Carmel Development Company v. Monterra Ranch Properties CA6 ( 2024 )


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  • Filed 9/30/24 Carmel Development Company v. Monterra Ranch Properties CA6
    NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication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.
    IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
    SIXTH APPELLATE DISTRICT
    CARMEL DEVELOPMENT COMPANY,                                          H050094 & H050530
    (Monterey County
    Plaintiff and Respondent,                                  Super. Ct. No. M91899)
    v.
    MONTERRA RANCH PROPERTIES,
    LLC et al.,
    Defendants and Appellants.
    This is defendants’ second appeal involving their residential development project
    in Monterey County. Defendants’ first appeal was resolved by a published decision in
    Carmel Development Co., Inc. v. Anderson (2020) 
    48 Cal.App.5th 492
    , 498 (CDC I) . As
    we explained in our previous opinion, plaintiff Carmel Development Company, Inc.
    provided design and construction work for defendants’ Monterra subdivision over the
    course of more than 10 years under an oral contract with property owner Roger Mills, the
    principal of Monterra Ranch Properties, LLC (Monterra LLC). Plaintiff recorded a
    mechanic’s lien and a site improvement lien against certain lots in the subdivision after
    being informed that Monterra LLC would no longer be able to continue paying for
    plaintiff’s work. Plaintiff sued several of Monterra LLC’s investors with property
    interests in unsold lots in the development (defendants Larry Anderson et al.) as well as
    the LLC. Plaintiff alleged causes of action for, among other things, breach of contract
    and foreclosure of the mechanic’s and site improvement liens. Monterra LLC stipulated
    to liability before trial; the investor defendants contested liability in a lengthy bench trial
    that resulted in a judgment for plaintiff.
    In CDC I, we reversed the judgment and remanded the matter for the limited
    purposes of subtracting sums associated with any contractual interest included in the
    liens; determining the precise number of lots that benefited from the mechanic’s lien for
    water infrastructure improvements; and recalculating prejudgment interest. (CDC I,
    supra, 48 Cal.App.5th at pp. 527–528.) On remand, the trial court heard additional
    evidence and entered a new judgment. Defendants have again appealed, asserting error
    by the trial court in not including all lots that benefited from the water infrastructure
    improvements; excluding testimony from defendants’ expert on contractual interest;
    sanctioning defendants for not admitting certain facts in discovery; and denying
    defendants’ peremptory challenge after appellate reversal of the judgment (Code Civ.
    Proc., § 170.6). For the reasons stated here, we will modify the judgment to add two lots
    to the Water Lien calculation and will affirm the judgment as modified.
    I.    TRIAL COURT PROCEEDINGS
    A. PROJECT HISTORY AND DEVELOPMENT AGREEMENT
    We reproduce this section verbatim from CDC I to provide relevant background.
    Our review of the trial court’s decision in this appeal is based on the evidence the trial
    court considered in the limited trial on remand.
    “The Monterey County Board of Supervisors approved a 2,911-acre subdivision
    known as Monterra in 1987. Brothers Roger and Basil Mills formed Monterra LLC and
    purchased the undeveloped Monterra subdivision in 1995. After Monterra LLC acquired
    the Monterra subdivision, the owners of the Tehama subdivision (located immediately
    south of Monterra) entered into an agreement with Monterra LLC. Among other things,
    the agreement provided that Monterra LLC would transfer about 1,000 acres from
    Monterra to Tehama to create Cañada Woods North (where a golf course and a small
    number of residential units were to be built). Tehama would also allow lots in Monterra
    2
    to use Tehama’s graywater sewage treatment system, and Monterra LLC would construct
    a potable water system to be used by lots in Monterra and Cañada Woods North.
    “Monterra LLC hired plaintiff via a handshake agreement to redesign Monterra as
    an ‘exclusive and environmentally-friendly development.’ The trial court found that the
    agreement was as follows: for design work plaintiff would charge its billing rate, actual
    consultant charges, and a 5 percent markup applied to the consultant charges; for
    construction work plaintiff would charge its actual costs for equipment and labor
    performed by plaintiff as well as the actual costs of its subcontractors and materialmen,
    plus a 25 percent markup of the construction labor costs to account for supervision,
    overhead, and profit.
    “Plaintiff developed Monterra between 1996 and 2008. That development work
    included ‘lot design and layout, locating building envelopes on each lot, water and
    sewage system layout and design, roadway design, construction and repair.’ Plaintiff
    developed Monterra in phases in order to build and sell a few houses at a time to raise
    capital to invest in each successive phase. Roughly half the lots in Monterra were
    developed and sold before Monterra LLC ran out of capital; those sales generated over
    $100 million. Part of the development included construction of a reverse osmosis water
    plant, which served the lots in the subdivision that had been sold to third parties.
    “Plaintiff and Monterra LLC entered into an oral contract providing for
    contractual interest in late 2000. Monterra LLC agreed to pay interest on unpaid balances
    at the rate of 10 percent. The trial court found that interest was ‘to accrue 60 days from
    the last day of the month in which the work was performed.’ (In determining the accrual
    period, the trial court acknowledged that trial testimony on that point was ‘often unclear,
    confusing and conflicting.’)
    3
    “Monterra LLC informed plaintiff in 2008 that it could no longer make payments,
    effectively breaching the contract. Plaintiff recorded two liens1 to secure its right to
    money for two categories of work: water improvements throughout Monterra, and site
    improvements in phases seven and nine. The water lien (Water Lien) was for water
    improvements ‘related to the expansion of a water and sewer system including the
    installation of new wells, lift stations and a larger reverse osmosis water plant to increase
    the water and sewer systems capacity to provide services to the last 85 unsold lots of the
    Monterra subdivision.’ The site improvement lien (Site Improvement Lien) ‘related to
    the installation of site improvements (roads, driveways, retaining walls, utilities) to
    benefit the lots located in Phases 7 and 9 of Monterra.’ ” (CDC I, supra, 48 Cal.App.5th
    at pp. 499–500.)
