Davies Machinery Co. v. Pine Mountain Club, Inc.

• Decision Date: 03 May 1974
• Docket Number: No. 1863,1863
• Citation: 39 Cal.App.3d 18,113 Cal.Rptr. 784
• Parties: DAVIES MACHINERY CO., a corporation, Plaintiff and Respondent, v. PINE MOUNTAIN CLUB, INC., et al., Defendants and Appellants.
• Court: California Court of Appeals Court of Appeals

Page 784

113 Cal.Rptr. 784

39 Cal.App.3d 18

DAVIES MACHINERY CO., a corporation, Plaintiff and Respondent, v. PINE MOUNTAIN CLUB, INC., et al., Defendants and Appellants.

No. 1863.

Court of Appeal, Fifth District, California.

May 3, 1974.

[39 Cal.App.3d 20] Raymond, Noriega, Clifford & Jenkins and Stephen Clifford, Bakersfield, for defendant and appellant Pine Mountain Club, Inc.

Robert E. Brimberry, Los Angeles, for defendant and appellant Argonaut Ins. Co.

Carter J. Stroud, Berkeley, for defendants and appellants Argonaut Ins. Co. and Pine Mountain Club, Inc.

Thomas Underhill, Bakersfield, for defendants and appellants W. J. Smith and Paul V. Smith.

Rex R. Mull, Bakersfield, for plaintiff and respondent.

OPINION

FRANSON, Associate Justice.

Prior to April 15, 1969, W.J. and Paul Smith ('the Smiths') had leased and purchased on a time basis various pieces of earthmoving equipment from the respondent, Davies Machinery Co. ('Davies'). They had dealt with each other off and on over a period of some 25 years. On April 15, 1969, the parties entered into a security agreement for the purchase of twelve pieces of new equipment plus other equipment which had been previously purchased under various security agreements. On September 15 this contract was superseded by a new security agreement covering all the equipment purchased under the security agreement of April 15 as well as six new pieces of equipment. Under the September 15 agreement the total deferred payment price including finance charges was $1,045,776, payable in 24 monthly payments of $43,574, starting October 15, 1969. The contract provided that all payments not paid when due would accrue interest at the rate of 12 percent.

By July 1970 the Smiths had become delinquent in the contract payments and on the open account established for maintenance and repair of the equipment and owed Davies over $100,000. After the Smiths fell behind in payments, Marion Kelley, manager for Davies, met several times with Paul Smith and Frank Remerowski, the accountant for Smith in an attempt 'to allow them to keep the equipment and to let them work (their) way out.' On July 6 Paul Smith, Remerowski, Ernie Davies and Kelley and two others from Davies met in Hanford. Remerowski testified that at the July 6 meeting he told Davies, 'I saw no reason at all why if we should continue bidding on the jobs that we could get some of the jobs and . . . would probably start paying for these equipment again as per contract.' He said, '. . . I think that Mr. Kelley then picked up the ball and said that probably we could ultimately pay it off . . ..'

At the July 6 meeting, the parties orally agreed that the Smiths would keep the equipment and would pay for it on the basis of a specified hourly rate for the actual number of hours each piece of equipment was used. Nothing was said about terminating the September 1969 purchase contract. The parties agreed that the open account for maintenance and repair would continue. At the close of the meeting Kelley dictated a memorandum concerning the terms of the oral agreement. This memorandum was not signed by the parties but they agreed, both at the meeting and at trial, that it accurately reflected the oral agreement. ¹

Mr. Remerowski testified that he understood that the payments to Davies for the use of the equipment would be applied to amounts owing on the purchase contract. ² After July 1970 Davies continued to send hand-written periodic statements to the Smiths showing the amount of the delinquency under the purchase contract with added principal and interest charges. After July 1970 the Smiths paid the 1970--71 personal property taxes on the equipment to the County of Kern. They also expended some $8,000 in safety modifications to the equipment.

In accordance with the July 1970 agreement, Remerowski submitted weekly reports to Davies showing the hourly use of the equipment on various jobs worked by the Smiths. Davies maintained a separate account for maintenance and repairs.

On February 2, 1971, the Smiths entered into a contract with appellant Pine Mountain Club, Inc. to do land-leveling work on land owned by it and known as the 'Mel Potrero' project. Thereafter, the Smiths got behind in payments to Davies on both the open account and the hourly rate for the equipment. On June 24 Davies served on Pine Mountain Club, Inc., a preliminary 20-day notice under Civil Code section 3097. Progress payments owed by Pine Mountain Club, Inc. to the Smiths were sent to Davies subsequent to June 4, 1971, the lien date. Smiths continued working on the Mel Potrero project until about September 1, when they removed the equipment from the job and advised Davies that they could take the equipment back. On September 30 Davies recorded a mechanic's line against the Pine Mountain Club, Inc. real property. On November 3 it initiated the instant action for the foreclosure of the lien for the period between June 24 and September 24, 1971, alleging that $56,911.55 was due under the lien. Thereafter, by agreement with the Smiths, Davies repossessed the equipment and sold it.

