Opinion
A131640
02-15-2012
DAVID J. GRANAHAN, Plaintiff and Appellant, v. ADOLF TRENKENSCHU et al., as Trustees etc., Defendants and Respondents.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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. SCV-242790)
I. INTRODUCTION
This appeal concerns whether a building contractor, appellant Granahan, asserting a mechanic's lien claim regarding real property in Sonoma County on which he had built a home for the original owners, can successfully foreclose on that lien as against the second successors in title to those original owners when he failed to timely (1) name the first successors in interest to the original owners of the property as defendants in his foreclosure action or (2) record a lis pendens on the property. The trial court held that, under Civil Code sections 3144 and 3146, appellant could not foreclose on the property because of his lien and that, therefore, respondents as successors in interest to bona fide purchasers of the property held it free and clear of any such lien.
All further statutory references are to the Civil Code unless otherwise noted.
We agree with the trial court and hence affirm its judgment.
II. FACTUAL AND PROCEDURAL BACKGROUND
In September 2006, appellant, a licensed general contractor, contracted with Paul and Robert Lowry, the original owners of property located on Siri Road in Guerneville, Sonoma County, to build a home for them. Appellant performed that construction during 2006 and 2007, apparently completing the construction in December 2007. However, although appellant received some payments from the Lowrys for his work, he claimed he was still owed "a balance of $76,581.47, plus interest and costs . . . for work performed on the Property." Because of this fact, on February 4, 2008, appellant recorded a mechanic's lien against the property. On May 1, 2008, appellant filed a civil foreclosure complaint naming the Lowrys and Does 1 through 20 as defendants.
During this time, however, there was also another outstanding claim on the property, namely, "an unpaid home construction loan and a related Deed of Trust, benefiting 16 individual investors and one corporation (collectively the Goodrich lenders)." The total amount of the loan made by the Goodrich lenders was $705,000. A deed of trust securing this loan had been recorded by the Goodrich lenders on September 29, 2006. Appellant's civil foreclosure complaint did not name the Goodrich lenders as parties. Appellant admitted that he did not know their identities until late 2008.
On May 22, 2008, i.e., just three weeks after appellant filed his civil foreclosure suit against the Lowrys and the 20 Doe defendants, the Goodrich lenders foreclosed on their deed of trust, thus taking title to the property. A trustee's deed made them legal owners of the property as of that date.
On October 15, 2008, appellant recorded a lis pendens against the property and, the following day, filed an amended complaint naming the 17 Goodrich lenders and the 20 "Does" as defendants.
On December 11, 2008, the Goodrich lenders sold the property to respondents Adolf and Karin Trenkenschu. That couple knew about appellant's mechanic's lien.
On May 19, 2009, appellant filed a Second Amended Complaint (SAC) deleting the Goodrich lenders as defendants and naming respondents Trenkenschus, the Lowrys, and Does 1 through 20 as defendants. However, in neither the SAC nor the October 16, 2008, amended complaint were respondents Trenkenschus added as defendants pursuant to Code of Civil Procedure (CCP) section 474.
On May 13, 2010, the trial court entered an order granting appellant's motion for leave to amend the SAC to substitute respondents Trenkenschus as Does 1 and 2 pursuant to CCP section 474. Appellant then filed such an amendment to his SAC, naming respondents as trustees of their respective trusts.
Appellant's foreclosure action was tried to the court on August 16, 2010, and briefs thereafter submitted by the parties. On December 23, 2010, the trial court (the Honorable Mark Tansil) filed a tentative ruling and statement of decision ruling in favor of respondents. That court received no comments and, thus, on January 7, 2011, filed the same document as its final ruling and statement of decision. In it, the court ruled that respondents "took title free and clear of the mechanic's lien. That is true given the fact that their predecessors in interest also took title the exact same way." This was so, the trial court ruled, because—among other things—appellant had not, as required by section 3144, named the Goodrich lenders in his action to foreclose his mechanic's lien within 90 days after the recording of that lien.
