J. W. THEISEN and John E. Meskell, copartners, doing business as Theisen Company, and United Pacific Insurance Company, a corporation, Plaintiffs and Appellants, v. COUNTY OF LOS ANGELES, J. M. Lowery, as Auditor of the County of Los Angeles, and Gilbert E. Durand, doing business as Durand Door Supply, Defendants and Respondents.
COUNTY OF LOS ANGELES, Cross-Complainant and Respondent, v. J. W. THEISEN and John E. Meskell, copartners, doing business as Theisen Company, and United Pacific Insurance Company, a corporation, Cross-Defendants and Appellants.*
This is an appeal by plaintiffs and cross-defendants J. W. Theisen and John E. Meskell, co-partners, doing business as Theisen Company, and United Pacific Insurance Company, from a judgment for defendants County of Los Angeles, J. M. Lowery, its auditor, and Gilbert E. Durand, in an action for declaratory relief and for exoneration of bound, and from a judgment in favor of defendant and cross-complainant County of Los Angeles on a cross-complaint for recovery covery under the terms of a bond.
J. W. Theisen and John E. Meskell, hereinafter referred to as Theisen Company, were contractors on a work of public improvement for the defendant County. In connection with the job, Theisen Company entered into a written agreement with the J. C. Petterson Corporation for the purchase of 64 doors, which were to conform to the architect's plans and specifications. The contract price for these doors was $3,173, f. o. b., Petterson's factory. Thereafter Petterson entered into a contract with defendant Durand (doing business as the Durand Door Supply) under which Durand, for $1,148, was to furnish Petterson with a total of 20 doors, which doors were to be a portion of the 64 doors which Petterson undertook to supply Theisen Company. Durand was paid $600 by Petterson. Thereafter, Theisen Company took delivery of the 64 doors at Petterson's factory and paid the latter in full. Subsequently, employees of Theisen Company installed the subject doors in the work of improvement under the former's supervision, and neither Durand nor Petterson or any employee of either of them participated in any manner in the installation of the 64 doors.
Durand, not having been paid in full by Petterson, filed with the defendant County a ‘stop notice’ pursuant to section 1190.1, Code of Civil Procedure, stating that the sum of $548 was due for furnishing labor and materials to Petterson, the latter being characterized by Durand as a ‘subcontractor’ of Theisen Company, notifying the County to withhold such sum from Theisen Company upon final payment under the construction contract. On the basis of this notice, the County withheld out of the moneys appropriated to pay the Theisen Company the sum of $548, to cover the amount claimed by Durand in his notice, plus an additional $100 to cover the cost of litigation. Thereafter, Durand commenced an action in the municipal court against the County of Los Angeles, its auditor, and Petterson. None of the plaintiffs in the case under review were named as parties in the municipal court action, nor were they served with summons or requested by the County or its auditor to intervene in the action or to undertake, manage, control, or otherwise participate in the defense of the action. Theisen Company had actual knowledge of the pendency of this action. Judgment was given Durand in the municipal court action and the County paid to him $648.
Prior to the above judgment but after the commencement of the action, Theisen Company (as principal) and United Pacific Insurance Company (as surety) executed and delivered to the County a ‘Bond to Release Money Withheld on Stop Notice.’ Thereupon, pursuant to section 119.1 (or 1192.1 (f)), Code of Civil Procedure, the County paid over to Theisen Company the sum of $648, previously withheld. The County, after satisfying the Durand judgment, demanded reimbursement of said sum from the Theisen and United Pacific Insurance Companies, both of which refused to pay said sum to the County.
Thereafter, plaintiffs commenced the instant action for declaratory relief against the County of Los Angeles, its auditor, and Durand, seeking, in the first cause of action, a declaration of the rights, duties, liabilities and obligations of the parties under the bond furnished by the plaintiffs to the County, and further seeking, in the second cause of action, a declaration of the rights, duties, obligations and relations of the plaintiffs and defendant Durand with respect to the municipal court judgment, and with respect to the sum of $648 received by defendant Durand in satisfaction of said judgment. The County and its auditor answered the complaint, and the County filed a cross-complaint based upon the obligation of the previously mentioned bond for the amount of $648. A slightly amended answer and cross-complaint was filed by the County to which plaintiffs filed an answer. Durand's demurrer to the second cause of action was sustained and plaintiffs amended their second cause of action and sought to require Durand to hold them harmless by paying to the County any sum for which plaintiffs might be declared liable under the bond.
The case was tried without a jury and judgment was that plaintiffs take nothing; and was for the County on their cross-complaint in the amount of $648. Plaintiffs have appealed from the whole of said judgment.
Section 1181, Code of Civil Procedure, provides for liens in behalf of mechanics, materialmen, contractors, laborers, et cetera, who have bestowed labor or furnished materials upon real property ‘at the instance of the owner or of any person acting by his authority or under him, as a contractor or otherwise.’ Section 1182(c) states: ‘For the purposes of this chapter, every contractor, subcontractor, architect, builder, or other person having charge of the construction, alteration, addition to, or repair, in whole or in part, of any building or other work of improvement shall be held to be the agent of the owner.’
