National Dispatchers, Inc., Respondent, vs. Hastings Motel Limited Liability Partnership, et al., Defendants, Cass Motel Corporation, a North Dakota Corporation, et al., Appellants.

This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480 A. 08, subd. 3 (2002).

 

STATE OF MINNESOTA

IN COURT OF APPEALS

C7-02-1901

 

National Dispatchers, Inc.,
Respondent,
 
vs.
 
Hastings Motel Limited Liability Partnership, et al.,
Defendants,
Cass Motel Corporation, a North Dakota Corporation, et al.,
Appellants.

 

 

Filed July 15, 2003

Affirmed Minge, Judge

 

Dakota County District Court

File Nos. C9987377, C2989603, C1999067

 

Bruce A. Boeder, Bruce A. Boeder, P.A., 1000 Superior Boulevard, Wayzata, MN 55391 (for respondent National Dispatchers, Inc.)

 

Alan T. Tschida, 505 Tanglewood Drive, Shoreview, MN 55126 (for respondents Consolidated Lumber, Dorglass, Inc., River City Floor Coverings, Inc., Swanson Plumbing & Heating, Inc. and Tim Mears d/b/a Northland Outdoor Services)

 

Jay D. Carlson, Ohnstad Twichell, P.C., 15 Broadway, Suite 502, Fargo, ND 58102-4907 (for appellants Cass Motel Corporation, Duane Rogne and Great North Construction Company)

 

            Considered and decided by Harten, Presiding Judge, Stoneburner, Judge, and Minge, Judge.

U N P U B L I S H E D   O P I N I O N

MINGE, Judge

            Appellants challenge an order of the district court upholding the foreclosure of multiple mechanics' liens.  Because we conclude that the district court had jurisdiction to address the mechanics' lien question, did not misapply the law in doing so, and did not otherwise abuse its discretion, either in resolving the merits of this complex dispute or in awarding attorney fees, we affirm. 

FACTS

            The effort of Hastings Motel, L.L.P. (Hastings) and Cass Motel Corp., one of its partners, to build a motel led to financial problems, more than five years of litigation, and Hastings's bankruptcy.  This appeal involves various challenges to ten of the more than 30 mechanic's liens originally involved in the case. 

By 1996, Hastings had a parcel of land, plans, financing and a general contractor.  As a part of its financing, Hastings mortgaged the parcel, except the east 117 feet.  Construction began with the actual structure being confined to the mortgaged premises; not the east 117 feet.  During construction, Hastings had financial problems.  In January 1998, Hastings mortgaged the east 117 feet of the land to one of its partners other than Cass.  In February, the general contractor filed a mechanic's lien for the benefit of the subcontractors on the portion of the property covered by the original mortgage, not the east 117 feet.  Several of the subcontractors filed their own mechanic's liens, (in some cases on the whole parcel including the east 117 feet).  At about this time, the original general contractor was replaced by Great North Construction Co., Hastings defaulted on the original mortgage, and the entity to which that mortgage had been assigned, National Dispatchers, Inc., started to foreclose that mortgage, which did not cover the east 117 feet. 

            Incident to the foreclosure, National Dispatchers initiated litigation requesting the appointment of a receiver for the mortgaged property (not for the east 117 feet) and for other relief.  Hastings answered, seeking a determination of the amount and priority of the mechanics' liens.  While these proceedings were pending, (a) National Dispatchers, the mortgagee, bought the mortgaged property at the foreclosure sale; (b) the mechanics' lien claimants, in the receivership proceeding, sought to foreclose their liens; (c) National Dispatchers sought, and the parties, including Great North, stipulated to consolidation of its receivership action with various other related suits; (d) the period to redeem from the mortgage foreclosure was extended; (e) the mechanic's lienors filed notices of intent to redeem the property; and (f) after a series of transactions, Great North acquired the east 117 feet of the property. 

            On July 20, 1999, the district court ruled, among other things, that with respect to that portion of the property subject to the original mortgage, the mortgage had priority over the mechanics' liens, that the mechanics' liens encumbered the entire property including the east 117 feet, and that it could not address other mortgage-related requests for relief.  On the day the mortgage redemption period would have expired, Hastings filed bankruptcy.  Although the bankruptcy extended the redemption period, the bankruptcy court rejected Hastings' challenge to the foreclosure, the redemption period expired, and the bankruptcy was dismissed.  No party redeemed the property. 

