By Glen Hansen
In T.O. IX, LLC v. Superior Court (2008) 165 Cal.App.4th 140, a contractor built a street through a nine-home subdivision developed by the property owners. The contractor alleged that he had not been paid. The contractor then recorded nine individual mechanic’s liens against each home; or, as the court summarized: “nine separate liens, at the full amount each, to secure the contractor’s right to be paid once.” The property owners applied ex parte for an order permitting them to release the parcels from the nine mechanic’s liens by posting a single surety bond in an amount equal to one and one-half times the total amount of the contractor’s claim, as provided under Civil Code section 3143. The trial court denied the owners’ application. The Court of Appeal, Second Appellate District, reversed.
The Court of Appeal explained that although the mechanic’s lien statutes are to be liberally construed for the protection of laborers and material-men, proceedings for the foreclosure of mechanic’s liens are nevertheless governed by equitable principles. In this case, both sides advocated inequitable positions.
First, the T.O. court held that the contractor and trial court were wrong in their position that the owners had to post multiple bonds to release duplicative liens to address a single debt. Just as Civil Code section 3130 allows a trial court to divide a single lien claim among several parcels, so too a court could use its equitable powers to allow a single bond to release several liens recorded against several parcels reflecting a single claim. In the end, the contractor has the necessary security for the payment of its entire claim. And in this case, the contractor failed to present any evidence that it would be prejudiced by the posting of a single bond.
Second, the T.O. court held that the owners were wrong in their position that the contractor’s lien rights were forfeited solely because the contractor insisted that section 3130 required the contractor to record the duplicative liens, and did in fact record such liens. Civil Code section 3118 does provide that a mechanic’s lien is forfeited by anyone who willfully includes in a claim of lien labor, services, equipment or materials that were not furnished for the property described in the claim. However, that would be an “absurd” result if applied to this case. So the T.O. court denied such forfeiture here.
The Court of Appeal granted the owners’ petition for writ of mandate and instructed the trial court to enter a new order authorizing the owners to post a single surety bond in the amount mandated by section 3143 to release the nine mechanic’s liens. The court held that the purpose of the mechanic’s liens statutes are to secure a contractor’s right to receive payment for the reasonable value of the labor, material and/or services provided, “not to secure that same right nine times over.” The T.O. court tersely explained: “Unlike a cat, the mechanic’s lien here has one life, not nine.”
Glen Hansen is a senior associate at Abbott & Kindermann, LLP. For questions relating to this article or any other California land use, real estate, environmental and/or planning issues contact Abbott & Kindermann, LLP at (916) 456-9595.
The information presented in this article should not be construed to be formal legal advice by Abbott & Kindermann, LLP, nor the formation of a lawyer/client relationship. Because of the changing nature of this area of the law and the importance of individual facts, readers are encouraged to seek independent counsel for advice regarding their individual legal issues.