Title: United Riggers & Erectors, Inc. v. Coast Iron & Steel Co.

State: california

Issuer: California Supreme Court

Document:

Filed 5/14/18 
 
 
 
IN THE SUPREME COURT OF CALIFORNIA 
 
 
 
UNITED RIGGERS & ERECTORS, INC., ) 
 
 
) 
 
Plaintiff and Appellant, 
) 
 
 
) 
S231549 
 
v. 
) 
 
 
) 
Ct.App. 2/1 B258860 
COAST IRON & STEEL CO., 
) 
 
) 
Los Angeles County 
 
Defendant and Respondent. 
) 
Super. Ct. No. VC062679 
 
____________________________________) 
 
This case is about construction –– both physical and statutory.  Spurred by 
late payment problems in the construction industry, the Legislature established 
statutory payment deadlines and imposed penalties on owners who delay paying 
their direct contractors, and on direct contractors who delay paying their 
subcontractors.  But these strict deadlines include an exception relevant to this 
case:  Direct contractors can withhold monies from subcontractors in 
circumstances where a dispute has arisen between the parties.  (Civ. Code, § 8814, 
subd. (c).)  What we must decide is whether this exception allows withholding 
when there is any dispute between the parties, or only when there is a dispute 
directly relevant to the specific payment that would otherwise be due. 
The Court of Appeal adopted the narrower construction.  We agree.  The 
dispute exception excuses payment only when a good faith dispute exists over a 
statutory or contractual precondition to that payment, such as the adequacy of the 
construction work for which the payment is consideration.  Controversies 
 
2 
concerning unrelated work or additional payments above the amount both sides 
agree is owed will not excuse delay; a direct contractor cannot withhold payment 
where the underlying obligation to pay those specific monies is undisputed.  We 
affirm. 
I. 
In 2010, Universal City Studios LLLP (Universal) entered agreements to 
build a new ride at its theme park, Universal Studios Hollywood.  For the new 
attraction that would become Transformers: The Ride, Universal selected 
defendant Coast Iron & Steel Co. (Coast Iron) as the direct contractor to design, 
furnish, and install metal work.  Universal agreed to pay Coast Iron on a monthly 
basis for amounts billed, minus a 10 percent withholding — referred to in the 
construction industry as a retention or retainage — as protection against 
nonperformance and potential liens.  Upon receipt, Coast Iron was contractually 
responsible for making corresponding payments to its subcontractors. 
One such subcontractor was plaintiff United Riggers & Erectors, Inc. 
(United Riggers), which was responsible for installing the metal work Coast Iron 
fabricated and supplied.  The contract between Coast Iron and United Riggers 
called for United Riggers to receive $722,742 for its work.  Because of change 
orders submitted by United Riggers and approved by Universal, the amount Coast 
Iron owed United Riggers eventually rose to just under $1.5 million. 
United Riggers completed its work to Coast Iron’s satisfaction.  In March 
2012, once all work on the project was finished, Coast Iron asked for a final bill 
from its subcontractor.  United Riggers demanded additional amounts that would 
have brought its pay to $1.85 million: $274,158.40 for increased expenses 
attributed to Coast Iron’s mismanagement, and $78,384 based on outstanding 
change order requests.  Coast Iron refused payment, responding instead that it 
would “see [United Riggers] in court!!” 
 
3 
In August 2012, Universal paid out the 10 percent withheld as a retention to 
Coast Iron, which in turn owed $149,602.52 of that amount to United Riggers.  
Although United Riggers requested payment, Coast Iron declined to pay forward 
any part of the retention. 
United Riggers sued in January 2013.  Its complaint alleged various 
common law claims and one statutory claim, for failure to make prompt payment 
of the retention monies Coast Iron had received from Universal and in turn owed 
United Riggers.  (Civ. Code, §§ 8814, 8818.)  In February 2013, Coast Iron made 
a partial payment of the retention, and in December 2013, it paid the remainder.  
These payments did not moot United Riggers’s statutory claim because the 
statutory scheme imposes a penalty for delay and awards attorney fees and costs to 
the prevailing party in any action over late payment of a retention.  (Id., § 8818, 
subds. (a), (b).) 
After a bench trial, the trial court issued a statement of decision denying 
relief on all claims and entered judgment for Coast Iron.  The Court of Appeal 
affirmed as to the common law claims but reversed on the statutory claim for 
failure to make timely retention payments.  The appellate court explained that in 
its view, limiting withholding to disputes specifically related to the withheld 
monies was more consonant with what the Legislature had contemplated in 
enacting the prompt payment statute.  Accordingly, Coast Iron could not use the 
parties’ dispute over project mismanagement to justify withholding United 
Riggers’s portion of the retention. 
The Court of Appeal’s decision contributed to a split of authority over 
whether the Legislature’s prompt payment statutes should be interpreted to permit 
withholding where there is any dispute between a contractor and subcontractor, or 
only when there is a dispute regarding entitlement to the retention monies 
themselves.  (Compare Martin Brothers Construction, Inc. v. Thompson Pacific 
 
