Opinion
A156094
10-16-2019
GERARD DUENAS, Plaintiff and Appellant, v. DEUTSCHE BANK NATIONAL TRUST COMPANY, Defendant and Respondent.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Sonoma County Super. Ct. No. SCV261142)
Plaintiff Gerard Duenas, doing business as Cornerstone Development and Construction (Cornerstone), has appealed from a judgment dismissing his lawsuit in favor of defendant Deutsche Bank National Trust Company (Deutsche Bank) after the trial court issued an order sustaining Deutsche Bank's demurrer without leave to amend. Plaintiff's lawsuit alleges that he holds an enforceable mechanic's lien on a property. He claims Deutsche Bank engaged in a fraudulent conveyance when it purchased the property in a nonjudicial foreclosure sale without satisfying his lien. Because plaintiff's mechanic's lien expired prior to the foreclosure, we conclude the demurrer was properly sustained. We therefore affirm.
FACTUAL AND PROCEDURAL BACKGROUND
In September 2005, Duenas conveyed a house located in Santa Rosa to his (now former) wife, Lisa DeVries, as her sole and separate property. DeVries obtained an $839,078 loan from Omega Mortgage, Inc., signing a deed of trust encumbering the property as security for repayment of the loan. The deed of trust was assigned to Deutsche Bank and recorded.
Duenas recorded a mechanic's lien against the property in June 2012 on behalf of Cornerstone, asserting DeVries owed him $189,487 for construction improvements made to the property. That September, plaintiff filed a lawsuit to foreclose on the lien naming DeVries as a sole defendant. In July 2013, plaintiff dismissed the foreclosure suit against DeVries with prejudice. According to plaintiff, the dismissal was entered in exchange for DeVries's agreement to sell or refinance the property to obtain the funds to pay Cornerstone.
DeVries defaulted on the payment of her loan to Deutsche Bank. A notice of default was recorded against the property in December 2016. A nonjudicial foreclosure sale was held in May 2017 under DeVries's deed of trust. Deutsche Bank bought the property for a credit bid of $850,000, as against the outstanding balance of $1.3 million on Devries's loan. A trustee's deed upon sale conveying the property to Deutsche Bank was recorded. Defendant initially offered to pay off plaintiff's lien, but then changed course and told Duenas he would need to file suit to have his lien honored.
In February 2018, plaintiff filed a first amended complaint (FAC) for fraudulent conveyance and for declaratory judgment and injunctive relief. Plaintiff claimed that his mechanic's lien was first in time and in priority over defendant's lien. He alleges Deutsche Bank was obligated to pay off his first position lien, instead of foreclosing on its second position lien and wrongfully retaining funds to which plaintiff was entitled.
Deutsche Bank demurred, arguing that plaintiff's mechanic's lien was void as a matter of law. Deutsche Bank requested judicial notice of and relied on several documents relating to the 2012 mechanic's lien foreclosure action initiated by plaintiff against DeVries. Plaintiff opposed the demurrer, arguing that defendant, as the " 'second place' " lienholder, had no right to withhold payment to Cornerstone, as the "first-place lienholder."
The trial court concluded plaintiff's mechanic's lien was unenforceable as a matter of law because the earlier foreclosure action had been dismissed with prejudice. Because the FAC was "entirely premised" on the enforceability of that lien, the instant action was precluded. This appeal followed.
DISCUSSION
I. Standard of Review
The standard of review of a dismissal following a demurer sustained without leave to amend is well-established. " 'We treat the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law. [Citation.] We also consider matters which may be judicially noticed' [Citation.] Further, we give the complaint a reasonable interpretation, reading it as a whole and its parts in their context. [Citation.] When a demurrer is sustained, we determine whether the complaint states facts sufficient to constitute a cause of action. [Citation.] And when it is sustained without leave to amend, we decide whether there is a reasonable possibility that the defect can be cured by amendment: if it can be, the trial court has abused its discretion and we reverse; if not, there has been no abuse of discretion and we affirm. [Citations.] The burden of proving such reasonable possibility is squarely on the plaintiff." (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) II. Dismissal Was Properly Granted Because the Mechanic's Lien Expired in 2012
Plaintiff alleges that Deutsche Bank fraudulently conveyed the subject property to itself in order to avoid paying off Cornerstone's mechanic's lien, in violation of Civil Code sections 3439.07, subdivision (a)(1) and 3439.08, subdivision (b)(1) of the Uniform Voidable Transactions Act (Civ. Code, § 3439 et seq. (UVTA).) The UVTA is a creditor protection statute that permits avoidance of a fraudulent transfer of an asset undertaken to prevent a creditor from reaching that interest to satisfy its claim. (Potter v. Alliance United Ins. Co. (2019) 37 Cal.App.5th 894, 903-904; see Mejia v. Reed (2003) 31 Cal.4th 657, 664).
All further statutory references are to the Civil Code.
Section 3439.07, subdivision (a)(1) provides, in relevant part: "In an action for relief against a transfer or obligation under this chapter, a creditor . . . may obtain . . . [¶]. . . [a]voidance of the transfer or obligation to the extent necessary to satisfy the creditor's claim." Section 3439.08, subdivision (b)(1) provides, in relevant part: "Except as otherwise provided in this section, the creditor may recover judgment for the value of the asset transferred . . ., or the amount necessary to satisfy the creditor's claim, whichever is less." Under the UVTA, a "creditor" is defined as "a person that has a claim." (§ 3439.01, subd. (c).) A "claim" in turn is defined as "a right to payment, whether or not the right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured." (Id., at subd. (b).)
