The California Constitution Gives Contractors, Subcontractors and Material Suppliers Constitutional Rights to Record Mechanics Liens and to Serve Public Works Stop Payment Notices.

Many years ago, wealthy individuals would use a person with few assets as their “general contractor”, who would then buy materials and hire workers and subcontractors to do most of the work.

Once the work was substantially finished, the owner would refuse to pay the phoney “general contractor”, who of course was then insolvent or bankrupt and unable to pay his laborers, subcontractors and suppliers, who thus then had no real way to get paid for their labor, work or materials.

Therefore, at a Constitutional Convention to amend the California Constitution in 1878-1879, the Workingmens’ Party succeeded in adding a mandatory Mechanics Lien right to the California Constitution, to protect the rights of laborers, contractors and suppliers to get paid..

Consequently, the California Constitution now grants mechanics lien rights to all those who furnish labor or material to a construction project.

“Mechanics, persons furnishing materials, artisans, and laborers of every class, shall have a lien upon the property upon which they have bestowed labor or furnished material for the value of such labor done and material furnished; and the Legislature shall provide, by law, for the speedy and efficient enforcement of such liens.” (Emphasis added)

California Constitution, Article XIV § 3.
Thus, the right to a Mechanics Lien and similar remedies to secure a worker’s or supplier’s right to payment on a project originates in or is derived from the Constitution, NOT in state laws adopted by the Legislature, such as the Civil Code:

“As the Koudmani court emphasized, and as we ignored in Maris, a mechanic's right to a lien rests on the Constitution, not on the procedures outlined in the Civil Code. . . .” (Emphasis added)

Solit v. Tokai Bank (1999) 68 Cal. App. 4th 1435, 1446.

“[T]he right of materialmen, artisans, and laborers of every class is to have a lien upon the property upon which they have bestowed their labor or furnished their material for the full value of the same, and this right is one solemnly guaranteed to them by the constitution of the state. (Art. XX, sec. 15.) The legislature is enjoined to pass laws for the speedy and efficient enforcement of these liens. Every provision of the laws which the legislature may enact must be subordinate to and in consonance with this constitutional provision. . . .”

Hampton v. Christensen (1905) 148 Cal. 729, 737.

Because of this broad Constitutional requirement or mandate:

“[O]ur courts "have uniformly classified the mechanics' lien laws as remedial legislation, to be liberally construed for the protection of laborers and materialmen." ( Connolly Development, Inc. v. Superior Court (1976) 17 Cal.3d 803, 826-827 [132 Cal.Rptr. 477, 553 P.2d 637], fn. omitted.) "[State] policy strongly supports the preservation of laws which give the laborer and materialman security for their claims." ( Id. at p. 827.)” ( E m p h a s i s added)

Hutnick v. United States Fidelity & Guaranty Co. (1988) 47 Cal. 3d 456, 462; Wm. R. Clarke Corp. v. Safeco Ins. Co.(1997) 15 Cal. 4th 882, 889.

Therefore, these remedial laws must be interpreted liberally, to protect and favor the Constitutional Rights of laborers and material suppliers to have their rights to payment so secured:

"Generally, doubts concerning the meaning of the mechanics' lien statutes are resolved in favor of the claimant. [Citation.]" ( Coast Central Credit Union v. Superior Court, supra, 209 Cal. App. 3d at p. 711.)”(Emphasis added)

Solit v. Tokai Bank (1999) 68 Cal. App. 4th 1435, 1442.

Because mechanics liens are not available where the construction project is performed on the property of the State or its political subdivisions (such as on CalTrans highway construction or other State or local County, City or District public construction jobs), in order to satisfy the Constitutional mandate to “give the laborer and materialman security for their claims." the Legislature therefore created rights to Stop Payment Notices, and Payment Bond requirements, for such public works projects. See generally, Civil Code §§ 9350 et seq; 9550 et seq.

“However, “[u]nder the principle of sovereign immunity, mechanics' liens may not be asserted on government projects. ... The only remedies available on public works are stop notices (Civ. Code, §§ 3179–3214) and actions on public works payment bonds (Civ. Code, §§ 3247–3252).” ( Liton Gen. Engineering Contractor, Inc. v. United Pacific Insurance (1993) 16 Cal.App.4th 577, 584 [20 Cal. Rptr. 2d 200]; see Civ. Code, § 3109.)”

“Importantly, “the payment bond is the practical substitute for the mechanic's lien in the public works context when a stop notice is inadequate because insufficient funds remain to be paid by the awarding body.” ( Department of Industrial Relations v. Fidelity Roof Co. (1997) 60 Cal.App.4th 411, 423 [70 Cal. Rptr. 2d 465]; see Washington Internat. Ins. Co. v. Superior Court (1998) 62 Cal.App.4th 981, 986 [73 Cal. Rptr. 2d 282].) “No lien being available to those who perform labor or furnish material on public works [citation], the provisions of the Public Works Act requiring a bond were obviously enacted to create a fund in lieu of the building or work itself against which materialmen and laborers might proceed as an additional and contemporaneous remedy. The bond required is not a voluntary bond but a statutory bond [citations], and affords an additional or cumulative remedy. [Citation.]” ( Pneucrete Corp. v. U.S. Fid. & G. Co. (1935) 7 Cal. App. 2d 733, 737 [46 P.2d 1000].)”(Emphasis added)

N.V. Heathorn, Inc. v. County of San Mateo (2005) 126 Cal. App. 4th 1526, 1535.

