Los Banos Gravel Co. v. Freeman

• Decision Date: 28 May 1976
• Parties: LOS BANOS GRAVEL COMPANY et al., Plaintiffs and Appellants, v. Vernon FREEMAN, Jr., et al., Defendants and Respondents. Civ. 2566.
• Court: California Court of Appeals Court of Appeals

Page 180

130 Cal.Rptr. 180

58 Cal.App.3d 785

LOS BANOS GRAVEL COMPANY et al., Plaintiffs and Appellants, v. Vernon FREEMAN, Jr., et al., Defendants and Respondents.

Civ. 2566.

Court of Appeal, Fifth District, California.

May 28, 1976.

Falasco & Galvin, Linneman, Burgess, Telles & Van Atta and Stephen P. Galvin, Los Banos, for plaintiffs and appellants.

J. Keith McKeag, Downey, Brand, Seymour & Rohwer, Sacramento, for defendants and respondents.

OPINION

ZEFF, ^* Associate Justice (Assigned).

STATEMENT OF THE CASE

On January 31, 1973, plaintiffs filed a complaint for the value of goods and materials sold and delivered for use in the construction of a service station and restaurant and to enforce mechanics liens on the land on which the service station and restaurant were constructed. Defendants Vernon Freeman, Jr., Betty J. Freeman, Elbon Corporation and Elbon Land Company, Inc. filed an answer admitting ownership of the real property against which the mechanics liens had been recorded, denying the other material allegations of the complaint and asserting as an affirmative defense that these defendants had posted and recorded, as owners, a notice of nonresponsibility. The defendants Donald Bauer, Interstate Fuel, Interstate Fuel Corporation and Circle Vending Co. failed to answer and their defaults were entered. A court trial was held June 21, 1974 and judgment was entered in favor of the defendants-respondents and against those defendants who had defaulted. The plaintiffs are the appellants here and have filed a timely notice of appeal from that portion of the judgment in favor of the defendants-respondents.

STATEMENT OF FACTS

Respondents Vernon Freeman, Jr., Betty J. Freeman, Elbon Corporation and Elbon Land Co. each owned a one-half interest in a 220 acre parcel of land on the Fresno-Merced County line on Interstate 5 which is referred to on an unrecorded parcel map as Rawhide Springs, and which by an agreement between respondents is operated under the name 'Rawhide Venture'.

Vernon Freeman, who acted as representative of Rawhide Venture during the transactions in question, has been a licensed real estate broker for 16 years and has been involved in land investment and development in the Los Banos area for some 25 years.

A written lease (a 'California Real Estate Association Standard Form'), dated June 13, 1972 was entered into between Rawhide Venture, represented by Vernon Freeman, and Circle Vending Co., represented by its president, Donald Bauer. The lease involved a square one acre parcel of unimproved foothill farm land located next to the freeway. With respect to the leasehold term, use, improvement, occupancy, rent, option, covenants to perform and lessor's privilege of terminating, the lease contained the following provisions:

1. The term was for three years commencing June 13, 1972 and ending June 12, 1975.

2. The premises were to be used only for a service station and restaurant which could be of the 'vending type'.

3. If the lessee did not commence construction of the service station and restaurant within 120 days, the lessor was released from any obligation to perform.

4. The lease was designed as a 'percentage lease', the rent to be one and one-half cents per gallon of all fuels sold, plus four percent of the gross income from all other products and services sold and rendered on the property with a minimum guarantee of $400 a month starting September 1, 1972.

5. All increases in county taxes resulting from improvements placed on the subject property were to be paid by the lessee.

6. If the lessee conformed to all of the conditions of the lease without any court action involving the lessor, the lessee was given the right of first refusal to match any lease or sale offer of the property acceptable to the lessor, and in addition the lessee was given an option to purchase the subject property for the sum of $125,000 cash during the term of the lease.

7. In the event of a default by the lessee concerning any of the covenants or conditions of the lease, the lessor was given a right of reentry and a right to remove all persons from the property.

8. The lessee was not entitled to make alterations on the property without the written consent of the lessor.

9. The lessee's possession was not to be construed as conveying title thereto or ownership thereof and the lessee was required to pay any increase in fire and liability insurance rates resulting from his occupation of the premises.

In addition to the foregoing, the lease contained other standard provisions usually found in such printed forms.

