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Force Framing, Inc. v. Chinatrust Bank

August 31, 2010

FORCE FRAMING, INC., PLAINTIFF AND APPELLANT,
v.
CHINATRUST BANK (U.S.A.), DEFENDANT AND RESPONDENT.



APPEAL from the Superior Court of Riverside County. Bernard Schwartz, Judge. Reversed. (Super.Ct.No. RIC487369).

The opinion of the court was delivered by: Miller, J.

CERTIFIED FOR PUBLICATION

OPINION

Force Framing, Inc. (Force Framing) sued Chinatrust Bank (U.S.A.), Corp. (Chinatrust) for a bonded stop notice.*fn1 (Civ. Code, § 3083.) The trial court granted Chinatrust's cross-motion for summary judgment (Code Civ. Proc., § 437c), because Force Framing served the statutorily required 20-day preliminary notice (Civ. Code, § 3097) on East West Bank, not Chinatrust. Force Framing contends that the trial court erred by granting Chinatrust's cross-motion for summary judgment because East West Bank qualified as the "reputed lender." (Civ. Code, § 3097, subd. (a).) Various amici have filed briefs in support of Force Framing's contentions. We reverse the judgment.

FACTUAL AND PROCEDURAL HISTORY

In or around September 2006, Force Framing and 92 Magnolia, LLC (Magnolia) entered into a written contract. Magnolia owned a property in Riverside where it was constructing condominiums (the project). The contract reflected that Force Framing would provide framing labor, material, equipment and services for the project; and Magnolia would pay Force Framing $1,460,233.*fn2

At or about the time Force Framing began working on the project, Magnolia gave Force Framing a "'Preliminary Information'" sheet. The Preliminary Information sheet listed Magnolia's contact information, the general contractor's contact information, the jobsite address, and the lender's contact information. The lender was identified as East West Bank, in Diamond Bar; however, Chinatrust was actually the construction lender.

Force Framing served East West Bank, in Diamond Bar, with the statutorily required 20-day preliminary notice. (§ 3097.) Force Framing's account manager declared that she sent the preliminary notice to East West Bank "[b]ased on the information contained in Magnolia's 'Preliminary Information' sheet."

In its complaint, Force Framing alleged that it completed its obligations under the contract; however, Magnolia still owed $1,398,882. Force Framing alleged that to the extent Chinatrust improperly disbursed funds subsequent to the service of Force Framing's stop notice, and that funds were now inadequate to pay Force Framing, then Chinatrust should be required to pay Force Framing. Force Framing filed its complaint on December 18, 2007.

Chinatrust moved for summary judgment. Chinatrust argued that Force Framing sent the required preliminary 20-day notice of intent to file a stop notice to East West Bank, not Chinatrust; therefore, Chinatrust was entitled to summary judgment because Force Framing did not comply with the statutory stop notice requirements. Chinatrust explained that it recorded a deed of trust against the property, which gave Force Framing constructive notice that Chinatrust was the actual construction lender.

Force Framing opposed Chinatrust's cross-motion for summary judgment. Force Framing argued that it did comply with the statutory stop notice requirements because it served the reputed lender, i.e., East West Bank. (§ Civ. Code, 3097, subd. (a).)*fn3 Force Framing asserted that it was reasonable to rely on Magnolia's representation that East West Bank was the construction lender, and therefore, Force Framing was not obligated to search the county records for Chinatrust's deed of trust.

The trial court found that a subcontractor who seeks a stop notice has a duty to investigate who owns the construction loan. The trial court concluded that "the statute and the case law require[] that it be incumbent upon the contractor or subcontractor to do that minimal research." In other words, the trial court held that a subcontractor has to be able to show that he searched the county records, or somehow researched who owns the construction loan, in order to prove that he reasonably, in good faith, accidentally served the wrong lender. Since Force Framing did not inspect the county records, or otherwise verify the owner of the construction loan, the trial court concluded that Force Framing could not be excused from serving the wrong bank. Therefore, Force Framing's claim--that Chinatrust improperly disbursed funds following Force Framing's attempt to serve the 20-day notice--could not stand, because Chinatrust cannot be held responsible for improperly distributing funds when the 20-day preliminary notice was not properly served. Consequently, the trial court granted Chinatrust's cross-motion for summary judgment.

DISCUSSION

In its opening brief, Force Framing presents a variety of arguments under different headings; however, Force Framing's overarching contention is that the trial court erred by granting ...


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