Torres v. Superior Court CA2/5

Filed 3/10/21 Torres v. Superior Court CA2/5
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION FIVE
VINCENT TORRES et al., B307363
Petitioners, (Los Angeles County
Super. Ct. No. 19NWCV00933)
v.
THE SUPERIOR COURT OF LOS
ANGELES COUNTY,
Respondent;
WILLIAM WADDLE,
Real Party in Interest.
ORIGINAL PROCEEDINGS; petition for writ of mandate.
Olivia Rosales, Judge. Petition granted.
Ogburn Law Office and Keith Ogburn, for Petitioners.
No appearance for Respondent.
No appearance for Real Party in Interest.
INTRODUCTION
Real party in interest William Waddle (Waddle) brought a
lawsuit against petitioners Vincent Torres and Michelle Torres
(collectively, petitioners), raising breach of contract and
foreclosure of mechanic’s lien claims arising out of work
performed on a remodel of property petitioners owned. Waddle
then recorded a lis pendens on the property. Petitioners
responded by moving to expunge the lis pendens, a motion that
the trial court denied. In this petition for a writ of mandate,
petitioners argue the lis pendens should have been expunged
pursuant to Code of Civil Procedure section 405.31, because the
suit no longer contained a real property claim once petitioners
recorded a lien release bond and unencumbered the real property.
We agree. We grant the petition directing the trial court to
vacate its order denying the motion to expunge the lis pendens
and instead to issue an order granting the motion.
FACTUAL AND PROCEDURAL BACKGROUND
1. Lawsuit Against Petitioners
Petitioners owned real property in Whittier, California. In
September 2018, petitioners and Waddle reached an agreement
under which Waddle would manage the remodel of the property
and be paid a 15 percent project management fee based upon the
costs of the remodel. Petitioners would fund the full cost of the
remodel (including materials, permits, fees, and construction
costs). Waddle would also be the listing agent for the property
after the remodel was finished and collect the commission on the
sale. Waddle alleged that he managed, supervised, and
completed the remodel of the property, but petitioners failed to
pay all the remodeling costs or the project management fee, and
hired another real estate agent to sell the property.
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In September 2019, Waddle recorded a mechanic’s lien on
the property. Three months later, Waddle filed a complaint
against petitioners, alleging causes of action for breach of
contract and foreclosure of mechanic’s lien. That same day,
petitioners sold the property.
Waddle then recorded a lis pendens on the property based
on his action to foreclose the mechanic’s lien. In January 2020,
petitioner Vincent Torres obtained and recorded a bond to release
the mechanic’s lien. The following month, petitioners recorded a
rider to the lien release bond adding the new owners of the
property as principals.
2. Motion to Expunge Lis Pendens
In March 2020, petitioners filed a motion to expunge the lis
pendens. Petitioners first claimed relief under Code of Civil
Procedure section 405.31 which states the court shall order the
notice expunged if it finds that the pleading on which the notice
is based does not contain a real property claim.1 They argued the
recordation of the lien release bond meant the mechanic’s lien
claim was no longer attached to the property. With the property
now unencumbered, Waddle’s mechanic’s lien cause of action
could no longer be termed a real property claim, thus entitling
petitioners to expungement.
Petitioners also claimed relief under section 405.32, which
states the court shall order the notice expunged if the court finds
that the claimant has not established by a preponderance of the
evidence the probable validity of the real property claim.
1
Subsequent undesignated statutory references are to the
Code of Civil Procedure.
3
Petitioners alleged Waddle was not entitled to recover under his
mechanic’s lien claim because he was performing work as an
unlicensed contractor.2
Waddle opposed the motion. He first challenged
petitioners’ standing to bring the motion, as they no longer owned
the property. He also insisted that the mechanic’s lien cause of
action remained a real property claim, regardless of the lien
release bond, based on the nature of the cause of action itself.
Finally, he claimed he was working as a project manager, not a
contractor, a position that does not require a license.
3. Ruling on the Motion to Expunge Lis Pendens
The trial court denied petitioners’ motion on August 18,
2020. The court first ruled that petitioners did have standing, as
section 405.30 permits any party to file a motion to expunge the
lis pendens.
The court then held mechanic’s lien claims were real
property claims, as they involve liens against real property. The
court observed that while the law requires those filing mechanic’s
lien claims to record a lis pendens, there was no indication from
the Legislature or case law that the lien release bond
automatically expunges the lis pendens. The trial court also
concluded that, under relevant appellate authority, a lien release
2
Under Business and Professions Code section 7031, “no
person engaged in the business or acting in the capacity of a
contractor, may bring or maintain any action . . . for the collection
of compensation for the performance of any act or contract where
a license is required by this chapter without alleging that he or
she was a duly licensed contractor at all times during the
performance of that act or contract regardless of the merits of the
cause of action.” (Emphasis omitted.)