4 
Construction, Inc. (2009) 179 Cal.App.4th 1401 (Martin Brothers Construction) 
[any bona fide dispute can justify withholding retention payment] with East West 
Bank v. Rio School Dist. (2015) 235 Cal.App.4th 742 [only disputes related to the 
retention’s security functions can justify withholding payment].) 
II. 
Construction contracts often call for payment in installments — known 
commonly as progress payments — due when a project reaches various stages of 
completion.  (9 Miller & Starr, Cal. Real Estate (4th ed. 2016) § 31:91, p. 31–370.)  
By arranging for progress payments, participants in a construction-related 
transaction build in an incentive for contractors to complete work and provide an 
owner some protection against the risk of nonperformance (Cates Construction, 
Inc. v. Talbot Partners (1999) 21 Cal.4th 28, 55), while permitting contractors to 
obtain an essential cash flow.  As an additional hedge against nonperformance and 
incentive for completion, an owner may withhold a small percentage of the money 
due at each stage –– typically 5 to 10 percent –– until the project is finished.  (Id. 
at p. 55; Yassin v. Solis (2010) 184 Cal.App.4th 524, 533–534; McAndrew v. 
Hazegh (2005) 128 Cal.App.4th 1563, 1566–1567.)  If the contractor defaults, or 
subcontractors assert mechanics liens1 for nonpayment, the owner can use this 
retention fund to make payment or seek substitute performance.  (Pittsburgh 
Unified School Dist. v. S.J. Amoroso Construction Co., Inc. (2014) 232 
Cal.App.4th 808, 814; Yassin, at p. 534.)  Once work is done to the owner’s 
                                              
1  
“Mechanics, persons furnishing materials, artisans, and laborers of every 
class, shall have a lien upon the property upon which they have bestowed labor or 
furnished material for the value of such labor done and material furnished; and the 
Legislature shall provide, by law, for the speedy and efficient enforcement of such 
liens.”  (Cal. Const., art. XIV, § 3; see Betancourt v. Storke Housing Investors 
(2003) 31 Cal.4th 1157, 1166.) 
 
5 
satisfaction and the period for filing liens has expired, the owner will release the 
retention.  (Yassin, at p. 534; McAndrew, at p. 1567.) 
Historically, contract and common law governed the precise details of 
progress payments and retention withholding, such as the timing of payments.  
Contractors faced challenges negotiating terms that ensured prompt payment and 
enforcing those terms when payors ignored them in difficult economic times.  
(Neal & Gibbs, Past Due (Jan. 2011) 33 L.A. Law. 24, 24–26.)  Yet timely 
payments are essential to enable direct contractors and subcontractors to maintain 
an adequate cash flow and make payments to the subcontractors, suppliers, and 
workers they owe.  (Sen. Rules Com., Off. of Sen. Floor Analyses, 3d reading 
analysis of Sen. Bill No. 2515 (1989–1990 Reg. Sess.) as amended Aug. 14, 1990, 
p. 2.) 
Recognizing the industry-wide problems slow payments could generate, the 
Legislature entered the scene in 1990.  That year, it enacted the first in a series of 
laws that supply payees a statutory means for enforcing their right to prompt 
payment.  (Stats. 1990, ch. 1536, § 1, pp. 7214–7215.)  The statutory scheme the 
Legislature erected thereafter imposes comprehensive deadlines for both progress 
and retention payments from owners to direct contractors, and in turn from direct 
contractors to their subcontractors, for both public and private projects.  (Civ. 
Code, §§ 8800, 8802, 8812, 8814; Pub. Contract Code, §§ 7107, 10262.5; Bus. & 
Prof. Code, § 7108.5.)  The deadlines are enforced by statutory penalties, typically 
2 percent of the unpaid amount per month, and by fee-shifting provisions that 
make the losing party responsible for attorney fees if a lawsuit is required to 
enforce the right to payment.  (Civ. Code, §§ 8800, subd. (c), 8802, subd. (c), 
8818; Pub. Contract Code, §§ 7107, subd. (f), 10262.5, subd. (a); Bus. & Prof. 
Code, § 7108.5, subds. (b), (c).)  These statutes are intended to discourage owners 
and direct contractors from withholding monies owed as a way of granting 
 