            In a series of motions in the state district court receivership proceeding, Great North as the owner of the east 117 feet then (a) moved to have the attempts to foreclose the mechanic's lien declared invalid because they had been initiated in the receivership proceeding; (b) noted that the receivership proceeding involved only the property covered by the original mortgage and argued that the district court lacked authority to address the east 117 feet of the property; and (c) moved to have the amounts of the mechanics' liens apportioned between the mortgaged portion of the property and the east 117 feet of the property.  The district court rejected Great North's argument that the mechanics' liens were invalid, stating that if the mechanics' liens were ruled defective, the lienors would not recover on their claims because the statutory period for starting mechanic's lien foreclosure actions had passed.  In a series of other rulings, the district court also determined that it had authority to address the east 117 feet of the property, denied the motion to apportion the amounts of the mechanics' liens between the mortgaged portion of the land and the east 117 feet, found that the mechanics' liens were valid against the east 117 feet of the property, and found that the liens all had the same priority and could be foreclosed.  Cass, Great North, and Duane Rogne, one of Great North's principals, appeal. 

DECISION

I.

            Because the mechanics' liens were foreclosed in an action that began as National Dispatcher's receivership proceeding, the first issue is whether the foreclosure of the mechanics' liens was invalid for failure to comply with Chapter 514 of the Minnesota Statutes.  Appellants raise two subsidiary issues under this general issue: (a) whether a proceeding under Minn. Stat. §§ 514.10-.12 (2002) was required; and (b) whether there were flaws in the foreclosure of specific mechanics' liens.

A.        Proceedings Under Chapter 514

Actions to foreclose mechanics' liens "shall be begun and conducted in the same manner as actions for the foreclosure of mortgages upon real estate * * * ."  Minn. Stat. § 514.10 (2002).  Appellants assert that, because National Dispatchers's receivership proceeding was not started in the same manner as a mortgage foreclosure proceeding and because the receivership proceeding did not include the east 117 feet of the property, the district court lacked subject matter jurisdiction to address the east 117 feet of the property.  Whether a district court has subject matter jurisdiction is a legal question we review de novo.  Odenthal v. Minn. Conference of Seventh-Day Adventists, 649 N.W.2d 426, 434 (Minn. 2002).  In mechanic's lien proceedings, subject matter jurisdiction usually cannot be waived.  Compare Duininck Bros. & Gilchrist v. Brandondale Chaska Corp., 311 Minn. 291, 293, 248 N.W.2d 743, 744 (1976) (stating statutory provision limiting mechanics' liens to one acre of land within a city is a limitation on "the subject-matter jurisdiction of the court and cannot be waived" and noting jurisdiction regarding mechanics' liens is "strictly governed by the statutes"), with Universal Constr. Co. v. Peterson, 280 Minn. 529, 530-31, 160 N.W.2d 253, 255 (1968) (affirming determination that jurisdictional defense in mechanic's lien proceeding was waived when not raised until just before trial). 

Here, National Dispatchers originally sought appointment of a receiver under Minn. Stat. §§ 559.17, 576.01 (1996).  Section 559.17 discusses receivers by referring to Minn. Stat. § 576.01.  Appointment of a receiver under Minn. Stat. § 576.01 is essentially a civil matter.  See Minn. Stat. § 576.01, subd. 2 (stating receiver may be appointed "following the procedures applicable to temporary injunctions under the rules of civil procedure").  Similarly, while a mechanic's lien itself is a creature of statute, an action to enforce a lien "is an ordinary civil action" to the extent not displaced by the mechanic's lien statute.  Zetah v. Isaacs, 428 N.W.2d 96, 99 (Minn. App. 1988); seeMinn. R. Civ. P. 81.01; Appendix A.  In civil actions including receivership and mechanic's lien proceedings, parties may consent to litigate questions not originally addressed in the pleadings.  See Minn. R. Civ. P. 15.02 (addressing litigation by consent).  Determining whether an issue has been litigated by consent is discretionary with the district court.  Schumann v. McGinn, 307 Minn. 446, 469, 240 N.W.2d 525, 538 (1976).  Here, the district court's September 2001 order indicates that early in the receivership proceeding, National Dispatchers indicated a willingness to litigate the mechanics' lien claims, that National Dispatchers sought a stipulated consolidation of all cases involving the disputed property, that Great North, Cass Motel, and Duane Rogne (the appellants) agreed to the proposed stipulation, and that the validity and priority of the mechanics' liens have been a central issue in this case from very early on and throughout the course of this litigation.  Because the record supports these findings, the district court did not abuse its discretion in ruling that the mechanic's lien questions had been litigated by consent, including appellants' consent, in the receivership proceeding. 

