This week’s question:

I heard a story at work last week about an unbelievable situation.  It involved a homeowner in Almaden Valley who had some construction work done at her house.  Evidently, she paid the contractor but the contractor did not pay the lumber yard bill.  And then the lumber yard filed a mechanic’s lien against the homeowner and threatened to foreclose on her house!  Is this legal?  How can that happen in America?  Is there any way around such a problem?

/s/Richard R., Almaden Valley

Dear Richard—

Without reviewing all of the documentation, it is difficult to say if it was legal or not, Richard.  As a general proposition, though, it is quite possible that the story is true.  And yes, it could happen in America—and in California.

Generally speaking, people and companies who improve someone else’s property are in a preferred category of payment.  Several aspects of the situation need to be discussed.

First of all, there typically needs to be a “work of improvement”.  This would seem to be the case when a homeowner has some construction work done at her house.

Next, the lumber yard could well be seen as a “materialman”.  California Civil Code §3090 defines a “materialman” (sorry about the gender bias) as any person who furnishes materials or supplies to be used or consumed in any work of improvement.

Other “materialman” might include workers on or connected with the job site, such as carpenters, plumbers, electricians, and others such as architects who had a hand in improving the property.

Another requirement is that there be a “contract” involved in that particular situation.  A “contract” is an agreement between the owner and any original contractor providing for the work of improvement or any part thereof.

The right to a mechanic’s lien is guaranteed by the California Constitution in article XIV, §3.  It provides that mechanics, persons furnishing materials, artisans, and laborers have a lien on property on which they have bestowed labor or furnished materials.  The lien is for the value of the labor done and materials furnished.

And the State Legislature is charged with providing for the speedy and efficient enforcement of such a lien.

A mechanic’s lien is in the nature of a mortgage and becomes a charge on the land involved.  The idea is that the laborer and the materialman have an equitable right to follow their labor and materials into a building of which the labor and materials have become a component part.

Almaden Times readers can learn more about mechanic’s liens by going online and entering California Civil Code §3109—3154 in their favor search engine box and then “go.”  

One can see that there are two types of mechanic’s liens in California: a lien is granted (1) to persons who have furnished labor or materials in connection with works of improvement and (2) to persons who have made site improvements, such as design professionals’ liens for professional architectural, engineering, or surveying services rendered prior to construction. 

Design professionals’ liens are governed by California Civil Code §§ 3081.1—3081.10.

If the owner of the property records a notice of nonresponsibility and posts it at some conspicuous place on the construction site within 10 days after obtaining knowledge of a work of improvement being constructed on the property, he or she may not be responsible for any mechanics’ liens claims arising from the improvement so long as he or she has not caused the improvement to be constructed or performed.

What can be the amount of the claim of lien?  Mechanics’ liens are direct liens either for the reasonable value of the labor, services, equipment, or materials furnished or for the price agreed on by the claimant and the person with whom he or she contracted, whichever is less, under California Civil Code §3123.

Homeowners and lien claimants alike need to know that there are strict time limits involved in the world of mechanic’s liens.  For example, before a lien claimant is entitled to enforce his or her lien, he or she must generally first (1) give a preliminary 20-day notice for a private work, and then (2) generally record a claim of lien at the County Recorder’s Office within certain strict time periods.

Another strict time deadline is that generally speaking a law suit to foreclose the lien must be commenced by filing suit within 90 days after the recording of the claim of lien, unless certain exceptions apply.  If the law suit to foreclose the lien is not commenced during the applicable time period, the lien automatically may become null and void and of no further force and effect.

Is there any way around a mechanic’s lien problem?  There may be one or two, Richard.  One way may be to obtain a payment bond.  A payment bond may be purchased from an insurance company since it is in effect an insurance policy.  Of course, insurance policies cost money.

Another way around a mechanic’s lien is by employing only experienced, qualified contractors.  There are many contractors available with excellent experience, references, qualifications, and credit standing.  This may be the best way to go, but that is an individual decision.  The cheapest contractor at the outset may not necessarily be the best contractor in the long run.

Consumers can also obtain a great deal of information from the California Contractor State License Board.  Go online with your favorite search engine and enter “California Contractor State License Board”.  It will be up on your screen in about a half-second with information pertaining to 310,000 licensed contractors and 43 different licensing classifications. It is taxpayer supported, of course, and very unbiased.

Finally, if you are prosecuting or defending a mechanic’s lien claim, it may well be advisable to obtain legal counsel who can help you with those legal issues.

So there you go, Richard.  A little information about mechanic’s liens in the State of California.

/s/Donald J. DeVries

Donald J. DeVries is an attorney practicing law in the Almaden Valley. Past Almaden Times articles since 1986 can be accessed through his web site: www.almadenvalleylawyers.com . If you would like him to answer your question in his next Almaden Times column, you can reach him by email at don@almadenvalleylawyers.com, with “Almaden Times” in the subject line, fax at (408)268-6502, telephone at (408)268-9500, or mail at DeVries & Horowitz, 6475 Camden Avenue, Suite 200, San Jose, CA 95120. Your matters are personal and private, so of course, he will not disclose your identity or any details about your situation. Mr. DeVries writes this column to provide you with general information about important legal matters affecting California residents—not to give you legal advice about your specific matter. No attorney-client relationship is created by these articles. The law is complex and constantly changing and varies from state to state. So you should consult an attorney before taking any action that would affect your personal or business matters.