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bond was a method of enforcement of the lien, rather than a
method to extinguish it. Next, the court expressed concern about
the consequences of expunging the lis pendens: “What if the
surety fails to perform its surety obligations? If this court
expunges the lis pendens, and the Bond is somehow defective,
how is the public on notice of the mechanic’s lien that . . . has not
been extinguished?” The court concluded that the cause of action
remained a valid real property claim because it affected title to
real property. Finally, the court held that the mechanic’s lien
claim sought payment for work that did not require a license.
4. Writ Proceedings
Petitioners filed a petition for writ of mandate in this court,
challenging the order denying the motion to expunge. On
September 25, 2020, we issued an order directing Waddle to file a
preliminary opposition. No opposition was filed, but petitioners
filed a “reply.” On October 27, 2020, we issued an order to show
cause before this court why the relief sought in the petition
should not be granted. No return was filed, but petitioners again
replied.
5. Post-Writ Trial Court Proceedings
In November 2020, the trial court granted petitioners’
motion for an order releasing the real property from the
mechanic’s lien. The court based its decision on Civil Code
section 8424, which states: “On recordation of the bond, the real
property is released from the claim of lien and from any action to
enforce the lien.” (Civ. Code, § 8424, subd. (c).) The court
differentiated this order from its prior order denying the motion
to expunge the lis pendens: “A lis pendens provides ‘notice’ of the
pendency of an action in which a real property claim is alleged.
([Code Civ. Proc.,] § 405.2.) A mechanic’s lien gives the
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lienholder the right to foreclose on the property for labor or
materials furnished, and such governed by specific mechanic’s
lien laws. [Civil Code section] 8424 specifically allows
[d]efendants and the property owners to record a bond to release
the real property from the mechanic’s lien.”
DISCUSSION
In their writ petition, petitioners allege the trial court erred
in denying the motion to expunge the lis pendens because the
filing of the lien release bond entitled them to relief. As
petitioners put it, “A Lis Pendens gives notice of the lawsuit in
which a real property claim is alleged. A Lis Pendens does not
give notice of a lien which is no longer attached to real property.”
Petitioners also again raise the argument that Waddle performed
work which required a license and thus cannot recover under a
mechanic’s lien claim.
Our standard of review is clear. “ ‘ “ ‘If the trial court
resolved disputed factual issues, the reviewing court should not
substitute its judgment for the trial court’s express or implied
findings supported by substantial evidence. [Citations.]’
[Citation.] ‘ “[W]e must consider the evidence in the light most
favorable to the prevailing party, giving such party the benefit of
every reasonable inference, and resolving all conflicts in support
of the judgment. [Citation.]” [Citation.]’ [Citation.]” [Citation.]
However, “[t]he interpretation of a statute and its application to
undisputed facts are questions of law subject to de novo review.
[Citation.]” [Citation.]’ [Citation.]” (Rey Sanchez Investments v.
Superior Court (2016) 244 Cal.App.4th 259, 262; see also Howard
S. Wright Construction Co. v. Superior Court (2003) 106
Cal.App.4th 314, 320.) On the effect of the lien release bond,
there are no disputed questions of fact. Our review is de novo.
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1. Lis Pendens
“ ‘A lis pendens is a recorded document giving constructive
notice that an action has been filed affecting title to or right to
possession of the real property described in the notice.’
[Citation.]” (Kirkeby v. Superior Court (2004) 33 Cal.4th 642,
647; Rey Sanchez Investments v. Superior Court, supra, 244
Cal.App.4th at pp. 259, 262.) A lis pendens clouds title to
property, “effectively preventing sale or encumbrance until the
litigation is resolved or the lis pendens is expunged.”
(Amalgamated Bank v. Superior Court (2007) 149 Cal.App.4th
1003, 1011.)
A lis pendens may be filed by any party in an action that
asserts a “real property claim.” (§ 405.20.) A real property claim
is a cause of action “which would, if meritorious, affect . . . title to,
or the right to possession of, specific real property . . . .” (§ 405.4.)
A cause of action to foreclose a mechanic’s lien for improvements
to land is, in most instances, a real property claim. “A mechanic’s
lien is a claim against real property, which may be filed if a
claimant has provided labor or furnished materials for the
property and has not been paid.” (Brewer Corp. v. Point Center
Financial, Inc. (2014) 223 Cal.App.4th 831, 839.) “[T]he laborer
and materialman have an interest in the specific property subject
to the lien since their work and materials have enhanced the
value of that property.” (Connolly Development Inc. v. Superior
Court (1976) 17 Cal.3d 803, 827.) A mechanic’s lien attaches to
the “work of improvement and to the real property on which the
work of improvement is situated.” (Civ. Code, § 8440.)
