From Casetext: Smarter Legal Research

Forefront Builders Corporation v. Superior Court of Contra Costa County

Court of Appeal of California
May 8, 2007
No. A116059 (Cal. Ct. App. May. 8, 2007)

Opinion

A116059

5-8-2007

FOREFRONT BUILDERS CORPORATION, Petitioner, v. THE SUPERIOR COURT OF CONTRA COSTA COUNTY, Respondent; 2005 SAN JOSE, LLC, Real Party in Interest.

NOT TO BE PUBLISHED


Here we decide that a pretrial motion seeking to reduce the amount of a mechanics lien that turns upon contested facts must be brought as a motion for summary judgment or summary adjudication under Code of Civil Procedure section 437c rather than under Civil Code sections 3123 and 3140 that govern the amount and priorities of such liens. We issue a peremptory writ of mandate that directs the trial court to vacate its November 6, 2006, order reducing the amount of petitioners mechanics lien and requires it to enter a new order denying the motion to reduce the lien.

BACKGROUND

Petitioner Forefront Builders Corporation (Forefront) contracted as general contractor with plaintiff and real party in interest 2005 San Jose, LLC (Baywoods) to refurbish a condominium complex at 2004 San Jose Drive in Antioch. Due to a dispute over whether Forefront was timely and fully paying its subcontractors, Baywoods terminated the contract on May 4, 2006, prior to completion. On May 26, 2006, Forefront recorded a mechanics lien against the Baywoods property for $1,991.150.71. This lien amount was the total of Forefronts final two unpaid applications for payment under the contract. On that same day, Baywoods filed a complaint against Forefront alleging breach of contract, negligence, negligence per se, fraud, negligent misrepresentation and conversion. In turn, Forefront cross-complained for breach of contract, breach of the implied covenant, breach of fiduciary duty, interference with contractual relations, interference with prospective economic advantage, fraud, negligent misrepresentation, conspiracy to commit fraud, defamation, unfair competition, unjust enrichment, and foreclosure of its mechanics lien.

In their briefs both parties refer to 2005 San Jose, LLC, as "Baywoods." To avoid confusion, we adopt the parties nomenclature. Antioch Baywoods Development, LLC is actually a separate entity whose only asset is its interest in 2005 San Jose, LLC.

The underlying lawsuit also involves another property and another construction contract, which are not relevant to the issues raised here.

On August 16, 2006, Baywoods filed a "Motion to Apportion and Reduce" Forefronts mechanics lien, which it sought to be heard on shortened time. Over petitioners objections, the superior court heard the motion to reduce and apportion the mechanics lien on shortened time, holding a hearing on the motion on September 1, 2006. After taking the matter under submission and requesting supplemental briefing, it initially denied the motion without prejudice due to a standing issue. On November 6, 2006, the court, ruling on a refiled motion, reduced Forefronts lien by $1,164,571.95, from $1,991.504.71 to $826,932.76.

The motion below dealt with both the request to apportion and to reduce the lien. The motion to apportion the lien was denied by the superior court and is not relevant to this writ petition.

Baywoodss motion asserts that petitioner failed to pay subcontractors and thereby misappropriated hundreds of thousands of dollars in project funds. It also argues that all or a substantial part of the work that formed the basis for Forefronts last two payment applications was either unauthorized or performed in breach of the parties contract. Additionally, Baywoods asserts that it paid the subcontractors directly a total of $745,958.77 for work represented in the last two payment applications. All but one of the subcontractors signed lien waivers, foregoing any rights they would otherwise have to assert their own liens for the work they performed.

Baywoods also settled with two of Forefronts subcontractors for a total of $319,591.30. In these settlements, Baywoods paid designated amounts to the subcontractors and, in return, the subcontractors assigned their claims against Forefront to Baywoods.

Baywoods also asserts that a company which supplied temporary labor to Forefront recorded a mechanics lien of $ 123,737.91 against Baywoods on July 25, 2006, of which $99,021.88 was included in Forefronts claim of lien.

Baywoods supported its motion with documentary evidence of its payments to subcontractors, the settled claims, and the contract terms. In opposition to the motion, petitioner argues that the lien was accurate at the time it was recorded, and that it is not required to amend its filed claim of lien whenever the owner makes a partial payment on the amounts due either to the general or subcontractors. Petitioner also argues that it was not given sufficient time to conduct an adequate factual investigation into Baywoodss claims, and its opposition marshaled no factual evidence disputing the accuracy of Baywoodss accounting. As indicated, the superior court granted Baywoodss motion and reduced the lien.