Under these sections (or their predecessors, sections 1183 and 1184, C.C.P.), a materialman is not considered as the owner's agent and, therefore, one furnishing material at the instance of a materialman is not entitled to a lien. See Phillips & Edwards Electric Corp. v. Shintaffer, 143 Cal.App.2d 561, 299 P.2d 912; Roebling's Sons Co. v. Humboldt Electric Light & Power Co., 112 Cal. 288, 44 P. 568; Wilson v. Hind, 113 Cal. 357, 45 P. 695.
Section 1190.1 limits the application of the ‘stop notice’ protection to those subcontractors, materialmen, et cetera, who perform work or furnish materials at the instance of the ‘contractor or other person acting by the authority of the owner.’ As a materialman is not the owner's agent so far as section 1181 is concerned, it would seem to follow that he is not the owner's agent under 1190.1. Therefore, a materialman seeking to obtain funds withheld as a result of the filing of a stop notice must establish, inter alia, that the person to whom such materials were furnished had authority beyond that of a mere materialman. With reference to the instant case, if Petterson Corporation was a subcontractor, it was the County's agent and Durand, having furnished materials at Petterson's request, would be entitled to the proceeds of the funds initially withheld and there would be no basis upon which to reverse the instant judgment.
However, if Petterson was itself only a materialman, then Durand was not within the class entitled to receive funds originally withheld pursuant to his stop notice and we must then determine whether Theisen Company may collaterally attack the municipal court judgment.
In Hihn-Hammond Lumber Co. v. Elsom, 171 Cal. 570, 574–575, 154 P. 12, 14, (dealing with § 1194, since repealed), the court defines these terms as follows: ‘The ‘original contractor’ is the person who agrees with the owner to construct a building on his property. Those who perform labor in the construction of the building come within the first class, as ‘laborers.’ Persons who merely furnish material to the contractors to be used and which are used, in the construction of the building come within the second class, as ‘materialmen.’ The term ‘subcontractor’ embraces all persons who agree with the original contractor to furnish the material and construct for him on the premises some part of the structure which the original contractor has agreed to erect for the owner * * *. Generally speaking, it would be held that one who, under an agreement with the contractor, enters upon the premises and there, with material furnished by himself, erects a definite part of the structure composing the building, is a subcontractor within the meaning of this section. * * * The cases above cited which hold the claimant to be a materialman go upon the theory that the claimant agreed with the owner or the contractor to construct, outside of the building, or away from the premises, some completed article, machinery, or apparatus to be thereafter placed in or attached to the building by the person who furnished it.'
It Phillips & Edwards Electric Corp. v. Shintaffer, supra, the latest California case on the subject, the court held that the party with whom the plaintiff dealt was a materialman and not a subcontractor and, therefore, plaintiff was not entitled to a lien. In that case, the owner commenced construction of a rice drying plant upon his property. The owner contracted with the Universal Corporation to engineer and purchase for owner all elevating and conveying equipment. Universal in turn purchased a ‘Square D’ control panel from plaintiff. Referring to the contract between owner and Universal, the court said it was ‘essentially one for the sale and purchase of equipment’ (143 Cal.App.2d at page 563, 299 P.2d at page 913), and held Universal a materialman without giving any definition thereof. Furthermore, relying on earlier cases, the court held the fact that Universal did some installation work did not change its status to a subcontractor.
In Harris & Stunston v. Yorba Linda Citrus Ass'n, 135 Cal.App. 154, 26 P.2d 654, plaintiff sold water softeners to Cruller which were installed in defendant's packing house. Plaintiff argued Cruller was a subcontractor, therefore defendant's agent. The court held Cruller a materialman. Cruller had a contract to furnish and install water softeners. At page 157 of 135 Cal.App., at page 655 of 26 P.2d the court states: ‘It seems clear that this case belongs to that class where a finished article is sold, the installation thereof being merely incidental and part of the delivery.’
In the following cases, it was held the status of the individual was that of a contractor or subcontractor: Bird v. American Surety Co., 175 Cal. 625, 166 P. 1009 (contracted to do all of the brick and steel work on the building; Hihn-Hammond Lumber Co. v. Elsom, supra (on the job contributions; plastering, constructing floors, etc.); Baird v. Peall, 92 Cal. 235, 28 P. 285 (painted the structure); La Grill v. Mallard, 90 Cal. 373, 27 P. 294 (papered and decorated several rooms); Rapp v. Horgan, 101 Cal.App. 605, 281 P. 1034 (did extensive work on the premises); United Materials Co. v. Loughery, 22 Cal.App. 1, 133 P. 18 (furnished all brick work); and Peterson v. Freiermuth, 17 Cal.App. 609, 121 P. 299 (remodeled the building itself).
