Court Opinion

ID: 6326567
Source: CourtListenerOpinion
Date Created: 2022-03-24 17:06:13.760103+00
Date Added: 2024-06-11T09:21:05.015752
License: Public Domain

138 Nev., Advance Opinion      13
                           IN THE SUPREME COURT OF THE STATE OF NEVADA

                    HELIX ELECTRIC OF NEVADA, LLC,                          No. 77320
                    Appellant/Cross-Respondent,
                    vs.
                    APCO CONSTRUCTION, INC., A
                    NEVADA CORPORATION,
                    Respondent/Cross-Appellant.

                    HELIX ELECTRIC OF NEVADA, LLC,                          No. 80508
                    Appellant/Cross-Respondent,
                    vs.
                    APCO CONSTRUCTION, INC., A
                                                                                                    • •c
                    NEVADA CORPORATION,
                                                                                MAR 2 4 2022
                    Respondent/Cross-Appellant.
                                                                              ELI
                                                                            CLERK
                                                                           ay
                                                                                 IEF DEPUTY CLERK

                                Consolidated appeals and cross appeals from a district court
                    judgment, certified as final pursuant to NRCP 54, and an award of attorney
                    fees in a construction contract action. Eighth Judicial District Court, Clark
                    County; Mark R. Denton, Judge.
                                Affirmed.

                    Peel Brimley LLP and Eric B. Zimbelman and Richard L. Peel, Henderson,
                    for Appellant/Cross-Respondent.

                    Fennemore Craig, P.C., and Christopher H. Byrd, Las Vegas; Fennemore
                    Craig, P.C., and John Randall Jefferies, Phoenix, Arizona; Marquis Aurbach
                    Coifing and Cody S. Mounteer, Las Vegas,
                    for Respondent/Cross-Appellant.

SUPREME COURT
     OF
   NEVADA

(0) I 947A .)1004
                                                                                    t 2 - OÝ2,V5
BEFORE THE SUPREME COURT, PARRAGUIRRE, C.J., STIGLICH and
SILVER, JJ.

                                 OPINION
By the Court, SILVER, J.:
            Pay-if-paid provisions enable a contractor to pay the
subcontractor only if the contractor first receives payment from the project
developer or owner. We clarified in APCO Construction, Inc. v. Zitting
Brothers Construction, Inc., 136 Nev. 569, 569, 473 P.3d 1021, 1024 (2020),
that pay-if-paid provisions, while not void per se, are unenforceable if they
run contrary to the rights and requirements established under NRS
624.624-.630. Here, the district court correctly concluded that a subcontract
provision conditioning the payment of funds retained from earlier progress
payments on the contractor first being paid was unenforceable. As the court
further concluded, however, the unenforceability of the pay-if-paid
condition did not also invalidate the remaining conditions precedent for
obtaining the retention payment. We also agree with the district court that,
as the subcontract was assigned after the original contractor terminated its
contract with the developer, the subcontractor cannot obtain the unpaid
retention from the original contractor. Finally, for the same reason, the
contractor is not entitled to attorney fees under the subcontract for
defending this action. We therefore affirm.
                 FACTS AND PROCEDURAL HISTORY
            Gemstone Development West, Inc., sought to construct
condominiums (the project) and hired respondent/cross-appellant APCO
Constniction, Inc., as its general contractor. APCO, in turn, subcontracted
with appellant/cross-respondent Helix Electric of Nevada, LLC, at
Gemstones direction. While working under APCO, Helix billed

                                     2
$5,131,207.11 and was paid $4,626,186.11. The difference, $505,021, was
withheld in retention. Under section 3.8 of the subcontract, the retention
would be released only upon the occurrence of several conditions, including
Gemstone paying APCO, Helix completing its work on the project,
Gemstone accepting that work, and Helix delivering close-out documents
and claim releases to APCO.
            Before the project's completion, the relationship between APCO
and Gemstone deteriorated. Due to Gemstone's failures to issue certain
progress payments to APCO, APCO issued stop work notices for the project
multiple times. In so doing, APCO notified the subcontractors that while
all work on the project was suspended due to its stop work notice, the parties
were hoping to resolve the issues and, as the prime contract had not at that
point been terminated, its subcontractors remained contractually bound to
their subcontracts with APCO. Gemstone, in turn, claimed APCO was in
breach of their agreement and threatened to terminate the prime contract
if the breaches were not cured. Gemstone notified the subcontractors of the
imminent termination of APCO and that it had already located a
replacement general contractor so as to not delay the project. Soon
thereafter, APCO notified the subcontractors that it intended to terminate
the prime contract, explaining that when the general contractor terminates
its contract, the subcontractors could also terminate their subcontracts.
Ultimately, APCO left the project at the end of August, with both parties
claiming that they had terminated the prime contract."