    B. REMAND INSTRUCTIONS FROM CDC I
    As relevant here, the court in CDC I concluded that the Water Lien and Site
    Improvement Lien could not include contractual interest because the trial court found that
    the contract price (without interest) and the reasonable value of the liened lots were
    equal. (CDC I, supra, 48 Cal.App.5th at pp. 520–522.) CDC I also concluded that
    because the water infrastructure improvements were a single work of improvement
    designed to be an integrated whole serving all lots in Monterra, the Water Lien had to be
    allocated to all lots in the development. (Id. at pp. 509–513.) The matter was reversed
    and remanded for additional factfinding on those issues.
    The opinion in CDC I provided the following guidance to the trial court for a
    limited trial on remand: “The trial court’s first task involves both liens. The court must
    recalculate the amount of the Site Improvement Lien and Water Lien after subtracting
    sums associated with any contractual interest included in the liens as a result of Monterra
    LLC’s agreement to pay plaintiff contractual interest. To the extent the parties are unable
    1
    What we will refer to as the water lien was recorded as several separate liens,
    one lien per relevant project phase.
    4
    to stipulate to a new calculation based on the existing record, additional expert testimony
    may be necessary. Once the new lien totals are determined, the trial court must divide the
    amount of the Site Improvement Lien among the lots in phases seven and nine.
    “The trial court’s second task involves only the Water Lien. The court must
    determine the precise number of lots that benefited from the Water Lien. We can state
    with certainty based on the record before us that at minimum all lots within Monterra
    benefited from the Water Lien improvements. The parties dispute whether the Water
    Lien also includes balances due for improvements benefiting lots outside Monterra (i.e.,
    lots owned by Tehama in either Tehama or Cañada Woods North). The parties appear to
    agree that certain water infrastructure improvements benefited lots owned by Tehama,
    but disagree regarding whether the Water Lien itself contains amounts associated with
    lots outside Monterra. (Defendants argue the Water Lien includes charges for
    improvements benefiting Tehama, whereas [Alan] Williams testified that Tehama was
    billed separately for water infrastructure.) Upon resolving that factual dispute and
    determining the total number of benefited lots, the court must divide the new Water Lien
    total by the number of benefited lots. Each of the 58 lots listed in the original judgment
    in this case will then be responsible for that lot’s pro rata share of the Water Lien.
    (Plaintiff acknowledges its recovery is limited to those 58 lots, noting in its cross-appeal
    that it is ‘not arguing that it should be permitted now to recover from the sold lots their
    proportionate share of the water lien, only that in making the calculations on a remand,
    the Water Lien would first have to be allocated across the 171 lots to determine each
    benefitted lot’s proportionate share (i.e., 1/171th) of the water lien.’)
    “Prejudgment interest at a rate of 7 percent must then be added to the newly
    calculated amounts for both liens, with a starting date of June 26, 2009 (the date already
    selected by the trial court). (Cal. Const., art. XV, § 1.)” (CDC I, supra, 48 Cal.App.5th
    at pp. 527–528.)
    5
    C. REMAND PROCEEDINGS
    Defendants attempted to disqualify the judge who heard the original trial. After
    their peremptory challenge under Code of Civil Procedure section 170.6 was denied, a
    different panel of this court summarily denied defendants’ petition for writ relief from
    that decision. (Case No. H048473.)
    Plaintiff served defendants with two requests for admission that are relevant to this
    appeal. The first asked defendants to admit: “Superior Court Judge Thomas Wills held,
    as stated in the Statement of Decision filed on December 12, 2013 in this CASE, that the
    amount due to Plaintiff under the CONTRACT between Plaintiff and Monterra Ranch
    Properties, LLC as of March 31, 2008 was the sum o[f] $2,283,337.65.” The second
    asked defendants to admit: “The sum of $2,283,337.65 as described in Admission No. 1
    contained unpaid interest in the amount of $1409.74.” Defendants denied both requests
    for admission.
    The trial court heard testimony over multiple days about the remand issues
    identified in CDC I. The parties also read into the record deposition testimony and
    testimony from the first trial. The court struck the testimony of defendants’ expert
    witness about contractual interest, finding his testimony irrelevant because it did not
    follow the appellate court’s instructions in CDC I. (We will summarize the relevant
    evidence in our later discussion.)
    The trial court decided the remand issues in a written order. The court found the
    testimony of Vanessa Hill, plaintiff’s forensic accounting expert, about removing
    contractual interest from the lien amount to be “credible, persuasive and in accordance
    with the directive of the Court of Appeal.” The court found that the combined lien
    amount of $2,283,337.65 contained $1,409.74 in contractual interest. Subtracting that
    interest, the court concluded the total combined lien amount without contractual interest
    was $2,281,927.91.
    6
    The court found that 181 lots benefited from the Water Lien. That amount
    included the 171 Monterra lots discussed in CDC I plus 10 lots in Cañada Woods North
    that the parties stipulated on remand should be subject to the Water Lien.
    The court determined that 42 affordable “inclusionary” housing units referred to as
    the Oak Tree subdivision “were a separate and prior work of improvement and not a part
    of the work of improvement which gave rise to the Plaintiff’s water lien.” The units were
    a separate subdivision sold by Monterra to another entity in 1997.
    The court also concluded no additional Tehama lots benefited from the Water Lien
    other than the 10 lots stipulated by the parties. Tehama was separately invoiced by
    plaintiff for construction work, and no work for Tehama was included in the Water Lien.
    Although the Tehama golf course uses greywater from the Monterra subdivision, it
    purchases the “effluent from the water company serving the developments.” There was
    no evidence that Tehama obtains that water cost free or at a discounted rate.
    The court further concluded that work on four water tanks near lot 69 was not part
    of the Water Lien. The court found, based on defense expert Strombom’s report in the
    first trial, that work on the Water Lien occurred between September 2007 and March
    2008. The court found plaintiff constructed the four tanks before that date range. Two
    tanks serve Monterra, and two serve Tehama. Tehama was separately billed for the two
    tanks serving its lots. The court found the “Tehama lots served by the two water tanks
    for which Tehama paid are not a portion of the single work of the Monterra improvement
    and are not subject to the water lien at issue here.”
