Jan/Feb 2013


Abdulaziz, Grossbart & Rudman Newsletter
Jan/Feb 2013
Greetings,

We hope that you enjoy this edition of our Newsletter.
 
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The Staff At
Abdulaziz, Grossbart & Rudman
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handmoney

MECHANIC'S LIEN AND BANKRUPTCY

 

 

The case of Pioneer Construction, Inc. v. Global Investment gives us an exception to the timing of the Mechanic's Lien. This particular case began because of a contract between Oakridge Homes LLC ("Oakridge") and Pioneer Construction, Inc. ("Pioneer") in 2005 for construction services on 19 lots in Stevenson Ranch. Pioneer completed the work but Oakridge never paid them for the work done on the project. This caused Pioneer to seek recovery by utilizing the Mechanic's Lien process. The legalities on the timing Pioneer utilized are what is at question in this case.

 

Pioneer recorded a Mechanic's Lien on April 17, 2008. On June 13, 2008, Oakridge filed for Chapter 11 bankruptcy. Pioneer recorded another Mechanic's Lien for more money on January 29, 2009. A Notice of Perfection of Security Interest (a filing in bankruptcy court rather than the superior court because of the bankruptcy stay, to notify all creditors of Pioneer's claims against the property) was filed by Pioneer in the Chapter 11 proceedings with a $2.67 million lien (the same amount as the second Mechanic's Lien).


By July 2009, the subject property was purchased by Global Investment Corp ("Global") at a trustee's sale held after relief from the automatic stay was obtained. Pioneer finally filed a complaint to foreclose on the Mechanic's Lien in November of 2009 as well as recorded a Lis Pendens.  Global demurred and motion expunged the Lis Pendens on the frounds that the Mechanic;s Lien was invalid.  The trial court expunged the Lis Pendens.


Civil Code Section 3144 (which is now Civil Code section 8460) at the time stated,


"(a) No lien provided for in this chapter binds any property for a longer period of time than 90 days after the recording of the claim of lien, unless within that time an action to foreclose the lien is commenced in a proper court, except that, if credit is given and notice of the fact and terms of such credit is recorded in the office of the county recorder subsequent to the recording of such claim of lien and prior to the expiration of such 90-day period, then such lien continues in force until 90 days after the expiration of such credit  but in no case longer than one year front the time of completion of the work of improvement. (b) if the claimant fails to commence an action to foreclose the lien within the time limitation provided in this section, the lien automatically shall be null and void and of no further force and effect."


Going by Civil Code section 8460 alone the trial court was accurate in the finding because Pioneer did not file its complaint within 90 days of the first Mechanic's Lien.  However, because this dealt with a bankruptcy matter, there are additional laws that needed to be considered, such as 11 U.S.C. sections 362 and 546.  Enforcement actions are not allowed during the automatic stay but tolled.  In other words the time period wherein the automatic stay is effect will not be counted as part of the time period used to calculate deadlines, etc.


In this instance, the 90-day timeline of Civil Code section 8460 was tolled.  This is because Pioneer filed its lien January 29, 2009, and the 90-day period did not begin until after the trustee's sale on August 25, 2009 and the complaint was filed on November 12, 2009, which was 79 days after the trustee's sale, the time within which time began to run as the bankrupt entity no longer owned the property.  Thus, the say made the complaint timely.  The appellate court reversed the trial court's judgment.

 

babyoldage
HOW DO YOU FEEL?

Two elderly gentlemen from a retirement center were sitting on a bench under a tree when one turns to the other and says, "Slim, I'm 83 years old now and I'm just full of aches and pains. I know you're about my age. How do you feel?"

 

Slim says, "I feel just like a newborn baby."

 

"Really!?! Like a newborn baby!?!"

 

"Yup. No hair, no teeth, and I think I just wet my pants."

PROJECT DOCUMENTATION

One of the most important things that a contractor can do on any project is to have complete documentation from beginning to end.
Metaphor
Since construction projects can be very complicated, last for long periods of time, and have multiple players, keeping good records is imperative. This is especially true if the project were to fall into a dispute and possible litigation. Construction litigation can be expensive, time consuming and very unpredictable. Having good records or project documentation makes your side of the matter much more credible.

 

Documentation of the project should be kept from the beginning, before work even starts. This could include bid documents as well as contract documents and any type of correspondence or notes regarding what has progressed. Of course, with that in mind, it is also necessary to keep documentation going during the project as well as any documentation after the project is actually completed.

 

Following is a concise checklist that you should keep in mind when documenting your projects.

  • Bid documents
  • Preliminary Notice
  • Records Proving Service of Preliminary Notice
  • Construction contracts
  • Design documents
  • Project calendar - schedule/delay data
  • Purchase orders
  • Change orders
  • Correspondence
  • Invoices/Progress Payments
  • Job cost reports/estimates
  • Financial statements
  • Payroll records
  • Photos/Videos
  • Daily logs or job notes
  • Permits
  • Punch lists
  • Notices, releases, liens, etc.

