Judge: Thomas D. Long, Case: 23AHCV02988, Date: 2024-11-12 Tentative Ruling

Case Number: 23AHCV02988    Hearing Date: November 12, 2024    Dept: 48

SUPERIOR COURT OF THE STATE OF CALIFORNIA

FOR THE COUNTY OF LOS ANGELES - CENTRAL DISTRICT

On December 27, 2023, Zwick Construction Company filed this action against APPA Colorado LLC seeking, in part, foreclosure of its Mechanic’s Lien (Document No. 20230667741) in the sum of $7,008,704.52.  On February 13, 2024, Zwick filed a Notice of Lis Pendens.  On June 18, 2024, APPA filed a first amended cross-complaint against Zwick.

On October 3, 2024, APPA filed a motion to expunge or reduce Zwick’s mechanic’s lien.

E-FILING DEFICIENCIES

Under the Court’s First Amended General Order for electronic filing, “[e]lectronic documents must be electronically filed in PDF, text searchable format when technologically feasible without impairment of the document’s image.” (General Order No. 2019-GEN-014-00, at ¶ 6(a).)  Additionally, the table of contents and all attachments, including exhibits, must be bookmarked.  (General Order No. 2019-GEN-014-00, at ¶¶ 6(b)-(d), (f); California Rules of Court, rule 3.1110(f)(4).)

Zwick’s filings do not comply with these requirements.  The documents are not text searchable and do not contain any electronic bookmarks.

If any party continues to electronically file noncompliant documents, the Court may strike the filings or issue sanctions.

EVIDENTIARY OBJECTIONS

The Court does not rule on Zwick’s and APPA’s numerous evidentiary objections.  Most of the objected-to material is irrelevant and immaterial to the Court’s decision.  For the documents that the Court does rely on, both parties treat the documents as authentic.  (See Evid. Code, § 1414.)

REQUEST FOR JUDICIAL NOTICE

APPA’s request for judicial notice of 19 mechanic’s liens is granted.

DISCUSSION

Zwick contends that “APPA’s motion is an obvious, subversive attempt at summary judgment prior to the commencement of any discovery and while the parties are preparing for private mediation of the entire dispute.”  (Opposition at p. 1.)  Not so.  This motion is not dispositive of any underlying claims in the complaint or amended cross-complaint.

“A motion to remove a mechanic’s lien is recognized as a device that allows the property owner to obtain speedy relief from an unjustified lien or a lien of an unjustified amount without waiting for trial on the action to foreclose the lien.”  (Howard S. Wright Construction Co. v. Superior Court (2003) 106 Cal.App.4th 314, 318 (Howard) [citing Lambert].)  “Unlike other motions, the burden is on the party opposing the motion to expunge—i.e., the claimant-plaintiff—to establish the probable validity of the underlying claim.  (Code Civ. Proc., § 405.30.)  The claimant-plaintiff must establish the probable validity of the claim by a preponderance of the evidence.  (Code Civ. Proc., § 405.32.)”  (Id. at p. 319, footnote omitted.)  This requires a claimant to establish 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 or cessation of work.”  (Basic Modular Facilities, Inc. v. Ehsanipour (1999) 70 Cal.App.4th 1480, 1485 (Basic Modular).)

“The function of the mechanic’s lien is to secure reimbursement for services and materials actually contributed to a construction site, not to facilitate recovery of consequential damages or to provide a claimant with leverage for imposing the claimant’s view of who caused the breakdown in the contract.”  (Lambert v. Superior Court (1991) 228 Cal.App.3d 383, 389 (Lambert).)[1]

A.        Zwick’s Mechanic’s Lien Exceeds the Value of the Work and the Agreed Price, and Zwick Does Not Establish the Probable Validity of Its Claim.

