Hayward Lumber & Inv. Co. v. Graham

• Decision Date: 27 December 1968
• Docket Number: No. 7905,7905
• Citation: 104 Ariz. 103,449 P.2d 31
• Parties: HAYWARD LUMBER & INVESTMENT COMPANY, a corporation, and Pioneer Plumbing Supply Company, an Arizona corporation, Appellants, v. Arthur E. (Bud) GRAHAM and Lucille L. Graham, husband and wife, Appellees.
• Court: Arizona Supreme Court

Page 31

449 P.2d 31

104 Ariz. 103

HAYWARD LUMBER & INVESTMENT COMPANY, a corporation, and Pioneer Plumbing Supply Company, an Arizona corporation, Appellants, v. Arthur E. (Bud) GRAHAM and Lucille L. Graham, husband and wife, Appellees.

No. 7905.

Supreme Court of Arizona, In Division.

Dec. 27, 1968.

Benton & Case, by Williby E. Case, Jr., Brandt & Baker, by Thadd G. Baker, Yuma, for appellants.

Rolle, Jones & Miller, by Everett L. Miller, Yuma, for appellees.

LOCKWOOD, Justice.

Arthur Graham, hereinafter referred to as Graham, leased approximately four acres of unimproved land to the Arizado Resort Corporation, hereinafter referred to as Arizado. Arizado bought materials and supplies from the Hayward Lumber Company, the Pioneer Plumbing Supply Company, and Elm Wholesale, hereinafter respectively referred to as Hayward, Pioneer, and Elm which were used in improving the leased property. After ninety per cent of the improvements were completed, the lease was terminated at the instance of the lessor, and the property and improvements were repossessed by him. Pioneer filed a mechanics' lien against the property and improvements on May 1, 1961. Hayward filed a lien on June 23, 1961, and Elm filed a lien on August 7, 1961. Thereafter Pioneer brought action to perfect its lien, and Graham filed a quiet title action against each of the lien claimants, who in turn, filed counterclaims setting up their mechanics' liens. The two cases were consolidated for trial and judgment was rendered in favor of the lessor, Graham, on his quiet title action. Personal judgments were rendered against Arizado in favor of the lien claimants on their counterclaims. The court denied all liens as to both the improvements and the realty. The trial court found that the work of construction was abandoned on April 1, 1961, and therefore the liens of Pioneer and Elm were not timely. The trial court also held that the lessee (Arizado) was not the agent of the lessor (Graham) and that the facts of the case did not take it out of the general rule that improvements at the instance of the lessee are not effective to bind the lessor's interests to the mechanics' and materialmen's liens.

Only Hayward and Pioneer have appealed from the judgment denying their liens. Proper disposition of this appeal requires examination of three questions.

1. Under the facts of this case, can the lessor's interest be subjected to the mechanics' liens under any theory of implied agency or estoppel?

2. If only the lessee's interest is subject to the mechanics' liens, what is the extent of that interest?

3. Can the trial court's finding of abandonment on April 1, 1961, be sustained? We will consider this question first.

A.R.S. § 33--993 requires the present lien claimants to file a copy of notice and claim of lien with the county recorder 'within sixty days after the completion' of the building or improvement. Both the appellants and the appellees agree that such notice must be filed within sixty days of abandonment of the work of construction to be effective, because abandonment is treated as completion for purposes of determining the time within which the claim must be filed. Raymond v. Agren, 44 Ariz. 327, 36 P.2d 797 (1934).

The real question raised here is whether the evidence is sufficient to show abandonment on April 1, 1961. The only evidence that would indicate the date of abandonment was testimony by the lessor, Graham, to the effect that work had ceased as of April 1. Also, the testimony of Donald Wayne Brasch, an employee of the lessee, Arizado, was to the effect that the last construction was 'about the middle of April'. We hold that this evidence is not sufficient to sustain a finding of permanent abandonment on April 1, 1961, and that the trial court erred in denying the lien claim of Hayward as not timely.

In Stark-Davis Company v. Fellows, 129 Or. 281, 277 P. 110, 64 A.L.R. 271 (1929), the Oregon Court, construing a statute substantially comparable to Arizona's, held that:

'In order to constitute a permanent abandonment of the construction of the building, so that the same would take the place of the completion mentioned in the statutes, there should be a cessation of operation, and an intent on the part of the owner and contractor to cease operations permanently, or at least for an indefinite period, or some fair notice to or knowledge of the abandonment by a lien claimant, either actual or implied.'

