The California Court of Appeals issued a fairly routine decision this week as part of an unpublished opinion in Dynamic Commercial Plumbing v. Preferred Bank.
The decision offers nothing ground-breaking, which is typical of unpublished decisions. However, it does present a good reminder to mechanics lien claimants related to their foreclosure actions. Just as there are technical requirements to follow when filing a mechanics lien in California (as elsewhere), there are technical requirements that also apply to the process of foreclosing a lien.
In the Dynamic Plumbing decision, the court was confronted with a lender arguing that the mechanics lien expired because it wasn’t properly foreclosed upon within the 90-day statutory period. In fact, Dynamic Plumbing had filed a timely foreclosure action. The problem, according to the lenders, is that they weren’t included as a defendant in that action.
Dynamic Plumbing didn’t argue that the lenders weren’t a necessary party, they simply argued that they didn’t know about them.
California Civil Code of Procedure 474 provides:
When the plaintiff is ignorant of the name of a defendant, he must state that fact in the complaint, . . . and such defendant may be designated in any pleading or proceeding by any name, and when his true name is discovered, the pleading or proceeding must be amended accordingly . . . .
While a mechanics lien foreclosure action in California requires claimants to name all parties who have an interest in the property, if they don’t know the party, they can rely on this procedure rule and name a “John Doe” as a defendant. Dynamic Plumbing claimed they didn’t know of the other party, and that they did properly name “John Doe” as a defendant.
The appeals court held that the naming of “John Doe” was done properly from a procedural perspective, but that Dynamic Plumbing couldn’t rely on this tactic because they had sufficient knowledge about the existence of the lender.
Here are the two key lessons for California mechanics lien claimants:
- If you know anything about a party’s involvement in a project – even if you’re only a little bit aware of their involvement – it may be safest to include them in your lien foreclosure action; and
- Always name “John Doe” defendants in your lien foreclosure complaint, just in case you don’t know about someone’s interest in the property.