Source: http://updates.mwbllp.com/2014_02_16_archive.html
Timestamp: 2019-04-19 22:33:37+00:00

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The California Court of Appeal, First District, recently reversed a lower court’s denial of a request for equitable subrogation by two lien holders over a third, where the third lien holder was initially the most junior lien holder on the subject property, but was able to advance to the priority position due to a series of refinances.
In so ruling, the Court held that equitable subrogation was appropriate under these factual circumstances where the doctrine would work to restore all the lien holders to a position reflecting the intentions of all the parties and the lien holders requesting equitable subrogation where not negligent.
The First Lien Holder extended a multi-million dollar loan to the borrower secured by a lien on the subject property. Subsequently, the Second Lien Holder with knowledge of the First Lien Holder extended another loan to the borrower secured by a lien on the subject property in second position. Finally, the Third Lien Holder extended a loan to the borrower secured by a lien behind both the First Lien Holder and Second Lien Holder.
The Third Lien Holder knew that its lien was a junior lien, but assumed that it was in the second position. However, the Court noted that the Third Lien Holder did not verify its lien’s priority. Additionally, due to errors made by the Third Lien Holder’s agent, the deed of trust recording its lien incorrectly provided that the amount of the loan as $100,000 and not $500,000.
Following the recording of the Third Lien Holder’s lien, the borrower refinanced its loan with the First Lien Holder and Second Lien Holder. Each of the respective refinancing agreements required that their lien positions be preserved.
The escrow agent for the refinance loans requested a payoff demand from the Third Lien Holder’s agent. The agent submitted to escrow a zero demand and request for reconveyance, along with the original note and deed of trust. The lower court found that the Third Lien Holder’s agent had forged his signatures on the zero demand and request for re-conveyance.
For unclear reasons, the Third Lien Holder’s lien was not reconveyed and remained on the record. Thus, when the First Lien Holder and Second Lien Holder refinanced their loans, the record title for the property reflected that the respective positions of the First and Second Lien Holders were now junior to the Third Lien Holder.
Eventually, the borrower defaulted on his loans, and the First Lien Holder began foreclosure proceedings. The Third Lien Holder then filed its complaint seeking the reformation of its lien amount from $100,000 to reflect the $500,000 of the amount of the actual loan, and judicial foreclosure of the subject property.
In the lower court, the First and Second Lien Holders argued that the doctrine of equitable subrogation applied to restore their lien positions, and that they were bona fide encumbrancers preventing the reformation of the Third Lien Holder’s deed of trust. The lower court rejected the First and Second Lien Holders’ arguments, and reformed the Third Lien Holder’s deed of trust and determined the Third Lien Holder was entitled to judicial foreclosure. The First and Second Lien Holder appealed.
Simon Newman Co. v. Fink, 206 Cal. 143, 146, 273 P. 565 (Cal. 1928). Thus, as the Court noted, equitable subrogation gives effect to the intentions of the parties.
The Court found that the First and Second Lien Holders refinance terms were subject to the maintenance of the lien positions. Additionally, the Court pointed out that the Third Lien Holder knew at the time of its loan was extended that its lien would be junior, and did not expect to receive a first-position lien.
The Court criticized the lower court’s determination that the First and Second Lien Holder’s knowledge of the Third Lien Holder’s lien at the time of their refinancing agreement prevented the application of the doctrine of equitable subrogation. The Court pointed out that the evidence reflected that while the First and Second Lien Holders were aware of the Third Lien Holder’s lien, they did not anticipate that it would remain on the property, and indeed, made the maintenance of their lien positions a prerequisite to the closing of the refinance transactions.
The Court also noted that any potential negligence by the escrow holder would not provide a basis for denying equitable subrogation. The Court explained that in California, as escrow holder is an agent and fiduciary of the parties to the escrow with the limited agency obligation to each in carrying out their respective instructions to the escrow. Thus, according to the Appellate Court, there was no basis to deny equitable subrogation based upon the actions of the escrow agent.
Finally, the Court rejected the Third Lien Holder’s argument that equities favored it because it had no knowledge of the refinance transactions, and if it had known, it would have asked for full repayment of its loan. The Third Lien Holder based its argument upon the fact that its agent had been found to have forged the Third Lien Holder’s signature on the reconveyance requests submitted to the escrow agent. However, as noted by the Court, the Third Lien Holder had been aware of similar actions by its agent in prior transactions, and by being placed in the third position, the parties each received what they expected.
