This is an appeal from an order of the District Court, Southern District of California, Central Division, approving and adopting a report of the Referee in Bankruptcy. The case is before this Court upon an agreed statement of facts.

There is no question of the jurisdiction of the court below, nor of this Court.

It appears that Mallard Pond Builders, Inc., the bankrupt herein, engaged in a construction project which included the erection of many houses. The bankrupt obtained construction loans from a predecessor of Perpetual Savings & Loan Association, hereinafter Perpetual, and entered into a series of construction loans with the lending agency. These loan agreements provided, inter alia, that the proceeds of the loans would be disbursed as progress payments in accordance with agreed schedules.

Bankrupt had no general contractor for the whole project, but did employ one Schmidt, the holder of a general contractor's license, to supervise all construction. T. F. Korherr, hereinafter Appellant, a licensed flooring contractor, entered into a contract with the bankrupt to furnish the material and labor in installing flooring in certain houses to be constructed. The bankrupt entered into numerous other similar contracts with plumbing contractors, electrical contractors, sheet metal contractors, etc., in the construction project.

Appellant having been paid only in part for the flooring he furnished and installed, filed with Perpetual pursuant to Section 1190.1(h) of the Code of Civil Procedure of California a so-called "stop notice" requesting the withholding of further payments to Bankrupt in an amount sufficient to cover Appellant's unpaid claim. It is agreed by the parties that this stop notice was filed within the time required by law and prior to bankruptcy, and that it was accompanied by a bond as required by Section 1190.1(h). It is also agreed that pursuant to law, Appellant duly and properly filed an action in the proper court on the stop notice. It is further agreed that at the time Appellant served his stop notice on Perpetual, that company held funds in the Bankrupt's construction loan accounts sufficient to satisfy all stop notice claims, including that of Appellant.

The present controversy arises out of an order to show cause based on the Trustee in Bankruptcy's petition alleging the construction loan funds constituted an asset of the bankrupt estate. Appellant claimed that to the extent necessary to satisfy his stop notice, the funds in the construction loan accounts were his and not an asset of the bankrupt estate.

Pertinent portions of Section 1190.1 (h) and Sections 1181 and 1184.1 of the Code of Civil Procedure are set out in the margin.1

The Referee and the District Court held that Appellant "is a contractor and therefore not entitled to avail himself of the stop notice remedy."

The right to a mechanic's lien is guaranteed by the Constitution of California Article 20, Section 15. The statutes of California have long contained provisions implementing the Constitutional guaranty. A stop notice, or a notice to withhold, is not identical with a mechanic's lien, but is an additional or cumulative remedy. Weldon v. Superior Court, 1903, 138 Cal. 427, 71 P. 502; Diamond Match Co. v. Silberstein, 1913, 165 Cal. 282, 131 P. 874.

The effectiveness, however, of mechanic's liens have been impaired by amendments to the California law providing that mortgages or trust deeds, by means of which the construction funds are secured, recorded before the commencement of the construction work, are senior in priority to liens recorded by persons furnishing labor and material to a construction project. The law formerly provided, in Section 1184 of the Code of Civil Procedure, that stop notices might be served upon the owner, requesting that he withhold from a person in the position of a general contractor moneys sufficient to pay the labor and materialmen. In later years, however, lending agencies have adopted the practice of executing loan agreements with the owner providing that the lending agency retain the proceeds of the loan in a separate fund and that payments be made from that fund directly to the persons entitled thereto rather than to the owner. In this case, such a loan agreement was signed by the owner and the savings and loan association.2

Appellee contends that the word "contractor" in the phrase "except the contractor" [emphasis added] in Section 1190.1(h) means any contractor supplying labor or material to the project.

We cannot agree. If that were true, there would be no reason for the use of the word "the" in describing the contractor. The word "a" would be more appropriate. If all the various contractors on a job, such as plumbing, brick, cement, electrical, and others, were to be included within the exception, the plural word contractors should have been used.

