Murr Plumbing, Inc., Appellant, vs. Scherer Brothers Financial Services Co., et al., Respondents.

STATE OF MINNESOTA
IN COURT OF APPEALS
C1-98-107

Murr Plumbing, Inc.,
Appellant,

vs.

Scherer Brothers Financial Services Co., et al.,
Respondents.

Filed August 25, 1998
Affirmed
Forsberg, Judge*

Dakota County District Court
File No. C5-96-6450

Dale C. Nathan, Nathan & Assoc., 3600 Kennebec Dr., Suite 7B, Eagan, MN 55122 (for appellant)

Thomas G. Jovanovich, Richard W. Sobalvarro, Rajkowski Hansmeier Ltd., 11 N. Seventh Ave., P.O. Box 1433, St. Cloud, MN 56302 (for respondents)

Considered and decided by Harten, Presiding Judge, Forsberg, Judge, and Thoreen, Judge.**

U N P U B L I S H E D   O P I N I O N

FORSBERG, Judge

Appellant Murr Plumbing challenges summary judgment granted to respondents (collectively "Scherer") in this action. Murr contends that the district court erred by refusing to allow Murr to amend its complaint, because material facts remain in dispute, and by refusing to impose a constructive trust on certain properties. Because Murr filed an untimely request to amend its complaint, failed to point to any material facts in dispute, and has not met the legal requirements for imposition of a constructive trust, we affirm.

FACTS

Murr was a plumbing subcontractor on houses being built in Dakota County by numerous general contractors. Scherer Bros. Lumber (Scherer) supplied lumber and building materials for these houses and filed mechanics liens to secure the debts owed it. Scherer Brothers Financial Services Company (Scherer) provided construction loans to finance the projects and received mortgages in return. Murr and Scherer had no contractual relationship, but merely provided plumbing services and construction materials or construction loans to the same properties.

When some of the general contractors began defaulting on their loans and the construction materials debts in 1989, Scherer foreclosed on its mortgages and redeemed its mechanics liens on the subject properties. As a result of the defaults, Murr and many other subcontractors were not paid by the general contractors for goods and services they had provided for the disputed properties. Murr filed mechanics liens on only two of the properties to which it provided plumbing services, and of those, one lien was defective and Murr failed to levy on its lien on the remaining property. Murr estimated that it lost over $62,000 in unpaid debts as a result of the defaults and foreclosures.

Murr subsequently filed suit against Scherer claiming fraud, tortious interference with contractual relations and unjust enrichment. Because of a federal law claim under the Racketeering, Influence, and Corrupt Organization Act, 18 U.S.C. §§ 1961-68 (1994), the case was removed to federal court and subsequently remanded to state court when the federal count was dismissed. After discovery was complete, the district court granted summary judgment to Scherer and denied Murr's requests for a constructive trust and to amend its complaint. This appeal followed.

D E C I S I O N

I

We construe appellant's contentions regarding its proposed amended complaint as a challenge to the December 1997 denial of leave to amend its complaint. This court will not review the November 1996 denial of Murr's motion for leave to amend, as appellant urges us to do. That order was interlocutory and specifically stated that appellant could renew its motion for leave to amend if new evidence was discovered during the course of further discovery. Indeed, Murr did renew its motion after the close of discovery, leading to the December 1997 order denying its request.

After a response has been filed, a party may amend its complaint only with the consent of the adverse party or by leave of the court. Minn. R. Civ. P. 15.01. Leave to amend shall be freely granted when justice so requires. Id. The denial of a motion to amend pleadings, however, is proper when the movant fails to offer evidence in support of the new allegations. Eustis v. David Agency Inc., 417 N.W.2d 295, 299 (Minn. App. 1987). The denial of a motion for leave to amend a complaint is reviewed subject to an abuse of discretion standard. Utecht v. Shopko Dep't Store, 324 N.W.2d 652, 654 (Minn. 1982).

Appellant has litigated the issues herein since the filing of its prior suit in 1992 in federal court. Further, after the filing of this suit and after its case was remanded to state court, appellant had sixteen months to conduct discovery. In spite of the lengthy discovery, Murr was unable to uncover facts sufficient to demonstrate that its proposed amended complaint was supported by the facts. Indeed, Murr failed to conduct any depositions between the date of its first motion to amend its complaint in October 1996, and its second motion to amend in October 1997. On appeal, Murr has failed to point to any facts that would support the new allegations proposed for its amended complaint.

The trial court did not abuse its discretion in denying Murr's motion to amend its complaint.

II

On appeal from a summary judgment, we ask two questions: (1) whether the evidence raises any genuine issues of material fact and (2) whether the district court erred in applying the law. State by Cooper v. French, 460 N.W.2d 2, 4 (Minn. 1990). An appellate court must view the evidence in the light most favorable to the nonmoving party. Fabio v. Bellomo, 504 N.W.2d 758, 761. (Minn. 1993).

