Bobo v. John W. Lattimore, Contractor
Decision Date | 22 April 1970 |
Docket Number | No. 1,CA-CIV,1 |
Citation | 468 P.2d 404,12 Ariz.App. 137 |
Parties | Mark BOBO and Mabel P. Bobo, husband and wife, Emile C. R. Clemens and Charlotte Clemens, husband and wife, Appellants, v. JOHN W. LATTIMORE, CONTRACTOR, a corporation, Arizona Parking Lot Service, Inc., a corporation, R. W. Craven, d/b/a Craven Electric Co., Appellees. 1192. |
Court | Arizona Court of Appeals |
Perry, Coulter & Head, by Allan K. Perry, Phoenix, for appellants.
T. Gale Dake, Phoenix, for appellee Craven Electric Co.
Richard S. Berry, Tempe, for appellee Arizona Parking Lot Service, Inc.
Gibbons, Kinney & Tipton, by C. Richard Potts, Phoenix, for appellee John W. Lattimore, Contractor.
This appeal questions whether a perfected mechanics' and materialmen's lien, authorized by A.R.S. § 33--981, 1 can be foreclosed against real property owned by a lessor for construction of improvements made on the leased property by his lessee.
The facts are undisputed. The record shows that the appellants, hereafter referred to as lessors, were owners of three lots located at 1729--1735 East Van Buren Street in the City of Phoenix, Arizona. On January 1, 1968, they leased the three lots to Parker who fifteen days later assigned the lease to Hamburger-King Systems, Inc., #1, hereafter referred to as the lessee. Both the lease and assignment were in writing and properly executed by all necessary parties. Several months later the lessee entered into separate contracts with each of the three appellees for the construction of improvements on the vacant leased land: Arizona Parking Lot Service, Inc., contracted to surface and complete the parking area; John W. Lattimore, Contractor, Inc., contracted to build the hamburger stand; and Craven Electric Co. contracted to install the necessary electric system. The appellees each fully performed their separate obligations under the three contracts. Thereafter lessee defaulted on its obligation to pay the appellees and each appellee timely perfected a mechanics' and materialmen's lien against the then improved leased real property. (A.R.S. § 33--993). Lessee also failed to pay the lessors their rent when it became due and the lessors filed this quiet-title action joining the lessee, Parker, and the three appellees as defendants. Appellees answered and counterclaimed separately, pleading their respective liens and praying for the foreclosure of their liens against the lessors' real property interest. Defaults were entered against the lessee and Parker. All parties to the action moved for summary judgment and the trial court granted judgment to each of the appellees, while denying it to the lessors. Lessors appeal from the entry of that summary judgment.
The lessors and appellees agree that the rule of law in Arizona is that ordinarily a lien for materials and/or labor contracted by a lessee and used on the leased premises is not good against the interest of the lessor. Mulcahy Lumber Co. v. Ohland, 44 Ariz. 301, 36 P.2d 579 (1934). They also agree that the exception to the rule applies where the evidence establishes that the lessee acted as an agent, created by statute, of the lessor in ordering the labor and/or materials, Mulcahy, supra; A.R.S. § 33--981. Both agree that DeVry Brick Co. v. Mordka, 96 Ariz. 70, 391 P.2d 925 (1964) is dispositive of this issue on appeal. Lessors quote from the last paragraph of the opinion where the Supreme Court, referring to a written lease, said, 96 Ariz. at p. 72, 391 P.2d at p. 926. This, the lessors contend, requires that at least a dual obligation be imposed upon the lessee by the lease: first, that lessee be required to improve the lessors' property and, second, that lessee's plans and specifications for the improvement be subject to approval by lessors. Appellees, on the other hand, contend that the statutory agency relationship is created merely by the lease requirement that the lessee make improvements upon the leased property. 96 Ariz. at p. 72, 391 P.2d 925.
The lease provision involved herein reads as follows:
'Construction of Building
Lessee agrees to construct a building of approximately 800 square feet on the leased premises at Lessee's cost and expense, and to complete the same within one hundred fifty days from the execution of this lease.
It is understood and agreed that Lessee shall not encumber the real property in any manner.'
The lease also provides that upon the expiration of the lease that peaceable possession and all real improvement will be delivered to the lessors.
In the DeVry case the lease required the lessee to removdel and improve the building on the leased premises in accordance with plans and specifications to be approved by both lessors and lessees. The Supreme Court held that these requirements created a statutory agency relation between the lessors and lessees for the purpose of the lien law. In reaching this conclusion the court cited Oregon Lumber & Fuel Co. v. Nolan, 75 Or. 69, 143 P. 935 (1914), wherein the lessee was obligated under the terms of the lease to construct a substantial rooming, boarding or apartment house building on the leased premises at a cost of not less than $6,000, to be completed within four months from the lease date. The Oregon Supreme Court held that, '* * * if the owner of the fee contracts with his tenant or would-be purchaser, compelling the latter to erect a building, an agency is created as against the owner of the fee by force of the statute, with the result that one who furnishes material or labor at the instance of the agent is entitled to a lien on the fee for the labor or materials furnished.' See also Lorenz v. Pilsener Brewing Co. of Oregon, 159 Or. 552, 81 P.2d 104 (1938); Gabriel Powder & Supply Co. v. Thompson, 163 Or. 623, 97 P.2d 182 (1939); 79 A.L.R. 965, Section IV(a); 163 A.L.R. 992. Our Supreme Court also cited Ott Hardware Co. v. Yost, 69 Cal.App.2d 593, 159 P.2d 663 (1945), as authority for its DeVry decision. The Ott case cites an earlier California Supreme Court case, English v. Olympic Auditorium, Inc., 217 Cal. 631, 20 P.2d 946, 87 A.L.R. 1281 (1933), for the proposition that in California the test for determining a statutory agent is whether or not the provision requiring improvement of the leased real property is optional or not. If it is an optional condition, no agency is created for lien purposes; however, if the lessee is required to make the improvements in order to avoid a breach of the lease, then he is a statutory agent. These two cases, which ground the Arizona Supreme Court's opinion in DeVry, favor appellees' argument. In a more recent case, Hayward Lumber & Investment Co. v. Graham, 104 Ariz. 103, 107, 449 P.2d 31 (1968), the Supreme Court though not citing Nolan, English or DeVry, restated the principles established in those cases. See also Mills v. Union Title Co., 101 Ariz. 297, 300, 419 P.2d 81 (1966); 57 C.J.S. Mechanics' Liens § 65, p. 562.
We agree with the appellees' contention and it is our opinion that a statutory agency is created by A.R.S. § 33--981 when a lessee is required by his lease to make substantial improvements on the leased property. The language in DeVry relating to the approval of plans and specifications by lessors is dealing with the particular facts of that case and does not impose additional requirements beyond the above-stated requirement.
Turning now to the lease provision set out above, it is clear from reading it together with the entire lease that lessee's failure to construct an approximately $800-square-foot-building on the leased property within one hundred and fifty days following the execution date of the lease would constitute a breach of the lease and compliance therewith is not optional with the lessee. The condition not being optional with the lessee it is our opinion that...
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