    Of the $2,281,927.91 total lien amount, the court attributed $132,580 to the site
    improvement lien and $2,149,347.90 to the Water Lien, based on Hill’s calculations.
    Dividing $2,149,347.90 by 181 lots yielded a Water Lien allocation of $11,874.85 per
    lot. $11,874.85 multiplied by the 58 remaining lots equaled a total of $688,741.30 for the
    Water Lien after reallocation. $688,741.30 plus the $132,580 site improvement lien
    equaled a total combined lien share of $821.321.30 for the subject lots. With costs,
    7
    prejudgment interest, and postjudgment interest as of October 31, 2021, the court found
    the total amount of the judgment as of that date was $1,990,798.80. Judgment was
    entered in April 2022, and defendants appealed that judgment in case No. H050094.
    D. DISCOVERY SANCTIONS
    Plaintiff moved to recover its attorney fees for proving the two requests for
    admission refused by defendants. (Code Civ. Proc., § 2033.420.) The trial court granted
    the motion by written order after a hearing, finding that the facts were of substantial
    importance to the issues on remand and that defendants denied the facts without a
    reasonable belief that they would disprove them. The court ordered defendants to pay
    plaintiff $39,125 in attorney fees for proving the facts and $26,150.50 in attorney fees
    related to the fee motion. The court also ordered defendants to pay $18,598.45 for
    plaintiff’s expert witness and $78.10 for expenses related to the motion. Defendants
    appealed that postjudgment order in case No. H050530. We ordered the two appeals
    considered together for briefing, oral argument, and disposition.
    II.   DISCUSSION
    A. PLAINTIFF’S MOTION TO STRIKE
    Plaintiff moved to strike portions of the appellant’s appendix that were not
    presented to the trial court during the remand proceedings, as well as the portions of
    defendants’ opening brief relying on that material. The trial court made clear during the
    remand proceedings that although evidence and testimony from the original trial was
    potentially admissible at the remand hearing, any evidence to be relied on by the parties
    was to be presented “here in the courtroom.” The court emphasized it did not want to
    “take this case under submission with somebody telling me here, Judge, read this
    thousand pages in the spare time that you don’t have before you come up with a
    decision.” Defendants have not challenged that ruling on appeal. In reviewing whether
    the trial court’s decision is supported by substantial evidence, we will consider only the
    8
    evidence presented to the trial court in the remand proceedings. Plaintiff’s motion to
    strike is denied.
    B. THE CODE OF CIVIL PROCEDURE SECTION 170.6 MOTION
    “[D]etermination of the question of the disqualification of a judge is not an
    appealable order and may be reviewed only by a writ of mandate from the appropriate
    court of appeal sought only by the parties to the proceeding.” (Code Civ. Proc., § 170.3,
    subd. (d); see People v. Panah (2005) 
    35 Cal.4th 395
    , 444 [“As we have repeatedly held,
    the statute means what it says: Code of Civil Procedure section 170.3, subdivision (d)
    provides the exclusive means for seeking review of a ruling on a challenge to a judge,
    whether the challenge is for cause or peremptory.”].)
    A different panel of this court summarily denied defendants’ petition for writ relief
    after the trial court denied their Code of Civil Procedure section 170.6 motion. (Case
    No. H048473.) Defendants did not petition for review of that decision in the Supreme
    Court; the issue is not cognizable on appeal.
    C. ALLOCATING THE WATER LIEN
    Defendants argue the trial court should have included several additional lots in the
    Water Lien allocation—an argument they nearly forfeited by not identifying the relevant
    standard of review, not summarizing the facts adduced at the remand hearing, and merely
    listing dozens of reporter’s transcript pages at the end of lengthy factual recitations
    without more specifically identifying the cited testimony. Defendants also rely on
    evidence to support their arguments without acknowledging the evidence the trial court
    actually relied on to make its decision. (City of Santa Maria v. Adam (2012)
    
    211 Cal.App.4th 266
    , 287 [“Rather than scour the record unguided, we may decide that
    the appellant has waived a point urged on appeal when it is not supported by accurate
    citations to the record.”]; Rayii v. Gatica (2013) 
    218 Cal.App.4th 1402
    , 1408 [an
    appellant “who cites and discusses only evidence in her favor fails to demonstrate any
    error and waives the contention that the evidence is insufficient to support the
    9
    judgment.”].) In the interest of finality, we have reviewed the evidence and will
    determine whether substantial evidence supports the trial court’s decision that the Water
    Lien should be allocated to 181 lots identified. (CDC I, supra, 48 Cal.App.5th at p. 507
    [“Because determining the amount of land benefited by a mechanic’s lien requires a trial
    court to resolve disputed evidence and make factual findings, we apply the substantial
    evidence standard of review.”].) We will address each of the five categories of parcels
    defendants contend should have been included in the Water Lied allocation.
    As we described in CDC I, supra, 48 Cal.App.5th at pp. 506–507 , plaintiff was
    authorized to record “a lien upon the property upon which [it] bestowed labor or
    furnished materials ... for the value of such labor done or materials furnished.” (Civ.
    Code, former § 31102; see also Cal. Const., art. XIV, § 3 [“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.”]) The lien attaches to “the work of improvement and the land on
    which it is situated together with a convenient space about the same or so much as may
    be required for the convenient use and occupation thereof.” (Civ. Code, former § 3128.)
    As to the geographic scope of a mechanic’s lien, the “ ‘question is not so much as to the
    amount of land required for the area to be occupied by the [improvements], but rather as
    to the amount of land to be improved or benefited by the creation and use of the
    [improvements].’ ” (Cal. Corrugated Culvert Co. v. Stewart (1934) 
    220 Cal. 104
    , 106–
    107 (Cal. Corrugated) [lien for construction of a rice elevator and a barn applied to entire
    farm property because the improvements benefited the whole farm].) Determining the
    scope of a lien “must take into consideration the intended use for which the
    2
    The Civil Code sections related to mechanic’s liens were repealed, renumbered,
    and reenacted, effective July 1, 2012. (Civ. Code, § 8052, subd. (a); Stats. 2010, ch. 697,
    §§ 16, 20.) The former Civil Code sections govern this matter because the liens were
    recorded before the effective date of the new law.
