Theisen v. Los Angeles County

• Decision Date: 20 May 1960
• Court: California Supreme Court
• Parties: , 352 P.2d 529 J. W. THEISEN et al., Appellants, v. COUNTY OF LOS ANGELES et al., Respondents. L. A. 25221.

Page 161

5 Cal.Rptr. 161

54 Cal.2d 170, 352 P.2d 529

J. W. THEISEN et al., Appellants, v. COUNTY OF LOS ANGELES et al., Respondents.

L. A. 25221.

Supreme Court of California, In Bank.

May 20, 1960.

Wellborn, Barrett & Rodi, Frank C. Hubbard and James D. Doggett, Los Angeles, for appellants.

Harold W. Kennedy, County Counsel, Edward A. Nugent, Deputy County Counsel, Bodkin, Breslin & Luddy and E. E. Hitchcock, Los Angeles, for respondents.

SCHAUER, Justice.

Plaintiffs-cross-defendants appeal from a judgment which is adverse to them in their action for declaratory relief and which awards defendant-cross-complainant, the County of Los Angeles, $648 in its cross-action on the obligation of a release bond. Plaintiffs-cross-defendants are the copartners in a firm (hereinafter sometimes called Theisen) which was the general contractor on a county construction job and Theisen's surety on such bond. In reliance on the bond the county released to Theisen $648 which it had withheld pursuant to a stop notice. Defendants are the county, its auditor, and Durand, a materialman who filed the stop notice and thereafter recovered $648 from the county in a municipal court action (to which plaintiffs were not parties) on the claim which was the basis of his stop notice. Plaintiffs brought the present action for a declaration of the rights and obligations of the parties under the bond and the municipal court judgment and the county brought the cross-action on the obligation of the bond.

On evidence which is without material conflict the superior court found the facts, made conclusions of law which reject plaintiffs' legal position in this controversy, and rendered the judgment from which plaintiffs have taken this appeal. We have concluded that the judgment should be affirmed.

The principal burden of plaintiffs' argument is (a) that the municipal court judgment, for various asserted reasons, does not conclusively determine, so far as the obligation of plaintiffs-indemnitors is concerned, that their indemnitee, the county, was liable to Durand, and therefore plaintiffs can defend against the county's cross-action on plaintiffs' bond by showing that there was a good defense which could have been presented in the municipal court action, namely, that Durand, as the supplier of material to a materialman, was not entitled to avail himself of the stop notice provisions of the CODE OF CIVIL PROCEDURE (SS 1190.1-1192.1), AND (B)¹ even if it is determined that plaintiffs are liable to the county on their bond, Durand should be required to pay such liability because he wrongfully used the stop notice procedure to cause the $648 to be withheld and paid to him pursuant to the municipal court judgment.

The material facts are as follows: The county let a contract to Theisen for the construction of a work of public improvement (a fire combat training center). In performing the contract Theisen contracted with Petterson Corporation (not a party to this action) for Petterson to supply 64 custom made doors to conform to architect's specifications. Petterson then contracted with defendant Durand for Durand to supply 20 of such doors for $1,148. Durand, obedient to the contract, fabricated and shipped the doors to Petterson and Petterson paid Durand $600 on account. (The unpaid balance of $548 occasions this litigation.) Theisen took delivery of the 64 doors at Petterson's plant and paid Petterson in full without asking for proof of releases by Petterson's suppliers. Theisen installed the doors. Neither Durand nor Petterson entered upon the job site.

Petterson defaulted in payment of the $548 due Durand. On June 13, 1955, Durand filed with the county a stop notice which designated Petterson as a 'subcontractor' of Theisen and notified the county to withhold from any money due Theisen 'a sum sufficient to satisfy this claim including the reasonable cost of any litigation thereunder, as provided in Section 1184 and Section 1184-e of the Code of Civil Procedure.' ² On the basis of this notice the county withheld from Theisen $548 plus $100 to cover the cost of litigation.

On January 3, 1956, in the municipal court, Durand sued the county, its auditor, and Petterson to enforce Durand's claim under the stop notice. Neither Theisen nor its surety was made a party to the municipal court action. However, Theisen, during the statutory period (specified in Code Civ.Proc., § 1197.1) for the filing of an action to enforce the claim of the stop notice, telephoned the office of the county auditor and learned that Durand had filed such an action, and a Theisen partner read the file of such action and spoke with Petterson's attorney concerning it.

