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MARION D. KELLY T/D/B/A KELLY BUILDING COMPANY v. CHARLES J. HANNAN AND NANCY L. HANNAN (11/16/89)

filed: November 16, 1989.

MARION D. KELLY T/D/B/A KELLY BUILDING COMPANY, APPELLANT,
v.
CHARLES J. HANNAN AND NANCY L. HANNAN, HIS WIFE LEGAL TITLE HOLDERS/OWNERS ALAN E. THOMPSON AND TERRI L. THOMPSON, HIS WIFE EQUITABLE TITLE OWNERS, APPELLEES



Appeal from the Order of the Court of Common Pleas of Fayette County, Civil Division at No. 13715 Mechanics Lien Index.

COUNSEL

Mary E. Baloh, Greensburg, for appellant.

J.R. Rygiel, Uniontown, for appellees.

Brosky, Popovich and Montgomery, JJ.

Author: Popovich

[ 388 Pa. Super. Page 639]

This is an appeal from the order entered in the Court of Common Pleas of Fayette County granting the appellees' preliminary objections. On appeal, the appellant, Marion D. Kelly (Kelly Building Company) hereafter "Kelly", contends:

[ 388 Pa. Super. Page 640]

(1) improved property remains subject to a mechanics' lien if the lease which purports to exempt the improved realty is patently fraudulent; and (2) the theory of estoppel validates a mechanics' lien filing where the parties to the construction contract are represented to be the owners of the improved realty. We reverse.

Briefly, the facts, as stated in the record, are as follows:

During the month of January, 1986, Mr. and Mrs. Charles J. Hannan claim they leased a portion of their property to their daughter and son in law, Terri and Alan Thompson. Mr. Hannan wrote the first lease by hand and dated it January 1, 1986. His signature was the only signature appearing therein. A formal lease was prepared thereafter by counsel and dated January 1, 1986, with the signatures of the Hannans and Thompsons. Mr. Hannan testified that the purpose of the leasing arrangement was to "give [the Thompsons] the property under a lease, in case something would ever happen to one of them, [he] wanted the property to revert back to [him]." (N.T. 11/1/88 p. 29)

On April 28, 1986, the Kelly Building Company entered into a construction contract with the Thompsons for the building of a home at the estimated cost of $229,877.75. (N.T. 3/1/88 p. 44) Initially, in 1986 when construction began, the Thompsons financed the construction with demand notes, and, thereafter, the Thompsons obtained a $100,000.00 mortgage. The bank issuing the mortgage knew that the Thompsons did not own the property. The record reveals that Mr. Hannan was an active member on the board of directors of the issuing bank, and he did not co-sign the loan.

The Thompsons zoning permit listed the home at a value of $100,000.00, and, during Mrs. Thompsons's deposition, she stated the figure was reduced so tax calculations in the future would be reduced. (N.T. 3/1/88 pp. 44-45) The home was insured for $225,00.00 under a home owner's policy. (N.T. 3/1/88 p. 72)

[ 388 Pa. Super. Page 641]

The appellant and his son testified that, during the bidding stage and at the time of signing the contract, Mr. and Mrs. Thompson stated that her father, Mr. Hannan, was "giving them a piece of property, approximately five to seven acres to build a house on." (N.T. 11/1/88 pp. 35, 37, 44) When applying for the zoning certificate and the permit for a sewage disposal system, the Thompsons listed themselves as the owners of the property. (N.T. 11/1/88 pp. 21, 24) Construction commenced under the contract on May 12, 1986. In August, 1986, the property was surveyed.

The Hannans and the Thompsons never recorded the lease, and the agreement was not disclosed to Mr. Kelly. The Hannans did not enter into the contract or agree in writing to pay for the improvements to the leased property. The Hannans claim that at the time the contract was entered into, and after construction began, Mr. Kelly knew that the Hannans were the owners of the land upon which the residence was being constructed. Terri Thompson stated that her father paid $50,000.00 toward the cost of the construction.

On December 8, 1987, Mr. Kelly filed a mechanics' lien against Charles and Nancy Hannan and Terri and Alan Thompson.*fn1 Preliminary objections were filed by Charles and Nancy Hannan on January 19, 1988, asserting the existence of a written lease between themselves and the Thompsons. On November 4, 1988, an evidentiary hearing pursuant to 49 P.S. § 1505*fn2 of the Mechanics' Lien Law of 1963 was conducted. These were the two issues addressed by the lower court at the hearing on the appellees' preliminary objections: (1) Was the improvement to leased premises

[ 388 Pa. Super. Page 642]

    without the necessary written indication from the owners that the construction was for their immediate use and benefit; and (2) whether the theory of estoppel prohibited the owners from using the lease as a bar to the appellant's mechanics' lien. Preliminary objections were sustained, and this timely appeal followed.