In its third Finding of Fact, the trial court found as follows:

'Between June 4, 1971 and September 24, 1971, plaintiff furnished at the request of defendants W. J. SMITH and PAUL V. SMITH earthmoving equipment, and parts, labor, services and materials therefor, for the construction of roads, grading of land, and other improvements, in the reasonable market value of $48,873.80, which equipment, parts, labor, services and materials were used and furnished in making improvements on said real property described hereinabove. Said earth moving equipment, parts, labor, services and materials were furnished pursuant to a written memorandum of agreement (plaintiff's Exhibit 1 in evidence), orally agreed to between the parties and an open account carried in the name of W. J. Smith with plaintiff. Said written memorandum of agreement by implication concelled and terminated all prior written agreements between plaintiff and said defendants for the purchase, rental or leasing of the equipment described therein.' (Emphasis added.)

On May 9, 1972, Davies was awarded a judgment of $48,873.80 against the Smiths and Argonaut Insurance Company, who bonded them against the imposition of valid liens on the subject property, and the judgment charged a lien against the Pine Mountain Club, Inc. real property. On May 24 Pine Mountain Club, Inc. and Argonaut Insurance Company filed notices of motions for new trial and the motions were denied. Appellants filed a timely notice of appeal.

DISCUSSION

In reviewing a trial court's interpretation of a written instrument where no conflicting extrinsic evidence is received, an appellate court is not bound by the trial court's ruling but must give the writing its own independent interpretation. (Parsons v. Bristol Development Co., 62 Cal.2d 861, 865--866, 44 Cal.Rptr. 767, 402 P.2d 839; Estate of Platt, 21 Cal.2d 343, 352, 131 P.2d 825; Estate of Shannon, 231 Cal.App.2d 886, 890, 42 Cal.Rptr. 278; 6 Witkin, California Procedure (2d ed.), Appeal, §§ 257--260, pp. 4248--4251.) The rationale for this rule is stated rhetorically in Estate of Shannon:

'(W)here only the interpretation of written instruments is concerned, unaffected by extrinsic evidence, is not an appellate court, after studying the briefs on appeal, listening to the arguments of counsel, and thereafter engaging in a full discussion of the problem among the justices, in a more adequately informed position than is the trial judge and therefore better able to interpret the intent of the parties? . . . We conclude that in any case where extrinsic evidence is completely lacking or the quantum and quality thereof does not in reason place the trial judge in a better position to form an accurate interpretation of writings, or in other words, where interpretation is essentially a question of law rather than of fact, an appellate court is not bound by the determination of the trial court.' (231 Cal.App.2d at pp. 890--891, 42 Cal.Rptr. at p. 281.)

We believe that logic and reason also compel our making an independent determination of the meaning to be given to an oral agreement where, as in the case at hand, the parties have agreed that a written memorandum, although unsigned, accurately reflects the oral agreement and where the extrinsic evidence, though subject to conflicting inferences, presents no factual conflicts giving rise to questions of credibility. (Estate of Dodge, 6 Cal.3d 311, 318, fn. 4, 98 Cal.Rptr. 801, 491 P.2d 385; Parsons v. Bristol Development Co., Supra, 62 Cal.2d 861, 866, 44 Cal.Rptr. 767, 402 P.2d 839.)

The judgment ordering foreclosure of the lien can be upheld only if Davies was a Lessor of the subject equipment at the time it was used by the Smiths on the Mel Potrero project. Civil Code section 3110 provides that 'mechanics, materialmen, contractors, subcontractors, Lessors of equipment . . . and all persons . . . furnishing materials or leasing equipment to be used or consumed in or furnishing appliances, teams, or power contributing to a work of improvement shall have a lien upon the property . . ..' ³ Vendors who have only a security interest in the equipment used by contractors or subcontractors on the property are not included within the class of persons entitled to a mechanic's lien. (Civ.Code, § 3110; see Roebling's S. Co. v. Humboldt etc. Co., 112 Cal. 288, 291--292, 44 P. 568; Blakemore Equip. Co. v. Braddock, Logan & Valley, 269 Cal.App.2d 12, 16, 74 Cal.Rptr. 484; Tarter, Webster & Johnson, Inc. v. Windsor Developers, Inc., 217 Cal.App.2d Supp. 875, 878--879, 31 Cal.Rptr. 452; cf. Theisen v. County of Los Angeles, 54 Cal.2d 170, 177, 5 Cal.Rptr. 161, 352 P.2d 529; George F. Kennedy, Inc. v. Miles & Sons Constr. Division, 5 Cal.App.3d 516, 85 Cal.Rptr. 298.) Not being the beneficial owner of the equipment, a vendor has no standing to claim a lien for the value of the...