Schrader Iron Works, Inc. v. Lee

Opinion

Defendants Wayne Lee and Tom T. Lee (sometimes hereinafter referred to as the Lees) and E. A. Norwitt and Annabelle Norwitt (sometimes hereinafter referred to as the Norwitts) appeal from a judgment entered against them in favor of plaintiff Schrader Iron Works, Inc., a corporation (hereafter Schrader) in an action to foreclose a mechanic’s lien. The judgment decreed that the Lees and the Norwitts owed Schrader the sum of $5,991.95, that plaintiff had a lien on the property involved for the sale of said property, for the application of the proceeds of said sale to the aforementioned indebtedness, and for the recovery of any deficiency against the Lees and Norwitts.

The Facts

On July 8, 1965, Mustin Construction Company (hereinafter “Mustin”) entered into a contract with Schrader for the production and erection of structural steel for a building Mustin was constructing on land owned by it. During the course of construction a “For Sale” sign was posted on the building. The structural steel produced by Schrader for the subject building was installed by Schrader on two separate days, i.e., on September 22, 1965 and on October 15,1965.

On October 21, 1965, Mustin and the Lees executed a deposit receipt agreement calling for the exchange of the Mustin property for property owned by the Lees. The broker representing the Lees was the Cable Car Realty and the transaction was handled by its agent George Fung. Pursuant to an oral agreement Mustin and the Lees agreed that the escrow would not close until the notice of completion was filed because the Lees wanted to be sure that the property was clear and they needed time to secure financing.

Mustin did not pay the sum of $4,750 due Schrader for the structural steel work within the 30-day period provided for in the contract between the parties. The contract provided that said sum was to be paid within 30 days after the steel was erected. Schrader contacted Mustin and was

We observe that in the instant case the Lees did obtain a title report prior to acquiring title and that such report revealed that a notice of completion had been recorded on January 11, 1966 by Mustin. The Lees knew or should have known that the lien period had not expired when they took title on February 24,1966. (See former § 1193.1, now Civ. Code, §§ 3093, 3097, 3115 to 3118.) Moreover, the Lees were well aware that a notice of completion was to be filed since they entered into an oral agreement with Mustin that the escrow would not be closed until the notice of completion had been filed. The record discloses, further, that while the construction was in progress, and while the negotiations for the sale were pending, defendant Wayne Lee visited the property daily and spoke with construction workers. It is apparent that the Lees had knowledge of the construction and that they were on notice that mechanics’ liens could attach to the property. It is equally apparent that they could have taken proper steps to protect themselves against mechanics’ liens.

We do not think it was in the contemplation of the lien law to put the burden on claimants who have contracted with an owner directly to make inquiry or to search the title records to ascertain whether the owner with whom they had contracted made a conveyance of the property. To interpret the subject statute as urged by defendants would require the contractor to make a day-to-day ascertainment whether there was a new owner of the property. We think it more reasonable to place the burden on the purchaser in view of the objectives and purposes of the mechanics’ lien law.

“The lien of a mechanic or materialman is a constitutional right and attaches to the structure as the material is furnished or labor per

In Halspar the lien claimant entered into a contract with a lessee. The lessor, who had actual knowledge of the work, failed to give a notice of non-responsibility. The court found that section 1183.1, subdivision (b) created a conclusive presumption which operated to transform the contract with the lessee into a contract with the lessor. The court concluded that the claimant was thus “ ‘under direct contract with the owner’ ” and excepted by the terms of section 1193, subdivision (a) from its requirement of serving a prelien notice. (238 Cal.App.2d at pp. 899-900.) Benson involved virtually identical facts and was decided by the same court by reference to its opinion in Halspar. (Benson Elec. Co. v. Hale Bros. Assoc., Inc., supra, 246 Cal.App.2d 686 , 693.)

