Opinion
E032598.
11-6-2003
WHITE CAP INDUSTRIES, INC. Plaintiff and Respondent. v. UNIVERSITY VILLAGE, LLC et al. Defendants and Appellants.
Law Offices of F. Glenn Nichols and F. Glenn Nichols for Defendants and Appellants. Law Offices of Allie & Schuster and William D. Schuster for Plaintiff and Respondent.
INTRODUCTION
University Village, LLC and First Bank and Trust (collectively appellants) appeal from a judgment in favor of White Cap Industries, Inc. (White Cap), in the principal sum of $35,893. The judgment is based on a stop notice against First Bank and Trust, and forecloses a mechanics lien against University Village. We affirm.
University Village owned and developed the University Village shopping center located near the Riverside campus of the University of California. The shopping center was built in several phases. White Cap supplied hardware and other materials to Hall Tech, Inc. (Hall Tech), an original contractor to University Village on Building B. First Bank and Trust was the construction lender to University Village.
Under Civil Code section 3097, subdivisions (a) and (c)(1), a preliminary 20-day notice shall include, as a necessary prerequisite to the validity of a mechanics lien or stop notice, "an estimate of the total price" of labor, services, equipment, or materials furnished or to be furnished to a work of improvement. The estimate must be "a derived figure, arrived at by rational analysis." (Rental Equipment, Inc. v. McDaniel Builders, Inc. (2001) 91 Cal.App.4th 445, 447 (McDaniel Builders).)
All further statutory references are to the Civil Code unless otherwise indicated.
In a preliminary 20-day notice (the notice) to appellants, White Cap estimated it would supply $8,000 in hardware and other materials to Hall Tech on the project. In a statement of decision, the trial court concluded that the $8,000 estimate was reasonable at the time the notice was given.
Appellants contend that the trial court erred, because the evidence showed that White Cap knew or reasonably should have known it would supply significantly more than $8,000 in materials to the project, at the time the notice was given. Appellants therefore maintain that White Caps mechanics lien and stop notice are invalid.
We conclude that substantial evidence supports the trial courts conclusion that the $8,000 estimate was reasonable, because it was based on the value of materials that White Cap furnished or reasonably expected to furnish to the project at the time the notice was given. White Caps mechanics lien and stop notice are therefore valid.
FACTS AND PROCEDURAL HISTORY
In approximately October 1999, University Village began construction of Building B. Aaron Management, Inc. was the original general contractor to University Village on Building B. Hall Tech, a subcontractor to Aaron Management, began work on the concrete foundation for Building B.
In late 1999, Aaron Management was replaced as the general contractor. As a result, in early January 2000, Hall Tech submitted written proposals to University Village to do the framing for a total price of $314,033 and the fabrication and delivery of structural steel for $79,260. In January 2000, Hall Tech submitted a bid to complete the entire project for over $2 million. Hall Tech was not awarded a general contract, however.
Nevertheless, by February 14, 2000, Hall Tech had entered into contracts with University Village totaling $464,197. The scope of Hall Techs work included the concrete foundation, framing, and fabrication and delivery of structural steel. Hall Tech also agreed to perform repair work on columns which had been left unfinished by the masonry contractor.
In mid-February 2000, Hall Techs president, Calvin Hall (Hall), spoke with Brian Salfrank (Salfrank), an outside sales representative for White Cap, about purchasing hardware for the project. Hall told Salfrank he was going to be the general contractor on a "big job," and wanted White Cap to submit a bid for hardware. Hall also told Salfrank he was going to need all of the hardware to construct the project.
Hall gave Salfrank a list of "material that he needed to get the job started." The list included specialized hardware that White Cap had to order. Salfrank obtained a $3,363 quote on the specialized hardware from Simpson Strong Tie, a manufacturer. Salfrank then inquired within White Cap regarding the prices of the items not included in the Simpson Strong Tie quote. He thereafter estimated that all of the hardware on Halls list would cost about $6,000. Salfrank relayed this information to Hall.
Salfrank did not think Halls list contained all the hardware that Hall Tech would need to complete the project. He thought Hall Tech "was probably going to be making additional orders later down the road." Hall, however, never gave Salfrank a list of all the hardware Hall Tech was going to need for the entire project. Hall testified that he supplied the same list he gave Salfrank to other suppliers to compare pricing.
Hall testified that at the time he gave Salfrank the list of materials he needed to get the job started, he did not know the scope and extent of material he would need to complete the project. Hall said that he and Salfrank did not discuss whether Hall Tech would purchase any materials in addition to the $6,000 order.
On February 21, Hall requested, and Salfrank gave Hall, an application to open a credit account with White Cap. Salfrank forwarded Hall Techs completed application to Dean Frazier (Frazier), a credit manager in White Caps credit department, and advised Frazier that he had a $6,000 order pending.