Section 1184 of the Code of Civil Procedure, which provided — until its repeal in 1951 —, for the giving of stop notices, also used the language "except the contractor" which is found in Section 1190.1 (h). This latter section was enacted in 1951, the same year that Section 1184 was repealed.

A reading of Section 11843 indicates that the words "except the contractor" referred to the general or prime contractor. By its terms it could not be contended that individual contractors doing only portions of the work would be excluded from the right to file stop notices with the owner.

The mere fact that in this case Appellant made his contract with the owner for the doing of the flooring in various houses, rather than with a general or prime contractor, should not deprive him of the right which he would have if he agreed to do the same work in a contract entered into with a general contractor. The owner here was acting in the same way a general contractor would act.

In discussing the difference between an original or principal contractor and a subcontractor, it is said in Nelson on Mechanic's Lien Laws, Section 183:

"But if his contract * * * is for work and materials for merely a portion of the entire improvement, he is a subcontractor. This is true even though his subcontract is made directly with the owner."

Appellant in this case was in the position of a subcontractor.

It is conceded by the Trustee that had Korherr been a subcontractor the stop notice would have been effective.4 It is not reasonable to us to believe that the accident of a modern financial arrangement should cause one such as Korherr to be denied the protection the mechanic's lien laws traditionally provide. The financing arrangement here, not an uncommon one today, resulted in an agency of the lending institution disbursing progress payments to the various contractors and materialmen working on the construction project. Absent such an arrangement, the payments would have been made by the general contractor. Thus, those materialmen and those who performed the plumbing, electrical work, flooring and the like might serve stop notices on the builder or lender, informing him that the general contractor had not paid them. Because there was a general contractor, these plumbers, electricians, etc., were subcontractors, and payments in the amounts sufficient to pay for their services would be secured upon service of the stop notices.

In the instant case, Appellant has the same relationship to the construction project as do the subcontractors in the above described situation. The same reasons that led the legislature to provide for the stop notice for subcontractors and materialmen apply to Korherr. To hold that because there is no general contractor here Appellant does not qualify under the law is to place a reliance on form over substance that is not in keeping with the spirit of the law of mechanic's liens.

It has been said that statutes relating to the enforcement of the mechanic's lien, being remedial in nature, should be liberally construed to effect their purpose. 32 Cal.Jur.2d § 7; Gallagher v. Campodonico, 1931, 121 Cal. App.Supp. 765, 5 P.2d 486; Burr v. Peppers Cotton Lumber Co., 1928, 91 Cal. App. 268, 266 P. 1025. Also, where words of exception are used, they are to be strictly construed to limit the exception. Piedmont & Northern R. Co. v. Interstate Commerce Commission, 1932, 286 U.S. 299, 52 S. Ct. 541, 76 L. Ed. 1115. See, generally, Sutherland on Statutory Construction, 3d Ed. §§ 4936 et seq. This is especially true where remedies are sought to be enforced, as in the instant case. Fleming v. Hawkeye Pearl Button Co., 8 Cir., 1940, 113 F.2d 52; Miller Hatcheries v. Boyer, 8 Cir., 1942, 131 F.2d 283.

Counsel have not been able to furnish the Court with any direct authority construing the phrase "except the contractor" in Section 1190.1(h), and we have found none.

Pugh v. Moxley, 1912, 164 Cal. 374, 128 P. 1037, 1039, relied upon by Appellee, is inapplicable. Though containing obi- ter dictum that "one may be an original contractor although he has agreed to do only part of the work required for the construction of a building," the case actually held, inter alia, that a hardware company that supplied and installed plumbing was a materialman and not an original contractor. Thus, the California Supreme Court held that the claimant's contract was not void because not in writing and recorded as required by the statute applicable to "original contracts."

Considering the obvious purpose of the section, the use of the words "the contractor" in the statute instead of "a contractor" or "the contractors," the unreasonableness of a construction that would, under the circumstances in this case, bar all individual contractors furnishing labor and materials to a project from using the stop notice procedure, we hold that Appellant was not barred from getting such benefit from Section 1190.1 (h) as he may obtain by filing a stop notice thereunder.

Judgment reversed.