HUTNICK v. UNITED STATES FIDELITY GUARANTEE CO

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Court of Appeal, Third District, California.

Michael W. HUTNICK et al., Plaintiffs and Appellants, v. UNITED STATES FIDELITY & GUARANTEE CO. et al., Defendants and Respondents.

No. C000785.

Decided: February 29, 1988

Kent R. Walker, Bullen, McKone, McKinley, Gay, Keitges & Pach, Stephen J. Gay, and Deborah D. Ditore, Sacramento, for plaintiffs and appellants. James B. Thompson, Sacramento, for defendants and respondents.

Civil Code section 3143 says that real property subject to a mechanics' lien is released from the lien upon the filing of a lien release bond.1  (All further statutory references are to the Civil Code unless otherwise noted.)   Section 3144.5 requires that notice of recording of the release bond be given to the lienholder.2  Section 3144.5 further provides “Any action on the lien release bond shall be commenced by the claimant within six months of the recording of the lien release bond,” although the limitation period is tolled until notice of recording the bond is given.

In this case, we consider how these statutes are applied when a lien release bond is recorded (and notice is promptly given) during the pendency of a lienholder's lawsuit to foreclose his mechanics' lien.   We conclude the lienholder must file a supplemental complaint to pursue an action on the bond within six months of the giving of notice of the recording of the lien release bond.   We also conclude the lienholder here did not commence an action on the bond by serving the surety, as a “Doe” defendant, with the lienholder's complaint to foreclose the mechanics' lien.   We conclude further that the provisions of sections 3143 and 3144.5 govern recovery on the release bond to the exclusion of inconsistent provisions in the Bond and Undertaking Law (Code Civ.Proc., §§ 995.010–996.560).   Finally, we conclude the lienholder's third amended complaint, pleading recovery on the bond but filed 10 months after notice of recording of the bond, did not “relate back” to the time of filing of the original complaint.   We therefore uphold the trial court's determination that the lienholder's action on the lien release bond was barred by section 3144.5.

FACTS AND PROCEDURAL BACKGROUND

The facts as we discuss them are set forth either in plaintiffs' third amended complaint or in documents in the file of this action of which the trial court took judicial notice.  (See Code Civ.Proc., § 430.30, subd. (a);  Evid.Code, §§ 452, subds. (d), (h), 459;  Committee on Children's Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 213, 197 Cal.Rptr. 783, 673 P.2d 660;  Neighborhood Action Group v. County of Calaveras (1984) 156 Cal.App.3d 1176, 1190, 203 Cal.Rptr. 401.)

In 1982, plaintiffs performed work and services for parties not involved in this appeal.   When plaintiffs were not paid, they duly recorded a mechanics' lien and later timely filed their complaint for breach of contract for the work, common count, and foreclosure of mechanics' lien.   The complaint alleged that defendants were the owners or reputed owners of the liened property.   The complaint also named as defendants Does I through XXX and alleged that “each of the fictitiously named defendants claims an interest or estate in the property herein mentioned and that all of the defendants are the agents of the other defendants․”

On May 9, 1984, plaintiffs filed their second amended complaint against various parties not involved in this appeal and against the 30 “Doe” defendants.   The second amended complaint alleged the same causes of action as the original complaint but added a fourth cause of action seeking a declaratory judgment of a dispute with another party not involved in this appeal.

In July 1985 the owners of the affected real property obtained from defendant United States Fidelity & Guarantee Co. (U.S.F. & G.) a mechanics' lien release bond under section 3143.   The bond was recorded on July 26, 1985, and notice of recording was served on plaintiffs on July 30, 1985.

On March 18, 1986, plaintiffs served defendant U.S.F. & G. as “Doe V,” with their second amended complaint.   Defendant demurred to the second amended complaint on the grounds that the complaint did not state facts sufficient to state a cause of action against it and that any causes of action alleged against defendant were barred by the six-month statute of limitations set forth in section 3144.5.   The demurrer was sustained with leave to amend.

