Miller v. Mountain View Sav. & Loan Ass'n

• Decision Date: 10 December 1965
• Citation: 238 Cal.App.2d 644,48 Cal.Rptr. 278
• Court: California Court of Appeals Court of Appeals
• Parties: Everett MILLER, individually and dba Everett Miller Plumbing Company, Plaintiff and Respondent, v. MOUNTAIN VIEW SAVINGS AND LOAN ASSOCIATION, Defendant and Appellant. Civ. 22473.

Page 278

48 Cal.Rptr. 278

238 Cal.App.2d 644

Everett MILLER, individually and dba Everett Miller Plumbing Company, Plaintiff and Respondent, v. MOUNTAIN VIEW SAVINGS AND LOAN ASSOCIATION, Defendant and Appellant.

Civ. 22473.

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

Dec. 10, 1965.

Rehearing Denied Dec. 17, 1965.

Hearing Denied Feb. 2, 1966.

Eustice & Feeley, Los Altos, for appellant.

Arvin O. Robb, San Jose, for respondent.

SIMS, Justice.

Defendant Mountain View Savings and Loan Association has appealed from a judgment awarding plaintiff the sum of $5,450, and interest, for plumbing material and labor furnished at the request of defendant owner to five lots on which appellant granted secured loans which were foreclosed by sales under the deeds of trust. The owner defaulted and has not appealed from the adverse judgment against him.

Appellant attacks the findings of fact and conclusions of law of the trial court insofar as they tend to support the right of respondent to recover. The issues raised are whether or not respondent subcontractor obtained a right to reimbursement from the lender by reason of an unbonded stop notice filed under the provisions of section 1190.1 of the Code of Civil Procedure; whether or not he acquired any such right by reason of an equitable lien, and the effect, if any, either on the foregoing claims or independently, of the fact that appellant after buying the property resold it at a substantial profit which more than encompassed the sum sought by respondent. It is conceded that any interest in the real property itself, which respondent might otherwise have acquired by reason of recording a mechanic's lien, was extinguished by the sale under the prior deed of trust held by appellant.

The trial court found that the defendant White and his wife on April 19, 1963 were the owners of the five lots to which the labor and material were subsequently furnished by respondent. The evidence reflects that appellant conveyed the premises to the Whites by deed dated April 19, 1963, and recorded on April 29th. Of the $9,500 purchase price received for each lot, $5,900 was credited to the purchasers from the proceeds of notes secured by deeds of trust executed by the Whites and recorded at the same time as the deed.

The findings set forth that on April 19th the Whites entered into a building and loan agreement with appellant as to each separate lot, pursuant to which appellant agreed to loan $39,000 on each of four lots, and $39,500 on a fifth lot; that the agreements provided for five progressive payments for the construction on each of the lots of a four-unit apartment house with carports, and that 'The payments from the loan were for the sole benefit of labor and materials rendered and furnished in the construction of these respective units.' Reference to the agreements reveals that each provides for a $5,900 payment to be paid upon recordation, and for the payment of a loan fee, trustee fee, and tax lien service fee to be paid by deduction from the loan proceeds.

The loan agreements provide that the loan proceeds are to be deposited with and assigned to the lender as further security, and that they are to be paid out in accordance with the agreement for the construction of the improvements. Interest payable is limited to that on funds actually disbursed for the first 90 days, then subsequently becomes payable on the full amount retroactively to the date of the agreement. The right to credit undisbursed funds on the indebtedness in the event of any default is expressly reserved to the lender.

Appellant's records reflect that on April 22, 1963, an 'Incomplete Loan' account was set up for each lot by crediting the account with the principal sum of the loan. At the same time each account was charged with the sum of $5,900, which was applied to the purchase price as set forth above. On April 30th, each account was charged with interest for April (for one-half month on $5,900 at 6 3/4 per cent), and the respective amounts set forth in the applicable agreement for loan fee, trustee fee, and tax lien service fee, which aggregated $1,581 for each of the first four lots and $1,601 for the fifth. On May 31st, each account was charged with one month's interest at 6 3/4 per cent on the sums theretofore advanced. On June 28th, each account was again charged with one month's interest at 6 3/4 per cent on the sums previously advanced; and, in the case of the first four lots, a progress payment was made in the sum of $4,937.83 which represented the difference between the payment called for, $6,620, and the charges previously made to the account as outlined above. In the case of the fifth lot, the progress payment was made July 11, 1963 in the sum of $5,017.60, representing the difference between $6,720, as called for, and said charges. The findings of the court recite that the full amount of these progress payments were disbursed for construction purposes, but no issue is made of this discrepancy by appellant.

