North Bay Const., Inc. v. City of Petaluma

• Court: California Court of Appeals
• Writing for the Court: Pollak
• Citation: North Bay Const., Inc. v. City of Petaluma, 143 Cal. App. 4th 552, 49 Cal. Rptr. 3d 455 (Cal. App. 2006)
• Decision Date: 28 September 2006
• Docket Number: No. A111591.,A111591.
• Parties: NORTH BAY CONSTRUCTION, INC., Plaintiff and Appellant, v. CITY OF PETALUMA, Defendant and Respondent.

49 Cal.Rptr.3d 455

143 Cal.App.4th 552

NORTH BAY CONSTRUCTION, INC., Plaintiff and Appellant, v. CITY OF PETALUMA, Defendant and Respondent.

No. A111591.

Court of Appeal, First District, Division 3.

September 28, 2006.

Delphine S. Adams, for Plaintiff and Appellant.

Joseph M. Quinn, Eric W. Danly, Meyers, Nave, Riback, Silver & Wilson, Oakland, for Defendant and Respondent.

POLLAK, J.

Plaintiff North Bay Construction, Inc. (North Bay) seeks to recover from the City of Petaluma (City) for grading work it performed on City land under a contract with the developer to whom the City had leased the property. North Bay seeks to foreclose a mechanic's lien against the property and to obtain judgment against the City on a theory of quantum meruit. The trial court dismissed North Bay's complaint on the grounds that a mechanic's lien cannot be enforced against property owned by a municipality, even if the work was not performed as part of a "public work" project, and that a contractor cannot recover in quantum meruit for improvements to a municipality's property performed under a contract with a third party. We agree with the conclusions of the trial court and shall affirm.

Factual and Procedural History

North Bay's complaint alleges that the City is the owner of real property commonly known as the Redwood Empire Sportsplex that was leased to a developer for the purpose of constructing a sports complex.¹ The developer contracted with North Bay, a licensed paving contractor, to perform grading work at the property, which North Bay has completed but for which it has not been paid. North Bay recorded a mechanic's lien against the property and served a "Notice of Potential Claim" on the City advising it that, as the owner and lessor of the property, it may be responsible for the reasonable value of the material and labor provided by North Bay. The complaint alleges, among other things, a common count to recover from the City the "reasonable value of work, labor, and services" (third cause of action) and a cause of action to foreclose on the mechanic's lien (fifth cause of action). The City demurred to the complaint on the grounds that a mechanic's lien cannot be enforced against public property and that common counts may not be asserted against public entities. The trial court sustained the demurrer without leave to amend. The City was dismissed from the action and North Bay filed a timely notice of appeal.

Discussion

1. Mechanic's Lien

"A mechanic's lien is a procedural device for obtaining payment of a debt ow[ ]ed by a property owner for the performance of labor or the furnishing of materials used in construction." (Road Sprinkler Fitters Local Union No. 669 v. G & G Fire Sprinklers, Inc. (2002) 102 Cal.App.4th 765, 774, fn. 11, 125 Cal. Rptr.2d 804.) The statute implementing this procedure, Civil Code section 3109 et seq.,² is derived from article 14, section 3 of the California Constitution, which provides that "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." Accordingly, section 3110 provides in relevant part, "Mechanics ... and all persons and laborers of every class performing labor upon ... a work of improvement shall have a lien upon the property upon which they have bestowed labor ... whether done or furnished at the instance of the owner ... or otherwise." Section 3129 provides that "[e]very work of improvement constructed upon any land ... with the knowledge of the owner ... shall be held to have been constructed ... at the instance of such owner ... and such interest shall be subject to any lien recorded under this chapter unless such owner ... shall give a notice of nonresponsibility pursuant to Section 3094."

Section 3109, added by the Legislature in 1969, expressly provides that the mechanics' lien law "does not apply to any public work." (Stats.1969, ch. 1362, § 2, p. 2761.) "Public work" is defined as "any work of improvement contracted for by a public entity." (§ 3100.) North Bay argues that since the City did not contract for the performance of any of the work on the sports complex, the project is not a "public work" and section 3109 therefore has no application. Since the work in question was contracted for by the lessee/developer, the argument continues, the mechanic's lien statute applies and, the City as owner having failed to file a notice of nonresponsibility pursuant to section 3094, a lien may be imposed on the property on which the improvements were performed.

