Thursday, June 18, 2009

United Rentals Northwest v. Snider Lumber Products (Cal. Ct. App. - June 18, 2009)

There's only so far that "plain language" and the alleged "unambiguity" of a statute can take you. At least in my view.

Take this case, for example. At least from reading Justice Wiseman's opinion, it seems one of the easiest case in the universe. Defendants own a sawmill upon which 10 lumber drying kilns -- essentially, buildings 68 feet long, 14 feet wide, and 20 feet tall where lumber was heated and dried -- are located. After a retooling of the sawmill, they decide the kilns aren't that essential, so decide to dismantle and sell 'em. They hire a contractor to take down the kilns, package 'em, and oversee their sale to a group of buyers. To do so, the contractor rents some equipment from the plaintiff, United Rentals Northwest. This is a pretty simple -- and, I'm sure, routine -- set of facts.

There's ultimately a lawsuit, so needless to say, something goes awry. Basically, there's a dispute between the rental company and the contractor, so the rental company sues and gets a default judgment. Meanwhile, it's filed a mechanic's lien against the defendants' sawmill, which it then seeks to foreclose. You may say that the plaintiffs' beef is really against the defaulting defendant, but for policy reasons, we permit these liens in certain cases. And that's what the fight is about.

Section 3106 of the Civil Code permits a mechanic's lien for suppliers who lease equipment to contribute to a "work of improvement" on a piece of real property. That's the basis for the plaintiff's lien, which (of course) the defendants dispute. How's taking down 10 buildings a "work of improvement"? It's true that mechanic's liens are generally for actually constructing stuff on a property, not taking stuff down. But Section 3106 expressly provides: "'Work of improvement' includes but is not restricted to the construction, alteration, addition to, or repair, in whole or in part, of any building, wharf, bridge, ditch, flume, aqueduct, well, tunnel, fence, machinery, railroad, or road, the seeding, sodding, or planting of any lot or tract of land for landscaping purposes, the filling, leveling, or grading of any lot or tract of land, the demolition of buildings, and the removal of buildings."

Seems pretty clear that plaintiff has a lien, right? They demolished/removed a building. The statute says they accordingly have a lien. And, for the Court of Appeal, that's the end of the matter. As Justice Wiseman puts it, "this is the end of the analysis."

But is it? It seems to me that we grant a lien on property for "works of improvement" because the work that's been done actually improves the property, hence the lien on the result. This policy sentiment underlies the defendants' argument -- bolstered by precedent -- that a "work of improvement" under Section 3106 has to result in a "permanent improvement" to the property; i.e., increase its value. Which is why all those earlier cases say that improvements have to "improve" (i.e., benefit) the property.

Justice Wiseman responds that this precedential requirement "cannot have much significance where the improvement is the removal or demolition of a building, however. . . . Logically, the permanency doctrine must be satisfied in this context by the fact that the removed or demolished building is removed or demolished." But I'm not sure that's right, either doctrinally or as a matter of fact. Lots of demolitions improve the value of the property. If you've got a lot that has a falling-down crack house on it, its market value pre-demolition might be $50,000 but post-demolition $100,000. The demolition would "subtract" from the property and yet improve its value. (Which, after all, is why you might rationally invest in the costs of demolition, even if you had no intention whatsoever of building anything on the property.) So as a logical matter, I'm not at all sure that Justice Wiseman is correct that the traditional common law requirements don't equally apply to demolitions.

Justice Wiseman concludes by essentially saying that this argument is irrelevant anyway since the statute is crystal clear, saying: "We have no authority to add a requirement that, after the work is done, the land must be better off in some other sense." This is the "plain language" point, though it seems to me that the existence of the previous common-law precedent itself tends to belie this argument. Moreover, I think that this may put too much weight on the mere existence of the words, which I forthrightly admit are indeed fairly clear.

Take the following hypothetical. I get a raise here at USD and decide that I want a solid gold outhouse built in the front yard of my property to flout my newfound wealth. I have no doubt that whoever builds the thing for me is entitled to a mechanic's lien, since surely that building "improves" the property. At least purely in terms of total market value.

But two years later, my wife finally convinces me that the thing couldn't be more gauche. So I agree to have it removed. Since, in the post-Tyco era, no one else is crass enough to want a gold outhouse, I hire someone to take it away, melt it down, and sell it for $900/ounce.

Yes, the person who removed the outhouse "removed a building" under Section 3106. But I'm not convinced that's a work of "improvement" covered by the statute. The market value of the property post-removal is now less than it was before. What's transpired in this hypothetical is more akin to removing a piece of artwork or any other type of personal property to sell to another party -- to which a mechanic's lien indisputably does not apply -- than to the classic "demolition" context in which the demolition itself improves the value of the land.

On the facts of this particular case, I'm not entirely certain the difference I've described above matters. But it might. Defendants might have simply wanted the buildings removed because they were unnecessary and ugly and a burden, in which case surely a mechanic's lien exists. However, they also appeared to take great pains -- at seemingly high expense -- to carefully dismantle the buildings and sell them to a third party for substantial value. Which suggests that the facts of this particular case might be closer to the "golden outhouse" hypo than one might otherwise think.

To me, it's a very plausible reading of the statute -- not to mention precedent -- that a "work of improvement" is something that increases the value of the underlying property. I don't think we'd want a subjective test about "why" the defendant allegedly sold the property (e.g., did they do it for its scrap value or otherwise), but rather the inquiry would be an objective one: Would a reasonable person have thought the value of the property would be improved by the demolition? If so, mechanic's lien; if not, otherwise.

I think such a vision not only comports with common sense, but also the central purpose of Section 3106. And probably place a higher value on that component of statutory interpretation than is usually given by the "plain language" crowd. To take the converse of the golden outhouse hypothetical, imagine that an owner of a perfectly good wharf decides that he thinks that prime numbers are exceptionally lucky and so hires someone to destroy every horizontal wooden plank on the wharf except for the prime-numbered ones, thereby totally destroying its utility. There's no doubt that's an "alteration . . . of a wharf," right? But is that really a "work of improvement" that would justify a lien on the property -- in particular, a lien (as here) on an innocent third party? That seems much more questionable, and I don't think this can properly be answered merely by the mantra of "plain language." Even when, as in this hypothetical, that language is indeed totally plain.

Reasonable minds might disagree on this one. And I agree that sometimes, plain language is indeed the end of the inquiry. Just not necessarily here, and not when -- as here -- there may be both precedent and common sense that augur in favor of a consistent and potentially easily-applied alternative doctrine that's in line with the structure and purpose of the statute.

Or that's my (overly long) take, anyway. Having written something that's itself nearly as lengthy as Justice Wiseman's entire opinion. See what you think.