      'Gemstone and APCO disputed which of them terminated the prime
contract, but ultimately, it was determined by the district court that APCO
validly terminated the contract.

                                      3
                                   Gemstone thereafter notified the subcontractors that it had
                     terminated the prime contract and that Camco Pacific Construction
                     Company would act as construction manager in place of APCO. Helix did
                     not terminate its subcontract with APCO but worked on the project under
                     Carrico from August to September 2008. Although Helix did not sign the
                     subcontract Cameo proposed, it billed Camco for its remaining fees,
                     including the retention earned while Helix worked under APCO, as
                     instructed by Gemstone. By December 15, 2008, however, the project
                     lenders had withdrawn funding and work on the project was terminated.
                     Camco paid Helix only a fraction of the amount it billed, which payment did
                     not cover its retention.
                                   APCO, Camco, and numerous subcontractors, including Helix,
                     recorded mechanics liens against the property, and the district court
                     consolidated the multiple cases for purposes of discovery and trial.
                     Pertinent here, the district court granted partial summary judgment in
                     favor of Helix and other subcontractors, preventing APCO and Camco from
                     asserting any defenses based on pay-if-paid agreements. The court relied
                     on NRS 624.624 and Lehrer McGovern Bovis, Inc. v. Bullock Insulation, Inc.,
                     124 Nev. 1102, 197 P.3d 1032 (2008), which generally make pay-if-paid
                     agreements unenforceable and also require higher-tiered contractors to pay
                     their lower-tiered subcontractors within the time periods set forth in NRS
                     624.624(1).
                                   At trial, the district court found that the subcontracts had been
                     assigned to Gemstone under the prime contract because Gemstone
                     purported to terminate the prime contract and told the subcontractors that
                     their contracts would be assumed by Cameo; Carrico began directing the
                     project and receiving billings from the subcontractors, including for

SUPREME COURT
        OF
     NEVADA

(CO 1947A    a1Mbo
                                                            4
                    retention; and Helix worked directly with Gemstone and Camco, not APCO,
                    after APCO left the project. The district court dismissed Helix's claims for
                    retention against APCO because section 3.8s preconditions for retention
                    were not satisfied while APCO was the contractor, a fact that Helix
                    admitted. Specifically, the district court faulted Helix for failing to show
                    completion of the entire project and Gemstones acceptance, Gemstones
                    final payment to APCO, and delivery of the close out documents and claim
                    releases.
                                APCO requested attorney fees pursuant to section 18.5 of the
                    subcontract, but the court awarded APCO attorney fees pursuant to NRCP
                    68, for less than APCO's requested amount. Helix appeals, challenging the
                    denial of its claims for retention against APCO and the award of attorney
                    fees under NRCP 68, and APCO cross-appeals, challenging the reduction of
                    its requested attorney fees.
                                                   DISCUSSION
                                Construction contracts commonly allow the owner or developer
                    of a project to withhold a percentage of funds from progress payments to the
                    contractor pending completion of the work. See Pittsburg Unified Sch. Dist.
                    v. S.J. Amoroso Constr. Co., 181 Cal. Rptr. 3d 694, 698-99 (Ct. App. 2014).
                    Such "retainage or "retention" helps reduce the risk of nonperformance and
                    ensure the work is completed per the contract's terms. Id. In Nevada, the
                    right to retain funds in this manner is governed by NRS 624.624(2)(a)(1),
                    which authorizes a higher-tiered contractor, upon written notice, to
                    withhold from any payment owed to the lower-tiered subcontractor "[a]
                    retention amount . . . pursuant to the agreement, but the retention amount
                    withheld must not exceed 5 [(formerly 10)] percent of the payment that is
                    [otherwise] required."