In Scott the claimant entered into a contract with an owner-developer. Prior to the time the claimant completed his work, the developer conveyed the property to a construction company which had been providing financing. At some point in time an additional party acquired an interest in the property. Although it is not stated when this occurred, the court’s reasoning suggests that it was while the work was in progress. ( 251 Cal.App.2d 347 , 352-353.) The court stated that “Where a noncontracting owner has actual knowledge of the improvements being made to his property and fails to avail himself of the mode of exempting his interest from liability for the work provided, by section 1183.1, subdivision (b), he is estopped to deny that the work was done at his instance and request. (Halspar, Inc. v. La Barthe, 238 Cal.App.2d 897 [ 48 Cal.Rptr. 293 ], hg. den. Feb. 16, 1966.) Under such circumstances the claimant has a ‘direct contract with the owner’ for the purposes of section 1193 and consequently is not required to give the notice prescribed therein. (Halspar, Inc. v. La Barthe, supra, 238 Cal.App.2d 897 , 899-900; Benson Elec. Co. v. Hale Bros. Assoc. Inc., 246 Cal.App.2d 686 , 693 [ 55 Cal.Rptr. 73 ].)” (At p. 353.)

It is clear that the rule declared in Halspar, Benson and Scott is not applicable in the instant case because the Lees were not required to file a notice of non-responsibility. They did not become owners of the property until more than one month after the notice of completion was filed. They had no interest in the property at the time Mustin contracted with Schrader and they had no interest in the property at the time Schrader performed its obligations under the contract with Mustin. It is thus apparent that the Lees could not have filed a notice of non-responsibility for they did not own the property at the relevant time. In sum, the facts presented by these cases are totally different from those presented by the instant case. Here we

Estoppel

The Lees contend that even if Schrader was not required to give them a prelien notice, Schrader is estopped by its own conduct to deny that a prelien notice to the Lees is a prerequisite to a valid hen. We perceive the thrust of this contention to be that because of its conduct Schrader was required under the theory of equitable estoppel to give a prehen notice to the Lees even though under section 1193, subdivision (a) it was not required to do so.

In the instant case estoppel was not pleaded. It is the general rule that where estoppel is an affirmative defense it must be affirmatively averred. (Phoenix Mutual L. Ins. Co. v. Birkelund, 29 Cal.2d 352 , 363 [ 175 P.2d 5 ]; Lucci v. United Credit and Collection Co., 220 Cal. 492 , 497 [ 31 P.2d 369 ]; Auto Auction, Inc. v. Riding Motors, 187 Cal.App.2d 693 , 698 [ 10 Cal.Rptr. 110 ].) An exception to this rule is where the party in whose favor the estoppel exists at the time of preparing his pleading is without knowledge that his claim must ultimately rest on it. (Auto Auction, Inc. v. Riding Motors, supra; Estate of Pieper, 224 Cal.App.2d 670 , 691 [ 37 Cal.Rptr. 46 ]; Guy v. Leech, 41 Cal.App. 704 , 708 [ 190 P. 1067 ].) An objection that a defendant did not plead estoppel is waived, however, where evidence thereon is admitted without objection and the issue is fully litigated. (Pacific Finance Corp. v. Foust, 44 Cal.2d 853 , 858 [ 285 P.2d 632 ]; Wynn v. Treasure Co., 146 Cal.App.2d 69 , 75 [ 303 P.2d 1067 ]; Petersen v. Cloverdale Egg Farms, 161 Cal.App.2d 792 , 798 [ 327 P.2d 127 ].)

In the instant case it is not claimed by the Lees that they were unaware of the facts on which they predicate estoppel at the time they filed then-answer. We are thus relegated to determining whether Schrader has waived

Adverting to' the doctrine of estoppel, we note that its application requires the establishment of four elements, to wit: “(1) that the party to be estopped must be apprised of the facts; (2) he must intend that his conduct will be acted upon, or act in such a manner that the party asserting the estoppel could reasonably believe that he intended that his conduct to be acted upon; (3) the party asserting the estoppel must be ignorant of the true state of the facts; and (4) he must rely upon the conduct to his injury. [Citation.]” (Crestline Mobile Homes Mfg. Co. v. Pacific Finance Corp., 54 Cal.2d 773 , 778 [ 8 Cal.Rptr. 448 , 356 P.2d 192 ]; Domarad v. Fisher & Burke, Inc., 270 Cal.App.2d 543 , 555 [ 76 Cal.Rptr. 529 ].)

In the present case, Schrader was not obliged to give a prelien notice to the Lees, even if he had actual knowledge that they acquired the property as owners during the period within which he could perfect his lien which had already attached, unless he did something to indicate to the Lees that he would give them such a notice as a prerequisite to the filing of his claim of lien.