Appellants argue that National Dispatchers lacked authority to make any agreements on behalf of appellants and therefore that the conduct of National Dispatchers should not impact their ability to challenge the propriety of allowing the mechanics' liens to be foreclosed in what started as a receivership proceeding.  Since appellants consented to the stipulation that consolidated the mechanics' liens cases into the receivership proceeding, appellants' argument is not persuasive. 

In this context the district court found estoppel.  The district court stated that (a) in the three years after the action was started,

the mechanic's lien holders have been continually led to believe that the liens were properly asserted and that [National Dispatchers] had no objection to the litigation of their validity and priority;

 

(b) ruling the mechanics' liens defective would leave the lienors without a remedy because, by the time of the September 2001 order, the statutory period for foreclosing the liens had expired; and (c) National Dispatchers "made numerous representations and inducements, which have reasonably been relied upon by the lien holders.  As such, estoppel [can be applied]" against any allegation that the foreclosures are defective for not being initiated in a proceeding started under Chapter 514.  In addressing the applicability beyond National Dispatchers of the estoppel applicable to National Dispatchers, the district court explained:

Great North acquired the interest in the easterly 117 feet having full knowledge of the mechanic's liens encumbering the property.  Great North was named as a party to this litigation in the initial complaint and has been served all motions and Orders concerning this lawsuit.  As such, Great North is properly bound by [National Dispatchers's] representations and inducements that the mechanic's liens would be litigated despite any technical defects. 

 

On appeal from an application of equitable estoppel, appellate courts acknowledge that the applicability of the doctrine "turns on the facts of the case at bar" and review the district court's decision for an abuse of discretion.  Evans v. Gov't Employees Ins. Co., 257 N.W.2d 689, 693 (Minn. 1977).  This record shows no abuse of discretion.  Great North acquired the east 117 feet of the property in January 2000 while involved in the receivership action and after the mechanics' lienors sought to foreclose their liens in that action, after National Dispatchers agreed to allow litigation of the mechanics' lien issues in that action, and after that district court ruled that the mechanics' liens were valid on the entire property.  Thus, appellants were (or should have been) aware that, by the time the east 117 feet of the land was acquired, the receivership action had, with the consent of the parties and the court, expanded to include the mechanic's lien questions.  See Lobnitz v. Fairchild, 186 Minn. 215, 216-17, 243 N.W. 62, 63 (1932) (holding party who bought land from purchaser at mortgage foreclosure sale had to abide by grantor's stipulation in prior mechanic's lien proceeding).  On this record, the district court did not abuse its discretion by holding Great North to the same estoppel applicable to National Dispatchers.  Hence, we reject appellants' assertions that the action in which the mechanics' liens were foreclosed did not satisfy Chapter 514.[1]  

B.        Specific Liens

Appellants make a series of disjointed and repetitive challenges to individual mechanic's liens.  To the extent those challenges are for a failure of the proceeding to abide by the provisions of Chapter 514 discussed above (or are otherwise addressed and rejected above), they are not repeated here.[2]

1.         Dorglass, Inc. and Swanson Plumbing & Heating, Inc.: Appellants argue that the mechanics' liens awarded Dorgalss, Inc. and Swanson Plumbing & Heating, Inc. are excessive because the liens include amounts for work beyond that addressed by the contract and for which there was no written change order, as required by the Dorglass and Swanson contracts.  Because the district court found that the amounts in question were contributed to the project with the knowledge and consent of the owners, any challenge to the award for lack of a written change order is waived.  See New Ulm Bldg. Ctr. v. Studtmann, 302 Minn. 14, 16, 225 N.W.2d 4, 5 (1974). 