SUPREME COURT
       OF
    NEvaoa

(0) 1947A astellb
                                                         5
                                In this appeal, Helix seeks its withheld retention from APCO,
                    asserting that, even though the prime contract was terminated and APCO
                    was required to leave the project, APCO never terminated the subcontract
                    and thus owes Helix the amount withheld in retention.2 Helix argues that
                    the district court incorrectly determined that the subcontract retention
                    provision's preconditions and the subcontract's purported assignment to
                    Gemstone/Camco precluded payment. In addressing Hethes initial
                    argument—that the section 3.8 preconditions are unenforceable, we first
                    address whether our holding in Zitting applies to pay-if-paid provisions
                    regarding retention. More specifically here, we determine whether, under
                    Zitting, NRS 624.624-.630 invalidates section 3.8 of the subcontract in its
                    entirety. We thereafter address whether Helix's subcontract was assigned,
                    precluding Helix's argument that the retention is owed by APCO.

                          2He1ix   alternatively argues that the retention amount is due under a
                    quantum meruit theory because its contract with APCO was unenforceable
                    for failure to reach a meeting of the minds. But after reviewing the record,
                    we conclude substantial evidence supports the district court's finding that
                    the subcontract was enforceable. Cf May v. Anderson, 121 Nev. 668, 672-
                    73, 119 P.3d 1254, 1257 (2005) (explaining that we will defer to the district
                    court's factual findings where they are based on substantial evidence).

                          Further, to the extent Helix asserts that APCO owes it "additional
                    monies earned and unpaid after APCO left the [p]roject,” the same analysis
                    applies.
SUPREME COURT
       OF
    NEVADA

10) 1447A allaNa.                                        6
The district court correctly determined that Helix is not entitled to further
payment from APCO under the subcontract
      The section 3.8 preconditions are valid
            Helix argues the preconditions to obtaining its retention
payment under section 3.8 of the APCO-Helix subcontract are void and
unenforceable under Zitting and its antecedent, Lehrer McGovern Bovis,
because those preconditions include an invalid pay-if-paid provision and
improperly require Helix to waive its rights under NRS 624.624-.630.
Consequently, Helix appears to argue, the retention amount became due
immediately upon completion of its work and is currently owed by APCO.
We review these questions de novo. I. Cox Constr. Co. v. CH2 Invs., LLC,
129 Nev. 139, 142, 296 P.3d 1202, 1203 (2013) (explaining that we review
statutory interpretation questions de novo); May, 121 Nev. at 672, 119 P.3d
at 1257 (explaining that we review contract interpretation questions de
novo). We will interpret a clear and unambiguous contract as written. Am.
First Fed. Credit Union v. Soro, 131 Nev, 737, 739, 359 P.3d 105, 106 (2015).
            In Lehrer McGovern Bovis, we addressed pay-if-paid provisions,
which predicate a subcontractor's right to payment from a general
contractor upon the developer or owner first paying the general contractor.
We concluded that pay-if-paid provisions violate public policy and are
generally unenforceable. In Zitting, we clarified that, consistent with 2001
statutory amendments and NRS 624.628(3), pay-if-paid provisions are not
void per se but will be unenforceable if they (1) "require subcontractors to
waive or limit rights provided under NRS 624.624-.630; (2) "relieve general
contractors of their obligations or liabilities" under those same statutes; or
(3) "require subcontractors to waive their rights to damages." 136 Nev. at
569, 473 P.3d at 1024. As to the third factor, NRS 624.628(3)(c) more
specifically provides that a condition is void if it does the following:

                                       7
            Requires a lower-tiered subcontractor to waive,
            release or extinguish a claim or right for damages
            or an extension of time that the lower-tiered
            subcontractor may otherwise possess or acquire as
            a result of delay, acceleration, disruption or an
            impact event that is unreasonable under the
            circumstances, that was not within the
            contemplation of the parties at the time the
            agreement was entered into, or for which the lower-
            tiered subcontractor is not responsible, is against
            public policy and is void and unenforceable.
(Emphases added.)
            Pay-if-paid provisions "require a case-by-case analysis to
determine whether they are permissible." Zitting, 136 Nev. at 574, 473 P.3d
at 1027. In Zitting, which involved the claims of another subcontractor who
worked on the project under a subcontract substantially similar to that at
issue here, the district court determined the subcontract's pay-if-paid
provisions were void and unenforceable. 136 Nev. at 574-75, 473 P.3d at
1027. On appeal, we agreed, because the subcontract provisions conditioned
Zitting's right to payment on the contractor being paid by the owner and
thus both violated the subcontractor's right under NRS 624.624(1) to
prompt payment for its work and restricted its recourse to a mechanics lien
granted by statute. Id.
            For the same reasons, the precondition subjecting Heli,x's right
to payment of the retention amount on APCO receiving payment from
Gemstone is void. The precondition requires Helix to waive its right to
monies earned if APCO does not receive payment, even if Helix meets its
obligations, is not at fault for the events that led to nonpayment, and would
otherwise have a claim for that retention.         See NRS 624.628(3)(c).
Accordingly, we conclude that this precondition is void.

                                     8
            Helix contends that section 3.8s other preconditions are also
void—first, because the pay-if-paid precondition's invalidity voids the whole
section, and second because they limit its statutory rights by requiring it to
satisfy conditions "entirely outside of its control." But the subcontract
included a severability clause, and Helix does not otherwise show why the
entire provision fails based on one unenforceable pay-if-paid precondition.
Nor does Helix show that, under NRS 624.628(3), the preconditions to the
retention payment require it to waive or limit its statutory or contractual
rights and thus are invalid as a matter of law. NRS 624.624(2)(b) explicitly
permits a contractor to condition payment of the retained funds upon the
subcontractor supplying lien releases, and the statute does not preclude the
contractor from imposing other completion and acceptance conditions on the
payment. Indeed, such terms appear to go to the very purposes of
retention—to encourage the subcontractor to complete its work on the
project and to reserve funds to cure any default •by the subcontractor. See
Pittsburg Unified Sch. Dist., 181 Cal. Rptr. 3d at 699 (where a contractor
defaults on the construction contract, the owner is entitled to use the
retention to complete the contract); see also 3 Philip L. Bruner & Patrick J.
O'Connor, Jr., Bruner & O'Connor on Construction Law § 8:18, at 39 (2016)
("A common contract approach to reducing a contractee's risk that its
contractor will fail to fully perform its contractual obligations is to withhold
a percentage of the sums due until the work is substantially complete.").
            Helix's additional arguments for not enforcing the
preconditions—that events subsequent to beginning work on the project,
including the project's ultimate abandonment, rendered the preconditions
impossible, futile, and excused—do not go to the general validity of those
terms, but rather to the facts of this case. Thus, the district court did not

                                       9
err by determining that, aside from the pay-if-paid precondition, the
subcontract's retention payment preconditions were valid. To the extent
Helix argues that APCO, by stopping work on the project or failing to
terminate the subcontract, prevented it from completing the preconditions,
such that those preconditions should be excused, the district court
concluded that Helix's work under the subcontract continued after APCO
left the project under assignment to Gemstone/Camco. Helix's arguments
as to the assignment findings are discussed next.
      APCO's obligations under the subcontract were assigned
            Helix contends that APCO's obligation to pay Helix for its work
on the project, including retention fees, was never assigned or waived and
therefore APCO must pay Helix the retention it earned. Specifically, Helix
argues that the prime contract allows for assignment only where Gemstone
terminates APCO for cause and that, because APCO was the party
ultimately found to have validly terminated the prime contract and APCO
did not expressly terminate its subcontract with Helix, APCO remained
obligated to pay Helix for the work it performed under the subcontract.
            "An assignment of a right is a manifestation of the assignor's
intention to transfer it by virtue of which the assignor's right to performance
by the obligor is extinguished in whole or in part and the assignee acquires
a right to such performance." Restatement (Second) of Contracts § 317 (Am.
Law Inst. 1981). "[A]n assignment does not modify the terms of the
underlying contract. It is a separate agreement between the assignor and
assignee which merely transfers the assignor's contract rights, leaving them
in full force and effect as to the party charged." Easton Bus. Opportunities,
Inc. v. Town Exec. Suites-E. Marketplace, LLC, 126 Nev. 119, 125, 230 P.3d
827, 831 (2010) (internal quotation marks omitted). Nevada law favors "the
free assignability of rights and frowns on restrictions that would limit or

