KITCHING, J.
Through its successor-in-interest MGP VIII Properties, LLC, Westside Medical Park, LLC (Westside) appeals from a judgment for plaintiff Tectonics Construction, Inc. (Tectonics) in its action to foreclose a mechanics' lien on property owned by Westside on which Tectonics' assignor, CSI Construction, Inc. (CSI) performed work of improvement pursuant to a contract with Amp'd Mobile, Inc. (Amp'd), which leased the property from Westside. We find that substantial evidence supported the trial court's finding that CSI's 20-day preliminary notice contained a description of the jobsite sufficient for identification for purposes of Civil Code section 3097. We also find that substantial evidence supported the trial court's finding rejecting Westside's allegation that CSI failed to obtain permits from the City of Los Angeles to replace lighting fixtures. Substantial evidence also supports the trial court's finding that Westside posted and recorded its notice of nonresponsibility before commencement of the work of improvement, and it was therefore premature and ineffective. We conclude that there was no abuse of discretion in the denial of Westside's motion to dismiss the action to foreclose the lien for failure to bring that action to trial within two years.
Tectonics cross-appeals from the portion of the judgment entered in favor of Westside after the trial court granted Westside's motion for judgment on Tectonics' action to foreclose its mechanics' lien and for quantum meruit. We conclude that the trial court correctly found that Westside could not be deemed to be a participating owner, and that in rejecting the application of the participating owner doctrine, the trial court did not erroneously apply a requirement that Westside have actual knowledge of construction.
We affirm the judgment.
Westside Medical Park, LLC (Westside) owns three office buildings located next to each other at 1901, 1925, and 1933 South Bundy Drive in Los Angeles. The buildings share a parking lot to the rear.
A cell phone company, Amp'd Mobile, (Amp'd) leased 20,000 square feet of office space at 1925 South Bundy Drive from Westside from August 1, 2005, to July 31, 2007. Subsequently Amp'd leased 15,000 square feet of office space in 1901 South Bundy Drive and 34,000 square feet at 1933 S. Bundy Drive. Those two leases also expired on July 31, 2007. In a lease dated March 5, 2007, and executed on March 7, 2007, Amp'd and Westside consolidated leases on the three buildings into a single lease, which extended the lease to March 31, 2009. The lease contemplated a single rental monthly rental of $129,500 and a $259,000 security deposit for the three buildings. Amp'd was also required to pay for use of the parking area. The lease made Amp'd responsible for utilities, janitorial, trash removal, fire life safety, and landscaping costs for the premises and the parking area, and made Westside responsible for all real estate taxes and assessments not attributed to Amp'd's occupancy of the premises. Amp'd intended to use the three buildings as a corporate headquarters and office facility. Amp'd intended that the 1933 building would provide office space for 120 people.
The lease provided that the premises were leased in "as is" condition. The 1933 building, however, was not usable in "as-is" condition. The previous tenant, 20th Century Fox/Fox Sport Networks, had removed fixtures and caused substantial damage when it vacated the premises. Repairs and renovation were required to make the premises functional as offices. The 1933 South Bundy building was dirty, with carpeting removed, unpainted interior partitions, missing interior doors and hardware, and damaged walls. It lacked working electrical outlets and data connections. Two hundred light fixtures had been removed and there were significant problems with the electrical system, including open J-boxes and broken plates. There was virtually no power outside the electrical room, a lack of heat and emergency lighting, and the premises were unsafe and not eligible for a certificate of occupancy. The lack of as-built plans required an electrical inspection before repair and renovation work could start. The lease also provided that Amp'd would make improvements at its sole cost and expense, and that those improvements would be subject to Westside's prior approval.
Alistair Khalessi was Amp'd's office manager beginning in March 2006 and later became facility supervisor responsible for construction of the new offices. Khalessi also was responsible for communicating with Westside; his primary contact with Westside was Lori Garcia, who was a property manager and later Vice President of Stonebridge Holdings, Westside's managing member and who was responsible for managing the three Bundy Drive properties since Westside acquired them. Khalessi discussed the interior defects of the 1933 building with Garcia in 2006. Subsequently Khalessi informed Garcia that the electrical system in the 1993 building needed to be re-installed. Garcia was aware of the damage to the building caused by Fox Sports when it vacated the building.
Amp'd also desired to paint the exterior of the buildings, to re-open a breezeway to connect the 1925 and 1933 buildings, and to install telecommunications equipment on the roof of the 1925 building.