The trial court sustained the appellees' preliminary objections based upon 49 P.S. § 1303(d) which provides in pertinent part:

§ 1303 LIEN NOT ALLOWED IN CERTAIN CASES

(d) Leasehold Premises. No lien shall be allowed against the estate of an owner in fee by reason of any consent given by such owner to a tenant to improve the leased premises unless it shall appear in writing signed by such owner that the erection, construction, alteration or repair was in fact for the immediate use and benefit of the owner.

49 P.S. § 1303(d)

Initially, we note our standard of review for the granting of preliminary objections as stated by this Court in Chambers v. Todd Steel Pickling, Inc., 323 Pa. Super. 119, 470 A.2d 159, 161 (1983):

For purposes of our standard of review, an order sustaining preliminary objections to a mechanics' lien claim because of a showing of exemption or immunity of property from the Mechanics' Lien Law, is analogous to an order sustaining preliminary objections to a complaint in assumpsit.

[W]hen the sustaining of preliminary objects will result in a denial of claim, or a dismissal of suit, preliminary objections should be sustained only in cases which are clear and free from doubt. Conrad v. City of Pittsburgh, 421 Pa. 492, 218 A.2d 906 (1966); Baker v. Brennan, 419 Pa. 222, 213 A.2d 362 (1965); Schrader v. Heath, [408 Pa. 79, 182 A.2d 696], supra.

Legman v. School District, 432 Pa. 342, 345, 247 A.2d 566, 569 (1968).

[ 388 Pa. Super. Page 643]

    disclosed to the contractor; and (4) no check or receipt of payment could be produced to show that consideration had been paid pursuant to the lease agreement.

The validity of a lease is discussed by this Court in Cusamano v. Anthony M. DiLucia, Inc., 281 Pa. Super. 8, 421 A.2d 1120, 1122 (1980):

We begin with the observation that leases are in the nature of contracts and are thus controlled by principles of contract law, including the well settled rules of interpretation and construction. Pugh v. Holmes, 253 Pa. Super. 76, 384 A.2d 1234 (1978), affirmed as modified, 486 Pa. 272, 405 A.2d 897 (1979). As in the case of other written contracts, the purpose in interpreting a lease is to ascertain the intention of the parties, and such intention is to be gleaned from the language of the lease. National Biscuit Co. v. Baehr Bros., 203 Pa. Super. 133, 199 A.2d 494 (1964). Such intention is not to be determined merely by reference to a single word or phrase, but rather by giving every part of the document its fair and legitimate meaning. Boyd v. Shell Oil Co., 454 Pa. 374, 377, 311 A.2d 616, 618-19 (1973); Friestad v. Travelers Indemnity Co., 260 Pa. Super. 178, 393 A.2d 1212 (1978).

Where the terms of a lease are not ambiguous, the interpretation and construction are for the court, and the court must determine the intention of the parties from the language of the lease alone. National Biscuit Co. v. Baehr Bros., supra. . . .

[I]n order for us to find an ambiguity in a contract, we must find that the document is reasonable subject to two different interpretations. Merriam v. Cedarbrook Realty, Inc., 266 Pa. Super. 252, 258-59, 404 A.2d 398, 401 (1978).

Cusamano v. Anthony M. DiLucia, Inc., at 13-14, 421 A.2d at 1123.

Instantly, when reviewing the validity of the lease, the purpose of the entire agreement is to be given every fair and legitimate meaning. Cusamano v. Anthony M. DiLucia, Inc., supra 281 Pa. Superior Ct. at 13, 421 A.2d at 1122.

[ 388 Pa. Super. Page 645]

The typed lease was drafted by an attorney, and the elements of the earlier hand-written agreement were incorporated and expanded upon to reflect the intent of the parties. The lease was not ambiguous in its meaning, and the typed lease was signed by the Hannans and the Thompsons. The document on its face reflects the intention of the parties held thereto.

We note, however, the controversy surrounding the leases. The hand-written lease signed by Mr. Hannan and the typed lease signed by the Hannans and the Thompsons were not produced during discovery or mentioned by the appellees' counsel and Terri Thompson during their depositions. Both leases were first introduced by the Hannans at the hearing. The appellant contends that the typed lease is patently fraudulent because the address given by the Thompsons as their current address on the lease agreement was that of the leased property which was not established until six months after the date of the lease.

During the cross examination of Terri Thompson, the confusion regarding the drafting of the lease was discussed by the appellees' counsel Mr. Rygiel. He stated that he prepared the lease but was unable to say when the lease was typed:

Q. And the first time -- now, if I understand you correctly, you did not have an attorney draw up either one of these leases, [the handwritten or the typed], but rather it was done between you and your father?

A. I am sorry. I didn't understand that.

Q. You did not have an attorney draw those papers up?

A. I didn't, no.

MR. RYGIEL: Let's get that straight now. That was created in my office. I told you that. I typed that form up. The instructions are right there -- Joe, in that first one. And we followed those instructions and we ...


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