Hutnick v. U.S. Fidelity & Guaranty Co.

• Citation: 253 Cal.Rptr. 236,763 P.2d 1326,47 Cal.3d 456
• Decision Date: 01 December 1988
• Docket Number: No. S005221,S005221
• Court: United States State Supreme Court (California)
• Parties: , 763 P.2d 1326 Michael HUTNICK, et al., Plaintiffs and Appellants, v. UNITED STATES FIDELITY AND GUARANTY COMPANY, et al., Defendants and Respondents.

Page 236

253 Cal.Rptr. 236

47 Cal.3d 456, 763 P.2d 1326

Michael HUTNICK, et al., Plaintiffs and Appellants, v. UNITED STATES FIDELITY AND GUARANTY COMPANY, et al., Defendants and Respondents.

No. S005221.

Supreme Court of California,

In Bank.

Dec. 1, 1988.

[763 P.2d 1328] Kent Walker, Stephen J. Gay, Deborah D. Ditore and Bullen, McKinley, Gay, Keitges & Pach, Sacramento, for plaintiffs and appellants

James B. Thompson, Sacramento, for defendants and respondents.

KAUFMAN, Justice.

As provided by Civil Code section 3144.5, ¹ the statute of limitations for an action on a mechanic's lien release bond is six months from the recording of the bond. We granted review in this case to determine how this statute of limitations affects a mechanic's lien foreclosure action commenced before the recording of the release bond. For the reasons to follow, we conclude that section 3144.5's limitation period was not intended to and does not apply to pending lien foreclosure actions. Accordingly, if a lien foreclosure action has been timely filed before the recording of the bond and the surety has thereafter been made a party defendant to the action, the surety may not invoke section 3144.5's limitations period as a defense.

FACTUAL AND PROCEDURAL BACKGROUND

According to the allegations of their third amended complaint, which we assume to be true for purposes of this appeal (Perdue v. Crocker National Bank (1985) 38 Cal.3d 913, 922, 216 Cal.Rptr. 345, 702 P.2d 503), plaintiffs Michael Hutnick and Tree Care, Inc., entered into an oral agreement with Thomas R. Henderson (Henderson) and Murieta Village Development Company (Murieta) to perform services consisting of planting, trimming, tree removal and insect control. The work was to be performed on property which Murieta was in the process of buying from Tana Investments (Tana) under a duly recorded installment contract. Plaintiffs fully performed under the agreement but were paid only $8,000 against a total bill of $29,208. In October 1982 plaintiffs recorded a mechanic's lien against the property on which the work had been performed.

In December 1982, plaintiffs timely filed a complaint alleging a common count to recover an agreed sum for work performed, a count seeking damages for breach of an oral contract, and a count seeking to foreclose the mechanic's lien. Plaintiffs subsequently filed first and second amended complaints adding a cause of action for declaratory relief and making other minor changes. The defendants named in these pleadings included Murieta, Henderson, Tana, and defendants designated by fictitious name as Does I through XXX. The fictitiously named defendants were alleged to be persons claiming an interest in the liened property and persons acting as agents for the other defendants.

While the action was pending, Fred Anderson (Anderson) acquired Tana's interest in the property and instituted foreclosure proceedings which resulted in the property being freed from Murieta's installment contract. On July 26, 1985, Anderson recorded a lien release bond from United States Fidelity and Guaranty Company (United) pursuant to section 3143. ² On July 30, 1985, notice of the release bond's recording was served on plaintiffs as required by section 3144.5. ³ In March 1986 plaintiffs served United as Doe V with summons and the second amended complaint.

United demurred and the court sustained its demurrer with leave to amend on the ground the complaint stated no cause of action against United and, in particular, stated no cause of action on the lien release bond. Plaintiffs then filed a "third amended complaint" adding a cause of action for recovery on the bond. Both United and Anderson were named as defendants to this cause of action but Anderson was not served and has not appeared in the action. United demurred to the "third amended complaint" on the ground suit on the lien release bond had not been brought within six months of the bond's recording as required Plaintiffs appealed and the Court of Appeal affirmed, stating that when a valid mechanic's lien release bond is recorded, a pending mechanic's lien foreclosure action is "terminated" and the owner of the liened property is entitled to a dismissal, leaving no party in privity with the surety to be bound by a judgment in the action. Surmising that one purpose of section 3144.5 was to provide a mechanism for bringing a release bond surety into a lien foreclosure action once the lien was released, the Court of Appeal concluded that when the release bond is recorded during a pending foreclosure action, the lienholder is required, within six months of the bond's recording, to file a supplemental complaint stating an action on the bond. As plaintiffs had failed to file a supplemental complaint stating an action on the bond issued by United within six months of its recording, the Court of Appeal concluded that any recovery on the bond was barred by section 3144.5 and that United's demurrer had been properly sustained. We granted review to determine whether these conclusions are correct. We conclude they are incorrect.

