Connolly Development, Inc. v. Superior Court (Diamond International Corporation)

Full title: CONNOLLY DEVELOPMENT, INC., et al., Petitioners, v. The SUPERIOR COURT OF…

Court: California Court of Appeals, Fifth District

Date published: Sep 3, 1974

41 Cal.App.3d 543 (Cal. Ct. App. 1974)

116 Cal. Rptr. 191

Opinion

Hearing Granted Nov. 13, 1974.

Opinion on pages 543-556 omitted.

HEARING GRANTED

[116 Cal.Rptr. 193]Orr, Wendel & Lawlor, Eugene K. Lawlor and Jacob Levitan, Oakland, for petitioners.

No appearance for Respondent.

Russell H. McLain, Sacramento, and Norman S. Stimmel, San Francisco, for real party in interest.

Munns, Kofford, Hoffman, Hunt & Throckmorton, Gordon Hunt and Ralph W. Hoffman, Pasadena, as amici curiae on behalf of real party in interest.

OPINION

GEO. A. BROWN, Presiding Justice.

Petitioners herein challenge the constitutional validity of the California mechanics' lien and stop notice provisions as set forth in article XX, section 15, of the California Constitution and chapters 2 and 3, title 15, part 4, division 3 of the Civil Code. This is yet another in a continuum of cases calling into question the validity of summary prejudgment creditors' remedies under the procedural due process clauses of the California and federal Constitutions, following the decision in Sniadach v. Family Finance Corp. (1969) 395 U.S. 337, 89 S.Ct. 1820, 23 L.Ed.2d 349 and its progeny. Sniadach held that Wisconsin's prejudgment wage garnishment statute was unconstitutional since it permitted the garnishment of the debtors' wages without prior notice and a hearing. Randone v. Appellate Department (1971) 5 Cal.3d 536, 96 Cal.Rptr. 709, 488 P.2d 13 (cert. den. 407 U.S. 924, 92 S.Ct. 2452, 32 L.Ed.2d 811) explains: 'The recent line of cases, commencing with Sniadach, reaffirms the principle that an individual must be afforded notice and an opportunity for a hearing before he is deprived of any significant property interest, and that exceptions to this principle can only be justified in 'extraordinary circumstances" (at p. 541, 96 Cal.Rptr. at p. 711, 488 P.2d at p. 15) and '. . . rather than creating a special constitutional rule for wages, the Sniadach opinion returned the entire domain of prejudgment remedies to the long-standing procedural due process principle which dictates that, except in extraordinary circumstances, an individual may not be deprived of his life, liberty or property without notice and hearing' (at p. 547, 96 Cal.Rptr. at p. 715, 488 P.2d at p. 119). Finally, the decision makes clear that the same principles apply though the deprivation only be temporary. (See pp. 551, 552, 96 Cal.Rptr. 709, 488 P.2d 13.)

Under the California statutory scheme, materialmen and other persons defined in Civil Code section 3110 ¹ who furnish labor or materials at the instance of the owner or the owner's contractor upon a 'work of improvement' are entitled to file a mechanic's lien upon the property upon which the work of improvement is located. A materialman must file a preliminary notice with the owner, the general contractor and the construction lender within 20 days after furnishing the materials (§§ 3097, 3114) and thereafter record in the office of the county recorder the claim of lien within 90 days of the completion of the work of improvement, or, if a notice of completion or notice of cessation of work is recorded, then within 30 days of such notice (§§ 3092, 3093, 3116).

1 All references will be to the Civil Code unless otherwise indicated.

The lien constitutes a direct lien (§ 3123) on the improvement and the real property to the extent of the interest of the owner or the one who cause the work of improvement to be constructed (§§ 3128, 3129) and takes priority over the encumbrances attaching subsequent to the 'commencement of the work of improvement' (§§ 3134, 3138).

The owner may cause the lien to be released by posting a bond equal to one and one-half times the amount of the lien (§ 3143). The lien terminates unless an action to enforce it is commenced within ninety days of the completion of the improvement [116 Cal.Rptr. 194] (§ 3144) and such action is subject to discretionary dismissal if not brought to trial within two years (§ 3147).