6 
themselves interest-free loans.  (Sen. Com. on Judiciary, Analysis of Assem. Bill 
No. 1608 (1991–1992 Reg. Sess.) as amended May 15, 1991, pp. 2–3; Sen. Rules 
Com., Off. of Sen. Floor Analyses, 3d reading analysis of Assem. Bill No. 1702 
(1991–1992 Reg. Sess.) as amended Aug. 20, 1992, pp. 1–2.) 
Although the statutes are designed to facilitate prompt payment, the right to 
payment in full is not unconditional.  Where a dispute arises between a payor and 
payee, the statutes guaranteeing timely payment of progress and retention amounts 
contain a standard exception permitting the owner or direct contractor to withhold 
up to 150 percent of the amount in dispute from the contractor or subcontractor, 
respectively.  (Civ. Code, §§ 8800, subd. (b), 8802, subd. (b), 8812, subd. (c), 
8814, subd. (c); Pub. Contract Code, §§ 7107, subds. (c), (e), 10262.5, subd. (a); 
Bus. & Prof. Code, § 7108.5, subd. (a).) 
We are concerned here with a direct contractor’s delay in making a 
retention payment to its subcontractor on a private project –– a situation governed 
by Civil Code section 8814 (section 8814).  Under subdivision (a), a direct 
contractor must pay forward to its subcontractor within 10 days retention 
payments it receives from an owner.  But subdivision (c) creates a limited 
exception to this obligation:  “If a good faith dispute exists between the direct 
contractor and a subcontractor, the direct contractor may withhold from the 
retention to the subcontractor an amount not in excess of 150 percent of the 
estimated value of the disputed amount.”  (§ 8814, subd. (c).)  The parties do not 
dispute that Coast Iron did not pay in a timely manner the retention payment it 
received from Universal.  The parties also agree that the adequacy of United 
Riggers’s performance of the work for which the retention was payment is not in 
question.  Their disagreement instead concerns whether United Riggers was owed 
additional monies over and above the agreed amounts.  The only question is 
whether the good faith dispute exception excuses the delay in these circumstances. 
 
7 
III. 
A. 
Coast Iron contends the language of section 8814 is without limitation, and 
thus a good faith dispute as to any matter can support withholding:  “If a good 
faith dispute exists between the direct contractor and a subcontractor, the direct 
contractor may withhold . . . .”  (§ 8814, subd. (c).)  United Riggers argues a 
restriction is implicit:  Because the subject of section 8814 is the timely making of 
a retention payment, the good faith dispute must necessarily be a dispute relating 
to that particular payment. 
The correct interpretation of section 8814 is an issue of law, which we 
review de novo.  (Weatherford v. City of San Rafael (2017) 2 Cal.5th 1241, 1247.)  
Our role in interpreting statutes is to ascertain and effectuate the intended 
legislative purpose.  (Carmack v. Reynolds (2017) 2 Cal.5th 844, 849; Goodman v. 
Lozano (2010) 47 Cal.4th 1327, 1332.)  We begin with the text, construing words 
in their broader statutory context and, where possible, harmonizing provisions 
concerning the same subject.  (926 North Ardmore Ave., LLC v. County of Los 
Angeles (2017) 3 Cal.5th 319, 328; Winn v. Pioneer Medical Group, Inc. (2016) 
63 Cal.4th 148, 155–156; Fluor Corp. v. Superior Court (2015) 61 Cal.4th 1175, 
1198.)  If this contextual reading of the statute’s language reveals no ambiguity, 
we need not refer to extrinsic sources.  (Ennabe v. Manosa (2014) 58 Cal.4th 697, 
713; Gomez v. Superior Court (2012) 54 Cal.4th 293, 300.) 
Section 8814 deals exclusively with the payment of retentions, and the 
article in which it appears has an equally singular focus on retention payments.  
(Civ. Code, §§ 8810–8822.)  Section 8814, subdivision (a), governs the timing of 
retention payments.  Subdivision (b) governs to whom retention payments must be 
made.  Subdivision (c) identifies the limited circumstances in which a portion of 
the retention payment may be withheld beyond the deadline established by 
 
8 
subdivision (a):  in cases of “a good faith dispute,” the direct contractor may 
withhold up to “150 percent of the estimated value of the disputed amount.”  
(§ 8814, subd. (c).)  It is certainly possible to read this language as allowing for 
withholding based on any dispute, without limitation, as Coast Iron does.  But the 
“words [of a statute] must, of course, be read in the context of the provision as a 
whole” (Doe v. City of Los Angeles (2007) 42 Cal.4th 531, 546) and in the context 
of the statutory scheme as a whole (see People v. Valencia (2017) 3 Cal.5th 347, 
358–360; Poole v. Orange County Fire Authority (2015) 61 Cal.4th 1378, 1385; 
id. at pp. 1391–1393 (conc. opn. of Cuéllar, J.); Planning & Conservation League 
v. Department of Water Resources (1998) 17 Cal.4th 264, 268–270).  A 
consideration of the statute’s context and its purpose leads us to conclude that it is 
also quite plausible to read subdivision (c) as referencing only disputes about the 
retention payment itself –– the sole subject of both section 8814 and the article of 
which it is a part –– as United Riggers does. 
Section 8814 is one of a series of provisions meant to ensure timely 
payment to contractors and subcontractors.  To the extent possible, statutes 
relating to the same class of things, and sharing the same purpose or object, should 
be harmonized and construed similarly.  (Winn v. Pioneer Medical Group, Inc., 
supra, 63 Cal.4th at p. 161; Lexin v. Superior Court (2010) 47 Cal.4th 1050, 
1090–1091.)  When the Legislature uses one enactment as the model for another 
enactment, legislators reasonably may anticipate that courts, and the public, will 
accord the related measures a common construction.  (American Airlines, Inc. v. 
County of San Mateo (1996) 12 Cal.4th 1110, 1129.)  This interpretive principle 
applies to the prompt payment statutes (Yassin v. Solis, supra, 184 Cal.App.4th at 
p. 536; Morton Engineering & Construction, Inc. v. Patscheck (2001) 87 
Cal.App.4th 712, 718–720), which were largely modeled on each other and 
designed to accomplish the same end in a series of closely related contexts (see, 
 
