Opinion ID: 1184768
Heading Depth: 1
Heading Rank: 1

Heading: Green Acres

Text: We first address the question whether Green Acres' interest in the property is subject to a lien for work performed and materials supplied in improving the premises for Hungry Hawaiian. The purpose of the Utah mechanics' lien law is to provide protection to those who enhance the value of a property by supplying labor or materials. First of Denver Mortgage Co. v. Zundel, Utah, 600 P.2d 521 (1979). We construe the lien statutes broadly to effectuate that purpose. See Stanton Transportation Co. v. Davis, 9 Utah 2d 184, 341 P.2d 207 (1959). Under § 38-1-3 a lessee may be an owner within the meaning of the statute and his leasehold may be subjected to a mechanic's lien. Buehner Block Co. v. Glezos, 6 Utah 2d 226, 310 P.2d 517 (1957). The precise issue, therefore, is whether the improvements made for Hungry Hawaiian were made at the instance of the owner, Green Acres or any other person acting by [its] authority as agent, contractor or otherwise. The rule in this State is that the mere existence of a lessor-lessee relationship, without more, does not justify charging the lessor's interest with a mechanic's lien for improvements made on the property at the instance of the lessee. Zions First National Bank v. Carlson, 23 Utah 2d 395, 464 P.2d 387 (1970); Morrow v. Merritt, 16 Utah 412, 52 P. 667 (1898). The statutory language at the instance of ... requires either an express or implied contract between the lessor or his agent and the contractor. Zions First National Bank v. Carlson, supra ; Eccles Lumber Co. v. Martin, 31 Utah 241, 87 P. 713 (1906); 10 Thompson on Real Property § 5189 (repl. ed. 1957); see also Stroh Corp. v. K & S Development Corp., Iowa, 247 N.W.2d 750 (1976). A lessee does not become the agent of the lessor simply on the basis that the lessor has knowledge that improvements are being made, or even that the lessor cooperated with the lessee with respect to the improvements, such as by assisting in obtaining necessary zoning changes. Zions First National Bank v. Carlson, supra . However, even though Green Acres sought to protect itself against liability arising as a result of Hungry Hawaiian's actions, [4] the lease provisions relied on cannot override the effect of the mechanics' lien law as to persons not a party to the lease. Metals Manufacturing Co. v. Bank of Commerce, 16 Utah 2d 74, 395 P.2d 914 (1964). In Zions First National Bank v. Carlson, supra , this Court, quoting from Utley v. Wear, Mo. App., 333 S.W.2d 787 (1960), stated that a lessor is subject to a lien for improvements by a tenant if the lease  requires or obligates the tenant to construct improvements which substantially enhance the value of the freehold ... . Id. at 792. For the lease to create an agency between the lessor and the lessee under the mechanics' lien law, the facts of the transaction must be explored:    in order to make such covenant constitute an agency between the lessor and lessee, we are necessarily bound to look at the facts to determine whether there was an agency or not. If, on account of the shortness of the lease, the extent, cost, and character of the improvements, or other facts in evidence, such as the participation by the lessor in the erection or construction thereof, it can be seen that the improvement is really for the benefit of the lessor, and that he is having the work done through his lessee, then it can be said with justice that the lessee in such case is acting for the lessor. [ Id. at 792 (quoting Dierks & Sons Lumber Co. v. Morris, 170 Mo. App. 212, 156 S.W. 75, 77 (1913)).]       In determining whether an agency should be implied the courts have often, perhaps of necessity, gone beyond the agreement and into the whole circumstances of the letting in order to find the answer.    [W]here the premises are let for a specific purpose and where the nature of the premises is such that the purpose cannot be accomplished except by the making of substantial improvements to the freehold, then the tenant is, by implication, required to make such improvements. He has no other option, and hence he is the landlord's (implied) agent to the extent of subjecting the property to a lien, this upon the theory that the landlord contemplated the necessity and required that such necessity be met. [Emphasis in original; Id. at 793; citations omitted.] It is undisputed that Interior's and Action's express contracts for improvements were with Hungry Hawaiian and not Green Acres or Navalco. Even though there was no express contract between either Navalco or Green Acres and the contractor, the facts do not, on the reasoning stated in Utley v. Wear, supra , exclude, as a matter of law, the possibility that Green Acres may have made Hungry Hawaiian its agent, at least to some extent, within the contemplation of the mechanics' lien statute. The lease between Green Acres and Hungry Hawaiian appears to contemplate that the latter would operate a restaurant during the term of the lease. The record demonstrates that the building had not been used as a restaurant prior to the lease to Hungry Hawaiian. To make the premises suitable for operating a restaurant, substantial improvements were necessary, but there is nothing in the lease which requires any improvement, except for the fire sprinkler system which was specifically required by a rider to the lease. Interiors provided some of the improvements necessary to allow the premises to be used as a restaurant, and Action installed the fire sprinkler system which clearly benefited both the lessor and lessee. The lessor retained the right to periodically inspect the installed system to insure compliance with the lease. Although the Hungry Hawaiian lease was for a term of twelve years and two months, there is nothing in the record to indicate that all the improvements made were usable only by Hungry Hawaiian. Certainly that does not appear to be true as to the fire sprinkler system. A similar factual situation arose under a comparable mechanics' lien statute in Masterson v. Roberts, 336 Mo. 158, 78 S.W.2d 856, 858 (1934). The court stated: It is clear that, when the owner of the life estate made the contract in the lease which, because of his conduct, verbal directions, and the condition of the building, by necessary implication, if not by direct statement, clearly obligated the tenants to alter the building from a garage to a moving picture theater, by requiring substantial alterations, he made these lessees his agents within the contemplation of the mechanic's lien statutes to make such improvements. .. . Green Acres relies on Commercial Fixtures & Furnishings, Inc. v. Adams, Utah, 564 P.2d 773 (1977), for the proposition that an agency will not be implied when the terms of a lease state that the lessee shall be liable for improvements. The case also held that generally a tenant's creditors have no greater right to charge the land for the value of the improvements than does the tenant. Commercial Fixtures was an action for unjust enrichment by a contractor against the lessor for the value of improvements which the lessee had contracted for. The lessee, under the lease, was held to have no right to charge the land with the value of improvements. In holding that the plaintiff had no greater right against the lessor than he had against the lessee, the Court emphasized that the plaintiff had not filed a lien against the property under the mechanics' lien law, and that the action was in equity without any attempt to exhaust any legal remedies available. Id. at 774. Since the plaintiffs in this case seek a legal remedy based on the mechanics' lien statute and not general equitable principles, Commercial Fixtures is not controlling in the instant case. In this case the sublease does not foreclose the possibility, as a matter of law (the case having been decided in summary judgment), that Hungry Hawaiian was an agent of Green Acres under the mechanics' lien statute to the extent that certain improvements were made to the premises which clearly and actually conferred a value on Green Acres when Hungry Hawaiian terminated its tenancy. We conclude that there are genuine issues of material fact which should be tried. [5]