Abbett Electric Corp. v. California Fed. Savings & Loan Assn.

• Decision Date: 21 May 1991
• Docket Number: No. A049514,A049514
• Citation: 281 Cal.Rptr. 362,230 Cal.App.3d 355
• Court: California Court of Appeals Court of Appeals
• Parties: ABBETT ELECTRIC CORPORATION, Plaintiff and Respondent, v. CALIFORNIA FEDERAL SAVINGS AND LOAN ASSOCIATION, et al., Defendants; Citicorp Real Estate, Inc., et al., Intervenors and Appellants.

Page 362

281 Cal.Rptr. 362

230 Cal.App.3d 355

ABBETT ELECTRIC CORPORATION, Plaintiff and Respondent, v. CALIFORNIA FEDERAL SAVINGS AND LOAN ASSOCIATION, et al., Defendants Citicorp Real Estate, Inc., et al., Intervenors and Appellants.

No. A049514.

Court of Appeal, First District, Division 4, California.

May 21, 1991.

Review Denied Aug. 15, 1991.

Steven R. Walker, Jeffrey H. Lowenthal, Leland, Parachini, Steinberg, Flinn, Matzger & Melnick, San Francisco, for intervenors and appellants.

Raymond H. Levy, Daniel Byrne, Raymond H. Levy, Inc., San Francisco, for plaintiff and respondent.

PERLEY, Associate Justice.

In this case we hold that a mechanic's lien claimant with a contractual right to attorney's fees, which prevails in an action against the property owner for breach of contract and foreclosure of the mechanic's lien, is not entitled to have its attorney's fees included in the mechanic's lien.

I. BACKGROUND

Respondent Abbett Electric Corporation entered into a written contract with Storek & Storek Environmental Center ("Storek") to perform electrical work on Storek's property at 530 Bush Street, San Francisco. The contract provided for attorney's fees to the prevailing party in case of any dispute. In 1981, respondent recorded a mechanic's lien against the subject property. A few weeks later respondent filed a complaint against Storek for breach of contract and foreclosure of its mechanic's lien, at the same time recording a lis pendens. The complaint prayed for judgment in the sum of $314,652, plus estimated attorney's fees of $100,000 pursuant to the contract.

After an initial mistrial, the case proceeded to trial in May of 1989. During the pendency of those proceedings, appellants Citicorp Real Estate, Inc. and Massachusetts Mutual Life Insurance Co. each recorded a deed of trust against the subject property. In October, 1989, the trial court rendered a tentative decision in respondent's favor that provided inter alia for reasonable attorney's fees, but did not indicate whether the fees were to be included in the mechanic's lien. The court permitted appellants, as junior lienors, to intervene on the question of whether the lien could properly include those fees.

The statement of decision filed in March of 1990 found that respondent was "entitled to a judgment against [Storek] both on the contract and to enforce its Mechanic's Lien rights." The judgment awarded the sum of $113,827.36, together with prejudgment interest thereon, costs of suit in excess of $27,000, and attorney's fees of $230,000 pursuant to Civil Code section 1717. Over appellants' objection, the judgment provided that the attorney's fees were included in the mechanic's lien, and appellants have appealed that portion of the judgment. ¹

II. DISCUSSION

Attorney's fees are not available to a prevailing litigant absent a contractual agreement or statutory authorization, and no statute provides for attorney's fees in mechanic's lien foreclosures. (Wilson's Heating & Air Conditioning v. Wells Fargo Bank (1988) 202 Cal.App.3d 1326, 1329-1330, 249 Cal.Rptr. 553.) "Although the statutory scheme [for mechanic's liens] originally provided for the recovery of attorney's fees by the successful lienholder, this provision of the statute was declared unconstitutional (Builders' Supply Depot v. O'Connor (1907) 150 Cal. 265, 268 [88 P. 982] ) and no similar provision has been subsequently enacted.... It is thus black letter law that except for any cause of action on a contract between the lien claimant and the owner of the improved property which provides for fees, a lienholder has no entitlement to them from the owner.... [p] ... [I]f indeed a contract exists, then that is the separate source of attorney's fees; it is not the lien which creates the right." (Id., at p. 1330, 249 Cal.Rptr. 553 [emphasis original].)

It is not disputed that Storek is personally liable for attorney's fees under its contract with respondent, and there is no question that the judgment in this combined action for breach of contract and foreclosure of the mechanic's lien may include an award of those fees. (See Civ.Code, § 3152 [personal action to recover debt may be maintained in action to foreclose mechanic's lien].) The issue is whether the fees are properly included in the mechanic's lien against the subject property.