On June 5, 1986, plaintiffs filed their third amended complaint.   That complaint replicates earlier causes of action for breach of contract, common count, and foreclosure of mechanics' lien against parties not involved in this appeal.   The third amended complaint for the first time alleges recording of defendant's bond and “in the event that it is adjudged by this court that a good and sufficient bond has been recorded to release plaintiffs' lien on said real property ․ that ․ defendant [U.S.F. & G.] be ordered to pay to plaintiff forthwith the above ․ sums․”

Defendant demurred to the third amended complaint and the demurrer was sustained without leave to amend on the ground suit had not been brought within six months as required by section 3144.5.

Plaintiffs appeal from the judgment of dismissal as to defendant U.S.F. & G.

DISCUSSION

Plaintiffs' recovery on the bond is barred by section 3144.5.A. Plaintiffs did not commence an action on the lien release bond merely by recording the bond and giving notice of the same.

Plaintiffs first contend the statute of limitations in section 3144.5 was not violated because by recording the bond defendant “stepped into an existing lawsuit.”   They argue an action on the lien release bond was commenced “simultaneously with the recording of the bond and the notice to the lienholder.”

As best we understand this argument, plaintiffs are asserting that the lien release bond merely substituted for the real property as the object of the mechanics' lien, so that recovery on the bond could be had on their existing cause of action for foreclosure of the mechanics' lien.   Implicit in this contention is that no amendment of the second amended complaint was necessary.

In a different context, a variation on this argument would have much to recommend it.

 Section 3143 mandates that the surety furnishing a lien release bond shall be liable for “any sum which the [lien] claimant may recover on the claim together with his costs of suit in the action, if he recovers therein.”  (See fn. 1, ante.)   This statutory obligation is incorporated in a bond furnished pursuant to section 3143 regardless of whether the language of the bond expressly so states.  (Frank Curran Lbr. Co. v. Eleven Co. (1969) 271 Cal.App.2d 175, 182, 76 Cal.Rptr. 753.)   Where a surety furnishing a bond has agreed to be responsible for the result of a lawsuit between others, to which the surety is not a party, the surety is ordinarily liable for a judgment against his principal, even if the surety has no opportunity to defend the lawsuit, in the absence of fraud or collusion.  (Prescott v. Farquhar (1936) 12 Cal.App.2d 286, 288, 55 P.2d 283;  see Home Indemnity Co. v. King (1983) 34 Cal.3d 803, 815, 195 Cal.Rptr. 686, 670 P.2d 340;  Kruger v. California Highway Indem. Exch. (1927) 201 Cal. 672, 678–680, 258 P. 602;  Crumrine v. Dizdar (1943) 59 Cal.App.2d 783, 789, 140 P.2d 101;  Conners, California Surety & Fidelity Bond Practice (Cont.Educ.Bar 1969) § 3.12, p. 25.)

However, the foregoing rule has been applied where (a) the principal has had an opportunity to defend against the claims for which the surety may ultimately be liable and (b) a judgment against the principal serves as a vehicle to establish the responsibility of the principal and, hence, the surety.  (See ibid.)

When a valid mechanics' lien release bond is recorded, two extremely unusual events occur:  “If a proper release bond for a mechanics' lien is recorded, the action is terminated on the cause of action to foreclose the mechanics' lien and the owner is entitled to a dismissal from the foreclosure action.”  (Flowers, Hagan & Finch, California Mechanic's Liens and Other Remedies (Cont.Educ.Bar Supp. 1987) § 3.29, p. 38;  citing Frank Curran Lbr. Co. v. Eleven Co., supra, 271 Cal.App.2d at p. 185, 76 Cal.Rptr. 753;  see § 3143.)

This means that where an owner has obtained a release bond but has no personal liability to the lienholder 3 and is dismissed from the action upon recording of the bond, there is no party in privity with the surety to be bound by a judgment in the action.   Nor is there any party to the lawsuit in privity with the surety to defend against claims for which the surety may be liable.   This is not a position up with which a responsible surety, contemplating the furnishing of a bond, is likely to put.4

The rule authorizing dismissal of an owner from a lien foreclosure action upon the recording of a valid release bond was announced in Frank Curran Lbr. Co., supra, in 1969.  271 Cal.App.2d at p. 185, 76 Cal.Rptr. 53.   We presume the Legislature was aware of the conundrum created by the owner's dismissal from a lien foreclosure action when the Legislature enacted section 3144.5 in 1983,5 because it is assumed the Legislature has in mind existing laws when it passes a statute.  (Estate of McDill (1975) 14 Cal.3d 831, 837, 122 Cal.Rptr. 754, 537 P.2d 874.)