The court entered a judgment to this effect on January 21, 2011. On January 31, appellant moved for a new trial, a motion opposed by respondents. On March 8, 2011, the trial court denied that motion, but modified the judgment to provide a default judgment in favor of appellant and against the Lowrys in the principal amount claimed in his complaint plus interest and costs.
Appellant filed a timely notice of appeal.
III. DISCUSSION
The parties agree that, especially in view of the bases for the trial court's ruling and judgment and the stipulated facts presented to that court, our standard of review on this appeal is de novo. However, as respondents note, the substantial evidence rule applies to disputed issues of material fact.
As noted above, the trial court ruled against appellant and in favor of the Trenkenschu respondents because the latter had, per that court, taken title to the Guerneville property "free and clear of [appellant's] mechanic's lien." And they did so, it continued, because their predecessors in interest, the Goodrich lenders "also took title the exact same way."
Then, relying on the facts that (1) appellant had not recorded a lis pendens regarding his mechanic's lien until October 15, 2008, which was (2) almost five months after the Goodrich lenders had become owners of the property, and (3) never named the Goodrich lenders as original defendants nor substituted them "into the case as Doe defendants," the trial court then quoted a leading text as to the rule of law applicable in such a situation: " 'If the property is sold after the mechanic has filed the foreclosure action, and the mechanic failed to record a lis pendens, or the sale is concluded prior to the recordation of a lis pendens, the foreclosure decree is not enforceable against the title interest of the subsequent purchaser who received an interest without actual or constructive notice of the pending suit.' " (Quoting from 3 Miller & Starr, Cal. Real Estate (3d ed., 2001) § 28:69, pp. 222-223, italics added; see also 3 Miller & Starr, Cal. Real Estate, supra, § 28:70; Packard Bell Electronics Corp. v. Theseus, Inc. (1966) 244 Cal.App.2d 355, 363-364 (Packard Bell).)
The trial court went on to note that "it was definitely not proven that [the Goodrich lenders] had either actual or constructive knowledge of the foreclosure complaint [of appellant] at the time" they took title to the property in May 2008 via their foreclosure action. Accordingly, the trial court continued, "the title transferred by the Goodrich parties to the Trenkenschus in 2008 was not subject to the mechanic's lien. It is immaterial whether the Trenkenschus were aware of the lien before this purchase."
Which, as noted above, they were per the stipulation of facts entered into by the parties.
The trial court then noted that a "mechanic's lien has no force and effect against a party holding some title interest in the property subject to the lien, or who is a beneficiary under a Deed of Trust associated with that property, whenever the party is not named as a defendant in a foreclosure action within 90 days of the recordation of the lien," and cited in support of that principle both section 3144 and Grinnell Fire Protection System Co. v. American Savings & Loan Assn. (1986) 183 Cal.App.3d 352, 358 (Grinnell).
The court concluded the substance of its statement of decision by noting that, although appellant did not name the Goodrich lenders, he could have done so "after he discovered their true identities through the invocation of the relation-back doctrine available under Code of Civil Procedure section 474. But he never substituted them in place of the previously unnamed Doe defendants. [Citing Breslin v. City and County of San Francisco (2007) 146 Cal.App.4th 1064, 1080-1081 (Breslin) and Union Tank & Pipe Co. v. Mammoth Oil Co., Ltd. (1933) 134 Cal.App. 229, 232 (Union Tank).]The failure to properly name the Goodrich owners/sellers as substituted Doe defendants means that the foreclosure action was null and void as to those parties, and, more importantly, as to their successors in interest—the Trenkenschus. It is immaterial whether the Trenkenschus were belatedly substituted into the case as Doe defendants."
In its March 8, 2011, order denying appellant's motion for a new trial, the trial court again quoted the passage from section 28:69 of Miller & Starr, and then added this additional passage from the same text: " '[A court's] judgment foreclosing [a] mechanic's lien is not enforceable against any person with an interest in, or a lien on, the property, who is not named as a defendant and served with process. The interest of a person holding an interest in the title who is not named as a defendant cannot be sold upon a foreclosure of the lien; if [that] 90-day period expires, that person's interest is free and clear of the lien.' Miller and Starr, California Real Estate (3d ed. 2001) Chapter 28, 'Mechanic's Liens,' section 28:69 page 219."