Amp'd contracted with Tectonics to perform $266,875 of construction, renovation, and repair work at 1925 and 1933 South Bundy Drive. Tectonics began work on the 1933 building in the week of March 19, 2007, and replaced 243 light fixtures, installed 83 receptacles and 21,000 square feet of carpet, re-energized parts of the switch gear, ran electrical wiring from the switch gear to distribution panels, removed countertop brackets from and patched holes in walls, replaced doors and hardware, and installed tack boards. Access for this work on 1933 was through the 1925 building.
With regard to painting the buildings, before the March 5, 2007, consolidated lease was executed, Amp'd contacted Westside to request a painting contractor do a "mock up" of the exterior painting in the breezeway between the 1925 and 1933 buildings in a location not visible from either Bundy Drive or the parking lot. Amp'd acknowledged that Westside would have to approve, and that the lease would have to be signed before painters would begin painting the buildings. On March 1, 2007, the painting contractor painted a mock up, measuring four feet by four feet, on a wall of 1925, facing into an enclosed courtyard, whose other side was the 1901 building. After completing the work in 90 minutes, the painter removed all equipment. Later that day Garcia viewed the painting mock up with Khalessi. Garcia said she had no problem with the painting mock up, but would have to check with another Westside executive regarding approval.
On March 5, 2007, Khalessi observed a notice of non-responsibility that Westside had posted on the 1901 building. That notice, recorded on March 8, 2007, specified that Westside, owner of 1901, 1925, and 1933 South Bundy Drive, obtained knowledge that Amp'd was going to begin tenant improvements on the property, and that Westside would not be responsible for any work, improvement, or mechanics' liens claimed for labor, services, materials, or equipment furnished for the tenant improvements.
Although Garcia testified that she also posted notices of nonresponsibility at 1925 and 1933, other witnesses (Khalessi and Joseph Balbona of Amp'd; Todd Mihm of Tectonics; Tim Uvalle of CSI Electrical Contractors, Inc. (CSI)) stated that they never saw any notice of nonresponsibility at either building.
On March 14, 2007, the painting contractor, Randall/McAnany, began work on exterior painting. On March 19, 2007, Tectonics commenced work on tenant construction, repair, and renovations of the 1933 building. On April 2, 2007, CSI, as Tectonics' subcontractor, began electrical work on 1925 and 1933, and pulled an electrical permit on April 3, 2007. Because there were no as-built electrical plans, CSI surveyed and tested the electrical system of the 1933 building, and investigated panels and circuiting to determine their current and future use. Some electrical conduits came between 1933 and 1925, so CSI also had to do some work in 1925 to determine where they originated and how the buildings were tied together electrically. CSI workers entered, and materials were delivered, to 1933 through the 1925 building. After completing this initial investigation of the electrical system in 1925 and 1933, CSI completed its work of retrofitting lighting and power for the 34,000 square-foot building by replacing missing duplex receptacles, light fixtures, and switches and providing feeder cable as required to energize two existing electrical panels.
While performing the work for Tectonics, CSI understood the jobsite to be 1925 and 1933 South Bundy Drive. CSI delivered a preliminary notice, dated April 11, 2007, to Westside and to Amp'd, for `$109,516 of electrical work at 1925 South Bundy Drive. Another subcontractor, Walters Wholesale Electric #6 (WWE), delivered a preliminary notice, dated April 18, 2007, to Westside, Tectonics, CSI, Inc., and Amp'd for $20,000 of electrical supplies at 1933 South Bundy Drive.
After receiving the preliminary notice from WWE, Westside mailed a notice of nonresponsibility regarding its property at 1901, 1925, and 1933 South Bundy Drive and its tenant, Amp'd, to WWE on April 20, 2007, and also mailed copies to Tectonics and CSI. Westside's notice of nonresponsibility had been posted at 1901 South Bundy Drive and recorded before any construction work began at the premises.
On June 1, 2007, Amp'd petitioned for bankruptcy in the U.S. Bankruptcy Court in the District of Delaware.
On June 15, 2007, CSI recorded a mechanics' lien for $109,516 of labor, services, equipment, and materials furnished for a work of improvement at property at 1925 South Bundy Drive, naming Tectonics and Westside.
On June 20, 2007, Tectonics recorded a notice and claim of mechanics' lien for $237,391 of labor, materials, and services for construction of tenant improvements at 1933 S. Bundy Drive, naming Amp'd and Westside.
On September 6, 2007, the bankruptcy court granted Tectonics' motion for relief from the automatic stay of section 362 of the U.S. Bankruptcy Code to permit Tectonics to file its complaint. On September 10, 2007, CSI assigned its lien to Tectonics. On September 12, 2007, Tectonics filed a complaint against Westside and Amp'd to foreclose liens of Tectonics and of CSI, and for recovery in quantum meruit of $237,391 for labor, materials, and services provided by Tectonics to those defendants.
