{"id":230,"date":"2011-12-12T08:42:43","date_gmt":"2011-12-12T15:42:43","guid":{"rendered":"https:\/\/www.myconstructionexpert.com\/blog\/?p=230"},"modified":"2011-12-12T08:42:43","modified_gmt":"2011-12-12T15:42:43","slug":"fighting-an-overstated-mechanics-lien-a-simpler-solution","status":"publish","type":"post","link":"https:\/\/www.myconstructionexpert.com\/blog\/fighting-an-overstated-mechanics-lien-a-simpler-solution\/","title":{"rendered":"Fighting an Overstated Mechanic&#8217;s Lien: a Simpler Solution"},"content":{"rendered":"<blockquote>\n<p style=\"margin-top: 0px; margin-right: 0px; margin-bottom: 1em; margin-left: 0px; border-style: initial; border-color: initial; font-size: 12px; font-family: Arial, Helvetica, clean, sans-serif; vertical-align: baseline; color: #3e3d40; line-height: 15px; border-width: 0px; padding: 0px;\">Dana C. Tsubota &#8211; December 7, 2011<\/p>\n<p style=\"margin-top: 0px; margin-right: 0px; margin-bottom: 1em; margin-left: 0px; border-style: initial; border-color: initial; font-size: 12px; font-family: Arial, Helvetica, clean, sans-serif; vertical-align: baseline; color: #3e3d40; line-height: 15px; border-width: 0px; padding: 0px;\">In a depressed economy wrought with defaulting developers, a lender in California facing a lien priority challenge should evaluate whether it would be worthwhile to secure a first priority position for its deed of trust through law and motion practice.<\/p>\n<p style=\"margin-top: 0px; margin-right: 0px; margin-bottom: 1em; margin-left: 0px; border-style: initial; border-color: initial; font-size: 12px; font-family: Arial, Helvetica, clean, sans-serif; vertical-align: baseline; color: #3e3d40; line-height: 15px; border-width: 0px; padding: 0px;\">California\u2019s case law provides the legal authority that allows a lender to require a mechanic\u2019s lien claimant to establish the validity of a lien by demonstrating that the lien only includes amounts for labor, services and\/or materials that were actually used in the construction of the improvement on the parcel upon which the lien was recorded.<\/p>\n<p style=\"margin-top: 0px; margin-right: 0px; margin-bottom: 1em; margin-left: 0px; border-style: initial; border-color: initial; font-size: 12px; font-family: Arial, Helvetica, clean, sans-serif; vertical-align: baseline; color: #3e3d40; line-height: 15px; border-width: 0px; padding: 0px;\">Take, for example, the case where a mechanic\u2019s lien claimant constructs improvements for a large-scale commercial development of 10 buildings on separate parcels.\u00a0 The developer, initially well-funded by its construction lender, paid for the necessary improvements to construct and sell off the first four buildings in the commercial project.\u00a0 Buildings five through eight were in various stages of production when the developer ceased to pay all of the mechanic\u2019s bills.\u00a0 The mechanic, usually on a pay schedule that runs 30 days behind work performed, completed the work necessary to complete buildings five through eight before ceasing operations at the site.\u00a0 At the time the mechanic realizes it won\u2019t be paid, the mechanic is owed $1,000,000.\u00a0 The developer sells buildings five through eight, and the construction lender\u2019s deed of trust is partially reconveyed based on a pay-down, through escrow, of the construction loan.\u00a0 The developer goes belly up and the mechanic records its $1,000,000 lien on each and every lot (i.e., one through ten) underlying the commercial buildings for the full value of all unpaid bills.\u00a0 The construction lender, no longer receiving payments on its loan, forecloses on its remaining security (i.e., the partially constructed buildings numbering nine and ten), and the mechanic\u2019s lien is wiped out as to those two parcels.\u00a0 The mechanic is left with a $1,000,000 lien on the lots underlying buildings one through eight, each of which is owned by a third party, and each of which has a purchase money deed of trust recorded against the parcel.