The court then added: "That precisely describes the Goodrich lenders who were never timely served as Doe defendants under the relation-back-theory. These lenders took title free and clear of the mechanic's lien. So did their successors—the Trenkenschus." A few lines later, the court repeated this same point, stressing that "the Goodrich lenders . . . had neither actual nor constructive notice of the lawsuit," thus providing respondents "with the same free and clear title."
In his opening brief to us, appellant argues that the trial court erred in its ruling for two reasons: (1) respondents Trenkenschus were not bona fide purchasers of the property because, as stipulated by the parties prior to trial, they had prior notice of both appellant's mechanic's lien and his lis pendens; and (2) the "target" of appellant's mechanic's lien was the real property involved and "not the title of the owner," and it was thus "immaterial that [he] failed to name the [Goodrich] lenders as defendants within the 90 days prescribed by" section 3144 or failed to substitute them in as Doe defendants, and thus his mechanic's lien "was still valid as to the TRENKENSCHUs because the lien remained attached to the real property itself."
In their brief to this court, respondents contend that the trial court was correct in its ruling because of the combination of three legal principles: (1) appellant's mechanic's lien became null and void as regards respondents because, under section 3144, their predecessors in interest, the Goodrich lenders, were required to be named as parties to the ensuing litigation within 90 days from the February 2008 recording of that lien, and they were not so named until much later (i.e., October 2008); (2) appellant also failed to record the lis pendens regarding that litigation prior to the date the Goodrich lenders took title to the property at their May 22, 2008, foreclosure sale; as a consequence, the Goodrich lenders became bona fide purchasers of the property under section 3146, and thus so did respondents, who purchased the property from them; and (3) appellant never properly or timely named the Goodrich lenders, respondents' vendors, as defendants in his action, because he first named and then deleted them as defendants and then failed to use a "relation back" amendment under CCP section 474.
We agree with respondents and the trial court that, for the reasons just stated, the Goodrich lenders and, thereafter, respondents took title to the property involved as bona fide purchasers and were not, therefore, subject to the mechanic's lien filed by appellant regarding that property.
Appellant's briefs to us present numerous arguments as to why the rulings of the trial court, and the arguments in support of it presented by respondents, are incorrect or inapplicable. But none of these arguments (most of them raised for the first time in appellant's reply brief) undermines the legal basis for the trial court's ruling.
As noted, appellant's initial argument in his opening brief is that because, per the pre-trial stipulation of the parties, respondents had actual notice of appellant's mechanic's lien on the property, they did not have bona fide purchaser status. In support of this argument, he cites CCP section 1908, subdivision (a)(2), and Albertson v. Raboff (1956) 46 Cal.2d 375, 379 (Albertson).
The problem with this argument is that the statutory provision appellant cites in support of it applies only as and when a "judgment or order" of a court becomes "conclusive" as to parties who have "notice, actual or constructive, of the pendency of the action or proceeding." (CCP § 1908, subd. (a)(2).) The fact that respondents had "actual notice" of the filing of a mechanic's lien—a lien which had already become null and void because of appellant's failure to perfect it—does not bring them within the terms of CCP section 1908, subdivision (a)(2), or the principle noted in Albertson. This is so because, among other reasons: (1) the filing by appellant of his mechanic's lien did not result in the entry of any "judgment or order" by a court and (2) that lien was then, per section 3144, subdivision (b), "null and void" as to respondents.
Albertson was a slander of title/malicious prosecution case involving the timely (unlike here) recordation of a lis pendens notice by the defendant in a prior lawsuit, a lawsuit which resulted in a judgment (also unlike here) against the party plaintiff in the first action. In the course of deciding it, our Supreme Court noted, albeit only parenthetically, the rule of law stated in the predecessor statute to (now) CCP section 1908, subdivision (a)(2). Thus, that case has no bearing on the factual situation before us here. (Albertson, supra, 46 Cal.2d 375.)
