Court Opinion

ID: 9737464
Source: CourtListenerOpinion
Date Created: 2023-08-26 19:26:01.540274+00
Date Added: 2024-06-11T07:23:59.116692
License: Public Domain

SIMS, J.
I dissent. This case involves the question of an equitable lien against a loan account created by the lender. There are on the one hand equitable rights against the borrower which the claimants may assert against funds which the lender acknowledges, or which in fact, are held for the borrower ’s account. (Smith v. Anglo-California Trust Co., 205 Cal. 496, 502 [271 P. 898].) There also may be equitable rights against the lender which are created by his express or implied representations that the funds will be paid or applied for the account of the claimants. In Pacific Ready Cut Homes, Inc. v. Title Ins. & Trust Co., the court held that the uncontradicted evidence compelled such a conclusion (216 Cal. 447, 451); and in Miller v. Mountain View Sav. & Loan Assn. it was noted: “In setting up this system of making payments appellant [lender] can be charged with inducing reliance on the payments it would make, and respondent can be said to have *848relied on the payments to be made to its escrow agent by a financial institution, even though he did not then know its identity. The evidence is sufficient to sustain the findings and conclusions of the trial court.” (238 Cal.App.2d 644, 663.)
Here the evidence set forth in the majority opinion justifies, if not compels, a finding that the claimants have equities superior to the borrower in respect of any loan funds that would be available to him (Smith v. Anglo-California Trust Co., supra). One searches in vain, however, for any evidence which would support, much less compel, findings contrary to those implied from the decision of the trial court, to wit: that the lender had done nothing to indicate that he would do other than pay the loan funds out to the borrower-builder in accordance with the stages of progress of the work, and that all progress payments so ‘due had been paid.
The policy reasons for making the lender an insurer of payment to lien claimants are persuasive and attractive. The Legislature, however, by acting to create a system wherein a claimant may protect himself by giving a stop notice, has halted short of adopting this concept. The courts have been vigilant to protect the claimants where the lender has in any manner led them to expect payment from him, but this ease would plow fields heretofore left uncultivated. Since the lender must generally look to the land and improvements for rapayment of his original advance and any amounts he is compelled to pay out to equitable lienholders, the effect of the decision is to give a mechanic’s lien claimant a priority over the lender with the first deed of trust, whenever he can show that the borrower—not necessarily the lender—induced him to rely on the loan fund.
In the absence of some estoppel or unjust enrichment that can be asserted against the lender, existing law does not require him to advance funds on terms to which he never agreed. I would affirm the findings and judgment of the lower court which are sustained by the record.
Respondent’s petition for a hearing by the Supreme Court was denied June 29, 1966.