Schrader Iron Works, Inc. v. Lee

• Decision Date: 30 June 1972
• Citation: 26 Cal.App.3d 621,103 Cal.Rptr. 106
• Court: California Court of Appeals Court of Appeals
• Parties: SCHRADER IRON WORKS, INC., a corporation, Plaintiff and Respondent, v. Wayne LEE et al., Defendants and Appellants. Civ. 28372.

Page 106

103 Cal.Rptr. 106

26 Cal.App.3d 621

SCHRADER IRON WORKS, INC., a corporation, Plaintiff and Respondent, v. Wayne LEE et al., Defendants and Appellants.

Civ. 28372.

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

June 30, 1972.

Rehearing Denied July 26, 1972.

Hearing Denied Aug. 23, 1972.

Rodger D. Lippa, Alley, Lippa & Walker, San Francisco, for defendants-appellants.

Connella & Sherburne, Frank J. Baumgarten, San Francisco, for plaintiff-respondent.

MOLINARI, Presiding Justice.

Defendants Wayne Lee and Tom T. Lee (sometimes hereinafter referred to as 'the Lees') and E. A. Norwitt and Annabelle Norwitt (sometimes hereinafter referred to as 'the Norwitts') appeal from a judgment entered against them in favor of plaintiff Schrader Iron Works, Inc., a corporation (hereafter 'Schrader') in an action to foreclose a mechanic's lien. The judgment decreed that the Lees and the Norwitts owed Schrader the sum of $5,991.95, that plaintiff had a lien on the property involved for the sale of said property, for the application of the proceeds of said sale to the aforementioned indebtedness, and for the recovery of any deficiency against the Lees and the Norwitts.

The Facts

On July 8, 1965, Mustin Construction Company (hereinafter 'Mustin') entered into a contract with Schrader for the production and erection of structural steel for a building Mustin was constructing on land owned by it. During the course of construction a 'For Sale' sign was posted on the building. The structural steel produced by Schrader for the subject building was installed by Schrader on two separate days, i.e., on September 22, 1965 and on October 15, 1965.

On October 21, 1965, Mustin and the Lees executed a deposit receipt agreement calling for the exchange of the Mustin property for property owned by the Lees. The broker representing the Lees was the Cable Car Realty and the transaction was handled by its agent George Fung. Pursuant to an oral agreement Mustin and the Lees agreed that the escrow would not close until the notice of completion was filed because the Lees wanted to be sure that the property was clear and they needed time to secure financing.

Mustin did not pay the sum of $4,750 due Schrader for the structural steel work within the 30-day period provided for in the contract between the parties. The contract provided that said sum was to be paid within 30 days after the steel was erected. Schrader contacted Mustin and was informed that Mustin did not have the necessary funds and that it was trying to sell the property. Schrader had dealt with Mustin for approximately three years and was aware that it built on speculation. Schrader sometimes allowed past due accounts to continue until the notice of completion was filed in order to preserve good will and insure future contracts.

On January 11, 1966, Mustin recorded a notice of completion. About 15 days later Mustin contacted Schrader and requested that it delay filing its claim of mechanic's lien until the end of the statutory period. Although it was Schrader's practice to file such a claim within 30 days after the recordation of the notice of completion, Schrader acceded to Mustin's request.

A deed from Mustin conveying the subject property to the Lees was recorded on February 24, 1966. The Cable Car Realty had obtained a title report and a policy of title insurance on the subject property. The report showed that a notice of completion had been filed. In accordance with its normal procedures, Schrader obtained a title report in order to verify the description of the property. The report, which was dated March 7, 1966, showed that Mustin had conveyed the property to the Lees on February 7, 1966, and that the deed had been recorded on February 24, 1966. This was Schrader's first knowledge that the Lees were involved, although there was testimony that upon the execution of the agreement of sale between Mustin and the Lees two 'sold' signs were placed upon the subject property by Cable Car Realty. None of Schrader's employees recalled having seen these signs or any 'for sale' signs on the building. On March 8, 1966, Schrader recorded its claim of lien.

As a part of its agreement of sale with the Lees, Mustin received a second deed of trust upon the property naming Mustin as the beneficiary. An assignment of this deed of trust from Mustin to the Norwitts were recorded on March 22, 1966. The Norwitts had no personal knowledge of any liens although they had obtained a title report. At the trial Mr. Norwitt could not remember whether the report was one he had ordered or the one obtained by the Lees.