At any time after a lis pendens has been recorded, a party
may file a motion to expunge the lis pendens. (§ 405.30.) The lis
pendens shall be expunged if “the court finds that the pleading on
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which the notice is based does not contain a real property claim.”
(§ 405.31.) The court may also order the lis pendens expunged if
“the claimant has not established by a preponderance of the
evidence the probable validity of the real property claim.”
(§ 405.32) or “if the court finds that the real property claim has
probable validity, but adequate relief can be secured to the
claimant by the giving of an undertaking.” (§ 405.33).
2. Lien Release Bond
“An owner of real property or an owner of any interest in
real property subject to a recorded claim of lien . . . that disputes
the correctness or validity of the claim may obtain release of the
real property from the claim of lien by recording a lien release
bond.” (Civ. Code, § 8424, subd. (a).) A lien release bond
provides “a means by which, before a final determination of the
lien claimant’s rights and without prejudice to those rights, the
property may be freed of the lien, so that it may be sold,
developed, or used as security for a loan.” (Hutnick v. United
States Fidelity & Guaranty Co. (1988) 47 Cal.3d 456, 462
(Hutnick).) (Fn. omitted.)
The lien release bond “does not give rise to a cause of action
which is separate and distinct from the cause of action to
foreclose the claim of lien.” (Dennis Electric, Inc. v. United States
Fidelity & Guaranty Co. (1990) 219 Cal.App.3d 1228, 1234;
Hutnick, supra, 47 Cal.3d at p. 463 [“In seeking to enforce their
mechanic’s lien first against the liened property and
subsequently against the release bond, plaintiffs have pursued a
single cause of action”]; accord, Royster Construction Co. v. Urban
West Communities (1995) 40 Cal.App.4th 1158, 1166–1167
(Royster); Grade-Way Construction Co. v. Golden Eagle Ins. Co.
(1993) 13 Cal.App.4th 826, 832.)
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A lien release bond does not extinguish the lien. (Royster,
supra, 40 Cal.App.4th 1158 at p. 1166.) “[I]t has been said that
the bond ‘does not change the relation or rights of the parties
otherwise than in substituting its obligations for the [property]
subject to the lien, and it was not within the legislative purpose
in permitting the substitution to deteriorate the lienor’s rights.’ ”
(Hutnick, supra, 47 Cal.3d at p. 463.)
What the lien release bond does, then, is substitute the
bond “for the land as the object to which the lien attaches.”
(Hutnick, supra, 47 Cal.3d at p. 463; Royster, supra, 40
Cal.App.4th at p. 1166; see also Frank Curran Lumber Co. v.
Eleven Co. (1969) 271 Cal.App.2d 175, 185–186 [affirming
dismissal of property owner from suit to enforce mechanic’s lien
between subcontractor and general contractor, citing a case
deciding the same, because “the effect of the recording of the bond
was to free the real property from the effect of the claim and lien
and any action brought to foreclose such lien”].)
3. Effect of Lien Release Bond on Lis Pendens
“ ‘ “ ‘A court must, where reasonably possible, harmonize
statutes, reconcile seeming inconsistencies in them, and construe
them to give force and effect to all of their provisions.’ ” ’ ”
(Newark Unified School Dist. v. Superior Court (2016) 245
Cal.App.4th 887, 904–905.) When two statutes potentially
conflict, courts should “find a way, if possible, to avoid the
conflict.” (Id. at p. 904.) “[O]ur task is to select the construction
that comports most closely with the Legislature’s apparent
intent, with a view to promoting rather than defeating the
statutes’ general purpose, and to avoid a construction that would
lead to unreasonable, impractical, or arbitrary results.”
9
(Commission on Peace Officer Standards & Training v. Superior
Court (2007) 42 Cal.4th 278, 290.)
The trial court based its decision in part on its conclusion
that the lis pendens was properly filed because Waddle was
statutorily required to record a lis pendens when filing a lawsuit
to enforce a mechanic’s lien. (Civ. Code, § 8461 [“After
commencement of an action to enforce a lien, the plaintiff shall
record in the office of the county recorder of the county . . . in
which the property is situated, a notice of the pendency of the
action”].) That goes only so far. It does not follow from the
requirement that a lis pendens be in place as a condition of
foreclosing a mechanic’s lien that the lis pendens cannot be
expunged when a lien release bond has been filed. Such a rule
would conflict with other statutes. A lis pendens is necessary
when a real property claim is asserted (§ 405.20), which affects
“title to, or the right to possession of, specific real property”
(§ 405.4). Yet after the recordation of a lien release bond, “the
real property is released from the claim of lien and from any
action to enforce the lien.” (Civ. Code, § 8424, subd. (c).) A lis
pendens only exists as a notice that real property is encumbered
by a pending action. To require a lis pendens where a lien
release bond has already unencumbered the property runs
counter to Civil Code section 8424. Or stated differently, once the
bond has been substituted for the property, the lawsuit “does not
contain a real property claim.” (§ 405.31.) It has become an
action on the bond.