Though the statutory provisions pertaining to the stop notice are contained in the same title as the Mechanics' Lien Law, the rights and remedies created are independent of and cumulative to mechanics' lien rights. (Bohannan Bros., Inc. v. Lo Jean Dev. Co. (1969) 3 Cal.App.3d 200, 205, 82 Cal.Rptr. 922.)

The stop notice claimant must give the twenty-day preliminary notice (§§ 3097, 3160) and then serve on the construction lender within the time a mechanic's lien may be filed (§ 3159) his notice to withhold funds. Upon receipt of a bonded stop notice carrying a bond equal to one and one-fourth times the amount claimed (§ 3083), the construction lender is required to set aside funds from the borrower (owner), or any other person to whom the lender is obligated, to make payments sufficient to answer the stop notice claim unless a payment bond has been recorded (§§ 3162, 3235). The stop notice may be released by posting a bond in an amount equal to one and one-fourth times the amount stated in the notice (§ 3171). An action must be commenced to enforce payment of the amount claimed in the stop notice between ten and ninety days after filing (§ 3172) and is subject to discretionary dismissal if not brought to trial within two years (§ 3173).

Turning to the facts in the instant proceeding, Connolly Development, Inc. ('Connolly') as owner and developer of a shopping center in the city of Los Banos, entered into a construction contract with Ralph E. Carlsen Construction Co. ('Carlsen') to construct the work of improvement and arranged with Union Bank ('Bank') for a construction loan to finance the improvement. Diamond International Corporation ('Diamond'), at the request of Carlsen, furnished materials for the shopping center for which on February 15, 1973, after complying with the preliminary notice requirements, a mechanic's lien for $6,727.84 was duly recorded and on February 22, 1973, it filed a bonded stop notice in the same amount with the Bank.

Thereafter Diamond filed a timely complaint to foreclose the mechanic's lien (first cause of action) and to enforce the stop notice (second cause of action). Connolly and the Bank demurred to the complaint on the ground the mechanic's lien and stop notice were violative of procedural due process, which demurrer was overruled. Connolly and the Bank thereupon petitioned this court for a writ of mandate and/or prohibition praying that the trial court be directed to dismiss the complaint or prohibited from further proceedings in said action. We entertained the writ because of the public importance of the issues involved. (Mooney v. Pickett (1971) 4 Cal.3d 669, 674-675, 94 Cal.Rptr. 279, 483 P.2d 1231.)

STATE ACTION

Initially Diamond contends that any taking represented by filing a mechanic's lien and stop notice does not involve the significant state action required to invoke the protection of the Constitution (Evans v. Newton (1966) 382 U.S. 296, 299-300, 86 S.Ct. 486, 15 L.Ed.2d 373) since the seizure is not made by a state officer or pursuant to court process. However, the recent case of Adams v. Department of Motor Vehicles (1974) 11 Cal.3d 146, 113 Cal.Rptr. 145, 520 P.2d 961 is to the contrary and is dispositive of this issue. In Adams the court held that action undertaken by a private individual in retaining possession of and selling a customer's vehicle pursuant to the garageman's lien (see § 3067 et seq.) was state action. In so holding the court relied on three principal factors: '. . . the lien is expressly provided for by statute, its execution by sale is authorized by statute, and a state agency oversees the sale and records the transfer of title.' (11 Cal.3d at p. 153, 113 Cal.Rptr. at p. 149, 520 P.2d at p. 965.)

Applying these principles, the Mechanic's Lien Law clearly constitutes state action. [116 Cal.Rptr. 195] First, the lien is thoroughly regulated by constitutional and statutory provisions. Secondly, in order to 'enforce a lien' it must, as in Adams, supra, be recorded with a state agency, in this case the county recorder. It it is not so recorded within the time prescribed by statute, it is of no force and effect. (§ 3116; see L. W. Blinn Lumber Co. v. American C. P. Co. (1921) 51 Cal.App. 479, 481, 197 P. 142.) Thirdly, court action is necessary to enforce the lien, for if no action is taken within the time allowed the lien expires. (§ 3144.)