Adverting to Schrader’s conduct, the record discloses without contradiction that there was no contact or communication between Schrader and the Lees. The trial court specifically found that Schrader was unaware of the negotiations between Mustin and the Lees. This finding was based on substantial evidence. There is nothing in the record to indicate that Schrader had indicated to Mustin or to any other person that it did not intend to perfect its lien if it did not receive payment for its work and labor. We apprehend that estoppel by conduct may not be predicated upon Schrader’s agreement with Mustin to withhold the filing of its claim of mechanic’s lien until the end of the period provided by statute for such filing. This was a right that Schrader was given by statute. Nor do we perceive that an inference could be drawn that a prelien notice would be given merely because Schrader agreed with Mustin to withhold the filing of a claim of mechanic’s lien until the end of the statutory period in order to assist Mustin in his sale of the property so that funds might be realized with which to satisfy Schrader’s claim. In sum, the record is devoid of any substantial evidence upon which an inference could be drawn that the Lees reasonably believed that Schrader intended to and would give them a prelien notice.

The Lees, on the other hand,' were not ignorant of the true facts. They

Accordingly, under the state of the record, the specific findings requested by the Lees, even if required, would have been adverse to them because, as a matter of law, all of the elements of estoppel were not established. The Lees may not, therefore, complain of the failure of the trial court to make the requested findings. (Roberts v. Graves, 269 Cal. App.2d 410 , 418-419 [ 75 Cal.Rptr. 130 ]; Pry Corp. of America v. Leach, 177 Cal.App.2d 632 , 636 [ 2 Cal.Rptr. 425 ].)

Norwitts’ Deed of Trust

The Norwitts concede that they took their interest under the deed of trust subject to any valid liens which were perfected before their deed of trust was recorded. (See Pugh v. Moxley, 164 Cal. 374 , 376-377 [ 128 P. 1037 ] [overruled on other grounds, Theisen v. County of Los Angeles, 54 Cal.2d 170 , 182 ( 5 Cal.Rptr. 161 , 352 P.2d 529 )]; Simons Brick Co. v. Hetzel, 12 Cal.App. 1 , 9 [ 236 P. 357 ].) They claim, however, that their interest is not made subject to otherwise invalid hens merely on the ground that the assignment of the deed of trust occurred after the lien was of record. This contention is predicated upon the thesis that if Schrader’s claim is invalid for failure to file the prehen notice, or upon the grounds of estoppel, or for any other reason, it is invalid for all purposes and is invalid as to them. Our determination hereinbefore made that Schrader’s lien is not invalid puts the Norwitts’ contention to rest.

The Judgment

The Lees and the Norwitts contend that, even thought the court

Aside from the doubtful validity of the counterdeclaration in its attempt to characterize the “effect” of the judge’s remarks, it is clear that the parties were discussing the requirement of a prelien notice in the context of section 1193, subdivision (a) and the relationship of the parties, and that the trial judge was merely expressing an opinion on a question of law and the interpretation of a statute, an interpretation which coincides with that made by this court. It is apparent that, although counsel for the Lees and the Norwitts had alluded to the factual question of estoppel in his opening statement, these facts were not detailed in the opening statement. The ensuing colloquy had particular reference to the interpretation of the statute and is understandable in view of the answer which did not plead an estoppel and the fact that estoppel was mentioned for the first time in defense counsel’s opening statement.

The trial record discloses that the Lees and the Norwitts were permitted at the trial to present their defenses, both legal and factual, without any hindrance or restraint on the part of the court and they were permitted to present the facts they so desired on the issue of estoppel without any judicial curtailment.