On September 15, 2009, Westside moved to dismiss the complaint under Civil Code section 3147,
Trial was by the court. After Tectonics rested, Westside made a motion for judgment (Code Civ. Proc., § 631.8), which the trial court granted as to the causes of action to foreclose Tectonic's mechanics' lien and for quantum meruit, because Tectonics had not filed a preliminary 20-day notice and it did not show that Westside was a "participating owner." The court denied the motion as to the second cause of action to foreclose CSI's mechanics' lien. Trial proceeded on that cause of action.
As reflected in its statement of decision, the trial court found that the timely preliminary notice sent by CSI was sufficient when it identified the location of the work as 1925 rather than 1933 South Bundy Drive, and that the notice of nonresponsibility Westside posted on March 5, 2007, was premature and was not effective to cut off Westside's liability pursuant to section 3094. The trial court also found that Westside did not carry its burden of persuasion on whether CSI's work was permitted under City of Los Angeles building codes. The trial court therefore found that Tectonics should recover nothing on its own claim, but Tectonics should recover $109,515.89 on the assigned claim of CSI.
On February 11, 2010, judgment was entered ordering that Tectonics recover nothing on its first and third causes of action, that Tectonics was entitled to foreclose its mechanics' lien under its second cause of action, to recover $109,515.89 plus prejudgment interest from June 15, 2007, to the date of the judgment, and to recover costs of suit, and that Tectonics should have a lien on the real property at 1925 South Bundy Drive in Los Angeles.
Westside filed a timely notice of appeal. Tectonics filed a notice of cross appeal.
Westside claims on appeal that:
1. The trial court erroneously held that CSI's preliminary notice sufficiently identified 1925 as the location of the work, where no extrinsic facts could have enabled Westside to identify the location of CSI's actual jobsite to the exclusion of others;
2. The trial court erroneously allowed Tectonics to foreclose the assigned mechanics' lien, even though neither Tectonics nor CSI obtained a required permits for CSI's work under the Los Angeles city building and electrical codes, which rendered the work illegal;
3. The trial court erroneously held that Westside's notices of nonresponsibility were premature when posting and recordation occurred after commencement of work relating to application of paint test coats; and
4. The trial court abused its discretion in denying Westside's motion to dismiss the complaint under section 3147, when no equities favored Tectonics except that the trial date was set within two years.
Westside claims that because CSI's preliminary notice did not identify 1933 South Bundy Drive as the location where CSI (and Tectonics) worked, the preliminary notice did not comply with section 3097 and the trial court's contrary finding was legal error.
Article XIV, section 3 of the California Constitution gives a creditors' remedy, a mechanics' lien, to a claimant
Section 3097 defines a preliminary 20-day notice as a written notice from a claimant given before recording a mechanics' lien, filing a stop notice, and asserting a claim against a payment bond. As a necessary prerequisite to the validity of any claim of lien, every person who furnishes labor, service, equipment, or material for which a lien can be claimed must give a written preliminary 20-day notice to the owner or reputed owner, to the original contractor or reputed contractor, and to the construction lender or reputed construction lender, if any. (Section 3097, subd. (a).)
The preliminary notice "shall contain the following information:
It is often stated that the mechanics' lien statutes are "remedial legislation, to be liberally construed for the protection of laborers and materialmen." (Connolly Development, Inc. v. Superior Court (1976) 17 Cal.3d 803, 826-827; see also Rental Equipment, Inc. v. McDaniel Builders, Inc. (2001) 91 Cal.App.4th 445, 449; Union Lumber Co. v. Simon (1907) 150 Cal. 751, 757.) It is also said that strict compliance with section 3097 is required. ( San Joaquin Blocklite, Inc. v. Willden (1986) 184 Cal.App.3d 361, 367; Truestone, Inc. v. Simi West Industrial Park II (1984) 163 Cal.App.3d 715, 721.)
The general principle of liberal construction of the mechanics' lien statutes remains valid, subject to the refinement that "where the Legislature has provided a detailed and specific mandate as to the manner or form of serving notice upon an affected party that its property interests are at stake, any deviation from the statutory mandate will be viewed with extreme disfavor. . . . [¶] . . . [¶] [Therefore] transmittal methods and notice requirements must be strictly construed." (Harold L. James, Inc. v. Five Points Ranch, Inc. (1984) 158 Cal.App.3d 1, 6-7.) The requirement that a preliminary notice contain "a description of the jobsite sufficient for identification" is not a specific mandate as to the manner or form of serving notice on an affected party. It is instead a non-specific threshold requirement that can be satisfied in a number of ways. Whether the property is given a description sufficient for identification is a question of fact. (Union Lumber Co. v. Simon, supra, 150 Cal. at p. 757; Borello v. Eichler Homes, Inc. (1963) 221 Cal.App.2d 487, 494; Credit Bureau of San Diego v. Williams (1957) 153 Cal.App.2d 834, 836.) Where substantial evidence supports a trial court finding as to the sufficiency of the description of property, this court will not disturb that finding. (Howard A. Deason & Co. v. Costa Tierra Ltd. (1969) 2 Cal.App.3d 742, 754.)