While there is less state involvement in the filing and perfecting of a stop notice in that it is not required to be recorded or filed with any public office before it becomes effective, the right was nonexistent at common law and the provisions of the statute compel the construction lender to withhold the funds under threat of a judgment for the amount claimed in the stop notice. 'This is not just action against a backdrop of an amorphous state policy, but is instead action encouraged, indeed only made possible, by explicit state authorization.' (Klim v. Jones (N.D.Cal. 1970) 315 F.Supp. 109, 114.) As was stated in United States v. Classic (1941) 313 U.S. 299, 326, 61 S.Ct. 1031, 1043, 85 L.Ed. 1368: 'Misuse of power, possessed by virtue of state law and made possible only because the wrongdoer is clothed with the authority of state law, is action taken 'under color of' state law.' Accordingly, it has been held in similar situations that statutes which create a private remedy of summary seizure do constitute state action. (Hall v. Garson (5th Cir. 1970) 430 F.2d 430, 438-440 (landlord's lien); Dielen v. Levine (D.Neb.1972) 344 F.Supp. 823, 824 (same); Klim v. Jones, supra, 315 F.Supp. 109, 114-115 (innkeeper's lien).) We agree with those pronouncements.

MECHANIC'S LIEN

Taking a cue from Sniadach, the courts have embarked upon a series of decisions holding that various prejudgment remedies are constitutionally infirm. (See Adams v. Department of Motor Vehicles (1974) 11 Cal.3d 146, 113 Cal.Rptr. 145, 520 P.2d 961 (that portion of garageman's lien permitting foreclosure and sale on a customer's car without a prior hearing); Randone v. Appellate Department (1971) 5 Cal.3d 536, 96 Cal.Rptr. 709, 488 P.2d 13 (garnishment of bank account); Blair v. Pitchess (1971) 5 Cal.3d 258, 96 Cal.Rptr. 42, 486 P.2d 1242 (claim and delivery law); McCallop v. Carberry (1970) 1 Cal.3d 903, 83 Cal.Rptr. 666, 464 P.2d 122 (attachment of wages); Damazo v. MacIntyre (1972) 26 Cal.App.3d 18, 24, 102 Cal.Rptr. 609 (attachment in unlawful detainer action); People ex rel. Younger v. Allstate Leasing Corp. (1972) 24 Cal.App.3d 973, 975-976, 101 Cal.Rptr. 470 (attachment of money due the state or a political subdivision upon an obligation or penalty imposed by law); Gray v. Whitmore (1971) 17 Cal.App.3d 1, 94 Cal.Rptr. 904 (landlord's lien); Mihans v. Municipal Court (1970) 7 Cal.App.3d 479, 87 Cal.Rptr. 17 (writ of possession in unlawful detainer actions).) Subsequent to Sniadach, in Fuentes v. Shevin (1972) 407 U.S. 67, 92 S.Ct. 1983, 32 L.Ed.2d 556 the Supreme Court held in a four to three decision that prejudgment replevin statutes requiring no prior hearing before the seizure of goods were likewise unconstitutional. ²

2 However, in Mitchell v. W. T. Grant Co. (1974), 416 U.S. 600, 94 S.Ct. 1895, 40 L.Ed.2d 406, the Supreme Court, in a five to four decision, held that the Louisiana sequestration statutes were not unconstitutional. The majority purportedly distinguished Fuentes v. Shevin, supra, but the four dissenting justices, as well as one concurring justice, clearly indicated that Fuentes should be considered overruled. Accordingly, although the sequestration statute upheld in Mitchell is distinguishable from the Mechanics' Lien Law in several material respects, it seems apparent that the floodgates have started to close and that Sniadach and its offspring will probably be limited by the Supreme Court of the United States.