Although there is no California case in point, the general tone of our decided cases, and especially the Hihn-Hammond case, supra, seems to indicate that one is a materialman and not a subcontractor unless he makes a substantial ‘on the job site’ contribution. In the instant case, Petterson never entered upon the job site, and it was Theisen Company who actually installed the doors.
The County and Durand argue, on the other hand that as these doors were ‘customized,’ made to order, not stock items, and would only fit this particular job, that such labor should be deemed as though performed on the premises and not viewed as merely furnishing materials. Stated differently, if labor is performed on materials which are designed for and actually used in a particular building, the individual contracting to perform this labor is a subcontractor no matter where he actually does his work. Both parties cite relevant cases from sister states.*
In 141 A.L.R. 321, this subject is annotated. At page 324 the following appears: ‘Generally, one who merely furnishes materials to the owner or a contractor is a materialman, and not a contractor or subcontractor, within the meaning of the mechanic's lien laws.’ On pages 325–326 it is stated: ‘The fact that one furnishing materials contracts to make them especially for, and in accordance with the specifications of, the structure for which they are furnished, or expends labor upon them before delivery, does not necessarily make him a contractor or subcontractor.’
While the contract between the Theisen Company and Petterson was entitled ‘Builders Sub-Contract Agreement,’ it was in essence only a purchase order, and was referred to as a ‘purchase order’ by Petterson's letter of acceptance. The contract was entered upon a standard printed form which Theisen Company kept in stock and modified to fit particular needs. In the instant case, the form was modified to read ‘We agree to furnish only all materials * * *’ instead of providing, as it did prior to being modified, that ‘We agree to furnish all materials and perform all labor * * *’ Furthermore, the following was added to the printed form: ‘Furnish only F.O.B. Factory in El Monte, the following doors: [description].’ The following provision was stamped upon the left margin of the agreement: ‘Subcontractor shall clean up and haul away all debris resulting from his operations.’ Since delivery of the doors was to be at Petterson's factory and as Petterson was to take no part in their installation, the above provision was obviously not intended by the parties to form a part of their agreement and is of no assistance in resolving the question presently under review. The testimony indicates that this stamp was placed on these printed forms long before any specific use was contemplated.
Considering the contract between the Theisen Company and Petterson, the nature of the undertaking assumed by Petterson, and the total absence of any on the job contribution, we are of the opinion that the Petterson Corporation was a materialman and not a subcontractor.
Collateral Attack on Prior Judgment.
May the plaintiffs collaterally attack the municipal court judgment and re-litigate issues therein decided?
Generally, only a party to a prior action or one in privity with such a party is bound by the judgment. Bernhard v. Bank of America Nat. Trust & Savings Ass'n, 19 Cal.2d 807, 812, 122 P.2d 892. However, ‘it is a well-settled rule that where one is bound to protect another from liability he is bound by the result of a litigation to which such other was a party. * * *’ Commercial Union Assurance Co. v. American Cent. Insurance Co., 68 Cal. 430, 432, 9 P. 712, 713. This rule, in turn, is subject to certain limitations, as will appear from section 2778, Civil Code, as follows:
‘4. The person indemnifying is bound, on request of the person indemnified, to defend actions or proceedings brought against the latter in respect to the matters embraced by the indemnity, but the person indemnified has the right to conduct such defenses, if he chooses to do so;
‘5. If, after request, the person indemnifying neglects to defend the person indemnified, a recovery against the latter suffered by him in good faith, is conclusive in his favor against the former;
‘6. It the person indemnifying, whether he is a principal or a surety in the agreement, has not reasonable notice of the action or proceeding against the person indemnified, or is not allowed to control its defense, judgment against the latter is only presumptive evidence against the former.’
Reasonably construed, section 2778, subdivisions 4, 5, and 6, provide that the prior judgment is not conclusive against the person indemnifying if (a) he is not requested to defend the action, or (b) has not received reasonable notice of the pendency of the action, or (c) is not allowed to control its defense.
The trial judge in the instant case found that the plaintiffs were not parties to the prior action and that they were not requested by the County or its auditor to intervene, or to undertake, manage, control or otherwise participate in the defense of said action. This being the case, it would appear that the prior judgment is not conclusive against the plaintiffs and they may now assert that Durand was not entitled to the benefit of any money initially withheld and that he should not have been paid by the County or its auditor.