by section 3144.5. This demurrer[47 Cal.3d 462] was sustained without leave to amend and judgment was entered accordingly in favor of United. ⁴

DISCUSSION

Mechanics' lien law derives from our state Constitution, which provides: "Mechanics, persons furnishing materials, artisans, and laborers of every class, shall have a lien upon the property upon which they have bestowed labor or furnished material for the value of such labor done and material furnished; and the Legislature shall provide, by law, for the speedy and efficient enforcement of such liens." (Cal. Const., art. XIV, § 3.) The mechanics' lien is the only creditors' remedy stemming from constitutional command and our courts "have uniformly classified the mechanics' lien laws as remedial legislation, to be liberally construed for the protection of laborers and materialmen." (Connolly Development, Inc. v. Superior Court (1976) 17 Cal.3d 803, 826-827, 132 Cal.Rptr. 477, 553 P.2d 637, fn. omitted.) "[S]tate policy strongly supports the preservation of laws which give the laborer and materialman security for their claims." (Id. at p. 827, 132 Cal.Rptr. 477, 553 P.2d 637.)

The purpose of the release bond procedure is to provide a means by which, before a final determination of the lien claimant's rights and without prejudice to those rights, the property may be freed of the lien, so that it may be sold, developed, or used as security for a loan. ⁵ Section 3143 provides that a mechanic's lien release bond "shall be conditioned for the payment of any sum which the claimant may recover on the claim together with his costs of suit in the action, if he recovers therein." The "claim" for which the principal and surety assume liability in the bond is the "claim of lien." (See fn. 2, ante.) The release bond procedure thus protects the lien claimant by providing an alternate source of recovery on the claim of lien. The release bond procedure "does not deprive the [lien claimant] of its constitutional right to a lien" but "[o]n the contrary, it provides for the speedy and efficient enforcement of such lien...." (Frank Curran Lbr. Co. v. Eleven Co. (1969) 271 Cal.App.2d 175, 184, 76 Cal.Rptr. 753, italics added.) The recording of the release bond does not extinguish the lien; rather, the bond is substituted for the land as the object to which the lien attaches. (See Marsh, California Mechanics' Lien Law (3d rev. ed., 1988) § 8.28 ["The recordation of the bond in effect transfers the claim of lien from the owner's land to the bond."].)

Because recovery on the bond is a part of the process for enforcing the mechanic's lien, authorities from other jurisdictions have concluded that a cause of action to foreclose a mechanic's lien is substantially the same whether relief is sought against the liened property or against a bond which has been substituted for the property. Thus it has been said that the bond "does not change the relation or rights of the parties otherwise than in substituting its obligations for the [property] subject to the lien, and it was not within the legislative purpose in permitting the substitution to deteriorate the lienor's rights." (Harley v. Plant (1914) 210 N.Y. 405, 410, 104 N.E. 946, 947; see also, United States v. Certified Industries, Inc. (2d Cir.1966) 361 F.2d 857, 861; Ohio Plate Glass Company v. Paskin (Ohio 1965) 209 N.E.2d 640, 642 [amendment of complaint alleging recording of bond and seeking relief against surety "does not change the cause of action in any way"].)

Recognizing that only a single cause of action is involved, courts of other jurisdictions have held that if a mechanic's lien foreclosure action has been timely commenced and the complaint is then amended to bring in a surety and to obtain relief on a lien release bond, the amendment is not itself subject to any limitations period. (Ohio Plate Glass Company v. Paskin, supra, 209 N.E.2d 640, 642; American Fire & Cas. Co. v. Davis Water & Waste (Fla.App.1978) 358 So.2d 225, 227; see also, Canam Systems v. Lake Buchanan Dev. Corp. (Fla.App.1979) 375 So.2d 582, 583.)

The analysis of these sister state decisions is sound. In seeking to enforce their mechanics' lien first against the liened property and subsequently against the release bond plaintiffs have pursued a single cause of action. (Cf. Commercial Centre R. Co. v. Superior Ct. (1936) 7 Cal.2d 121, 126-128, 59 [47 Cal.3d 464] P.2d 978.) Once an action has been timely commenced by the filing of a complaint, the filing of a supplemental or amended complaint which does not introduce a new cause of action is not subject to the statute of limitations. (Taylor v. Marine Cooks & Stewards Assn. (1953) 117 Cal.App.2d 556, 561, 256 P.2d 595.) In a properly pleaded mechanics' lien foreclosure action, an amended or supplemental complaint ⁶ alleging the recording of a release bond and seeking recovery against...