Appellant's only other argument in his opening brief is that his failures to name the Goodrich lenders as defendants within the 90 days prescribed by section 3144 and to substitute them in as Doe defendants is "immaterial" because, under the law, "the target of the mechanics [sic] lien is the real property itself, not the title of the owner." Thus, he continues, it does not matter whether or not respondents inherited the bona fide purchaser status of the Goodrich lenders "because the lien remained attached to the real property itself."
There are, quite obviously, several problems with this argument. The first is that, of course, the lien did not remain "attached to the real property itself" because it was never perfected within the 90-day time limit prescribed by section 3144. But more significantly, appellant's contention that the lien attaches to the real property and not to the title of the owner is simply belied by abundant authority. Thus, as one of our sister courts has held: "The constitutional scheme requires a balancing of the interests of lien claimants and property owners. Our statutes relating to mechanics' liens result from the legislative adjustment regarding the respective rights of lien claimants with those of the owners of property improved." (Gary C. Tanko Well Drilling, Inc. v. Dodds (1981) 117 Cal.App.3d 588, 594, italics added; see also Baker v. Hubbard (1980) 101 Cal.App.3d 226, 233-234; Borcher Bros. v. Buckeye Incubator Co. (1963) 59 Cal.2d 234, 239; 3 Miller & Starr, Cal. Real Estate, supra, § 28:6.) These authorities make clear that appellant's argument that the lien attaches to the real property and not to anyone's title is simply incorrect.
In his reply brief, appellant asserts many other arguments, but none of them overcomes the legal bases for the trial court's statement of decision. Thus, at one point he argues that, because (1) he commenced work on the subject property in September 2006 and (2) under section 3134, a mechanic's lien "relates back to the time when the lien claimant commenced his work," the Goodrich lenders were junior lien claimants to appellant. But this argument overlooks the key fact stressed by the trial court and respondent: the specific and unmistakable meaning of section 3144 that a mechanic's lien must be perfected via the filing of an action to foreclose it within 90 days after the recording of the lien and, if such does not occur "the lien automatically shall be null and void and of no further force and effect." (§ 3144, subd. (b).) Two cases cited by respondent holding that this statutory language means what it says are not discussed or even cited in either of appellant's briefs to us.
These cases are: West Coast Development v. Reed (1992) 2 Cal.App.4th 693, 700 (West Coast) and Automatic Sprinkler Corp. v. Southern Cal. Edison Co. (1989) 216 Cal.App.3d 627, 633-635. The West Coast court held that, under the must-file-within-90-days rule, the "recorded lien was . . . legally a nullity" because such did not happen in that case. (West Coast, supra, 2 Cal.App.4th at p. 700.) Nor did it here.
Whether authority is or is not cited in appellant's briefs to us is more difficult to determine than normal because that authority is not, as it should be, listed alphabetically.
Another example: appellant argues that the Goodrich lenders knew "[i]nferably . . . when they recorded their deed of trust that [appellant] was performing and would continue to perform construction activities at the property" thus putting them "on inquiry" as to whether appellant "would be making a mechanics [sic] lien claim against the property for his construction services" and had thus known for some time that appellant "may have" such a claim against the property. (Italics added.) But appellant cites no law, and we have found none, that holds or even suggests that inferences that might have been drawn from conspicuous construction work on a piece of real property mandate a legally-recognizable conclusion that a mechanic's lien has been filed on the property.
Another example: appellant argues that the Goodrich lenders had actual notice of his "impending mechanics lien claim through their agent Charlene Goodrich Loan Services, Inc." and that it "is clear from the evidence that the relationship between Goodrich and the Lenders was an agency relationship." As a consequence of this, appellant continues in his reply brief, "it must be held that the [Goodrich] Lenders had actual notice of whatever [that agent] knew," which arguably included the fact that he might not be getting paid "for his construction services and would be making a mechanics [sic] lien claim against the property." This, appellant concludes, means that the Goodrich lenders were not bona fide purchasers when they acquired the property and, thus, neither were their vendees, respondent Trenkenschus.
