Hutnick v. U.S. Fidelity & Guaranty Co – Case Brief Summary (California)

In Hutnick v. U.S. Fidelity & Guaranty Co. (1988) 47 Cal.3d 456, the California Supreme Court described the constitutional underpinnings of mechanics' lien law in California:

"Mechanic's lien law derives from our state Constitution, which provides: '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.' (Cal. Const., art. XIV, § 3.) The mechanic's lien is the only creditors' remedy stemming from constitutional command and our courts 'have uniformly classified the mechanics' lien laws as remedial legislation, to be liberally construed for the protection of laborers and materialmen.' 'State policy strongly supports the preservation of laws which give the laborer and materialman security for their claims.' "

The Hutnick court noted that Civil Code section 3143 provides a statutory procedure by which a party may execute and record a bond, known as a "release bond," in place of real property subject to a mechanics' lien. (Hutnick, supra, 47 Cal.3d at pp. 462-463.)

The effect of executing and recording a release bond is that the principal and surety on the release bond assume liability for the mechanics' lien claim:

"The purpose of the release bond procedure is to provide a means by which, before a final determination of the lien claimant's rights and without prejudice to those rights, the property may be freed of the lien, so that it may be sold, developed, or used as security for a loan. Fn. omitted. Civil Code section 3143 provides that a mechanic's lien release bond 'shall be conditioned for the payment of any sum which the claimant may recover on the claim together with his costs of suit in the action, if he recovers therein.' The 'claim' for which the principal and surety assume liability in the bond is the 'claim of lien.' The release bond procedure thus protects the lien claimant by providing an alternate source of recovery on the claim of lien. The release bond procedure 'does not deprive the lien claimant of its constitutional right to a lien' but 'on the contrary, it provides for the speedy and efficient enforcement of such lien . . . .' The recording of the release bond does not extinguish the lien; rather, the bond is substituted for the land as the object to which the lien attaches. (See Marsh, Cal. Mechanics' Lien Law (3d rev. ed. 1988) § 8.28 'The recordation of the bond in effect transfers the claim of lien from the owner's land to the bond.'.)" (Hutnick, supra, 47 Cal.3d at pp. 462-463.)

In Hutnick the Court noted that:

"Because recovery on the bond is a part of the process for enforcing the mechanics' lien, authorities from other jurisdictions have concluded that a cause of action to foreclose a mechanics' lien is substantially the same whether relief is sought against the liened property or against a bond which has been substituted for the property." (Hutnick, supra, 47 Cal.3d at p. 463.)

The Hutnick court agreed with these authorities and concluded that in seeking to enforce a "mechanic's lien first against the liened property and subsequently against the release bond," a plaintiff "pursues a single cause of action." (Ibid.)