Exceptions to the due process requirement of notice and opportunity for a [116 Cal.Rptr. 196] hearing before a person is deprived of any significant property interest 'can only be justified in 'extraordinary circumstances" (Randone v. Appellate Department, supra, 5 Cal.3d 536, 541, 96 Cal.Rptr. 709, 711, 488 P.2d 13, 15) ". . . where some valid governmental interest is at stake that justifies postponing the hearing until after the event" (Fuentes v. Shevin, supra, 407 U.S. at p. 82, 92 S.Ct. at p. 1995; see also Randone v. Appellate Department, supra, 5 Cal.3d 536, 552-553, 96 Cal.Rptr. 709, 488 P.2d 13; Blair v. Pitchess, supra, 5 Cal.3d 258, 277-279, 96 Cal.Rptr. 42, 486 P.2d 1242). Thus whether or not a prior hearing is required in a given situation is dependent upon a judicial weighing of the seriousness of the deprivation against the importance of a governmental or public interest served by the summary process. (Boddie v. Connecticut (1971) 401 U.S. 371, 377-379, 91 S.Ct. 780, 28 L.Ed.2d 113.) Accordingly, the standard remains a flexible one requiring courts to weigh the competing interests in determining what type of safeguards due process requires.

Varied forms and application of this 'balancing process' are found in virtually every decision following Sniadach. Factors which these cases have indicated should be taken into consideration include whether the creditor has a possessor interest in the property allegedly 'taken' by virtue of his adding labor or materials 'to which he originally had a right of possession' in; whether the invocation of the remedy works a change of possession (Adams v. Department of Motor Vehicles, supra, 11 Cal.3d 146, 154-155, 113 Cal.Rptr. 145, 150, 520 P.2d 961, 966); whether the claimant is required to post a bond which theoretically would deter frivolous claims; the importance of the interest taken; whether the taking is necessary to 'secure an important governmental or general public interest'; whether there is a need for very prompt action; whether a governmental official or private individual may make the decision to invoke the 'taking' (Fuentes v. Shevin, supra, 407 U.S. at pp. 83-93, 92 S.Ct. at p. 2000; see also Randone v. Appellate Department, supra, 5 Cal.3d 536, 553-554, 113 Cal.Rptr. 145, 520 P.2d 961); the length of the deprivation (Fuentes v. Shevin, supra; Adams v. Department of Motor Vehicles, supra); the nature of the creditor's interest in the property, if any; whether the debtor can immediately seek dissolution of the action which constitutes the taking; and whether the alleged debtor could effectively dispose of the property in the absence of the prejudgment remedy. (Mitchell v. W. T. Grant Co. (1974) 416 U.S. 600, 94 S.Ct. 1895, 1900-1901, 40 L.Ed.2d 406.)

Of particular significance to the constitutionality of the Mechanics' Lien Law are such factors as the increase in the value of the property as the result of the mechanic or materialman contributing labor or materials to the improvement thereon, the minimal impingement of the lien upon the owner's possession and continued use of the property, and the public interest in maintaining the balance in the traditionally unstable construction industry.

With respect to the significance of the property interest infringed upon when the lien is imposed, it is readily apparent that the owner is not deprived of the possession of his property in any way; nor is he, as petitioner contends, deprived of the use of his property. (Cf. Blair v. Pitchess, supra, 5 Cal.3d 258, 278, 96 Cal.Rptr. 42, 486 P.2d 1242.) In Randone v. Appellate Department, supra, 5 Cal.3d 536, 544-545, fn. 4, 96 Cal.Rptr. 709, 714, 488 P.2d 13, 18, the court observed:

'Because the attachment of real estate does not generally deprive an owner of the use of his property, but merely constitutes a lien on the property, the 'taking' generated by such attachment is frequently less severe than that arising from other attachments. In view of this basic difference in the effect of such attachment, it has been suggested that a statute which dealt solely with the attachment of real estate might possibly [116 Cal.Rptr. 197] involve constitutional considerations of a different magnitude than those discussed hereafter.

'(See generally Note, Attachment in California: A New Look at an Old Writ (1970) 22 Stan.L.Rev. 1254, 1277-1279.) The instant statute is not so limited, however, and the great majority of cases arising under it do involve the deprivation of an owner's use of his property; thus we have no occasion in this proceeding to speculate as to the constitutionality of a prejudgment attachment provision which does not significantly impair such use.'

