{"id":265950,"date":"2014-12-11T06:20:29","date_gmt":"2014-12-11T13:20:29","guid":{"rendered":"https:\/\/www.myconstructionexpert.com\/blog\/?p=265950"},"modified":"2014-12-10T10:21:01","modified_gmt":"2014-12-10T17:21:01","slug":"california-court-holds-mechanics-lien-claimants-entitled-to-pre-judgment-interest-of-7-percent-not-10-percent-against-non-contracting-property-owners","status":"publish","type":"post","link":"https:\/\/www.myconstructionexpert.com\/blog\/california-court-holds-mechanics-lien-claimants-entitled-to-pre-judgment-interest-of-7-percent-not-10-percent-against-non-contracting-property-owners\/","title":{"rendered":"California Court Holds Mechanic\u2019s Lien Claimants Entitled to Pre-Judgment Interest of 7 Percent, Not 10 Percent, Against Non-Contracting Property Owners"},"content":{"rendered":"<p>Traub Lieberman Straus &amp; Shrewsberry LLP | November 20, 2014<\/p>\n<p>Under California Civil Code (CC) Section 3289, a mechanic\u2019s lien claimant may obtain pre-judgment interest against contracting property owners calculated at 10 percent per annum from the date of breach.\u00a0 In Palomar Grading &amp; Paving, Inc. v. Wells Fargo Bank, N.A., et al. (2014) 230 Cal. App. 4th 686, the California Court of Appeals considered whether a mechanic\u2019s lien claimant may also obtain pre-judgment interest of 10 percent against non-contracting property owners, or whether such claimant is limited to the constitutional default rate of 7 percent per annum, as codified under Article XV, Section 1 of the California Constitution. \u00a0The Court determined that the constitutional default rate of 7 percent applied to \u201cinnocent\u201d non-contracting property owners.<\/p>\n<p>Two subcontractors working on construction of a Kohl\u2019s Department Store in Beaumont, California recorded mechanic\u2019s liens and sued to foreclose on those liens after the general contractor, 361 Group Construction Services, Inc. (361) failed to pay them.\u00a0 Judgments of foreclosure were obtained against the current owners of the property, Kohl\u2019s Department Store (Kohl\u2019s) and Wells Fargo Bank, N.A. (Wells Fargo), neither of which contracted with nor breached an agreement with 361 or the subcontractors. \u00a0The trial court awarded the subcontractors pre-judgment interest against Kohl\u2019s and Wells Fargo at 10 percent under CC 3289.<\/p>\n<p>On appeal, the California Court of Appeals considered whether the two subcontractors were entitled to pre-judgment interest at 10 percent under CC 3289 or the constitutional default rate of 7 percent.\u00a0 The Court first noted, based on the language in Article XV, the constitutional default rate applies to the \u201cforbearance of any money, goods, or things in action,\u201d and determined mechanic\u2019s lien foreclosure actions qualify as \u201cthings in action.\u201d\u00a0 The Court then recognized different interest rates can apply to different types of actions.\u00a0 While pre-judgment interest is recoverable at 10 percent under CC 3289 in contract actions, CC 3288 allows recovery of pre-judgment interest in tort actions at the constitutional default rate of 7 percent.\u00a0 Because Kohl\u2019s and Wells Fargo had no written contracts with the subcontractors, the liens on the property were the result of mechanic\u2019s lien laws, not contract.<\/p>\n<p>Analogizing \u201cinnocent\u201d non-contracting property owners to tort defendants, the Court of Appeals reversed the trial court, holding that CC 3289 did not provide the statutory basis for recovery of pre-judgment interest against Kohl\u2019s and Wells Fargo.\u00a0 Instead, the Court of Appeals held that the constitutional pre-judgment interest rate of 7 percent should apply because CC 3289 only applies to contract defendants, which Kohl\u2019s and Wells Fargo were not.<\/p>\n<p>via <a href=\"http:\/\/www.traublieberman.com\/construction-law\/2014\/1120\/5636\/\">California Court Holds Mechanic\u2019s Lien Claimants Entitled to Pre-Judgment Interest of 7 Percent, Not 10 Percent, Against Non-Contracting Property Owners | Traub Lieberman Straus &amp; Shrewsberry LLP<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Traub Lieberman Straus &amp; Shrewsberry LLP | November 20, 2014 Under California Civil Code (CC) Section 3289, a mechanic\u2019s lien claimant may obtain pre-judgment interest against contracting property owners calculated at 10 percent per annum from the date of breach.\u00a0 In Palomar Grading &amp; Paving, Inc. v. Wells Fargo Bank, N.A., et al. (2014) 230&hellip; <a class=\"more-link\" href=\"https:\/\/www.myconstructionexpert.com\/blog\/california-court-holds-mechanics-lien-claimants-entitled-to-pre-judgment-interest-of-7-percent-not-10-percent-against-non-contracting-property-owners\/\">Continue reading <span class=\"screen-reader-text\">California Court Holds Mechanic\u2019s Lien Claimants Entitled to Pre-Judgment Interest of 7 Percent, Not 10 Percent, Against Non-Contracting Property Owners<\/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":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false},"version":2}},"categories":[8],"tags":[184],"class_list":["post-265950","post","type-post","status-publish","format-standard","hentry","category-mechanics-lien-rights","tag-mechanics-lien-law","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>California Court Holds Mechanic\u2019s Lien Claimants Entitled to Pre-Judgment Interest of 7 Percent, Not 10 Percent, Against Non-Contracting Property Owners - 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\/california-court-holds-mechanics-lien-claimants-entitled-to-pre-judgment-interest-of-7-percent-not-10-percent-against-non-contracting-property-owners\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"California Court Holds Mechanic\u2019s Lien Claimants Entitled to Pre-Judgment Interest of 7 Percent, Not 10 Percent, Against Non-Contracting Property Owners - Advise &amp; Consult, Inc.\" \/>\n<meta property=\"og:description\" content=\"Traub Lieberman Straus &amp; Shrewsberry LLP | November 20, 2014 Under California Civil Code (CC) Section 3289, a mechanic\u2019s lien claimant may obtain pre-judgment interest against contracting property owners calculated at 10 percent per annum from the date of breach.\u00a0 In Palomar Grading &amp; Paving, Inc. v. 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