Liens and Waivers
D’Orsay International Partners v. Superior Court (Jeffrey C. Stone, Inc.)
123 Cal. App. 4th 836 (2d Dist. Oct. 29, 2004)
Where general contractor provided design and planning services for a construction project, but no actual visible work was commenced at the project and no materials were delivered to the site, owner was entitled to an outright release of contractor’s mechanics’ lien. Because contractor recorded a mechanics’ lien – not a design professionals’ lien – provisions of the design professionals’ lien law authorizing filing of a design lien despite lack of commencement of construction do not apply.
The general rule is that a mechanics’ lien (in contrast to a design professional’s lien) does not attach unless and until actual visible work on the land has begun. In cases where no actual construction has commenced prior to recordation of the lien, the design professionals’ lien law provides the exclusive remedy and the prior exception to mechanics’ lien law requirements where owner prevents construction is no longer operative.
Tesco Controls, Inc. v. Monterey Mechanical Co.
124 Cal. App. 4th 780 (3d Dist. Dec. 6, 2004)
The City of Chico contracted with defendant Monterey Mechanical to expand the City’s municipal wastewater treatment plant project. Monterey entered into a subcontract with Stratton Electric. Stratton retained plaintiff Tesco Controls to furnish certain electrical instruments. Monterey and Stratton then entered into a joint check agreement for the express benefit of Tesco whereby Monterey agreed to pay Tesco by joint check made out to Tesco and Stratton. Stratton then would endorse the check and make it payable to Tesco “as payment in full of the related invoice.”
On March 12, 1999, Tesco received a check for $194,762.13 drawn on Stratton’s account, but Stratton’s check never cleared. Meanwhile, on March 15, 1999, Tesco gave Monterey a lien waiver and release conditioned upon receiving a progress payment of $50,000. The waiver expressly provided that it only covered services and material furnished through January 31, 1999. Monterey paid $50,000 to Stratton and Tesco which Tesco deposited in its bank.
As of March 31, Tesco was still owed approximately $370,000. Tesco issued a second conditional lien waiver and release dated May 11 whereby it agreed to release its mechanics’ lien rights for services rendered through March 31 upon payment from Monterey of $370,000 (which sum Tesco was paid). When the contract was completed, Tesco was still owed $194,762, the amount of Stratton’s bounced check, and Stratton filed for Chapter 11 bankruptcy protection. Tesco sought to recover from Monterey the approximately $194,000 it undisputedly provided in goods and services after March 31 which Monterey refused to pay.
The trial court found that the March 15 lien release waived Tesco’s lien rights only up to the amount of the $50,000 actually paid to Tesco and not as to the rest of the money owed for materials supplied and services performed through January 31. The Court of Appeal reversed, concluding that Tesco, by executing the conditional lien release, waived its lien rights for services rendered and materials provided up to the date provided – even if those services and materials were not compensated. However, such waiver was limited to those express lien rights and, by executing the release, Tesco did not foreclose its ability to exercise lien rights on sums that became due after the release date.
Castro v. Superior Court (California Savings)
116 Cal. App. 4th 1010 (2d Dist. Mar. 11, 2004)
Two parties disputed ownership of a $1 million residence. Defendants held record title and claimed the property was a gift while plaintiffs argued that it was a business investment between the parties. Plaintiffs filed an action to restore title and recorded a lis pendens. Defendants brought a motion to expunge the lis pendens; however plaintiffs withdrew the lis pendens before a ruling on the motion.
Under Code of Civil Procedure section 405.38, a prevailing party on a motion to expunge a lis pendens is entitled to attorneys’ fees. The trial court denied defendants’ request for attorneys’ fees because the court found that a party is not liable for statutory attorneys’ fees where it withdraws a lis pendens prior to a court order expunging the lis pendens. Defendants petitioned for a writ of mandate.
The Court of Appeal held that “when a lis pendens is withdrawn while a motion to expunge is pending, the moving party is not automatically entitled to attorney fees, nor automatically denied attorney fees, under section 405.38.” The Court found that the trial court incorrectly applied an “inflexible rule” and that a “practical approach,” which requires an analysis of “the extent to which each party has realized its litigation objectives,” should be applied in this context.
Using the practical approach to determine which is the prevailing party, a court must consider whether the moving party would have prevailed on the motion. Notwithstanding this holding, the Court of Appeal dismissed defendants’ petition as moot because the parties had settled and dismissed the action with prejudice.
Mix v. Superior Court (Bheniwal)
124 Cal. App. 4th 987 (4th Dist. Dec. 7, 2004)
In 1992 the Legislature toughened the standard by which to judge a motion to expunge a notice of lis pendens when the trial court has already substantively rejected the recording party’s claim. The post-1992 standard provides that, where the claimant loses at trial, the lis pendens must be expunged unless the trial court is willing to find it is probable that its own decision will be reversed on appeal. Here, trial court’s denial of owner’s motion to expunge a lis pendens was reversible error where trial court improperly applied weaker pre-1992 standard which merely required claimant to show that it had a “substantial issue on appeal.”
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