Similarly, in Empfield v. Superior Court (1973) 33 Cal.App.3d 105, 108 Cal.Rptr. 375 the court rejected a challenge to the constitutionality of a prejudgment lis pendens, stating:

'The notice of lis pendens does not deprive petitioners of 'necessities of life' or any significant property interest. They may still use the property and enjoy the profits from it. [Citation.] Concededly, the marketability of the property may be impaired to some degree, but the countervailing interest of the state in an orderly recording and notice system for transactions in real property makes imperative notice to buyers of property of the pending cause of action concerning that property. [Citations.]' (33 Cal.App.3d 105, 108, 108 Cal.Rptr. 375, 377; emphasis added.)

This notion has been applied in at least two cases upholding the constitutionality of mechanic's lien laws. ³ In Cook v. Carlson (D.S.D.1973) 364 F.Supp. 24, 27, the court observed:

3 It is also noted that at least one federal court has struck down a 'mechanic's lien law' (see Mason v. Garris (N.D.Ga.1973) 360 F.Supp. 420). There, however, the challenged statute was in effect a 'garageman's lien,' and the court only held that the summary foreclosure of the lien without a prior hearing was constitutionally infirm. Accordingly, that decision did no more than what was done by our Supreme Court in Adams v. Department of Motor Vehicles, supra.

'The mechanics' and materialmen's lien, however, neither deprives the owner of the possession nor of the use of his property. Although the use of the property might be said to be curtailed, in that selling the property, borrowing on the property, or renting the property may be more difficult or less profitable, the owner is not legally prevented from selling, encumbering, renting or otherwise dealing with his property as he chooses. Although the value of the property may be diminished due to the existence of the lien, two factors tend to mitigate that harm: (1) while the value of the property may be diminished by the amount of the lien, the improvements, at least theoretically, have increased the value of the property by the amount of the lien, thereby minimizing harm to the owner; and (2) the owner can force an expeditious adjudication on the merits, without cost to him, by demanding that the lien be foreclosed, whereupon the lienholder must commence foreclosure proceedings within [90 days] or forfeit the lien. [Citation.]'

(See also Spielman-Fond, Inc. v. Hanson's, Inc. (D.Ariz.1973) 379 F.Supp. 997.) ⁴

4 In Gunter v. Merchants Warren National Bank (D.Me.1973) 360 F.Supp. 1085, it was held that prejudgment attachment of real estate violated due process. That case was distinguished in Cook v. Carlson, supra, however, where the court observed that prejudgment attachment under the challenged statute absolutely prevented the owner from transferring or further encumbering the property. (Cook v. Carlson, supra, 364 F.Supp. 24, 27.)

With respect to the relative interests in the property, the recent case of Adams v. Department of Motor Vehicles, supra, 11 Cal.3d 146, 113 Cal.Rptr. 145, 520 P.2d 961 indicates that one who performs labor on and contributes material to property has a 'possessory interest' therein until compensation for the labor and materials is forthcoming. In upholding the constitutionality [116 Cal.Rptr. 198] of the interim retention provisions of the garageman's lien, the court observed:

'In none of the cases bearing on temporary deprivation of use and enjoyment of property did the creditor have a possessory interest of the same character as a garageman's interest in a car left for him to repair with his own labor and materials. Usually the claim of an attaching or garnisheeing creditor is a general claim unrelated to the specific property seized. And while the claim of a conditional vendor or chattel mortgagee arises out of a transaction involving the seized chattel itself, the interest of such creditor in the seized chattel is ordinarily purely pecuniary; the creditor has not, subsequent to the acquisition of the chattel by the vendee or mortgagee, mixed his own labor with it, nor, more significantly, has he added to it materials to which he originally had a right of possession.' (Fn. omitted; emphasis added; 11 Cal.3d at pp. 154-155, 113 Cal.Rptr. at p. 150, 520 P.2d at p. 966.)

Furthermore, the public interest in maintaining the stability of the construction industry is a factor of some significance. In Cook v. Carlson, supra, 364 F.Supp. 24, 29, the court observed:

'The mechanics' and materialmen's lien originated in the necessity of protecting the construction industry and those in its employ. Labor and materials contractors are in a particularly vulnerable position. Their credit risks are not as diffused as those of other creditors. They extend a bigger block of credit, they have more riding on one transaction, and they have more people vitally dependent upon eventual payment. They have much more to lose in the event of default. There must be some procedure for the interim protection of contractors in this situation. A contractor must have some protection against subsequent bona fide purchasers between the time he completes the work and the time he gets a judgment. Considering their vulnerability, and especially considering their importance to the stability of the American economy, I think there exists sufficient justification for the South Dakota statutory scheme which creates a lien as a matter of law as soon as labor and materials are furnished.'