At issue in this appeal is whether plaintiff can maintain an action under the UVTA as creditor, meaning whether he has a legally enforceable claim against the subject property by virtue of the recorded mechanic's lien. We conclude he does not. "The mechanics' lien statutes, which are set out in the Civil Code commencing at [former] section 3109, are based on article XIV, section 3 of the California Constitution. 'The mechanics' lien is the only creditors' remedy stemming from constitutional command and our courts "have uniformly classified the mechanics' lien laws as remedial legislation, to be liberally construed for the protection of laborers and materialmen." ' [Citations.] 'Generally, doubts concerning the meaning of the mechanics' lien statutes are resolved in favor of the claimant.' " (Solit v. Tokai Bank (1999) 68 Cal.App.4th 1435, 1441-1442 (Solit).)
Effective July 1, 2012, California's mechanic's lien statute is found in sections 8000 through 9566. (Stats. 2010, ch. 697, §§ 16, 20.)
Article XIV, section 3, of the California Constitution affords recognition to mechanic's liens: "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."
The mechanic's lien procedures allow contractors to recover for nonpayment by initiating foreclosure proceedings. "The recordation of a timely claim of lien transforms the claimant's inchoate personal right created by our Constitution into a tangible lien on the property. Only this lien, which was created by the statutory scheme, is automatically nullified by a failure to timely commence a foreclosure proceeding. The constitutional right to a lien remains and may be perfected so long as the claimant can comply with the conditions precedent set forth in the statutory scheme." (Coast Central Credit Union v. Superior Court (1989) 209 Cal.App.3d 703, 711.)
A recorded mechanic's lien does not bind the property in perpetuity. "Under the Civil Code provisions relating to mechanics' liens, a timely recorded mechanic's lien binds the property against which it is recorded for only 90 days, unless within that time an action is commenced to foreclose it. [Citation.] . . . If the claimant fails to commence an action to foreclose a timely recorded lien within 90 days, the lien 'automatically shall be null and void and of no further force and effect.' [Citation.] If the claimant does not bring the foreclosure action to trial within two years after commencing it, the trial court has the discretion to dismiss the action for want of prosecution [citation], and if the action is dismissed with prejudice, then the dismissal 'shall be equivalent to the cancellation and removal from the record of such lien.' " (Solit, supra, 68 Cal.App.4th at p. 1442, italics added.)
Section 8460, subdivision (a), provides: "The claimant shall commence an action to enforce a lien within 90 days after recordation of the claim of lien. If the claimant does not commence an action to enforce the lien within that time, the claim of lien expires and is unenforceable."
Although plaintiff filed a timely foreclosure action to enforce his mechanic's lien against DeVries, his subsequent dismissal of the action with prejudice operated to cancel and remove from the record such lien on the property. (Solit, supra, 68 Cal.App.4th at p. 1442; see Boeken v. Philip Morris USA, Inc. (2010) 48 Cal.4th 788, 793 [" ' "with prejudice" clearly means the plaintiff's right of action is terminated and may not be revived,' " and a " 'dismissal with prejudice . . . bars any future action on the same subject matter' "].) Because plaintiff no longer has an enforceable mechanic's lien, he has no security interest in the property as a matter of law.
Deutsche Bank also contends that the mechanic's lien is void on the basis that Deutsche Bank was not named as a defendant in the foreclosure action or served with the summons and complaint. Although it is unnecessary to reach this issue, the point is well taken. (See Riley v. Peters (1961) 194 Cal.App.2d 296, 297-298.) --------
Plaintiff argues that Cornerstone's mechanic's lien survived the dismissal of the foreclosure action because Duenas and DeVries agreed to "dismiss[] the lawsuit and leav[e] the mechanic's lien on the property." Plaintiff provides no record citation to support this contention, but even if the parties had so agreed, we are not persuaded that an agreement between litigants is sufficient to extend the legal effectiveness of a lien that has expired as a matter of law.
Plaintiff also contends that "this action is not an action to foreclose on a mechanic's lien. Rather, it is a collection action explicitly authorized in the Code." Plaintiff claims he is "simply seeking to recover funds due and owing to him as a result of improvements made at the property." He relies on section 8480, subdivision (b), which provides, in part, that "[a] release order does not bar any other cause of action or claim for relief by the claimant, other than an action to enforce the claim of lien that is the subject of the release order."
While it is true the instant lawsuit is not an action to foreclose on a mechanic's lien, plaintiff's complaint is based on the premise that his lien represents a legally cognizable security interest in the property that is superior to defendant's position. In the absence of an enforceable mechanic's lien, however, plaintiff has not asserted an alternative basis for creditor relief under the UVTA. Accordingly, the demurrer was properly sustained for failure to state a cause of action. In light of our conclusion, we need not address the parties' remaining arguments.
DISPOSITION
The judgment is affirmed.
/s/_________
Sanchez, J. WE CONCUR: /s/_________
Humes, P. J. /s/_________
Banke, J.