Accordingly, the Court reversed the lower court’s determination, and held that under these circumstances, the fact that the Third Lien Holder’s trust deed was not reconveyed does not establish the type of “culpable and inexcusable neglect” by the First and Second Lien Holders to justify the denial of equitable subrogation.
After determining that the First and Second Lien Holders were entitled to equitable subrogation placing the Third Lien Holder’s lien in the junior position, the Court declined to address the lower court’s ruling on the reformation of the Third Lien Holder’s lien.
The U.S. Court of Appeals for the Sixth Circuit recently held that, although the federal Protecting Tenants at Foreclosure Act (“PTFA”) does not provide a private right of action, violations of the PTFA may be used by tenants to establish the elements of state law causes of action.
A copy of the opinion is available at: http://www.ca6.uscourts.gov/opinions.pdf/14a0030p-06.pdf.
A bank foreclosed on a borrower, who rented the subject Kentucky property to tenants. The tenants alleged that although they had a valid lease - and supposedly informed the bank of same - the bank nevertheless evicted them from the home, prior to the expiration of the alleged lease.
The tenants filed suit against the bank, alleging wrongful foreclosure in that the bank did not honor their lease, in violation of the PTFA. The bank moved to dismiss the action, arguing that the PTFA does not provide a private right of action. The lower court agreed, and granted the bank's motion to dismiss. The tenants appealed.
As you may recall, the PTFA generally provides that immediate successors in interest to foreclosed residential property assume such interest subject to the rights of bona fide tenants. Pub. L. No. 111-22, Sec. 702, 123 Stat. 1632, 1661 (codified at 12 U.S.C. Sec. 5220 note (Supp. V. 2012)). Kentucky law generally provides that a foreclosure terminates the rights of tenants as to the subject property, and also provides for causes of action for wrongful eviction.
The Sixth Circuit began its analysis by examining whether the PTFA creates a private right of action. It had little difficulty in answering in the negative, finding that "neither the text [of the PTFA] nor the statutory structure indicate that Congress intended to provide a private right of action."
The Sixth Circuit next examined whether the lower court had erred in determining that the tenants' complaint stated claims based only on the PTFA - rather than claims arising out of state law. The Sixth Circuit scrutinized the pleadings, and found that the tenants' complaint alleged that they were "wrongfully evicted." In addition, the Sixth Circuit noted that on appeal, the tenants argued that the PTFA preempted Kentucky state law, which state law provides that a foreclosure terminates a tenant's lease.
The Sixth Circuit held that the "purpose of the PTFA could not be accomplished if it did not preempt state laws that set lower standards for successors in interest that the Act requires." For that reason, the Court determined that the provisions of Kentucky law at issue here were preempted.
Having determined that the PTFA preempted the relevant provisions of Kentucky law, the Sixth Circuit turned to whether the PTFA is available as a defensive measure only - that is, as a defense to state court eviction actions - or whether it may be used as a basis to establish a state law cause of action, as the tenants contended.
The Sixth Circuit again ruled in favor of the tenants, reasoning that "[i]n cases where successors in interest do not initiate judicial proceedings, tenants have no opportunity to raise the PTFA as a defense. Thus, they must be permitted to use available state law causes of action, such as wrongful eviction, to enforce the PTFA's protections."
Accordingly, the Sixth Circuit held that the facts alleged by the tenants supported a claim for wrongful eviction under Kentucky state law. The Sixth Circuit therefore reversed the holding of the lower court.
The U.S. Court of Appeals for the Ninth Circuit reversed a district court’s dismissal based on lack of Article III standing of an action alleging willful violations of the Fair Credit Reporting Act (“FCRA”), 15 U.S.C. § 1681, et seq., holding that alleging actual harm is not necessary to satisfy standing requirements where the individual plaintiff alleges willful statutory violations, so long as the subject statute does not require a showing of actual harm.
In so ruling, the Ninth Circuit held that the Plaintiff had Article III standing to sue a website’s operator (“Operator”) under FCRA for allegedly publishing inaccurate personal information about the Plaintiff. The Ninth Circuit also held that law of the case did not limit the district court in its final order, and that the district court was free to reconsider its own prior ruling on standing, where the district court had neither been divested of jurisdiction nor submitted the case to the jury.