APPA argues that Zwick’s lien is overstated because multiple amounts were included contrary to California law.  (Motion at pp. 8-9.)  A mechanic’s lien may be recorded for the lesser of the reasonable value of the work provided by the claimant or the price agreed to by the claimant and the person that contracted for the work.  (Civ. Code, § 8430, subd. (a).)  “If there is a rescission, abandonment, or breach of the contract, the amount of the lien may not exceed the reasonable value of the work provided by the claimant.”  (Civ. Code, § 8430, subd. (c).)

Zwick’s September 7, 2023 demand for an adjustment and resolution of $7,008,704.52 (the amount of the mechanic’s lien) consists of (1) Extended General Conditions; (2) Owner’s Misuse of Contingency; (3) Owner Rejected Change Orders; (4) Outstanding Change Orders; and (5) Outstanding Progress & Retention Due.  (Motion, Marzwell Decl. ¶¶ 24, 43 & Ex. I; Opposition, Dushane Decl. ¶¶ 2-6 & Ex. A.)

Zwick’s Vice President and Director of Risk Management explains, “Each general condition comprising the EGC [Extended General Conditions] category of ZWICK’s lien was an actually incurred cost to ZWICK over the course of many months of delay for which ZWICK contends it is not responsible, including, among the most prominent: Salaries/costs for Project Executive, Project Managers, Assistant Project Manager, Project Engineer, Administrative Assistant, Superintendents, Assistant Superintendents, Laborers, Vehicles, field trailers, Temporary lodging, site office and computers/furniture leasing/equipment/materials/supplies, and insurance.”  (Opposition, Dushane Decl. ¶ 5.)  He also states that Zwick “told APP A on multiple occasions that if it would provide verification of its direct payments to select subcontractor claimants, ZWICK would be willing and able to promptly reduce the amount of its lien accordingly because those amounts paid by APPA directly to ZWICK’s subcontractors would reduce ZWICK’s obligation to those subcontractors, and its right to recover from APPA for those amounts.”  (Opposition, Dushane Decl. ¶ 8.) 

Zwick argues that it is able to recover the Extended General Conditions amounts because they are costs expressly provided for in the parties’ underlying contract dated February 13, 2020.  (Opposition at p. 11.)  The contract specifies that “[t]he Guaranteed Maximum Price includes a General Conditions line item in the amount of $2,406,134, which shall be a fixed, maximum cost not eligible for adjustment for any reason (the ‘General Conditions Costs’),” which may be increased “[i]n the event of any delays caused by [APPA].”  (Motion, Marzwell Decl., Ex. A at p. 7, §§ 5.2.1.1-5.2.1.1.)

However, Zwick’s demand for $2,707,710.68 in Extended General Conditions for alleged overhead costs for delay was released by Zwick under the parties’ July 20, 2022 mutually executed PCCOR #128/Change Order #25 (“CO25”).  (Motion, Marzwell Decl. ¶¶ 7, 36 & Ex. B.)  CO25 “captures the final settlement and compromise between Contractor and Owner for the Pending Change Order Claims, the Time Impact Claims, all claims for increases to the Contract Sum or the Contract Time on account of delays or changes in the Work arising due to events occurring before or in existence as of the date of this CO, all claims for increases to the Contract Sum or Contract Time due to missed or implied scope, all claims for increases to the Contract Sum or Contract Time on account of changes to the Work after the date of this CO (excluding Owner/Architect directed changes in scope), all claims for additional General Conditions Costs through final completion of the Work, and all other claims that Contractor may have against the Owner arising out of the Project,” including a waiver of the provisions of Civil Code section 1542.  (Motion, Marzwell Decl., Ex. B at p. 1.)

The settlement excluded the remaining balance of the Contract Sum in the amount of $3,857,663.51.  (Motion, Marzwell Decl., Ex. B at p. 1.)  After CO25, “[t]here shall be no adjustment of the Guaranteed Maximum Price for any reason unless the Owner adds new scope never communicated to Contractor prior to the date of this CO.”  (Motion, Marzwell Decl., Ex. B at p. 2, ¶ 9; see Marzwell Decl. ¶ 7(e); see also Reply at p. 3.)