                                     10
preclude assignability," and ordinarily a contractual right is assignable
unless the assignment will materially change the contract's terms or the
contract expressly precludes assignment.      Id. at 124, 230 P.3d at 830
(internal quotation marks omitted); see also Restatement (Second) of
Contracts § 317 (Am. Law Inst. 1981) (explaining that where neither the
contract nor a statute precludes assignment, a contract right is assignable
unless the assignment "would materially change the duty of the obligor, or
materially increase the burden or risk imposed on him by his contract, or
materially impair his chance of obtaining return performance, or materially
reduce its value to him").
            Absent a contract provision or statute that imposes restrictions
on assignments, "there are no prescribed formalities that must be observed
to make an effective assignment," so long as the assignor manifests "a
present intention to transfer its contract right to the assignee." Easton, 126
Nev. at 127, 230 P.3d at 832 (internal quotation marks omitted). Evidence
of an assignment may include that the assignee administers the project and
ensures it is correctly carried out, the assignee pays the subcontractors, and
the assignee answers questions about the project and is physically present
at the project.   Cf. J. Christopher Stuhrner, Inc. v. Centaur Sculpture
Galleries, Ltd., 110 Nev. 270, 274-75, 871 P.2d 327, 330-31 (1994).
            Here, section 10.02 of the Gemstone-APCO prime contract
provides in pertinent part that, for any enumerated reason, "Developer
may.. . terminate employment of General contractor and may.. . . accept
assignment by any Third-Party Agreements pursuant to section 10.04." In
turn, Section 10.04 provides in pertinent part, "Each Third-Party
Agreement for a portion of the Work is hereby assigned by General
Contractor to Developer provided that such assignment is effective only

                                     11
               after termination of the Agreement by Developer for cause" and upon
               written notification in writing to the general contractor and the
               subcontractor. In August, Gemstone notified APCO that it would terminate
               the agreement for cause and, upon termination, acquire the subcontracts by
               assignment, and in September, Gemstone sent Helix a letter confirming its
               intent to continue with Helix's services, to which was attached a ratification
               agreement incorporating the APCO-Helix subcontract. Although Helix
               ultimately did not sign the ratification, it negotiated terms, continued to
               work on the project under Camco, and submitted billing statements to
               Camco. Thus, even though the district court many years later concluded
               that APCO, not Gemstone, had validly terminated the contract, it appears
               that the parties proceeded under section 10.04 as if Gemstone had
               terminated the prime contract for cause based on the information available
               to them at the time.
                           Regardless, even if Gemstones purported termination did not
               trigger an assignment under the prime contract, we conclude that the
               APCO-Helix subcontract was assigned to Gemstone/Camco. Nothing in the
               prime contract prevented an assignment by other means, and neither that
               contract nor the subcontract required Helix to approve the assignment.
               Gemstone manifested an intent to assign the contract obligations to Camco
               by telling subcontractors their contracts would be assumed by Camco, and
               Camco thereafter directed the project. Helix worked directly with
               Gemstone and Camco after APCO left the project, and Helix billed Cameo
               for its payments, including for the retention. Therefore, we conclude the
               district court did not err in finding APCO's obligations under the
               subcontract were assigned after APCO left the project and Cameo became

SUPREW COURT
      Of
    NEVADA

                                                    12
(0) OVA
the general contractor.3 See Saavedra-Sandoval v. Wal-Mart Stores, Inc. ,
126 Nev. 592, 599, 245 P.3d 1198, 1202 (2010) (holding that we will affirm
the district court if it reaches the correct result, even if for the wrong
reason). Accordingly, the district court did not err in concluding that Helix
failed to prove that APCO owes it further payment for retention or other
amounts.4
The district court did not abuse its discretion in granting APCO attorney fees
pursuant to NRCP 68
            Helix argues that APCO's offer of judgment was untimely,
rendering NRCP 68 fees unavailable, because it was not made before the
start of trial in the consolidated cases in 2012. Helix asserts that, because
no written order bifurcated the trial and the district court recognized the
start of one overarching "triar for purposes of NRCP 41(e), failure to serve
the offer of judgment before the trial of matters involving parties other than
it in 2012 necessarily rendered the offer untimely. While NRCP 68(a)
requires parties to serve offers of judgment before trial, we explained in
Allianz Insurance Co. v. Gagnon that an action may consist of more than

      3As we conclude that the district court properly determined the
subcontract was assigned, we reject Helix's argument that section 9.4 of the
subcontract, even if it applied here when the subcontract was not
terminated for convenience, requires APCO to pay Helix's retention.