    10
    [improvement] is erected. ... [I]f its use is dependent upon, and connected with the uses
    made of other buildings or the uses made of other portions of the tract of land upon which
    it is situate[d], then if all of the larger tract is required for the ‘necessary and convenient
    use’ of the [improvement] involved, such larger tract may properly be included.”
    (Anselmo v. Sebastiani (1933) 
    219 Cal. 292
    , 298 (Anselmo); accord, CDC I,
    48 Cal.App.5th at pp. 506–507.)
    1. Inclusionary Housing Lots
    The trial court concluded the 42 inclusionary housing lots should not be included
    in the Water Lien allocation because they “were a separate and prior work of
    improvement and not a part of the work of improvement which gave rise to the Plaintiff’s
    water lien.” William Silva testified at the remand trial that he oversaw construction of
    the inclusionary housing units. The 42 inclusionary housing units were a condition of
    county approval for the Monterra development. The inclusionary housing units needed to
    be built before any Monterra properties could be sold. The Mills sold lots 1 through 42 to
    Oak Tree Housing, a limited partnership created by Silva for the purpose of building the
    inclusionary housing units. A grant deed recorded in January 1997 reflects the transfer.
    Silva testified that the agreement with Mills required Silva’s partnership to build and sell
    the inclusionary housing units within 18 months. Silva’s partnership was responsible for
    building all water and sewer infrastructure on the 42 inclusionary housing lots, which
    would connect to infrastructure being built on the Monterra property by the Mills. The
    Mills were responsible for “bringing the water to” the inclusionary housing lots. By the
    time the last inclusionary housing lot sold in 1998, water and sewage services were being
    supplied to all inclusionary housing units. A water subsidization agreement was signed
    to ensure that inclusionary housing units would receive water at reasonable rates.
    Alan Williams, the principal of plaintiff Carmel Development Company, agreed
    with defendants’ counsel’s question that a vicinity map showed “four separate projects,
    there would be the inclusionary housing, there would be Monterra, there would be
    11
    Cañada Woods North and then there would be Tehama proper.” Williams testified that
    his company performed no work on the inclusionary housing lots, and that water
    infrastructure on Monterra land connected to water infrastructure on the inclusionary
    housing lots. Williams acknowledged that a water system was engineered to treat sewage
    both from the inclusionary lots and from Monterra. Plaintiff built a reverse osmosis plant
    in the late 1990’s to serve Monterra and the inclusionary lots, and that system had been
    completed and paid for in full.
    The reverse osmosis plant is distinct from the High Well Water Treatment Plant,
    which was constructed in the late 2000’s. It is undisputed that the Water Lien includes
    charges for the construction of the High Well Water Treatment Plant, which was not yet
    operational when the Water Lien was recorded. The parties stipulated that the “High
    Well Water Treatment Plant (and related infrastructure of pipes, wells, pumps, etc.) is
    currently providing water to the customers of the Cañada Woods Water Company whose
    service area contains the 171 lots within Monterra, the 42 lots of inclusionary housing,
    and 10 lots within Cañada Woods North.”
    The foregoing provides substantial evidence to support the trial court’s decision
    that the inclusionary housing units were a separate work of improvement. Construction
    of the units was severed from the Monterra project when the land was sold to Silva’s
    limited partnership in 1997, and plaintiff was not involved with construction on the
    inclusionary housing lots. The inclusionary lots were all sold by 1998, at which time
    they all had operational water and sewage services.
    Defendants’ appellate argument does not grapple with the substantial temporal
    separation between completion of the inclusionary housing units and the work that
    formed the basis of the Water Lien. Defendants note that Monterra was responsible for
    supplying water and sewage services to the inclusionary housing units. Defendants then
    assert that the “42 homes that were built on the ‘inclusionary housing’ parcels could not
    be sold until CDC and Chapin completed the water and sewer infrastructure that is the
    12
    subject of the Water Lien.” The assertion that the Water Lien infrastructure had to be
    completed before the inclusionary housing could be sold is not supported by the record:
    Silva testified that the inclusionary lots were all sold—complete with functioning water
    and sewer service—nearly a decade before the work that formed the basis for the Water
    Lien.
    Defendants suggested at oral argument that the inclusionary housing units are part
    of the Monterra work of improvement as a matter of law based on findings from the first
    trial and CDC I. We see nothing in the trial court’s original findings or the opinion in
    CDC I that compels such a result. According to the statement of decision after the first
    trial, the trial court determined Monterra’s “infrastructure, particularly the sewage and
    water system, was designed to be an integrated whole serving all the lots in each phase,
    no phase of which could have operated independently of the others.” The trial court
    made that finding to resolve a dispute between the parties about whether project phases
    within the Monterra subdivision were separate works of improvement. We observed in
    CDC I that the “Monterra water system was designed to be an integrated whole serving
    the entire subdivision.” (CDC I, supra, 48 Cal.App.5th at p. 508; see also id. at p. 509
    [“Substantial evidence supports the trial court’s conclusion that the Water Lien
    improvements benefited all lots in Monterra.”].) But CDC I did not discuss the
    inclusionary housing units. Substantial evidence from the remand trial supports a finding
    that the inclusionary housing units were not part of the Monterra subdivision and were
    instead a separate work of improvement. The inclusionary housing units being a separate
    work of improvement also forecloses defendants’ argument that the Water Lien for work
    performed between 2007 and 2008 relates back to the period before the inclusionary
    housing was sold to the Oak Tree Housing limited partnership in 1997. (Citing Forsgren
    Associates, Inc. v. Pacific Golf Community Development LLC (2010)
    
    182 Cal.App.4th 135
    , 146 [“Although the claim of lien may be recorded after the work is
    completed, the lien relates back to the date the first labor or material was furnished for
    13
    the work of improvement, and transferees who take an interest in the property after work
    has begun, and before the claim of lien is recorded, take subject to the lien.”].)
