Serving a Preliminary Notice on a Reputed Lender Cases in California
There are three cases that dominate a discussion about serving a preliminary notice on a reputed lender:
(1) Brown Co. v. Appellate Department (1983) 148 Cal.App.3d 891 (Brown);
(2) Romak Iron Works v. Prudential Ins. Co. (1980) 104 Cal.App.3d 767 (Romak);
(3) Kodiak Industries, Inc. v. Ellis (1986) 185 Cal.App.3d 75 (Kodiak).
Two of the cases set forth similar definitions of the term "reputed construction lender." Essentially, a " 'reputed construction lender' is a person or entity reasonably and in good faith believed by the claimant to be the actual construction lender." (Kodiak, supra, 185 Cal.App.3d at p. 87; see also Brown, supra, 148 Cal.App.3d at p. 900.)
The same two cases also set forth similar tests for analyzing whether a claimant held a good faith belief that the reputed lender was the actual lender, i.e., would a reasonable person, given the claimant's information, have been led to believe in good faith that the reputed lender was the actual lender? (Brown, at pp. 901-902; Kodiak, at p. 87.)
The cases diverge when discussing how a claimant may prove that he held a good faith belief that the reputed lender was the actual lender.
In Romak, the appellate court held that a good faith belief that the reputed lender was the actual lender should be proven by evidence that the claimant examined county records to ascertain the identity of the construction lender, e.g., the building permit or construction deed of trust. (Romak, supra, 104 Cal.App.3d at pp. 774-775.)
In Brown, the Court held that a claimant did not need to check county records in order to demonstrate that he held a good faith belief that the reputed lender was the actual lender. (Brown, supra, 148 Cal.App.3d at p. 901.) Rather, the Court concluded that a good faith belief could be proven by evidence that the claimant relied upon information supplied by the general contractor. (Id. at p. 903.)