Furthermore, while the plaintiffs actually knew of the pendency of the prior action, it does not appear they were given any notice thereof by the County of its auditor. In Sampson v. Ohleyer, 22 Cal. 200, 208, it is stated that ‘if a party to a suit has a right to resort to another upon his failure in the action * * * on the ground that he is indemnified by such third party * * * then it is clearly his duty to give full notice to * * * [the] party who has agreed to indemnify him, of the pendency of the suit, what it is he requires him to do in the suit, and the consequences which may follow if he neglect to defend the action. Mere knowledge or information of the existence of such an action, is entirely insufficient to bind the party by the judgment. Unless the party to the action notifies him that he expects him to defend the action, or to furnish testimony, or to do some other act to aid in it, he may well suppose that the party is well prepared to defend it, has all the evidence necessary, and needs no assistance from him to defend his title or assert his rights. * * *’ (To the same effect is 26 Cal.Jur.2d § 31, p. 375.) In Eva v. Andersen, 166 Cal. 420, 425, 137 P. 16, 18, the court states: ‘While subdivision 4 of section 2778 of the Civil Code specifies that notice may be given to the person indemnifying, it does not make such notice compulsory. The two following subdivisions of that section merely declare rules of evidence under which a judgment recovered against the person indemnified may become prima facie or conclusive evidence of liability in his action against the person indemnifying. ‘The omission to give notice to the indemnitor does not go to the right of action against him but simply changes the burden of proof and imposes upon the indemnitee the necessity of again litigating and establishing all of the actionable facts.’ (Citation.)'
The Restatement of the Law of Judgments, section 107, provides in part as follows:
‘In an action for indemnity between two persons who stand in such relation to each other that one of them has a duty of indemnifying the other upon a claim by a third person, if the third person has obtained a valid judgment on his claim in a separate action against
‘(a) the indemnitee, both are bound as to the existence and extent of the liability of the indemnitee, if the indemnitee gave to the indemnitor reasonable notice of the action and requested him to defend it or to participate in the defense. * * *’
Some California cases state that the indemnitor is bound if he had reasonable notice of the litigation and an opportunity to control and manage it. Lamb v. Belt Casualty Co., 3 Cal.App.2d 624, 631, 40 P.2d 311, 314. ‘Opportunity to control and manage’ means a direct or implied request to do so (see Pezel v. Yerex, 56 Cal.App. 304, 308–309, 205 P. 475), since, by section 2778, subd. 4, the indemnitee has the right to conduct the defense if he so desires.
Defendants argue, however, that plaintiffs are estopped from collaterally attacking the prior judgment, contending that the following conduct by the plaintiffs should work an estoppel: ‘(1) appellants created the defect of which they now complain by their voluntary action in giving the County the release bond, (2) by said release bond appellants assured the County it would be held harmless from any loss by reason of acceptance of said bond or the stop notice claim, (3) at the time appellants had notice a vital defense was not pleaded by the County, a defense peculiarly within Theisen's knowledge, (4) despite this they acquired the stop notice fund from the County knowing or with information sufficient to know that on the County's pleadings it was liable to sustain an adverse judgment, (5) the County relied on the representations in said release bond in paying Theisen.’
This estoppel argument is without merit. The County was under no obligation to accept the bond and release the funds to Theisen Company. Sections 1191.1 and 1192.1(f) give the County discretion in this respect. In the bond itself, Theisen Company states that it ‘disputes the correctness and validity of said claims' yet the County did not seek to have Theisen Company brought in as a party to the municipal court action. Under these circumstances, no estoppel would arise.
The trial court in the instant case found Petterson to be a subcontractor. This finding, however, for reasons previously discussed, is erroneous. Therefore, it would appear that the judgment in behalf of the County and its auditor should be reversed. However, with respect to the judgment for defendant Durand, there is no ground for reversal. He was not unjustly enriched at plaintiffs' expense.
The judgment in favor of the County and its auditor is reversed; that judgment in favor of Durand is affirmed.
I am unable to concur in the majority opinion. While no difficulty is encountered in arriving at the conclusion that J. C. Petterson Corporation was a materialman and not a sub-contractor, it seems to me that the question of whether plaintiffs herein (Theisen Company and United Pacific Insurance Company) are concluded by the Municipal Court judgment rendered in Durand v. County of Los Angeles, et al., falls far short of furnishing the solution to this case. Let it be assumed that plaintiffs are not bound by that judgment, that they are now free to show that Durand had no right to recover the $648 (or any other sum) from the County, it does not follow that they have so shown, nor does it follow that the County has no right of recovery upon the bond which is the subject of its cross-complaint.
The theory advanced by the majority opinion is that Durand was a materialman who furnished materials to another materialman (Petterson Corporation) and hence was not entitled to the benefit of the stop notice sections (1191.1 or 1192.1) of the Code of Civil Procedure; this upon the analogy of the rule which precludes such a materialman from asserting a valid lien based upon sales to another materialman.
This view overlooks the substantial difference between § 1181, Code of Civil Procedure, which relates to liens, and §§ 1191.1 and 1192.1 Code of Civil Procedure, which govern the matter of stop notices in cases of public improvements. Section 1181 provides that a materialman may perfect a lien for materials that have gone into the particular improvement, ‘whether done or furnished at the instance of the owner or of any person acting by his authority or under him, as contractor or otherwise.’ Cases cites in the majority opinion seem to establish that this does not include materials furnished by one materialman to another materialman. But the majority err, I think, when they say: ‘However, if Petterson was itself only a materialman, then Durand was not within the class entitled to receive funds originally withheld pursuant to his stop notice’; and ‘[s]ection 1190.1 limits the application of the ‘stop notice’ protection to those subcontractors, materialmen, et cetera, who perform work or furnish materials at the instance of the ‘contractor or other person acting by the authority of the owner.’ As a materialman is not the owner's agent so far as section 1181 is concerned, it would seem to follow that he is not the owner's agent under 1190.1. Therefore, a materialman seeking to obtain funds withheld as a result of the filing of a stop notice must establish, inter alia, that the person to whom such materials were furnished had authority beyond that of a mere materialman.'