 We think one purpose of section 3144.5 is to provide a mechanism by which a surety on a mechanics' lien release bond is brought into a lien foreclosure action once a lien release bond is filed.   Read in its entirety, section 3144.5 contemplates that the surety must give notice of recording of the bond and the lienholder must timely bring the surety into action by filing a supplemental complaint 6 to commence an “action on the lien release bond” within six months of the giving of notice.   We believe the statute is intended to afford a surety timely opportunity to defend the action and to insure that the surety will be bound by a judgment.   We think the statute uses the phrase “action on the ․ bond” in its well-established sense, as meaning an action alleging the contractual obligation of the bond and seeking recovery premised upon the contractual right.  (See, e.g., Wallace v. Miller (1983) 140 Cal.App.3d 636, 643, 189 Cal.Rptr. 637, and authorities cited therein;  59 Cal.Jur.3d, Suretyship and Guaranty, § 62, pp. 116–117;  1A C.J.S. (1985) Actions, § 94, p. 502.)

 It follows from this discussion that, contrary to plaintiffs' contention, no “action on the lien release bond” was commenced by defendant's mere recording of the bond and sending notice of the same.

Plaintiffs assert the legislative history of section 996.420 shows our interpretation of the statute is erroneous.   They cite a comment on the bill that proposed the statute prepared by a staff member of a committee of the Assembly.   However, the staff comment is not cognizable legislative history.

 Extrinsic evidence of legislative intent is useful only where statutory language is ambiguous.  (In–Home Supportive Services v. Workers' Comp. Appeals Bd. (1984) 152 Cal.App.3d 720, 739, 199 Cal.Rptr. 697.)   Plaintiffs have not identified any ambiguity in section 3144.5.   The result we reach is fully in accord with the plain meaning of the language of sections 3143 and 3144.5.   Moreover, extrinsic evidence of legislative history is relevant only to the extent it contains proof of the corporate intent of the Legislature, because “the Legislature is a collective entity and its ‘intentions' are primarily known by its legislative acts.”  (Ibid.)  Consequently, unless an individual legislator reports upon events leading to passage of legislation, or upon a corporate legislative discussion, the views of the legislator as to the meaning of legislation are not considered by courts construing the legislation.  (California Teachers Assn. v. San Diego Community College Dist. (1981) 28 Cal.3d 692, 699–700, 170 Cal.Rptr. 817, 621 P.2d 856.)   A fortiori, the views of a committee staff member are not appropriate legislative history.7

B. Sections 3143 and 3144.5 govern plaintiffs' recovery on the bond to the exclusion of inconsistent provisions of the Bond and Undertaking Law.

 Plaintiffs assert the trial court had the authority to allow plaintiffs to recover on defendant's bond pursuant to Code of Civil Procedure section 996.420, subdivision (a), which provides:  “A surety on a bond given in an action or proceeding submits itself to the jurisdiction of the court in all matters affecting its liability on the bond.”   Plaintiffs contend they are entitled to enforce the obligation of the bond by motion after judgment pursuant to Code of Civil Procedure section 996.440.8  We cannot agree.

For present purposes, we need not decide whether the mechanics' lien release bond was “given in an action or proceeding” within the meaning of Code of Civil Procedure section 996.420 when the bond was recorded.  (But see Code Civ. Proc., § 995.340.)   Nor need we determine whether the submission to jurisdiction envisioned by that statute is merely a consent to personal jurisdiction or whether it encompasses a waiver of defenses.   Even assuming for purposes of argument these issues are decided in plaintiffs' favor, we conclude these statutory provisions do not govern plaintiffs' recovery on the lien release bond.

The cited sections of the Code of Civil Procedure are a part of the Bond and Undertaking Law (Code Civ.Proc., §§ 995.010–996.560) which generally governs statutory bonds and undertakings.   The Bond and Undertaking Law applies to “a bond or undertaking executed, filed, posted, furnished, or otherwise given as security pursuant to any statute of this state, except to the extent the statute prescribes a different rule or is inconsistent.”  (§ 995.020, subd. (a), emphasis added.)