The findings of fact recite: 'Plaintiff, in reliance upon the building and loan fund, and pursuant to a contract with the defendant Larry White, installed basic plumbing material and labor for the construction of the housing units on each specific lot.' Appellant objects to so much of the foregoing as states: 'in reliance upon the building and loan fund.' The evidence on this point is hereinafter reviewed.

The court found that respondent continued to work on the project until July 29, 1963, at which time he had completed, pursuant to the terms of his contract, the rough plumbing and part of the 'top out' to the extent of a reasonable value of $1,907.50 for each unit; and that he had been paid $1,362.50 on account for each of three units. The court also found that the construction of the uncompleted improvements ceased on or about July 23, 1963. Respondent completed the rough plumbing and sent bills for 50 per cent of the contract price on July 24th. After the complete cessation of work on the project he estimated the additional work and materials furnished by him, which did not reach the 'top out' stage, as 20 per cent of the contract price, and on August 9th prepared and submitted new bills for the total balance then due, with credit for the payments received. He was unable to state with any accuracy when the last work was done by him, but the court's finding of July 29th falls within the limits of his testimony although it is inconsistent with the general finding that work ceased July 23rd. Respondent admitted that about one year later he was charging about $600 more than he would have earned on completion of the original contract, to complete each of the jobs for a new owner, and explained that vandalism had caused more work and that his cost of doing business had increased.

Following the discovery on July 23, 1963 that no work was in progress, appellant, on July 24th, charged each of the 'Incomplete Loan' accounts with the unexpened loan balance, which in each case was a sum equal to the total of the undisbursed four out of the five projected construction progress payments. ¹ On July 29, 1963, appellant caused to be recorded Notices of Default which had been executed under date of July 24, 1963, for each loan. Each of these notices recited that the alleged breach was: 'The failure upon the part of the trustor and/or his duly authorized agent to apply funds toward construction of the proposed improvement.' The court expressly found that no evidence was adduced to support this recital, and that although work had ceased on all of the five jobs, the period of cessation of work had not violated the terms of the construction loan agreement ['ten (10) calendar days'] at the time the notice of default was recorded.

The findings reflect that on July 30, 1963, respondent caused to be served upon appellant a stop notice pursuant to 'Section 1190.1(c) C.C.P.' which was received by it on August 2, 1963 by certified mail; and that this notice was not accompanied by a bond. Appellant questions the former finding, insofar as it implies compliance with law, because of the failure to accompany the notice with a bond. Thereafter, on August 21, 1963, respondent recorded a 'Mechanics' Lien' for the work, labor and services so performed. ² The court expressly found that said lien was nullified by the subsequent foreclosure of the deeds of trust by appellant, and that the legal rights of respondent terminated by merger of the equitable and legal title in appellant. No other claims were made against appellant by any other person or claimant performing work, labor and services upon the property involved.

The court found that the property was thereafter (March 12, 1964, as evidenced by deeds dated that day and recorded March 24, 1964) sold by the trustee under the deed of trust to appellant for an aggregate sum of $65,434.38, ³ which represented the total amounts which appellant claimed it had expended 'pursuant to their note obligation and deed of trust' on each of the five lots; and that 'immediately thereafter' ⁴ appellant sold the property to a third party for $76,000 and received a profit in the sum of $10,865.62.

Appellant offered requests for express findings--pursuant to the provisions of section 634 of the Code of Civil Procedure. In addition to covering some of the discrepancies and the objections noted above, appellant complains of the failure to set forth the date on which suit was filed to engorce respondent's lien rights. The record reveals that the complaint was filed August 26, 1963, and no express finding is required on this point. Appellant's answer was filed January 28, 1964.

From the foregoing facts the trial court concluded that respondent had an equitable lien upon the construction funds which precluded appellant from crediting back the balance of the loan account in disregard of the amount of his claim; ⁵ and that respondent was entitled to judgment...