POST BROS CONSTRUCTION CO v. YODER (1977)

OPINION

INTRODUCTION

The action in the trial court was brought by a heavy equipment rental operator to foreclose a mechanic's lien on subdivision acreage where the equipment was used in performing a grading subcontract, and also to recover from the surety on a labor and material bond filed with the City of Orange by the subdivider.

The trial court held for the defendant subdivider and its surety. This result was reached because of four joint checks which were issued by the subdivider's wholly owned subsidiary and which named the subcontractor and the plaintiff as payees along with two, and in one instance three, additional payees in an aggregate amount exceeding the total of all of plaintiff's rental charges for work on the subdivision involved. In our view the law was incorrectly applied on the facts disclosed by the record, and so the judgment is reversed with directions.

FACTS

At the times of the joint check transactions which led to this litigation, the plaintiff, Post Bros. Construction Company (Post), was in the business of renting earth-moving and grading equipment. Defendants, Clarence Yoder (Yoder), an individual doing business as West Pac Constructors, and West Pac Constructors, Inc. (West Pac), were grading contractors. The defendant, Shapell Industries, Inc. (Shapell), was the owner of certain lands in Orange County which it was developing as subdivisions. S & S Construction Company (S & S), was a wholly owned subsidiary of Shapell and operated as a general contractor, at the instance of Shapell, in carrying forward the various subdivision efforts. Shapell and S & S had the same officers and directors and shared the same offices in Beverly Hills.

The mechanic's lien which Post had recorded and which the first count of the complaint sought to foreclose in the amount of $17,509 was against so-called Tract 8009 located in the City of Orange and owned by Shapell.

As a condition for the subdivision of that tract, Shapell had procured and filed with the City of Orange a labor and material bond on which Safeco Insurance Company of America (Safeco) had subscribed as surety for a penalty of up to $301,700. This bond was filed in compliance with the Subdivision Map Act¹ and provided that ‘. . . if said PRINCIPAL [Shapell] or any contractor or subcontractor of said PRINCIPAL fails to pay for any materials, provisions, or supplies used in, upon or for or about the construction of the public improvements or performance of the work to be done, or for any work or labor done thereon of any kind, in, on or about the above numbered tract, said SURETY will pay the same in an amount not exceeding the sum set forth above, and also in case suit is brought upon this bond, a reasonable attorney's fee to be fixed by the Court. This bond shall inure to the benefit of any and all persons, companies and corporations entitled to file claims against said tract of land under and by virtue of the laws of the State of California.’

By reason of this bond, Safeco was named as a defendant, and the second count of the complaint sought recovery from the surety Safeco for the alleged reason that Post had not been paid in full for the rental of equipment used for the grading of Tract 8009. Such recovery sought against Safeco was likewise in the amount of $17,509 and also for interest and attorneys fees.

Going back to a time before the mechanic's lien was recorded, Shapell had instructed S & S to proceed with the necessary on-site work for Tract 8009. S & S, as general contractor, on August 31, 1973, subcontracted with West Pac for the latter to perform the grading of that tract for a total figure of $69,459.20. An amendment to the subcontract later upped the figure to $70,032.02. West Pac in turn retained Post, at Post's regular rental rates, to furnish the heavy equipment necessary to perform the subcontract. Such equipment was furnished to West Pac and used in the grading of Tract 8009 from August 31, 1973, to November 6, 1973.

The aggregate rental charges by Post to West Pac for such rentals amounted to $32,996.03. According to Post, at the time the complaint was filed only $15,487.03 of this sum had been paid by West Pac, thus yielding the $17,509 for which recovery was sought as noted.

At the time the work on Tract 8009 began, Post had already been furnishing rental equipment to West Pac for the latter's use in grading Tract 8308 also owned by Shapell. The record further reflects that there were other parcels of land owned by Shapell, though not identified by tract numbers, which were being, or had been, graded by West Pac using rental equipment furnished by Post. In the words of counsel for Shapell and Safeco, ‘. . . the evidence has established now whereby Post Brothers was embarked upon a course of dealing with West Pac to provide equipment for S & S tracts. They [Post] had lien rights with respect to each one of those tracts for which they had not been paid prior to the time that they were being asked to supply equipment for Tract 8009.’