      4He1ix's   argument that the district court erred in not holding APCO
liable for the payments owed Helix because this court, in Zitting, already
determined that APCO is the "party legally liable" under the mechanics'
lien statutes, see Zitting, 136 Nev. at 577, 473 P.3d at 1029, is without merit.
In Zitting, APCO waived many of the defenses at issue here, including the
conditions precedent and assignment arguments. Id. at 576 & n.6, 473 P.3d
at 1028 & n.6.

                                      13
                      one trial for NRCP 68 purposes. 109 Nev. 990, 994-95, 860 P.2d 720, 723-
                      24 (1993) ("The offer of judgment is a useful settlement device which should
                      be made available at every possible juncture where the rules allow.").
                      Nothing in that opinion, or in the federal case it relied on, Cover v. Chicago
                      Eye Shield Co., 136 F.2d 374, 375 (7th Cir. 1943), requires an order
                      bifurcating trial or ties the definition of "triar for offer-of-judgment
                      purposes to NRCP 41(e). See generally In re Estate of Sarge, 134 Nev. 866,
                      870-71, 432 P.3d 718, 722 (2018) ("Consolidated cases retain their separate
                      identities . . . ."). Accordingly, the district court properly concluded that the
                      offer of judgment, made before trial on Helix's claims began in 2018, was
                      timely.
                                  APCO argues on cross-appeal that the district court erred by
                      relying on NRCP 68 to grant APCO its attorney fees incurred following the
                      offer of judgment, instead of relying on section 18.5 of the APCO-Helix
                      subcontract to award APCO its fees for the entirety of the case. Attorney
                      fees are not recoverable absent a statute, rule, or contractual provision.
                      Albios v. Horizon Cmtys., Inc., 122 Nev. 409, 417, 132 P.3d 1022, 1028
                      (2006). We review the district court's decision regarding the fees for an
                      abuse of discretion. Gunderson v. D.R. Horton, Inc., 130 Nev. 67, 80, 319
                      P.3d 606, 615 (2014) (reviewing attorney fees for an abuse of discretion).
                                  "Generally an assignor retains ordy those rights which have not
                      passed to the assignee by the assignment . . . ." 6A C.J.S. Assignments
                      § 120 (2016). "Mollowing an assignment of a contract the assignee stands
                      in the shoes of the assignor and the assignor retains no rights to enforce the
                      contract at all." See 6A C.J.S. Assignments § 105 (2016); see also Lauren
                      Kyle Holdings, Inc. v. Heath-Peterson Constr. Corp., 864 So. 2d 55, 58 (Fla.
                      Dist. Ct. App. 2003) ("Because an assignment vests in the assignee the right
SUPREME COURT
        OF
     NEVADA

(0) I947A    c‘0144
                                                             14
to enforce the contract, an assignor retains no rights to enforce the contract
after it has been assigned."). Because the APCO-Helix subcontract was
assigned to Gemstone and Camco, APCO retains no right to enforce section
18.5 of the subcontract, and the district court did not err by declining to
award APCO attorney fees under the subcontract. Accordingly, we affirm
the attorney fees award.
                               CONCLUSION
              We clarify that Zitting applies to retention fees earned by
subcontractors, and we conclude that section 3.8s pay-if-paid precondition
is unenforceable under NRS 624.628(3)(c). However, Helix fails to show
that the other preconditions in section 3.8 are invalid. We further conclude
that the APCO-Helix subcontract was assigned under these facts and that.
therefore, APCO was not entitled to attorney fees under section 18.5 of the
subcontract but was properly awarded fees pursuant to NRCP 68.
Accordingly, we affirm the district court.5

                                       LIZ4a.t.)
                                      Silver

        ur:

                               C.J.
Parraguirre

         ilp4'
       A4
Stiglich

      5As to the parties remaining arguments, we have considered them
and conclude they are either unnecessary to address, given this disposition,
or without merit.

                                      15