9 
e.g., Sen. Com. on Judiciary, Analysis of Assem. Bill No. 1608, supra, as 
amended May 15, 1991, p. 3; Sen. Rules Com., Off. of Sen. Floor Analyses, 3d 
reading analysis of Assem. Bill No. 329 (1991–1992 Reg. Sess.) as amended Aug. 
29, 1991, p. 2; Sen. Rules Com., Off. of Sen. Floor Analyses, 3d reading analysis 
of Assem. Bill No. 1702, supra, as amended Aug. 20, 1992, p. 3). 
In most instances, the Legislature drafted the dispute exception in these 
statutes using language that plainly limits withholding to circumstances in which 
the dispute relates to the specific amount or payment at issue.  (See Bus. & Prof. 
Code, § 7108.5, subd. (a) [“good faith dispute over all or any portion of the 
amount due”]; Civ. Code, §§ 8800, subd. (b) [“good faith dispute . . . as to a . . . 
payment due”], 8802, subd. (b) [“good faith dispute over all or part of the amount 
due”], 8812, subd. (c) [“good faith dispute . . . as to a . . . payment due”]; Pub. 
Contract Code, § 10262.5, subd. (a) [“good faith dispute over all or any portion of 
the amount due”].)  The absence of similar language makes section 8814 an 
outlier.  (§ 8814, subd. (c); see Pub. Contract Code, § 7107 [also omitting explicit 
limiting language].) 
We might have reason to assign importance to the omission of an explicit 
limit if the Legislature consistently left out such a limit from statutes governing 
private projects, as opposed to public projects; or direct contractor-subcontractor 
payments, as opposed to owner-direct contractor payments; or retention payments, 
as opposed to progress payments.  In closely related statutes, such consistent 
textual distinctions would suggest the Legislature could be understood to have 
reasonably contemplated, by the inclusion or omission of such language, a 
different withholding rule for one category than for the other.  Yet no such 
consistency appears.  Business and Professions Code section 7108.5 and Public 
Contract Code section 10262.5 collectively govern the timing of progress 
payments from direct contractors to subcontractors on private and public projects, 
 
10 
but expressly limit withholding to disputes over the specific payment.  (Bus. & 
Prof. Code, § 7108.5, subd. (a); Pub. Contract Code, § 10262.5, subd. (a).)  
Meanwhile, Civil Code section 8812 governs the timing of retention payments 
from owners to direct contractors on private projects and also expressly limits 
withholding to disputes over the specific payment.  (Civ. Code, § 8812, subd. (c).)  
Reviewing the full matrix of prompt payment statutes, there is nothing unique 
about retention payments (as opposed to progress payments), or direct contractor-
subcontractor payments (as opposed to owner-direct contractor payments), or 
private projects (as opposed to public works) that has led the Legislature 
consistently to omit limits on withholding.  The absence of any pattern reinforces 
the conclusion that section 8814 is textually ambiguous, and that we cannot be 
certain the omission of an explicit limit on the nature of disputes justifying 
withholding means any dispute, whether or not related to the subject of section 
8814 or the article in which it resides, will suffice. 
While this preliminary analysis of the text offers no clear answers, reading 
the statute in light of its broader purpose, as we must (Augustus v. ABM Security 
Services, Inc. (2016) 2 Cal.4th 257, 269), supports the conclusion that only 
withholding for disputes over the retention payment itself is allowed.  Section 
8814 evinces the same underlying aim as the Legislature’s other prompt payment 
statutes:  to ensure that parties who supply work or materials on projects, and who 
otherwise might lack leverage, are timely paid, and to provide them recourse in the 
event they are not.  (See Blois Construction, Inc. v. FCI/Fluor/Parsons (2016) 245 
Cal.App.4th 1091, 1095; FEI Enterprises, Inc. v. Yoon (2011) 194 Cal.App.4th 
790, 795–796.)  This purpose is remedial.  (Blois Construction, Inc., at p. 1096; 
FEI Enterprises, Inc., at p. 796; see Civ. Code, § 8820 [prohibiting as a matter of 
public policy contractual waiver of the protections of § 8814].)  More broadly, the 
statute is a part of the state’s mechanics lien law (Civ. Code, §§ 8000–9566) –– 
 