According to the testimony of an employee of Post, Mrs. Dobkins who did Post's bookkeeping, Post maintained a single ledger for West Pac not segregated with reference to the parcels of land where the equipment was operated. Chronologically, as West Pac was invoiced for any work an entry was made in this one ledger. The basis for these invoices were so-called work tickets which were brought in to Mrs. Dobkins daily from the field. On each of these work tickets, in addition to the work performed and the amount to be charged for the work, there was a job number or job location inscribed by a Post foreman and/or by a West Pac representative. Mrs. Dobkins kept an index of some sort which identified these job numbers by tract. In this instance, job 330 was the designation for Tract 8009. The invoices or billings which Mrs. Dobkins prepared and sent to West Pac were segregated, however, as to where the work had been performed, i. e., a given invoice would have on it only charges, for instance, for Tract 8009.

When West Pac would send a check to Mrs. Dobkins in response to the invoices, Sandy, an employee of West Pac, would indicate either by an informal note or by telephone which invoices were to be paid by the remittance. It can readily be inferred that the payment of invoices lagged considerably behind their submission. When such a remittance was received, Mrs. Dobkins prepared a receipt for accounting purposes and attached it to the group of invoices and supporting work tickets for which payment had been made per Sandy's instructions. For instance, on April 8, 1974, receipt No. 4802 for a $3,000 check from West Pac was prepared covering invoices ‘15065, 66, 67, 68, 69, rest on 70[,] called 4/10/74.’ This inscription was explained by Mrs. Dobkins to be the result of a call to Sandy who instructed Mrs. Dobkins to credit the $3,000 to the first five invoices and the ‘rest,’ i. e., the rest of the $3,000, to No. 15070. The first five of the invoices noted covered work on Tract 8308 which in the aggregate came to $1,998. The balance of the $3,000 remittance, i. e., $1,002, was applied against invoice No. 15070 issued for $1,363, leaving $361 unpaid on that invoice.

The testimony of Mrs. Dobkins also established that as of September 7, 1973 Post was furnishing equipment to West Pac for use on other S & S jobs besides Tract 8009. The net result of the procedures described was that Post, acting on instructions from West Pac, as periodic payments were received from West Pac, would credit the oldest or earliest date unpaid invoices which covered work on more than one location.

A work sheet prepared by Mrs. Dobkins and in evidence as Exhibit No. 22 shows that invoicing of West Pac by Post for work on Tract 8009 began August 31, 1973, continued periodically through September and October, and ended with invoice No. 15111 issued November 6, 1973. On December 6, 1973, when the total account owed Post by West Pac stood at $44,951, West Pac sent a check to Post for $17,065.53. Following the pattern described, this payment was distributed: (1) $12,120 to invoices for work on Tract 8009 issued through September 20, 1973; (2) $4,189 to invoices for work on Tract 8308 issued through September 26, 1973; and (3) the balance to other charges for work on other locations. Subsequent payments by West Pac to Post of $886 on January 11, 1974, of $2,513 on February 14, 1974, and the $3,000 on April 8, 1974, already noted, were accorded a similar kind of allocation. The result, with reference to Tract 8009, was that no invoice after invoice No. 15070, issued September 25, 1973, was shown as paid on Post's records. These invoices running from No. 15070 through No. 15111 totaled the $17,509 sued for, allowing of course for the credit of $1,002 on No. 15070. Aside from this amount, at the time suit was filed, there was an additional $3,576.50 owing Post by West Pac for work done on locations other than Tract 8009. The ready inference to be drawn from Mrs. Dobkins' work sheet and the Post ledger account for West Pac is that an orderly and reasonable procedure for dealing with a slow-pay account had been evolved by Mrs. Dobkins acting on behalf of Post and in conjunction with Sandy at West Pac.