    Defendants appear to contend that the inclusionary housing units benefited from
    the Water Lien improvements because the High Well Water Treatment Plant now
    provides water to those inclusionary units. But the trial court could reasonably conclude
    that any benefit the inclusionary housing units derive from that service is by virtue of
    being part of the same water utility as Monterra, a service that the inclusionary housing
    units pay for.
    Defendants argue “the facts of this case make clear that [the inclusionary housing]
    was part and parcel of the same overall ‘work of improvement’ ” as Monterra.
    Defendants point to evidence they argue indicates the developers “considered themselves
    to be working on a single work of improvement that included the ‘inclusionary housing’
    component of the project.” But the trial court found that Monterra and the inclusionary
    housing units were separate works of improvement, and we have summarized the
    evidence supporting that decision. Because substantial evidence supports the trial court’s
    decision, the existence of other evidence in the record that arguably could support an
    alternative finding does not lead to reversal. (See City of San Buenaventura v. United
    Water Conservation District (2022) 
    79 Cal.App.5th 110
    , 120 [“We may not reweigh a
    judgment ‘supported by substantial evidence even if substantial evidence to the contrary
    also exists.’ ”].)
    Some of the purportedly contrary evidence defendants reference in their briefing is
    not supported by the record references they cite. For example, defendants contend that
    “Williams admitted that some of the unpaid work CDC seeks to collect in this action was
    directly related to CDC’s work on the ‘inclusionary housing’ portion of the
    development.” To the contrary, Williams testified in the cited deposition testimony that
    plaintiff built the reverse osmosis water plant to serve the inclusionary housing units
    somewhere between 1997 and 1999. Although Williams provided that answer in
    14
    response to being asked about the “water improvements work that you haven’t been paid
    for,” his answer indicates he mentioned the reverse osmosis plant to describe “the early
    phases” of the project. Elsewhere, Williams testified that plaintiff was paid in full for the
    reverse osmosis plant. And the Strombom defense expert report from the first trial that
    the trial court relied on in its remand decision indicated the unpaid work forming the
    basis for the Water Lien occurred in 2007 and 2008.
    Defendants’ argue that Monterra and the inclusionary housing units must be
    considered a single work of improvement because plaintiff and another construction
    company “started their site improvement work on the Monterra project—including on-
    site at the ‘inclusionary housing’ parcels—by no later than May 1996.” Defendants
    contend that because that work began before the inclusionary housing lots were sold to
    the other developer, they must be considered the same work of improvement as Monterra.
    Defendants cite deposition testimony by Williams that his company “first [became]
    involved in the actual construction work on the Monterra Ranch project” in May 1996.
    That testimony does not establish plaintiff performed any work on the inclusionary
    housing lots at that time. And any work plaintiff completed on Monterra land to supply
    water and sewer services to the inclusionary housing lots was paid for almost a decade
    before the work that formed the basis for the Water Lien. We reject defendants’
    contention that the inclusionary housing units—a legally separate subdivision that pays
    for water and sewer services—must be part of the allocation for water infrastructure work
    on an adjacent subdivision that was installed years later to serve the increased needs of
    the adjacent subdivision.
    2. The Tehama Golf Course
    The trial court excluded the Tehama golf course from the Water Lien allocation
    because Tehama was separately invoiced by plaintiff and no work for Tehama was
    included in the Water Lien. Though the Tehama golf course uses greywater from the
    Monterra subdivision, it purchases that “effluent from the water company serving the
    15
    developments.” There was no evidence that Tehama obtains greywater cost free or at any
    discounted rate.
    Williams testified that, other than the 10 lots in Cañada Woods North that the
    parties stipulated on remand should be included in the Water Lien, no other Tehama lot is
    served by the Monterra water infrastructure. Williams acknowledged that Tehama
    purchases greywater from Monterra that is then treated at Tehama’s treatment plant and
    used to irrigate the golf course. Williams also acknowledged that the greywater Tehama
    purchases from Monterra flows by necessity through the Monterra wastewater
    infrastructure to reach Tehama.
    Substantial evidence supports the trial court’s decision to exclude the Tehama golf
    course from the Water Lien allocation. There is no evidence of any Monterra water
    infrastructure being physically located on the golf course property, such that the golf
    course is neither the “land on which [the Monterra water infrastructure] is situated” nor
    “a convenient space about the same or so much as may be required for the convenient use
    and occupation thereof.” (Civ. Code, former § 3128.) And substantial evidence supports
    a finding that the Tehama golf course is not “ ‘land to be improved or benefited by the
    creation and use of the [improvements].’ ” (Cal. Corrugated, supra, 220 Cal. at pp. 106.)
    The purpose of the Monterra water infrastructure is to supply water and sewage services
    to Monterra. (See Anselmo, supra, 219 Cal. at p. 298 [scope of lien “must take into
    consideration the intended use for which the [improvement] is erected.”].)
    Defendants argue that the golf course should be included in the Water Lien
    allocation because it “receives reclaimed water from the Water Lien improvements that
    are used to irrigate the golf course.” But undisputed evidence shows that Tehama pays
    independently for that water. The trial court could reasonably conclude that the mere
    purchase of greywater, at market rates, for use on the adjacent Tehama golf course does
    not confer any additional benefit to the golf course property beyond what it receives by
    purchasing the water.
    16
    3. Parcel W (High Well Water Treatment Plant)
    The trial court did not discuss parcel W in its order. It is undisputed that parcel W
    is a utility lot on which plaintiff installed the High Well Water Treatment Plant. It is
    further undisputed that the Water Lien includes charges for construction of the High Well
    Water Treatment Plant. The parties stipulated that the plant “is currently providing water
    to the customers of the Cañada Woods Water Company whose service area contains the
    171 lots within Monterra, the 42 lots of inclusionary housing, and 10 lots within Cañada
    Woods North.” Williams testified that the parcel W land is necessary for use of the
    treatment plant.
