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Redco Construction, A Wyoming Corporation v. Profile Properties

February 23, 2012

REDCO CONSTRUCTION, A WYOMING CORPORATION, APPELLANT (PLAINTIFF),
v.
PROFILE PROPERTIES, LLC, A WYOMING LLC, APPELLEE (DEFENDANT).



Appeal from the District Court of Laramie County The Honorable Michael K. Davis, Judge Representing Appellant: S-10-0255

The opinion of the court was delivered by: Golden, Justice.

Before KITE, C.J., and GOLDEN, HILL, VOIGT, and BURKE, JJ.

NOTICE:

This opinion is subject to formal revision before publication in Pacific Reporter Third. Readers are requested to notify the Clerk of the Supreme Court, Supreme Court Building, Cheyenne, Wyoming 82002, of any typographical or other formal errors so that correction may be made before final publication in the permanent volume.

[¶1] This case is a lien foreclosure case involving a landlord, a tenant and a contractor. Profile Properties, LLC (Profile) leased commercial real property to Clean Start, LLC (Clean Start). Clean Start sought to renovate the property to convert it from office space to a commercial laundry facility. Profile granted Clean Start permission to renovate the property on the condition that Clean Start would pay for the renovations, and Clean Start thereafter contracted with Redco Construction (Redco) to perform the work. When Clean Start defaulted on its payments to Redco, Redco filed a lien against Profile's property.

[¶2] Redco thereafter filed a complaint against Profile and Clean Start, alleging claims for breach of contract, breach of the implied covenant of good faith and fair dealing, quantum meruit, unjust enrichment, and promissory estoppel, and seeking to foreclose on its lien against Profile's real property. The district court interpreted Wyoming's lien statutes to allow a lien against a landlord's real property for the debt of a tenant under two circumstances: 1) if the landlord agreed to pay for the improvements to the property; or 2) if the tenant was acting as the landlord's agent in contracting for the improvements. It then granted Profile's motion for summary judgment finding that Profile did not agree to pay for the renovations to the property and that Clean Start was not acting as Profile's agent in contracting for the improvements. We affirm.*fn1

ISSUE

[¶3] Redco presents the following single issue on appeal:

a. Did the trial court err as a matter of law by finding that for a valid mechanic's lien to exist for improvements placed upon the landlord's property by the tenant, "specifically authorized" as used in W.S. 29-2-105(a)(ii), requires the finding of something akin to an agency relationship between the landlord and tenant and granting summary judgment to the Defendant?

FACTS

[¶4] Profile owns a commercial property in Cheyenne, Wyoming, that it historically leased as office and storage space. In January 2008, Profile began negotiations to lease that commercial space to Clean Start. From the outset of their negotiations, Profile understood that Clean Start desired to use the property as a commercial laundry facility and that it desired to eventually purchase the property. Both Profile and Clean Start also understood that converting the property from office space to a space that would accommodate a commercial laundry operation would require substantial renovations to the property, including an upgrade in the property's electrical supply.

[¶5] In January 2008, at the same time it was negotiating to lease Profile's property, Clean Start contacted Redco, a general contractor. At Clean Start's request, Redco examined the property to determine its suitability for a commercial laundry facility and advised Clean Start that the property could be renovated to accommodate a laundry operation. Clean Start thereafter sought and received Profile's permission to renovate the property.

[¶6] After receiving Profile's permission to renovate the property, Clean Start hired Redco to perform the work. Redco prepared the plans and specifications and obtained the necessary permits to complete the construction. Redco began work on the renovations in March 2008, approximately two months before Profile and Clean Start memorialized their agreement with the execution of a Lease Agreement (Lease).

[¶7] During the negotiations between Profile and Clean Start and their subsequent relationship, Scot Cook acted on behalf of Profile, and David Sipe acted on behalf of Clean Start. Scot Cook testified that on behalf of Profile, he authorized the renovations, and that he knew generally what those renovations would entail but no specifics. David Sipe testified similarly. Both Cook and Sipe further testified that Clean Start alone selected the contractor to perform the renovations, that no one from Profile reviewed or was shown the plans or specifications for the work, that Profile did not know the specific design details or costs of the renovations, that Profile did not assert any control over the renovations, that Clean Start was to pay the entire cost of the renovations, and that no one on behalf of Profile at any time met with Redco or its representatives to discuss the contract or the work being done to the property.