<\/p>\n<p style=\"margin-top: 0px; margin-right: 0px; margin-bottom: 1em; margin-left: 0px; border-style: initial; border-color: initial; font-size: 12px; font-family: Arial, Helvetica, clean, sans-serif; vertical-align: baseline; color: #3e3d40; line-height: 15px; border-width: 0px; padding: 0px;\">In this instance, a purchase money lender with a deed of trust recorded after construction commenced at the project may utilize the California Civil Code to either eliminate the mechanic\u2019s lien entirely, or have that lien apportioned and subordinated to the purchase money deed of trust through a relatively simple motion, despite the mechanic\u2019s claim of priority.\u00a0 When a mechanic\u2019s lien claim is asserted for work that benefited multiple properties, failure to apportion allows the claimant to burden property inequitably with a claim for labor and materials that were not actually used for that property.\u00a0 (Cook v. Cappellino (1929) 101 Cal.App. 77, 79.)<\/p>\n<p style=\"margin-top: 0px; margin-right: 0px; margin-bottom: 1em; margin-left: 0px; border-style: initial; border-color: initial; font-size: 12px; font-family: Arial, Helvetica, clean, sans-serif; vertical-align: baseline; color: #3e3d40; line-height: 15px; border-width: 0px; padding: 0px;\">Civil Code section 3118 addresses this inequity, and provides as follows:<\/p>\n<p style=\"margin-top: 0px; margin-right: 0px; margin-bottom: 1em; margin-left: 0px; border-style: initial; border-color: initial; font-size: 12px; font-family: Arial, Helvetica, clean, sans-serif; vertical-align: baseline; color: #3e3d40; line-height: 15px; border-width: 0px; padding: 0px;\"><strong>\u00a73118.\u00a0 Forfeiture of Lien.\u00a0<\/strong>\u00a0[\u00b6]\u00a0 Any person who shall willfully include in his claim of lien labor, services, equipment, or materials not furnished for the property described in such claim shall thereby forfeit his lien.<\/p>\n<p style=\"margin-top: 0px; margin-right: 0px; margin-bottom: 1em; margin-left: 0px; border-style: initial; border-color: initial; font-size: 12px; font-family: Arial, Helvetica, clean, sans-serif; vertical-align: baseline; color: #3e3d40; line-height: 15px; border-width: 0px; padding: 0px;\">A lien is therefore statutorily forfeited if a mechanic includes the costs for labor or materials provided to separate parcels in its recorded lien.\u00a0 In simple terms, the California Civil Code requires a mechanic to apportion its lien based upon the actual labor and materials provided to each separate parcel.\u00a0 (See Cal. Civ. Code, \u00a73130.)<\/p>\n<p style=\"margin-top: 0px; margin-right: 0px; margin-bottom: 1em; margin-left: 0px; border-style: initial; border-color: initial; font-size: 12px; font-family: Arial, Helvetica, clean, sans-serif; vertical-align: baseline; color: #3e3d40; line-height: 15px; border-width: 0px; padding: 0px;\">When a lien is overstated, the trial court has the authority to order the lien forfeit, or to reduce the excessive lien to its proper amount.\u00a0 (See,\u00a0<em style=\"border-style: initial; border-color: initial; font-family: inherit; vertical-align: baseline; border-width: 0px; padding: 0px; margin: 0px;\">e.g., Basic Modular Facilities, Inc. v. Ehsanipour\u00a0<\/em>(1999) 70 Cal.App.4th 1480, 1485.)\u00a0 The actual amount due on the lien presents a question of fact for the trial court (see, e.g.,\u00a0<em style=\"border-style: initial; border-color: initial; font-family: inherit; vertical-align: baseline; border-width: 0px; padding: 0px; margin: 0px;\">Howard A. Deason &amp; Co. v. Costa Tierra Ltd.\u00a0<\/em>(1969) 2 Cal.App.3d 742, 754-757), which question may be resolved by way of motion (<em style=\"border-style: initial; border-color: initial; font-family: inherit; vertical-align: baseline; border-width: 0px; padding: 0px; margin: 0px;\">Basic Modular Facilities, Inc. v. Ehsanipour, supra<\/em>, 70 Cal.App.4th at 1485).