Frazier opened a credit account for Hall Tech. He relied on credit information he received from ORCO, a competing hardware and materials supplier. ORCO described Hall Techs payment history as "prompt." Frazier requested, but did not receive, credit references from three of Hall Techs other vendors and Hall Techs bank.
On March 8, Frazier served the notice on University Village. The notice included an estimate of $8,000 for "hardware, rough framing hardware, subsurface drainage products, construction materials, chemicals and waterproofing and equipment rentals."
In arriving at the $8,000 estimate, Frazier relied on Hall Techs pending $6,000 order, and added $2,000 for "contingency extras." He and Salfrank discussed how the $6,000 figure was calculated, but they did not discuss the amount of materials Hall Tech would need to complete the entire project. As of March 8, Frazier said there was no indication that Hall Tech was going to purchase any additional materials. At his deposition, Frazier testified that he did not recall how the $8,000 figure was calculated.
Frazier had prepared "thousands" of preliminary 20-day notices. It was not White Caps policy to file more than one preliminary 20-day notice on a specific job, even if a customer purchased more materials than originally estimated.
On February 29, Hall Tech ordered its first materials from White Cap. Through March 7, Hall Techs orders totaled $6,581. As of the same date, its net orders totaled only $4,744, after credits of $1,836. The return receipt for the notice served by White Cap on University Village was dated March 8. Through June 28, Hall Tech ordered a total of $43,813 in materials from White Cap.
Hall testified that he purchased more than $6,000 in materials from White Cap for two reasons: (1) the scope of Hall Techs work increased, and (2) White Cap offered better prices than a competing supplier, ORCO. On May 22, Hall Tech was terminated. By the same date, University Village had paid Hall Tech a total of $548,113. Hall Tech did not pay for any of the materials it purchased from White Cap.
ORCO filed a $26,127 mechanics lien on the project.
Hall Tech periodically provided a list of its vendors and suppliers to University Village. The lists indicated whether there was an outstanding balance owed; however, a specific figure was not referenced. University Village never requested any mechanics lien releases from White Cap. University Villages construction manager, Ted Robinson, assumed that Hall Tech was paying White Cap from payments it was receiving.
DISCUSSION
A preliminary 20-day notice is a "necessary prerequisite" to the validity of a mechanics lien or stop notice. (§ 3097, subd. (a).) The notice "shall contain . . . [¶] [a] general description of the labor, service, equipment, or materials furnished, or to be furnished, and an estimate of the total price thereof." (§ 3097, subd. (c)(1), italics added.) The notice must be given "not later than 20 days after the claimant has first furnished labor, service, equipment, or materials to the jobsite." (§ 3097, subd. (d).)
The "estimate of the total price" requires "a derived figure, arrived at by rational analysis." (McDaniel Builders, supra, 91 Cal.App.4th at p. 447.) The estimate is "an approximate computation of the probable cost of a piece of work made by a person undertaking to do the work." (Id. at p. 449.) The estimate cannot be "made up out of whole cloth." (Id. at p. 451.)
The mechanics lien laws protect both materialmen and property owners. (R. D. Reeder Lathing Co. v. Allen (1967) 66 Cal.2d 373, 379.) As the McDaniel Builders court observed, "a real estimate protects both materialmen and property owners, in that it promotes communication based on real factors and the true state of affairs." (McDaniel Builders, supra, 91 Cal.App.4th at p. 450.)
In addition to a description of services and a total price estimate, a preliminary 20-day notice must contain the name and address of the potential lien claimant, the name and address of the person with whom the potential lien claimant contracted, and "[a] description of the jobsite sufficient for identification." (& sect; 3097, subd. (c)(2)-(4).) This information enables property owners to ascertain whether and to what extent each potential lien claimant has furnished or expects to furnish labor, service, equipment, or materials to a project, in addition to those described and estimated in the notice, after the notice has been given.
Indeed, an estimate can only be based on the state of affairs and the claimants knowledge at the time the notice is given. A claimant "need give only one" notice regarding all items furnished to a work of improvement, unless the items are furnished under contracts with more than one subcontractor, in which case separate notices must be given regarding each contractor. (§ 3097, subd. (g), first paragraph.) A notice is not defective because, after it is given, the claimant furnishes items not within the scope of the general description given in the notice. (§ 3097, subd. (g), second paragraph.)
For these reasons, an estimate in a preliminary 20-day notice is not "a binding statement of all . . . charges to be incurred throughout the entire project." (McDaniel Builders, supra, 91 Cal.App.4th at p. 450.) Indeed, the estimate "can be in compliance with the statute even though it badly misses the mark with reference to the total charges as finally tallied." (Ibid.)