“Under a mechanic's lien, a claimant is only entitled to recover "the reasonable value of the labor, services, equipment, or materials furnished" or "the price agreed upon by the claimant and the person with whom he or she contracted, whichever is less." (Civ. Code, § 3123, italics added.) In contrast, a payment bond, given in connection with a public work of improvement according to the terms of the statute under which it is required, is not limited to reimbursing unpaid subcontractors and others for only the reasonable value of the labor or materials furnished. Instead, a payment bond "shall secure the payment of the claims of laborers, mechanics or materialmen employed on the work under the contract and shall contain all other provisions required by law." (§ 10223, italics added.)”(Emphasis added)

Washington Internat. Ins. Co. v. Superior Court (1998) 62 Cal. App. 4th 981, 986.

On some State Public Works contracts, such as for CalTrans, there is also a more specific Payment Bond requirement:

“The payment bond shall secure the payment of the claims of laborers, mechanics or materialmen employed on the work under the contract and shall contain all other provisions required by law.” (Emphasis added)

Pub Cont. Code § 10223.

“[W]here a surety bond is given pursuant to the requirements of a particular statute, the statutory provisions are incorporated into the bond, (ibid.) and that this is true whether or not the bond makes specific reference to the statute pursuant to whose requirements it is given, so long as it appears from all the circumstances that it was given pursuant to such statute. ( Evans v. Shackelford (1923) 64 Cal. App.. 750, 754 [222 P. 846]; Cal. Surety & Fidelity Bond Practice (Cont.Ed.Bar 1969) Statutory and Common Law Bonds, § 5.2, pp. 39-40.)” (Emphasis added)

Washington Internat. Ins. Co. v. Superior Court (1998) 62 Cal. App. 4th 981, 987. Just like the mechanics lien laws adopted as required by the Constitution:

“(a) A [payment] bond given under this part shall be construed most strongly against the surety and in favor of all persons for whose benefit the bond is given.” (Emphasis added)

Civil Code § 8154; Washington Internat. Ins. v. Superior Court, supra, 62 Cal. App. 4th at 988

Civil Code Section 9100(a) states that "any of the following persons that have not been paid in full may give a stop payment notice to the public entity or assert a claim against a payment bond:

(1) “A person that provides work for a public works contract, if the work is authorized by a direct contractor..."

Civil Code §9100(a).

Civil Code Section 8048 defines "work" to mean "labor, service, equipment, or material provided to a work of improvement." Civ. Code §8048. (Emphasis added)

"Work of improvement" includes, but is not limited to: "construction, alteration, repair...in whole or in part, of, or addition, to a ...bridge,...or road." Civ. Code §8049.

In addition, the California Supreme Court has stated that a person furnishing labor or materials used in, on, or about the performance of public work may avail himself or herself of the stop payment notice procedure, providing the work or materials is furnished at the instance of the prime or direct contractor or a subcontractor having charge, in whole or in part, of the project. Theisen v. Los Angeles County (1960) 54 Cal.2d 170, 177; see also George F. Kennedy, Inc. v. Miles & Sons Constr. Div. (1970) 5 Cal.App.3d 516, 520.

The California Supreme Court further stated that "one who agrees with the prime contractor to perform a substantial specified portion of the work of construction which is the subject of the general contract in accord with the plans and specifications by which the prime contractor is bound has 'charge of the construction' of that part of the work of improvement (citation omitted) and is a subcontractor although he does not undertake to himself incorporate such portion of the projected structure into the building." Theisen, 54 Cal.2d at 183.

The material involved in Theisen consisted of 64 doors custom made in accordance with the architect's specification.

The California Supreme Court in Theisen held that the subcontractor/material supplier was entitled to invoke the stop payment notice procedure as a subcontractor/supplier.

The benefit to the construction contractor or supplier of having these Constitutional and statutory rights and remedies is that you may still be able to recover payment EVEN IF the owner or general contractor becomes insolvent or declares Bankruptcy, provided there is equity in the property, money still unpaid by the public agency, or the claims on the bond do not exceed the amount of the payment bond!!

However, to also protect the Due Process rights of property owners and general contractors, the time limits on recording a Mechanics Lien (See related article), making a Public Works Payment Bond claim (See related article), or serving a Public Works Stop Notice (See related article) are very very short,

Further, these laws also require that the unpaid claimant who has no direct contract with the property owner have previously served a 20-Day Preliminary Lien Notice (See related article) or a Payment Bond Notice..

Also, to “perfect” or enforce Mechanics Liens, Stop Payment Notice claims, or Public Works Payment Bond claims, suit must be filed very soon (sometimes as soon as 90 days after recording or serving, as discussed in the related articles above), or your Constitutional and statutory rights to such remedies may expire and become invalid!!!

Additionally, there are many technicalities to making proper and effective claims under or to these payment remedies.

Therefore, if you have not been paid, it is best to consult with an experienced Construction attorney very early on, to make sure you don’t make fatal missteps or errors, and to secure your right to be paid what is owed to you.

N.B. The contents of this Article DO NOT constitute legal advice or create an attorney-client relationship, and you may NOT rely on it without seeking legal advice regarding your particular, unique situation from a competent California Construction lawyer or Employment Law attorney.
Please also note that factual situations vary, and statutes, regulations and case law are frequently changing and evolving, and these materials thus also may be or become outdated or incorrect.
For further information on this topic and how the current law may apply to your particular contract, job and issues, Contact Us via email, phone (415)788-1881 or visit our website at www.wolfflaw.com for other contract information.
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