Liton General Engineering Contractor, Inc. v. United Pacific Insurance

I respectfully dissent.

This case presents important issues of first impression in this state which affect all public (and ultimately private) works of improvement. It concerns the liability of a surety, issuing a public works payment bond, for a subcontractor’s attorney fees and costs incurred in recovering an award from the *595 surety’s principal in a private and voluntary contractual arbitration, in which each party agreed, and was ordered, to pay its own such expenses, and to which the surety was not a party. It raises the issue of whether such private arbitration is an action “on the payment bond” triggering the surety’s liability for such fees and costs in excess of the actual confirmed arbitration award.

The majority opinion upholds an award of attorney fees and costs against the surety on these facts. This result, without precedent, is erroneously reached because the majority:

In order to fully understand the erroneous reasoning of the lower court, and the majority’s new and different reasoning which reaches the same erroneous result, further exposition of the facts is required. I will refer to Liton as “subcontractor,” Bay Cities as “contractor,” and UPI as…

Introduction

United Pacific Insurance (UPI) appeals from a judgment of the Contra Costa County Superior Court, ordering UPI as surety to pay attorney fees incurred by respondent subcontractor Liton General Engineering Contractor, Inc. (Liton), in its action against UPI on a public works payment bond, where the bulk of fees were incurred in arbitration of Liton’s contractual dispute with the general contractor, Bay Cities Paving & Grading, Inc. (Bay Cities). UPI contends the fee award must be reversed claiming: (1) The statutory right to attorney fees applies only to actions on the bond to which the surety is a party and the arbitration proceeding satisfied neither requirement; (2) because UPI was not a party to the arbitration, it was denied due process by the fee award; (3) full payment of the arbitration award by Bay Pacific exonerated UPI; (4) Liton waived its right to a fee award in its arbitration agreement with Bay Cities.

We conclude that the strong policy of this state favoring mechanics, laborers and materialmen, as reflected in statutes mandating the award of attorney fees to the prevailing party in an action on a public works payment bond, requires award of…