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Cal Sierra Construction, Inc v. Comerica Bank et al

May 31, 2012

CAL SIERRA CONSTRUCTION, INC., PLAINTIFF AND APPELLANT,
v.
COMERICA BANK ET AL., DEFENDANTS AND APPELLANTS.



APPEAL from a judgment of the Superior Court of Placer County, Charles D. Wachob, Judge. (Super. Ct. No. SCV22025)

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

CERTIFIED FOR PUBLICATION

Reversed with directions.

In Connolly Development, Inc. v. Superior Court (1976) 17 Cal.3d 803 (Connolly), the California Supreme Court upheld the constitutionality of the state's mechanics lien and stop notice laws against a claim that they permit a taking of an owner's property without due process. The court concluded the procedures available to a property owner to obtain interim relief from unjustified claims before the claimant files suit on the lien or stop notice provide sufficient safeguards against such claims delaying or otherwise interfering with a construction project until the dispute can be resolved. (Id. at pp. 808, 827-828.)

In Lambert v. Superior Court (1991) 228 Cal.App.3d 383 (Lambert), the Court of Appeal pointed out that where a claimant has already filed suit to enforce a mechanics lien or stop notice, the procedures identified in Connolly may no longer be available to the property owner. In such case, the owner may instead file a motion in the enforcement action to have the matter examined by the trial court. On such motion, the claimant bears the burden of establishing the "probable validity" of the claim underlying the lien or stop notice. (Id. at p. 387.) If the claimant fails to meet that burden, the lien and stop notice may be released in whole or in part. We refer to this procedure as a "Lambert motion."

In this matter, plaintiff Cal Sierra Construction, Inc. (plaintiff), filed suit to enforce a mechanics lien and stop notice in connection with a construction project financed by defendants Comerica Bank, Affinity Bank and United Commercial Bank (the banks). The banks filed a Lambert motion, asserting plaintiff's claims are invalid because plaintiff either has been paid for the work done or did not perform the work claimed. The trial court agreed and entered an order releasing the mechanics lien and stop notice. The court thereafter denied plaintiff's motion for new trial and the banks' motion for attorney fees.

Plaintiff appeals both the order releasing its mechanics lien and stop notice and the order denying its motion for new trial. The banks cross-appeal from the denial of their motion for attorney fees.

We conclude the banks were not entitled to file a Lambert motion to release the mechanics lien and stop notice. Connolly was concerned with the due process rights of property owners, not lenders, and Lambert sought to provide additional procedural safeguards not identified in Connolly. We therefore conclude the trial court erred in granting the banks' Lambert motion. Because we so conclude, plaintiff's appeal from the order denying its motion for new trial and the banks' appeal from the order denying attorney fees are rendered moot. We reverse the order granting the banks' Lambert motion.

Facts and Proceedings

On September 26, 2007, plaintiff initiated this action against Dunmore Homes, Inc. (Dunmore Homes), Dunmore Croftwood, LLC (Dunmore Croftwood), the banks, and Valley Utility Service, Inc. Plaintiff later filed a first amended complaint.

According to the pleadings, Dunmore Croftwood is the owner of certain real property in Placer County (the property) on which plaintiff performed construction services pursuant to a master agreement entered into between plaintiff and Dunmore Homes and various letters of authorization executed thereafter. The banks provided funding to Dunmore Croftwood for the construction work and received a deed of trust on the property as security.

Plaintiff commenced work on the various improvements but, on August 23, 2007, Dunmore Homes and Dunmore Croftwood demanded that plaintiff cease all further work. At the time, plaintiff was allegedly owed $2,368,622.25 for work already performed.

Plaintiff immediately recorded a mechanics lien on the property for the amount claimed. On September 25, 2007, plaintiff served the banks with a stop notice in the amount of $2,368,622.25 and later a bonded stop notice in the same amount.

The first amended complaint sets forth five causes of action: (1) breach of contract, (2) foreclosure of the mechanics lien, (3) unjust enrichment, (4) account ...


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