Hedlund Engineering Services, Inc., Respondent, vs. Hampton Arden Hills, L.L.P., Appellant, LGI Entertainment, Inc., et al., Defendants, Walsh Bishop Associates, Inc., Respondent.

This opinion will be unpublished and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

C4-03-263

 

 

Hedlund Engineering Services, Inc.,

Respondent,

 

vs.

 

Hampton Arden Hills, L.L.P.,

Appellant,

 

LGI Entertainment, Inc., et al.,

Defendants,

 

Walsh Bishop Associates, Inc.,

Respondent.

 

Filed October 28, 2003

Affirmed

Robert H. Schumacher, Judge

 

Washington County District Court

File No. CX0055545

 

 

Robert P. Laue, Michael W. Plambeck, Christensen & Laue, P.A., 5101 Vernon Avenue South, Suite 400, Edina, MN 55436; and

 

John P. Farrell, Farrell Law Offices, Post Office Box 24423, Edina, MN 55424 (for respondent Hedlund Engineering)

 

Timothy A. Sullivan, Caryn S. Glover, Best & Flanagan LLP, 225 South Sixth Street, Suite 4000, Minneapolis, MN 55402 (for appellant)

 

Erik M. Johnson, Meagher & Geer, P.L.L.P., 33 South Sixth Street, Suite 4200, Minneapolis, MN 55402 (for respondent Walsh Bishop Associates)

            Considered and decided by Lansing, Presiding Judge; Schumacher, Judge; and Poritsky, Judge.*

U N P U B L I S H E D   O P I N I O N

ROBERT H. SCHUMACHER, Judge

            Hampton Arden Hills, L.L.P. appeals from the district court's judgment, finding that respondents Hedlund Engineering Services, Inc. and Walsh Bishop Associates, Inc. could foreclose mechanics' liens.  We affirm.

FACTS

Hampton Arden Hills is a limited liability partnership with two principles: Chad Lemmons and DeSoto Associates.  Richard Schreier is the only general partner of DeSoto Associates.  On April 14, 1999 Hampton Arden Hills closed on the purchase of an undeveloped parcel of land in the City of Woodbury.  On the same day, Hampton Arden Hills entered into a purchase option agreement with LGI Entertainment, Inc.  LGI sought to purchase the property and develop it for a post-production recording studio.  Prior to April 14, LGI held a purchase option with the parcel's previous owner for the same purpose.

Between July 1998 and October 1999 Hedlund Engineering Services performed engineering and surveying work for the recording studio project.  Hedlund Engineering Services was brought into the project by a development coordinator, Trek Development.  Between June 1999 and October 1999, Walsh Bishop Associates provided architectural services for the recording studio project.  Stahl Construction, a general contractor hired by LGI, hired Walsh Bishop Associates.

On or about April 1999, David Salene, financial consultant to LGI, and Schreier met and discussed renewal of a special-use permit necessary to proceed with the recording studio development.  On October 13, Salene met with Schreier to negotiate continuation of the purchase option agreement.  Salene met with Schreier again on October 15 and in November 1999.  During these conversations, Salene updated Schreier regarding engineering services rendered for the sanitary sewer and utilities for the site, engineering services relating to drainage of the site, LGI's retaining of a general contractor, and the retaining of an architect.

Salene prepared a project status summary for Schreier after the October 13 meeting.  Schreier had possession of this summary at the October 15 meeting.  Additionally, on or about November 4, 1999, LaSalle Gabriel, president of LGI, provided Schreier with a shareholder status report which discussed construction planning.  LGI's option to purchase the real property from Hampton Arden Hills was terminated in January 2000.

Wayne Bishop signed the mechanic's lien statement for Walsh Bishop Associates, listing $134,136.55 as the unpaid amount due.  The correct lien amount was $90,136.55, a difference of $44,000.  Robert Walsh explained at trial the error was the result of his confusion after the company made changes to its accounting system.

D E C I S I O N

1.         Hampton Arden Hills argues the district court erred as a matter of law in allowing the assertion of mechanics' liens for engineering, surveying, and architectural services where no visible improvements ever resulted and the owner, Hampton Arden Hills, did not contract for the services rendered.  A reviewing court is not bound by and need not give deference to a district court's decision on a purely legal issue.  Modrow v. JP Foodservice, Inc., 656 N.W.2d 389, 393 (Minn. 2003) (citing Frost-Benco Elec. Ass'n v. Minn. Pub. Utils. Comm'n, 358 N.W.2d 639, 642 (Minn. 1984)).  A reviewing court need not defer to the district court's application of the law when the material facts are not in dispute.  Hubred v. Control Data Corp., 442 N.W.2d 308, 310 (Minn. 1989).