11 
remedial legislation meant to protect the right to fair compensation for contractors, 
laborers, and suppliers.  State policy strongly supports liberally construing this law 
for the benefit of those it is intended to protect.  (Wm. R. Clarke Corp. v. Safeco 
Ins. Co. (1997) 15 Cal.4th 882, 889; Connolly Development, Inc. v. Superior 
Court (1976) 17 Cal.3d 803, 826–827.) 
Consider, in light of this purpose, the consequence of interpreting section 
8814 as permitting withholding when any amount is in dispute –– irrespective of 
whether the dispute relates to the particular retention payment.  Such a reading 
would allow for the possibility of double withholding by contractors.  For 
example, here, roughly $350,000 was at issue apart from the retention.  This was 
money United Riggers asserted Coast Iron owed for various reasons, but that 
Coast Iron had not paid — and as a result of the favorable judgment on the merits 
of the common law claims, will never pay.  Allowing Coast Iron, in addition to the 
money it has not paid and disputes it owes, to withhold from money it has not paid 
and does not dispute it owes, an amount equal to up to 150 percent of the disputed 
amount, would create a windfall:  Coast Iron would be able to secure for itself an 
interest-free loan of the additionally withheld amount.  But this is precisely the 
evil the Legislature sought to eliminate when it enacted this and other prompt 
payment statutes. 
Conversely, interpreting section 8814 as permitting withholding only for a 
dispute that relates to the work underlying the particular retention payment, e.g., a 
dispute over the work’s performance or over a third-party lien, avoids double 
withholding while not impairing the retention’s ability to function as security.  
This reading allows a party to keep amounts in dispute it might need to hold on to 
in order to satisfy liens or obtain substitute performance and avoids the prospect of 
double payment, without granting interest-free loans of amounts that themselves 
are not controverted.  It also prevents contractors, who may have more leverage 
 
12 
than the subcontractors they owe (Blois Construction, Inc. v. FCI/Fluor/Parsons, 
supra, 245 Cal.App.4th at p. 1095), from using the withholding of monies over 
which there is no dispute to exacerbate subcontractors’ cash-flow issues and chill 
the assertion of legitimate claims for additional compensation.  United Riggers’s 
proposed interpretation better serves the underlying policies the Legislature sought 
to advance. 
We may also consider legislative history to resolve the ambiguity in section 
8814.  Section 8814’s language originated in former Civil Code section 3260.  
(Cal. Law Revision Com. com., reprinted at 12C West’s Ann. Civ. Code (2012 
ed.) foll. § 8814, p. 480.)  Prompt payment protections such as former section 
3260 were not adopted all at once, but instead were enacted in piecemeal fashion.  
(See Stats. 1990, ch. 1253, § 2, pp. 5275–5276; Stats. 1990, ch. 1536, § 1, 
pp. 7214–7215; Stats. 1991, ch. 368, § 1, p. 2032; Stats. 1991, ch. 925, § 1, 
pp. 4142–4143; Stats. 1992, ch. 1042, § 1, pp. 4878–4879; Stats. 2009, ch. 307, 
§ 73.)  Different bills, drafted by different authors, passed at different times, might 
well use different language to convey the same basic rule, so the absence of an 
express limit in section 8814 need not imply a departure in meaning from other 
like statutes.  To the contrary:  The legislative history associated with these 
enactments suggests, notwithstanding variations in language, that the prompt 
payment statutes are best understood uniformly, as requiring that all monies not 
themselves in dispute be paid over in a timely fashion. 
First, analyses generated by legislative committees remarked that later bills 
were modeled after and intended to mirror the protections of Civil Code former 
section 3260.  (See, e.g., Sen. Com. on Judiciary, Analysis of Assem. Bill No. 
1608, supra, as amended May 15, 1991, p. 3; Sen. Rules Com., Off. of Sen. Floor 
Analyses, 3d reading analysis of Assem. Bill No. 1702, supra, as amended Aug. 
20, 1992, p. 3.)  Second, these laws were designed to require timely payment of all 
 
13 
“amounts due about which there is no good faith dispute.”  (Assem. Com. on 
Consumer Protection, Governmental Efficiency and Economic Development, 
Analysis of Assem. Bill No. 1608 (1991–1992 Reg. Sess.) as amended May 15, 
1991, p. 2; see Dept. of General Services, Enrolled Bill Rep. on Assem. Bill No. 
1702 (1991–1992 Reg. Sess.) prepared for Governor Wilson (Sept. 4, 1992) p. 2 
[prompt payment statute intended to impose statutory penalties when “funds that 
are not disputed are not released”].)  Third, the Legislature understood the 
importance of timely payment to contractors’ cash flow (Sen. Rules Com., Off. of 
Sen. Floor Analyses, 3d reading analysis of Assem. Bill No. 329, supra, as 
amended Aug. 29, 1991, p. 2) — a cash flow that would be impaired if any dispute 
between two contractors on one project could forestall payment on another, 
unrelated project.  All of which makes it plausible to infer the Legislature assumed 
former section 3260 to similarly require timely payment of all funds that were not 
themselves the subject of dispute, despite the absence of express language so 
declaring. 
The recent recodification of certain prompt payment protections also 
supports the conclusion that the dispute-related exceptions operate in a similar 
fashion, notwithstanding distinctions in their wording.  Contemplating a revision 
of the state’s mechanics lien law, the California Law Review Commission 
(Commission) and legislative staff expressly recognized the existing framework’s 
inconsistencies and ambiguities:  “The mechanics lien law was first enacted in 
1850, and the existing law still contains language dating back to 1872.  Since the 
last recodification of the statute in 1969, individual provisions have been amended 
more than 70 times.  Over time the statute has become increasingly difficult to use, 
generating litigation over confusing provisions, and often leaving participants 
unsure of their rights and obligations.  [¶]  This recommendation recodifies and 
clarifies the entire mechanics lien statute.  Terminology has been modernized and 
 