With this background, we come to the critical transactions around which the dispute revolved. On October 17, 1973, S & S issued a check for $144 payable jointly to West Pac and Post; on November 7, 1973, S & S issued a check for $37,507.97 payable jointly to West Pac, Post, La Mirada Trucking, Inc., and C. W. Poss, Inc.; on February 7, 1974, S & S issued a check for $9,066.89 payable jointly to West Pac, La Mirada Trucking, Inc., Post, and C. W. Poss, Inc.; and on April 4, 1974, S & S issued a check for $7,095.20 payable jointly to West Pac, Post, La Mirada Trucking, Inc., C. W. Poss, and Maness Excavating & Grading, Inc. All four checks were each endorsed by all of the payees respectively named on each and then deposited in West Pac's bank account. None of the checks carried any inscription with reference to how the funds were to be allocated among the payees, nor was there anything stamped or typed on any of the checks about waiver of lien rights. The record also is devoid of any evidence to show any instructions or even notification from S & S to West Pac indicating how the face amount of the check was to be allocated among the payees. However, according to the agreed statement of facts, subscribed by counsel on both sides, all four of the checks were ‘for grading work performed on Tract 8009’ pursuant to the West Pac contract with S & S.

The aggregate amount of the four checks is $53,814.06. However, in terms of the informal arrangement in effect between West Pac and Post as above described, payments by West Pac to Post credited on account of the rental of equipment used on Tract 8009 were: $12,120.03 on December 6, 1973; $984 on January 11, 1974; $1,381 on February 14, 1974; and $1,002 on April 8, 1974. The aggregate of these payments is $15,487.03.

For purposes of convenience the following tabulation is suggested.

As noted, the total of Post's invoices for work on Tract 8009 was $32,996.03; hence the recovery sought of $17,509 ($32,996.03 minus $15,487.03). It can be also observed that while the remittances from S & S to West Pac were for work on Tract 8009, the remittances from West Pac to Post over a more or less similar period were also for work on other S & S jobs.

In any event, Post recorded a mechanic's lien for the amount owed, according to Post's records, and in this connection there was some attention devoted at the trial to the adequacy of the 20-day preliminary notices per Civil Code section 3097, required in various situations, including the one here, as a condition precedent to perfecting a valid mechanic's lien. Such notices as here pertinent must be served upon the owner or reputed owner of the property on which or for which labor is to be furnished or material supplied.

The facts as they evolved showed that Tract 8009 was at all times owned by Shapell. The notices were directed to S & S who operated as the general contractor for Shapell in the development of the various subdivisions. There was no question of the timeliness of the notices or of their proper content. The only question was whether the ‘owner or reputed owner’ had been given notice by Post as prescribed by section 3097 of the Civil Code. As one of its conclusions of law, the trial court stated ‘The 20 Day California Preliminary Notices served by POST BROS. on September 7, 1973 and on September 20, 1973, were legally sufficient and are deemed to have provided notice to SHAPELL, as owner of Tract 8009.’ To hold otherwise would have been to exalt form over substance, for as noted the officers and directors of Shapell and of S & S were the same individuals. Accordingly, for purposes of this appeal, we have treated and regard Shapell and S & S as the same legal entity and deem all knowledge, acts, and omissions of S & S to be imputed to Shapell.

As another of its legal conclusions the trial court stated that the mechanic's lien recorded by Post on July 12, 1974, was a valid and enforceable lien upon Tract 8009. This brings us back to the litigation itself. Despite the legal conclusion noted, the trial court decided that Post was ‘estopped’ from asserting the mechanic's lien. It also concluded that ‘[t]he claim of POST BROS. against SHAPELL with respect to Tract 8009 is deemed fully paid.’ By reason of that conclusion the trial court further concluded that ‘[t]here being no sums due to POST BROS. by SHAPELL, no liability exists with respect to SAFECO Bond No. 2007544.’

The judgment was therefore against Post and in favor of both Shapell and Safeco. Default judgments were entered in favor of Post as against Yoder and West Pac Constructors, Inc., but the appeal does not involve that phase of the case. The appeal is by Post as to that part of the judgment which went in favor of Shapell and Safeco. Obviously, we would not have the case for decision if West Pac were able to pay, and so there is here again presented the frequent task of deciding which of two so-called innocent parties shall bear the financial burden of the insolvency of a third party with whom each was in privity.