The cases hold that a right to establish a lien is not an essential condition to invoking the ‘stop notice’ procedure (embodied, so far as public work is concerned, in §§ 1190.1, 1191.1, 1192.1 and 1197.1, Code of Civil Procedure). Indeed there can be no lien upon public property (41 Cal.Jur.2d § 52, p. 434); stop notice is the only remedy of the claimant (Id., pp. 434–435). Bates v. Santa Barbara County, 90 Cal. 543, at pages 546–547, 27 P. 438, at page 439, says: ‘Under section 1184, Code Civil Proc., the mechanic or material-man may give the owner of the building upon which he has performed labor, or for which he has furnished material, written notice of his claim, and thereupon it becomes the duty of such owner to retain sufficient funds to answer such claim. Upon receipt of the notice the owner becomes liable as on garnishment or assignment. McAlpin v. Duncan, 16 Cal. , 128. ‘It is a form of equitable subrogation regulated by statute.’ Loonie v. Hogan, 9 N.Y. , 439, 440; Frank v. Board of Chosen Freeholders, 39 N.J.L. 347; 2 Jones, Liens, § 1285. The rights of plaintiffs do not depend upon the legality of the contract. Whether it was void or valid, the contractor and subcontractor will be held to be the agent of the owner for the purposes of the law, and neither the one nor the other can assert a want of privity between himself and the laborer or material-man. The right of plaintiffs to recover does not depend upon their right to a lien. The equitable garnishment provided for by section 1184, Code Civil Proc., is a cumulative remedy, in ordinary cases; but in this instance it is the only remedy provided by the lien law, because the pursuit of the remedy by foreclosure would involve the taking of buildings which, on the grounds of public policy and public necessity, are exempt from execution and forced sale. And this remedy is one which does not contravene any principle of public policy. It operates merely as an assignment pro tanto of the money due by the owner to the contractor, and in no way affects the public buildings. The fund is in the treasury, and the statute justly provides that, instead of paying it to the contractor for the work which he agreed to do, but which the laborer has actually performed, the owner shall pay it to the latter. The true spirit and merit of the statute is lost sight of in the contention that this remedy is a mere substitute for the remedy by lien, and that, when the latter does not exist, the former cannot exist. The right to control and direct the fund remaining in the hands of the owner is as distinct and independent as the right to file and enforce a lien. It is a remedy entirely disconnected from and additional to the remedy by lien upon the building, and as the exceptional element which it is claimed arrests in this case the usual operation of the lien law does not exist, it is a remedy which should be regarded with favor by the court.'1 To the same effect, see: Southern California Electric Co. v. McDonald, 178 Cal. 386, 391, 173 P. 760; First Nat. Bank of Bridgeport v. Perris Irrigation Dist., 107 Cal. 55, 65, 40 P. 45; Diamond Match Co. v. Silberstein, 165 Cal. 282, 288, 131 P. 874; Board of Education of City & County of San Francisco v. Blake, 4 Cal.Unrep.Cas. 891, 893, 38 P. 536; French v. Powell, 135 Cal. 636, 640, 68 P. 92.
The terminology of the statutes leaves no doubt about the matter. While § 1181 (quoted supra) rules out liens in favor of materialmen who merely furnish goods to other materialmen, § 1190.1 specifically provides that ‘(a) Any of the persons mentioned in Sections 1181 and 1184.1, except the contractor, and all persons * * * excluding the contractor, performing work, or furnishing materials, or both, upon any public improvement * * * may * * * give to the owner, a notice that they have performed labor or furnished materials, or both, to the contractor or other person acting by the authority of the owner, or that they have agreed to do so, stating in general terms the kind of labor and materials and the name of the person to or for whom the same was done or furnished, or both, and the amount in value, as near as may be, of that already done or furnished, or both * * *.’ Reference to § 1181 leaves no doubt about the meaning of 1190.1 for it enumerates as potential lienees ‘mechanics, materialmen’ etc. ‘furnishing materials to be used or consumed in’ any improvement.