14 
made more uniform, and inconsistencies have been eliminated.”  
(Recommendation: Mechanics Lien Law (Feb. 2008) 37 Cal. Law Revision Com. 
Rep. (2007) p. 529; accord, Sen. Rules Com., Off. of Sen. Floor Analyses, 3d 
reading analysis of Sen. Bill No. 189 (2009–2010 Reg. Sess.) as amended Jan. 14, 
2010, p. 10.)  We infer from this ready acknowledgement of existing 
inconsistencies that not every variation in the scheme’s pre-2010 language 
reflected a considered difference in underlying purpose. 
We find further support for this inference in the historical details of how 
Civil Code sections 8812 and 8814 were enacted.  The content of these provisions 
traces to former section 3260 of the Civil Code, which governed retention 
payments by both owners to direct contractors, and direct contractors to 
subcontractors, for private projects.  (Civ. Code, former § 3260, subd. (b), as 
enacted by Stats. 1990, ch. 1536, § 1, p. 7214.)  Former section 3260 used similar 
language to describe the dispute withholding rights for these two situations, and 
omitted any express limit on the relation of the dispute to the retention.  (See Civ. 
Code, former § 3260, subd. (c) [“In the event of a dispute between the owner and 
the original contractor, the owner may withhold from the final payment an amount 
not to exceed 150 percent of the disputed amount”]; id., subd. (e) [“If a bona fide 
dispute exists between a subcontractor and the original contractor, the original 
contractor may withhold from that subcontractor with whom the dispute exists its 
portion of the retention proceeds . . . . not [to] exceed 150 percent of the estimated 
value of the disputed amount”].) 
The Commission and Legislature sought to recodify these rights unaltered.  
Section 8814 “restates former Section 3260(d)-(e) without substantive change.”  
(Cal. Law Revision Com. com., reprinted at 12C West’s Ann. Civ. Code, supra, 
foll. § 8814, p. 480.)  Likewise, section 8812 “restates former Section 3260(c) 
without substantive change, except that” language relating to completion dates has 
 
15 
been omitted and the requirement that the dispute be in good faith made express.  
(Id., foll. § 8812, p. 478.)  The Legislature accepted the Commission’s work as a 
“ ‘nonsubstantive reorganization of the existing mechanics lien statute that would 
modernize and clarify existing law’ ” (Sen. Rules Com., Off. of Sen. Floor 
Analyses, 3d reading analysis of Sen. Bill No. 189, supra, as amended Jan. 14, 
2010, p. 8) and enacted the Commission’s proposed sections 8812 and 8814 
verbatim. 
Nonetheless, the Commission –– and in turn the Legislature –– introduced a 
discrepancy in the recodified rules by explicitly confining owners to withholding 
from general contractors based on disputes about the payment itself, while 
including no such new explicit limit in the rule for direct contractor-subcontractor 
payments.  (Compare Civ. Code, § 8812, subd. (c) [“If there is a good faith dispute 
between the owner and direct contractor as to a retention payment due, the owner 
may withhold from final payment an amount not in excess of 150 percent of the 
disputed amount” (italics added)] with § 8814, subd. (c) [“If a good faith dispute 
exists between the direct contractor and a subcontractor, the direct contractor may 
withhold from the retention to the subcontractor an amount not in excess of 150 
percent of the estimated value of the disputed amount”].)  The legislative history 
indicates both that the express limitation added to Civil Code section 8812 was 
intended merely to clarify existing law, and that the lack of any corresponding 
addition to section 8814 is not significant.  Even statutes enacted at the same time, 
and intended to have the same substantive effect, can employ different language. 
Also instructive is Civil Code section 8816, the provision immediately 
following section 8814.  Section 8814 recodified Civil Code former section 3260, 
subdivisions (d) and (e); section 8816 reenacts former section 3260, subdivision 
(f), without substantive change.  (Cal. Law Revision Com. com., reprinted at 12C 
West’s Ann. Civ. Code, supra, foll. § 8816, p. 482.)  Section 8816 sets out rules 
 