2.         AM-TECHS Telecommunications, Inc. and Superior Masonry & Concrete, Inc.: Appellants argue that the lien of AM-TECHS Telecommunications, Inc. is defective because AM-TECHS alleged its lien was only on the mortgaged property.  But the AM-TECHS lien statements refer to the entire parcel.  Also, appellants' argument that AM-TECHS executed lien waivers for the east 117 feet of the property is inconsistent with exhibit 50, which states that AM-TECHS waived the right only to put a lien on the portion of the property subject to the original mortgage. 

Appellants argue that the AM-TECHS lien is defective because the lien statement was not served by a person not a party to the action, as appellants argue is required by Minn. Stat. § 514.08.  The statute, however, does not explicitly require such service and, while Minn. R. Civ. P. 4.02 prohibits service of a "summons or other process" by someone who is a party to the action, appellants cite no authority for the proposition that a mechanic's lien statement is a "summons or other process."  Appellants' argument that the lien is excessive because of the lack of a written change order is addressed by the same analysis as that used to address the claims regarding the Dorglass and Swanson liens.  Also, even if appellants are correct in asserting that no notice of lis pendens was filed regarding the liens of AM-TECHS and Superior Masonry & Concrete, Inc., that does not deprive the district court of jurisdiction to enforce those liens.  See Julius v. Callahan, 63 Minn. 154, 156, 65 N.W. 267, 267 (1895).

            3.         JH Larson Electrical Co.: Appellants argue that the record does not show that materials supplied by JH Larson Electrical Co. were used in building the motel.  But the JH Larson invoices show that the materials in question were delivered to the job site by a JH Larson truck.  And JH Larson's credit manager testified that there were no allegations that materials for which bills were sent, were not received.  Viewed in the light most favorable to the district court's findings that JH Larson supplied materials for use in the motel, the record supports those findings.  See Rogers v. Moore, 603 N.W.2d 650, 656 (Minn. 1999) (stating record reviewed in light most favorable to district court's findings). 

II.

            Appellants seem to argue that, after expiration of the redemption period for the original mortgage, the district court lacked jurisdiction to allow foreclosure of the mechanics' liens mortgages on the east 117 feet of the property, in part, because of the assertions by the mechanics' lienors that they would redeem the property from the mortgage combined with the lack of a separate action to foreclose the liens on the unmortgaged property.  As previously noted, these matters were consolidated by stipulation.  Additionally, by the time the redemption period for the mortgage expired, the district court had ruled that the mechanics' liens encumbered the entire property.  Thus, for purposes of this proceeding, by the time the redemption period for the mortgage expired, an attempt to foreclose the mechanics' liens had been initiated.  Therefore, we reject appellants' argument. 

III.

With exceptions not applicable here, mechanics' liens "extend to all the interest and title of the owner in and to the premises improved[.]"  Minn. Stat. § 514.03, subd. 3 (2002).  Arguing that "premises improved" is the actual area of the improvements, appellants challenge the district court's failure to apportion the mechanics' liens between the mortgaged property and the east 117 feet.  "When a decision turns on the meaning of words in a statute * * * a legal question is presented."  St. Otto's Home v. Minn. Dept. of Human Servs., 437 N.W.2d 35, 39 (Minn. 1989). 

            Interpreting a predecessor to Minn. Stat. § 514.03, subd. 3, in the context of constructing a building on the rear portion of two abutting lots which the owner used as a homestead, the supreme court noted that the building permits "specified the rear 42 feet of the lots as the site upon which [the building] was to be erected[,]" but rejected an argument virtually identical to the one appellants make here, stating:

The statute provides that mechanics' liens shall extend to all the interest and title of the owner in and to the premises improved * * * .  G. S. 1923, § 8492.  The lien extends to the entire tract, if it does not exceed the prescribed area. 