We conclude that since the mechanics' lien provisions impose a minor encumbrance on the property in favor of persons who presumably have added materials or labor to the value of the property, that since it does not interfere with the possession or use of the property by the debtor, protects the mechanics' and materialmen's interest in the property, and is necessitated by the importance of the construction industry to the economy, the provisions of the mechanics' lien statute providing for the imposition of a lien upon the work of improvement and real property upon which it is located prior to a hearing are not unconstitutional. ⁵

5 Petitioners' contention that the Mechanics' Lien Law denies equal protection of the law (Hollenbeck-Bush P. Mill Co. v. Amweg (1917) 177 Cal. 159, 165, 170 P. 148) and amici curiae's argument that petitioners waived their constitutional rights to due process of law by contracting 'with the law before them' are without merit. (Fuentes v. Shevin, supra, 407 U.S. 67, 94-96, 92 S.Ct. 1983.)

STOP NOTICE

The challenge to the constitutionality of the bonded stop notice (§§ 3156-3172) poses a significantly more serious question than does the mechanics' lien.

Upon a receipt of the bonded stop notice the construction lender must set aside the funds for payment to the claimant (§ 3162). The stop notice constitutes an 'equitable garnishment' on the balance of the loan funds in the amount stated in the notice (Calhoun v. Huntington Park First Sav. & Loan Ass'n (1960) 186 Cal.App.2d 451, 459, 9 Cal.Rptr. 479) and in effect mandates the withholding of the funds in the amount stated from the owner and general contractor to whom the funds belong. (Systems Inv. Corp. v. National [116 Cal.Rptr. 199] Auto. & Cas. Ins. Co. (1972) 25 Cal.App.3d 1057, 1061, 102 Cal.Rptr. 378.)

Furthermore, despite any contractual rights the construction lender may have by his contract with the owner, he cannot apply the garnished funds to the payment of amounts due to the lender himself. Even though the loan is in default and the lender is otherwise entitled to use the funds remaining in the construction loan account to cure the default or reduce the debt, the fund becomes frozen when a bonded stop notice is received and the lender in effect cannot use his own funds to satisfy his own debt. (§ 3166; Idaco Lumber Co. v. Northwestern S. & L. Ass'n (1968) 265 Cal.App.2d 490, 496-497, 71 Cal.Rptr. 422; Rossman Mill & Lbr. Co. v. Fullerton S. & L. Assn. (1963) 221 Cal.App.2d 705, 709-710, 34 Cal.Rptr. 644.)

The claimant's priority is over all other persons who claim an interest in the funds. A lender cannot apply the funds to complete the construction (H. O. Bragg Roofing, Inc. v. First Federal Sav. & Loan Ass'n (1964) 226 Cal.App.2d 24, 27-28, 37 Cal.Rptr. 775) and, except for actual possession, the rights of the stop notice claimant to the garnished funds are complete.

Thus the procedure clearly calls for a summary prejudgment 'taking' by the claimant of the construction loan funds without a hearing though the claimant has no interest in the funds save the possibility that he might eventually recover judgment. This possibility is immaterial, however, for as the Supreme Court observed in Fuentes v. Shevin, supra, "To one who protests against the taking of his property without due process of law, it is no answer to say that in his particular case due process of law would have led to the same result because he had no adequate defense upon the merits." (407 U.S. at p. 87, 92 S.Ct. at p. 1997.) It is precisely this fact, that is, the taking before the validity of the claim is determined, that violates due process. ⁶

6 Diamond urges that it had an interest in the construction fund from the beginning in that the fund was established for the purpose of paying the claims of persons furnishing labor and materials for the project and amounts to a trust fund for that purpose. However, the enactment of section 3264 abolished any theory of equitable lien or trust fund. It states: 'The rights of all persons furnishing labor, services, equipment, or materials for any work of improvement, with respect to any fund for payment of construction costs, are governed exclusively by Chapters 3 (commencing with Section 3156) and 4 (commencing with Section 3179) of this title, and no person may assert any legal or equitable right with respect to such fund, other than a right created by direct written contract between such person and the person holding the fund, except pursuant to the provisions of such chapters.'

