Picerne Constr. Corp. v. Castellino Villas

By Hector H. Espinosa and Benjamin Kussman, K&L Gates, Los Angeles

Under California’s mechanic’s lien laws, a general contractor has 90 days from “completion” of its work to record a claim of mechanic’s lien. Ca. Civ. Code §8412.  Previously, it remained unsettled as to when this 90-day period began to run because some California courts held that the 90-day clock was triggered upon substantial completion of contractor’s work.  In Picerne Constr. Corp., the California Court of Appeal rejected this interpretation of Ca. Civ. Code §3115[1], ruling that completion (for purposes of the 90-day window) only occurs upon “actual completion” of the work of improvement as defined by statute.

BACKGROUND

Castellino Villas (“Castellino”) contracted with Picerne Construction Corp. (“Picerne”) to construct an eleven building residential apartment complex.  Certificates of occupancy were issued for the individual buildings between May and July 2006, during which time Picerne continued to perform its work.  Between August 28, 2016 and September 8, 2006, Castellino accepted all eleven buildings making up the complex.  Through September 2006, Picerne continued performing its contract work, including the completion of various punch-list items.  Castellino began renting out the units in October 2006.

Ultimately, Picerne recorded a claim of mechanic’s lien against the property on November 28, 2006.  The lien claim was submitted to the trial court, which held that Picerne timely recorded its claim of mechanic’s lien. Castellino appealed that determination.

On appeal, Castellino argued that Picerne’s claim of mechanic’s lien was untimely because it was not recorded within 90 days of “substantial completion” of the project.  According to Castellino, the 90-day time period was triggered upon substantial completion which, in this case, was July 2006 – when the Certificates of Occupancy were issued.

RESULT

The Appellate Court disagreed, noting that while the pre-1929 version of the predecessor to §3115 did contemplate substantial completion as the triggering date, the current statutory scheme requires actual completion before the 90-day period begins.  Relying partially on the fact that, as a matter of public policy, the mechanic’s lien laws are supposed to inure to the benefit of the potential claimants, the Court held that one of the three conditions in §3086 must be satisfied before “completion.”  Notably, this holding expressly overruled the court in In re Showplace, which had held that a claim of mechanic’s lien must be recorded within 90 days of substantial completion – not actual completion.  In this case, based on the predecessor statute, the Owner’s acceptance of the work constituted “actual completion.”[2]

Going forward, both owners and contractors should be aware that the 90-day window to record a claim of mechanic’s lien will be counted from the actual completion of the work and not from the date that either party believes substantial completion has occurred.[3]

[1] At the time that the underlying events occurred, the relevant California’s mechanic’s lien statutes were found at Ca. Civ. Code §3100, et seq.  In 2012, the relevant mechanic’s lien laws were recodified under Ca. Civ. Code §8000, et seq.

[2] Under the predecessor statute, acceptance of the work by the owner was one trigger for “actual completion.”  Note that the new statute, codified at § 8180, does not include this language.

[3] Under the current § 8180, completion for private projects includes: (1) actual completion of the work of improvement; (2) occupation or use by the owner accompanied by cessation of labor; (3) cessation of labor for a continuous period of 60 days, or (4) recording a notice of cessation after cessation of labor for a continuous period of 30 days.