It is to be noted that, while section 1190.1 is limited by its terms to labor or materials or both furnished ‘to the contractor or other person acting by the authority of the owner,’ subdivisions (a) to (f) inclusive relate to stop notices upon private or public (subd. (g)) work, while subdivisions (h) and (i), which cover the subject of release bonds, are specifically declared by subdivision (j) to be inapplicable to public work. To complete that phase of the matter one must consider § 1191.1 which does apply to public agencies, permits the filing of a release bond, ‘which bond shall guarantee the payment of any sum which said claimant may recover on said claim together with his costs of suit in said action * * *.’ The majority opinion asserts that the stop notice under consideration was filed pursuant to § 1190.1 and seems to assume that the bond was given under 1191.1 or 1192.1 (f). The bond provided by § 1191.1 is available to ‘the contractor, subcontractor, or other person against whom any claim is filed,’—broad enough to include materialman Petterson, and also extending in its terms to Theisen the original contractor.
The bond itself declares that ‘[t]his bond is given and accepted under and in accordance with the provisions of Section 1192.1(f) of the Code of Civil Procedure of the State of California.’ Section 1192.1 is specifically made available to any ‘materialman or person furnishing materials * * * used in, upon, for, or about the performance of the work * * * except the prime contractor’ and ‘any person, except the prime contractor, who supplies both work and materials.’ He ‘may at any time, after he has furnished material * * * file with the public agency * * * a verified statement of such claims, together with a statement that the same have not been paid.’ ‘Actions against the * * * political subdivision of the State, or the disbursing officer whose duty it is to make payments under the provisions of the contract for the public improvement in question, brought by any claimant who has filed claim under this section, or his assign, shall be governed by the provisions of Sections 1190.1 and 1197.1 and the verified notice provided for in those sections is equivalent for all purposes to the verified claim provided for herein.’ (§ 1192.1(c)) Subdivision (f) provides: ‘If the contractor, subcontractor, or other person against whom any claim is filed as provided in this section disputes the correctness or validity of any claim so filed, the controller * * * or other body by whom the contract for the improvement was awarded, in its or his discretion, may permit the contractor to whom the contract was awarded to deliver to such board, commission, or officer a bond executed by some corporation authorized to issue surety bonds in the State of California, in a penal sum equal to one and one-fourth times the amount of the claim, which bond shall guarantee 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 filing of the bond * * * then such board, commission or officer shall not withhold any moneys from the contractor on account of the claim. The sureties upon the bond are jointly and severally liable to the claimant with the sureties upon the contractor's bond given in accordance with Chapter 3 of Division 5, Title 1 of the Government Code.’ There is no language in § 1192.1 which limits the benefit of its beneficent provisions to those who ‘have performed labor or furnished materials, or both, to the contractor or other person acting by the authority of the owner.’ The fact of materials furnished for and used in the particular public job is enough to give the claimant the right to a stop notice and withholding of money under § 1192.1.
Section 1192.1 is specifically made available to ‘[a]ny materialman or person furnishing materials * * * used in, upon, for, or about the performance of work contracted to be executed or performed to which Chapter 3 of Division 5, Title 1 of the Government Code applies * * * or any person who performed work or labor upon the same or any person who supplies both work and materials * * *.’ He may ‘file with the public agency, body or officer by whom the contract was awarded * * * a verified statement of such claims, together with a statement that the same have not been paid.’
Both of §§ 1190.1 and 1192.1 recognize that a materialman has the right to a stop notice per se. He is a person who may effectuate such a granishment. ‘The right to file a stop notice extends to any of the persons mentioned in the mechanics' lien law, except the contractor, and to all persons, firms, and corporations, excluding the contractor, that perform work or furnish materials on any public improvement, including highways, streets, wagon roads, viaducts, and sewers.’ (41 Cal.Jur.2d § 60, p. 439.)
Viewing the matter from the standpoint of the majority of this court, it is true that, at the appropriate time, the materialman must prove the validity of his claim, but the fact that he ultimately may fail in his proof does not render void ab initio his attachment. It is good until held, upon the merits, to be ill-founded. The claimant is not required to decide correctly and in advance this mixed question of fact and law; he does not act at his peril. In this instance if Durand actually believed Petterson to be a sub-contractor, as asserted in his ‘notice to withhold,’ he was warranted in so alleging and in standing on that ground until the court ruled against him as a matter of law. It follows, I think, that the majority opinion does not successfully dispose of this case upon the basis that Durand was not qualified to file or pursue a stop notice.
Nor does the statute contemplate that the public agency which has been served with a stop notice (in this case the County) must determine the merits of same or do so at its peril. The duty imposed upon it is to withhold the necessary money and to pay the claim of that claimant unless effective measures are taken pursuant to the statute to prevent payment. If the claim is not disputed it proceeds, of course, to payment. But if it is disputed the statute provides a means of settling the argument,—the giving of a bond under § 1191.1 or § 1192.1, Code of Civil Procedure. It runs to the public-agency-debtor in the penal sum of one and one-fourth times the amount of the claim, ‘which bond shall guarantee the payment of any sum which said claimant may recover on said claim * * * if he shall recover therein’ (§ 1191.1). If given under § 1192.1 the bond, for one and one-fourth times the amount of the claim, ‘shall guarantee 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 filing of the bond by and with the consent of such board, commission or officer, then such board, commission or officer shall not withhold any moneys from the contractor on account of the claim. The sureties upon the the bond are jointly and severally liable to the claimant with the sureties upon the contractor's bond given in accordance with Chapter 3 of Division 5, Title 1 of the Government Code.’ In either event the filing of the bond results in release of the ‘stopped’ money to the contractor or sub-contractor ‘or other person against whom any claim is filed.’ The statute plainly presupposes an action by the claimant to recover the sum so released by giving of bond.