ISSUES, DISCUSSION AND DISPOSITION

After a careful scrutiny of the record, we see it that there is finally only one question to be answered: has Post been paid? If so, then the judgment of the trial court was correct. If not, then Post is entitled to the relief sought in both counts of the complaint.

However, before proceeding with the effort to discuss and apply the precedents which are controlling, we deem it necessary to consider the manner in which the trial court decided the case, for there is a contradiction which tends to preclude a clear cut presentation of the issue as above noted. Both sides agree that what happened is as we have described it. The dispute is over what inferences and what legal conclusions are to be drawn from the undisputed events. In this posture, the trial court, as one of its legal conclusions, stated that the mechanic's lien recorded by Post as a ‘valid and enforceable lien upon Tract 8009.’ Nevertheless, the trial court also concluded that Post ‘is estopped from asserting a mechanic's lien upon Tract 8009.’ We find these two legal conclusions difficult to reconcile because there were no findings (and the record does not otherwise indicate) the basis from which it could be concluded that an estoppel had arisen.

It is fundamental that four elements are essential to the raising of an estoppel: (1) the party to be estopped must know the facts; (2) he must intend that his conduct in misrepresenting the facts shall be acted on; (3) the other party must be ignorant of the true facts; and (4) the other party must rely on the former's misrepresentations to the latter's injury. (City of Long Beach v. Mansell, 3 Cal.3d 462, 489, 91 Cal.Rptr. 23, 476 P.2d 423; Evid.Code, § 623.) When applied to the facts of the case at bench, there is nothing in the record to satisfy the fourth requirement. Even assuming that inferences could be drawn from the facts such as would satisfy the first three requirements, we cannot see that Shapell took any action to its detriment in reliance upon Post's endorsement of the checks or in reliance upon Post's failure to inquire about how the funds represented by the four checks were to be allocated. Actually, what the record reflects is that S & S and/or Shapell paid only $53,814.06 toward the $70,032.02 subcontract with West Pac. Hence, where was there any injurious reliance by Shapell? We find none, and so no estoppel could properly be raised against Post.

As a consequence, if Post had perfected a valid mechanic's lien, the reason announced by the trial court for precluding its enforcement was a reason without legal sanction. What we divine from the trial court's announcement of its intended decision and from the findings of fact and conclusions of law otherwise is that the reason the decision went for both defendants was that the trial court concluded, as to Shapell, that Post had ‘waived’ the right to assert the mechanic's lien or, as to both Shapell and Safeco, that Post had been paid.

Stated in other terms, as to Shapell, we cannot see how it is possible for Post to have had a valid and enforceable mechanic's lien if Post had been paid. The very essence of such a lien is the absence of payment for the benefits bestowed on the property sought to be subjected to the lien. Therefore, if Post was denied enforcement of a mechanic's lien, it must have been because the charges on Tract 8009 had been paid.

We see it thusly, for the record does not show any waiver. For there to be a waiver, it is essential that there be an existing right, knowledge of that right, and an actual intention to relinquish it. (Perini v. Perini, 225 Cal.App.2d 399, 407, 37 Cal.Rptr. 354.) Moreover, doubtful cases will be decided against the party asserting that the other has waived a right. (Id.; Roberson v. Industrial Acc. Com., 146 Cal.App.2d 627, 629, 304 P.2d 202.) In other words, the burden of establishing a waiver must be carried by clear and convincing evidence which does not leave the matter to speculation, especially where the right allegedly waived is one favored by the law. (Trujillo v. City of Los Angeles, 276 Cal.App.2d 333, 343–344, 81 Cal.Rptr. 146.) As noted, the evidence does not meet these requirements.