This argument completely ignores the trial court's finding that "it was definitely not proven that the [Goodrich lenders] had either actual or constructive knowledge of the foreclosure complaint at the time of that sale." That finding is clearly supported by substantial evidence; indeed, appellant nowhere argues to the contrary in his briefs to us. Second, appellant's argument is based entirely on speculation, i.e., that agent Goodrich "knew that [appellant] was not getting paid in full for his construction services and would be making a mechanics [sic] lien claim against the property." But there is absolutely nothing in the record establishing that the Goodrich lenders' agent knew, or even suspected, that a mechanic's lien claim was in the offing as regards appellant and this property.
Additionally, this argument is made only in appellant's reply brief; we find no such argument in appellant's opening brief to us. It is, therefore, waived.
Appellant's argument that respondents did not have bona fide purchaser status is simply incorrect, for the reasons noted both by the trial court and respondents in their brief to us. They are, shortly stated: (1) appellant never "perfected" his lien against the Goodrich lenders as required by section 3144; (2) persons with an interest in real property must be made parties to litigation concerning that property, but; (3) the Goodrich lenders were not made parties in a timely manner and thus took the title as bona fide purchasers, i.e., free and clear of appellant's (then nugatory) mechanic's lien as of the date they took title to the property pursuant to their deed of trust in May 2008; and (4) thus, so did respondents when they purchased the property from the Goodrich lenders in December 2008.
The law regarding a successor purchaser's status as a bona fide purchaser is also clear. One who purchases real property from a bona fide purchaser is, notwithstanding any actual knowledge the successor purchaser may have, itself a bona fide purchaser. (See, e.g., 3 Miller & Starr, Cal. Real Estate, supra, § 11:58; Reiner v. Daniel (1989) 211 Cal.App.3d 682, 689-690; Jones v. Independent Title Co. (1944) 23 Cal.2d 859, 861-862.) As the court held in Schuch v. Northrup-Jones, Inc. (1958) 162 Cal.App.2d 279, it is a "well-settled principle of law that a bona fide purchaser may clothe his transferee with a good title regardless of whether the transferee had notice of adverse claims which were void or unenforceable against the transferor." (Id. at p. 290.)
Another section of the Civil Code, section 3146, confirms that the Goodrich lenders were bona fide purchasers of the property. It provides: "After the filing of the complaint in the proper court, the plaintiff shall record in the office of the county recorder of the county, or of the several counties in which the property is situated, a notice of the pendency of such proceedings, as provided in Title 4.5 (commencing with Section 405) of Part 2 of the Code of Civil Procedure . . . . Only from the time of recording such notice shall a purchaser or encumbrancer of the property affected thereby be deemed to have constructive notice of the pendency of the action, and in that event only of its pendency against parties designated by their real names." (§ 3146, italics added.)
In his briefs to us, appellant does not cite, much less discuss, section 3146. But its provisions make clear that it is pertinent here, for the simple reason that appellant did not record a lis pendens regarding the complaint he had filed against the Lowrys and Does 1-20 in May 2008 until October of that year. But, as noted above, the Goodrich lenders took title to the property at the May 22, 2008, foreclosure sale. Thus, under the clear language of section 3146, the Goodrich lenders became bona fide purchasers of the property. As the court held in Packard Bell, a case involving the predecessor statute to section 3146 (former CCP section 1198.2), the law "requires a lis pendens to be filed in order to give constructive notice to purchasers or encumbrancers pendente lite." (Packard Bell, supra, 244 Cal.App.2d at p. 363; see also Grinnell, supra, 183 Cal.App.3d 352, 358; Frank Pisano & Associates v. Taggart (1972) 29 Cal.App.3d 1, 23; Riley v. Peters (1961) 194 Cal.App.2d 296, 298; Paramount Securities Co. v. Daze (1933) 128 Cal.App. 515, 521-522.)
