Alpha Mechanical Heating & Air Conditioning, Inc. v. Travelers Casualty & Surety Co. of America

2 Analyses of this case by attorneys

  1. “Good Faith” In Prompt Payment Disputes

    Sheppard, Mullin, Richter & Hampton LLPJune 24, 2011

    Cal. Civ. Code § 3260(e) (emphasis supplied). Hence, a key factor as to when monies may be withheld from a subcontractor without exposing the general contractor to sanctions is whether there is a bona fide or good faith dispute between the parties.The case of Alpha Mechanical, Heating & Air Conditioning, Inc. v. Travelers Casualty & Surety Company of America, 133 Cal. App. 4th 1319 (4th Dist. 2005) was the first to expressly examine what constitutes a “good faith dispute” on a private work of improvement under Bus. & Prof. Code § 7108.5 and Civ. Code 3260. In that case, the court observed that “the phrase ‘good faith’ does have a distinct meaning and purpose in the law” (id., at 1339) and “suggests a moral quality; its absence is equated with dishonesty, deceit or unfaithfulness to duty,” Guntert v. City of Stockton, 43 Cal. App. 3d. 203, 211 (1974) (citation omitted), or “that state of mind denoting honesty of purpose, freedom from intention to defraud, and, generally speaking, means being faithful to one’s duty or obligation.”

  2. Existence of “Good Faith Dispute” Allows Contractor to Withhold Payments and Avoid Prompt Payment Penalties

    K&L Gates LLPJanuary 1, 2007

    Alpha Mech., Heating & Air Conditioning, Inc. v. Travelers Cas. & Sur. Co. of Am., 133 Cal. App. 4th 1319 (2005)In this case, subcontractor Alpha Mechanical, Heating & Air Conditioning sued general contractor RAS Builders and payment bond issuer Travelers after RAS withheld a final payment on the grounds that Alpha Mechanical had damaged other trades’ work. At trial, Alpha Mechanical argued that RAS failed to comply with California prompt payment statutes because RAS failed to give timely notice of any good faith dispute.