<\/p>\n<p style=\"margin-top: 0px; margin-right: 0px; margin-bottom: 1em; margin-left: 0px; border-style: initial; border-color: initial; font-size: 12px; font-family: Arial, Helvetica, clean, sans-serif; vertical-align: baseline; color: #3e3d40; line-height: 15px; border-width: 0px; padding: 0px;\">Once the moving party (the purchase money lender) has questioned the validity of the lien, the lien claimant has the burden of establishing the validity of the lien, including that the labor, services and\/or materials were actually used in the construction, the reasonable value of the work and\/or materials, and the date of completion of cessation of work.\u00a0 (1 Marsh, Cal. Mechanic\u2019s Lien Law and Construction Industry Practice (6th ed. 2007) \u00a7 4.124, p. 4-126.)\u00a0 A lien is, by definition, limited to the reasonable value of the labor or furnished materials for which a mechanic or contractor (among others) has not been paid.\u00a0 (See, e.g., Civil Code \u00a7\u00a7 3110, 3118, 3123.)\u00a0 The lien claimant must therefore establish the probable validity of its claim by a preponderance of the evidence.\u00a0 (Cal. Code Civ. Proc., \u00a7405.32.)\u00a0 \u201cUnlike other motions, the burden is on the party opposing the motion to expunge \u2013 i.e., the claimant-plaintiff \u2013 to establish the probably validity of the underlying claim.\u201d (<em style=\"border-style: initial; border-color: initial; font-family: inherit; vertical-align: baseline; border-width: 0px; padding: 0px; margin: 0px;\">Howard S. Wright Const. Co. v. Superior Court\u00a0<\/em>(2003) 106 Cal.App.4th 314, 318.)<\/p>\n<p style=\"margin-top: 0px; margin-right: 0px; margin-bottom: 1em; margin-left: 0px; border-style: initial; border-color: initial; font-size: 12px; font-family: Arial, Helvetica, clean, sans-serif; vertical-align: baseline; color: #3e3d40; line-height: 15px; border-width: 0px; padding: 0px;\">This simple remedy is time tested.\u00a0 In the case of<em style=\"border-style: initial; border-color: initial; font-family: inherit; vertical-align: baseline; border-width: 0px; padding: 0px; margin: 0px;\">\u00a0Hendrickson v. Bertelson<\/em>, after waiving their lien rights to three of the six lots that made up a project, several contractors recorded mechanic\u2019s liens against the remaining three lots for the full amount they were owed.\u00a0 The California Supreme Court upheld the trial court\u2019s jurisdiction to allocate the debt across all six lots and allow the claimants a lien for one-half the total amount, allocated equally across the three liened lots.\u00a0 (<em style=\"border-style: initial; border-color: initial; font-family: inherit; vertical-align: baseline; border-width: 0px; padding: 0px; margin: 0px;\">Hendrickson v. Bertelson\u00a0<\/em>(1934) 1 Cal.2d 430, 432-433.)\u00a0 \u201cIt was \u2026 properly within the jurisdiction of the court as a court of equity, and in line with the spirit of the mechanic\u2019s lien law and constitutional provision, to apportion the amounts of the respective liens\u2026.\u201d\u00a0 (Id. at 434.)\u00a0 Similarly, in\u00a0<em style=\"border-style: initial; border-color: initial; font-family: inherit; vertical-align: baseline; border-width: 0px; padding: 0px; margin: 0px;\">A.J. Raisch Paving Co. v. Mountain View Savings &amp; Loan Assoc<\/em>., a contractor recorded a mechanic\u2019s lien against only one tract of land after installing sewer lines that benefited two tracts.\u00a0 (<em style=\"border-style: initial; border-color: initial; font-family: inherit; vertical-align: baseline; border-width: 0px; padding: 0px; margin: 0px;\">A.J. Raisch Paving Co. v. Mountain View Savings &amp; Loan Assoc<\/em>. (1972) 28 Cal.App.3d 832, 834-835.)\u00a0 The appellate court ordered the lien be apportioned between the two tracts, even though it meant that the claimant would only recover on its single lien on one tract, having failed to timely record a lien on the other.