Westside claims that CSI's 20-day preliminary notice violated the fourth requirement of section 3097, subdivision (c)—that it contain "a description of the jobsite sufficient for identification"—because it identified the jobsite as 1925 South Bundy Drive when in fact CSI furnished labor, services, equipment, and materials to 1933 South Bundy Drive.
The evidence showed that Westside owned 1901, 1925, and 1933 South Bundy Drive and leased all three buildings to Amp'd in one lease, on which Amp'd paid a single security deposit and a single monthly rental. Amp'd paid for use of the parking area for the three buildings, and the lease made Amp'd responsible for utilities, janitorial, trash removal, fire life safety, and landscaping costs for the premises and parking area.
The lease provided that the premises—all three buildings—were leased in "as-is" condition and that Amp'd would make improvements at its sole cost and expense subject to Westside's approval. Amp'd office manager, Alistair Khalessi, communicated with Westside's property manager, Laurie Garcia, who was responsible for managing the three Bundy Drive properties, who had accompanied Khalessi inside the 1933 building and was aware of damage to the building caused by the previous tenant, of the need to repair and renovate the 1933 building, and that the "as-is" condition of the 1933 building made it unusable as office space.
Access to 1933 was only through 1925, and deliveries of material for 1933 were made to 1925, integrating the 1925 building with the 1933 jobsite.
Another subcontractor of Tectonics, Walters Wholesale Electric #16, delivered a preliminary notice dated April 18, 2007, to Westside for $20,000 of electrical supplies at 1933 South Bundy Drive.
Westside's March 2, 2007, notice of nonresponsibility specified Westside as the owner of all three properties, 1901, 1925, and 1933 South Bundy, was posted near the entrance of 1901 South Bundy, and was recorded on March 8, 2007. Thus Westside gave notice of nonresponsibility for work on all of the buildings while posting the notice at only one of them, indicating that it treated the three buildings as a single property and that, like CSI's preliminary notice, Westside's notice of nonresponsibility for one property applied to work at any of the three properties.
This substantial evidence supports the trial court's finding that the identification of the jobsite as 1925 South Bundy Drive in CSI's preliminary notice was "a description of the jobsite sufficient for identification" for purposes of section 3097, subdivision (c)(4). "As a general rule, the description of property sought to be charged with the lien will be deemed sufficient if it enables a party familiar with the locality to identify the property with reasonable certainty to the exclusion of others. [Citations.] Thus, errors in the description may be disregarded if the identification of the property is otherwise sufficient and where the notice of lien which is recorded is not fraudulent and does not mislead the owner or innocent third persons. [Citations.]" (Howard A. Deason & Co. v. Costa Tierra Ltd., supra, 2 Cal.App.3d at p. 754.)
Westside claims that the trial court erroneously allowed Tectonics to foreclose on the assigned CSI mechanics' lien even though neither Tectonics nor CSI obtained a permit for CSI's work under the City of Los Angeles building and electrical codes, which rendered the work illegal.
In its answer, Westside pleaded the affirmative defense that plaintiff did not obtain permits for work of improvement at 1933 South Bundy Drive, which rendered such work illegal, and which prohibited plaintiff from foreclosing on a mechanics' lien. A defendant advancing an affirmative defense to the plaintiff's claims bears the burden of proof of that defense. (Seltzer v. Barnes (2010) 182 Cal.App.4th 953, 969.)
Westside cites Los Angeles Municipal Code section 91.106.1.1, stating in relevant part: "No person shall erect, construct, alter, repair, demolish, remove or move any building or structure . . . unless said person has obtained a permit therefor from the department." Westside claims that CSI failed to obtain a permit for installation of more than 200 light fixtures, which constituted an alteration of 1933 South Bundy Drive.
Todd Mihm, the owner of Tectonics, testified that 243 light fixtures were replaced in 1933 South Bundy. Mihm applied for a building permit, which was issued by the City of Los Angeles Building Department. The application for the electrical permit described the work as "Add (10) circuit tele/data room." Timothy Uvalle, CSI's senior project manager, testified that an electrical permit is necessary when circuits are added to an existing building. Replacement of lights on existing circuits, however, does not require an electrical permit. Uvalle also testified that an electrical permit was not required for repair or replacement of electrical fixtures in a pre-existing building. The City of Los Angeles required a permit for new work but not for repair or replacement of a pre-existing condition. Uvalle stated that the application for the electrical permit did not cover the entire scope of CSI's electrical work, because a permit was not required for repair or replacement of the pre-existing condition. The permit was required for new electrical work, which in this case was the installation of 10 new circuits.
