Big Lake Lumber, Inc. v. Security Property Investments, Inc.

820 N.W.2d 253, 2012 Minn. App. LEXIS 90, 2012 WL 3641210
CourtCourt of Appeals of Minnesota
DecidedAugust 27, 2012
DocketNo. A11-2220
StatusPublished
Cited by1 cases

This text of 820 N.W.2d 253 (Big Lake Lumber, Inc. v. Security Property Investments, Inc.) is published on Counsel Stack Legal Research, covering Court of Appeals of Minnesota primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Big Lake Lumber, Inc. v. Security Property Investments, Inc., 820 N.W.2d 253, 2012 Minn. App. LEXIS 90, 2012 WL 3641210 (Mich. Ct. App. 2012).

Opinion

OPINION

SCHELLHAS, Judge.

Appellant-bank challenges the district court’s determination that respondents’ mechanic’s liens have priority over appellant’s mortgage under the relation-back doctrine and Minn.Stat. § 514.05. Because the pre-mortgage excavation of the property was not part of one continuous project of improvement, the district court erred by concluding that respondents’ post-mortgage contributions of material and labor related back to the first visible sign of pre-mortgage excavation. We therefore conclude that respondents’ mechanic’s liens do not have priority over appellant’s mortgage, and we reverse.

[256]*256FACTS

In 2005, M & L Cabinets and Counter-tops, Inc. (M & L), started by Mark Hilde, purchased a lot in Zimmerman, Minnesota (the property). Hilde intended to build a house, live in it for several years, and then sell it. At Hilde’s request, Wruck Excavating Inc. designed a septic system for the house in July 2005. In order to obtain a construction loan, Hilde had respondent Big Lake Lumber Inc. draft preliminary building plans and had Wruck clear a path on the property on August 13-14, 2005. Hilde paid Wruck for the work, and Wruck performed no further work on the property until after October 27, 2006.

After Wruck performed its work in the summer of 2005, Hilde’s intentions regarding the property changed. Rather than construct a home to be his personal residence, Hilde decided to construct and sell a “spec home.” In early 2006, defendant Security Property Investments Inc. offered to purchase the property with the proposed spec home on it. Later, Security Property decided to purchase the property without a spec home, and, on July 6, Hilde signed a purchase agreement to sell the property without a spec home. For reasons not clear from the record, the named buyer in the purchased agreement was Jason Shackelton, not Security Property. The purchase agreement included a sale price of $142,000 and a closing date of July 20, 2006. Hilde testified that “sometime prior to the closing,” Security Property asked him to construct a home on the property. He further testified that

in order to even consider a build on there, again, [Wruck] had to be in there to clear some of the lot out so that people could get up in there. The lot had to be staked. The house that they were going to build or I was going to build out there had to be staked. Engineering had to be done.... [T]his was work that was done again because too much time had passed from the original.

Hilde testified that this work was “in addition to the 2005 work ... done by Wruck Excavating.” On July 28, 2006, Bogart, Pederson & Associates staked the property. Hilde acknowledged that the staking of the property in July 2006 “wasn’t performed as part of the project that [Hilde] originally intended to do in 2005” but rather was performed for “the ultimate project that was built.”

In late August 2006, defendant Christopher Schonning, an individual associated with Security Property, entered into a contract with MLH Construction, another company started by Hilde, for the construction of a house on the property. On about October 4, 2006, the parties modified the purchase agreement, moving the closing date to later in October; substituting Schonning as the buyer; and increasing the purchase price from $142,000 to $889,596, which included the cost of the land and a house. At closing on October 26, Hilde executed an affidavit, stating that “[t]here has been no labor or materials furnished to the [property] for which payment has not been made,” and Schonning granted appellant 21st Century Bank a $290,000 mortgage against the property to secure his construction loan. The bank recorded its mortgage on October 27, 2006.

Subsequent to the closing, Wruck installed on the property the septic system that it designed in 2005. Ultimately, MLH was asked to leave the project and respondent J. DesMarais Construction was asked to replace MLH. DesMarais took over as general contractor in January 2007.

In March 2007, Big Lake Lumber recorded its mechanic’s lien for $43,475.01 for materials and labor first contributed in November 2006. In July 2007, DesMarais recorded its mechanic’s lien for $103,985.85 for labor it began contributing in January [257]*2572007. The parties stipulated to the validity of both liens, disputing only priority as to the bank’s October 2006 mortgage.

Schonning defaulted on the mortgage, the bank foreclosed the mortgage in May 2008, and Schonning did not redeem from the foreclosure. Big Lake Lumber thereafter commenced a mechanic’s-lien foreclosure action and asserted various other claims against Security Property, Schon-ning, DesMarais, the bank, and others. Before trial Big Lake Lumber dismissed all of its claims against Security Property and Schonning, except its mechanic’s lien; the bank moved for partial summary judgment that its mortgage had priority over the mechanic’s liens; and DesMarais, joined by Big Lake Lumber, moved for partial summary judgment that their mechanic’s liens had priority over the mortgage. The district court granted partial summary judgment to DesMarais and Big Lake Lumber. The bank appealed, and this court reversed and remanded for further proceedings. Big Lake Lumber, Inc. v. Sec. Prop. Invs., No. A09-2129, 2010 WL 3682451 (Minn.App. Sept. 21, 2010) (Big Lake Lumber I).

On remand, after a court trial, the district court concluded that DesMarais’s and Big Lake Lumber’s mechanic’s liens had priority over the bank’s mortgage, reasoning that the attachment of the liens related back to Wruek’s August 2005 excavation work because that work and the materials and labor of the mechanic’s-lien claimants contributed to “the single improvement of constructing a home on the Property.” The district court further concluded that the 14-month delay between Wrack’s work in August 2005 and the bank’s mortgage recorded on October 27, 2006, “alone [did] not constitute abandonment.”

This appeal by the bank follows.

ISSUES

I. What is this court’s scope of review?

II. Did the district court erroneously conclude that the mechanic’s liens related back to the excavation work completed in August 2005?

ANALYSIS

I. Scope of Review

Based on this court’s opinion in Big Lake Lumber I, DesMarais argues that the law-of-the-case doctrine requires this court to reject the bank’s arguments against the relation back of DesMarais’s and Big Lake Lumber’s mechanic’s liens to Wrack’s excavation work in August 2005. We disagree. “The law-of-the-case doctrine is a rale of practice that once an issue is considered and adjudicated, that issue should not be reexamined in that court or any lower court throughout the case.” State v. Dahlin, 758 N.W.2d 300, 305 n. 7 (Minn.2008) (quotation omitted). But in Big Lake Lumber I, this court did not reject the bank’s arguments but rather reversed and remanded the district court’s grant of summary judgment because genuine issues of material fact existed with regard to whether the lien claimants’ work was “part of the same continuous improvement” as work performed prior to recordation of the bank’s mortgage. Big Lake Lumber I, 2010 WL 3632451, at *1, *5. We therefore conclude that DesMarais’s argument that we must reject the bank’s priority arguments is without merit.

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Related

Big Lake Lumber, Inc. v. Security Property Investments, Inc.
836 N.W.2d 359 (Supreme Court of Minnesota, 2013)

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Bluebook (online)
820 N.W.2d 253, 2012 Minn. App. LEXIS 90, 2012 WL 3641210, Counsel Stack Legal Research, https://law.counselstack.com/opinion/big-lake-lumber-inc-v-security-property-investments-inc-minnctapp-2012.