In the case at bench, the plaintiff sought recovery against two defendants on respectively different theories. Against Shapell, the effort was to enforce a mechanic's lien on property owned by Shapell. Against Safeco, the effort was to recover on a surety bond inuring directly to Post's benefit. In a mechanic's lien context, one may waive his right to enforce a mechanic's lien right and yet recover directly on the surety bond if there be one extant in the larger transaction. (Ferry v. Ohio Farmers Ins. Co., 211 Cal.App.2d 651, 655, 27 Cal.Rptr. 471.) In Ferry, the surety company argued that the plaintiff, in endorsing a joint check on which a waiver of lien rights was inscribed, had also acknowledged payment. In holding for the plaintiff materialman, the Ferry court stated that there the burden rested on the surety to prove that the owner's payment (by joint check to the contractor and materialman) was actually applied to the debt owed the materialman by the contractor. (Id. at p. 656, 27 Cal.Rptr. 471.)

From the foregoing, it can be observed that it would have been possible for the trial court, had there been evidence of waiver, to have ruled against Post on the claim against Shapell and for Post on the claim against Safeco. In analyzing the key elements here relevant to defenses against both theories, Shapell could claim waiver and payment; Safeco could only claim payment. As a consequence, because the trial court ruled in favor of both defendants, the real basis for decision must have been payment, for that is the defense common to both theories. It is by this avenue of reasoning that we arrived at the characterization of the single underlying issue on appeal announced at the outset, namely: has Post been paid?

Turning then to Shapell's contentions in support of the judgment, it is first argued that Shapell's intent in drawing the four checks in an amount in excess of that owing to Post from West Pac, payable jointly to Post and West Pac, was that Post retain the full amount due from West Pac. To illustrate the point, Shapell calls attention to the fact that the total of the joint checks was $53,814.06, and that the total amount due the materialman was $32,996.03, observing that where there is no agreement as to how the proceeds shall be allocated and the materialman retains less than what is owed him, he will be deemed to have been paid in full. Shapell cites Westwood Bldg. Materials Co. v. Valdez, 158 Cal.App.2d 107, 322 P.2d 79, for this proposition.

For the proposition stated, we agree that Westwood is valid authority. Indeed in Bohannan Bros., Inc. v. Lo Jean Dev. Co., 3 Cal.App.3d 200, 82 Cal.Rptr. 922, it is stated, ‘. . . under Westwood the presentation to the materialman of the early checks, those made payable jontly [sic] to it and the subcontractor without any endorsement or other notation whatsoever, constituted payment in full of the materialman in the absence of any showing of a contrary intention of the parties . . ..’ (Id. at pp. 204–205, 82 Cal.Rptr. at p. 924.)

Except for the one check for $144, what Shapell glosses over in urging the foregoing argument upon us is that the latter three joint checks, aggregating $53,670, were drawn to the order of four and, on one occasion, five payees. Because of this circumstance, the comments in Post's reply brief are a cogent rejoinder. He states, ‘Where the owner or contractor issues a check made payable jointly to the subcontractor and one materialman, the payees are in privity and they know their respective interests in the proceeds of the check. The materialman can obtain possession of the proceeds of the check by requiring the subcontractor to endorse and deliver the check to the materialman. Where the owner or contractor issues a check made payable jointly to the subcontractor and several materialmen, none of the payees is in a position to obtain the proceeds of the check without the signatures of all of the other named payees. The only practical method of obtaining and distributing the check proceeds is to have all materialmen endorse the check over to the subcontractor in accordance with the procedure followed in the present case. Although defendants contend that Post was obligated to retain the full amount of each joint check issued by S & S until the Post account for equipment supplied to Tract 8009 had been paid in full, this reasoning creates an equal obligation on the part of the other named payees to retain the full amount of the check until the obligation owed to each of them had also been paid in full. It was never the intent of the cases cited by defendants in support of their position in this matter that the owner or contractor be permitted to abdicate his responsibility to assure payment to his subcontractor's materialmen by the device of issuing joint checks to the subcontractor and all of his suppliers on a project without instructions as to the allocation of the check proceeds. [¶] An examination of the authorities cited by defendants in support of their position in this matter shows that in every instance in which the materialman has been deemed to have received the full amount of a joint check issued by the owner or contractor, the check was made payable to the subcontractor and one materialman or the check was made payable directly to the materialman.’