 

Gale v. Hopkins, 165 Minn. 177, 179-80, 206 N.W. 164, 165 (1925) (emphasis added).  Here, the property on which the motel was built does not exceed the area limit in the current statute[3] and the building permits for the motel included the entire parcel.  The case for limiting the mechanics' liens to the rear portion of the land in Gale was stronger than is the case for limiting the mechanics' liens here and, under Gale, we conclude that the liens at issue here extended to the entire tract, even though no motel construction occurred on the east 117 feet of the parcel.[4] 

            Appellants also cite several cases to argue that because the east 117 feet of the property was not improved, it should not secure the entire amounts of the liens.  Most of the cited cases involve Minn. Stat. § 514.09 or one of its predecessors, under which lienholders who contribute to multiple improvements to one lot or to improvements on adjoining lots under a single general contract with the owner, may file a single lien statement for the entire claim or may apportion the total claim and file multiple lien statements.  And the "lot" on which that statute allows a lien to be filed may include more or less than the lot as platted.  Menzel v. Tubbs, 51 Minn. 364, 367-68, 53 N.W. 653, 654 (1892) (citing 1889 Gen. Stat. ch. 200, § 7 (predecessor to Minn. Stat. § 514.09)).  Unlike this case, however, Menzel addresses when the "lot" on which a lien is filed exceeds the lot as platted.  51 Minn. at 367-68, 53 N.W. at 654-55.  The same is true for the other Minnesota cases appellants cite.  See LaValle v. Bayless, 257 N.W.2d 283, 285 (Minn. 1977); Miller v. Shepard, 50 Minn. 268, 270-71, 52 N.W. 894, 895 (1892); Reilly v. Williams, 47 Minn. 590, 593-94, 50 N.W. 826, 827 (1891); Automated Bldg. Components v. New Horizon Homes, Inc., 514 N.W.2d 826, 829-30 (Minn. App. 1994).  Thus, the cases cited by appellants are distinguishable both because they involve a different statute (Minn. Stat. § 514.09) than the one at issue here (Minn. Stat. § 514.03) and because they involve mechanics' liens on multiple parcels of land, rather than dividing a single parcel into multiple parts. 

            Appellants argue that because the mortgage and lien indemnity agreement cover only the mortgaged portion of the property, there could be no reasonable expectation that the east 117 feet could be used to secure a mechanic's lien.  But the indemnity agreement ensures that the title insurance company will be held harmless if the construction created a title problem regarding the mortgaged portion of the land.  Because the mortgage was the reason for the indemnity agreement and because the east 117 feet of the land was not involved in the original mortgage, the relevance of the fact that the indemnity agreement did not address the east 117 feet of the property is unclear. 

            Appellants claim that a former owner of the property was not joined to the action in which the lienors attempted to foreclose their liens.  It is undisputed that the former owner no longer has any interest in the land and that appellants have been involved in this case since its inception.  Appellants do not identify, and we cannot discern, what prejudice this alleged error created.  Cf. Minn. R. Civ. P. 61 (requiring harmless error to be ignored in civil cases); Midway Ctr. Assocs. v. Midway Ctr., Inc., 306 Minn. 352, 356, 237 N.W.2d 76, 78 (1975) (requiring appellant to show error and prejudice to prevail in civil appeal). 

 

 

IV.

            Appellants allege that the attorney fee awards made to the mechanics' lienors were excessive because much of the fees were incurred in litigation involving the portion of the land subject to the original mortgage.  Fee awards in mechanic's lien cases are discretionary with the district court.  C. Kowalski, Inc. v. Davis, 472 N.W.2d 872, 878 (Minn. App. 1991), review denied (Minn. Sept. 13, 1991).  In addressing fee awards, the district court considers

[the] time and effort required, novelty or difficulty of the issues, skill and standing of the attorney, value of the interest involved, results secured at trial, loss of opportunity for other employment, taxed party's ability to pay, customary charges for similar services, and certainty of payment.

 

Jadwin v. Kasal, 318 N.W.2d 844, 848 (Minn. 1982) (citation omitted).  This case has been in litigation for over five years, appellants candidly admit the complexity of the case, and the district court judge, who has been involved in the case since at least October 1998, had ample time to assess the skill and the results secured by counsel.  Regarding the value of the interest involved, the motel was sold in 2000 for $3 million and the east 117 feet (conveyed in 1999 for $134,000) were sold at a December 2002 sheriff's sale for $242,197.93.  Moreover, there are no explicit challenges to appellants' ability to pay fees or regarding the customary payment for similar services.  While much of the fees were incurred before the mechanics' lienors attempted to foreclose their liens on the east 117 feet of the property, that was necessary because of the complicated and peculiar mortgage foreclosure on only part of the property.  On this record, appellants have not shown that the district court abused its discretion by refusing to make the mechanics' lienors bear the risk for the way the original owner of the property (Great North's predecessor in interest) mortgaged or otherwise treated the property. 