\u00a0 (<em style=\"border-style: initial; border-color: initial; font-family: inherit; vertical-align: baseline; border-width: 0px; padding: 0px; margin: 0px;\">Id<\/em>. at 834, 839.)<\/p>\n<p style=\"margin-top: 0px; margin-right: 0px; margin-bottom: 1em; margin-left: 0px; border-style: initial; border-color: initial; font-size: 12px; font-family: Arial, Helvetica, clean, sans-serif; vertical-align: baseline; color: #3e3d40; line-height: 15px; border-width: 0px; padding: 0px;\">Other jurisdictions follow California\u2019s approach: \u201c[t]he general rule is that a single mechanic\u2019s lien [claim] against more than one lot \u2026 cannot be enforced against less than the entire property liened, without first showing what part of the entire lien may be properly allocated to the lot \u2026 against which enforcement is sought.\u201d\u00a0 (<em style=\"border-style: initial; border-color: initial; font-family: inherit; vertical-align: baseline; border-width: 0px; padding: 0px; margin: 0px;\">Assoc. Sand &amp; Gravel Co., Inc. v. DiPietro\u00a0<\/em>(Wash.App. 1973) 509 P.2d 1020, 1023, citing Hendrickson, supra, 1 Cal.2d 430;\u00a0<em style=\"border-style: initial; border-color: initial; font-family: inherit; vertical-align: baseline; border-width: 0px; padding: 0px; margin: 0px;\">see also Compass Bank v. Brickman Group, Ltd<\/em>. (Colo. 2005) 107 P.3d 955, 961,\u00a0<em style=\"border-style: initial; border-color: initial; font-family: inherit; vertical-align: baseline; border-width: 0px; padding: 0px; margin: 0px;\">citing CS&amp;W Contractors v. Southwest Savings &amp; Loan Association<\/em>(Ariz. 1994) 883 P.2d 404, 406.)<\/p>\n<p style=\"margin-top: 0px; margin-right: 0px; margin-bottom: 1em; margin-left: 0px; border-style: initial; border-color: initial; font-size: 12px; font-family: Arial, Helvetica, clean, sans-serif; vertical-align: baseline; color: #3e3d40; line-height: 15px; border-width: 0px; padding: 0px;\">Two simple lessons result.<\/p>\n<p style=\"margin-top: 0px; margin-right: 0px; margin-bottom: 1em; margin-left: 0px; border-style: initial; border-color: initial; font-size: 12px; font-family: Arial, Helvetica, clean, sans-serif; vertical-align: baseline; color: #3e3d40; line-height: 15px; border-width: 0px; padding: 0px;\">First, purchase money lenders can utilize law and motion practice to have a court deem forfeit, or, at the very least, apportioned, an overstated lien that threatens the priority of a purchase money deed of trust where a mechanic fails to properly prove up the reasonable basis for the lien claim on the burdened lot.\u00a0 This expedited process reduces the time and cost associated with litigation of priority, and has the added benefit of shifting the burden of proof to the mechanic, who must then demonstrate compliance with California\u2019s statutory scheme.<\/p>\n<p style=\"margin-top: 0px; margin-right: 0px; margin-bottom: 1em; margin-left: 0px; border-style: initial; border-color: initial; font-size: 12px; font-family: Arial, Helvetica, clean, sans-serif; vertical-align: baseline; color: #3e3d40; line-height: 15px; border-width: 0px; padding: 0px;\">Second, mechanics should resist the temptation to record multiple full-value liens for work done on a divisible project.\u00a0 When recording a lien for work performed on a project that involves numerous parcels, apportionment of that lien is critical.\u00a0 If a mechanic fails to properly apportion, the mechanic risks forfeiture of the entire lien, or, at the very least, court apportionment and subordination to a purchase money deed of trust that post-dates the start of construction.