 We do not think the Bond and Undertaking Law governs plaintiffs' recovery on the mechanics' lien release bond.   As we have explained, we believe the provisions of sections 3143 and 3144.5 prescribe the appropriate procedures for recovery on such a bond, because unusual problems may be encountered as a consequence of the dismissal from the action of the principal on the bond.

 Plaintiffs rely on Code of Civil Procedure section 996.440.  That statute expressly contemplates that where a claimant on the bond makes a motion after judgment to enforce the liability on the bond, a judgment following the motion shall be entered against the principal.  (Id., subd. (d);  see fn. 8, ante.)   However, we do not think the statute applies to a situation where the principal has been dismissed from the underlying action.   Thus, for example, although the motion for judgment is made in a pending action, the statutes make no unusual provision for obtaining jurisdiction over a principal who is not a party when the motion is made.   Moreover, subdivision (d) of Code of Civil Procedure section 996.440 expressly allows a trial if the judge hearing the motion for judgment concludes there are triable issues of fact.   Unless we are to say that an absent principal is somehow bound by the antecedent judgment entered in the action, a principal previously absent from the action would litigate on the motion the same defenses that could have been adjudicated at the trial of the action had the principal been a party to it.   We do not think the Legislature intended that there be such a duplication of effort.   We therefore conclude that Code of Civil Procedure section 996.440 necessarily implies that the principal was a party bound by the antecedent judgment who remains a party to the action when the post-judgment motion is made.  (See also Code Civ.Proc., § 996.480.)  Whatever is necessarily implied in a statute is as much a part of it as that which is expressed.  (Johnston v. Baker (1914) 167 Cal. 260, 264, 139 P. 86.)

Since Code of Civil Procedure section 996.440 mandates the same mode of recovery against principal and surety, and since the statute may not be used to adjudicate a claim against a principal/owner who has been dismissed from a mechanics' lien foreclosure action, it may not be used to recover on the lien release bond.   Because the Bond and Undertaking Law is inconsistent with the procedures in section 3143 and 3144.5, the latter provisions must govern here.  (Code Civ.Proc., § 995.020, subd. (a).)

C. Neither the second nor the third amended complaint “related back” to an earlier time for purposes of tolling the statute of limitations.

Finally, plaintiffs assert that either their second or third amended complaint was filed within the statute of limitations in section 3144.5 because both these complaints “related back” to the filing of the original complaint once defendant was brought into the action as a “Doe” defendant.

 Preliminarily, we note that the filing of the second amended complaint never tolled the section 3144.5 statute of limitations.   That statute expressly requires that “any action on the lien release bond” be brought within the designated time.   The second amended complaint never stated such an action.   Even liberally construed, the second amended complaint did not seek recovery on the bond.   This is not surprising in view of the fact the second amended complaint was filed more than a year before defendant furnished its bond.   That complaint was aimed at recovery on the contract for work and services and at foreclosure of the then-existing mechanics' lien, not at recovery on the yet-to-be-obtained bond.

This leaves the question whether plaintiffs' third amended complaint “related back” to the filing of the original complaint.   In Barrington v. A.H. Robins Co. (1985) 39 Cal.3d 146, 216 Cal.Rptr. 405, 702 P.2d 563, our Supreme Court recently summarized the “relation-back” doctrine:  “The relation-back doctrine has been used to determine the time of commencement of an action for the purpose of the statute of limitations.   Normally, the statute of limitations commences to run regardless of the injured party's ignorance of his or her cause of action.  (3 Witkin, Cal.Procedure (2d ed. 1971) Pleading, § 368, p. 2030.)   In Austin v. Massachusetts Bonding & Insurance Co. (1961) 56 Cal.2d 596 [15 Cal.Rptr. 817, 364 P.2d 681], we held that an amended complaint is not barred by the statute of limitations, even though it substitutes a named party for a fictitious defendant, if the amended complaint relates back to a timely original complaint.   Reasoning that the defendant was not prejudiced by the filing of an amendment after the statutory period had elapsed, we observed that ‘a defendant unaware of the suit against him by a fictitious name is in no worse position if, in addition to sustituting [sic] his true name, the amendment makes other changes in the allegations on the basis of the same general set of facts․'  (Id., at p. 602  [15 Cal.Rptr. 817, 364 P.2d 681].)  Conversely, ‘a plaintiff who did not know of the true name at the time the original complaint was filed ․ has at least as great a need for the liberality of amendment ․ as a plaintiff who knew the defendant's name throughout, and he should not be penalized merely because he was compelled to resort to his statutory right of using a fictitious name.’  (Id., at p. 603 [15 Cal.Rptr. 817, 364 P.2d 681].)