As we marshal the authorities in this area, it appears that Westwood and Bohannan and the other cases cited by Shapell, where the checks were issued jointly to a subcontractor and the materialman, rely on a particular application of the rule stated in B. & J. Constr. Co. v. Spacious Homes, Inc., 204 Cal.App.2d 216, 22 Cal.Rptr. 41, that the allocation of the proceeds of such joint checks is a matter of fact deriving from, and depending on, the intention of the parties and that ‘it is not necessarily improper for the contractor [or subcontractor] to retain the proceeds of such a joint check, keeping alive the materialman's claim. [Citations.]’ (Id. at p. 223, 22 Cal.Rptr. at p. 46.) Stated otherwise by the late Justice Kerrigan in Rodeffer Industries, Inc. v. Chambers Estates, Inc., 263 Cal.App.2d 116, 119, 69 Cal.Rptr. 551, 553, citing B. & J. Constr. Co. v. Spacious Homes, Inc., supra, ‘[w]hether a joint check constitutes payment of the materialman's bill represents a question of fact based upon the intention of the parties.’

These authorities direct us to search for the intent of the parties as to how the funds should be allocated. This then brings us back to the record. The findings state that ‘[i]t was the intention of Shapell and S & S that materialmen and suppliers be paid with the joint checks in order to prevent the imposition of liens upon Tract 8009.’ However, it seems to us that that finding is inconsistent with the one immediately preceding it which states: ‘No instructions were given by S & S for the division of the proceeds of the checks made jointly payable by S & S, as between WEST PAC, POST BROS. or any other payee.’ While Shapell and S & S may have had the intention indicated, no instructions for the division of the proceeds were given.

The question then arises as to whether the use of the device of a joint check payable to multiple payees as in the case at bench serves to communicate the intent which the trial court found to exist. Without more, it is difficult to see that it does. Here again we defer to Post's reply brief where it is observed, ‘[i]f, as defendants contend, it must be presumed that Shapell and S & S, by issuing joint payment checks, intended that Post retain the full amount of each check until West Pac's obligation to Post was paid in full, such presumption must also apply to each of the other named joint payees. There is no evidence as to the amounts owed by West Pac to the other named joint payees. There is no factual basis for an inference that the proceeds of the joint payment checks were sufficient to pay the costs of West Pac and the obligations it incurred to all of its suppliers and materialmen for labor, materials and equipment furnished for the construction of improvements on Tract 8009.’

As already noted, where there are multiple payees who are not in privity with one another, there is no way any one of them is going to know what is owed to the others by the common debtor (here West Pac). Accordingly, the only practical procedure open is for them all to endorse the joint check and turn it back to the common debtor, leaving it to him to pay them what it is owing. Stated in other terms, we see nothing in the mere issuance of joint checks to multiple payees not all in privity, and the endorsement of such check by all, which manifests any intent, mutual or otherwise, that the proceeds be allocated in any particular manner. No doubt S & S had some thought in mind about the matter of foreclosing the lien rights of West Pac's suppliers, but the device actually used was logically inept for such purpose.

Where that brings us in this case is to a conclusion that the use of the joint checks was meaningless, except possibly the one for $144. That payment would come within the ambit of the Westwood rule except for the fact that in the case at bench the same owner, same contractor, same subcontractor, and same equipment rental service were all involved simultaneously with work on several different parcels of land. Moreover, at the time the check for $144 was issued, the value of rentals by Post for work on Tract 8009 had grown to approximately $25,000.

In view of this analysis of the authorities, the disposition of the case finally is governed by section 1479 of the Civil Code.² We come to this conclusion, even though the first consideration in these joint payee cases is the intent of the parties, for the reason that there is nothing decisive in the facts before us which can be pointed to as evidence of intent as to how the proceeds of the joint checks were to be allocated. With this the posture of the matter, there is no place to turn but to the dealings between West Pac and Post to answer the questions about the nature and extent of payment of the West Pac obligations owed to Post.

