Can I file a lien on a property in escrow if I was not paid by the contractor?

06/24/2009 - Category:Civil Actions - Liens - State: CA #17166

Full Question:

I did some air conditioning work on a vacant property. The contractor did not pay me and the property is now in escrow according to the real estate agent. They are saying that they are not responsible that they paid the contractor. I have tried contacting the contractor and he doesn't answer my calls. I don't have anything in writing. I was wondering if I could put a lien on the property for the $3,000 job.

Answer:

There are various ways to obtain a lien on property. A lien is a claim to property for the payment of a debt, typically one connected to the property. It is the right to retain the lawful possession of the property of another until the owner fulfills a legal duty to the person holding the property, such as the payment of lawful charges for work done on the property. The right of lien generally arises by operation of law, but in some cases it is created by express contract. There are two kinds of liens; particular and general. When a person claims a right to retain property, due to money or labor invested in that property, it is a particular lien. Liens may arise by express contract; from implied contract, as from general or particular usage of trade; or by legal relation between the parties, such as created with common carriers and inn keepers. In certain circumstances, the lien holder may foreclose on the property if the debt is not paid in full.

To create a valid lien, it is essential that the party claiming a lien should have the absolute property or ownership of the thing or, at least, a right to vest it; that the party claiming the lien should have an actual or constructive, possession, with the assent of the party against whom the claim is made; that the lien should arise upon an agreement, express or implied and not be for a limited or specific purpose that contradicts the express terms or the clear, intent of the contract. In certain circumstances, the lien holder may foreclose on the property if the debt is not paid in full. Liens can generally be removed by the payment of the amount owed. This payment can occur at any time up to and including the stage at which the closing documents for the sale of the property are signed.

There are several types of liens, all of which could cloud the title and prevent the seller from conveying marketable title to the buyer. A judgment lien is created when a court grants a creditor an interest in the debtor's property, based upon a court judgment. A judgment lien can be filed if an actual judgment in a lawsuit is obtained from a court. Such cases include failure to pay a debt, including credit cards, bank loans, or deficiency judgments on repossessed vehicles. In some circumstances, judgments can be enforced by sale of property until the amount due is satisfied. A plaintiff who obtains a monetary judgment is termed a "judgment creditor." The defendant becomes a "judgment debtor." secure payment of the claim to the injured party. After the judgment creditor places a lien upon the attached property, the next step in the collection process is to conduct a sale of the attached property to satisfy the judgment debt.

If you are unable to file a mechanics lien and wish to pursue a legal remedy for a breach of contract withthe contractor, the following information on contracts may be helpful:

Contracts are agreements that are legally enforceable. A contract is an agreement between two parties that creates an obligation to do or refrain from doing a particular thing. The purpose of a contract is to establish the terms of the agreement by which the parties have fixed their rights and duties. An oral contract is an agreement made with spoken words and either no writing or only partially written. An oral contract may generally be enforced the same as a written agreement. However, it is much more difficult with an oral contract to prove its existence or the terms. Oral contracts also usually have a shorter time period within which a person seeking to enforce their contract right must sue. A written contract generally provides a longer time to sue than for breach of an oral contract. Contracts are mainly governed by state statutory and common (judge-made) law and private law. Private law generally refers to the terms of the agreement between the parties, as parties have freedom to override many state law requirements regarding formalities of contracts. Each state has developed its own common law of contracts, which consists of a body of jurisprudence developed over time by trial and appellate courts on a case-by-case basis.

An unjustifiable failure to perform all or some part of a contractual duty is a breach of contract. A legal action for breach of contract arises when at least one party's performance does not live up to the terms of the contract and causes the other party to suffer economic damage or other types of measurable injury. A lawsuit for breach of contract is a civil action and the remedies awarded are designed to place the injured party in the position they would be in if not for the breach. Remedies for contractual breaches are not designed to punish the breaching party. The five basic remedies for breach of contract include the following: money damages, restitution, rescission, reformation, and specific performance. A money damage award includes a sum of money that is given as compensation for financial losses caused by a breach of contract. Parties injured by a breach are entitled to the benefit of the bargain they entered, or the net gain that would have accrued but for the breach. The type of breach governs the extent of damages that may be recovered.

Restitution is a remedy designed to restore the injured party to the position occupied prior to the formation of the contract. Parties seeking restitution may not request to be compensated for lost profits or other earnings caused by a breach. Instead, restitution aims at returning to the plaintiff any money or property given to the defendant under the contract. Plaintiffs typically seek restitution when contracts they have entered are voided by courts due to a defendant's incompetence or incapacity.

Rescission is the name for the remedy that terminates the contractual duties of both parties, while reformation is the name for the remedy that allows courts to change the substance of a contract to correct inequities that were suffered. In order to have a rescission, both parties to the contract must be placed in the position they occupied before the contract was made. Courts have held that a party may rescind a contract for fraud, incapacity, duress, undue influence, material breach in performance of a promise, or mistake, among other grounds.

Specific performance is an equitable remedy that compels one party to perform, as nearly as practicable, his or her duties specified by the contract. Specific performance is available only when money damages are inadequate to compensate the plaintiff for the breach.