A copy of the opinion is available at: http://cdn.ca9.uscourts.gov/datastore/opinions/2014/02/04/11-56843.pdf.
The Operator ran a website that provides users with information about other individuals, including contact data, marital status, age, and occupation. The Plaintiff sued the Operator for willful violations of the FCRA, alleging that the Operator’s website contained false information about him. The Operator moved to dismiss the complaint for lack of subject-matter jurisdiction on the ground that the Plaintiff lacked standing sufficient under Article III of the United States Constitution.
The district court ruled that the Plaintiff had failed to allege an injury in fact because he had not alleged “any actual or imminent harm.” The district court characterized Plaintiff’s allegations as simply “that he has been unsuccessful in seeking employment, and that he is concerned that the inaccuracies in his report will affect his ability to obtain credit, employment, insurance, and the like.” The district court noted that “[a]llegations of possible future injury do not satisfy the [standing] requirements of Art. III” and dismissed the complaint without prejudice.
The Operator again moved to dismiss for lack of standing. The district court denied the motion, concluding that the Plaintiff had alleged a sufficient injury in fact, namely Operator’s marketing of inaccurate consumer reporting information. The court also ruled that the injury was traceable to the alleged violations of the FCRA and that the injury was redressable through a favorable court decision.
The district court later reconsidered and reversed its previous ruling on standing. It held the Plaintiff failed to plead an injury in fact and that any injuries pled were not traceable to the Operator’s alleged violations, dismissing the action. The Plaintiff appealed.
The Ninth Circuit recognized that under United States v. Alexander, 106 F.3d 874, 876–77 (9th Cir. 1997) the law-of- the-case doctrine precluded a district court from reconsidering an evidentiary issue after a mistrial, but found Alexander distinguishable. It noted the rule from Alexander applies only to cases in which a submission to the jury separates the two decisions.
Here, because the district court had neither been divested of jurisdiction nor submitted the case to the jury, it was free to reconsider its own prior ruling.
The Plaintiff next argued that the FAC sufficiently alleges Article III standing and that the initial district court ruling was correct. The Ninth Circuit recognized that the FAC indeed alleged violations of various statutory provisions. The Plaintiff contended that because these provisions are enforceable through a private cause of action, they create statutory rights that he has standing to vindicate in court. See Warth v. Seldin, 422 U.S. 490, 500 (1975).
The Operator responded that the FAC “pleads no facts from which an inference of willfulness might be drawn.” The Ninth Circuit disagreed, as willful violations within the meaning of 15 U.S.C. § 1681n include violations in “reckless disregard of statutory duty.” Safeco Ins. Co. of Am. v. Burr, 551 U.S. 47, 57 (2007).
According to the Ninth Circuit, the allegations made it plausible that the Operator acted in reckless disregard of duties created by the FCRA. The Plaintiff pled that the Operator knew about inaccuracies in its reports and marketed its reports for purposes covered by the FCRA despite disclaiming any such uses.
The Ninth Circuit next examined Congressional intent. It noted Congress’s creation of a private cause of action to enforce a statutory provision implies that Congress intended the enforceable provision to create a statutory right. See Fulfillment Servs. Inc. v. United Parcel Serv., Inc., 528 F.3d 614, 619 (9th Cir. 2008). Further, the violation of a statutory right is usually a sufficient injury in fact to confer standing. See Edwards v. First Am. Corp., 610 F.3d 514, 517 (9th Cir. 2010).
The Operator argued the Plaintiff cannot sue under the FCRA without showing actual harm. But the Ninth Circuit held that a statutory cause of action does not require a showing of actual harm when a plaintiff sues for willful violations. 15 U.S.C. § 1681n(a); see also Beaudry v. TeleCheck Servs., Inc., 579 F.3d 702, 705–07 (6th Cir. 2009). The Ninth Circuit explained that where the statutory cause of action does not require proof of actual damages, a plaintiff can suffer a violation of the statutory right without suffering actual damages.
Of course, the Constitution limits the power of Congress to confer standing. See Lujan, 504 U.S. at 577. According to the Ninth Circuit, this constitutional limit, however, does not prohibit Congress from “elevating to the status of legally cognizable injuries concrete, de facto injuries that were previously inadequate in law.” Id. at 578.