Murr contends that disputed material facts exist, but fails to point to evidence in the record placing any material facts in dispute. Because of this failure, its argument on this point amounts to a claim that there is a disputed interpretation of the undisputed material facts. That is not a ground on which to object to the granting of summary judgment. See Minn. R. Civ. P. 56.03 (summary judgment proper when material facts are undisputed; no requirement that interpretation of material facts be undisputed).

III

Murr contends the district court erred by refusing to grant an equitable trust in its favor on the eight disputed properties. A constructive trust is an equitable remedy, and the determination whether to impose such a remedy is subject to an abuse of discretion standard of review. See Nadeau v. County of Ramsey, 277 N.W.2d 520, 524 (Minn. 1979).

A constructive trust may be applied when the legal title to property is obtained through fraud, oppression, duress, undue influence, force, crime, or by taking advantage of fiduciary relationships. Wright v. Wright, 311 N.W.2d 484, 485 (Minn. 1981). A court will only establish a constructive trust where unjust enrichment would otherwise result. Id.; Iverson v. Fjoslien, 298 Minn. 168, 171, 213 N.W.2d 627, 628-29 (1973).

A constructive trust does not arise unless there is property on which the trust can be fastened, and the property is held by the person to be charged as constructive trustee.

Rock v. Hennepin Broad. Assoc's, Inc., 359 N.W.2d 735, 739 (Minn. App. 1984) (citing Restatement of Restitution § 160 (1937)). In addition, clear and convincing evidence must be presented in order to justify the imposition of a constructive trust. Id.

This court has defined unjust enrichment as the knowing receipt and unjust retention of something of value to which one is not entitled. Southtown Plumbing, Inc. v. Har-Ned Lumber Co., 493 N.W.2d 137, 140 (Minn. App. 1992). First, as the district court found, Murr has failed to show that Scherer unjustly enriched itself by foreclosing on the mortgages it held on the disputed properties and by redeeming its liens. It merely enforced its rights as a creditor by foreclosing on its mortgages and liens on the subject properties. Murr had performed plumbing services at these same properties and was also a creditor of the developers that owned the properties and had comparable creditors' rights.

Second, the property Murr wished to place in a constructive trust does not meet the ownership test. Scherer never owned four of the eight disputed properties. Scherer has since sold the four properties it did foreclose on. Thus, it would have been neither proper nor logical for the district court to place any of the eight properties in a constructive trust for the benefit of Murr because none are owned by Scherer. Rock, 359 N.W.2d at 739 (constructive trust may only be placed on property held by person to be charged as constructive trustee).

Murr cites ServiceMaster of St. Cloud v. GAB Business Services, Inc., 544 N.W.2d 302 (Minn. 1996), and Southtown Plumbing to assert that Minnesota case law does not prohibit the grant of equitable relief where the plaintiff has failed to seek a legal remedy. This principle, however, is irrelevant, regardless of whether it is a correct statement of Minnesota law, because it was not the basis for the district court's denial of Murr's request for a constructive trust. Further, Murr did not clearly have the weight of the equities on its side because it did not first attempt to enforce its remedies at law before seeking equitable relief. It failed to secure a mechanic's lien on six of the eight disputed properties and did not enforce its liens on two other properties. Murr made a less than compelling case for equitable relief. Finally, Murr's request for a constructive trust did not meet the minimum requirements for the imposition of such an extraordinary remedy under Minnesota case law.

The district court did not abuse its discretion by refusing to impose a constructive trust on the disputed properties.

IV

Murr contends the district court erred by ruling that, on the undisputed facts of this case, Scherer was not liable to Murr for interference with contractual relations. Legal conclusions in a summary judgment are reviewed de novo. State by Cooper, 460 N.W.2d at 4.

The tort of interference with contractual relations has five elements: (1) the existence of a contract; (2) the defendant's knowledge of the contract; (3) the intentional procurement of a breach of the contract; (4) lack of justification; and (5) damages. Furlev Sales & Assoc's, Inc. v. North Am. Automotive Warehouse, Inc., 325 N.W.2d 20, 25 (Minn. 1982). Scherer asserts the defense of justification, negating the fourth element, arguing that its actions in foreclosing on some of the disputed properties were justified. It contends that it had a superior legal right to the property as a superior lienholder over Murr's junior (2 properties) or unperfected (6 properties) liens. It is well established that foreclosure on property by a superior lienholder does not constitute tortious interference with a contract; foreclosure is justified under the law because it is a legal method of collecting a debt. See, e.g., Langeland v. Farmers State Bank, 319 N.W.2d 26, 33 (Minn. 1982).

Scherer's actions in foreclosing on its mortgages and redeeming its liens on the disputed properties were justified. Therefore Murr's claim against Scherer for tortious interference with contract relations fails. The district court properly granted summary judgment to Scherer on this claim.

Affirmed.

* Retired judge of the Court of Appeals, serving by appointment pursuant to Minn. Const. art. VI, § 10.

** Retired judge of the district court, serving as judge of the Minnesota Court of Appeals by appointment pursuant to Minn. Const. Art. VI, § 10.