Circle Vending Co. was apparently a Nevada corporation, now defunct, and at the time of the lease negotiations Vernon Feeeman was aware that neither the corporation nor Mr. Bauer were financially sound, and for this reason drafted the lease to protect himself by providing that if the service station and the vending restaurant were not started within 120 days he would be released from all obligations. Freeman, apparently, did not expect that Bauer would be able to begin construction; however, Circle Vending Co. did enter into possession and began construction soon after the lease was signed.

On September 26, 1972 after returning from a hunting trip, Freeman first learned that construction had begun. He immediately visited the site and discovered that foundations had been laid, concrete poured, and that fuel tanks were already in the ground. Surprised that Circle Vending had been able to start construction, Freeman man made inquiry to determine whether the fuel tank had been paid for and learned that they had. On October 5, (the answer and the findings of fact refer to the date 'October 4') Freeman posted a notice of nonresponsibility on the property and recorded the notice in the Merced County Recorder's Office on October 6, 1972.

Each of the plaintiffs-appellants had supplied services and materials to Donald Bauer and Circle Vending Co. in varying amounts. On or about October 27, 1972, each of the appellants except T. Falasco, Inc. served defendants with preliminary 20-day pre-lien notices, and on November 24, 1972, each of the appellants filed claims of lien on the property for the value of the materials and services.

ISSUES

I

Were Respondents 'Participating Owners' in the Construction Such as to Preclude Them From Exempting the Property From Mechanics Liens Through Compliance With The Notice of Nonresponsibility Statute?

II

Was the Posted Notice of Nonresponsibility Invalid and Ineffectual Because it Was Not Verified As Required By the Statute?

III

Were Appellants Required to Serve Respondents With Preliminary Lien Notices?

I

A determination by this court with respect to issue I that the respondents were 'participating owners' would mean that respondents would not be entitled to exempt the property from the mechanics liens, despite compliance with the statutes relating to notice of nonresponsibility. The resolution of this issue against the respondents would also be dispositive of the issues framed under II and III.

The trial court in its findings of fact and conclusions of law made no express finding of fact with regard to the question of whether the respondents were participating owners, but did recite as a conclusion of law 'the lease between defendants Freeman, et al., and Circle Vending Co. did not make defendants, Freeman, et al., participating owners with defendants, Bauer, et al., in the construction work carried on on the lease premises'.

A preliminary question is presented with respect to the authority of an appellate court reviewing a lease agreement which is susceptible of more than one interpretation.

As stated in 6 Witkin, Cal. Procedure (2d ed. 1971) Appeal, § 257, p. 4248:

'The issue in a case may be the proper meaning to be given an instrument or other writing which is susceptible of more than one interpretation. Is the reviewing court bound to accept the construction given by the trial judge, or may it reverse the judgment by substituting its own construction which it deems more reasonable? The cases fall into three classes:

'(1) Where extrinsic evidence has been properly admitted as an aid to interpetation, and the evidence is in conflict.

'(2) Where no competent extrinsic evidence has been introduced, and the interpretation is derived solely from the terms of the instrument.

'(3) Where competent extrinsic evidence has been introduced, but it is not in conflict.

'The California decisions in the second and third classes were difficult to reconcile, but the uncertainty was resolved in the landmark case of Parsons v. Bristol Dev. Co. (1965) 62 Cal.2d 861 (44 Cal.Rptr. 767, 402 P.2d 839).'

It is the established rule that where the extrinsic evidence has been properly admitted and the evidence is in conflict any reasonable construction by the trial court will be upheld under the general rule of conflicting evidence.

We hold that the matter under consideration falls squarely within the third classification: 'Where competent extrinsic evidence has been introduced, but it is not in conflict.'

As was held by this court in Davies Machinery Co. v. Pine Mountain Club, Inc. (1974), 39 Cal.App.3d 18, 23, 113 Cal.Rptr. 784, 787:

'In reviewing a trial court's interpretation of a written instrument where no conflicting extrinsic evidence is received, an appellate court is not bound by the trial court's ruling but must give the writing its own independent interpretation. (Parsons v. Bristol Development Co., 62 Cal.2d 861, 865--866, 44 Cal.Rptr. 767, 402 P.2d 839; Estate of Platt, 21 Cal.2d 343, 352, 131 P.2d 825; Estate of Shannon, 231 Cal.App.2d 886, 890, 42 Cal.Rptr. 278; 6 Witkin, California Procedure (2d ed.) (1971), Appeal, §§ 257--260, pp. 4248--4251.) The rationale for this rule is stated rhetorically in Estate of Shannon: '(W)here only the interpretation of written instruments is concerned, unaffected by extrinsic evidence, is not an appellate court, after...