This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (2002).
STATE OF MINNESOTA
IN COURT OF APPEALS
Miller Johnson Steichen Kinnard, Inc.,
Anthony Harold Smith, et al.,
Stephanie Lynn Weede,
Filed August 12, 2003
Hennepin County District Court
File No. MC01017437
F. Chet Taylor, Meikle & Taylor, P.A., 4000 Campbell Mithum Tower, 222 South Ninth Street, Minneapolis, MN 55402 (for respondent Miller Johnson Steichen Kinnard, Inc.)
Stephanie Lynn Weede, OID #209246, MCF-WRIV, 86032 County Highway 61, Willow River, MN 55795 (pro se respondent)
Michael L. Brutlag, Ryan J. Trucke, Brutlag, Hartmann & Okoneski, P.A., 1100 Pillsbury Center, 200 South Sixth Street, Minneapolis, MN 55402 (for appellant)
Considered and decided by Peterson, Presiding Judge, Lansing, Judge, and Wright, Judge.
U N P U B L I S H E D O P I N I O N
Appellant Rand Corporation challenges the district court’s imposition of a constructive trust on real property owned by respondent Stephanie Lynn Weede in favor of respondent Miller Johnson Steichen Kinnard, Inc. from whom Weede had embezzled funds used to purchase the property. Rand, which held a mortgage on the same property, argues that its interest was paramount because MJSK’s notice of lis pendens was not valid. It contends that the district court abused its discretion in granting MJSK’s motion to amend its complaint to include the claim for a constructive trust and that the district court erred in granting MJSK’s motion for summary judgment and in denying Rand’s motion for partial summary judgment to discharge the notice of lis pendens. We affirm.
Respondent Stephanie Lynn Weede worked as a sales assistant for respondent Miller Johnson Steichen Kinnard, Inc. (MJSK), an investment-securities corporation. From June to August 2001, Weede embezzled $215,264.22 from the investment accounts of several of MJSK’s customers. She used this money to purchase, among other things, a townhouse.
MJSK discovered Weede’s theft and notified the police, which led to criminal charges against Weede. In addition, in a complaint dated September 5, 2001, MJSK sued Weede for civil theft under Minn. Stat. § 609.53, subd. 4 (2000), and for conversion. On September 7, 2001, MJSK amended the complaint to add several co-conspirators.
On November 15, 2001, MJSK filed the following documents with the district court: the original summons and complaint, the amended summons and complaint, affidavits of service, a motion to file a second amended complaint, a proposed second amended complaint that added a claim for a constructive trust as to the townhouse, and a notice of lis pendens. The next day, MJSK filed its notice of lis pendens with the office of the county recorder in Dakota County, where Weede’s townhouse is located.
On January 15, 2002, Weede pleaded guilty to two felony counts of theft by swindle of more than $35,000. She admitted that she committed the alleged offenses and used the stolen proceeds to purchase, among other things, her townhouse. She was sentenced to 42 months’ imprisonment with a stayed execution conditioned on restitution of $215,264.22 and immediate sale of her townhouse and vehicles.
It was later discovered that, on December 28, 2001, several weeks before her guilty plea, Weede obtained an $88,500 loan from appellant Rand Corporation, secured by a five-year mortgage on her townhouse at a 16-percent interest rate and an $88,724.70 balloon payment due March 1, 2007. After payment of loan fees and payoff of a consumer debt, Rand issued a check to Weede on January 3, 2002, for $61,387.32. The title search conducted before the mortgage was issued did not list MJSK’s November 16, 2001, notice of lis pendens because of a time lag in the county recorder’s office between the filing and the recording of the notice of lis pendens. Weede failed to disclose MJSK’s interest and submitted an affidavit denying any undisclosed claims or interests. The Rand mortgage was deemed to be a material violation of Weede’s plea agreement, her probation was revoked, she was sent to prison, and the townhouse was never sold.
Rand later learned of the notice of lis pendens and MJSK’s lawsuit. On July 1, 2002, Rand intervened in the lawsuit and filed an answer and counterclaim, asserting that its mortgage was superior to MJSK’s interest and seeking a discharge of the lis pendens.