Promissory estoppel is a term used in contract law that applies where, although there may not otherwise be an enforceable contract, because one party has relied on the promise of the other, it would be unfair not to enforce the agreement. Promissory estoppel arises from a promise which the promisor should reasonably expect to induce action or forebearance of a definite and substantial character on the part of the promisee and which does induce such action or forebearance in binding if injustice can be avoided only by enforcement of the promise. Detrimental reliance is a term commonly used to force another to perform their obligations under a contract, using the theory of promissory estoppel. Promissory estoppel may apply when a promise was made; reliance on the promise was reasonable or foreseeable; there was actual and reasonable reliance on the promise; the reliance was detrimental; and injustice can only be prevented by enforcing the promise. Detrimental reliance must be shown to involve reliance that is reasonable, which is a determination made on an individual case-by-case basis, taking all factors into consideration. Detrimental means that some type of harm is suffered.

Reasonable reliance is usually referred to as a theory of recovery in contract law. It was what a prudent person might believe and act upon based on something told by another. Sometimes a person acts in reliance on the promise of a profit or other benefit, only to learn that the statements or promises were either incorrect or were exaggerated. The one who acted to their detriment in reasonable reliance may recover damages for the costs of his/her actions or demand performance. Reasonable reliance connotes the use of the standard of an ordinary and average person.

Mechanics liens are available to mechanics and material men or persons who furnish materials for the construction, alteration, improvement, addition to, or repair of property. There are formalities that the state statutes require in order to create a valid lien. If these requirements aren't met, the lien may be invalidated. The owner is permitted to limit his liability to the amount of the original contract with the contractor if he files the original contract and records a payment bond. The owner also is allowed to protect his interest in cases where the contractor fails to perform under the contract or to make full payment by demanding such bond or security as he deems necessary. In cases where the general contractor has been fully paid, the court will not make the owner pay twice if the contractor fails to pay the subcontractors.

Please see the following are CA statutes to determine applicability:

3153.

In all cases where a claim of lien is recorded for labor, services, equipment, or materials furnished to any contractor, he shall defend any action brought thereon at his own expense, and during the pendency of such action the owner may withhold from the original contractor the amount of money for which the claim of lien is recorded. In case of judgment in such action against the owner or his property upon the lien, the owner shall be entitled to deduct from any amount then or thereafter due from him to the original contractor the amount of such judgment and costs. If the amount of such judgment and costs exceeds the amount due from him to the original contractor, or if he has settled with the original contractor in full, he shall be entitled to recover back from the original contractor, or the sureties on any bond given by him for the faithful performance of his contract, any amount of such judgment and costs in excess of the contract price, and for which the original contractor was originally the party liable.

3116.

Each claimant other than an original contractor, in order to enforce a lien, must record his claim of lien after he has ceased furnishing labor, services, equipment, or materials, and before the expiration of
(a) 90 days after completion of the work of improvement if no notice of completion or cessation has been recorded, or
(b) 30 days after recordation of a notice of completion or notice of cessation.

3117.

Where the work of improvement is not made pursuant to one original contract for the work of improvement but is made in whole or in part pursuant to two or more original contracts, each covering a particular portion of the work of improvement, the owner may, within 10 days after completion of any such contract for a particular portion of the work of improvement, record a notice of completion. If such notice of completion be recorded, notwithstanding the provisions of Sections 3115 and 3116, the original contractor under the contract covered by such notice must, within 60 days after recording of such notice, and any claimant under such contract other than the original contractor must, within 30 days after the recording of such notice of completion, record his claim of lien. If such notice is not recorded, then the period for recording claims of lien shall be as provided for in Sections 3115 and 3116.


Please see the information at the following links:

http://definitions.uslegal.com/m/mechanics-lien/
http://definitions.uslegal.com/j/judgment-liens/
http://definitions.uslegal.com/c/common-law-lien/
http://definitions.uslegal.com/c/contract-law/
http://definitions.uslegal.com/c/contracts-breach-of-contract/
http://lawdigest.uslegal.com/consumer-issues/contracts/
http://definitions.uslegal.com/p/promissory-estoppel/
http://definitions.uslegal.com/d/detrimental-reliance/
http://definitions.uslegal.com/r/reasonable-reliance/

Please see the forms at the following links:

http://www.uslegalforms.com/us/US-00758BG.htm
http://www.uslegalforms.com/us/US-01135BG.htm
http://www.uslegalforms.com/us/US-01598.htm
http://www.uslegalforms.com/us/US-M6792.htm
http://www.uslegalforms.com/us/US-00782.htm
http://www.uslegalforms.com/constructionliens/california-mechanic-lien-forms.htm

For further discussion, please see:

http://www.leginfo.ca.gov/cgi-bin/displaycode?section=civ&group=03001-04000&file=3110-3112
http://www.leginfo.ca.gov/cgi-bin/displaycode?section=civ&group=03001-04000&file=3114-3118
http://www.bicknell-law.com/const/const_more.asp?real=9
http://www.thecontractorsgroup.com/preliminary_notices7.htm

06/24/2009 - Category: Liens - State: CA #17166

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