In re Morrell
| Decision Date | 10 July 1984 |
| Docket Number | No. C-84-0091 RFP.,C-84-0091 RFP. |
| Court | U.S. District Court — Northern District of California |
| Parties | In re Richard J. MORRELL, Debtor. Edward M. WALSH, Trustee, Plaintiff, v. Marilyn P. MISENAR; Salvatore A. Bartimioli and Rose Laura Bartimioli; Albert P. Lomeli, Contra Costa County Tax Collector, State of California, Black & Veatch, dba Frederick Sena & Associates; Accounts Adjustment Bureau, a California corporation; Bruce M. Kellogg; and Chicago Title Company, Defendants. And Counter-Claim. |
Dennis D. Davis, Terrance L. Stinnett, Goldberg, Stinnett & MacDonald, San Francisco, Cal., for plaintiff Edward M. Walsh.
Richard M. Kaplan, Richard M. Kaplan, P.C., San Francisco, Cal., for defendants.
This is an appeal from a decision in Bankruptcy Court granting summary judgment in favor of defendant-appellee Black & Veatch. The Bankruptcy Court held that appellee has an enforceable lien on certain property in debtor's bankruptcy estate. Plaintiff-appellant Edward M. Walsh, trustee for debtor Richard J. Morell, appeals that decision and conversely asks for summary judgment in his favor. Jurisdiction is based upon section 1334 of Title 28 of the United States Code (1976), which grants district courts original jurisdiction over all matters and proceedings in bankruptcy.
The issues on appeal are:
(1) whether appellee has a valid mechanic's lien when, due to the fault of the debtor, no construction or visible improvement ever commenced on the property against which the lien is asserted; and
(2) whether appellee timely filed its notice of claim of mechanic's lien.
The court upholds the decision of the bankruptcy judge in part, finding that appellee has a valid mechanic's lien on the property in question. But the court does not rule on the timeliness of appellee's lien claim. Rather, the court remands the case to the bankruptcy judge to make factual findings on that issue. Appellee has also asked for attorneys' fees; the court denies that request.
Appellee, a firm of licensed architects and engineers, contracted with debtor to prepare drawings and specifications for a proposed improvement on debtor's property located in Pittsburg, California. Appellee performed the contract and completed the plans in late August of 1979. But the debtor never commenced construction of the project, and failed to pay appellee the contract price of $14,000. On September 3, 1980, appellee recorded its notice of claim of lien against debtor's property, claiming $18,657.33, the contract price increased by change orders and extra work.
On April 15, 1981, an involuntary petition under Chapter 7 of the Bankruptcy Code was filed against debtor, who had fled the state. Walsh was appointed trustee of debtor's estate, which included the realty in Pittsburg. On May 26, 1981, the matter was converted into a Chapter 11 case.
In October of 1982, Walsh filed an adversary proceeding to determine the validity of various claims against the property, including appellee's claim arising under the mechanic's lien. On January 24, 1983, the bankruptcy judge determined that the property was subject to two encumbrances —a first deed of trust recorded on April 16, 1976, and a second deed of trust recorded on December 1, 1976. Walsh contended that appellee's mechanic's lien claim was invalid because the notice of the lien was untimely, and there was no improvement on the land against which a lien could attach. Both parties filed cross-motions for summary judgment. On December 9, 1983, the Bankruptcy Court granted appellee's motion, ordered Walsh to pay appellee the amount of the lien, and denied Walsh's motion for summary judgment. This appeal arises from that judgment.
Summary judgment is proper "`only where there is no genuine issue of any material fact or where viewing the evidence and the inferences which might be drawn therefrom in the light most favorable to the adverse party, the movant is clearly entitled to prevail as a matter of law.'" Radobenko v. Automated Equipment Corp., 520 F.2d 540, 543 (9th Cir. 1975), quoting Caplan v. Roberts, 506 F.2d 1039, 1042 (9th Cir.1974). A bankruptcy judge's conclusions of law are subject to de novo review in the district court. See, e.g., In re Bubble-Up Delaware, Inc., 684 F.2d 1259, 1262 (9th Cir.1982); In re Visiting Home Services, Inc., 643 F.2d 1356, 1359 (9th Cir.1981). There are no disputed facts in this case, so the court need not resolve whether the bankruptcy judge's findings of fact are reviewable under the standard of clear error or under the less deferential standard of General Order 24 of the Northern District of California. See Morrissey v. Frank, 717 F.2d 100 (3d Cir.1983).
