Lentz Plumbing Co. v. Fee

• Decision Date: 03 April 1984
• Docket Number: No. 55755,55755
• Citation: 679 P.2d 736,235 Kan. 266
• Parties: LENTZ PLUMBING CO., Ralph Stumbaugh, Conner Tile & Floor Covering, Inc., Appellants, v. Tom FEE, Jr., Jerry Vickers, Nancy Glynn, Country Showplace, Inc., and Kenneth E. Reeves and Greta Reeves, his wife, Appellees, and Kenneth E. REEVES, Appellant, v. Tom FEE, Jr., Jerry Vickers, Nancy Glynn, and Country Showplace, Inc., Appellees.
• Court: Kansas Supreme Court

Page 736

679 P.2d 736

235 Kan. 266

LENTZ PLUMBING CO., Ralph Stumbaugh, Conner Tile & Floor

Covering, Inc., Appellants, v. Tom FEE, Jr., Jerry Vickers, Nancy Glynn, Country Showplace,

Inc., and Kenneth E. Reeves and Greta Reeves, his wife, Appellees, and Kenneth E. REEVES, Appellant, v. Tom FEE, Jr., Jerry Vickers, Nancy Glynn, and Country

Showplace, Inc., Appellees.

No. 55755.

Supreme Court of Kansas.

April 3, 1984.

Syllabus by the Court

1. A corporate officer or director, actively participating in the fraud practiced on behalf of a corporation, cannot escape personal liability on the ground that he was acting for the corporation or that the corporation obtained the benefit therefrom.

2. If his agency and the identity of his principal are unknown, an agent, to avoid personal liability on a contract to be entered into on behalf of his principal, has a duty to disclose both the fact that he is acting in a representative capacity and the identity of his principal, for the party dealt with is not required to discover or make inquiries to discover such facts.

3. Where the other party has actual knowledge of the agency and the identity of the principal, the agent will be relieved from liability, whether he himself makes the disclosure or the other party acquires the knowledge from some other source.

4. The estate of the owner cannot be subjected to a lien for work done or materials furnished at the instance of the lessee unless the lessee may be regarded as an agent or trustee of the owner. Such may be express or implied from the conduct and acquiescence of the owner and from all the circumstances which estop him from denying the agency.

5. Where a mechanic's lien arises under a contract with a tenant, such lien attaches to the leasehold or tenant's estate only, and not to the reversion, fee, or the estate of the landlord. The rights of the mechanic's lien claimant can rise no higher than those of the person with whom he has contracted or to whom he has furnished labor or materials. A mechanic's lien which attaches to a leasehold is subject to all the conditions of the lease and subordinate to the rights of the lessor. Without the authority of the landlord, or his consent, or some act of the landlord to make his estate liable, a tenant cannot charge the land with a lien for labor or materials for constructing or improving a building thereon.

James S. Willard, of Scott, Quinlan & Hecht, Topeka, argued the cause and was on the brief, for appellants Lentz Plumbing Co. and Conner Tile & Floor Covering, Inc.

C. Bruce Works, Topeka, argued the cause and was on the brief, for appellant Ralph Stumbaugh.

Bruce C. Harrington, Topeka, argued the cause and was on the brief, for appellees Tom Fee, Jr., Jerry Vickers and Nancy Glynn.

Hugh R. McCullough, Topeka, argued the cause and was on the briefs, for appellant/appellee Kenneth E. Reeves.

LOCKETT, Justice:

This appeal involves four cases consolidated for trial. Lentz Plumbing Company (Lentz), Conner Tile & Floor Covering, Inc. (Conner Tile), and Ralph Stumbaugh (Stumbaugh) furnished labor and materials to Country Showplace, Inc., a private club in Topeka, Kansas. Conner Tile and Stumbaugh appeal from the trial court's determination that Tom Fee, Jr. (Fee), president of Country Showplace, Inc. (Showplace), was not personally liable for the labor and materials supplied to Showplace. All three appellants appeal the trial court's failure to enforce their mechanic's liens against the property leased to Showplace for use as a private club. Kenneth E. Reeves (Reeves) owned the land where the private club was located. Mr. Reeves appeals from the trial court's denial of his fraud claim for damages against Fee.

Showplace was incorporated as a Kansas corporation May 15, 1977. In 1977, the corporation leased the building owned by Reeves for use as a 3.2 beer tavern. In 1978, Fee purchased 25% of the corporate stock of Showplace and became president of the corporation.

The corporation hired a Ron Morey to manage the tavern. In 1979, the corporation determined it should change the image of the tavern. Morey convinced the board of directors of Showplace that Topeka had need for another private club. Morey was authorized by the corporation to renovate the premises. Morey contacted each of the plaintiffs and entered into separate oral contracts for material and labor to remodel the leased premises.