The above may not include all of the items that you should document on each project but it is a very good jumping off point and should be done at the minimum.

PEARLY GATES

A contractor dies on a fishing accident on his 40th birthday and finds himself greeted at the Pearly Gates by a brass band.

Saint Peter runs over, shakes his hand and says "Congratulations!"

"Congratulations for what?" asks the contractor.

"Congratulations for what?" says Saint Peter. "We are celebrating the fact that you lived to be 160
years old."

"But that's not true," says the contractor. "I only lived to be forty."
"That's impossible," says Saint Peter, "we added up your time sheets!!"
DON'T MISS THESE SEMINARS!!!
***** ***** ***** ***** *****
Hidden Assets: Using Personal Assets to Satisfy Corporate Debt!
Presented by Milene C. Apanian
Hosted by the Credit Management Association (CMA) and the LA/Valley Credit Professionals Group
Friday, February 22, 2013
8:45 a.m. to 10:15 a.m.
At Industrial Metal Supply at
8300 San Fernando Road in Sun Valley
$10 includes continental breakfast
Send registration form to Larry Convoy by fax at 818-972-5323 or email at lconvoy@emailcma.org
Attend this seminar to:
  • Recognize the importance of Credit Applications
  • Understand the types and benefits of a Personal Guarantee
  • Identify tools for investigating & evaluating prospective & current customers
  • Hear about piercing the corporate veil and pursuing personal assets
  • Explore the use of Promissory Notices for collecting old debts
  • Learn how to help expedite collecting activities & help your legal team
  • Explore suggestions on using personal assets for getting paid for corporate debt
Email any questions to mca@agrlaw.com
***** ***** ***** ***** *****

Collecting Your Money Through Mechanic's Liens, Stop Payment Notices and Payment Bonds

Presented by Kenneth S. Grossbart
At the PHCC-GLAA Flow Expo at the Long Beach Convention Center

Saturday, March 2, 2013
9:00 a.m. to 10:30 a.m.
Visit the trade show website for more information

Attend this seminar to:
  • Learn how to protect your rights
  • Learn which forms to use
  • Learn about the new changes to the Preliminary Notice
  • Learn the new laws that affect Mechanic's Liens and Stop Payment Notices
  • Learn what legislative changes there are because of SB 189 and other legislation
  • Learn what to do to make a Mechanic's Lien valid
  • Learn how to record and enforce a Mechanic's Lien
  • Learn the basic Stop Payment Notice requirements
  • Learn the basics on bond claims
  • Learn common pitfalls to avoid
  • Learn how to collect your money!
***** ***** ***** ***** *****

Collecting Your Money Through Mechanic's Liens, Stop Payment Notices and Payment Bonds

Presented by Kenneth S. Grossbart
Hosted by Shasta Builders' Exchange

 

Thursday, March 14, 2013
12:00 p.m. to 3:00 p.m.
At the Shasta Builders' Exchange Training Center
View the registration form for more information.

Attend this seminar to:
  • Learn how to protect your rights
  • Learn which forms to use
  • Learn about the new changes to the Preliminary Notice
  • Learn the new laws that affect Mechanic's Liens and Stop Payment Notices
  • Learn what legislative changes there are because of SB 189 and other legislation
  • Learn what to do to make a Mechanic's Lien valid
  • Learn how to record and enforce a Mechanic's Lien
  • Learn the basic Stop Payment Notice requirements
  • Learn the basics on bond claims
  • Learn common pitfalls to avoid
  • Learn how to collect your money!
Abdulaziz, Grossbart & Rudman
provides this information as a service to its friends and clients. This Newsletter is of a general nature and is not intended to be a substitute for legal advice. This Newsletter does not establish an attorney-client relationship with the reader. Since laws are ever changing, please contact an attorney before using any of the information contained within this Newsletter.
 
Abdulaziz, Grossbart & Rudman
P.O. Box 15458, North Hollywood, California 91606
(818) 760-2000; (818) 760-3908 (fax)
In This Issue
Free Membership
Mechanic's Lien and Bankruptcy
How Do You Feel?...HaHaHa
Project Documentation
Pearly Gates...HaHaHa
DON'T MISS THESE SEMINARS!!!
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Upcoming Events

Visit our website for more information on the following:

Hidden Assets: Using Personal Assets to Satisfy Corporate Debt! - 2/22/13

CSLB Meeting - 2/26/13

Collecting Your Money Through Mechanic's Liens, Stop Payment Notices and Payment Bonds - 3/2/13

Collecting Money with Mechanic's Liens, Stop Payment Notices & Bonds - 3/14/13

Bond Claims & Prompt Payment Penalties on CA Construction Projects: How to Use Them to Get Paid - Webinar - 4/9/13

CSLB Meeting - 4/23-24/13

Second Annual NAWIC San Gabriel Valley Chapter Legal Seminar - 5/10/13

CSLB Meeting - 6/11/13