In the present instance the condition of the bond is this: ‘Now therefore, if the the above named Principal shall fully protect the Obligee herein against any loss by reason of or arising out of the acceptance of this bond, or the release of said moneys, or the payment thereto to said Principal, and shall pay any sum which said claimants may recover on said claims, together with the costs of suit in said action, not exceeding the penal sum of this bond, then this obligation shall be void, otherwise it shall be and remain in full force and effect.’
Durand's notice to withhold declared Theisen Company as general contractor and J. C. Petterson Corporation, as sub-contractor, to be his debtors and demanded withholding of $548 (plus reasonable cost of litigation) from moneys due or to become due to either of them. Durand then sued the County of Los Angeles, the County Auditor and J. C. Petterson Corporation for recovery of said sum and obtained judgment against the County for $548 plus $100 attorney fee, which judgment the County paid. The judgment also ran against Petterson Corporation in the sum of $548 plus interest. Having paid the judgment the County, by cross-complaint in the instant action sought recovery from Theisen Company and United Pacific Insurance Company upon the release bond they had given it. Their primary defense seems to have been that Durand had no right to the benefit of a stop notice, which theory is hereinbefore shown to be unsound. That Durand was not paid in full by Petterson seems conceded by all. That the fund garnished through service of the stop notice disappeared immediately upon the giving of the release bond now in suit appears equally clear. Durand made himself whole through collection of his judgment against the County and in no other way. The County has paid twice, once through release of the $548 in reliance upon appellants' bond, and once through satisfaction of the Municipal Court judgment.
Confronted with the bond condition that they ‘shall pay any sum which said claimants may recover on said claims' appellants assert that there was no valid recovery because Durand was only a materialman and could not avail himself of a stop notice; this position, as above shown, is untenable.
Moreover, both § 1191.1 and § 1192.1 contain substantially the following concluding sentence: ‘The sureties upon the bond are jointly and severally liable to the claimant with the sureties upon the contractor's bond given in accordance with Chapter 3 of Division 5, Title 1 of the Government Code.’ (Referring to §§ 4200–4208 Government Code.) Section 4204 provides: ‘To be approved, the contractor's bond shall provide that if the person or his subcontractors, fail to pay for any materials, provisions, provender or other supplies, or teams, used in, upon, for or about the performance of the work contracted to be done, or for any work or labor thereon of any kind, or for amounts due under the Unemployment Insurance Act with respect to such work or labor, that the surety or sureties will pay for the same, in an amount not exceeding the sum specified in the bond, and also, in case suit is brought upon the bond, a reasonable attorney's fee, to be fixed by the court.’ And § 4205: ‘To be approved, the contractor's bond shall by its terms inure to the benefit of any and all persons entitled to file claims under Section 1192.1 of the Code of Civil Procedure so as to give a right of action to them or their assigns in any suit beought upon the bond.’ (Emphasis added.) Section 4206: ‘Suit against the surety or sureties on the contractor's bond may be brought by any claimant, or his assign, at any time after the claimant has ceased to perform labor or furnish material, or both, and until the expiration of six months after the period in which verified claims may be filed as provided in Section 1192.1 of the Code of Civil Procedure.’ (Emphasis added.) Plainly these sections (1191.1, 1192.1, 4204 and 4205) impose upon the sureties joint and several liability to materialmen and hence make the bond available to them. See, Pneucrete Corp. v. United States Fidelity & Guaranty Co., 7 Cal.App.2d 733, 736–738, 46 P.2d 1000; McCormick Saeltzer Co. v. Haidlen, 119 Cal.App. 96, 100, 6 P.2d 255.
It is said by appellants that the Municipal Court judgment is void because Theisen Company was an indispensable party to that action and was not joined as such. In this respect, the rule applicable to foreclosure of a lien affords a persuasive analogy, in my opinion. ‘A contractor is not a necessary party in a suit to foreclose a mechanic's lien.’ Hazard, Gould & Co. v. Rosenberg, 177 Cal. 295, 297, 170 P. 612, 614. Accord: Yancy v. Morton, 94 Cal. 558, 560, 29 P. 1111; Russ Lumber & Mill Co. v. Garrettson, 87 Cal. 589, 596, 25 P. 747; Holden v. Mensinger, 175 Cal. 300, 304, 165 P. 950. ‘The obligation of the contract requires the payment of the installment when it becomes due. The owner is then required to make the payment. If stop notices had been previously given, he is required to pay the amount thereof to the laborer or materialman, and the balance only to the contractor. The right of such laborer or materialman accrues immediately upon the maturity of the installment. He may immediately begin an action against the owner for so much of the installment as is necessary to pay his claim for labor or materials furnished in the building, and the rights of the parties thereupon became fixed.’ (Emphasis added.) Southern California Electric Co. v. McDonald, supra, 178 Cal. 386, 390–391, 173 P. 760, 762.