The second basis of alleged irregularity is that the court exerted pressure upon the Lees and the Norwitts to settle the case in the amount demanded by Schrader. Upon inquiry as to whether the case could be settled, counsel for Schrader indicated a willingness to accept $4,000 in full settlement. The trial judge’s statement that he thought it was a fair figure and that the settlement should be accepted was obviously made in the light of the court’s belief that the defense based on the prelien notice was hot a valid one. When the offer was unequivocally rejected the trial judge proceeded with the trial. The claim of coercion is clearly without substance. Under the state of the record we have nothing more than a sincere

It is next claimed that the trial judge’s conduct was irregular because he evinced a prejudice and hostility toward title companies. The allusions to title companies would better have been left unsaid. Such statements, however, did not prevent a fair trial. No title company was a party to the proceedings. The claim that the trial judge showed a strong interest in the title policy issued to the Lees on the subject property, particularly as to whether or not the policy covered the claim of lien in question, did not reflect prejudice against the Lees or the Norwitts. We apprehend, in view of the claim of estoppel, that the knowledge and conduct of the Lees were relevant to that issue, and that whether the title policy protected them against mechanics’ liens was relevant to the issue of estoppel, as was the scope and extent of the title report on the property obtained by the Lees.

The next claim of irregularity is that the trial court demonstrated hostility toward the defense in connection with the testimony of the witness George Fung. In this regard all that is stated in defendants’ declaration is that “Judge McCarty took over the examination of the witness concerning the purchase contract of the subject real property, before the witness had been permitted to testify concerning that matter on direct examination, and used leading questions to elicit confused testimony contrary to the face of the document.” These statements are essentially conclusionary and are not evidentiary. We point out that a trial judge is entitled to question a witness in order to ascertain the truth and that it is not error for him to do so unless the party claiming error can point out such error, as well as its prejudicial effect.

It is asserted in the declaration that the trial judge expressed a doubt concerning the credibility of Chinese witnesses. This assertion finds its basis in the colloquy between the court and counsel at the time findings were being settled. When defense counsel asserted that it was apparent the witnesses Lee and Fung had not lied, the trial judge stated he did not know whether they were lying or not. The judge later related a previous experience where a Chinese witness who testified he did not understand English turned out to be a graduate of the University of California articulate in the English language. The court remarked, however, that he “shouldn’t judge individuals by past experience.” Although it would have been better to have left unsaid the. remarks with respect to a previous

Finally, it is claimed that the trial judge exhibited his hostility and prejudice to these defendants because he summarily refused to grant the requests for specific findings. The trial judge indicated he had read the proposed findings and the objections thereto and that he was ready to approve the findings as submitted without argument. The trial judge was not required to hear argument on the findings but to consider the written objections and request for specific findings. This he did. While error might be predicated upon an improper denial of a specific finding, such denial is not an indication of prejudice or a deprivation of the right to a fair trial.

We perceive that the claim of error asserted as irregularities depriving the Lees and the Norwitts of a fair and impartial trial are essentially claims of bias and prejudice on the part of the trial judge. Each of the alleged incidents became known to these defendants at the time they occurred, yet no objection was interposed by them nor was any motion made to disqualify the trial judge at the earliest practicable opportunity after learning of the grounds therefor as required in a disqualification proceeding brought pursuant to section 170. (See Develop-Amatic Engineering v. Republic Mortgage Co., supra, 12 Cal.App.3d 143 , 150.) The alleged bias or prejudice was urged for the first time in the motion for new trial—at a time subsequent to receiving an adverse judgment.

Under the state of the record which involves essentially questions of law and a minimum of facts which are in dispute, we are entitled to presume that the judgment rests on the strength of the trial court’s resolutions of these questions upon the applicable legal principles rather than any remarks the court may have made in discussing these principles with counsel. We observe, moreover, that the granting or denial of a new trial is a matter which rests largely in the discretion of the trial court and will not be disturbed except on a manifest and unmistakable abuse of that discretion. (McFarland v. Voorheis-Trindle Co., 52 Cal.2d 698 , 707 [ 343 P.2d 923 ]; Develop-Amatic Engineering v. Republic Mortgage Co., supra, 12 Cal.App.3d 143 , 151.) In the present case the burden which reposes upon the Lees and the Norwitts of showing that the court abused its discretion has not been sustained. (See Yarrow v. State of California, 53 Cal.2d 427 , 434 [ 2 Cal.Rptr. 137 , 348 P.2d 687 ].)

The judgment is modified as follows: The word “defendants” is deleted

Sims, J., andElkington, J., concurred.

A petition for a rehearing was denied July 26, 1972, and appellants’ petition for a hearing by the Supreme Court was denied August 23, 1972.