A trial courts finding that an estimate complies with section 3097, or is "a derived figure, arrived at by rational analysis," will be upheld if supported by substantial evidence. (McDaniel Builders, supra, 91 Cal.App.4th at pp. 447, 451-452.) We review the record in the light most favorable to the respondent and resolve all evidentiary conflicts and indulge all reasonable inferences in support of the judgment. (In re Marriage of Mix (1975) 14 Cal.3d 604, 614.)
Appellants contend that the $8,000 figure in White Caps notice was not "a derived figure, arrived at by rational analysis" (McDaniel Builders, supra, 91 Cal.App.4th at p. 447), and that White Caps mechanics lien and stop notice were therefore invalid. We disagree.
The evidence showed that White Caps $8,000 estimate was based on Hall Techs initial $6,000 order, plus $2,000 for "contingency extras" which Frazier believed Hall Tech might require during the course of the project. Through March 7, the day before the notice was given, Hall Techs orders totaled $6,581. Hall Techs net orders totaled only $4,744, after credits of $1,836.
Hall testified that at the time he gave Salfrank the list of materials he needed to get the job started, he did not know the scope and extent of material he would need to complete the project. At that time, Hall and Salfrank did not discuss whether Hall Tech would purchase any materials in addition to the $6,000 order. Hall said Hall Tech ultimately purchased more materials from White Cap because the scope of Hall Techs work increased and White Cap offered better prices than its competitor, ORCO.
Although Salfrank believed Hall Tech was probably going to order additional materials, White Cap had no commitment from Hall Tech to purchase any additional materials. Rather, Hall Tech was placing orders with White Cap on a day-to-day basis.
It is therefore of no moment that Hall Tech continued to purchase materials from White Cap on a regular basis through June 28, and that Hall Techs purchases eventually totaled $43,813, over five times the $8,000 estimate. As White Cap argues, it would have been speculative for it to assume that Hall Tech was going to purchase more than $8,000 in materials.
Accordingly, substantial evidence supports the trial courts conclusion that White Caps $8,000 estimate was reasonably based on the amount of materials it had furnished or reasonably expected to furnish to Hall Tech throughout the course of the project, at the time the notice was given.
As noted, a mechanics lien claimant is only required to give one preliminary 20-day notice on a work of improvement. (§ 3097, subd. (g).) And the estimate stated in the notice complies with the statute if it is reasonably based on the state of affairs at the time the notice is given.
Thus, an owner may not reasonably rely on an outdated estimate as limiting the amount of a mechanics lien. Throughout the course of a project, a diligent owner will periodically ascertain whether and to what extent all potential mechanics lien claimants have furnished or expect to additionally furnish labor, services, equipment, or materials to the owners project. In this manner, the owner may control its project costs and exposure to mechanics liens.
The facts of McDaniel Builders are distinguishable from the present case. There, the plaintiff, an equipment supplier, served two preliminary 20-day notices on November 14 and 24. Each notice gave an estimate of $10,000. The plaintiff filed a mechanics lien in the amount of $159,898. (McDaniel Builders, supra, 91 Cal.App.4th at pp. 447-448.)
The November 14 notice identified the equipment furnished or to be furnished as "rental of construction equipment, includes: 80 straight lift." By that date, the plaintiff had billed its customer $8,232, including $7,800 for the 80-foot straight lift. But the customer had also rented a 60-foot boom, an 80-foot boom, a backhoe, and a trak loader for the project. The November 24 notice identified a trak loader as the equipment furnished or to be furnished. And by that date, the plaintiff had billed the customer over $23,000. At trial, the plaintiff offered no evidence concerning how the $10,000 estimates were derived. (McDaniel Builders, supra, 91 Cal.App.4th at p. 448.)
The trial court in McDaniel Builders found that the $10,000 estimates were "not derived by any rational process . . . had no bearing whatsoever on the actual work done and to be done on the project and . . . [were] made out of whole cloth. The stark factual reality of this case is that [the] dollar figure of $10,000 was not even a guess, much less an estimate." (McDaniel Builders, supra, 91 Cal.App.4th at p. 449.)
The appellate court held that substantial evidence supported the trial courts conclusion. The appellate court noted that at the time the notices were given, the plaintiff had supplied a substantial amount of equipment that was not reflected in its estimates. (Id. at pp. 451-452.)
Here, however, substantial evidence supported the trial courts conclusion that White Caps $8,000 estimate was based on the amount of materials it had furnished or reasonably expected to furnish to the project. In other words, substantial evidence supports the conclusion that the $8,000 estimate was "a derived figure, arrived at by rational analysis." (McDaniel Builders, supra, 91 Cal.App.4th at p. 447.)
DISPOSITION
The judgment is affirmed. White Cap shall recover its costs on appeal.
We concur: McKinster, Acting P.J., and Ward J.