Contentions

The Lees and the Norwitts raise several issues. Their main contention is that Schrader did not have a valid lien. They argue that Schrader was required to serve a prelien notice in accordance with Code of Civil Procedure section 1193. ¹ In the alternative, they argue that even if Schrader was not required to serve a prelien notice, it is estopped to deny that a prelien notice was required. In conjunction with this latter argument, they urge that the court erred in rejecting their request for a special finding on the question of estoppel as it was a material issue. They also argue that even if an adverse finding is implicit, it is unsupported by the evidence. The Norwitts contend, further, that their deed of trust is not subject to any claim of Schrader and that Schrader may not assert its invalid claim of mechanic's lien against them.

The Lees' and the Norwitts' second contention is that there is no basis for a money judgment, a deficiency judgment, execution of judgment, or interest charges as they had no contract with Schrader. Finally, they request that, in the event the judgment is not reversed, it be vacated and a new trial granted because of alleged irregularities below which prevented a fair trial.

Prelien Notice

The trial court determined that Schrader was not required to give a prelien notice to the Lees and that Schrader had complied with the statutory provisions respecting the perfection of mechanics' liens.

At the time Schrader attempted to perfect his lien, former section 1193, subdivision (a) provided, in relevant part, that 'Except one under direct contract with the owner or one performing actual labor for wages, every person who furnishes labor, service, equipment or material for which a lien otherwise can be claimed under this chapter, must, as a necessary prerequisite to the validity of any claim of lien subsequently filed, cause to be given not later than 15 days prior to the filing of a claim of lien a written notice as prescribed by this section, to the owner or reputed owner and to the original contractor. . . .' ²

The issue presented is whether the notice prescribed in section 1193, subdivision (a) must be given to an owner of property who did not directly contract with the lien claimant notwithstanding that there was a direct contract between the lien claimant and a previous owner for the performance of the work or the furnishing of materials for which the lien is claimed.

'In construing a statute our concern is to ascertain and to give effect to the legislative intent. (Citations.) In ascertaining the intent articulated in a statute, the court should first turn to the words of the statute to determine the will of the Legislature (citations) and give effect to the statute according to the usual, ordinary import of the language employed in framing it. (Citations.)' (Noroian v. Dept. of Administration, 11 Cal.App.3d 651, 654--655, 89 Cal.Rptr. 889, 891.)

Analyzing the subject statute pursuant to the foregoing principle of statutory construction, we interpret it to mean that the notice prescribed in section 1193, subdivision (a) must be given to the owner of the property at the time the claimant seeks to perfect his lien, except where the claimant has entered into a direct contract with a person who was the owner of the property at the time the contract was made for the performance of the work or the furnishing of materials. We think this is the plain import of the statute which is made clear by the express language prefacing the statute with the proviso excepting 'one under direct contract with the owner' from the requirement of giving notice of the intention to file a claim of lien.

From a reading of the statute we think it was the legislative intent to protect the owner who has entered into a contract for work and labor to be performed on his building, or for materials to be furnished therefor, from liens that might be placed on his building by persons with whom he did not contract, such as subcontractors, and whose identity is unknown to the owner. As observed by the Attorney General: 'Section 1193 was enacted in 1959 to give increased financial security to the building industry by providing early notice to the owner, lender, and general contractor of the presence on the job of persons, including contractors, entitled to file a mechanics' lien and the amount of their potential liens. On a typical construction job, it is not unusual for the property owner and lending institution not to know the identity of persons furnishing labor and supplies to the job, other than the general contractor with whom they have dealt directly. Section 1193 was intended as a means of identifying these unknown persons, who are potential lien claimants, so that meaningful communication could be had among the property owner, lending institution and general contractor to insure timely payment of these persons' claims and avoidance of costly work stoppages, mechanics' liens foreclosure sales, and double payments by the owner. (Citations.)' (51 Ops.Cal.Atty.Gen. 69.) ³ (See Windsor Mills v. Richard B. Smith, Inc., 272 Cal.App.2d 336, 340, 77 Cal.Rptr. 300; Wand Corp. v. San Gabriel Valley Lbr. Co., 236 Cal.App.2d 855, 861, 46 Cal.Rptr. 486; Alta Bldg. Material Co. v. Cameron, 202 Cal.App.2d 299, 303--304, 20 Cal.Rptr. 713.)

An owner who...