Trial Court: San Mateo County Superior Court Trial Judge: Hon. Raymond V. Swope (San Mateo County Super. Ct. No. 468259)
The opinion of the court was delivered by: Lambden, J.
CERTIFIED FOR PUBLICATION
Vieira Enterprises, Inc. (Vieira), a seller and installer of manufactured homes, filed mechanic's liens after the owners of two lots in the City of East Palo Alto (the City) failed to pay for its delivery and installation of two manufactured homes. Prior to the filing of the mechanic's liens, another party foreclosed on the properties and applied to the City of East Palo Alto's Building Services Department (the City's Building Department) pursuant to Health and Safety Code section 18551*fn1 for issuance of notices of installation for the two manufactured homes. The City's Building Department issued the notices of installation (the notices).
Vieira sued Hamid Pouya, the person who issued the notices, the City, and the City's Building Department (collectively, the City defendants) and claimed that the manufactured homes remained its personal property under section 18551 until the City defendants issued the notices. Vieira claimed the City defendants violated its substantive due process rights under section 1983 of title 42 of the United States Code (hereafter 42 U.S.C. § 1983). Vieira also set forth a cause of action for inverse condemnation against the City and the City's Building Department.
The trial court granted summary judgment in favor of the City and the City's Building Department and sustained without leave to amend Pouya's demurrer to Vieira's complaint. The trial court concluded that the common law of fixtures, not section 18551, applies and the undisputed facts established that the manufactured homes were fixtures to the real property at the time of the foreclosure and therefore Vieira's property interest in the homes had been extinguished by the time the City defendants issued the notices. We agree with the trial court and affirm the judgment.
Vieira, an authorized dealer of Fleetwood Manufactured Homes, is in the business of selling and installing manufactured homes. In June 2005, it entered into contracts with Jeff and Maureen Wilson (collectively, the Wilsons) to install several manufactured homes on two lots owned by the Wilsons (the properties) located in the City (the contracts). Under the contracts, Vieira agreed to sell, deliver, and "install" the manufactured homes on their "foundation." The contract price for the installation of each manufactured home that is the subject of this lawsuit was a little over $203,000 and a little over $202,000.*fn2
The contracts between Vieira and the Wilsons provided in paragraph two under the title of additional terms and conditions, the following: "Parties understand that seller shall retain title to the manufactured home until payment in full of the entire purchase price whether or not possession of manufactured home has been transferred to buyer. Retention of such title shall in no way relieve buyer from any obligations under the terms of this agreement, nor shall it require seller to incur any additional liability or obligation concerning the agreement for sale of the manufactured home."
Paragraph 3 in the contracts specified: "In the event of default by purchaser upon any of the terms of this agreement and without notice to buyer, seller may declare the entire unpaid balance of this agreement immediately due and payable. Seller shall be entitled to all relief granted seller by law and choice of one remedy by seller shall not be deemed a waiver by seller of any other right or remedy which it has, but all of its remedies shall be cumulative and, shall include, in addition to any other rights or remedies to which seller is entitled under law the following: (i) to immediately take possession of the manufactured home (ii) to sell the same in accordance with California law applying the proceeds of said sale as required under California law."
Paragraphs 4 and 6 in the contracts stated, respectively: "Should the security represented by the manufactured home, in fact, be impaired, seller may sue buyer for the entire unpaid balance owing from buyer to seller on the contract." "The manufactured house herein shall remain personal property and will not be placed on a foundation system, become affixed to or become any part of any real property without the express written consent of seller until payment of the entire balance as set forth in this agreement. Failure to comply with this paragraph shall constitute a breach of this agreement giving rise to all the remedies made available to the seller as herein above set forth."
Installation of the Manufactured Homes and Vieira's Lawsuit Against the Wilsons
Pursuant to the contracts, Vieira installed the homes on foundation systems on the properties. From July 17, 2005, until October 30, 2007, Vieira was listed in the records of the Department of Housing and Community Development (HCD) as the dealer owning the manufactured homes installed on the properties. In October 2007, once Vieira paid the manufacturer for the homes, Vieira was listed as the registered owner of the homes in the records of HCD.
The Wilsons did not pay Vieira the money owed pursuant to the contracts and, on February 6, 2006, Vieira recorded mechanic's liens on the properties. Manuel A. Vieira (Manuel), the Vice President of Vieira, stated under penalty of perjury that the homes had been installed. The mechanic's liens on the homes were for the full value of the contracts.
On April 18, 2006, Vieira filed a complaint against the Wilsons for breach of contracts and for foreclosure on the mechanic's liens.*fn3 Vieira alleged that it performed all work and services required by the contracts. The matter never proceeded to trial and was dismissed without prejudice.
Foreclosure on the Properties
After the manufactured homes had been installed on the foundations, Polo Investment Fund No. 1, LLC (Polo) issued a loan to Maureen Wilson (Maureen) on the properties and Maureen executed a deed of trust dated March 22, 2006. On March 28, 2006, Polo recorded this deed of trust on the properties.
Polo foreclosed on the properties and took title to the properties pursuant to a trustee's deed upon sale recorded on April 20, 2007. Between April and November of 2007, Vieira repeatedly made demands regarding its right to enter the properties to recover possession of the manufactured homes; Polo rejected these demands. Vieira also notified Pouya and other City officials that it owned as chattel the manufactured homes on the properties.
The Issuance of the Notices
Coast Capital Income Fund I, LLC (Coast Capital) became the successor in interest to Polo and on November 14, 2007, Coast Capital applied to the City's Building Department for the issuance of notices of installation pursuant to section 18551. In its application, Coast represented that it owned the properties and the manufactured homes installed on the properties. The application completed by Coast Capital stated in relevant part: "[T]he enforcement agency may obtain a title search printout from [HCD] Registration and Titling Program. The information on the title search should be compared to the information shown on the surrendered HCD Certificate of Title . . . and registration card(s). This will ensure that the most current ownership and registration documents have been submitted to the enforcement agency and that the registered owner owns the manufactured home . . . free of any liens or encumbrances. Where the title search indicates a record legal owner or junior lienholder, or both, evidence should be provided to the enforcement agency that the legal owner or junior lienholder, or both, have been paid in full or that the legal owner or junior lienholder consent to the attachment of the unit upon the satisfaction of their liens by the registered owner."
On December 10, 2007, Pouya, the acting building official for the City's Building Department, issued the notices. Pouya testified that he had no experience with inspecting projects involving the installation of manufactured homes. He stated that he did not read the instructions on the notices. He explained that he did not fill out the forms and that he signed the forms based on the title. Pouya acknowledged that he did not order a title search from HCD.
The Sale of the Properties
On May 30, 2008, Coast Capital sold the properties for $700,000 to Free at Last Properties. Jessica L. Coons, the escrow officer for Fidelity National Title Company (Fidelity) issued an endorsement to its title insurance policy, insuring that the manufactured homes were affixed to the land. Coons reviewed, among other documents, the notices.
Vieira's Lawsuit Against the City Defendants and Others
Vieira filed its original complaint against Polo and others on December 5, 2007. On August 19, 2009, it filed a first amended complaint with eight causes of action against Coast Capital, the City, the City's Building Department, and others. On August 10, 2010, Vieira amended its pleading to insert Pouya as a Doe defendant.
On August 20, 2010, the trial court issued an order approving the good faith settlement between Vieira and Coast Capital, Free at Last Properties, Fidelity, and others. The settling defendants paid Vieira a total of $225,000 in ...