On February 16, 1956, Theisen (principal) and its surety, with actual knowledge of such action, executed and delivered to the county (obligee) the 'Bond to Release Money Withheld on Stop Notice.' The bond provides that Theisen and its surety are bound to the county in the sum of $685 and that 'The Condition Of The Above Obligation Is Such, That

'Whereas, the said Principal * * * entered into a written contract (for the construction of the public work) * * *

Whereas, a certain stop-notice has been filed against payments which are due the said Principal in connection with said contract, to wit: Durand Door Supply.

'Whereas, the said Principal disputes the correctness and validity of said claims so filed, and desires that the funds now due him under the provisions of said contract shall be delivered to him notwithstanding said stop-notice.

'Now, Therefore, if the * * * Principal shall fully protect the Obligee herein against any loss by reason of or arising out of the acceptance of this bond, or the release of said moneys, or the payment thereto (sic) to said Principal, and shall pay any sum which said claimants may recover on said claims, together with the costs of suit in said action (this is the only mention in the bond of an 'action'), * * * then this obligation shall be void, otherwise it shall be and remain in full force and effect.

'This bond is given and accepted under * * * Section 1192.1(f) of the Code of Civil Procedure.' ³ In reliance on the bond the county paid Theisen the $648. It did not request Theisen or its surety to participate in the defense of Durand's pending action.

A partner in the Theisen firm was present at the trial of Durand's action and spoke to the judge as to the proposed judgment. Petterson failed to appear at the trial. On April 2, 1956, Durand, in such municipal court action, recovered a money judgment against the county and its auditor for $548 plus $100 on account of attorney fees, and a money judgment for $548 plus interest and costs against Petterson. Pursuant to such judgment the county paid Durand $648. The county then demanded and Theisen and its surety refused reimbursement of the county in the sum of $648. The present action followed.

As already indicated, plaintiffs urge that Durand's municipal court judgment does not conclusively adjudicate the liability of the county (plaintiffs' indemnitee) to Durand and that therefore they can present in the present cross-action of the county against them the defense that Durand was not entitled to avail himself of the stop notice procedure. Because we have concluded, for the reasons hereinafter stated, that Durand properly invoked the stop notice remedy, we do not pass upon and need not here set forth plaintiffs' arguments in support of their claim that the municipal court judgment is not conclusive as to them.

The trial court, rejecting plaintiffs' contention that Durand was not one of the persons to whom the stop notice remedy is available, determined that Petterson under its agreement with general contractor Theisen was 'a sub-contractor for all the purposes set forth in California Code of Civil Procedure section 1182, ⁴ in reference to said work of improvement.' Manifestly, if Petterson, to whom Durand furnished materials, was 'a sub-contractor,' as determined by the trial court, then Durand properly invoked the stop notice remedy pursuant to subdivision (a) of either section 1190.1 or section 1192.1 of the Code of Civil Procedure, supra, footnote 1. Plaintiffs, however, urge that upon the undisputed facts Petterson as a matter of law was itself only a materialman, not an agent or subcontractor of general contractor Theisen. Plaintiffs rely upon the rule that one who sells materials to a materialman is not entitled to a mechanic's lien. (Wilson v. Hind (1896), 113 Cal. 357, 359, 45 P. 695; Roebling's Sons Co. v. Humboldt etc. Co. (1896), 112 Cal. 288, 292, 44 P. 568; Harris & Stunston v. Yorba Linda Citrus Ass'n (1933), 135 Cal.App. 154, 156, 26 P.2d 654; L. W. Blinn Lumber Co. v. American Cement Products Co. (1921), 51 Cal.App. 479, 481, 197 P. 142.)

In answer to this contention of plaintiffs the county presents the following argument, among others: A work of public improvement cannot be subjected to a mechanic's lien; the stop notice procedure, available as an alternative to the lien remedy in cases of private construction, is the only such remedy which can be had in cases of public work. (Clark v. Beyrle (1911), 160 Cal. 306, 311, 116 P. 739.) Recognizing the necessity that public property should not be subject to liens on the one hand, and the desirability of encouraging private persons to contribute work or material to public improvements on the other hand, the Legislature (according to the county) made the stop notice procedure which applies to public works only (Code Civ.Proc., § 1192.1) available to those who supply materials to a materialman, that is, to a class of claimants who cannot avail themselves of a mechanic's lien (Code Civ.Proc., § 1181) or of the general stop notice procedure which applies to both private and public work (Code Civ.Proc., § 1190.1).

This argument of the county has no support in the language of the mechanic's lien law and the concomitant stop notice provisions and...