“We later traced the evolution of the relation back doctrine in Smeltzley v. Nicholson Mfg. Co. (1977) 18 Cal.3d 932 [136 Cal.Rptr. 269, 559 P.2d 624, 85 A.L.R.3d 121], and formulated a general rule:  An amended complaint relates back to the original complaint, and thus avoids the statute of limitations as a bar against named parties substituted for fictitious defendants, if it:  (1) rests on the same general set of facts as the original complaint;  and (2) refers to the same accident and same injuries as the original complaint.  (Id., at pp. 936–937 [136 Cal.Rptr. 269, 559 P.2d 624].)”  (39 Cal.3d at pp. 150–151, 216 Cal.Rptr. 405, 702 P.2d 563.)

Plaintiffs assert that their third amended complaint sought recovery upon the same general set of facts as the original complaint.   They argue they “would have been required to prove the same set of facts and injuries prior to prevailing on the foreclosure action as [plaintiffs] are now required to prove in order to prevail against the Respondent bonding company.   The only difference is that now there is a bond instead of the property.”

We shall assume for purposes of argument that plaintiffs' action on the bond, pleaded in their third amended complaint, in ordinary circumstances would “relate back” to the time of filing of their original complaint, on the theory that the action on the bond represented merely a variation in plaintiffs' remedy for violation of the same primary right.  (See, e.g., Grudt v. City of Los Angeles (1970) 2 Cal.3d 575, 584, 86 Cal.Rptr. 465, 468 P.2d 825;  Austin v. Massachusetts Bonding & Insurance Co. (1961) 56 Cal.2d 596, 601, 15 Cal.Rptr. 817, 364 P.2d 681;  Big Boy Drilling Corp. v. Rankin (1931) 213 Cal. 646, 648–649, 3 P.2d 13;  Weinstock v. Eissler (1964) 224 Cal.App.2d 212, 36 Cal.Rptr. 537;  4 Witkin, Cal.Procedure (3d ed. 1985) Pleading § 29, pp. 73–74, 5 Witkin, op. cit. supra, § 1156, pp. 573–574.)

Nonetheless, in the present context, we cannot reconcile the “relation back” doctrine with either the plain language or apparent purpose of section 3144.5.   When that statute says an action on the bond must be filed “within six months of the recording of the lien release bond” (emphasis added), we think the statute means “after ” the filing and giving of notice.   By plaintiffs' theory, the statute of limitations would be tolled by a complaint filed before the bond was ever recorded.   Plaintiffs do not suggest how this theory can be reconciled with the language of the statute.

 Nor would the “relation back” theory serve the purposes of section 3144.5.   By this theory, a plaintiff could wait years after receiving notice of recording of the bond before bringing the surety into the action.   This result would not allow the surety timely to defend the action in the absence of its principal.   We therefore conclude plaintiffs' third amended complaint did not toll the statute of limitations in section 3144.5 by “relating back” to a time before that complaint was filed.

We also note that the “action on the bond” pled in the third amended complaint contains a request for declaratory relief as to the validity of the bond.   However, plaintiffs have pointed to no defect in the bond, which is attached as an exhibit to their complaint.   Nor have they contended that they should be able to pursue their lien foreclosure action on the ground the bond was somehow invalid.   Rather, plaintiffs' have contended their recovery on the bond is not barred by the statute of limitations.   However, no action on the bond was filed until 10 months following notice of recording of the bond.   That action, contained in plaintiffs' third amended complaint, was barred by the six month statute of limitations in section 3144.5.

DISPOSITION

The judgment is affirmed.