"Facts which will constitute an abandonment must include a conclusion, upon the part of the participants, to cease operations permanently, or at least for an indefinite period. (citing cases) Thus a mere cessation of labor is not an abandonment." (Emphasis supplied.) 277 P. at 112.

See also, 64 A.L.R. 276, entitled Abandonment of construction or of contract as affecting time for filing mechanics' liens.

The New Mexico Court had opportunity to examine the question of abandonment in Allison v. Schuler, 38 N.M. 506, 36 P.2d 519, 523 (1934):

'We indicated in the Hot Springs Plumbing & Heating Co. case, supra, that anything short of permanent abandonment would not start the running of the time within which a lien claim must be filed, and that suspension of work must be accompanied by an intention to cease work or cease furnishing materials permanently, or at least indefinitely, would be necessary to constitute abandonment. We there displayed a leaning toward the Oregon rule, and cited Eastern & Western Lumber Co. v. Williams, 129 Or. 1, 276 P. 257. That decision was shortly afterwards followed in Stark-Davis Co. v. Fellows, * * *.'

The writer of the annotation of this subject in 64 A.L.R. at page 283 stated the following:

'Whether or not there is an abandonment within the meaning of the rule by which abandonment is deemed equivalent to completion as regards the time for filing mechanics' lien claims is often a difficult question. It has been held that Abandonment of the work will not be presumed where the right to a mechanics' lien is in question, but must be established by the evidence; * * *.' (Citation in footnote, Feick v. Stephens, 250 F. 185, 162 C.C.A. 321, (1918)) (Emphasis supplied.)

At page 277 of the annotation the writer also states that:

'* * * there is direct authority to the effect that, in determining the question when a work is completed or abandoned, as regards the rights of parties to file or assert mechanics' liens, the court should not take a technical and narrow view, but should save to parties entitled to liens any rights they may justly have under a fair and equitable construction of the facts and the law applicable thereto.'

The real party interested in the work of improvement was the lessee. The amendment to the lease, executed April 11, 1960, provided that:

'During the term of this lease, Lessee has the right to place such improvements upon the demised premises as may be considered necessary for the conduct of its business. Upon the termination of the lease or at any time during the term of the lease, provided Lessee has complied with all terms and conditions of said lease, Lessee may remove, improve, restore, replace or otherwise alter the leased premises and the improvements placed thereon, And at all times the improvements placed upon the premises by Lessee shall belong to and remain the property of Lessee. Lessee agrees that should any buildings or other improvements be removed, that the premises will be restored to a clean and neat condition and that debris, foundations, and other traces of the improvements will be removed so that the premises will be restored as close as is reasonable to the original condition.' (Emphasis supplied.)

Since the work was done at the instance of the lessee, and since he was the real person interested in the construction, it was his intention to abandon that is important. Mere cessation of labor without evidence of an intent to abandon on the part of the lessee, is insufficient to constitute permanent abandonment with which to begin the period of limitation for the filing of mechanics' liens. This conclusion does no injustice to the lessor, because his rights are protected at all times. The purpose of the time limitation would be to protect the interest of the lessee, at whose instance the work is being done.

The record of this case indicates other facts which show that the lessee did not intend to abandon the work of improvement on April 1st. A luau was held on April 1, 1961 by the lessee for the purpose of selling stock in Arizado. The whole purpose of the stock sale was to further finance the work of improvements. At least on April 1st, there was no intent by the lessee to abandon the improvement. The lessee continued to remain on the leased property until 'the end of May or the first of July' and had paid delinquent rental through the first of May. Thus the only evidence bearing upon the question of the lessee's intent is to the effect that there was no intent On his part to abandon the improvement on April 1, 1961. We thus hold that in the absence of evidence of an intent on the part of the active participant to abandon the work of improvement, there can be no finding of permanent abandonment as a matter of law.

We believe the trial court was correct in denying the liens against the lessor's interests. The lease involved in this case allowed the lessee to build on and improve the property, but only to the extent that it did not create a lien against the lessor's interests. The lien claimants concede that 'ordinarily a lien for material used on leased premises by the lessee is not good against the interest of the lessor, even though the latter may have known of, or even acquiesced in, the use of the material.' Mulcahy Lumber Co. v. Ohland, 44 Ariz. 301, 303, 36 P.2d 579 (1934). The Court in Mulcahy also stated that:

'In most of those (cases) where the statute is similar to ours the substance of the decisions seems to be that where a tenant is compelled by the terms of...