A lien for improvement to land may be asserted against an owner who is not a party to the contract for services, so long as the owner had knowledge:

When improvements are made by one person upon the land of another, all persons interested therein otherwise than as bona fide prior encumbrancers or lienors shall be deemed to have authorized such improvements, in so far as to subject their interests to liens therefor.  Any person who has not authorized the same may protect that person's interest from such liens by serving upon the persons doing work or otherwise contributing to such improvement within five days after knowledge thereof, written notice that the improvement is not being made at that person's instance, or by posting like notice, and keeping the same posted, in a conspicuous place on the premises.

 

Minn. Stat. § 514.06 (2002) (emphasis added).  The phrase "upon the land" refers "not to the visibility of the improvement, but to improvements which, if completed, would run with the land, as opposed to being removable fixtures." Korsunsky Krank Erickson Architects, Inc., v. Walsh, 370 N.W.2d 29, 32 (Minn. 1985) (finding valid mechanic's lien, where no physical improvement resulted, for architectural plans completed per contract between architect and purchase option holder).

In this case, the architectural, engineering, and surveying services were intended to result in the building of a post-production recording studio.  This is a building, not a removable fixture.  Thus, the district court did not err in determining Hedlund Engineering Services and Walsh Bishop Associates have valid mechanics' liens even though there was no visible improvements to the property.

2.         Hampton Arden Hills argues the district court erred in finding it had knowledge of lienable services as required by Minn. Stat. § 514.06.  The appellate court will not overturn findings of fact unless they are clearly erroneous.  Minn. R. Civ. P. 52.01.  It is not the province of the appellate courts "to reconcile conflicting evidence.  On appeal, a trial court's findings of fact are given great deference, and shall not be set aside unless clearly erroneous. . . .  If there is reasonable evidence to support the trial court's findings of fact, a reviewing court" will not disturb those findings.  Fletcher v. St. Paul Pioneer Press, 589 N.W.2d 96, 101 (Minn. 1999) (citations omitted).

An owner has knowledge of improvements when the owner has actual knowledge the improvements are underway.  Master Asphalt Co., v. Voss Constr. Co. of Minneapolis, 535 N.W.2d 349, 353-54 (Minn. 1995) (citing Bruer Lumber Co. v. Kenyon, 166 Minn. 357, 359, 208 N.W. 10, 11 (1926); Henning v. McAdam, 155 Minn. 194, 197-98, 193 N.W. 124, 125 (1923); Wheaton v. Berg, 50 Minn. 525, 530-31, 52 N.W. 926, 927 (1892)).  The obligation to serve or post a written disclaimer arises from knowledge of a course of improvement or improvements not "solely from knowledge of a specific individual's work or materials."  Berks v. Oberpriller, 448 N.W.2d 883, 885 (Minn. App. 1989), review denied (Minn. Feb. 9, 1990).  Knowledge is not present where an owner has only general awareness of a tenant's contemplation of making improvements to the property.  Master Asphalt, 535 N.W.2d at 352. 

In this case the district court found the testimony of Salene credible.  Salene testified to four conversations with Schreier between April 1999 and November 1999.  During each conversation, Salene and Schreier discussed the progress of engineering work, the retention of an architect, and the progress of a retained general contractor.  The district court further believed the testimony of Salene and Gabriel regarding the providing of status reports.  The information provided to Schreier by Salene and Gabriel communicated a course of improvements, engineering, architectural, and surveying, were underway.  Schreier's knowledge satisfied the requirements of Minn. Stat. § 514.06.

Schreier's conversations with Salene began on or about April 1999.  On February 14, 2000, Hampton Arden Hills served on Walsh Bishop Associates a disclaimer notice pursuant to Minn. Stat. § 514.06.  Thus, Hampton Arden Hills's disclaimer notice was not sent to Walsh Bishop Associates within five days of knowledge of the improvements.  Hampton Arden Hills did not serve a disclaimer notice on Hedlund Engineering Services or post a disclaimer notice on the property.  The district court's determination of Hampton Arden Hills's knowledge and failure to serve a timely disclaimer under Minn. Stat. § 541.06 was not clearly erroneous.

3.         Hampton Arden Hills argues the district court erred as a matter of law in allowing Hedlund Engineering Services and Walsh Bishop Associates to pursue mechanics' liens and not pursue contract claims against those that contracted for the services rendered.  As previously noted, a reviewing court is not bound by and need not give deference to a district court's decision on a purely legal issue.  Modrow, 656 N.W.2d at 393.

In 1890, the Minnesota Supreme Court held a general contractor was a necessary party defendant in a mechanic's lien action brought by a subcontractor.  Northwestern Cement & Concrete Pavement Co. v. Norwegian-Danish Evangelical Lutheran Augsburg Seminary, 45 N.W. 868, 43 Minn. 449 (1890).  The supreme court's opinion provides that this rule is not "an inflexible one . . . but one introduced by the court itself for the purpose of convenience and justice."  Id. 45 N.W. at 870, 43 Minn. at 453.