The Ninth Circuit identified the issue as whether violations of statutory rights created by the FCRA are “concrete, de facto injuries” that Congress can so elevate. In Beaudry, the Sixth Circuit considered whether an FCRA plaintiff suing under 15 U.S.C. § 1681n had sufficiently alleged an injury in fact by alleging a violation of the FCRA. 579 F.3d at 707. The Sixth Circuit identified two constitutional limitations on congressional power to confer standing. First, a plaintiff “must be ‘among the injured,’ in the sense that she alleges the defendants violated her statutory rights.” Id. Second, the statutory right at issue must protect against “individual, rather than collective, harm.” Id. The Beaudry court held that the plaintiff satisfied both of these requirements. Id.
The Ninth Circuit found that the facts in the present case were analogous. First, the Ninth Circuit held that the Plaintiff alleged that the Operator violated his statutory rights, so he is “among the injured.” Second, according to the Ninth Circuit, the interests protected by the statutory rights at issue are sufficiently concrete and particularized that Congress can elevate them. Lujan, 504 U.S. at 578. Like “a company’s interest in marketing its product free from competition,” the Ninth Circuit noted, the Plaintiff’s personal interests in the handling of his credit information are individualized rather than collective. Id. Therefore, the Ninth Circuit held that the alleged violations of the Plaintiff’s statutory rights were sufficient to satisfy the injury-in-fact requirement of Article III.
The Ninth Circuit next examined causation and redressability, which are also required to demonstrate standing. See Laidlaw, 528 U.S. at 180–81. It noted that where statutory rights are asserted, however, cases have described the standing inquiry as boiling down to “essentially” the injury-in-fact prong. See Edwards, 610 F.3d at 517; Fulfillment Servs., 528 F.3d at 618–19. According to the Ninth Circuit, when the injury in fact is the violation of a statutory right that we inferred from the existence of a private cause of action, causation and redressability will usually be satisfied. First, the Ninth Circuit held that there is little doubt that a defendant’s alleged violation of a statutory provision “caused” the violation of a right created by that provision. Second, the Ninth Circuit held that statutes like the FCRA frequently provide for monetary damages, which redress the violation of statutory rights. See Jewel v. Nat’l Sec. Agency, 673 F.3d 902, 912 (9th Cir. 2011). Therefore, the Ninth Circuit concluded that Plaintiff adequately pled causation and redressability.
Accordingly, the Ninth Circuit reversed the district court's ruling and remanded for further proceedings.
The U.S. District Court for the Western District of Washington recently held that a computer program used by a taxicab company does not qualify as an automatic telephone dialing systems (“ATDS”) under the federal Telephone Consumer Protection Act (“TCPA”), and therefore that the taxicab company was not subject to liability under the TCPA. A copy of the opinion is attached.
A taxicab company used a computer program (called “TaxiMagic”) to link taxicab drivers with their customers, and provide text message updates to the customers to let them know when the taxicab would arrive and other information.
Using the program, when a customer called the company dispatch, the dispatcher obtains the customer’s name and telephone number, along with the requested pickup and dropoff locations. The dispatcher then manually inputs the information into the terminal. When the dispatcher presses “enter,” the information is sent to TaxiMagic and the driver closest to the requested pickup location. When the taxicab driver presses “accept” on his or her Mobile Data Terminal, the driver communicates his or her acceptance to TaxiMagic. The program then composes the notification and transmits the message to the customer via text message. The system is capable of generating and sending dispatch notifications only after a driver accepts the customer’s request.
In this case, the plaintiff requested a taxicab and provided his location. Although the plaintiff did not provide his telephone number, the dispatcher was able to obtain it using Caller ID. The dispatcher input the number into the system and transmitted the data to the driver and the driver accepted the plaintiff’s request for a taxicab. Once accepted, the program sent a text message to the plaintiff to notify him the taxi had been dispatched to pick him up.
The plaintiff filed suit, alleging that the text message violated the TCPA.
As you may recall, the three elements of a TCPA claim are: (1) the defendant called a cellular telephone number (under the TCPA, a text message is deemed a call); (2) using an ATDS; (3) without the recipient’s prior express consent.
Under the TCPA, equipment is an ATDS if it either has “the capacity to store or produce telephone numbers to be called, using a random or sequential number generator, and to dial such numbers,” 47 U.S.C. § 227(a)(1), or is a predictive dialer with the capacity to dial telephone numbers from a list without human intervention. In the Matter of Rules & Regulations Implementing the TCPA of 1991, 23 F.C.C.R. 559, 566 ¶14 (Jan. 4, 2008).