    We agree with defendants that parcel W must be included in the Water Lien
    allocation. A mechanic’s lien attaches to “the work of improvement and the land on
    which it is situated together with a convenient space about the same or so much as may
    be required for the convenient use and occupation thereof.” (Civ. Code, former § 3128.)
    The High Well Water Treatment Plant is part of the Monterra water infrastructure and is
    located on parcel W. The plant is therefore an on-site improvement on parcel W that
    must be included in the Water Lien allocation.
    Plaintiff contends parcel W should not be included because “the improvements on
    [parcel W] do not provide water to” that parcel. But the parcel was improved by virtue of
    the water infrastructure built on it, even if that infrastructure ultimately serves different
    property. Given that the treatment plant is an on-site improvement, we find the cases
    plaintiff cites about off-site improvements inapposite.
    4. Water Company Parcel Next to Lot 69
    Defendants argue the same parcel W analysis applies to a water company parcel
    next to lot 69. The analysis differs, however, because substantial evidence supports a
    finding that costs associated with the water tanks were not included in the Water Lien.
    But we conclude nonetheless that the water company parcel must be included in the
    Water Lien allocation.
    17
    The trial court found that work on four water tanks near lot 69 was not part of the
    Water Lien. The court found, based on defense expert Strombom’s report in the first
    trial, that work included in the liens at issue occurred between September 2007 and
    March 2008, and that plaintiff constructed the four tanks before that date range. Two
    tanks serve Monterra. The other two were paid for by Tehama and serve the Tehama
    lots. The trial court’s factual findings are supported by substantial evidence, namely
    evidence showing the last charge related to the water tanks occurred in 2006 and defense
    expert Strombom’s report in the first trial which indicated the work included in the Water
    Lien occurred in 2007 and 2008. Defendants’ argument that “the Water Lien
    improvements include the construction of four ‘high well tanks’ ” ignores that evidence.
    But whether the Water Lien included charges for the water tanks does not
    conclusively resolve whether the water company parcel on which they sit must be
    included in the Water Lien allocation. Under the Civil Code section in effect when
    plaintiff recorded the Water Lien, a “ ‘work of improvement’ means the entire structure
    or scheme of improvement as a whole.” (Civ. Code, former § 3106.) A mechanic’s lien
    attaches to “the work of improvement and the land on which it is situated.” (Civ. Code,
    former § 3128.) Whether those sections authorize a mechanic’s lien to attach to a parcel
    on which part of a comprehensive work of improvement is located even if the mechanic’s
    lien did not include charges for construction on that specific parcel is a question of
    statutory interpretation that we review de novo. (People v. Gonzalez (2017)
    
    2 Cal.5th 1138
    , 1141.)
    The trial court concluded in the first trial that the “ ‘Monterra project was a single
    work of improvement for purposes of determining the validity and the timeliness of the
    liens asserted.’ ” (CDC I, 
    supra,
     48 Cal.App.5th at p. 517 [quoting the trial court].) It is
    undisputed that the two Monterra water tanks on the water company parcel next to lot 69
    were constructed as part of the Monterra work of improvement. Civil Code former
    sections 3106 and 3128 contain no requirement that a mechanic’s lien be limited to
    18
    parcels related to the specific charges in the mechanic’s lien. Instead, they indicate a
    mechanic’s lien attaches to the land on which the “scheme of improvement as a whole” is
    located. (Civ. Code, former §§ 3106, 3128.) Because the Monterra water tanks on the
    water company parcel next to lot 69 were constructed as part of the Monterra work of
    improvement, that parcel is land on which the Monterra work of improvement is located
    and therefore must be included in the Water Lien allocation.
    5. 23 Tehama Lots Identified by Defendants
    The trial court found the “Tehama lots served by the two water tanks for which
    Tehama paid are not a portion of the single work of the Monterra improvement and are
    not subject to the water lien at issue here.” Those lots appear to be the same lots
    defendants assert “Williams admitted are directly served by the High Well Treatment
    Plant and other Water Lien infrastructure.”
    Williams testified that plaintiff constructed four water tanks on a water company
    parcel next to lot 69. Two were paid for by Monterra to serve Monterra; two were paid
    for by Tehama to serve Tehama. They are “commingled by tap but they were metered
    water in, water out, so you kept track of whose water was stored in the tanks.” Defense
    counsel asked Williams if “the lot 69 tanks would serve all of the mustard color lots in
    Tehama,” without differentiating between the Tehama versus Monterra tanks. Williams
    responded, “Yes.” Defense counsel then asked, “And it would serve all of the green lots
    in Tehama that are south of the golf course parcel, correct?,” to which Williams
    answered, “Yes.” Defense counsel then asked, “And it would serve all of the red lots that
    go along that boundary, correct?” Williams testified “it’s serving maybe the upper half
    of red.”
    The foregoing supports the trial court’s conclusion that the Tehama lots are served
    by the Tehama water tanks such that they derive no benefit from the Monterra work of
    improvement. Williams made clear that Tehama paid for two of the water tanks on the
    water company parcel next to lot 69, and that the four tanks are metered allowing the
    19
    water company to differentiate between water owned by the two developments. In
    questioning Williams about Tehama lots served by water tanks on the water company
    parcel next to lot 69, defense counsel asked Williams generically about “the lot 69 tanks”
    but did not specify whether counsel was referring to the Tehama tanks or the Monterra
    tanks. The trial court could reasonably conclude that Williams’s testimony about
    Tehama lots served by water tanks on the water company parcel referred to the Tehama
    tanks and not the Monterra tanks.
    D. NO ABUSE OF DISCRETION IN EXCLUDING DEFENDANTS’ EXPERT
    The trial court excluded testimony from defendants’ accounting expert at the
    remand trial, finding the testimony was irrelevant because the expert did not follow the
    CDC I court’s instructions about recalculating the liens to subtract sums associated with
    contractual interest. We review that evidentiary decision for abuse of discretion (People
    v. Kelly (1992) 
    1 Cal.4th 495
    , 523), while whether the trial court correctly interpreted
    CDC I is a question of law we review de novo. (Ayyad v. Sprint Spectrum, L.P. (2012)
    
    210 Cal.App.4th 851
    , 859.) “When, as in this case, the reviewing court remands the
    matter for further proceedings, its directions must be read in conjunction with the opinion
    as a whole.” (Ibid.)