            Noting that Shopworks' lien was only $21,001.40, appellants argue that the fee award of $25,000 to Shopworks as excessive.  We reject this argument; when a case is complex, fees awards are not necessarily excessive because they exceed the amount of a mechanic's lien.  Kirkwold Constr. Co. v. M.G.A. Constr., Inc., 498 N.W.2d 465, 470-71 (Minn. App. 1993), aff'd 513 N.W.2d 241 (Minn. 1994).

V.

            Appellants challenge the district court's alleged resolution of claims in one of the cases consolidated with the proceeding initiated by National Dispatchers.  Appellants' argument refers generally to claims by appellants Rogne and Cass, but the claims at issue and the prejudice resulting from the allegedly improper resolution are not specified.  See State, Dep't of Labor & Indus. v. Wintz Parcel Drivers, Inc., 558 N.W.2d 480, 480 (Minn. 1997) (declining to address issue in absence of adequate briefing); Midway, 306 Minn. at 356, 237 N.W.2d at 78 (stating to prevail on appeal a party must show error and that error caused prejudice).  Also, it is not clear that this alleged error was presented to the district court.  Cf. Thiele v. Stich, 425 N.W.2d 580, 582 (Minn. 1988).  If appellants are making arguments on behalf of a title company that is not a party to this appeal, they lack standing to do so.  To the extent they raised due process arguments for the first time in their reply brief, the arguments are not properly before this court.  See McIntire v. State, 458 N.W.2d 714, 717 n.2 (Minn. App. 1990) (holding issues not raised or argued in appellant's brief cannot be revived in reply brief), review denied (Minn. Sept. 28, 1990).[5]

            Affirmed.

[1] Appellants argue that National Dispatchers's summons in the receivership proceeding could not start a valid mechanic's lien foreclosure action for the east 117 feet of the property because the summons did not contain the contents of a summons to foreclose a mechanic's lien that are listed in Minn. Stat. § 514.11 (2002).  Our resolution of the estoppel question means we need not address these questions here.  We note, however, that errors or omissions from a summons that do not affect the substantial rights of parties to a mechanic's lien proceeding are ignored if the relevant information is readily ascertainable in the file.  Dressel v. Brill, 168 Minn. 99, 100-01, 209 N.W. 868, 869 (1926).  Here, the relevant information was either in the file or not disputed (or both).  Also, that the summons did not require answers to be filed (as required by Minn. Stat. § 514.11) is not fatal to the foreclosures.  See Melvey v. Bowman, 169 Minn. 504, 505, 212 N.W. 194, 195 (1927) (holding summons's failure to require filing of answer not a jurisdictional defect).  Similarly, in light of the parties' agreement that the receivership proceeding would include the mechanic's lien questions, a reasonable person familiar with the facts of the case would understand which land was at issue.  Therefore, the fact that National Dispatchers's summons did not include the east 117 feet of the land does not render the foreclosures defective.  Evans v. Sanford, 65 Minn. 271, 272, 68 N.W. 21, 22 (1896). 

[2] This includes appellants' claims regarding the liens of Falcon Fire Protection, Inc., Consolidated Lumber Co., River City Flooring, Shop Works, Inc., and Tim Mears.

[3] The relevant portions of the statute have not been changed since Gale.  Compare Minn. Stat. § 514.03, subd. 3 (2002) with 1923 Gen. Stat. § 8492. 

[4] Appellants argue that Phillips Klein's mechanic's lien did not include the east 117 feet and that this fact shows that there was no agreement to improve that portion of the property.  The Gale analysis addresses this allegation.  Moreover, the argument ignores the facts that the district court ruled that the liens applied to the whole property.  The Gale analysis also addresses appellants' argument that the law does not allow a mechanic's lien claimant to secure their lien with property not contracted to be improved. 

[5] Respondent Shopworks alleges various violations of the rules by appellants, but admits that it has not moved to dismiss, to strike, or for sanctions.  See Minn. R. Civ. App. P. 127 (stating that, absent other form prescribed by the rules, an application seeking relief from appellate court is to be by motion).  The violations alleged by Shopworks are technical and not jurisdictional.  See Boom v. Boom, 361 N.W.2d 34, 36 (Minn. 1985) (addressing violations of the rules).  Therefore, we decline to address them.