Appellant argues that this law is inapplicable because, in this case, the Trenkenschu respondents "were initially named as DOE defendants and later substituted for DOES." However, appellant never substituted the Goodrich lenders in as Doe defendants as prescribed by CCP section 474. Instead, in his first amended complaint, filed in October 2008 (five months after the 90-day period provided for in section 3144), appellant named the Lowrys and the Goodrich lenders as defendants. Then, in his SAC filed in May 2009, he deleted the Goodrich lenders as defendants and named the Lowrys, respondents Trenkenschus, and Does 1 through 20 as defendants. In so doing, he never used, or even attempted to use, a "relation-back" amendment allowed by CCP 474 to bring in the Goodrich lenders as parties defendant in the action in place of previously-named Doe defendants. As our colleagues in Division Four of this court recently held: "When a plaintiff is ignorant of the names of a defendant, the plaintiff may sue using a fictitious name for the defendant, amending the pleading when the defendant's true name is discovered. (Code Civ. Proc., § 474.) In this case, DeToy sued Breslin and multiple Doe defendants. She might have been able to amend her pleadings to plead the true names of Moran, Siragusa or Zerga, but she did not do so. Although we must liberally construe the fictitious names statute to avoid the bar of the statute of limitations, the city cites no authority in which the plaintiff could have but did not actually exercise this authority by substituting true names for Does by amendment. [Citations.]" (Breslin, supra, 146 Cal.App.4th at pp. 1080-1081.)
Although the 2007 Breslin decision was specifically relied upon by the trial court in its statement of decision, it is not cited or discussed in either of appellant's briefs to us.
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In his reply brief, appellant concedes that, when he "learned the names of the [Goodrich lenders] and filed his Amended Complaint in October, 2008, he did not follow the DOE amendment procedure prescribed by C.C.P. 474. That was a mistake, but not fatal to his mechanics [sic] lien claim." Such is the case, appellant continues, because "the statute of limitations for implementing a DOE substitution is three years" and thus he "would have had plenty of time to bring the Lenders into the lawsuits as substitutes for DOE defendants . . . if the Lenders had not meanwhile sold their interest in the property to" the Trenkenschu respondents. And, he continues, "[o]nce the Lenders did that, there was no reason to hold them in the lawsuit any longer."
The problem with this argument is obvious: as the trial court noted (citing Breslin and this court's decision in Union Tank, supra, 134 Cal.App. at p. 232): "The failure to properly name the Goodrich [lenders] as substituted Doe defendants means that the foreclosure action was null and void as to these parties, and, more importantly, as to their successors in interest—the Trenkenschus. It is immaterial whether the Trenkenschus were belatedly substituted into the case as Doe defendants."
Or, to put the matter another way, once the Goodrich lenders became bona fide purchasers of the property they never lost that status because they were never properly substituted into this action as defendants via CCP section 474. Thus, their vendees, the Trenkenschu respondents, also became bona fide purchasers.
To briefly summarize the basis for our affirmance: Although appellant filed his mechanic's lien in February 2008, his May 1, 2008, complaint named only the Lowrys as defendants. Appellant never recorded a lis pendens regarding the lien and his initial complaint until October 2008. By that time, however, appellant's mechanic's lien had become null and void as to the Goodrich lenders under section 3144, subdivision (b). Further, the Goodrich lenders were not named as parties in the May 1, 2008, original complaint and, three weeks later, they took title to the property through foreclosure of their 2006 deed of trust on the property. As and when they did, and as the trial court specifically found, there was no evidence that they "had either actual or constructive knowledge" of the May 2008 original complaint filed by appellant against the Lowrys. Accordingly, the Goodrich lenders were clearly bona fide purchasers and, thus, so were their vendees, respondents Trenkenschu, via their purchase of the property in December 2008. Thereafter, appellant failed to name the Goodrich lenders as defendants in his SAC of May 19, 2009 (which named only the Lowrys and respondents as defendants), and never substituted in the Goodrich lenders in lieu of Doe defendants—or even attempted to do so—pursuant to CCP section 474. As a consequence, and as the trial court correctly concluded, the "failure to properly name the Goodrich [lenders] as substituted Doe defendants means that the foreclosure action [of appellant on his mechanic's lien] was null and void as to these parties, and, more importantly, as to their successors in interest—the Trenkenschus."
IV. DISPOSITION
The judgment is affirmed. Costs on appeal are awarded to respondents.
Haerle, J. We concur:
Kline, P.J.
Lambden, J.