Article Date: 12/19/2014

Subcontractor Groups Say ‘Error’ in California Mechanic’s Lien Case Could Cause Irreparable Harm

By Steve Rizer


It will be interesting to see what kind of impact an appeals court ruling in Moorefield Construction v. Intervest-Mortgage Investment Co. will have on the construction industry if California’s Supreme Court does not grant a petition for review or de-publish the case. At least in the eyes of a pair of subcontractor groups, if the state’s high court does not take such action, “the general public policy and California constitutional right to mechanic’s lien stated in Wm. R. Clarke Corp. v. Safeco Ins. Co. … would be irreparably harmed.”


Late last month, the American Subcontractors Association (ASA) and American Subcontractors Association of California (ASAC) sent a letter to the California Supreme Court, asking the tribunal to review, or at least de-publish, the case (Supreme Court Case No. S222379). The groups made the request based on the “adverse impact to the construction industry and the right to secure payment via a mechanic’s lien” caused by the Court of Appeals’ “misinterpretation” of California Civil Code Section 3262 and current California Civil Code Section 8122 in case No. D065464.


ASA and ASAC maintained that allowing the appeals court’s decision to stand “would introduce uncertainty into contracting as to what is or is not enforceable or permitted, engender disputes and create conflicts and inconsistencies with the California Code, and run counter to the public interest in assuring payment to those who provide construction labor and materials to projects to improve real property in California.”


By allowing a subordination agreement in a prime contract under the facts at bar to be enforceable against a mechanic’s lien claimant, the groups believe the Court of Appeals “has removed any meaningful protection in the California Code against impairing mechanic’s lien rights other than through the prescribed statutory release forms. Such an interpretation hopelessly undermines the public policy intended by California’s legislature and the California Constitution to secure payment protection and the public policy in favor of mechanic’s lien claimants in [the state’s] construction industry. Clearly, we urge [the California Supreme] Court to correct this error by granting certification to review the decision or, at a minimum, de-publishing the decision.”


Representatives of Intervest-Mortgage and two California banking/lending associations did not immediately answer ConstructionPro Week's (CPW) questions concerning their reaction to the ASA/ASAC letter.


The ConstructionPro Network member version of this article includes additional details about the case and comments that Scott Holbrook, legal counsel to ASAC, made during an interview with CPW, including what he said about the case's potential impact outside of California.



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