Custom Design Studio, a Division of L.B. Baron Properties, Inc. v. Chloe, Inc.

584 N.W.2d 430, 1998 Minn. App. LEXIS 1095, 1998 WL 664632
CourtCourt of Appeals of Minnesota
DecidedSeptember 29, 1998
DocketC4-98-229
StatusPublished
Cited by6 cases

This text of 584 N.W.2d 430 (Custom Design Studio, a Division of L.B. Baron Properties, Inc. v. Chloe, 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
Custom Design Studio, a Division of L.B. Baron Properties, Inc. v. Chloe, Inc., 584 N.W.2d 430, 1998 Minn. App. LEXIS 1095, 1998 WL 664632 (Mich. Ct. App. 1998).

Opinion

OPINION

CRIPPEN, Judge.

To address the issues on this appeal, we must examine the closely competing interests of a eontract-for-deed vendor and the mechanic’s lien claimant with whom the vendor has had only slight contact. In this case, we reverse the trial court judgment that the contractor is entitled to a lien, correcting the court’s conclusion that the claimant had too little knowledge about the vendor’s interest in the property to trigger the statutory requirement for prelien notice. We also reverse the trial court’s conclusion that the facts of the case show unjust enrichment of the vendor.

FACTS

Improvements to real property at 2415 Emerson in Minneapolis gave rise to this action. Appellant John Newman held a vendor’s interest in the property after contracting to convey the property to 2415 Emerson Ltd., owned by David Meunier. Respondent Custom Design Studio is in the interior decorating and design business. Custom Design’s officers and shareholders are William and Lori Baron. The Barons, along with Phillip Weber and David Fhima, were also stockholders and officers of respondent Chloe, Inc., which was formally incorporated on November 1, 1994, for the purpose of purchasing a building in which to start a restaurant.

In the summer of 1994, Fhima met Meunier, who indicated that he was interested in selling the Emerson property. Meunier informed Fhima that his vendee’s interest was assumable and that he had an interest-free obligation on the contract for deed. During a meeting to discuss the concept of opening a restaurant, Fhima relayed this information to the Barons and Weber. Finding the terms of the contract for deed attractive, the group agreed that the Emerson property should be acquired for their restaurant project.

Around September 1994, Custom Design orally agreed with Fhima and Weber, as *432 representatives of Chloe, to do the remodeling work on the Emerson property. Custom Design began work on October 17. On October 31, Weber, on behalf of Chloe, signed a purchase agreement for the property, and on November 29, 2415 Emerson Ltd. assigned its vendee’s interest to Chloe, Inc. for $224,-000. In December, appellant first learned of the assignment to Chloe, Inc., and during the last week of January 1995, just before the restaurant opened, appellant met Fhima at the property and observed the nearly completed remodeling work. (Final minor improvements were completed on February 6, 1995).

In April 1995, after Chloe, Inc. defaulted on the contract for deed payments, appellant commenced cancellation of the contract for deed. Nine days later, Custom Design served a mechanic’s lien on appellant and Chloe, Inc. Shortly thereafter the Barons met with appellant for the first time. Although appellant voiced his approval of the improvements, he indicated that he would not pay off the hen. In June, the property was returned to appellant, who then sold it for $200,000.

Alleging failure to pay over $48,000 in materials and labor, Custom Design brought this action asserting a mechanic’s lien against the property and unjust enrichment. 1 Denying appellant’s motion for summary judgment and for a directed verdict, the trial court found that appellant, having been shown plans and having occasion to walk through the building as it was being remodeled, had knowledge of and consented to the improvements to the property from about the time of the commencement of the improvements. The court also found that Custom Design did not know of appellant’s existence prior to November 29, 1994. The trial court concluded that Custom Design was entitled to recover from appellant $46,159.92 for unjust enrichment and that Custom Design was entitled to enforce a mechanic’s lien on the property. 2

Appellant challenges the trial court’s judgment, as amended to include an award of attorney fees, and the denial of his motion for a new trial.

ISSUES

1. Did the trial court err in determining that appellant was not entitled to prelien notice?

2. Did the trial court err in determining that appellant was unjustly enriched?

ANALYSIS

When reviewing a bench trial, we are limited to determining whether the trial court’s findings are “clearly erroneous, either without substantial evidentiary support or induced by an erroneous view of the law.” Reserve Mining Co. v. State, 310 N.W.2d 487, 490 (Minn.1981). On appeal from the denial of a motion for a new trial, our review is limited to determining whether the verdict is “manifestly and palpably contrary to the evidence, viewed in a light most favorable to the verdict.” ZumBerge v. Northern States Power Co., 481 N.W.2d 103, 110 (Minn.App.1992), review denied (Minn. April 29, 1992). We review de novo the trial court’s construction of the mechanic’s lien statute. David-Thomas Cos. v. Voss, 517 N.W.2d 341, 342 (Minn.App.1994).

Prelien Notice

Appellant contends that the trial court erred in concluding that because Custom Design was not aware of appellant’s specific identity during the relevant period it was excused from giving him prelien notice. Minn.Stat. § 514.011, subd. 1 (1996) (contractors are required to notify property owners within ten days after orally contracting to perform improvement work on their property); Merle’s Constr. Co. v. Berg, 442 N.W.2d 300, 302 (Minn.1989) (failure to give notice defeats lien). Undisputed evidence indicates that Custom Design knew when it agreed to improve the property that a contract vendor held title to the property.

*433 The trial court relied on Lori and William Baron’s testimony that they did not know appellant’s identity within the ten-day window and apparently agreed that they had no affirmative obligation to seek his name. 3 That reasoning is counterintuitive to the goal of protecting property owners, and we are not persuaded that Mill City Heating & Air Conditioning Co. v. Nelson, 351 N.W.2d 362 (Minn.1984), upon which Custom Design relies, supports their position.

Under the prelien notice statute, notice must be given to the owner of an interest “whose interest in the property * * * is known” to the lien claimant. Minn.Stat. § 514.011, subd. 5 (1996). In Mill City the supreme court reasoned that when a lien claimant “knows that a person has a[n] * * * interest in registered land * ⅜ * it would be unfair and unreasonable for the law to allow the [lien claimant] to wear blinders and look only to the certificate of title.” Id. at 365.

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Bluebook (online)
584 N.W.2d 430, 1998 Minn. App. LEXIS 1095, 1998 WL 664632, Counsel Stack Legal Research, https://law.counselstack.com/opinion/custom-design-studio-a-division-of-lb-baron-properties-inc-v-chloe-minnctapp-1998.