Zwick (as the lien claimant) has the burden of establishing the validity of the lien.  (Basic Modular, supra, 70 Cal.App.4th at p. 1485.)  It has not done so here.  Zwick’s lien of $7,008,704.52 exceeds the reasonable value of the work and the price agreed to by the parties.

B.        The Court Reduces the Lien to $784,545.57.

APPA asks that the Court determine that Zwick’s lien amount is forfeited in its entirety because it willfully included improper items and amounts.  (Motion at p. 9; Reply at p. 10.)  Zwick argues that the lien should not be stricken because there was no intent to defraud.  (Opposition at pp. 12-13.)

APPA relies on subdivision (c) of Civil Code section 8422, which provides for forfeiture of a lien when a claimant “willfully include[s] in a claim of lien labor, services, equipment, or materials not furnished for the property.”  APPA argues that Zwick’s inclusion of amounts for work performed by other subcontractors is “the very definition of a ‘willful’ inclusion.”  (Reply at p. 10.)

When reading subdivision (c) in the full context of section 8422, the Court disagrees with APPA.  Erroneous information relating to the claimant’s demand, credits and offsets deducted, the work provided, or the description of the site does not invalidate the lien, “[e]xcept as provided in subdivisions (b) and (c).”  (Civ. Code, § 8422, subd. (a).)  Subdivision (b) states that erroneous information does invalidate the lien if the claim of lien was made with intent to defraud or an innocent third party without notice became the bona fide owner of the property after recordation of the claim of lien.  Subdivision (c) states that a claimant who willfully includes labor, services, equipment, or materials not furnished for the property will forfeit the lien.  The Court sees no meaningful difference in subdivision (b)’s use of “invalidates the claim of lien” and subdivision (c)’s use of “forfeit the person’s lien,” and thus concludes that invalidation and forfeiture are both subject to a finding of fraud.  This is supported by the historic application of prior versions of the statute and the Court’s ability to reduce (rather than fully invalidate) lien amounts.  (See, e.g., B. & J. Const. Co. v. Spacious Homes, Inc. (1962) 204 Cal.App.2d 216, 221 [“a finding that plaintiff willfully failed to give proper credits, or that it willfully charged too high a price, is not a finding of fraud” under former Civil Code section 1193.1]; Basic Modular, supra, 70 Cal.App.4th at p. 1485.)

Zwick did “willfully” include each category and amount claimed in its lien.  However, the Court see no evidence of an intent to defraud, particularly when Zwick has offered to reduce the amount of its lien by the amounts that APPA can prove that it paid the subcontractors.  (Opposition at pp. 6-7; see Zwick Decl. ¶¶ 3-6; Dushane Decl. ¶ 8.)  Accordingly, the Court will not order Zwick’s entire lien forfeited.

In the alternative to a full forfeiture, APPA asks that the lien be reduced to no greater than $784,545.57, “which—if ignoring the millions in Contract-related damages Zwick owes APPA—represents the ceiling remaining Contract amount available for Zwick to pay what its subcontractors are owed.”  (Motion at p. 16.)  The Court may reduce an excessive lien to its proper amount instead of fully removing the lien.  (Basic Modular, supra, 70 Cal.App.4th at p. 1485.)  The actual amount due on the lien presents a question of fact for the Court.  (Ibid.)

Zwick does not provide evidence supporting each item claimed, but APPA does provide evidence of its claimed deductions from the full $7,008,704.52 lien amount.  The Court therefore adopts APPA’s calculation for the maximum lien amount of $784,545.57.

CONCLUSION

The motion to expunge or reduce Zwick’s mechanic’s lien is GRANTED IN PART.

The Court orders Zwick’s Mechanic’s Lien, Document No. 20230667741, reduced to $784,545.57.

Moving party to give notice.

Parties who intend to submit on this tentative must send an email to the Court at SMCDEPT48@lacourt.org indicating intention to submit.  If all parties in the case submit on the tentative ruling, no appearances before the Court are required unless a companion hearing (for example, a Case Management Conference) is also on calendar.

         Dated this 12th day of November 2024