Mechanical Wholesale Corp. v. Fuji Bank, Ltd.

Plaintiff Mechanical Wholesale Corporation appeals from an order of dismissal entered after the trial court sustained, without leave to amend, the demurrer of defendant the Fuji Bank, Limited (Fuji Bank). The thrust of plaintiff’s argument is that the trial court misapplied the law relating to stop notices which are given, pursuant to California’s mechanic’s lien laws, to construction lenders (such as Fuji Bank), by subcontractors (such as plaintiff) when general contractors either refuse or are unable to pay the subcontractors for the subcontractors’ work or materials. Plaintiff also appeals from a postdismissal order awarding attorney fees to Fuji Bank, asserting there is no statutory basis for the award.

The principal issue presented by this case, which apparently has never before been considered in a published California opinion, is whether stop notices can be applied to construction funds held and administered in California for private works of improvement on sites located outside of California. As we conclude that a stop notice may only be served and enforced by a party entitled to record a mechanic’s lien, we necessarily hold that a stop notice is not an available…