial evidence supports the jury’s finding that the District wrongfully withheld liquidated damages. But the application of section 7107 does not turn on whether a public entity’s refusal to pay a disputed amount is ultimately vindicated in court. Here, the questions directed to the jury’s special verdict on liquidated damages found that “a dispute exist[ed] between the District and Tricon at the time the District withheld liquidated damages,” and that “the District act[ed] in good faith when it withheld liquidated damages.” Section 7107 specifically provides that “[i]n the event of a dispute between the public entity and the original contractor, the public entity may withhold from the final payment an amount not to exceed 150 percent of the disputed amount.” (§ 7101, subd. (c).)
It makes no difference to our analysis that Tricon prevailed on its claim that the District breached the implied covenant of good faith and fair dealing. Even if this verdict “is necessarily a finding that the District acted in bad faith,” it is not necessarily a finding that the District acted in bad faith when it withheld the retention proceeds or liquidated damages. The special verdict returned by the jury was in three parts. Part I of the special verdict required the jury to answer questions regarding Tricon’s claim that the District breached the contract. Part II required the jury to answer questions regarding the District’s claim that Tricon breached the contract. Part III required the jury to answer three questions regarding the District’s withholding of liquidated damages. The jury finding that the District breached the covenant of good faith and fair dealing was contained in Part I of the special verdict. None of the questions in Part I addressed the subject of retention or liquidated damages. The only part of the special verdict that addresses the District’s withholding of payments is Part III, where the jury found that “a dispute exist[ed] between the District and Tricon at the time the District withheld liquidated damages,” and that “the District act[ed] in good faith when it withheld liquidated damages.”
We will not infer from the special verdict that the District breached the covenant of good faith and fair dealing or that it acted in bad faith when it withheld payments from Tricon as liquidated damages. “When a special verdict is involved as here, a reviewing court does not imply findings in favor of the prevailing party. [Citations.] This rule stems from the nature of a special verdict and its ‘ “recognized pitfalls,” ’ namely, that it requires the jury to resolve all of the controverted issues in the case, unlike a general verdict which merely implies findings on all issues in one party’s favor. [Citations]. Under these circumstances, ‘ “ ‘[t]he possibility of a defective or incomplete special verdict, or possibly no verdict at all, is much greater than with a general verdict that is tested by special findings . . . .’ ” ’ ” (City of San Diego v. D.R. Horton San Diego Holding Co., Inc. (2005) 126 Cal.App.4th 668, 678 [fn. omitted].)
Code of Civil Procedure section 624 provides, in relevant part: “The special verdict must present the conclusions of fact as established by the evidence, and not the evidence to prove them; and those conclusions of fact must be so presented as that nothing shall remain to the Court but to draw from them conclusions of law.”
Tricon also claims that the District improperly withheld payments because section 7107 “required the District to estimate the amount in dispute at the time it chose to withhold the retention.” In making this argument, Tricon relies on Denver D. Darling, Inc. v. Controlled Environments Construction, Inc., supra, 89 Cal.App.4th 1221, a case that construes Civil Code section 3260, a prompt payment statute that applies to private works contracts. Darling involved a contractor’s refusal to pay a subcontractor. The applicable language in Civil Code section 3260 provided that in the case of “a bona fide dispute” “[t]he amount withheld from the retention payment shall not exceed 150 percent of the estimated value of the disputed amount.” (Civ. Code, § 3260, subd. (e), italics added.) While similar statutory language appears in section 7107, subdivision (e), it applies to payments owed by a contractor to a subcontractor, and not to payments owed to a contractor by a public entity.
In Darling, the contractor had previously estimated the cost of corrective work at $32,394, but withheld the entire $101,580 retention. (Denver D. Darling, Inc. v. Controlled Environments Construction, Inc., supra, 89 Cal.App.4th at p. 1242.)
In a dispute between a contractor and a public entity, section 7107, subdivision (c) provides that the public entity may withhold “an amount not to exceed 150 percent of the disputed amount.” Unlike subdivision (e), the language of subdivision (c) makes no reference to a “bona fide dispute” or that the public entity must calculate the “estimated value of the disputed amount.” “When the Legislature has used a term or phrase in one part of a statute but excluded it from another, courts do not imply the missing term or phrase in the part of that statute from which the Legislature has excluded it.” (People v. Gardeley (1996) 14 Cal.4th 605, 621-622.)
Because section 7107 did not authorize the imposition of penalties in this case, that portion of the judgment must be vacated along with the attorney fees awarded pursuant to the statute. (See Denver D. Darling, Inc. v. Controlled Environments Construction, Inc., supra, 89 Cal.App.4th at p. 1241 [“attorney fees are to be awarded only in cases in which the retention payments are not made within the required time periods”].)
Because we conclude Tricon was not entitled to attorney fees under section 7107, we do not address the District’s additional argument that the trial court failed to properly apportion attorney fees between Tricon’s compensable section 7107 claims and its other noncompensable claims.
