Kirkwold Construction Co. v. M.G.A. Construction, Inc.

513 N.W.2d 241, 1994 Minn. LEXIS 107
CourtSupreme Court of Minnesota
DecidedMarch 11, 1994
DocketNos. C1-92-1227, C5-92-1764
StatusPublished
Cited by15 cases

This text of 513 N.W.2d 241 (Kirkwold Construction Co. v. M.G.A. Construction, Inc.) is published on Counsel Stack Legal Research, covering Supreme Court of Minnesota primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Kirkwold Construction Co. v. M.G.A. Construction, Inc., 513 N.W.2d 241, 1994 Minn. LEXIS 107 (Mich. 1994).

Opinion

OPINION

KEITH, Chief Justice.

The question to be decided in this case is whether the services performed by engineers and surveyors are entitled to lien priority under Minn.Stat. § 514.05 even though the interest of a purchaser in good faith and a mortgagee were recorded prior to the actual and visual beginning of the improvement on the ground. We affirm the Court of Appeals.

Charles B. Faegre, in early 1989, formed a wholly owned corporation, Duckwood Crossings, Inc. (Duckwood) to develop a retail shopping mall on three lots located in Dakota County. In preparation for the sale of one lot to Holiday Stationstores, Inc. (Holiday) and the closing on two mortgages to Miller and Schroeder Investments Corporation (Miller) to complete the purchase of the other lots, Duckwood hired Minnesota Valley Surveyors, Inc. (MN Valley) and Ulteig Engineers, Inc. (Ulteig) to perform surveying and engineering services for the development. MN Valley began work on February 20, 1989, and Ulteig began work April 10, 1989. Neither company was fully paid for its services by Duckwood.

The closing on the sale of the lot to Holiday and the execution of the two mortgages to Miller were completed by October 30, 1989. The trial court found that Holiday and Miller knew of the work performed by Ulteig and MN Valley and knew or should have known that they had not been paid by Duck-wood. The first actual and visible construction on the ground of the proposed shopping center began November 2,1989. Liens were filed subsequent to November 2, 1989, by MN Valley, Ulteig, and various other parties who contributed labor or materials to the project. When Duckwood failed to meet its leasing obligations, Miller foreclosed and ultimately took title to its portion of the property. This litigation was commenced to establish lien priority.

The trial court held that, under Minn.Stat. § 514.05, the interests of Holiday and Miller [243]*243were subordinate to the liens of MN Valley, Ulteig, and all other parties who contributed labor and material to the project after November 2, 1989. The Court of Appeals partially reversed the trial court, holding that under the statute Holiday and Miller had priority over the liens of all claimants other than MN Valley and Ulteig, 498 N.W.2d 465. This appeal deals only with the priority claims of MN Valley and Ulteig.

A review of the history of Minn.Stat. § 514.05 is helpful. Prior to 1974, surveyors and engineers were not entitled to mechanics’ liens in Minnesota. See Dunham Assoc., Inc. v. Group Investments, Inc., 223 N.W.2d 376 (Minn.1974); Anderson v. Breezy Point Estates, 168 N.W.2d 693 (Minn.1969). The legislature in 1974 included the services of engineers and surveyors in the amendment to Minn.Stat. § 514.01 which read, in relevant part:

Whoever performs engineering or land surveying services with respect to real estate, or contributes to the improvement of real estate by performing labor, or furnishing skill, material or machinery for any of the purposes hereinafter stated, * * * shall have a lien upon the improvement, and upon the land on which it is situated

Laws of Minnesota for 1974, c 381, s 1.

In addition, the following amendment was made to Minn.Stat. § 514.05:

WHEN LIEN ATTACHES; NOTICE. All such liens, as against the owner of the land, shall attach and take effect from the time the first item of material or labor is furnished upon the premises for the beginning of the improvement, and shall be preferred to any mortgage or other encumbrance not then of record, unless the hen-holder had actual notice thereof. As against a bona fide purchaser, mortgagee, or encumbrancer without notice, no lien shall attach prior to the actual and visible beginning of the improvement on the ground, but a person having a contract for the furnishing of labor, skill, material, or machinery for the improvement, may file for record with the register of deeds of the county within which the premises are situated, or, if claimed under section 514.04, with the secretary of state, a brief statement of the nature of such contract, which statement shall be notice of his lien. Engineering or land surveying services with respect to real estate shall not constitute the actual and visible beginning of the improvement on the ground referred to in this section, except when such engineering or land surveying services include a visible staking of the premises.

Id. at s 2.

In 1986, the Court of Appeals interpreted this amendment to mean that a visible staking or grading of property could constitute the first visible improvement, and the priority of all mechanics liens could therefore attach with the performance of surveying or engineering services. R.B. Thompson, Jr. Lumber Company v. Windsor Development Corporation, 383 N.W.2d 362, 366-67 (Minn.App.1986). This case conflicted with a long line of cases which had held that the actual or visible improvement must be an improvement on the ground. See Reuben E. Johnson Co. v. Phelps, 156 N.W.2d 247, 251 (Minn.1968); Erickson v. Ireland, 134 Minn. 156, 158 N.W. 918, 920 (1916). In the R.B. Thompson case, the court expressed concern regarding the ability of all lien claimants to tack onto the priority of engineers and surveyors, stating:

By holding that housing contractors and other lien claimants may tack their liens back to any visible work done on a site, even if done years before the actual erection of the building, these cases inject great uncertainty into the bar and the industry.

R.B. Thompson, 383 N.W.2d at 367. The court’s concern in these cases was not with the priority of the lien of the surveyor or engineer, but with the ability of all other claimants who provided work or material to tack on to that priority.

In 1987, the legislature again amended Minn.Stat. § 514.05 by adding the words actual or record before the word notice and the word only in the second sentence of Subd. 1 and by striking the last sentence of Subd. 1 and adding a new Subd. 2. Currently, the statute reads as follows:

[244]*244Subdivision 1. Generally. All Kens, as against the owner of the land, shall attach and take effect from the time the first item of material or labor is furnished upon the premises for the beginning of the improvement, and shall be preferred to any mortgage or other encumbrance not then of record, unless the lienholder had actual notice thereof. As against a bona fide purchaser, mortgagee, or encumbrancer without actual or record notice, no Ken shall attach prior to the actual and visible beginning of the improvement on the ground, but a person having a contract for the furnishing of labor, skill, material, or machinery for the improvement, may file for record with the county recorder of the county within which the premises are situated, or, if claimed under section 514.04, with the secretary of state, a brief statement of the nature of the contract, which statement shall be notice of that person’s Ken only.

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Kirkwold Const. v. MGA CONST.
513 N.W.2d 241 (Supreme Court of Minnesota, 1994)

Cite This Page — Counsel Stack

Bluebook (online)
513 N.W.2d 241, 1994 Minn. LEXIS 107, Counsel Stack Legal Research, https://law.counselstack.com/opinion/kirkwold-construction-co-v-mga-construction-inc-minn-1994.