16 
for resolving controversies over “work in dispute” (Civ. Code, § 8816, subd. (a)) 
and requires that “[w]ithin 10 days after acceptance of disputed work, the owner or 
direct contractor shall pay the portion of the retention relating to the disputed 
work” (id., subd. (b)).  Reading sections 8812 and 8814 in context with section 
8816, the good faith disputes that justify withholding are those that relate to the 
work for which the retention is payment. 
B. 
Against these arguments from text, context, and history, Coast Iron 
emphasizes the absence in section 8814 of any express limit on the nature of the 
dispute justifying withholding, and contends this provision is unambiguous.  For 
support, Coast Iron relies on Martin Brothers Construction, supra, 179 
Cal.App.4th at pages 1412–1414, which concluded the text of Public Contract 
Code section 7107 was unambiguous and allowed withholding based on any 
dispute.  Like Civil Code section 8814’s permission to withhold in cases of a 
“good faith dispute,” Public Contract Code section 7107 allows withholding when 
there is a “bona fide dispute” (Pub. Contract Code, § 7107, subd. (e)) without 
otherwise tying the dispute to the amount withheld.  Because in its view the 
statute’s plain meaning was clear, the Martin Brothers Construction court did not 
address either the surrounding statutory context or the legislative history.  (Martin 
Brothers Construction, at pp. 1410–1411, fn. 4, 1412–1414.) 
The court in East West Bank v. Rio School Dist., supra, 235 Cal.App.4th at 
pages 748–750, expressly rejected Martin Brothers Construction, supra, 179 
Cal.App.4th 1401.  East West Bank emphasized the underlying purpose of the 
prompt payment statute:  to ensure timely payment of the retention as soon as its 
narrow justifications have been served.  (East West Bank, at pp. 748–749.)  As 
remedial legislation, the statute must “be construed to suppress the mischief at 
which it is directed.”  (Id. at p. 748.)  An interpretation that allows ongoing 
 
17 
retention when the work for which money is being retained has been completed to 
everyone’s satisfaction and the period for liens has passed would not do so.  (Id. at 
pp. 748–749.)  East West Bank’s observations are sound. 
Coast Iron urges us to follow Martin Brothers Construction, supra, 179 
Cal.App.4th 1401 because the Legislature allegedly embraced the case’s reasoning 
when it enacted section 8814 the next year without inserting an express limit on 
the nature of disputes that could support withholding.  No persuasive rationale 
supports such an inference.  Indeed, the language of section 8814 was drafted by 
the Commission before Martin Brothers Construction was decided and was 
enacted without change by the Legislature.  (See Recommendation: Mechanics 
Lien Law (Feb. 2008) 37 Cal. Law Revision Com. Rep., supra, at p. 726; Stats. 
2010, ch. 697, § 20.)  To the extent it sheds light on the question before us, the 
legislative history is as bereft of any mention of Martin Brothers Construction as 
it is of indication that legislators ever considered the Commission’s proposed 
language in light of that case.2 
Finally, Coast Iron underscores that section 8814 allows withholding of up 
to 150 percent of the disputed amount (§ 8814, subd. (c)).  From this provision it 
reasons that the Legislature was willing to allow withholding of amounts not in 
dispute.  Yet the most reasonable understanding of the 150 percent clause is also 
the most straightforward –– by allowing withholding up to 150 percent, the statute 
provides a margin for error for managing the run-of-the-mill disputes about 
                                              
2  
This sequence of events does render more understandable the conclusion 
the appellate court reached in Martin Brothers Construction, supra, 179 
Cal.App.4th 1401.  Because that case was decided before formal enactment of a 
recodified mechanics lien statute, the Court of Appeal did not have the opportunity 
to consider the later legislative history and the illumination it offers as to the 
Legislature’s purposes and intent.  With the benefit of that history, this case is an 
easier one than the interpretive problem the Martin Brothers Construction court 
confronted. 
 
18 
construction that lie at the heartland of the statute’s purpose, given the likelihood 
of uncertainty about the precise cost of incomplete or inadequate work.  The 
resulting leeway insulates payors from statutory penalties and prevailing party fees 
in the event a judge or jury later takes a marginally different view of the amount 
genuinely in dispute.  (Cf. Denver D. Darling, Inc. v. Controlled Environments 
Construction, Inc. (2001) 89 Cal.App.4th 1221, 1241–1242 [although a good faith 
dispute existed, holding that the direct contractor exceeded even the 150 percent 
allowance by withholding more than $100,000 from subcontractor when $35,000 
or less was at issue].)  It also provides payors additional security in the event that 
finding another contractor to remedy deficient or unfinished work proves costlier 
than anticipated.  Nothing about the presence of this additional flexibility suggests 
the statutory purpose encompasses shielding payors who withhold monies with no 
good faith basis for contesting either the adequacy of the construction work for 
which the monies are payment, or the obligation to pay these funds as opposed to 
other sums that may be the subject of any separate, ongoing controversy. 
C. 
We conclude section 8814 does not arise from a legislative purpose to grant 
broader withholding rights for direct contractors making retention payments to 
their subcontractors on private projects than in other circumstances.  We resolve 
the ambiguity evident from the text and context in favor of allowing the same 
withholding rights as under the panoply of prompt payment statutes that expressly 
limit withholding to a narrow class of disputes over the specific payment in 
question.  This interpretation comports more closely with the prompt payment 
statutes’ underlying remedial purpose:  to ensure timely payment of undisputed 
amounts to contractors, without impairing the ability of payors to withhold 
amounts as security when the obligation to pay those specific monies is in doubt.  
(See East West Bank v. Rio School Dist., supra, 235 Cal.App.4th at pp. 748–749.) 
 