After the supreme court's holding in Northwestern, the legislature amended Minn. Stat. § 514.11 in 1973 and 1986.  The statute currently provides: "The action may be commenced by any lienholder who has filed a lien statement for record and served a copy thereof on the owner pursuant to section 514.08, and all other such lienholders shall be made defendants therein."  Minn. Stat. § 514.11 (2002).  The statute does not, by its own language, require a lienholder to join the party that contracted for its services.  Moreover, it does not require joinder of parties who are not lienholders.

Hampton Arden Hills provides no evidence the contracting parties are lienholders.  Even if the holding of Northwestern remains applicable, its rule is subject to modification depending on the circumstances of the case.  Thus, the district court did not err in determining Walsh Bishop Associates and Hedlund Engineering Services may assert mechanics' liens regardless of whether recovery was sought against the contracting parties.

4.         Hampton Arden Hills argues the district court erred in finding Walsh Bishop Associate's lien overstatement resulted from an honest mistake.  Whether a claimant has intentionally overstated a lien claim is a fact question for the trial court and the trial court's determination will not be overturned unless clearly erroneous.  Cox v. First Nat'l Bank of Aitkin, 415 N.W.2d 385, 388 (Minn. App. 1987), review denied (Minn. Jan. 20, 1988).

Minn. Stat. § 514.74 (2002) provides: "In no case shall a lien exist for a greater amount than the sum claimed in the lien statement, nor for any amount, if it be made to appear that the claimant has knowingly demanded in the statement more than is justly due."  "'To deprive the [lien] claimant of [the] right to a lien under [the] statute, there must be a showing of fraud, bad faith, or an intentional demand for an amount in excess of that due.'" Witcher Const. Co. v. Estes II Ltd. P'ship, 465 N.W.2d 404, 407 (Minn. App. 1991) (quoting Delyea v. Turner, 264 Minn. 169, 175, 118 N.W.2d 436, 440 (1962)), review denied (Minn. Mar. 15, 1991).

The district court heard Walsh's testimony.  Walsh was the individual who originally calculated the overstated figure.  He explained the mistake resulted from a change in accounting practice at Walsh Bishop Associates.  He testified the overstatement in the mechanic's lien was an honest mistake and not intended in bad faith.  Given Bishop's testimony, the trial court did not err in finding the lien overstatement resulted from honest mistake.

5.         Hampton Arden Hills argues the district court abused its discretion in determining the amount of attorney fees awarded because the mechanics' liens are not enforceable.  Reasonable attorney fees may be awarded to a successful claimant as part of its foreclosure costs.  Minn. Stat. § 514.14 (2002); Automated Bldg. Components, Inc. v. New Horizon Homes, Inc., 514 N.W.2d 826, 831 (Minn. App. 1994), review denied (Minn. June 15, 1994).  As stated above, the mechanics' liens are enforceable and therefore reasonable attorney fees may be awarded.

In the alternative, Hampton Arden Hills argues the district court abused its discretion in determining the amount of the attorney fee awards because they are disproportionate to the value of the mechanics' liens.  Hampton Arden Hills does not claim the district court failed to make sufficient findings to support the fee awards.

"On review, this court will not reverse a trial court's award or denial of attorney fees absent an abuse of discretion."  Becker v. Alloy Hardfacing & Eng'g Co., 401 N.W.2d 655, 661 (Minn. 1987).  In determining whether to award attorney fees, the trial court considers 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).  Attorney fee awards should be in proportion to the mechanic's lien judgment.  Asp v. O'Brien, 277 N.W.2d 382, 385 (Minn. 1979).  Yet fees are not disproportionate merely because they exceed the mechanic's lien amount.  Kirkwold Constr. Co. v. M.G.A. Constr. Inc., 498 N.W.2d 465, 470 (Minn. App. 1993).  "Limiting fees in such a manner would discourage small lienholders from pursuing valid claims through the legal system."  Id.

In this case, the district court awarded Hedlund Engineering Services a mechanic's lien in the amount of $16,113.62 and attorney fees and costs of $16,427.13.  The fee award exceeded the mechanic's lien by $313.51.  Hampton Arden Hills argues the fees are disproportionate only because the award exceeds the mechanic's lien amount.  Fees are not disproportionate merely because they exceed the mechanic's lien amount.  Id.  Moreover, Hampton Arden Hills does not argue the district court failed to make sufficient findings to support the value of the fee award.  We conclude Hampton Arden Hills failed to show the fees are disproportionate.

The district court awarded Walsh Bishop Associates a mechanic's lien in the amount of $102,451.90 and attorney fees and costs of $33,831.51.  Hampton Arden Hills argues the fee award of approximately one-third the mechanic's lien is disproportionate.  But Hampton Arden Hills fails to show why proportionality of one-third is an abuse of discretion.  And, Hampton Arden Hills does not argue the district court failed to make sufficient findings to support the value of the fee award.  Again, Hampton Arden Hills failed to show the fees are disproportionate.

Affirmed.

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