On December 11, 2006, Forefront filed the instant petition and sought a temporary stay of the lower courts order reducing the mechanics lien. On December 21, 2006, we issued a temporary stay of that order and requested informal briefing. After reviewing the briefing, on January 31, 2007, we issued an order to show cause and set the matter for argument. Real party elected not to file a return, so pursuant to the January 31, 2007, order, we deem the opposition to petition for writ of mandate as the return. Petitioners reply to the opposition to petition for writ of mandate is deemed the traverse.

DISCUSSION

A. Writ Relief is Appropriate

The superior courts order reducing the lien is not a final judgment; thus, it is not appealable. (See Griset v. Fair Political Practices Com. (2001) 25 Cal.4th 688, 698.) Furthermore, Baywoods is selling individual condominium units. By reducing the lien, the superior court enables Baywoods to sell individual units free of the full amount of Forefronts recorded lien. Thus, even if Forefront is able to show at trial that it is entitled to full recovery, it will have lost the benefit of a powerful mechanism designed to vindicate its rights; the lien against the improved property for the full amount it claims it is owed. If Baywoods wins in the trial court, yet Forefront ultimately prevails on appeal, the available remedy may be wholly inadequate, since by then many, if not all, of the units likely will have been sold free of Forefronts lien. It is, thus, possible that the amount Forefront should be able to recover will exceed the value of its surviving secured interest in the property. Consequently, writ relief is appropriate. (See Code Civ. Proc., § 1086 [writ of mandate to issue where there is "not a plain, speedy, and adequate remedy, in the ordinary course of law"]; Omaha Indemnity Co. v. Superior Court (1989) 209 Cal.App.3d 1266, 1272.)

B. The Appropriate Pretrial Mechanism to Reduce a Mechanics Lien is a Summary Judgment/Summary Adjudication Motion

California mechanics liens are authorized by the Constitution and implemented by statute. (Cal. Const., art. XIV, § 3; Civ. Code, § 3109 et seq.) Generally, a mechanics lien arises in favor of one who bestows labor or supplies materials to improve real property, and the lien attaches to the property to secure payment by the propertys owner. (Howard S. Wright Construction Co. v. BBIC Investors, LLC (2006) 136 Cal.App.4th 228, 238.) To enforce the lien, it must be timely recorded and an action to foreclose the lien must be timely filed. In the foreclosure action, the mechanics lien claimant must prove the validity of the lien. (Ibid. )

Under both the federal and state Constitutions recording a mechanics lien constitutes a significant taking of property because it may restrict the owners ability to sell or encumber it. (Connolly Development, Inc. v. Superior Court (1976) 17 Cal.3d 803, 811-812.) Californias mechanics lien law provides adequate due process safeguards and is constitutional. (Id. at pp. 827-828.) In so concluding, our Supreme Court balanced the interests of property owners against those who improve property and considered the imposition of a lien a less significant hardship upon an owner than the absence of a lien remedy would be to a laborer or materialman. In this context, the court concluded that the prefiling notice of lien requirement under California law combined with injunctive and declaratory relief remedies available to an owner afford adequate protection against a wrongful taking. (Id. at pp. 822-823.) These remedies were considered to provide sufficiently speedy and efficient mechanisms to dispose of invalid lien claims. In this way " `speedy and efficient " means that the owners "title should be cleared as soon as possible, so that it will have some marketability." (Borchers Bros. v. Buckeye Incubator Co. (1963) 59 Cal.2d 234, 239.) Nonetheless, the court was well aware that the procedure for foreclosing a mechanics lien can cloud title "sometimes for a matter of years before the foreclosure action proceeds to trial and judgment." (Id. at p. 239, fn. 2.) We understand this to mean that the resolution of mechanics liens should be as efficient as possible without sacrificing the accuracy of the determinations concerning the validity of the component claims.

But we do not read the cases to say that to speedily and efficiently vindicate an excessive lien, the courts should use summary procedures that are not customarily recognized means to dispose of factual disputes. Here, petitioners cross-complaint sought to foreclose a mechanics lien, and alleged $2,645,000 owing as the reasonable value of improvements upon Baywoodss property. Baywoods answered the cross-complaint with affirmative defenses that alleged the lien was improper, excessive, had been satisfied, paid by Baywoodss payments to subcontractors, and/or was subject to an offset. Baywoods then filed a "motion" that primarily argued due to Baywoodss payment to or settlement with various subcontractors, due process and sections 3123 and 3140 of the Civil Code required the court to reduce petitioners lien.