<\/p>\n<\/blockquote>\n","protected":false},"excerpt":{"rendered":"<p>Dana C. Tsubota &#8211; December 7, 2011 In a depressed economy wrought with defaulting developers, a lender in California facing a lien priority challenge should evaluate whether it would be worthwhile to secure a first priority position for its deed of trust through law and motion practice. California\u2019s case law provides the legal authority that&hellip; <a class=\"more-link\" href=\"https:\/\/www.myconstructionexpert.com\/blog\/fighting-an-overstated-mechanics-lien-a-simpler-solution\/\">Continue reading <span class=\"screen-reader-text\">Fighting an Overstated Mechanic&#8217;s Lien: a Simpler Solution<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":false,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false},"version":2}},"categories":[8],"tags":[12,76],"class_list":["post-230","post","type-post","status-publish","format-standard","hentry","category-mechanics-lien-rights","tag-construction","tag-mechanics-lien","entry"],"jetpack_publicize_connections":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v25.0 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Fighting an Overstated Mechanic&#039;s Lien: a Simpler Solution - Advise &amp; Consult, Inc.<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.myconstructionexpert.com\/blog\/fighting-an-overstated-mechanics-lien-a-simpler-solution\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Fighting an Overstated Mechanic&#039;s Lien: a Simpler Solution - Advise &amp; Consult, Inc.\" \/>\n<meta property=\"og:description\" content=\"Dana C. Tsubota &#8211; December 7, 2011 In a depressed economy wrought with defaulting developers, a lender in California facing a lien priority challenge should evaluate whether it would be worthwhile to secure a first priority position for its deed of trust through law and motion practice. 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Tsubota &#8211; December 7, 2011 In a depressed economy wrought with defaulting developers, a lender in California facing a lien priority challenge should evaluate whether it would be worthwhile to secure a first priority position for its deed of trust through law and motion practice. California\u2019s case law provides the legal authority that&hellip; Continue reading Fighting an Overstated Mechanic&#8217;s Lien: a Simpler Solution","og_url":"https:\/\/www.myconstructionexpert.com\/blog\/fighting-an-overstated-mechanics-lien-a-simpler-solution\/","og_site_name":"Advise &amp; Consult, Inc.","article_publisher":"https:\/\/www.facebook.com\/Advise-Consult-Inc-126949043996790\/","article_published_time":"2011-12-12T15:42:43+00:00","author":"admin","twitter_card":"summary_large_image","twitter_creator":"@adviseconsult","twitter_site":"@adviseconsult","twitter_misc":{"Written by":"admin","Est. reading time":"7 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"Article","@id":"https:\/\/www.myconstructionexpert.com\/blog\/fighting-an-overstated-mechanics-lien-a-simpler-solution\/#article","isPartOf":{"@id":"https:\/\/www.myconstructionexpert.com\/blog\/fighting-an-overstated-mechanics-lien-a-simpler-solution\/"},"author":{"name":"admin","@id":"https:\/\/www.myconstructionexpert.com\/blog\/#\/schema\/person\/0a11abe008083d5fb19c2b0feefe7bd7"},"headline":"Fighting an Overstated Mechanic&#8217;s Lien: a Simpler Solution","datePublished":"2011-12-12T15:42:43+00:00","mainEntityOfPage":{"@id":"https:\/\/www.myconstructionexpert.com\/blog\/fighting-an-overstated-mechanics-lien-a-simpler-solution\/"},"wordCount":1310,"commentCount":22,"publisher":{"@id":"https:\/\/www.myconstructionexpert.com\/blog\/#organization"},"keywords":["construction","mechanics lien"],"articleSection":["Mechanics Lien Rights"],"inLanguage":"en-US","potentialAction":[{"@type":"CommentAction","name":"Comment","target":["https:\/\/www.myconstructionexpert.com\/blog\/fighting-an-overstated-mechanics-lien-a-simpler-solution\/#respond"]}]},{"@type":"WebPage","@id":"https:\/\/www.myconstructionexpert.com\/blog\/fighting-an-overstated-mechanics-lien-a-simpler-solution\/","url":"https:\/\/www.myconstructionexpert.com\/blog\/fighting-an-overstated-mechanics-lien-a-simpler-solution\/","name":"Fighting an Overstated Mechanic's Lien: a Simpler Solution - Advise &amp; 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