While there is no dispute that the express exemption for public work provided by section 3109 does not apply, it does not necessarily follow that a mechanic's lien may be impressed on property owned by the City. In 1891, the California Supreme Court held that a mechanic's lien could not be enforced against a school house owned by a local school district. (Mayrhofer v. Board of Education (1891) 89 Cal. 110, 112, 26 P. 646 (Mayrhofer).) The court explained that because of principles of sovereign immunity, any right to impress a mechanic's lien on public property must be expressly, not implicitly, provided for by statute. The court rejected the argument that "public buildings are included both in the word `property,' used in the constitution, and in the phrase `any building,' used in the code, and therefore it must necessarily follow that mechanics and material-men are, by these provisions, given a right to a lien upon such buildings." (Ibid.) The court relied on "the rule of statutory construction, that the state is not bound by general words in a statute, which would operate to trench upon its sovereign rights, injuriously affect its capacity to perform its functions, or establish a right of action against it." (Ibid.) Since Mayrhofer, the general rule has been broadly stated, often without reference to section 3109, that "liens for labor or supplies on public property are not permitted." (A.J. Setting Co. v. Trustees of Cal. State University & Colleges (1981) 119 Cal.App.3d 374, 381, 174 Cal.Rptr. 43; Sukut-Coulson, Inc. v. Allied Canon Co. (1978) 85 Cal.App.3d 648, 654, 149 Cal.Rptr. 711 ["the mechanics lien laws, in general, do not apply to public improvements"].) While most of these cases did involve public work projects, the prohibition is frequently stated as applying to "public property," not simply to public work projects. This is consistent with the rule in many other jurisdictions. (E.g., John Kennedy & Co. v. New York World's Fair 1939 (N.Y.App.Div.1940) 260 A.D. 386, 388, 22 N.Y.S.2d 901, 904 ["lien cannot attach to the City's interest in the real estate"]; National Fireproofing Co. v. Town of Huntington (1909) 81 Conn. 632, 71 A. 911, 912 ["public buildings" not subject to lien]; see also 51 A.L.R.3d 657, § 3[a] [listing cases in which courts have applied principles of sovereign immunity "in determining that municipal property could not be the subject of a mechanic's lien"]; 3 Bruner & O'Connor, Construction Law (2006) § 8:136 ["As a general rule, mechanics' liens do not attach to public property"].)

The holding in Mayrhofer remains good law. There is no right to impose a lien on property owned by a public entity unless such a right has been expressly conferred by statute. (Mayrhofer, supra, 89 Cal. at p. 113, 26 P. 646 ["One cannot sue the state, unless expressly authorized by statute, and this principle is embodied in our constitution. General statutes creating new remedies for individuals have never been held to authorize such suits"].) This principle has been reconfirmed very recently by our Supreme Court: "A traditional rule of statutory construction is that absent express words to the contrary, governmental agencies are not included within the general words of a statute." (Wells v. One2One Learning Foundation (2006) 39 Cal.4th 1164, 48 Cal.Rptr.3d 108, 122, 141 P.3d 225, 239 (Wells); State ex rel. Harris v. PricewaterhouseCoopers (2006) 39 Cal.4th 1220, 48 Cal.Rptr.3d 144, 153, 141 P.3d 256, 265.)³

While sovereign immunity against being sued has been waived by Government Code section 945 (a "public entity may sue and be sued"), Government Code section 944 provides that "[n]othing in this part imposes liability upon a public entity unless such liability otherwise exists." No statute imposes liability on a public entity for debts incurred by a lessee for improving property owned by and leased from the public entity. Nor can section 3109 be construed to implicitly authorize a mechanic's lien against public property for performing work that is not a "public work." To the contrary, the legislation adopting section 3109 provided expressly that it was the intent of the Legislature that "[t]his act shall not be construed to constitute a change in, but shall be construed as declaratory of, the preexisting law." (Stats. 1969, ch. 1362, § 10, p. 2783.)

North Bay argues that a distinction must be drawn between property owned by a municipality that is used for governmental as opposed to proprietary purposes. It contends that property held in a proprietary capacity—as it asserts is the case here⁴—is subject to a lien as is any other privately held property. Although there is no California authority directly on point, some other jurisdictions have agreed that the purpose for which governmentally-owned property is used determines whether the property is subject to a mechanic's lien. (Comstock & Davis, Inc. v. City of Eden Prairie (Minn.Ct.App.1997) 557 N.W.2d 213, 216; Mayor & Council v. Recony Sales & Engineering Corp. (Del. 1962) 185 A.2d 68, 70; American Seating Company v. City of Philadelphia (1969) 434 Pa. 370, 256 A.2d 599, 600-601 (American Seating).)⁵

In American Seating, supra, 256 A.2d at pages 600-601, the court held that a...