General Elec. Co. v. Central Sur. & Ins. Corp.

• Decision Date: 03 March 1965
• Citation: 43 Cal.Rptr. 48,232 Cal.App.2d 590
• Court: California Court of Appeals Court of Appeals
• Parties: GENERAL ELECTRIC COMPANY, a corporation, Plaintiff, Appellant and Respondent, v. CENTRAL SURETY AND INSURANCE CORPORATION, a corporation, Beals & Poore Construction Company, a general partnership, Defendants, Respondents, and Appellants. Civ. 21944.

Page 48

43 Cal.Rptr. 48

232 Cal.App.2d 590

GENERAL ELECTRIC COMPANY, a corporation, Plaintiff, Appellant and Respondent, v. CENTRAL SURETY AND INSURANCE CORPORATION, a corporation, Beals & Poore Construction Company, a general partnership, Defendants, Respondents, and Appellants.

Civ. 21944.

District Court of Appeal, First District, Division 1, California.

March 3, 1965.

Cooley, Crowley, Gaither, Godward, Castro & Huddleson, Thomas A. H. Hart-well, San Francisco, for General Electric Co.

Robert N. Zarick, Sacramento, for Central Surety and Insurance Corporation.

SIMS, Justice.

This case involves cross-appeals on the one hand by plaintiff General Electric Company, the supplier of materials to an electrical subcontractor, and on the other by defendants Central Surety and Insurance Corporation, the surety on a general contractor's bond furnished pursuant to the provisions of sections 4200-4205 of the Government Code, and Beals & Poore Construction Company, the general contractors, from a judgment awarding plaintiff a portion of its claim, interest thereon, attorneys' fees and costs.

Plaintiff seeks to recover an additional $2,087.83, which although admittedly due from the subcontractor to plaintiff was disallowed in the judgment against the contractors and their surety, and attorneys' fees for the prosecution of this appeal.

Defendants urge that plaintiff failed to give proper notice as required by the provisions of section 4209 of the Government Code, and that in any event it was error to allow interest on the amount found to be due.

The subcontractor, although a party to the proceedings below, was found to be discharged in bankruptcy proceedings and is not involved in the appeal.

Sufficiency of the Notice of Claim.

The trial court found that a notice, the terms of which will hereinafter be discussed, was mailed to defendant contractor in the manner and within the time prescribed by section 4209 of the Government Code, and that said notice constituted substantial compliance with the provisions of that section. ¹

Defendants attack this finding and assert that the notice was insufficient to give rise to any right of action on the bond because (1) on its face it is a 'Stop Notice' for an equitable garnishment against funds held by the owner school district for the contractor; (2) it was not expressly directed to the contractor; and (3) did not state with substantial accuracy the amount claimed.

They properly point out the difference between the rights conferred by a stop notice, ² a mechanics' lien, ³ and the rights under a bond for payment of materials and labor on public works where no lien is granted. ⁴ It is urged that since the notice is entitled 'Stop Notice,' and was addressed to the public agency concerned with the work and not specifically addressed to the contractor, it could only at best serve as a notice under the provisions of section 4210 of the Government Code. (See also, Code Civ.Proc. §§ 1190.1 and 1192.1.) If the remedies were in the alternative these facts and defendants' conclusions would appear to preclude recovery, but the law recognizes that the acquisition of an equitable garnishment by giving a stop notice is a remedy which is cumulative to that provided by a mechanics' lien. (Calhoun v. Huntington Park First Sav. & Loan Assn. (1960) 186 Cal.App.2d 451, 459, 9 Cal.Rptr. 479; Rossman Mill & Lbr. Co. v. Fullerton S. & L. Assn. (1963) 221 Cal.App.2d 705, 708, 34 Cal.Rptr. 644.) The same considerations should govern the relationship between the stop notice procedure and an action to recover on a bond which is required on public works to protect those who can acquire no lien on public lands. (See Powers Regulator Co. v. Seaboard Surety Co. (1962) 204 Cal.App.2d 338, 346, 22 Cal.Rptr. 373; Duncanson-Harrelson Co. v. Travelers Indemnity Co. (1962) 209 Cal.App.2d 62, 67, 25 Cal.Rptr. 718; and Cal. Elec. Sup. Co. v. United Pacific Life Ins. Co. (1964) 227 A.C.A. 148, 154, 38 Cal.Rptr. 479.) It is concluded that the designation of the instrument as 'Stop Notice' does not of itself preclude its consideration for other purposes.