The issues Baywoods sought to resolve in its motion to reduce petitioners lien were issues contested by the pleadings. Code of Civil Procedure section 437c provides the procedural mechanism to summarily resolve them. It states in part: "A party may move for summary adjudication as to one or more causes of action within an action, one or more affirmative defenses, one or more claims for damages, or one or more issues of duty, if that party contends that the cause of action has no merit or that there is no affirmative defense thereto, or that there is no merit to an affirmative defense as to any cause of action, or both . . . ." (Code Civ. Proc., § 437c, subd. (f)(1).) Yet Baywoods argues that its motion ostensibly filed under Civil Code sections 3123 and 3140 has been recognized and authorized under case law.

The parties focus on two cases, Lambert v. Superior Court (1991) 228 Cal.App.3d 383 and Basic Modular Facilities, Inc. v. Ehsanipour (1999) 70 Cal.app.4th 1480. In Lambert a contractor recorded a lien, based in part on alleged damages resulting from the owners delay. (Lambert at pp. 385, 388.) Based on its review of the statute, the appellate court determined that a mechanics lien cannot be based on delay damages. (Id. at pp. 388-389.) In fact, by clarifying that the superior court, on remand, would not need to concern itself with the "minute details of [the] contractors accounting" (ibid.), the court left no doubt that it considered the motion to turn on a legal, and not a factual, issue. In Ehsanipour the appellate court corrected the lower courts erroneous view that a mechanics lien was limited by the amount of the initial construction contract, notwithstanding subsequent change orders that were authorized by the owners. This too was a purely legal issue. Neither case dealt with sorting out the intricacies of contested facts in order to determine the proper amount of lien. Although the cases approve generally of the use of pretrial motions to reduce liens, the issues addressed in them are not similar to the issues raised here. Thus, neither case dictates the outcome of this one.

Although the courts have approved the use of pretrial motions to reduce liens, the language sometimes used—referring generally to "motions"—is imprecise. Certainly, the use of a pretrial motion to reduce a lien that is based on statutorily unauthorized expenses or some other legal defect is appropriate. The misuse of a mechanics lien in such circumstances often can be addressed by demurrer, motion to strike, or motion for judgment on the pleadings. But our research reveals no published case where a California court has approved a procedure other than a summary judgment motion to adjudicate factual claims that reduce the amount of a lien before trial. For the following reasons, we conclude that such a motion should be brought as a motion for summary judgment or adjudication of issues pursuant to Code of Civil Procedure section 437c.

Code of Civil Procedure section 437c provides important procedural safeguards that operate to significantly reduce the possibility of a court making an erroneous factual decision before trial. It requires that notice of a summary judgment motion must be given at least 75 days before the hearing. (Code Civ. Proc., § 437c, subd. (a).) The purpose of this lengthy notice period is to afford a party who is challenged by a motion for summary judgment adequate time to present all the relevant evidence to the court. Here, by contrast, petitioners opposition to the motion to reduce the lien was due one week after the motion was served. Moreover, if it appears that facts "may" exist that would justify denying a summary judgment, but which cannot reasonably be presented to the court by the time of the hearing, the motion may be denied. (Code Civ. Proc., § 437c, subd. (h).) In essence, here petitioner argued that the motion to reduce the lien should be denied for analogous reasons—because petitioner did not have sufficient time to discover possible discrepancies between Baywoodss claims about what it paid to subcontractors and how those payments should be allocated.

There are other intricacies of summary judgment procedure that are crafted to assist the court in the pretrial resolution of factual claims. The moving party is required to provide the court with a separate statement of all material undisputed facts that references the evidence used to establish each fact. (Code Civ. Proc., § 437c, subd. (b)(1).) The opposing party must agree or disagree with each fact alleged to be undisputed, must state additional facts it believes are material to the dispute and reference the evidence that supports its characterization of the facts. (Id., subd. (b)(3).) This process allows the court to easily identify those material facts that are truly undisputed.

