2012 California Appellate Court Decisions on Mechanics Liens/Stop Notices

Get the latest analysis of mechanics lien litigation in California. This article discusses the recent changes to the California Mechanics Lien Law and surveys 2012 published and unpublished California intermediary appellate court decisions on mechanics lien and stop notice (now stop payment notice) issues. The article appears as the lead article in the November 2012 issue of California Real Estate Reporter (Matthew Bender). The author writes:

In the California mechanics lien area, the most cognizant changes took place with the enactment into law of California Senate Bill 189 and Assembly Bill 457, which became respectively effective on January 1, 2011 or July 1, 2012 (with the bulk of the reforms taking effect on the latter date). These wholesale amendments are discussed in a comprehensive manner in my March 2012 article in the California Real Estate Reporter. However, even with these amendments and changes, jurisprudence in California law keeps flowing under the former statutory schemes. That inspired this article, a survey of 2012 published and unpublished California intermediary appellate decisions on mechanics lien and stop notice (now stop payment notice) issues.

Our kickoff of 2012 unpublished decision in the mechanics lien area comes from the California Third District Court of Appeal in Regional Builders, Inc. v. Hughes [enhanced version available to Lexis.com subscribers]. It involves several amended complaint "relation back" issues arising out of a defense petition to expunge a mechanics lien by the mechanics lien claimant under former Cal. Civil Code section 3154.

A mechanics lien relates back, from a priority prospective over a recorded deed of trust or other consensual lien, to the time of "commencement of the work of improvement." Case law has developed a test for determining "commencement": apparent and visible work "easily seen by everybody and recognized as the commencement of a building" of permanent nature.

The judicial "apparent/visible work" test was front and center in the resolution reached by the California Second District, Division 2, in Advent, Inc. v. Ashland Avenue Apartments, LLC [enhanced version available to Lexis.com subscribers]. As with many cases, the factual circumstances were critical to the result reached.

The appealing lender in Southern California Steel v. East West Bank [enhanced version available to Lexis.com subscribers] received a boon when several mechanics lien claimants obtained attachment orders in the wake of a pending nonjudicial foreclosure. Although appealing the issuance of the attachment orders, the claimants apparently did not post bonds such that the real property was sold at a foreclosure sale absent perfected attachment liens. The result of this gaffe was the claimants lost their priority, and the appellate court deemed lender's appeal to be moot.

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Conclusion

As we have seen, 2012 was a busy year for the intermediate California appellate courts when facing both mechanics lien and stop notice issues of a dense and sometimes convoluted nature. I would predict that 2013 also will be an interesting year for jurisprudence in this area, especially as the judiciary confronts the 2011 amendments to the mechanics lien and stop payment notice statutory schemes.

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