In this context, section 1479 of the Civil Code applies because it deals with the characterization of an act of performance (here, payment) where there are two or more obligations which such performance would satisfy. Subdivision one states, ‘If, at the time of performance, the intention or desire of the debtor that such performance should be applied to the extinction of any particular obligation, be manifested to the creditor, it must be so applied.’ This is precisely what Sandy at West Pac did in her various notes and verbal instructions to Mrs. Dobkins.

There is another practical reason why there is justice in this result. If Post had credited more invoices for work on Tract 8009 than was done, lien rights could have been asserted against other Shapell parcels of land for which the invoices would not have been paid. In other words, it almost comes down to a senseless quibble because the facts disclose that the credits, as they were allocated by Post, were also for work done on other Shapell projects, i. e., on property against which Post could have asserted mechanic's lien rights had the payments from West Pac been used to credit additional invoices for work on Tract 8009 than were actually credited.

The foregoing is dispositive of the key question as first defined but for one further inquiry. Shapell urges that the joint payee circumstance imposes some kind of legal necessity or duty on the various payees to question the maker of the check to determine what the maker intended. For this proposition Shapell cites Modesto Lumber Co. v. Wylde, 217 Cal. 421, 19 P.2d 238. True, the language of that case carries the admonition claimed by Shapell (Id. at p. 425 et seq., 19 P.2d 238), but Modesto Lumber was a case where the check from the construction lender was made payable solely to the materialman and then handed to the contractor for delivery to the materialman with instructions as to how the check's proceeds were to be applied. Contrary to the lender's instructions, the contractor advised Modesto Lumber Company to apply the check to the contractor's personal account and not to the account opened for the Wylde project financed by the lender. It was in this context that the Supreme Court determined that ‘[t]he check not being made to the contractor was notice to the materialman that the contractor was without authority to determine finally the application of the funds.’ (Id. at p. 425, 19 P.2d at p. 239.) In the case at bench, to force any of the joint payees to make such an inquiry would have been meaningless, for there was no way any one of them could have controlled the proceeds so as to carry out whatever might have been learned from any inquiry to S & S.

Having determined that Post was not fully paid for the rentals used on Tract 8009, it also follows that Safeco is liable to that extent on the bond which it subscribed as surety and which was filed with the City of Orange in connection with the subdivision of that tract.

The judgment is reversed with directions that judgment be entered in favor of Post foreclosing its mechanic's lien as to Tract 8009 and in favor of Post against Safeco, including interest, as prayed for in the complaint. The case is also remanded to the trial court for the purpose of fixing a reasonable attorneys fee to be awarded Post in accordance with the provisions of Bond No. 2007544.

FOOTNOTES

1.  Sections 66462, 66499 and 66499.1 of the Government Code are the sections now applicable. At the time the bond was filed, it was required by section 11612 of the Business and Professions Code.

2.  Section 1479 of the Civil Code provides:‘Where a debtor, under several obligations to another, does an act, by way of performance, in whole or in part, which is equally applicable to two or more of such obligations, such performance must be applied as follows:‘One—If, at the time of performance, the intention or desire of the debtor that such performance should be applied to the extinction of any particular obligation, be manifested to the creditor, it must be so applied.‘Two—If no such application be then made, the creditor, within a reasonable time after such performance, may apply it toward the extinction of any obligation, performance of which was due to him from the debtor at the time of such performance; except that if similar obligations were due to him both individually and as a trustee, he must, unless otherwise directed by the debtor, apply the performance to the extinction of all such obligations in equal proportion; and an application once made by the creditor cannot be rescinded without the consent of [the] debtor.‘Three—If neither party makes such application within the time prescribed herein, the performance must be applied to the extinction of obligations in the following order; and, if there be more than one obligation or a particular class, to the extinction of all in that class, ratably:‘1. Of interest due at the time of the performance.‘2. Of principal due at that time.‘3. Of the obligation earliest in date of maturity.‘4. Of an obligation not secured by a lien or collateral undertaking.‘5. Of an obligation secured by a lien or collateral undertaking.’

McDANIEL, Associate Justice.

GARDNER, P. J., and TAMURA, J., concur.