Case law also articulates the burdens a party must meet to prevail. The moving party bears the burden of persuasion that there is no dispute of material fact. A plaintiff moving for summary judgment bears the burden of persuasion that each element of a cause of action is proven and that there is no defense to that cause of action. A defendant has the burden of persuasion that at least one element of a cause of action cannot be established or that a complete defense exists. (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 850.) If the moving party carries its burden, the opposing party must make a prima facie showing that a triable issue of material fact exists. (Ibid.) Just how moving and opposing parties carry their burden of persuasion/production on summary judgment depends on what their burden of proof would be at trial. Thus, a plaintiff moving for summary judgment "must present evidence that would require a reasonable trier of fact to find any underlying material fact more likely than not." (Id. at p. 851.) Similarly, a defendant who moves for summary judgment "must present evidence that would require a reasonable trier of fact not to find any underlying material fact more likely than not." (Ibid.) Here Baywoodss motion to reduce was based on its affirmative defenses. As a defendant moving for summary judgment or adjudication, it would be required to present evidence in support of each element of its defenses it would bear the burden of proof on those defenses at trial. (Acosta v. Glenfed Development Corp. (2005) 128 Cal.App.4th 1278, 1292-1293.) For example, it would have to show that all the charges it paid subcontractors in order to reduce the lien amount were paid for work performed under its contract with Forefront. Adherence to the procedural framework required for summary adjudication promotes careful and thorough scrutiny of the issues and facilitates a court in reaching a well-reasoned decision in such factually intricate cases.

The complexity of this case readily illustrates the point. There are various instances where the payment made by Baywoods to a subcontractor does not correspond to the amount Forefront billed Baywoods as a result of work by that subcontractor. For example, on July 27, 2006, Baywoods authorized payment of $21,379.03 to North Valley Construction, Incorporated. Yet Baywoods argues that it should be credited with only $10,306 of this payment, towards a $22,396.63 claim Forefront makes for North Valleys work. Although this may be correct, Forefront should not be denied a sufficient opportunity to verify and, if appropriate, challenge these calculations. Simply because Baywoods asserts that a $10,306 credit is proper does not make it so.

Furthermore, at least some of the subcontractors work was not performed pursuant to Forefronts contract with Baywoods. Baywoods states that it directly paid Timberline, a roofing subcontractor, $27,694, of which $11,733.40 was for work performed after Forefronts termination. In fact, not only did work continue on this project after Forefronts contract was terminated, but Forefront was not the original general contractor. It is also possible that some of the subcontractors work may have been performed before Forefront became the general contractor. Baywoodss payments to subcontractors for work not undertaken pursuant to its contract with Forefront would not necessarily reduce Forefronts lien. We perceive no reason why Forefront should be denied an adequate opportunity to confirm whether the credits Baywoods claims for its payments to subcontractors should be deducted from the amount owed to Forefront.

Finally, Forefront asserts that some subcontractors "submitted billings for work that was not adequately or timely performed or work that was not authorized by Baywoods." Reducing the amount of Forefronts lien on account of Baywoodss payments to subcontractors short-circuits the resolution of these contractor-subcontractor disputes and the bearing they may have on Baywoodss liability on the general contract. Of course, Forefront can still bring suit against the subcontractors, but the potential efficiencies in resolving such disputes derived from the mechanism of a mechanics lien would be eliminated by the superior courts order reducing the lien amount. Forefront should be permitted to explore these issues before the court adjudicates the amount of its lien.

The requirement that a summary adjudication motion not be granted unless it completely disposes of a cause of action, affirmative defense, a damage claim, or an issue of duty (Code Civ. Proc., § 437c, subd. (f)(1)), would not bar such a motion in a case like this. Where the matters alleged in a complaint have no relationship to one another, involve different obligations and separate damages, courts consider that, regardless of how they were pled, they actually involve separate causes of action. (See Lilienthal & Fowler v. Superior Court (1993) 12 Cal.App.4th 1848 [summary adjudication in legal malpractice case appropriate on separate and distinct wrongful acts, even though motion, if successful, would not dispose of entire cause of action]; Edward Fineman Co. v. Superior Court (1998) 66 Cal.App.4th 1110 [complaint alleging banking improprieties was drafted so as to aggregate damages based on 83 checks, summary adjudication of claims based on 23 of them was appropriate because checks represented separate and distinct wrongful acts].) (But see DeCastro West Chodorow & Burns, Inc. v. Superior Court (1996) 47 Cal.App.4th 410, 412 [summary adjudication not proper on a component of damages that did not fully dispose of an indivisible claim].) Here, Forefronts lien and Baywoodss defenses are based on separate acts with respect to separate subcontractors. Certainly, eliminating claims for the work of certain subcontractors would streamline the trial of this case.