FOOTNOTES

1.   Civil Code section 3143 provides in relevant part:  “If the owner of property, or the owner of any interest therein, sought to be charged with a claim of lien, or any original contractor or subcontractor disputes the correctness or validity of any claim of lien, he may record in the office of the county recorder in which such claim of lien was recorded, either before or after the commencement of an action to enforce such claim of lien, a bond executed by a corporation authorized to issue surety bonds in the State of California, in a penal sum equal to 11/212 times the amount of the claim or 11/212 times the amount allocated in the claim of lien to the parcel or parcels of real property sought to be released, which bond shall be conditioned for the payment of any sum which the claimant may recover on the claim together with his costs of suit in the action, if he recovers therein.   Upon the recording of such bond the real property described in such bond is released from the lien and from any action brought to foreclose such lien.”

2.   Section 3144.5 provides:  “Any person who obtains a lien release bond which is recorded pursuant to Section 3143 shall give notice of the recording to the lienholder by mailing a copy of the bond to the lienholder at the address appearing on the lien.   Service of the notice shall be by certified or registered mail, return receipt requested.   Failure to give the notice provided by this section shall not affect the validity of the lien release bond, but the statute of limitations on any action on the bond shall be tolled until the notice is given.   Any action on the lien release bond shall be commenced by the claimant within six months of the recording of the lien release bond.”

3.   E.g., by contract.

4.   With apologies to Winston Churchill and Zoltan Vegvary.

5.   Stats. 1983, ch. 351, § 1, p. 1554.

6.   Where, as here, notice of recording of the lien release bond is given during the pendency of an action to foreclose a mechanics' lien, the plaintiffs' appropriate remedy is to move to file a supplemental not an amended, complaint, since plaintiffs' action on the bond will necessarily allege facts material to the case occurring after the filing of the original complaint;  i.e., the furnishing of the bond.  (See Code Civ.Proc., § 464;  Earp v. Nobmann (1981) 122 Cal.App.3d 270, 286–287, 175 Cal.Rptr. 767;  5 Witkin, Cal.Procedure (3d ed. 1985) Pleading, §§ 1166–1173, pp. 588–596.)

7.   In any event, the staff comment does not aid plaintiffs.   The staff comment suggests that by requiring that notice of recording a lien release bond be served on a lienholder, the lienholder who has not filed suit will know to sue on the bond and will therefore refrain from filing a lien foreclosure action, thereby avoiding an amendment of the complaint when the lienholder later discovers the bond.   The comment is directed at a situation where the release bond is recorded before the foreclosure action is filed.   It does not suggest that no supplemental complaint is required where the release bond is recorded during the pendency of a lien foreclosure action.   Indeed, it implies the opposite.   Nothing in the staff comment suggests section 3144.5 was intended to apply only where the release bond was obtained before the lien foreclosure action was filed.   The fact that section 3144.5 may serve a salutary purpose where the bond is recorded before the foreclosure action is filed does not preclude an equally salutary purpose where this sequence of events is reversed.   More to the point, the language of sections 3143 and 3144.5 may not reasonably be read to limit application of section 3144.5 to situations where the bond is recorded before the foreclosure action is filed.

8.   Code of Civil Procedure section 996.440 provides:  “(a) If a bond is given in an action or proceeding, the liability on the bond may be enforced on motion made in the court without the necessity of an independent action.“(b) The motion shall not be made until after entry of the final judgment in the action or proceeding in which the bond is given and the time for appeal has expired or, if an appeal is taken, until the appeal is finally determined.   The motion shall not be made or notice of motion served more than one year after the later of the preceding dates.“(c) Notice of motion shall be served on the principal and sureties at least 30 days before the time set for hearing of the motion.   The notice shall state the amount of the claim and shall be supported by affidavits setting forth the facts on which the claim is based.   The notice and affidavits shall be served in accordance with any procedure authorized by Chapter 5 (commencing with Section 1010).“(d) Judgment shall be entered against the principal and sureties in accordance with the motion unless the principal or sureties serve and file affidavits in opposition to the motion showing such facts as may be deemed by the judge hearing the motion sufficient to present a triable issue of fact.   If such a showing is made, the issues to be tried shall be specified by the court.   Trial shall be by the court and shall be set for the earliest date convenient to the court, allowing sufficient time for such discovery proceedings as may be requested.“(e) The principal and sureties shall not obtain a stay of the proceedings pending determination of any conflicting claims among beneficiaries.”

SIMS, Associate Justice.

PUGLIA, P.J., and EVANS, J., concur.