Scott, Blake and Wynne v. Summit Ridge Estates, Inc.

• Decision Date: 24 May 1967
• Citation: 251 Cal.App.2d 347,59 Cal.Rptr. 587
• Court: California Court of Appeals Court of Appeals
• Parties: SCOTT, BLAKE & WYNNE, a California corporation, Plaintiff and Respondent, v. SUMMIT RIDGE ESTATES, INC., a corporation and B.J.K. Development Co., a Corporation, Defendants and Appellants. Civ. 29296.

Page 587

59 Cal.Rptr. 587

251 Cal.App.2d 347

SCOTT, BLAKE & WYNNE, a California corporation, Plaintiff and Respondent, v. SUMMIT RIDGE ESTATES, INC., a corporation and B.J.K. Development Co., a Corporation, Defendants and Appellants.

Civ. 29296.

Court of Appeal, Second District, Division 3, California.

May 24, 1967.

Flynn & Rafferty and Owen P. Rafferty, Los Angeles, for appellants.

Erb, Picone & Calaway, Beverly Hills, for respondent.

MOSS, Associate Justice.

Defendants appeal from a judgment decreeing the foreclosure of plaintiff's mechanics lien for surveying and engineering services rendered in connection with the subdivision of Tract 23198.

Defendants contend that plaintiff's mechanics lien is void because (1) the contract under which plaintiff performed its services was not a direct contract with the owner and therefore plaintiff's failure to give the notice of lien required by section 1193 of the Code of Civil Procedure ¹ rendered its claim of lien invalid; (2) a portion of the services included in plaintiff's claim of lien was rendered for the benefit of land which was not a part of Tract 23198 and some of the improvements designed by plaintiff were not used in the tract; (3) plaintiff's claim of lien was not timely filed by reason of notices of completion filed by defendants; and (4) the award of fees to plaintiff's attorney was excessive.

On August 1, 1959, plaintiff, a licensed land surveyor and civil engineer, entered into a written contract with defendant Summit Ridge Estates, Inc. ('Summit Ridge'), designated in the contract as 'developer', to render surveying and engineering services pertinent to the development of Tract 23198 located in the City of Los Angeles. At that time Tract 23198 existed only as a number assigned by a governmental agency to a proposed new residential subdivision. Summit Ridge then owned Lot 12 of Tract 7996 consisting of a seven-acre parcel of mountainous terrain. This seven-acre parcel with certain peripheral changes hereafter noted became Tract 23198 consisting of 19 residential building sites. The official tract map, prepared by plaintiff, was recorded on September 16, 1960. Originally Summit Ridge contemplated only 12 residential lots in the subdivision, but due to minor extensions of the boundaries of the tract made possible by new acquisitions and redesigns developed by plaintiff, Summit Ridge was able to create 19 building sites instead of the contemplated 12 sites. The changes in the original boundary of Lot 12, Tract 7996 consisted primarily of drainage easements, storm easements, sewer easements to and from the tract, grading slope easements to protect the roadway into the tract, and certain fee acquisitions which were made as the result of a slight realignment of the entry road to prevent slippage and slides, and to eliminate loose surface and fill materials. Certain areas of Lot 12, Tract 7996 were excluded from Tract 23198 because their inclusion would not have increased the number or value of the 19 lots into which the tract was ultimately subdivided. Some of these acquisitions were not made of record until after the recording of Tract 23198. The record owners of the acquisition parcels joined in the recorded tract map and later executed conveyances thereof to the defendants.

B.J.K. Development Co., Inc. ('BJK') and La Trobe Construction Company ('La Trobe') were joined as defendants. The general manager of the development during the period commencing before the date of plaintiff's contract with Summit Ridge until after the filing of this action was Earl Kaldenberg, who was also the secretary-treasurer of both Summit Ridge and BJK. Plaintiff dealt primarily with Kaldenberg throughout. BJK and Summit Ridge were joint venturers in the devolopment of Tract 23198. La Trobe supplied the money for the development and prior to March 23, 1961, held an unrecorded deed of trust on the tract as security for its loan. Summit Ridge conveyed Tract 23198 to La Trobe by deed recorded on March 23, 1961 and La Trobe in turn conveyed the tract to BJK by deed recorded August 23, 1961. Summit Ridge transferred title to La Trobe only after La Trobe threatened to record its deed of trust and foreclose it. When BJK was able to obtain financing from lending institutions, La Trobe transferred title to BJK.

