Fisher Law Corporation’s Frequently Asked Questions

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Notice: The information contained in these articles is designed to provide accurate information in regard to the subject matters covered and is made available with the understanding that the information provided does not constitute the rendering of legal or professional services. All information is of a general nature, is specific to California law only, and is not intended to to replace professional or legal advice. Each person’s situation is unique and the information contained herein cannot be applied to any individual’s situation. If legal advise is required, the services of a professional should be sought.

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What are the different forms of doing business? »

What do trade terms mean? »

What are liquidated damages in real property contracts? »

What is a Lis Pendens? »

How do loan modifications work? »

What is a Mechanic’s Lien? »

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What is the Statute of Frauds? »

What is Statute of Limitations on Debts Secured By a Mortgage? »

Does a buyer’s broker have a duty to inspect? »

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Q. What is a Mechanic’s Lien?

A. A mechanic who is not paid for the labor and/or materials he has furnished has five separate, alternative, and cumulative remedies he can pursue to collect the amount owed to him.

First, he can file a claim for a mechanic’s lien on the construction project and pursue the statutory procedures of foreclosure; in doing so, he can have the encumbered property sold to satisfy the claim.

Second, he can sue the person who contracted for the labor and/or materials to collect the contract price. Usually, the general contractor is the person who contracted with the subcontractor or material man for the labor and materials, but the mechanic can recover a personal judgment against any person who has assumed a contractual obligation to pay the debt. The contracting party may be the owner who has expressly or impliedly agreed to pay the debt, or a buyer of the property who has assumed payment of the debt. A person who has ordered the work or materials, or who is otherwise contractually obligated to pay the debt, is liable for payment of the sums due the mechanic even though the person liable is not the owner of the property improved.

The mechanic can bring two separate actions, one to foreclose the lien and another for a personal judgment against the person who contracted to pay the debt; the remedies are cumulative, but any recovery in one action must be credited toward any judgment received in the other.

The mechanic who establishes personal liability against the defendant can protect his recovery by attaching the assets of the party who contracted for the labor and/or materials even though the claim is otherwise secured by a mechanic’s lien. When the mechanic attaches funds held by the owner, the attachment lien only applies to funds which are due the general contractor. Since the owner can withhold funds from the general contractor until the total amount of all liens is determined, an attachment by one mechanic is not effective until the validity and amount of all liens has been determined by a final judgment.

The subcontractor or material man is not required to make an election. He can seek personal liability against the contractor and attach assets of the contractor in the same action in which he forecloses his mechanic’s lien. If he recovers a judgment, he can pursue his mechanic’s lien and enforce his judgment lien simultaneously, but there is a single debt, and any funds received by one procedure are credited against any amount which may be recovered by the other. This is a specific exception to the general rule that a secured creditor is not entitled to a writ of attachment. A mechanic who decides not to record his claim of lien can waive his mechanic’s lien rights and seek an attachment in his personal action against the general contractor. Similarly, the mechanic can enforce personal liability against the person who contracted for the labor and/or materials, even though his claim of lien is invalid and unenforceable.

The mechanic also can recover a personal judgment against the contractor even though he also is enforcing a stop notice against the holder of the construction loan funds.

Third, if a performance bond has been obtained, the mechanic can file an action directly against the surety to collect the sums due for the labor and/or materials incorporated into the work of improvement. This action is cumulative with the mechanic’s other remedies. The action on the performance bond can be combined with an action to enforce a stop notice, and the two actions are independent and cumulative, with any recovery in one action being credited toward any judgment recovered in the other. The mechanic can collect sums due from the surety for the labor and materials supplied to the project even though he may have waived his lien rights against the owner.

If the person with whom he contracted is a licensed contractor, the mechanic also may seek a recovery against the contractor’s license bond.

Fourth, the mechanic can file a stop notice with the construction fund lender or any other person holding funds to pay the costs of construction; if the recipient has any unexpended construction funds in his possession, the mechanic can compel him to pay over the amount claimed in the stop notice. The stop notice is a cumulative remedy which can be pursued by the mechanic at the same time that he is pursuing enforcement of a mechanic’s lien, or an action on the bond, or the enforcement of a personal judgment against anyone who is personally liable for the debt.

Fifth, when there is a provision in the contract with the mechanic that disputes regarding the contract will be decided by arbitration, the mechanic also can prosecute his claim by demanding that the dispute be referred to arbitration. The filing of a claim of lien is not inconsistent with, or a repudiation of, the agreement to arbitrate personal liability; nor is it a waiver of the arbitration agreement. If the right to arbitrate is not waived, any civil suit to enforce the contract can be stayed pending the conclusion of the arbitration proceedings. The mechanic can file his mechanic’s lien and a suit to enforce the mechanic’s lien and preserve his right to arbitrate provided he seeks a stay of his own action pending the arbitration at the time he files his action.

Although these remedies are cumulative, and although the mechanic can pursue any one or more of them, a recovery received through one procedure will be offset against a recovery awarded in any of the other procedures.

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