D. Interest under Section 20104.50 and Civil Code Section 3287
The court awarded Tricon $65,139.41 in interest pursuant to section 20104.50 and Tricon $89,283.97 in prejudgment interest pursuant to Civil Code section 3287. The District argues that Tricon was not entitled to recover both section 7107 penalties and the interest awarded under section 20104.50 and Civil Code section 3287. In light of our conclusion that section 7107 penalties were improperly assessed, this issue is moot.
Section 20104.50, subdivision (b), provides: “Any local agency which fails to make any progress payment within 30 days after receipt of an undisputed and properly submitted payment request from a contractor on a construction contract shall pay interest to the contractor equivalent to the legal rate set forth in subdivision (a) of Section 685.010 of the Code of Civil Procedure [presently 10 percent].” Section 20104.50, subdivision (e)(2) provides: “A ‘progress payment’ includes all payments due contractors, except that portion of the final payment designated by the contract as retention earnings.”
Civil Code section 3287, subdivision (b), provides: “Every person who is entitled under any judgment to receive damages based upon a cause of action in contract where the claim was unliquidated, may also recover interest thereon from a date prior to the entry of judgment as the court may, in its discretion, fix, but in no event earlier than the date the action was filed.”
The District also claims Tricon was not entitled to recover interest under section 20104.50, subdivision (b), because the statute authorizes such an award only when a contractor’s payment request is undisputed.
The District asserts that it made progress payments in response to the first 14 of Tricon’s 16 payment applications, but did not make a progress payment in response to Tricon’s January 2003 application because the amount then in dispute between the parties exceeded the amount requested.
Tricon seeks to support the award of interest pursuant to section 20104.50 because the District failed to comply with the directive contained in section 20104.50, subdivision (c) that the agency that is presented a progress payment request shall review and document in writing, within seven days, any reason the payment request is not proper. (§ 20104.50, subd. (c)(1), (2).) But the review and notification provision in subdivision (c) makes no reference to subdivision (b) that authorizes interest only on “undisputed” amounts. Tricon cites no authority to support its construction of the statute that would authorize an award of interest due to an agency’s failure to comply with the technical requirements of subdivision (c) when there is an existing dispute between the parties regarding the amount owed to the contractor. Nor does Tricon contest that the District disputed the payment requests in question. Because the plain language of section 20104.50, subdivision (b) authorizes interest only on payment requests that are “undisputed,” we conclude the award of $65,139.41 in interest to Tricon, pursuant to section 20104.50 must be vacated. (See Breda Costruzioni Ferroviarie v. Los Angeles County Metropolitan Transportation Authority (1997) 56 Cal.App.4th 1433, 1440 [declining to apply section 20104.50 interest rate because “a pay request denied because of a stop notice is not ‘undisputed’ ”].)
Section 20104.50, subdivision (c), provides: “Upon receipt of a payment request, each local agency shall act in accordance with both of the following: [¶] (1) Each payment request shall be reviewed by the local agency as soon as practicable after receipt for the purpose of determining that the payment request is a proper payment request. [¶] (2) Any payment request determined not to be a proper payment request suitable for payment shall be returned to the contractor as soon as practicable, but not later than seven days, after receipt. A request returned pursuant to this paragraph shall be accompanied by a document setting forth in writing the reasons why the payment request is not proper.”
In light of our conclusion, we will not address the District’s argument that section 20104.50 applies only to progress payments and therefore does not authorize an award of interest on damages for delay or repair work, or on amounts that were withheld here for stop notices, liquidated damages, and incomplete punch list items.
E. Code of Civil Procedure Section 998 Expert Fees
The trial court also awarded Tricon expert fees of $6,877 pursuant to Code of Civil Procedure section 998, subdivision (d), because Tricon’s judgment exceeded the amount of its statutory pretrial settlement offer. Tricon offered to settle this case for $680,000, including attorney fees and costs. Tricon was awarded approximately $450,000 in damages and $240,000 in attorney fees in the judgment, for a total of approximately $690,000. In light of our determination that Tricon was not entitled to penalties or attorney fees under section 7107, or interest under section 20104.50, we will vacate those awards. The remaining judgment for Tricon no longer exceeds its section 998 settlement offer of $680,000, and the award of expert fees must also be vacated. (See Wickware v. Tanner (1997) 53 Cal.App.4th 570, 575; Atkins v. Strayhorn (1990) 223 Cal.App.3d 1380, 1399-1400; Syverson v. Heitmann (1985) 171 Cal.App.3d 106, 114.)
Code of Civil Procedure section 998, subdivision (d) provides: “If an offer made by a plaintiff is not accepted and the defendant fails to obtain a more favorable judgment or award . . . the court . . . in its discretion, may require the defendant to pay a reasonable sum to cover postoffer costs of the services of expert witnesses, who are not regular employees of any party, actually incurred and reasonably necessary in either, or both, preparation for trial . . . or during trial . . . of the case by the plaintiff, in addition to plaintiff’s costs.”
DISPOSITION
The award of penalties and attorney fees under section 7107 is vacated. The award of interest under section 20104.50 is vacated. The award of expert fees under
Code of Civil Procedure section 998 is vacated. The judgment is otherwise affirmed. The parties are to bear their own costs on appeal.
We concur: McGuiness, P.J., Pollak, J.