Baywoods also argues that the superior courts ruling is justified by the combination of Civil Code section 3140 and paragraph 9.6.2 of the contract. Section 3140 limits the lienholders ultimate recovery to what is due "according to the terms of [the] contract." (Civ. Code, § 3140.) Paragraph 9.6.2 gives Baywoods the right to pay subcontractors directly if Forefront fails to do so. Thus, Baywoods argues that because the contract gives it the right to pay the subcontractors directly and it has exercised that right, the lien must be reduced by those payments. But as we point out above, the record at this stage of the proceedings does not clearly show what charges were "legitimately incurred" under the contract. Moreover, the superior court never made findings regarding Baywoodss entitlement to act under this part of the contract when it granted the motion to reduce the lien. In fact, it was not in a position to do so, in light of Forefronts lack of opportunity to discover evidence that would support or refute the claimed reductions.

Paragraph 9.6.2 states: "The Contractor shall promptly pay each Subcontractor, upon receipt of payment from the Owner, out of the amount paid to the Contractor on account of such Subcontractors portion of the Work, the amount to which said Subcontractor is entitled, reflecting percentages actually retained from payments to the Contractor on account of such Subcontractors portion of the Work. . . . Should Contractor neglect or refuse to cause to be paid promptly any bill or charge legitimately incurred by it hereunder, Owner shall have the right but not the obligation to pay such bill directly, and Contractor shall immediately reimburse Owner for same. If Contractor does not so reimburse Owner, Owner may offset the amount of such bill against amounts owed by Owner to Contractor hereunder, after giving Contractor five (5) days written notice of its intention to do so provided there is no dispute present between the Contractor and Subcontractor in which case funds involved in that dispute received by the Contractor may be returned to the Owner or credited in a subsequent payment application."

Baywoods also asserts that Forefronts lien must at least be reduced by $99,021.88, the amount that is said to duplicate a $123,737.91 lien recorded July 25, 2006, by a subcontractor, CLP Resources. It is undisputed, however, that this subcontractors lien was recorded long after Forefronts. Reducing Forefronts lien by the amount sought by CLP Resources would not reflect on the probable validity of Forefronts lien at the time it was recorded, but on the likelihood that Forefront could ultimately recover that amount in its lien. By fully crediting Baywoods for the entire amount it claims is duplicative, one must assume that (1) the amount Baywoods claims is duplicative in the two liens is correct, and (2) any dispute between CLP Resources and Forefront should be resolved in CLPs favor—unwarranted assumptions at this stage of the proceedings.

We recognize that an aggrieved owner may contest a mechanics lien by a motion that is not a motion for summary judgment or adjudication of issues when it can be resolved solely by making a legal determination or based on an adverse partys admission. Thus, our holding is limited: in ruling on a pretrial motion to reduce a mechanics lien, which is not a summary judgment/adjudication motion, a court may not reduce the lien when the motion is based on contested facts. The proper procedure to determine whether there are genuine and material issues of dispute in such circumstances is a motion for summary judgment pursuant to Code of Civil Procedure section 437c.

DISPOSITION

Let a peremptory writ of mandate issue remanding this matter to the respondent superior court and directing it to vacate its November 6, 2006, order reducing Forefronts mechanics lien and requiring it to enter a new and different order denying the motion to reduce the lien. That portion of the respondent superior courts November 6 order concerning the apportionment of the lien is unaffected by this writ. The temporary stay previously ordered by this court is dissolved as moot. Petitioner Forefront shall recover its allowable costs.

We concur:

McGuiness, P.J.

Parrilli, J.


Summaries of

Forefront Builders Corporation v. Superior Court of Contra Costa County

Court of Appeal of California
May 8, 2007
No. A116059 (Cal. Ct. App. May. 8, 2007)
Case details for

Forefront Builders Corporation v. Superior Court of Contra Costa County

Case Details

Full title:FOREFRONT BUILDERS CORPORATION, Petitioner, v. THE SUPERIOR COURT OF…

Court:Court of Appeal of California

Date published: May 8, 2007

Citations

No. A116059 (Cal. Ct. App. May. 8, 2007)