This week's question: My husband and I signed a contract to purchase a home here in the Almaden Valley. It's the home our dreams. However, the sellers changed their mind because of the husband's serious health issues, or so they claimed. We might need to file suit for breach of contract, but I checked our contract, called a "deposit receipt", and there is a mediation clause that both sides initialed. Must we really go through mediation first? Isn't that a grand waste of time and money? Can't we just file our suit and get it over with? What is mediation, anyway?

/s/Susan S., Almaden Valley

Dear Susan- Interesting question, Susan. And I think the answer is fairly clear, at least in a general sense. In a recent case dated May 28, 2008, from the Court of Appeal, Third Appellate District, entitled Jay Lange v. Roxanne Schilling, the Court held that yes, a mediation clause means what it says and the parties to such a contract must proceed with mediation before the Plaintiff files a lawsuit.

In that case, arising out of Calaveras county, the parties had signed a standard California residential property purchase agreement that contained a mediation clause. The mediation clause stated that: "Buyer and Seller agree to mediate any dispute or claim arising between them out of this Agreement, or any resulting transaction, before resorting to arbitration or court action." The mediation clause in the Lange-Schilling contract went on to state: "If, for any dispute or claim to which this paragraph applies, any party commences an action without first attempting to resolve the matter through mediation, or refuses to mediate after a request has been made, then that party shall not be entitled to recover attorney fees, even if they would otherwise be available to that party in any such action."

Plaintiff Lange filed his complaint against defendant Schilling after a dispute arose about claimed misrepresentations about a lake level related to the property in question. The trial court found that Plaintiff was entitled to about $80,000 in attorney's fees against the defendant in addition to damages of only $13,475. However, the facts of the Lange v. Schilling case were clear to the effect that Plaintiff did not attempt mediation before commencing the litigation. The Defendant argued in the Court of Appeal that because Plaintiff filed his lawsuit before offering mediation there was no basis to award attorney's fees. And the Court of Appeal agreed with Defendant's argument. The Court of Appeal reversed the trial Court, denied Plaintiff's application for attorney's fees, and stated that there is a strong public policy in favor of mediation.

In the words of the Court of Appeal: "In mediation, a neutral third party analyzes the strengths and weaknesses of each party's case, works through the economics of litigation with the parties, and otherwise assists in attempting to reach a compromise resolution of the dispute." "The public policy of promoting mediation as a preferable alternative to judicial proceedings is served by requiring the party commencing litigation to seek mediation as a condition precedent to the recovery of attorney fees. . . Had the parties resorted to mediation, their dispute may have been resolved in a much less expensive and time-consuming manner." So, generally speaking, when a contract provides for mandatory mediation before filing suit, it means what it says.

Then the question arises as to what is mediation, anyway. Mediation is a relatively informal way to try to resolve disputes. It is often a simple meeting in the mediator's office. It is voluntary in nature in the sense that the mediator tries to help the parties themselves come to an agreement to resolve the dispute. Typically, the parties may have their own attorney present if they wish. Usually the mediator conducts "shuttle diplomacy", going from one party with their attorney in one room to the other party with their attorney in a second room and back and forth again. This may go on for hours or even days in a complicated case. Once again, the mediation may result in a voluntary settlement or agreement. However, the mediator cannot impose a decision on the parties like a judge can in a court trial.

Mediation is quite different from arbitration which is a good topic for another day. You can read the Jay Lange v. Roxanne Schilling suit in the Court of Appeal for your self by going to your favorite search engine and entering the case name. Sometimes two or three options are available to select and read the case for yourself. I personally favor the Court of Appeal web site so I can avoid all the advertising and entry on yet another junk email list. And as I always add, please read the case in consultation with your own attorney to see how the case may or may not apply in your particular situation. Best wishes for a successful mediation, Susan. I hope it all works out to your satisfaction.

/s/Donald J. DeVries, Almaden Valley

Donald J. DeVries is an attorney practicing law in the Almaden Valley. Past Almaden Times articles since 1986 can be accessed through his web site: www.almadenvalleylawers.com. If you would like him to answer your question in his next Almaden Times column, you can reach him by email at don@almadenvalleylawyers.com, with "Almaden Times" in the subject line, fax at (408)268-6502, telephone at (408)268-9500, or mail at DeVries & Horowitz, 6475 Camden Avenue, Suite 200, San Jose, CA 95120. Your matters are personal and private, so of course, he will not disclose your identity or any details about your situation. Mr. DeVries writes this column to provide you with general information about important legal matters affecting California residents-not to give you legal advice about your specific matter. No attorney-client relationship is created by these articles. The law is complex and constantly changing and varies from state to state. So you should consult an attorney before taking any action that would affect your personal or business matters.