    1. The Trial Court’s 2013 Statement of Decision
    The trial court concluded in its 2013 statement of decision following the original
    trial that the combined total amount of the liens was $2,283,337.65. The trial court took
    that calculation from exhibit D-597 from the first trial, which was a report by plaintiff’s
    trial expert Ingraham. That exhibit indicates $1,409.74 in the final column, “Accrual
    interest carried to next month.” The exhibit was created in response to the trial court’s
    direction to “calculat[e] interest at 10% per annum commencing sixty days after the end
    of the month in which the work was performed and an application of payments first to
    interest accrued and then to principal as of the date of the checks.”
    20
    2. The Decision in CDC I
    The CDC I court determined that because Monterra LLC made payments to
    plaintiff on account, plaintiff had “discretion to apply the payments ‘toward the
    extinction of any obligation’ so long as the application was made ‘within a reasonable
    time’ after the payments were received. ([Civ. Code,] § 1479, subd. Two.)” (CDC I,
    
    supra,
     48 Cal.App.5th at p. 505.) CDC I found “substantial evidence to support the trial
    court’s finding that plaintiff did not actually apply Monterra LLC’s payments to specific
    categories of work until plaintiff prepared the liens at issue here,” and found plaintiff’s
    “application of payments on account is permissible.” (CDC I, at p. 505.) CDC I also
    found, “Substantial evidence supports the trial court’s decision that an oral contract
    existed with the following essential features: plaintiff and Monterra LLC agreed to pay
    interest on past-due invoices; the interest rate would be 10 percent; and interest would
    accrue ‘60 days from the last day of the month in which the work was performed.’ ”
    (CDC I, at p. 518.) But the CDC I court determined that the liens could not include
    contractual interest because the trial court “found that the reasonable value of the liened
    work equaled the contract price without interest for that work, and the contractual interest
    provision added no additional value to the liened work.” (CDC I, at p. 521.) After
    determining the appellate record was insufficiently developed to decide whether interest
    remained in the liens, the CDC I court directed the trial court to “recalculate the amount
    of the Site Improvement Lien and Water Lien after subtracting sums associated with any
    contractual interest included in the liens as a result of Monterra LLC’s agreement to pay
    plaintiff contractual interest.” (CDC I, at p. 527.)
    3. Testimony at the Remand Trial
    At the remand trial, plaintiff’s forensic accounting expert Vanessa Hill testified
    that she reviewed the trial court’s statement of decision from the first trial as well as
    expert Ingraham’s testimony in the first trial. The trial court had instructed the experts in
    the first trial to apply payments first to interest and then to principal, and that was Hill’s
    21
    understanding of what Ingraham did in creating the spreadsheet admitted as exhibit D-
    597 in the first trial. The amount of unpaid contractual interest in exhibit D-597 was
    $1,409.74. Hill then explained how she removed that contractual interest and
    recalculated the lien amounts.
    Defense expert Mike Zollman testified that he was directed to calculate “the
    contract price without interest.” The court asked Zollman whether his calculations were
    “assuming that none of the payments that were made by Monterra should be deemed
    applied to interest which accrued prior to the recordation of the lien?” The court also
    asked, “Are you assuming that all of those payments should have been applied to
    principal amounts owed rather than any interest?” Zollman responded, “This excludes
    interest completely.”
    The trial court granted plaintiff’s motion to strike Zollman’s testimony, reasoning:
    “The Court of Appeal made it very clear that the payments, because they were made on
    account, could be applied, the principal or interest, and this is prior to recordation of the
    lien, the Court of Appeal found that the agreement for contractual interest was valid, it
    did not find otherwise, and that the payments made prior to the recordation of the lien
    could be applied to interest at the option of the creditor, CDC, because the debtor,
    Monterra, did not request that they be applied otherwise. And at the time the lien was
    recorded any interest then owing contractually was to be excluded. It did not say to go
    back and remove all the interest that had ever been charged or paid by Monterra, prior to
    the recordation of the lien.” The trial court thus found that Zollman’s analysis was
    irrelevant because he incorrectly assumed he “was at liberty to go back and to remove all
    the interest that had ever been paid by Monterra prior to recordation of the lien,” which
    was “simply not on the table here.”
    4. The Testimony was Properly Excluded
    The trial court correctly interpreted CDC I. The 2013 statement of decision relied
    on the Ingraham report, which had been created in response to the trial court’s directive
    22
    to calculate interest and then apply payments first to interest and then to principal. CDC I
    found that plaintiff’s application of payments did not violate Civil Code section 1479.
    (CDC I, supra, 48 Cal.App.5th at p. 505.) It also found that an oral contract to pay
    contractual interest existed between Monterra and plaintiff. (CDC I, at p. 518.) CDC I
    remanded with directions to subtract “sums associated with any contractual interest
    included in the liens.” (CDC I, at p. 527, italics added.) When read in conjunction with
    the opinion as a whole, the instructions required the parties to remove contractual interest
    remaining in the liens but did not authorize the parties to recalculate the balances due
    before the liens were recorded to remove any and all contractual interest.
    Defendants’ belief that CDC I authorized them to remove any contractual interest
    ever charged to Monterra finds no support in the appellate opinion. Zollman testified he
    was directed to calculate “the contract price without interest” and that his calculations
    “exclude[d] interest completely.” Because Zollman’s opinion did not comport with the
    remand instructions from CDC I, the trial court did not abuse its discretion in excluding
    it.