Between April, 1979, and September, 1979, each of the plaintiffs worked on the premises. Conner Tile installed carpeting and tile. The bill for labor and materials supplied by Conner Tile was $6,394.09. Lentz did various plumbing work on the building. Lentz' bill for labor and materials amounted to $1,156.72. Stumbaugh performed various carpentry jobs and painting. Stumbaugh charged $6,000.00 for labor and materials. Each of the plaintiffs billed "Country Showplace" for payment.

September 20, 1979, the stockholders of Showplace agreed to sell their stock to Morey. Showplace requested Reeves to allow it to assign the lease to Morey. Reeves would not approve assignment of the lease to Morey by Showplace. Reeves' refusal to allow the assignment of the lease to Morey halted the sale of the stock. Later in September, 1979, Morey rented a trailer, loaded Showplace's movable property into the trailer, and departed. Morey disappeared, never to be heard from again.

Showplace failed to pay its outstanding obligations. Reeves changed the locks on the doors of the building, barring Showplace employees from entering. Showplace could not continue the business. Each plaintiff filed a mechanic's lien for the amount it claimed due from Showplace. Suits were filed and consolidated. Showplace filed for bankruptcy.

This matter was tried to the court. At the close of the trial, the court made findings of fact and conclusions of law, some of which are hereinafter set forth:

"1. Country Showplace, Inc., was ... a Kansas corporation pursuant to Articles of Incorporation filed with the Secretary of State on May 15, 1977.

....

"4. The corporation ... has filed a bankruptcy .... The ... plaintiffs were listed as creditors of the corporation and their claims have been discharged in bankruptcy.

"5. At the time of trial, counsel for the defendant, Country Showplace, Inc., confessed judgment as to the ... claims of the ... plaintiffs.

"6. That defendants, Vickers and Glynn, were at all times relevant herein officers and stockholders in Country Showplace, Inc.

....

"8. ... the defendants Reeves were the owners of the real estate commonly known as 8249 S.W. 10th Street, Topeka, Kansas. The real estate and improvements had been leased by Reeves to Country Showplace, Inc., that lease agreement specifically forbade any material improvements to the property without written permission of the landlord and forbade any improvements which would result in mechanic's liens without written permission and provided that the tenant was not to be considered an agent of the landlord.

"9. From about April, 1979, through September, 1979, each of the plaintiffs above named furnished labor and materials for the remodelling of the Country Showplace. The labor and materials furnished by the respective plaintiffs were, for the most part, ordered by Ronald Morey, who was acting as manager of Country Showplace, Inc. Morey directly supervised the remodelling of the premises and dictated what was to be done. The defendant Fee was at that time president of the corporation and had hired Morey as manager. He visited the premises from time to time and presumably was aware of the nature and extent of the remodelling, although he denies authorizing Morey to incur some of the expenses for which the plaintiffs make claim.

"10. No evidence was presented by any party to connect the defendants, Vickers or Glynn, with any of the events in question.

"11. In late September or early October, 1979, when Country Showplace, Inc., had defaulted in rent payments under its lease, Reeves locked the parties out of the premises and took possession.

"12. Although the defendant, Kenneth Reeves, may have had some knowledge as to the improvements which were being added to the premises by plaintiffs, he did not authorize or consent to any of the improvements.

"13. There is no evidence to establish an agency relationship between the defendants Reeves and any of the other defendants.

"Based upon the foregoing findings of fact, the following are the Court's conclusions of law:

"1. The services and materials furnished by each of the above named plaintiffs were furnished to Country Showplace, Inc., and these plaintiffs have failed to establish facts sufficient to prove that the defendants, Fee, Vickers or Glynn, are individually liable, although they were officers and directors of the corporation.

"2. The plaintiffs have failed to establish facts to prove an agency relationship between the defendants Reeves and the other defendants.

"3. The mechanic's liens asserted by each of the above named plaintiffs are not enforceable against the defendants Reeves or the real estate owned by them for the reason that the labor and materials furnished by each of these plaintiffs was not furnished under a contract with the owners or their agent. The labor and materials in question were never requested or authorized by the defendants Reeves.

"4. The defendants Reeves have failed to establish by clear and convincing evidence their claims of fraud on the part of the defendant Fee.

"5. The individual defendants, Fee, Vickers and Glynn, are entitled to judgment in their favor as to the respective claims of the plaintiffs for labor and materials furnished.

"6. The defendants Reeves are entitled to judgment in their favor as to the claims of the plaintiffs above named for foreclosure of their respective mechanic's liens and these liens should be dismissed.

"7. The individual defendant Fee is entitled to judgment in his favor as to the claims of fraud by the cross...