[¶8] With respect to control over the improvements and construction, Scot Cook testified more particularly:

Q. Acting on behalf of Profile, what was the extent that you had control over the construction work Clean Start was having performed on the building?

A. Profile did not have any control over the construction work. Profile had a lease agreement with David Sipe with an option to purchase, being a triple net lease, and all construction costs were borne by David Sipe.

Q. Could you have requested that Clean Start use specific contractors to perform work?

A. No.

Q. Did Profile have any control over who Clean Start used as a general contractor on the job?

A. No.

Q. Did you ever object to Redco being used?

A. No.

Q. Did Profile have the authority to tell Clean Start which modifications of the building it approved of and which ones it did not?

A. No. In regards to structural issues or what have you; is that what you're referring to?

Q. I was kind of -- a general modification.

A. Under the lease terms with Clean Start, he has to conform to city codes.

Q. And I guess what I meant is if he wanted to put in 30 washing machines, that was okay?

A. Yeah. It's his business.

[¶9] David Sipe's testimony on the question of who controlled the details of the construction echoed that of Scot Cook. He testified:

Q. Did Scot Cook on behalf of Profile Properties ever make any of the construction decisions as to how that building was going to be remodeled?

A. No.

Q. Were those decisions exclusive to yourself?

A. Those -- those decisions were a collaboration of me and Redco and Ted and outside parties as far as my equipment and things like that.

Q. But none of that was done at the behest of Profile Properties; is that fair?

A. That's fair.

[¶10] M.J. Gertsch is the Redco principal who worked with Clean Start on the renovations to the property. Gertsch testified that Redco's contract was with Clean Start and that Redco had no contract with Profile. Gertsch also testified that he knew Profile owned the building and property on which Redco was working, and Redco did not seek out or receive from Profile a guarantee that it would pay for the work if Clean Start was for any reason unable to pay Redco.

[¶11] Redco was not the sole contractor to perform work on the property renovations. Some demolition work was done by a contractor known as C.H. Yarber, a company in which Scot Cook has an ownership interest. Clean Start contracted with Yarber directly and paid it in full for the work that it did on the property. Cook testified that he did not recommend Yarber for the work, and that he had no involvement in negotiating the contract between Yarber and Clean Start or in overseeing Yarber's work on the project. On appeal, Redco does not contend otherwise.

[¶12] The other contractor to perform work on the property was an electrical contractor. In the course of their negotiations, Profile agreed to advance the funds necessary to complete the upgrade of the property's electrical service. Clean Start agreed to repay the cost of the electrical upgrade through higher rental payments for the first two years of the Lease. Scot Cook testified as follows concerning his involvement with the electrical contractor:

Q. . . . And did you -- were you the person who hired Superior Electric?

A. Yes.

Q. And did you -- did you provide them with the scope of work?

A. As in behalf of Profile Properties?

Q. I just mean did you physically -- I want to know who negotiated with them in case I need to talk to them. I want to know who gave them the plans.

A. David Sipe. David Sipe coordinated with Superior Electric for his needs of what he needed specifically for the building, and then Superior Electric coordinated with me in reference to cost. And then when I had the cost, I built it into the lease agreement, and that's how we derived the terms. But as -- was I directing Superior Electric to say I need a 400-amp, three-phase, umpteen-gazillion circuit something or other? No.

[¶13] Profile and Clean Start formally executed a Lease Agreement (Lease) on May 29, 2008. It provided for an initial term of June 1, 2008, to May 30, 2012, and a purchase option that allowed Clean Start to purchase the property after April 1, 2012. Alternatively, the Lease provided Clean Start the option of extending the Lease for an additional term through May 30, 2015.

[¶14] The Lease was a triple net lease that required Clean Start as the tenant to pay all real estate taxes, building insurance, and maintenance expenses, in addition to its monthly rental payment. The monthly rental payment was $8,200, which would drop to $6,000 at the end of the first two years. The additional $2,200 per month during the first two years was Clean Start's repayment of the amount Profile fronted for the electrical upgrade. The Lease did not require Clean Start to make improvements to the property, but it did allow Clean Start to make major alterations to the premises, provided Clean Start obtained Profile's prior permission.

[ΒΆ15] David Sipe and Scot Cook both testified that the parties negotiated the Lease with the intention and expectation that Clean Start would exercise its ...


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