Respondent submits that this issue is well-settled in its favor, but none of the cases it cites is dispositive. Claims under contracts providing for attorney's fees were joined with actions to foreclose mechanic's liens in Vitek, Inc. v. Alvarado Ice Palace, Inc. (1973) 34 Cal.App.3d 586, 110 Cal.Rptr. 86; Robinson v. Diller (1969) 274 Cal.App.2d 813, 79 Cal.Rptr. 508; Distefano v. Hall (1968) 263 Cal.App.2d 380, 69 Cal.Rptr. 691, and the judgments in those cases awarded attorney's fees. However, these cases do not indicate whether the fees were included in the liens and the point was never raised. In Cal. Viking Sprinkler Co. v. Cheney (1960) 182 Cal.App.2d 564, 6 Cal.Rptr. 197, a contractual provision for attorney's fees was enforced in the context of a mechanic's lien action without any mention of whether the fees were included in the lien. Our issue does not appear to have been squarely addressed. ²

Appellants argue, however, that the reasoning of Wilson's Heating & Air Conditioning v. Wells Fargo Bank, supra, extends to our situation. There, subcontractors sued the general contractor, construction lender, and others involved in a construction project to enforce their mechanics' liens. The contracts provided for recovery of attorney's fees in case of a dispute. The lender foreclosed and became legal owner of the property. The general contractor went into bankruptcy, and remained in the action only as "a nominal defendant." (Wilson's Heating & Air Conditioning v. Wells Fargo Bank, supra, 202 Cal.App.3d at p. 1329, 249 Cal.Rptr. 553.) The other defendants were dismissed, apparently leaving only the lender to defend the suit. For the reasons quoted supra at the outset of our discussion, the Wilson's Heating court rejected the subcontractors' claim to attorney's fees based on the mechanic's lien statutes. It also rejected their claim to attorney's fees under Civil Code section 1717 based on their contract with the general contractor. The court noted that section 1717 generally assumes the existence of a contract between the parties, and reasoned that the lender could not be liable thereunder without being a party to the contract or assuming its obligations. (Id., at pp. 1330, 1333-35, 249 Cal.Rptr. 553.) As neither of these conditions was met, the claim for fees failed even though the mechanics' liens had priority over the lender's deed of trust. (Id., at p. 1329, 249 Cal.Rptr. 553.) ³

We find no persuasive distinction between our case and Wilson's Heating. Respondent has no more right to attorney's fees under the mechanic's lien statutes than the subcontractors in Wilson's Heating, and no greater contractual claim to those fees against any lender that is not a party to its contract. If we were to hold that respondent's attorney's fees were included in its mechanic's lien by virtue of its contract with Storek, this would subordinate appellants' deeds of trust to a lien for those fees, even though appellants were strangers to the contract. This would produce the result Wilson's Heating found to be untenable.

Respondent notes that, unlike the lender in Wilson's Heating, appellants have not foreclosed. If appellants were to foreclose, however, they would be in the same position as the bank in Wilson's Heating, and we fail to see why they should be subject to a lien for respondent's fees, when the bank in Wilson's Heating was not, simply because they have not yet exercised their powers of sale. Respondent suggests that appellants lack "standing", but appellants have a sufficient financial stake in the attorney's fee issue to have standing to raise it. If those fees are included in the mechanic's lien, then appellants will be obliged to pay them to protect their junior interests. Respondent also emphasizes that, unlike the subcontractors in Wilson's Heating, it is in privity of contract with the present owner of the property, but that distinction also seems to us irrelevant. Insofar as respondent has a contractual claim to fees from Storek, it has the same remedies against Storek and its property as any other party in an action for breach of a contract with an attorney's fee clause. We simply conclude that it does not have the additional remedy of a mechanic's lien for those fees.

This conclusion is consistent with Civil Code section 3123, subdivision (a), which makes no provision for attorney's fees when it limits the amount of a mechanic's lien to "the reasonable value of the labor, services, equipment, or materials furnished or for the price agreed upon by the claimant and the person with whom he or she contracted, whichever is less." (See also Cal.Const., art. 14, § 3 [providing mechanics' liens only "for the value of such labor done and material furnished"].) Section 3123 was recently cited by Division Three of this District in Lambert v. Superior Court (1991) 228 Cal.App.3d 383, 279 Cal.Rptr. 32, on the analogous question of whether delay damages may be included in the amount of a mechanic's lien. The Lambert court concluded "that Civil Code section 3123 does not permit a lien for delay damages ... The function of the mechanic's lien is to secure reimbursement for services and materials actually contributed to a construction site, not to facilitate recovery of consequential damages...." (Id., at p. 389, 279 Cal.Rptr. 32 [emphasis added].) The same reasoning applies to the claim for attorney's fees in our case. Like delay damages, they are beyond the contemplation of the mechanic's lien remedy.

It has been said that the purpose of a mechanic's lien is "to prevent unjust enrichment of a property owner at the expense of a laborer or...