Westside cites Los Angeles Municipal Code section 93.0201, stating: "No person shall install, alter, reconstruct or repair any electrical wiring unless a permit therefor has been obtained from the Department except as otherwise provided in this Code." Although Westside argues that section 93.0201 required a permit for the repair or replacement of lighting fixtures, the provision is consistent with Uvalle's testimony. Installation, alteration, reconstruction or repair of electrical wiring requires a permit; replacement of lights on existing circuits does not require a permit.
Whether the evidence showed any violation of code provisions was a question of fact for the trial court. (M. Arthur Gensler, Jr., & Associates, Inc. v. Larry Barrett, Inc. (1972) 7 Cal.3d 695, 702 (Gensler).) Although the trial court heard some conflicting evidence from a defense expert witness, the trial court rejected that evidence as less persuasive than the contractors' evidence. Substantial evidence supported the trial court's finding that Westside failed to carry the burden of persuasion on its affirmative defense that CSI's failure to obtain electrical permits for replacement of lighting fixtures rendered the contract illegal.
Additionally, Westside has not provided authority that the failure to obtain a permit for installation of hanging light fixtures rendered the underlying contract illegal and prevented CSI or its assignee Tectonic from foreclosing on a lien. In Gensler, a contractor failed to apply for an amended permit. The opinion stated: "Although the court generally will not enforce an illegal contract, in some cases the statute making the conduct illegal, in providing for a fine or administrative discipline, excludes by implication the additional penalty involved in holding the illegal contract unenforceable." (Gensler, supra, 7 Cal.3d at p. 702.) Gensler does not provide authority making a failure to obtain a building permit the ground for either voiding the contract or for making a mechanics' lien unenforceable.
Westside claims that the trial court erroneously found that Westside's notices of nonresponsibility were premature, even though posting and recordation of those notices occurred after commencement of work relating to the application of a painting test coat on a wall of 1925 South Bundy Drive.
Section 3094 states: "`Notice of nonresponsibility' means a written notice, signed and verified by a person owning or claiming an interest in the site who has not caused the work of improvement to be performed, or his agent, containing all of the following:
The purpose of the 20-day preliminary notice law of section 3097 is to advise a noncontracting owner of construction on its property. Section 3094 requires the noncontracting owner to notify the claimant that the owner is not responsible for the work, and thus informs the claimant that he or she may not look to the property to secure payment for the work of improvement. If a noncontracting owner has been served with a preliminary notice or otherwise has actual knowledge of the work to be performed on its property, the owner must file the notice of nonresponsibility within 10 days of the owner's knowledge of actual, not intended, construction. (Kim v. JF Enterprises (1996) 42 Cal.App.4th 849, 858 (Kim ).) "A premature notice of nonresponsibility is ineffective to relieve an owner from liability." (Arthur B. Siri, Inc. v. Bridges (1961) 189 Cal.App.2d 599, 601.) Whether improvement has commenced is a question of fact. (Ibid.)
On March 1, 2007, the painting contractor painted a mock up, measuring four feet by four feet, on a wall of the 1925 building facing into a courtyard whose other side was the 1901 building. The painter completed the work in 90 minutes and removed all equipment. Later that day Lori Garcia viewed the painting mock up, and told Khalessi she had no problem with the painting mock up, but would have to check with another Westside executive regarding approval.
Westside posted a notice of nonresponsibility stating that Westside owned 1901, 1925, and 1933 South Bundy Drive, that Amp'd was the lessee of that real property, and "[t]hat on March 1, 2007, the undersigned first obtained knowledge that the tenant was going to begin tenant improvements on the above-described real property." The notice of responsibility was observed to be posted on March 5, 2007. The notice of nonresponsibility was recorded on March 8, 2007.
The painting of the buildings began on March 14, 2007. Tectonics began construction in the week of March 19, 2007. CSI started work on April 2, 2007.
The painting of a four-foot by four-foot mock-up was not something that would necessarily indicate that tenant improvement was beginning. The mock-up was painted subject to approval by Westside, which could have denied approval, which in turn precluded a finding that "actual" work of tenant improvement had commenced. The painting of the buildings did not begin until March 14, 2007.
