Ringland-Johnson-Crowley Co. v. First Central Service Corp.

• Decision Date: 29 June 1977
• Docket Number: RINGLAND-JOHNSON-CROWLEY,No. 58385,58385
• Citation: 255 N.W.2d 149
• Parties: COMPANY, Appellant, v. FIRST CENTRAL SERVICE CORP., Appellee.
• Court: Iowa Supreme Court

Page 149

255 N.W.2d 149

RINGLAND-JOHNSON-CROWLEY COMPANY, Appellant, v. FIRST CENTRAL SERVICE CORP., Appellee.

No. 58385.

Supreme Court of Iowa.

June 29, 1977.

Gary S. Gill, Swift, Brown & Winick, Des Moines, for appellant.

Lindgren, Davis & Baker, Des Moines, for appellee.

Heard before MOORE, C. J., and MASON, RAWLINGS, REES and REYNOLDSON, JJ.

MASON, Justice.

Plaintiff, Ringland-Johnson-Crowley Company, commenced an action in the Polk District Court seeking to recover $143,038.17 from KSDL, Inc., and First Central Service Corporation for labor and material furnished by plaintiff in the renovation of a building in which KSDL and First Central held interests. In addition, plaintiff sought to establish and enforce a mechanic's lien filed by it with respect to the renovated property against KSDL, First Central and various other holders of interests in the subject property. Various pretrial motions and orders resulted in plaintiff proceeding to trial against only KSDL and First Central.

Following trial to the court, plaintiff was awarded a judgment against KSDL in the amount of $143,038.17 plus interest and costs. Plaintiff's claim against First Central, based upon the mechanic's lien, was dismissed. Plaintiff appeals from that portion of the judgment dismissing its claim for relief against First Central.

In 1922 the trustees of the Frederick M. Hubbell Trust, titleholder of the subject property, leased the premises to Commonwealth Company, said lease terminating in 2019. Subsequently, Commonwealth erected the Paramount Theater Building on the site.

Some time in early 1973 First Central purchased the stock of Commonwealth and arranged to lease Commonwealth's only asset, the Paramount Building, for a term of years not established by the record herein. The lease was not reduced to writing until June 1, 1973; however, for some time prior to that date the parties operated according to an oral arrangement.

On March 1, 1973, KSDL leased the subject property from First Central for ten years with an option to renew for five additional years. In addition, KSDL was given an option to purchase the premises. Additional provisions of the lengthy lease agreement will be discussed if and as they become pertinent to a resolution of the issue presented by this appeal.

Plaintiff and KSDL entered into a contract dated March 7, the terms of which provided plaintiff would perform the work necessary to convert the theater portion of the subject property into a dinner theater and would be compensated therefor on a "cost of the work plus a fee" basis. The renovation of the theater consisted primarily of converting the typical sloping audience area into a terraced arrangement. The work was completed April 17. Between that date and May 13, plaintiff submitted to KSDL for payment three bills totaling $143,038.17. As of the time of trial plaintiff had received no payments from KSDL.

Plaintiff's petition, filed June 6, named as defendants KSDL, First Central, the Hubbell trustees and two additional entities connected with the dinner theater project. Prior to trial the Hubbell trustees were granted summary judgment and plaintiff dismissed its action with respect to all other named defendants other than KSDL and First Central.

KSDL did not appear to defend and plaintiff was accordingly granted a default judgment against KSDL in the amount prayed for in the petition. The trial court, however, dismissed plaintiff's claim against First Central finding and concluding as follows:

" * * *not

"5. First Central * * * was not a party to the contract for remodeling the premises. The lease between the tenant (KSDL) and owner (First Central) contained no provision requiring remodeling of the premises. There was no evidence to establish a joint venture between the owner and lessee. The evidence fails to show that the work performed by the plaintiff improved or enhanced the value of the building so as to benefit the owner.

" * * *e b

"The plaintiff had the burden of proving by a preponderance of the evidence that the defendant First Central * * * was either directly or indirectly a party to the contract * * *, or that KSDL * * * was acting as an agent for First Central * * * or that the alterations and remodeling so enhanced the value of the premises as to result in an unjust gain or substantial benefit to the defendant. The Court, after considering the entire record, concludes that plaintiff has failed to sustain this burden of proof."

On this appeal, plaintiff contends the trial court's dismissal of its action against First Central was erroneous.

The only question presented herein may be succinctly stated as follows: Under the facts and circumstances present herein has First Central's conduct resulted in its interest in the subject property being subjected to plaintiff's mechanic's lien?

I. An action to enforce a mechanic's lien is in equity. Section 572.26, The Code; Landas Fertilizer Company v. Hargreaves, 206 N.W.2d 675, 676 (Iowa 1973). Consequently, this court's review is de novo. Rule 334, Rules of Civil Procedure. It is our responsibility to review the whole record and determine from the credible evidence rights anew on those propositions properly presented, provided issue has been raised and error, if any, preserved in the course of trial proceedings. While weight will be given to findings of the trial court, this court will not abdicate its function as triers de novo on appeal. Basic Chemicals, Inc. v. Benson, 251 N.W.2d 220, 225-226 (Iowa 1977).

Section 572.1(1), The Code, states, " 'Owner' shall include every person for whose use or benefit any building, erection, or other improvement is made, having the capacity to contract, including guardians."

Section 572.2, The Code, provides in part as follows:

"Every person who shall furnish any material or labor for, or perform any labor upon, any building or land for improvement, alteration, or repair thereof, including those engaged in the construction or repair of any work of internal or external improvement, * * *, by virtue of any contract with the owner, his agent, trustee, contractor, or subcontractor shall have a lien upon such building or improvement, and land belonging to the owner on which the same is situated * * *, to secure payment for material or labor furnished or labor performed."

The question whether a mechanic's lien, which arises as a result of the activities of a lessee, attaches to the lessor's interest in the property has been confronted by this court on a number of occasions. See Stroh Corp. v. K & S Development Corp., 247 N.W.2d 750 (Iowa 1976); Landas Fertilizer Company, supra; Knudson v. Bland, 253 Iowa 614, 113 N.W.2d 242; Cassaday v. DeJarnette, 251 Iowa 391, 101 N.W.2d 21; Denniston & Partridge Co. v. Romp, 244 Iowa 204, 56 N.W.2d 601. The principles enunciated in those cases were summarized as follows in Stroh Corp., supra, 247 N.W.2d at 752:

"Ordinarily, mere knowledge of or consent to the making of improvements by a lessee does not subject the interest of the lessor to a mechanic's lien. * * * (citing authorities).

"But if the lessor has by express or implied agreement with his lessee contracted for the improvement of his real estate by the latter, it is generally held he has subjected his interest in the realty to the claim of a mechanic's lien for the reasonable value of labor and material furnished. This is particularly true where the lease is so drafted that...