The bankruptcy judge ruled that appellee Black & Veatch has a mechanic's lien upon debtor's Pittsburg property, even though no on-site construction ever commenced. But California courts have never squarely decided whether an architect's claim for services rendered in the preparation of drawings and plans is lienable against the interest of the one who contracted for the services when, through the fault of the owner of such interest, no actual work on the ground commenced. See Tracy Price Associates v. Hebard, 266 Cal.App.2d 778, 788, 72 Cal.Rptr. 600, 606 (1968). Appellant argues that the bankruptcy judge erred by not applying the rule that actual work on the ground must begin before a mechanic's lien arises. Appellee counters that that rule only applies in cases in which other security claimants assert rights in the same property. According to appellee, this court should follow the reasoning of a Minnesota case, Lamoreaux v. Andersch, 128 Minn. 261, 150 N.W. 908 (1915), and allow the lien to stand.
The purpose of a mechanic's lien is to secure to mechanics, materialmen, and anyone else who contributes labor or materials to an improvement, payment for the labor performed or materials furnished. See Nolte v. Smith, 189 Cal.App.2d 140, 144, 11 Cal.Rptr. 261, 263 (1961). It also serves to discourage a casual attitude toward payment of obligations incurred in the construction of an improvement. See Selby Constructors, Inc. v. McCarthy, 91 Cal.App.3d 517, 525, 154 Cal.Rptr. 164, 168-69 (1979). Section 15 of Article XX of the California State Constitution guarantees mechanic's liens to persons who contribute toward an improvement of real property. This constitutional mandate has been made effective through the enactment of section 3110 of the California Civil Code (West 1974), which provides:
Mechanics, materialmen, contractors, subcontractors, lessors of equipment, artisans, architects, registered engineers, licensed land surveyors, machinists, builders, teamsters, and draymen, and all persons and laborers of every class performing labor upon or bestowing skill or other necessary services on, or 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 upon which they have bestowed labor or furnished materials. . . .
(Emphasis added.) Because section 3110 specifically refers to architects, they clearly are entitled to mechanic's liens for their services.
Under section 3134 of the California Civil Code (West 1974), such liens are preferred to encumbrances that attach subsequent to the commencement of the work of improvement. A "work of improvement" includes "the construction, alteration, addition to, or repair, in whole or in part, of any building. . . ." Cal.Civ.Code § 3106 (West 1974).
The general rule in California is that a mechanic's lien attaches upon commencement on the ground of the work of improvement for which the claimant has done work or furnished materials, not when the claimant actually performs the lienable work or files the lien claim. Walker v. Lytton Savings and Loan Association, 2 Cal.3d 152, 156-57, 465 P.2d 497, 500, 84 Cal.Rptr. 521, 524 (1970); see generally 6 B. Witkin, Summary of California Law 1533 (8th ed. 1974). Note, Selected Mechanics Lien Priority Problems, 16 Hastings L.J. 155 (1964). The rationale for the ground-work requirement is twofold. First, under section 3128 of the California Civil Code, a mechanic's lien attaches to the work of improvement and the land on which it is situated; if no work of improvement has commenced, there is nothing upon which the lien can attach. See English v. Olympic Auditorium, Inc., 217 Cal. 631, 20 P.2d 946 (1933). Second, actual visible work on the land notifies potential lenders that mechanic's liens have arisen. See generally 6 B. Witkin, supra, at 1533. The court in Walker reasoned that if an encumbrance attaches before any work is done on the property, "then the liens of all others who contributed work or materials to the work of improvement . . . would likewise relate back . . . and thereby take priority over the subsequent encumbrance. . . . under such circumstances it would appear that construction loans would shortly become next to impossible to obtain. . . ." Walker, 2 Cal.3d at 159-60, 465 P.2d at 503, 84 Cal.Rptr. at 526-27.
Because no work ever commenced on the property in the present case, the general rule seems to dictate that appellee cannot assert a mechanic's lien. But appellee points to the case of Lamoreaux, in which the Supreme Court of Minnesota, construing a lien statute similar to California's, upheld an architect's lien as against the owner even though no actual work had been done on the land. In Lamoreaux, an architect drew up plans for an improvement, but the owners of the property refused to proceed with the construction and repudiated the architect's contract. The court concluded that it would be inequitable to permit the owner to defeat the architect's right to a lien. It explained that "it is rather hard on those who have performed labor or furnished material in...
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