Unlike the mechanic's lien, the claimant does not contribute to or improve or increase the fund by labor or material and interference with the use of the 'fund' is total. Moreover, merely because the claimant has posted a bond to protect the debtor against damages from wrongful seizure is not sufficient to justify a summary taking of his property. (Fuentes v. Shevin, supra, 407 U.S. at pp. 79-80, 92 S.Ct. 1983.)

In Sniadach it was clear that the property right taken by the wage garnishment was the use of the garnished wages (Sniadach v. Family Finance Corp., supra, 395 U.S. at p. 342, 89 S.Ct 1820 (Harlan, J., concurring); see also Randone v. Appellate Department, supra, 5 Cal.3d 536, 548, fn. 9, 96 Cal.Rptr. 709, 488 P.2d 13; Blair v. Pitchess, supra, 5 Cal.3d at pp. 277-278, 96 Cal.Rptr. 42, 486 P.2d 1242), just as the owner, contractor and construction lender are, upon the filing of the stop notice, totally deprived of the use of construction funds in the amount claimed. In the normal course of events, the owner or contractor will be deprived of the use of these funds without a hearing for a period of up to two years.

Sniadach, Randone and other cases additionally refer to the hardship that results when wages and bank accounts are garnished. Similar hardships can he suffered by the owner, contractor and/or lender when the loan founds are garnished. (See Miller, Validity of the Stop Notice as a [116 Cal.Rptr. 200] Summary Remedy (1973) 48 State Bar J. 44, 106-107; Ilyin, Stop Notice!--Construction Loan Officers' Nightmare (1964) 16 Hastings L.J. 187; Comment, California's Private Stop Notice Law: Due Process Requirements (1974) 25 Hastings L.J. 1943.) The contractor, for instance, depends upon the construction funds for payment of his costs of construction. Deprival of these funds usually results in an inability to pay necessary expenses and employees and the consequent incurrence of additional costs. Similarly, as a result of the prehearing garnishment of the funds, the owner may be in default under the terms of his loan and may be unable to complete the improvement, causing the loss of his property by foreclosure pending a hearing on the merits of the claim. As to the lender, he relies upon the funds to assure the construction project is completed and the costs of construction are paid, it being a usual and customary provision in construction loan agreements that upon default by the borrower the lender may use the construction fund to complete the improvement in order that it may have the full and bargained-for security for its loan. This is an important property right in the loan funds of which the lender is deprived upon garnishment.

While the same public policy in favor of mechanics and materialmen referred to in our discussion of the Mechanics' Lien Law is applicable, inasmuch as the less ruthless remedy of mechanics' lien is available to claimants the public interest in the 'cumulative' remedy of a stop notice (Idaco Lumber Co. v. Northwestern S. & L. Ass'n, supra, 265 Cal.App.2d 490, 498, 71 Cal.Rptr. 422) is muted.

We have thus arrived at the inescapable conclusion that Diamond's bonded stop notice was invalid because the statutory base upon which it rests offends fundamental principles of procedural due process. ⁷

7 It is noted that there are summary procedures which provide for a quick adjudication of the validity of the creditor's claim when a stop notice is imposed in connection with a 'public work.' (See §§ 3197-3205.) While these summary procedures would probably satisfy due process (Mitchell v. W. T. Grant Co., supra, 416 U.S. 600, 94 S.Ct. 1895, 40 L.Ed.2d 406), for reasons not clear their provisions are expressly made inapplicable to stop notices on private work (§ 3179). (See generally, Comment, California's Private Stop Notice Law: Due Process Requirements (1974) 25 Hastings L.J. 1043, 1047, 1072-1073.)

Let a writ of prohibition issue prohibiting the Superior Court of Merced County from proceeding further upon the second cause of action of the complaint except to dismiss said cause of action. The order to show cause is otherwise discharged.

GARGANO and FRANSON, JJ., concur.