    E. NO ABUSE OF DISCRETION IN IMPOSING DISCOVERY SANCTIONS
    Defendants refused two requests for admission before the remand hearing. The
    first asked defendants to admit: “Superior Court Judge Thomas Wills held, as stated in
    the Statement of Decision filed on December 12, 2013 in this CASE, that the amount due
    to Plaintiff under the CONTRACT between Plaintiff and Monterra Ranch Properties,
    LLC as of March 31, 2008 was the sum o[f] $2,283,337.65.” The second asked
    defendants to admit: “The sum of $2,283,337.65 as described in Admission No. 1
    contained unpaid interest in the amount of $1409.74.”
    “If a party fails to admit the genuineness of any document or the truth of any
    matter when requested to do so under this chapter, and if the party requesting that
    admission thereafter proves the genuineness of that document or the truth of that matter,
    the party requesting the admission may move the court for an order requiring the party to
    23
    whom the request was directed to pay the reasonable expenses incurred in making that
    proof, including reasonable attorney’s fees.” (Code Civ. Proc., § 2033.420, subd. (a).)
    The trial court “shall make this order unless,” among other exceptions not at issue here,
    the party “failing to make the admission had reasonable ground to believe that that party
    would prevail on the matter.” (Id., subd. (b), (b)(3).) A trial court’s order under Code of
    Civil Procedure section 2033.420 is reviewed for abuse of discretion. (Bloxham v.
    Saldinger (2014) 
    228 Cal.App.4th 729
    , 753.) Defendants challenge plaintiff’s
    entitlement to sanctions; they have not challenged the reasonableness of the amount
    ordered.
    The 2013 statement of decision concluded the combined total of the two liens was
    $2,283,337.65. As the CDC I court explained, that amount was the parties’ contract price
    with some amount of contractual interest. (CDC I, 48 Cal.App.5th at p. 521 [“rather than
    awarding plaintiff the ‘reasonable value’ of the liened work—which the court found was
    equal to the contract price without interest—as required by [Civ. Code] former section
    3123, the trial court added contractual interest to the reasonable value.”].) The only
    relevant evidence offered at the remand hearing showed that the amount of contractual
    interest contained in those liens was $1,409.74. Defendants offered no relevant evidence
    to call either of those sums into question, much less to support an alternative calculation.
    Defendants thus failed to demonstrate a reasonable ground to believe that they would
    prevail on the matter. The trial court did not abuse its discretion.
    Defendants attempt to parse the language of the first request for admission,
    arguing they did not admit it because it would have required them to “accept its faulty
    premise that any sum awarded was based on a contractual theory.” But CDC I concluded
    substantial evidence supported the trial court’s finding that the reasonable value of the
    liened work equaled the contract price without interest. (CDC I, 48 Cal.App.5th at
    p. 521.) The lien total listed in the first request for admission was indeed an “amount due
    24
    to Plaintiff under the CONTRACT between Plaintiff and Monterra Ranch Properties,
    LLC.”
    Defendants argue they “reasonably believed, and continue to believe, that the
    expert testimony of Mike Zollman regarding the amount of interest that was and could be
    included as part of the mechanic’s lien judgment follows a proper reading of the Court of
    Appeal Ruling.” (Citing Orange County Water Dist. v. The Arnold Engineering Co.
    (2018) 
    31 Cal.App.5th 96
    , 117 [“a party may reasonably deny [a request for admission]
    based on credible expert opinion evidence, even where the expert opinion evidence is not
    ultimately believed by the trier of fact.”].) As we have discussed, Zollman’s opinion was
    not based on a correct interpretation of the opinion in CDC I. It was therefore not
    credible expert opinion evidence and does not provide a reasonable ground to deny the
    second request for admission.
    Defendants contend the requests for admission were “contrary to [defendants’]
    own legal positions in the case.” They speculate that “if this Court of Appeal believed
    that the amount of contractual interest to be deducted from the ultimate lien amounts was
    calculable from the record evidence adduced at the original trial, it would not have
    remanded that issue to the trial court for further proceedings.” But CDC I explained that
    the matter would be remanded because “the trial court never made a finding that no
    contractual interest remained in the liens” and “the record [was] insufficiently developed
    for us to decide the issue on appeal.” (CDC I, 48 Cal.App.5th at p. 521.) Although the
    requests for admission were doubtless contrary to defendants’ legal positions, defendants
    ultimately did not produce relevant evidence to support those legal positions.
    III.   DISPOSITION
    In case No. H050094, the judgment is modified as follows: The Water Lien must
    be reallocated across 183 lots, consisting of: the 171 Monterra lots, 10 lots in Cañada
    Woods North added by stipulation, parcel W, and the water company parcel with water
    tanks next to lot 69. The Water Lien total of $2,149,347.90 divided by 183 lots yields a
    25
    lien allocation of $11,745.07 per lot. $11,745.07 multiplied by the 58 remaining lots still
    at issue in the case yields a total of $681,214.06 for the Water Lien. Prejudgment interest
    of seven percent per annum runs from June 26, 2009 to February 18, 2014. $681,214.06
    multiplied by 0.07 yields $47,684.98 in annual prejudgment interest for the Water Lien.
    $47,684.98 divided by 365 days per year yields $130.64 in daily prejudgment interest.
    $130.64 in daily interest multiplied by 1,698 days between June 26, 2009 and
    February 18, 2014 yields $221,826.72 in total prejudgment interest for the Water Lien.
    $221,826.72 added to $681,214.06 yields a total judgment of $903,040.78 for the Water
    Lien. $903,040.78 divided by the 58 remaining lots yields $15,569.67 in Water Lien
    liability per lot. As so modified, the judgment is affirmed.
    In case No. H050530, the order is affirmed.
    Plaintiff is awarded its appellate costs. (Cal. Rules of Court, rule 8.278(a)(3).)
    26
    ____________________________________
    Grover, J.
    WE CONCUR:
    ____________________________
    Greenwood, P. J.
    ____________________________
    Lie, J.
    H050094, H050530 - Carmel Development Company v. Monterra Ranch Properties, LLC et al.
    

Document Info

Docket Number: H050094

Filed Date: 10/1/2024

Precedential Status: Non-Precedential

Modified Date: 10/1/2024