Documentary evidence also reflects Westside's intention to post the notice of nonresponsibility before commencement of the tenant's work of improvement. The notice of nonresponsibility stated: "on March 1, 2007, the undersigned first obtained knowledge that the tenant was going to begin tenant improvements on the above-described real property." (Italics added.) In a declaration, Alistair Khalessi of Amp'd stated that on Friday, March 2, 2007, Lori Garcia told him that over the weekend or on March 5, 2007, she planned to post a notice of nonresponsibility on each of the South Bundy Drive buildings "in connection with work which Amp'd Mobile intended to have performed at the property, including repainting of the buildings and other work." (Italics added.) Khalessi testified that on March 2, 2007, he informed Garcia that Amp'd was not engaged in any construction work at the property, and Garcia told him she wanted to post the notice of nonresponsibility before any construction work began. In a July 30, 2007, e-mail to Tectonic's attorney Susan Fowler McNally, Westside's attorney Scott J. Tepper stated that Tectonics and other subcontractors sought to begin work in February 2007, but Westside refused to give them permission until after the lease was signed (which occurred on March 7, 2007). Tepper stated: "So, Westside knew in February that a work of improvement was going to be made, refused to allow it to begin until after the lease was signed, and then posted immediately before any work of improvement began."
Substantial evidence supports the trial court's finding that the posting and recording of the notice of nonresponsibility occurred before actual commencement of work of improvement, was therefore premature, and was ineffective to relieve Westside from liability for the lien.
Westside claims that the trial court abused its discretion in denying Westside's motion to dismiss the action to foreclose the lien, pursuant to section 3147, for plaintiff's failure to bring it to trial within two years after it was commenced.
Section 3147 states: "If the action to foreclose the lien is not brought to trial within two years after the commencement thereof, the court may in its discretion dismiss the same for want of prosecution." This court reviews an order on a motion to dismiss an action to foreclose a lien for failure to bring it to trial within two years according to an abuse of discretion standard. (Farbstein v. Woulfe (1928) 204 Cal. 595, 597; Bronger v. Polytechnic School (1943) 60 Cal.App.2d 656, 657.)
Tectonics filed its complaint to foreclose liens on September 12, 2007. Westside moved to dismiss the complaint pursuant to section 3147 on September 15, 2009. Westside argued that it had never impeded the setting of a trial date and that Tectonics' lack of diligence caused the failure to bring the action to trial.
After filing its complaint, Westside moved for summary judgment, which the trial court heard on June 18, 2008, which was also set for a trial setting conference. The trial court denied the summary judgment motion, but made no order setting the trial. The court clerk informed plaintiff's counsel that the court would mail notice of a rescheduled trial setting conference to the parties. From July through November 2008, plaintiff's counsel repeatedly requested that the trial court set a trial setting conference, but did not make a motion to specially set the matter for trial. On December 11, 2009, plaintiff's counsel received notice from the court of a January 14, 2009, status conference, which was continued to January 23, 2009, to hear Westside's motion for leave to amend its answer. Westside filed its amended answer on January 26, 2009. At the January 23, 2009, hearing, the trial court set a February 9, 2009, trial setting conference. At the February 9, 2009, trial setting conference, plaintiff's counsel was not available for an April 28, 2009, trial date, nor was Todd Mihm, a key witness for plaintiff, whose wife was scheduled to give birth around that time. Plaintiffs' counsel requested a trial for July or August 2009, but Westside's attorney was not available for trial in those months, and the trial judge would be on vacation during late July and early August. Plaintiffs' counsel requested a June 2009 trial date, but Westside's counsel stated he was not available for trial during June 2009. Defendant's counsel advised the court that if the case was not set for trial within two years of the date the complaint was filed, he intended to move to dismiss it. The trial court continued the trial setting conference until August 10, 2009, without objection from plaintiff or defendant. Both plaintiff and defendant conducted discovery in May, June, and July of 2009. On August 10, 2009, Westside informed the trial court that it intended to call experts at trial, and the trial court set a November 12, 2009, trial date without objection from either plaintiff or defendant.
Ruling on October 15, 2009, the trial court stated that on August 10, 2009, it had set a trial for November 12, 2009, and denied the motion.
There was no showing that the setting of the trial date was due to plaintiff's delay or lack of diligence in prosecuting the case. The delay in setting a trial date arose because the trial setting conference, initially set for June 18, 2008, did not occur until February 9, 2009, and because the parties could not agree to a trial date at that trial setting conference. At the trial setting conference on August 10, 2009, neither party objected to a trial date set two months after the two-year period of section 3147. We find no abuse of discretion in the denial of the motion to dismiss.
Tectonics claims on appeal that:
1. The trial court erroneously granted Westside's motion for judgment (Code Civ. Proc., § 631.8) based on the inapplicability of the participating owner doctrine;
2. The trial court incorrectly applied a requirement of actual knowledge of construction in concluding that Westside was not a participating owner, and erroneously applied inapposite case precedent.