Under the contract Summit Ridge agreed to pay plaintiff at designated rates. Plaintiff's total charges were $53,410.27 of which it was paid $36,436.19 leaving a balance due of $16,974.08. Defendants caused to be recorded notices of completion of specific aspects of the work on January 5, 1961 and February 21, 1961 respectively. Plaintiff performed services until March 31, 1961. Plaintiff filed its claim of lien on May 5, 1961, and commenced this action on July 27, 1961. It did not file a notice of lien pursuant to section 1193. No notice of nonresponsibility was given pursuant to section 1183.1 by defendants or any other owner of the property which ultimately became part of Tract 23198.

Defendants contend that the contract of August 1, 1959 was not a 'direct contract with the owner' as that term is used in section 1193 and that therefore the failure of plaintiff to give the notice specified in section 1193 invalidates its lien. In support of this contention they point out that on the date of the contract Summit Ridge did not own all of the land that ultimately was included in Tract 23198 and that on May 5, 1961, when plaintiff recorded its claim of lien, Tract 23198 was owned of record not by Summit Ridge but by La Trobe and Margaret E. Rabinowitz.

The pertinent portion of section 1193 provides that '(a) 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.'

An owner may be estopped, however, to assert that a claim is invalid because the claimant failed to give him the prior notice required by section 1193. Where a noncontracting owner has actual knowledge of the improvements being made to his property and fails to avail himself of the mode of exempting his interest from liability for the work provided by section 1183.1(b), ² he is estopped to deny that the work was done at his instance and request. (Halspar, Inc., v. La Barthe, 238 Cal.App.2d 897, 48 Cal.Rptr. 293, hrg. denied Feb. 16, 1966.) Under such circumstances the claimant has a 'direct contract with the owner' for the purposes of section 1193 and consequently is not required to give the notice prescribed therein. (Halspar, Inc. v. La Barthe, supra, 238 Cal.App.2d 897, 899--900, 48 Cal.Rptr. 293; Benson Elec. Co. v. Hale Bros. Assoc. Inc., 246 Cal.App.2d 686, 693, 246 A.C.A. 767, 774, 55 Cal.Rptr. 73.) 'This result is entirely logical as * * * the owner is already in possession of the type of information otherwise provided by the prelien notice of section 1193.' (Halspar. Inc. v. La Barthe, supra, 238 Cal.App.2d at p. 900, 48 Cal.Rptr. at p. 294.)

Defendants contend that the reasoning of the Halspar case does not make sense in the light of section 1193(b) which provides: 'Any agreement made or entered into by an owner whereby the owner agrees to waive the rights or privileges conferred upon by him by this section shall be void and have no effect.' Defendants say that an owner, before entering into such an agreement, would necessarily have actual knowledge of work being done and that such knowledge has the effect of a waiver of the prelien notice under Halspar contrary to the prohibition contained in section 1193(b). This argument ignores the difference between waiver and estoppel. The knowledge of the owner referred to in section 1183.1(b) is knowledge of actual construction, not intended construction. (Arthur B. Siri, Inc. v. Bridges, 189 Cal.App.2d 599, 601, 11 Cal.Rptr. 322.) The basis of section 1183.1(b) is estoppel. (Halspar, Inc. v. La Barthe, supra, 238 Cal.App.2d 897, 899, 48 Cal.Rptr. 293.) Section 1193(b) invalidates a waiver of the right to prelien notice by agreement before construction of the work covered by the agreement commences. Section 1183.1(b) estops an owner from disclaiming responsibility for work performed on his land with his actual knowledge unless he files a notice of nonresponsibility.

The reasoning of Halspar applies to this case provided that the owners of the land which was included in Tract 23198 had actual knowledge of the work done by plaintiff. The evidence is undisputed that they did. Defendant Summit Ridge, the record owner of most of the land that became Tract 23198 made the contract with plaintiff. The court found that defendant BJK was a joint venturer with Summit Ridge to develop the tract. Therefore BJK was charged with the knowledge of Summit Ridge. (Civ.Code § 2332.) Furthermore, since the general manager of the development, Earl Kaldenberg, was an officer of BJK as well as Summit Ridge, his actual knowledge was chargeable to BJK. (Snyder v. Sec. First. Nat. Bank, 31 Cal.App.2d 660, 664, 88 P.2d 760; Witkin, Summary Cal.Law, Agency, § 55, p. 431.) The court found that defendant La Trobe financed the development. There is uncontradicted evidence that one of La Trobe's officers and directors, Mr. Ferrari, personally invested in the tract and followed the progress of the work. Furthermore, there is ample evidence to support the finding that the title to the tract which La Trobe held of record from March 23, 1961 to August 23, 1961 was for security only, and, therefore, whether or not La Trobe had notice of plaintiff's work its interest was subordinate to plaintiff's lien under the provisions of section 1189.1(b). ³

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