Defendants point out by analogy with section 4210 that the giving of the requisite notice is a condition precedent to recovery. (See Fredericksen v. Harney (1962) 199 Cal.App.2d 189, 196-197, 18 Cal.Rptr. 562; and Duncanson-Harrelson Co. v. Travelers Indemnity Co., supra, 209 Cal.App.2d 62, 66-67, 25 Cal.Rptr. 718.) They urge an interpretation which would require strict compliance with the requirements of the statute by reference to rules established in cases involving a publication of a notice of hearing on a petition to form an irrigation district (In re Central Irrigation District (1897) 117 Cal. 382, 390-396, 49 P. 354), a notice of lien recorded under the mechanics' lien law (Santa Monica L. & M. Co. v. Hege (1897) 119 Cal. 376, 379-381, 51 P. 555, hereinafter discussed), and a claim against a municipality (Ghiozzi v. City of South San Francisco (1946) 72 Cal.App.2d 472, 475-478, 164 P.2d 902).

The foregoing authorities are not controlling. In Cal. Elec. Sup. Co. v. United Pacific Life Ins. Co., supra, ⁵ this court reviewed the California and federal cases dealing with the subject of contractors' bonds and the requisites of a notice as a condition precedent to recovery thereon. The decision upholds a finding that the personal delivery of a schedule showing the subcontractor's obligation to the supplier from the supplier's credit manager to the general contractor's agent at a meeting to discuss the liquidation of the subcontractor's obligations was sufficient compliance with the provisions of section 4209. The opinion recites: 'Sections 4200 through 4210 of the Government Code are commonly known and referred to as the Public Works Act. Because the right to file a mechanic's lien does not inure against public property, this act was enacted to afford a statutory remedy to materialmen and laborers who supply work, labor or materials upon a public works job. [Citations.] Both the Miller Act [40 U.S.C.A. § 270b] and the public works statutes of this State have received liberal construction in order to effectuate their purposes. [Citations.]

'In the Federal Courts, the general rule is that where one having no contractual relationship with the prime contractor furnishes material or performs labor for a subcontractor, the giving of the written notice to the prime contractor within the specified time is a condition precedent to the right to maintain an action on the payment bond. [Citations.] It is also established that no particular form of notice is required. All that is demanded, generally, is that the notice meet in fair measure the procedures in the statute relating to substance. [Citation.] The notice should show that the designated subcontractor owes the materialman money in a certain sum, and must be served in a timely manner. Notice to the prime contractor is essential in order to enable him to protect himself against his subcontractor by withholding from him money due on his subcontract. [Citation.]' (227 A.C.A. at p. 154, 38 Cal.Rptr. at p. 482.)

As noted in the Duncanson-Harrelson case, supra, the requirements of sections 4209 and 4210 are similar. Examination of the notice in question against the requirements of section 4209 reveals that it is addressed to the superintendent of the public agency concerned, and on its face its recites 'copies' followed by the names and addresses of the contractors, bonding company and subcontractor. It is conceded that a copy was mailed to the contractors and was received by the latter at their business office by registered or certified mail with the postage prepaid on December 16, 1961, which was within 90 days from the date on which the supplier furnished the last of the materials for which claim is made. It correctly sets forth the name of the subcontractor to whom the materials were furnished and states in respect of the amount claimed that the supplies and materials furnished were of the reasonable and agreed value of $7,129.50.

Defendants' objections to the form of the notice and the fact it is not directly addressed to the contractor wither away under the light of the principles established in the Cal. Elec. Sup. Co. case. (See also United States Fid. & Guar. Co. v. Oak Grove Union School Dist. (1962) 205 Cal.App.2d 226, 236-238, 239-240, 22 Cal.Rptr. 907.)

The discrepancy between the $7,129.50 alleged and the $4,404.15 allowed by the court is referred to as evidencing lack of compliance with the requirement that the notice set forth the amount claimed with substantial accuracy. The statutory reference is to the claim not to the amount of recovery. The compliant seeks recovery of $6,491.98. The court found that this sum was justly due from the subcontractor to the supplier, although, as hereinafter reviewed, it deducted the value of certain items and reduced the judgment to the lower sum. Santa Monica L. & M. Co. v. Hege, supra, 119 Cal. 376, 51 P. 555 does indicate that a mechanics' lien will not be enforced where the notice of lien set forth only the balance allegedly due and failed to set forth as required by law the contract price and the amounts paid therein. There is no such requirement in section 4209. In fact the law now expressly provides insofar as mechanics' liens are concerned that a lien is not invalidated for errors in the balance asserted to be due unless such mistake or error was made with the intent to defraud. (Code Civ.Proc. § 1196.1) ⁶ Furthermore, even before the statutory provision the innocent overstatement of a claim would not invalidate the lien. (See: Harmon v. S. F. Etc. R. R. Co. (1890) 86 Cal. 617, 619, 25 P. 124; Gordon Hardware Co. v. R. R. Co. (1890) 86 Cal. 620, 622, 25 P. 125; Lucas v. Rea (1909) 10 Cal.App. 641, 647, 102 P. 822; Lucas v. Gobbi (1909) 10 Cal.App. 648, 651, 103 P. 157.)

It is concluded that the same principles should be applied to the requirement of...