The court focused on both definitions of equipment in analyzing the computer program at issue. First, the court held that the issue of whether a dialing system was an ATDS under the TCPA depends on whether the equipment has the capacity to store or produce telephone numbers to be called, using a random or sequential number generator. The system need not actually store, produce or call randomly or sequentially generated telephone numbers, it need only have the capacity to do it.
The plaintiff argued that the modem used to operate TaxiMagic is an ATDS because the modem has the ability to store multiple numbers and transmit a mass text message to those numbers.
The court rejected the plaintiff’s argument. According to the court, the plaintiff’s interpretation was too broad because it essentially covered any technology with the potential capacity to store or produce and call telephone numbers using a random number generator.
The court held that this would produce an “absurd” result because such a broad interpretation would encompass many of contemporary society’s most common technological devices and possibly subject all iPhone owners to the TCPA.
In rejecting the broad definition, the court mandated that the language of the TCPA requires evaluation of the system’s present, not potential, capacity to store, produce or call randomly or sequentially generated telephone numbers. The court concluded that the TaxiMagic system operated based on numbers that had been provided by the customer and manually put in the system, and the plaintiff had not introduced sufficient evidence demonstrating that the system or its modem had the capacity to randomly or sequentially generate numbers.
As to the second definition of equipment – a predictive dialer with the capacity to dial numbers without human intervention – the court concluded that there was too much human involvement to constitute a predictive dialer. The process used to generate the text message to the customer included the dispatcher manually entering the number, hitting “enter” and then the driver “accepting.” This conduct, according to the court, was sufficient to constitute human intervention.
Finding that the TaxiMagic system utilized by the taxicab company did not qualify as an ATDS, the court concluded that the plaintiff had not established all of the required elements for a claim under the TCPA and granted the defendant’s motion for partial summary judgment as to that claim.
(3) a stop notice claimant’s failure to give the lender a notice of the commencement of the stop notice action did not bar the claimant from recovering where the lender suffered no prejudice.
The case involves a large condominium construction project involving several contractors. The lender was a licensed real estate broker that facilitated the raising of construction loan funds for the project. The owner of the project borrowed $13,625,000 from the lender to fund the remaining construction of the project. The lender agreed that it acted as a construction lender for purposes of the California “stop notice” statutory scheme.
Under the terms of the owner’s loan, the lender was obligated to obtain $2.8 million to close the transaction and agreed to use its best efforts to raise the balance of the loan in stages. The lender obtained the initial funds and distributed them to the owner. The lender, as it raised funds for subsequent stages of construction, assigned portions of its beneficial interest in the construction loan trust deed to third-party investors.
The lender entered into private loan servicing agreements with its third-party investors, under which the lender served as each investor’s agent with regard to the construction loan. The lender paid the third-party investors interest on their fractional loan interest and charged a servicing fee. Under the private loan placement and fee agreements on each of the loans, the lender prepaid itself interest, loan fee/points, loan underwriting and other fees totaling $1,555,771.37. The loan servicing agreements between the lender and the third-party investors were not recorded as public record. The lender contributed some of its own money to fund the construction loan, resulting in a small beneficial interest in the construction loan trust deed and promissory note. The lender raised and disbursed a total of $12,018,612.50 and never funded the remaining balance of the loan amount.
After giving a 20-day preliminary notice, a laborer or materialman may serve a stop notice upon the owner or the construction lender. A timely served stop notice obligates the owner or lender to withhold funds for the benefit of the stop notice claimant. Once a stop notice is timely served on an owner or lender, an action to enforce the stop notice must be commenced within 90 days of the deadline to serve the stop notice, regardless of whether the stop notice was served early.
The party whom received the timely stop notice is required to withhold funds in the amount of the stop notice until the expiration of the claimant's deadline to file an action to enforce the stop notice, plus five additional days for receipt of a notice of commencement of the action to enforce the stop notice. If several stop notices have been filed and not enough money exists to pay them all, stop notice claimants share pro rata in the available funds. If a lender fails to withhold funds required by the bonded stop notice, it is personally liable to the claimant for the full amount of the claim.
A stop notice claimant obtains priority over any "assignment" of the construction loan funds, whether the assignment is made before or after a stop notice is served.