By way of summary, we return to the Supreme Court’s
decision in Hutnick: “The purpose of the release bond procedure
is to provide a means by which, before a final determination of
the lien claimant’s rights and without prejudice to those rights,
10
the property may be freed of the lien, so that it may be sold,
developed, or used as security for a loan. [Civil Code section]
3143 provides that a mechanic’s lien release bond ‘shall be
conditioned for the payment of any sum which the claimant may
recover on the claim together with his costs of suit in the action,
if he recovers therein.’ The ‘claim’ for which the principal and
surety assume liability in the bond is the “claim of lien.” The
release bond procedure thus protects the lien claimant by
providing an alternate source of recovery on the claim of lien.
The release bond procedure ‘does not deprive the [lien claimant]
of its constitutional right to a lien’ but ‘[on] the contrary, it
provides for the speedy and efficient enforcement of such lien . . . .’
(Frank Curran [Lumber] Co. v. Eleven Co.[, supra,] 271
Cal.App.2d [at p. 184], italics added.) The recording of the
release bond does not extinguish the lien; rather, the bond is
substituted for the land as the object to which the lien attaches.
(See Marsh, Cal. Mechanics’ Lien Law (3d rev. ed. 1988) § 8.28
[‘The recordation of the bond in effect transfers the claim of lien
from the owner’s land to the bond’]).” (Hutnick, supra, 47 Cal.3d
at pp. 462–463.)
Finally, we observe that permitting the lien release bond to
substitute for the property that is subject to a lis pendens tends
to reduce lis pendens abuse. “The history of lis pendens
legislation shows a legislative intent to restrict the common law
notion of constructive notice. This is because of the ease with
which a lis pendens can be recorded and the serious consequences
flowing from it.” (BGJ Associates v. Superior Court (1999) 75
Cal.App.4th 952, 966–967 (BGJ).) “The financial pressure
exerted on the property owner may be considerable, forcing him
to settle not due to the merits of the suit but to rid himself of the
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cloud upon his title. The potential for abuse is obvious.” (La
Paglia v. Superior Court (1989) 215 Cal.App.3d 1322, 1326,
abrogated on other grounds by Lewis v. Superior Court (1999) 19
Cal.4th 1232.) “It must be borne in mind that the true purpose of
the lis pendens statute is to provide notice of pending litigation
and not to make plaintiffs secured creditors of defendants nor to
provide plaintiffs with additional leverage for negotiating
purposes.” (Urez Corp. v. Superior Court (1987) 190 Cal.App.3d
1141, 1149.) Accordingly, lis pendens is a provisional remedy
that is applied narrowly. (BGJ, supra, 75 Cal.App.4th at p. 967.)
“Overbroad definition of ‘an action . . . affecting the title or the
right of possession of real property’ would invite abuse of lis
pendens.” (Burger v. Superior Court (1984) 151 Cal.App.3d 1013,
1018.) “[T]o allow a party to record a lis pendens in a case in
which the party seeks only ‘to freeze the real property as a res
from which to satisfy a money judgment’ [citation], is not
consistent with the history and purpose of the lis pendens
statutes . . . . ” (Campbell v. Superior Court (2005) 132
Cal.App.4th 904, 918–919.) The Legislature chose to minimize
the risk of lis pendens abuse by authorizing a lien release bond to
provide substitute security, thus freeing up property but
affording protection to certain creditors.
Although the trial court seemed to doubt a lien release
bond is sufficient to secure Waddle’s rights, other decisions have
dismissed such concerns. A bond “provides for the speedy and
efficient enforcement of such lien in a manner that is just and
equitable both to the . . . holder of the lien, and to the . . . owners
of the property.” (Frank Curran Lumber Co. v. Eleven Co., supra,
271 Cal.App.2d at p. 184.)
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Because we agree with petitioners that the lawsuit no
longer contains a real property claim and that the motion to
expunge the lis pendens should have been granted for that
reason, we need not address their other argument that Waddle
failed to establish the probable validity of his mechanic’s lien
claim.
DISPOSITION
Let a peremptory writ of mandate issue directing the
respondent court to vacate its August 18, 2020, order denying the
motion to expunge the lis pendens, and issue a new order
granting the motion to expunge. Petitioners Vincent Torres and
Michelle Torres shall recover their costs in this proceeding.
RUBIN, P. J.
We concur:
BAKER, J.
KIM, J.
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