19 
Consistent with this rule, a direct contractor may delay payment when the 
sufficiency of the subcontractor’s construction-related performance is the subject 
of a good faith dispute, when liens or other demands from third parties expose the 
direct contractor to potential double payment, or when payment would result in the 
subcontractor receiving more than the minimum amount both sides agree is due.  
What a direct contractor may not do is withhold a retention that is simply part of 
that undisputed minimum amount, because a dispute has arisen over whether 
additional amounts over and above the retention might also be owed.  In effect, the 
payor must be able to present a good faith argument for why all or a part of the 
withheld monies themselves are no longer due. 
Here, for example, United Riggers contended Coast Iron should pay 
amounts over and above the $1.5 million it eventually received, but the retention 
monies Coast Iron held on to were part of the original $1.5 million over which 
there was no dispute.  Coast Iron could not use United Riggers’s demand for $1.85 
million to justify keeping all monies in excess of $1.35 million.  There was never 
any good faith argument over Coast Iron’s underlying obligation to pay over the 
additional $150,000, which it eventually did, but the intervening delay granted 
Coast Iron a no-interest loan and punished United Riggers for seeking additional 
compensation, in contravention of the Legislature’s purposes to end such loans 
and reduce payors’ abuse of their superior leverage. 
To the extent Martin Brothers Construction, Inc. v. Thompson Pacific 
Construction, Inc., supra, 179 Cal.App.4th 1401 is inconsistent with the views 
expressed in this opinion, we disapprove it. 
 
 
 
20 
IV. 
The statutory right to prompt payment United Riggers asserts is remedial, 
granted by one of several laws that sought to ensure contractors are not at the 
mercy of those upon whom they depend for payment.  In light of that remedial 
purpose, we construe the right broadly and exceptions to its application narrowly.  
Our analysis is informed by the text, structure, and previous interpretations of 
those laws establishing a similar right, as well as the relevant legislative history.  
Taking all these factors into account, we conclude that timely payment may be 
excused only when the payor has a good faith basis for contesting the payee’s right 
to receive the specific monies that are withheld.  Coast Iron argues instead that the 
Legislature chose to permit withholding of monies both sides agree are due when 
any conceivable dispute exists between the parties, because the statute fails to 
include explicit limits on the circumstances in which monies can be withheld.  
This construction of the statute is not built on the most secure foundation, given 
the frequency with which the Legislature has imposed explicit limits in related 
contexts, the statute’s specific remedial purpose, and evidence that the omission 
here was not a purposeful departure from the Legislature’s general approach.  We 
affirm the judgment of the Court of Appeal and remand for further proceedings 
consistent with this opinion. 
 
 
 
 
 
 
CUÉLLAR, J. 
WE CONCUR: 
CANTIL-SAKAUYE, C. J. 
CHIN, J. 
CORRIGAN, J. 
LIU, J. 
KRUGER, J. 
BAMATTRE-MANOUKIAN, J.*
                                              
* Associate Justice of the Court of Appeal, Sixth Appellate District, assigned by 
the Chief Justice pursuant to article VI, section 6 of the California Constitution. 
 
 
See next page for addresses and telephone numbers for counsel who argued in Supreme Court. 
 
Name of Opinion United Riggers & Erectors, Inc. v. Coast Iron & Steel Co. 
__________________________________________________________________________________ 
 
Unpublished Opinion 
Original Appeal 
Original Proceeding 
Review Granted XXX 243 Cal.App.4th 151 
Rehearing Granted 
 
__________________________________________________________________________________ 
 
Opinion No. S231549 
Date Filed: May 14, 2018 
__________________________________________________________________________________ 
 
Court: Superior 
County: Los Angeles 
Judge: Thomas I. McKnew 
 
__________________________________________________________________________________ 
 
Counsel: 
 
Law Office of Dirk Bruinsma, Dirk Bruinsma; Law Offices of Kristen Martin and Kristen Martin for 
Plaintiff and Appellant. 
 
John P. Carpenter for The Associated General Contractors of California as Amicus Curiae on behalf of 
Plaintiff and Appellant. 
 
Westrup & Associates, R. Duane Westrup and Ian Chuang for Defendant and Respondent. 
 
 
 
 
 
 
 
 
 
 
 
 
Counsel who argued in Supreme Court (not intended for publication with opinion): 
 
Kristen Martin 
Law Offices of Kristen Martin 
1278 Glenneyre Street, #205 
Laguna Beach, CA  92651-3103 
(949) 510-5509 
 
John P. Carpenter 
Balfour Beatty Construction 
2335 Broadway, Suite 300 
Oakland, CA  94612 
(402) 250-9586 
 
R. Duane Westrup 
Westrup & Associates 
444 Ocean Boulevard, Suite 1614 
Long Beach, CA  90802-4524 
(562) 432-2551