The dispute involved 4 specific contractors. One of the contractors served its bonded stop notice in June, 2007 when the lender was holding sufficient unexpended construction loan funds to cover the claim. The lender, however, did not withhold sufficient funds to satisfy the claims and the parties agreed that the lender had stop notice liability as to that contractor. By October 2007, the lender had fully disbursed all monies in the construction loan. The lender received additional bonded stop notices from the other 3 contractors in March and April 2008, by which time all construction loan funds held by the lender had been disbursed.
All of the contractors filed actions against the lender and others. The sole issue before the trial court was the lender’s liability with respect to the contractors’ bonded stop notice claims. The contractors argued that the lender was prohibited from assignment of the construction loan funds, before or after receipt of a stop notice, and that under Familian Corp. v. Imperial Bank (1989) 213 Cal.App.3d 681, the lender could not avoid a stop notice claimant’s priority by private agreement.
The trial court awarded the contractors a total of $1,555,771.37, which was apportioned among them, plus costs, prejudgment interest and attorneys’ fees under the stop notice statute. The trial court also denied the lender’s motion for entry of judgment against two of the contractors based on those contractors’ alleged failure to comply with the stop notice statutes.
On appeal, the Court of Appeal recognized that Familian was a case of first impression, but that it unequivocally established that a secured lender could not defeat a stop notice claimant’s statutory priority to construction loan proceeds by segregating the fund into pre-allocated accounts and thereafter deducting charges and interest as accrued. Under Familian, the lender’s pre-allocation of funds to pay points, interest and other non-construction costs, like the lender had in this case, constituted an “assignment” of the construction loan funds within the meaning of the stop notice statutory provisions that was subordinate to the perfected claims of contractors. The Familian court further realized that limiting a stop notice claimant’s priority to “unexpended or “undisbursed” loan funds would render the stop notice statutory provisions meaningless because the lenders would then simply arrange to deduct their profits at the inception of the loan to assure a double recovery at the expense of the contractors responsible for enhancing the value of the property.
The Court of Appeal rejected the lender’s attempt to overturn Familian or otherwise distinguish it in such a way to render it inapplicable to the facts of this case. The Court of Appeal was clear: “the Legislature created the stop notice law to give laborers and materialmen priority over lenders to payments from the construction loan fund.” The Court of Appeal also clarified that Familian did not invalidate the pre-allocation of construction loan funds by lenders. Instead, according the Court, lenders were free to draft construction loan agreements to give themselves a contractual right to priority but those agreements will cede to a stop notice claimant’s statutory priority.
The Court rejected the lender’s argument that a “super-priority” first trust deed wiped out the lender’s priority and, as a result, it was not unjustly enriched by the stop notice claimant’s contribution to the project. The Court concluded that the holdings from Familian did not attempt to avoid unjust enrichment and did not depend on whether the lender ultimately realized a gain or loss on the project. The Court established that the stop notice claims took priority over any monies the lender received from the construction loan funds.
In addition, the Court of Appeal provisionally reversed the trial court as to one contractor and remanded the matter to resolve a factual issue. As to that contractor, the Court concluded that because it was not the prime or general contractor, it was required to provide the 20-day notice under the stop claim statute. It was undisputed that the contractor had not provided the required notice. The contractor asserted, however, that it was exempt under the statute because it had a direct contract with the owner, and had commenced work on the project before the lender recorded its construction loan trust deed. The Court remanded the matter to the trial court on this potentially dispositive factual issue.
Finally, the Court addressed the issue of one of the contractor’s failure to give the lender a required notice of the commencement of the stop notice action. According to the Court, by the time the contractor served its bonded stop notice the lender did not have any undisbursed funds left in its control. Thus, the contractor’s failure to give the lender notice of the commencement of the action did not prejudice the lender because the lender had no funds to release. The Court held that the contractor’s failure to strictly comply with the stop notice statute was excused where there was no prejudice to the lender.
In sum, the Court affirmed that the lender was required to honor the stop notice claims, even in the presence of a private agreement that allowed the owner to segregate and pre-allocate funds to be used for deducting charges and interest as accrued to the lender. In addition, the Court held that there was a question of fact as to whether the recognized exemption for contractors with direct contract with the owner applied here. Finally, the Court held that a contractor’s failure to strictly comply with the stop notice statute was excused where there was no prejudice to the lender.

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