Franklin's Earthmoving, Inc. v. Loma Linda Park, Inc.

• Decision Date: 21 September 1964
• Docket Number: No. 7484,7484
• Citation: 395 P.2d 454,74 N.M. 530,1964 NMSC 219
• Parties: FRANKLIN'S EARTHMOVING, INC., a New Mexico Corporation, Plaintiff-Appellant, v. LOMA LINDA PARK, INC., a corporation, Earl Troxel and Lureata Troxel, his wife, James E. Crosby and Patricia Crosby, his wife, and Sandia Land Developers, Inc., a New Mexico Corporation, Defendants-Appellees.
• Court: New Mexico Supreme Court

Page 454

395 P.2d 454

74 N.M. 530

FRANKLIN'S EARTHMOVING, INC., a New Mexico Corporation Plaintiff-Appellant, v. LOMA LINDA PARK, INC., a corporation, Earl Troxel and Lureata Troxel, his wife, James E. Crosby and Patricia Crosby, his wife, and Sandia Land Developers, Inc., a New Mexico Corporation, Defendants-Appellees.

No. 7484.

Supreme Court of New Mexico.

Sept. 21, 1964.

Harry O. Morris, Albuquerque, for appellant.

Richard C. Civerolo, Albuquerque, for appellee Sandia Land Developers, Inc.

Frank J. Southerland, Albuquerque, for appellees.

NOBLE, Justice.

Appellant (plaintiff) Franklin's Earthmoving, Inc. (hereafter referred to as Franklin) constructed a racetrack at Loma Linda Park in Bernalillo County, New Mexico, pursuant to a contract with Loma Linda Park, Inc. (hereafter referred to as Loma Linda). Loma Linda had an unexercised option to buy the land upon which the improvements were made. Franklin filed its amended complaint seeking foreclosure of a claim of lien against the land, Loma Linda and Sandia Land Improvement Developers, inc. (hereafter referred to as Sandia), owner of the premises. Judgment was entered against Loma Linda and the action dismissed against Sandia, and foreclosure of the mechanic's lien denied upon the court's finding of equitable estoppel preventing Franklin from asserting its claim of lien against Sanda. This appeal is from the judgment denying Franklin's foreclosure of its claimed lien.

The statute, Sec. 61-2-10, N.M.S.A.1953, makes all lands upon which improvements are constructed with the owner's knowledge subject to mechanic's and materialmen's liens unless one having an interest in the land shall post a notice of non-responsibility within three days after obtaining knowledge of such construction, alteration or repair, or the intended construction, alteration or repair.

Facts found by the court and not attacked, and which are therefore the facts upon which the case rests in this court, Marrujo v. Martinez, 65 N.M. 166, 334 P.2d 548, are that George W. Walker, a director of Sandia, observed Franklin working on the racetrack and told J. S. Lovvorn, representing Franklin, that the land was owned by Sandia and not by Loma Linda and that he intended to immediately post a non-responsibility notice. Lovvorn asked Walker not to post and thus stop the work, assuring him that if Sandia refrained from posting, Franklin would not file a lien against the land but would look solely to Loma Linda and its officers for payment. Relying upon Franklin's promise, the land was not posted. It is clear to us that Walker's reliance upon Franklin's promise was sufficient to create an equitable estoppel preventing foreclosure of an artisan's lien by Franklin if Walker was authorized to represent Sandia. The trial court found:

'26. In his dealings with J. S. Lovvorn, [representative of Franklin] George W. Walker was acting with authority for Sandia Land Developers, Inc., and with the knowledge of said corporation.'

If the finding is substantially supported by the evidence, the judgment should be affirmed.

It is undoubtedly true that a director individually cannot ordinarily bind the corporation unless authorized to act as its agent. 2 Flecther Cyclopedia Corporations (Perm. Ed.) Sec. 309, but the facts here present a different situation. Generally, knowledge of an individual director charges a corporation with notice that improvements are being made on the corporation's lands. Todd v. Exeter Land Co., 103 N.J.Eq. Eq. 268, 143 A. 428; 3 Fletcher Cyclopedia Corporations (Perm. Ed.) Sec. 815.

We have no doubt but that a notice of non-responsibility as provided by Sec. 61-2-10, supra, posted by Walker on behalf of Sandia would have effectively released Sandia and its land from responsibility for the mechanic's claim for construction, improvement or alterations, whether or not Walker had been authorized to so post such notice. The question of whether a corporation is bound by the ats of its president or by individual directors, absent action by the board of directors, was said in Yucca Mining & Petrol. Co. v. Howard C. Phillips Oil Co., 69 N.m. 281, 365 P.2d 925, to be a problem that has caused considerable difficulty. Recognizing the general rule that although ordinarily a corporation can only act through its directors regarding matters that are not in the usual course of the daily operation of the business, this court there called attention to the refusal of many courts to permit disclaimer of unauthorized agreements by corporate officers because of the injustice that would result to those dealing with the corporation. It was pointed out that such refusal was upon various agency theories of 'apparent authority,' 'implied authority,' 'waiver' or 'estoppel,' as well as ratification and acquiescence. Anyone...