At the conclusion of Tectonics' case in chief, Westside moved for judgment under Code of Civil Procedure section 631.8. The trial court denied the motion as to Tectonics' second cause of action to foreclose the CSI mechanics' lien assigned to Tectonic, and granted the motion as to the Tectonics' first cause of action to foreclose its mechanics' lien for $237,391 against Westside's property at 1933 South Bundy Drive, and as to its third cause of action for quantum meruit for that amount. Tectonics did not have a contract with Westside and did not post a 20-day preliminary lien notice, but argued that it was exempt from that requirement because Amp'd was the agent of Westside under the participating owner doctrine. The trial court found that the facts presented during Tectonics' case in chief did not support application of the participating owner doctrine, that Westside was not involved in Tectonics' contract with Amp'd, and that Westside could not be deemed a participating owner. Thus Tectonics had failed to prove an essential element of its claim. Tectonics cross-appealed from the subsequently entered judgment.
To enforce a lien a claimant does not record a mechanics' lien until after completion of the work or after labor, services, equipment or materials are furnished. (§§ 3115, 3116.) Nonetheless, with some exceptions, a claimant must serve a preliminary notice "not later than 20 days after the claimant has first furnished labor, service, equipment, or materials to the jobsite." (§ 3097, subd. (d).) The preliminary 20-day notice is necessary to make a claim of lien valid and enforceable. (Id. at subd. (a); § 3114.) There are, however, exceptions to these requirements. One exception is that no preliminary 20-day notice is required from "one under direct contract with the owner." (§ 3097, subd. (a); Kim v. JF Enterprises, supra, 42 Cal.App.4th at p. 855.)
Contractors, mechanics, and suppliers of materials have an automatic lien on property for which they have provided labor or furnished material "at the instance of the owner" or owner's agent. (§ 3110.) When the property is leased and the lessee orders work performed on leased premises without the lessor's knowledge, the lien attaches only to the lessee's leasehold interest and not to the owner's property. Improvements constructed with the owner's knowledge, however, are deemed to be at the instance of the owner, unless the owner gives notice of nonresponsibility. (Howard S. Wright Construction Co. v. Superior Court (2003) 106 Cal.App.4th 314, 321 (Wright Construction Co.).) When the landowner "caused the work of improvement to be performed," a notice of nonresponsibility has no effect. (§ 3094.)
Under the "participating owner doctrine," when the lease requires the tenant to make the improvements, the tenant may be treated as an agent of the landowner, who is deemed to have caused the work to be performed. (Wright Construction Co., supra, 106 Cal.App.4th at p. 321.) "Where the terms of a lease impose a mandatory duty upon a lessee to make designated substantial alterations to existing structures, or to make other substantial improvements to the realty without which the specific purpose for which the lease is made cannot be accomplished, [the lessee] is by implication required to make these improvements." (Baker v. Hubbard (1980) 101 Cal.App.3d 226, 235 (Baker).) By compelling a lessee to substantially enhance the value of the lessor's real property or be in default of the lease, the owner-lessor is deemed to be a participant with his lessee in contracts to make those improvements. (Ibid.) Under the participating owner doctrine, "an owner who has authorized construction, either by himself or through an agent[,] cannot escape liability despite the filing of a notice of nonresponsibility." (Los Banos Gravel Co. v. Freeman (1976) 58 Cal.App.3d 785, 793.) The participating owner doctrine applies where the owner would not have leased the property except for the lessee's promise either to substantially alter existing structures or build new ones, the improvements are permanent and benefit the lessor, and failure to make the improvements would be a breach of the lease. (Baker, at p. 235.)
Here the lease did not require Amp'd to make improvements, substantial alterations to the leased structures, or substantial improvements without which the specific purpose for which the lease was made could not be accomplished. (Cf. Wright Construction Co., supra, 106 Cal.App.4th at pp. 322-323.) Thus the lease did not require, compel, or impose a mandatory duty on the lessee to make designated improvements which would substantially enhance the value of Westside's property or, if Amp'd did not make those improvements, would place Amp'd in default of the lease. Importantly, the lease stated that Amp'd took the premises in "as-is" condition, and that Amp'd's improvements were to "be made at Tenant's sole cost and expense and, except as provided elsewhere in this Lease, shall be subject to Landlord's prior approval[.]" The trial court found that Amp'd failed to seek Westside's consent to make improvements, and that Westside never granted its consent despite the contractual requirement that Amp'd make improvements subject to the prior approval of Westside. Thus Westside did not authorize the construction of improvements; that work was performed by authorization of Amp'd.
