It’s funny how cases are decided completely independent from one another, but somehow, there is overlap and relationships between them. This is the case for two decisions from the past few weeks, one in Idaho and another in California. They both regard almost identical issues, yet the courts reach almost opposite results. Ah, there is so much to love about the law [sarcasm]. 🙂
Idaho Court Invalidates Lien Because Claimant Incorrectly Identifies Itself
The case at issue in Idaho is Stonebrook Construction v. Chase Home Finance. In this matter, a contractor performed work, wasn’t paid and filed a mechanics lien. It’s contract and lien was in the name “Stonebrook Construction, L.L.C.” The contractor’s license, however, was in the name “Stonebrook Construction,” as a tradename for one of the members of the LLC.
delivered to your inbox
Stonebrook made arguments before the Idaho Supreme Court that the license applied to them, that the difference was inconsequential, that the invalidation of the mechanics lien was too harsh a result, etc. etc. Chase Home Finance argued simply that “Stonebrook Construction” may have a construction license and be entitled to a mechanics lien, but “Stonebrook Construction, LLC” was not.
The Idaho Supreme Court agreed with Chase Home Finance:
The LLC is the entity that entered into the contract, provided the labor and materials, brought the legal action, and filed the claim of lien. The plain language of the Act provides that the LLC was also the entity required to register. Therefore, we affirm the district court’s judgment that Stonebrook did not comply with the ICRA.
California Court Upholds Lien With Identical Identification Issue
The Stonebrook Construction case is remarkably similar to the case I wrote about a few days ago coming out of the circuits in California, Montgomery Sansome LP v. Rezai. Just like the circumstances in Idaho, the California contractor identified itself as “Montgomery Sansome Ltd., LP” on the mechanics lien and in the underlying contract, but was actually licensed as “Montgomery Sansome, Ltd.”
Just like in Idaho, a contractor cannot file a mechanics lien in California if it is unlicensed. And just like in Idaho, a contractor must register itself in the name for which it does business.
While the rules are identical, and the public policy reasons behind the rules are identical, the results between the Montgomery Sansome LP case in California and the Stonebrook Construction case in Idaho are exactly opposite. The California appeals court determined that it was an “issue of fact” as to whether the two entities were “operating as one” such as to allow recovery. Instead of invalidating the lien based on a technicality, the court allowed the claimants some room to show that it was just that – a technicality – and not two separate entities operating two separate businesses.