The statutes immediately under consideration carry the same inference. Section 1197.1, which governs such actions procedurally, presupposes separate actions to enforce claims supported by stop-payment notices, and further provides: ‘(b) [Notice of proceedings.] Notice of such proceedings shall be give or filed within five days after the commencement thereof to the same persons and in the same manner as provided in Article 2 of this chapter with respect to notice of claim. (c) [Joinder of parties: Consolidation of actions.] Any number of persons who have given such notices may join in the same action and when separate actions are commenced the court first acquiring jurisdiction may consolidate them. (d) [Impleading claimants.] Upon the demand of the owner the court shall require all claimants to the moneys withheld by the owner in response to such notices to be impleaded in said action, to the end that the respective rights of all parties may be adjudicated and settled therein.’ Subdivision (b) is significant. While (c) and (d) relate to parties, it (b) is concerned with ‘Notice’ of the action. It must be given within five days after commencement to the same persons and in the same manner as provided for notice of claim under Article 2 (§§ 1190.1–1192.1). Under § 1190.1(b) notice of claim must be given in case of public work to the public disbursing officer or the county board of supervisors or the like, not to the contractor; but its service forthwith results in withholding from the contractor of funds otherwise payable to him. If funds are sufficient to pay all such claims then all is well; otherwise the total amount is distributed pro rata among holders of valid claims. After such pro ration any deficit may be recovered upon the bond given under § 4200 Government Code. Section 1192.1(c) says that actions to enforce stopnotice claims shall be governed by §§ 1190.1 and 1197.1 (discussed supra). Clearly the statutes do not require joinder of the contractor as a party. Appellants' rights were not adjudged or affected by the Municipal Court judgment and were left open for independent adjudication at the trial of the instant case.
The transcript reveals that, although plaintiffs were free to do so, they made no effort at the trial of this case, to show that Durand did not furnish the 20 doors as agreed, or that plaintiff Theisen Company did not have full knowledge of that fact as deliveries were made or that Petterson had paid Durand more than $600 upon his total bill of $1,148. Plaintiffs-appellants relied below, as here, upon the contention that, as matter of law, Durand and Petterson were both materialmen and hence Durand was precluded from the benefits of the stop-notice statutes.
The practical situation discloses by the record is this: Durand agreed with Petterson to furnish 20 doors (out of 64) for the County job upon which Theisen Company was general contractor. Theisen knew of this agreement and its full performance by Durand; Theisen thus received the full benefit of Durand's delivery of the doors; they were incorporated in the public work in question. Assuming, erroneously and without obtaining legal advice, that Petterson and Durand both were materialmen and not entitled to the benefit of a stop notice, Theisen paid Petterson in full for all doors and did so within ten days after delivery in order to obtain a one per cent discount on the price, $31.73. This it did without requiring Petterson to produce receipts showing payment of its door suppliers, without requiring it to give a bond and without making any inquiry of Durrand as to whether he had been paid in full. Within the statutory period Durand filed a stop notice and on June 13, 1955 the County advised Theisen of the fact and the resultant withholding of $648. On January 3, 1956, Durand sued the County, its auditor and Petterson in the Municipal Court for recovery of the sum so withheld. Theisen promptly learned of that suit, but, relying upon the fact that it was not a party and the theory that Durand's stop notice was ineffective, did nothing except to consult Petterson's lawyer who said to forget it. There was in fact no defense to the suit, for Durand had furnished the materials, they went into the County job, he had not been paid and his stop-notice operated as a lawful and effective garnishment of the $648 which was in the County's hands at the time of filing of the stop notice. Naturally the suit resulted in judgment against Petterson as well as the County. This valid judgment the County paid on or that November 5, 1956. Prior to trial of that action plaintiffs Theisen Company and United Pacific Insurance Company had deposited their release bond and received the $648 which the County had been withholding. Thus the County has received one set of 20 doors from Durand and has paid twice the balance due upon them. Somewhere in the course of these events Petterson went into bankruptcy. Durand has been paid but once, through satisfaction of the Municipal Court judgment. Theisen Company, having paid Petterson prematurely, is made whole through repudiation of its release bond sanctioned by a judgment of this court,—one which requires the County to pay twice while exonerating Theisen from the obligation to perform the condition of its bond. I see no equity, no justice in this.
The judgment of the lower court in favor of the County and Durand should be affirmed.
1. Concerning § 1184 West's Code of Civil Procedure says: ‘The repealed section related to notice of labor performed or materials furnished, procedure, and rights of the parties. The provisions thereof were incorporated into new section 1190.1.’
FOX, Presiding Justice.