Tectonics argues that the work of improvement benefited Westside by increasing the value of its real property at 1901, 1925, and 1933 South Bundy by taking a dilapidated, non-functioning property and renovating it into a modern corporate office building. The issue, however, is whether Westside required Amp'd to perform those works of improvement in the lease or participated financially in paying for those works of improvement, in essence becoming a joint venturer with Amp'd (see Ott Hardware Co. v. Yost (1945) 69 Cal.App.2d 593, 601-602). The lease did not require Amp'd to perform the works of improvement, Westside did not participate in financing the works of improvement, and Westside was not a joint venturer with Amp'd in the works of improvement of Westside's realty.
We conclude that the trial court correctly found that Westside could not be deemed to be a participating owner.
Tectonics claims that in concluding that Westside was not a participating owner, the trial court incorrectly applied a requirement of actual knowledge of construction to the participating owner doctrine.
The trial court stated that it was not persuaded by the argument that without the improvements made to the Westside's South Bundy Drive properties, the lease would have little or no value to Amp'd. In this connection, the trial court stated to the extent that this was really an argument that Westside had constructive notice that there would be construction or that there was a need for construction, the argument failed because it was the owner's actual, not constructive knowledge, which did away with the need for the preliminary notice, and constructive notice did not satisfy Civil Code section 3129.
The owner's actual knowledge, not constructive knowledge, of construction excuses a claimant from the requirement of serving a preliminary notice in section 3097. (Kim, supra, 42 Cal.App.4th at p. 859.) In Kim, plaintiffs contracted to perform construction work on leased premises and the lessee did not pay them fully for that work. Plaintiffs did not file section 3097 preliminary notices, and contended they were not required to do so because no preliminary notice was required from "one under direct contract with the owner." (§ 3097, subd. (a).) Plaintiffs argued that although their contracts were with the lessee, the owners had knowledge of work performed by plaintiffs, who therefore did not need to file preliminary notices. Kim stated that section 3129 created a presumption that where an owner had knowledge of construction work on its property, that work was done at the instance of the owner and hence "under direct contract with the owner" within section 3097, and no preliminary notice was required from the claimant. (Kim, at p. 856.) Plaintiffs, however, could only show the owner's constructive knowledge. Plaintiffs alleged that the lease permitted the lessee and any assignee to make improvements which would benefit the owners, and argued that this lease term created a duty on the owner to inquire whether the lessee had contracted for works of improvement and that reasonable inquiry by the owners would have revealed the construction work performed by plaintiffs. (Ibid.)
Kim rejected plaintiff's claim that the owners' constructive knowledge exempted plaintiffs from the requirement to serve a preliminary 20-day notice. It held that "only where the owner has actual knowledge of the construction is a claimant excused from serving a preliminary notice." (Kim, supra, 42 Cal.App.4th at p. 859.)
Kim did not discuss or apply the participating owner doctrine. Kim has relevance because it identified the presumption created by section 3129 that where an owner has knowledge of construction work on its property, that work is done at the owner's instance and hence under direct contract with the owner within section 3097. Only the owner's actual knowledge of construction—not constructive knowledge—will exempt the claimant from the section 3097 requirement of filing a 20-day preliminary notice. (Kim, supra, 42 Cal.App.4th at p. 859.)
Likewise only actual knowledge of construction—not constructive knowledge—gives rise to the presumption of section 3129. Because the presumption created by section 3129 places the noncontracting owner in the position of a party to the contract, the lessor-owner with actual knowledge of the work of improvement to its property may be estopped to deny the validity of the lien because the lessee is viewed as his agent. (Truestone, Inc. v. Simi West Industrial Park II, supra, 163 Cal.App.3d at p. 722.)
Therefore, if Tectonics argued that Westside knew Amp'd would have to perform construction on Westside's buildings in order for the lease to have value to Amp'd, that argument was at best an argument that Westside had constructive knowledge of Tectonics' construction work. Constructive knowledge, however, was not sufficient to create the presumption of section 3129 which would place Westside in the position of a party to the Amp'd-Tectonics contract. If it had, that would have weighed in favor of finding that Westside was a participating owner, which would preclude Westside from escaping liability for mechanics' liens on its property by filing a notice of nonresponsibility. (Los Banos Gravel Co. v. Freeman, supra, 58 Cal.App.3d at p. 793.) Because Westside was required to have actual knowledge of the work of improvement before the section 3129 presumption could place it in the position of a party to the Tectonics-Amp'd contract, constructive knowledge was not sufficient to do so. The trial court did not erroneously apply a requirement of actual knowledge of construction in concluding that Westside was not a participating owner.
The judgment is affirmed. The parties are ordered to bear their own costs on appeal.
CROSKEY, Acting P. J. and ALDRICH, J., concurs.