The parties filed cross-motions for summary judgment, and, at a hearing on the motions, the district court also heard MJSK’s motion to amend its complaint to include a claim for a constructive trust on Weede’s townhouse. The district court granted MJSK’s motion to amend and its motion for summary judgment on its civil-theft, treble-damages, conversion, and constructive-trust claims against Weede. The district court also rejected Rand’s challenge to the notice of lis pendens. It later dismissed Rand’s counterclaims and entered judgment. This appeal followed.
D E C I S I O N
When reviewing a summary judgment, we must determine whether any genuine issues of material fact exist and whether the district court erred as a matter of law. State by Cooper v. French, 460 N.W.2d 2, 4 (Minn. 1990).
The primary issue in this case is whether the notice of lis pendens was valid, giving MJSK an interest in the townhouse that was superior to Rand’s mortgage. Rand argues that, when MJSK filed its notice of lis pendens on November 16, 2001, its amended complaint sought only a money judgment and that the motion to amend and the copy of the proposed second amended complaint — which explicitly included a claim for a constructive trust — did not meet the statutory standards for filing a valid notice of lis pendens. Consequently, Rand contends that the notice of lis pendens should be discharged and that its mortgage has priority over MJSK’s interest.
Section 557.02 sets out the standards for filing a notice of lis pendens:
In all actions in which the title to, or any interest in or lien upon, real property is involved or affected, or is brought in question by either party, any party thereto, at the time of filing the complaint, or at any time thereafter during the pendency of such action, may file for record with the county recorder of each county in which any part of the premises lies a notice of the pendency of the action, containing the names of the parties, the object of the action, and a description of the real property in such county involved, affected or brought in question thereby. From the time of the filing of such notice, and from such time only, the pendency of the action shall be notice to purchasers and encumbrancers of the rights and equities of the party filing the same to the premises.
Minn. Stat. § 557.02 (2002) (emphasis added). “The sole function of the lis pendens is to give constructive notice to all the world of the pendency of the action” and that the party filing the lis pendens has “rights and equities * * * in the land therein described.” Joslyn v. Schwend, 89 Minn. 71, 74, 93 N.W. 705, 706 (1903), quoted in Chaney v. Minneapolis Cmty. Dev. Agency, 641 N.W.2d 328, 333 (Minn. App. 2002), review denied (Minn. May 28, 2002).
A notice of lis pendens filed before a proper action is commenced has no effect until that action is pending. Id. Further, the action must be based on a claim involving title to, interest in, or a lien upon real property. Minn. Stat. § 557.02; Westphal v. Anderson, 347 N.W.2d 85, 87 (Minn. App. 1984). This includes an action based on an equitable lien arising from a constructive trust that affects the title to the property. Rehnberg v. Minn. Homes, Inc., 236 Minn. 230, 233-34, 52 N.W.2d 454, 456 (1952); Bly v. Gensmer, 386 N.W.2d 767, 769 (Minn. App. 1986). The notice of lis pendens may not be based on an action whose sole purpose is recovery of money, where the plaintiff “neither sought nor recovered a lien upon the premises.” Melin v. Mott, 212 Minn. 517, 518, 4 N.W.2d 600, 601 (1942).
The statute provides that the notice of lis pendens may be filed “at the time of filing the complaint” of an action involving any title to, interest in, or a lien on real property. Minn. Stat. § 557.02. Rand argues that the notice of lis pendens was not valid because it was filed when the amended complaint sought only a money judgment and before leave had been granted to file the second amended complaint that contained the constructive trust claim. Rand contends that, if the lis pendens could be recorded before a complaint containing the claim for a constructive trust was properly asserted and filed, the interested party would have no sure means of determining the nature of the dispute through the public record, and title to the real estate would be unnecessarily and prematurely impaired. While Rand acknowledges that anyone who examined the public record in the county recorder’s office could at some point have learned that MJSK had filed the notice of lis pendens, it argues that the same party would have only learned that a motion seeking leave to amend had been filed.
The function of lis pendens is to give constructive notice of the pendency of an action asserting an interest in the subject property. Joslyn, 89 Minn. at 74, 93 N.W. at 706. MJSK’s claim for a constructive trust in the property in the proposed second amended complaint explicitly described the nature of the dispute and its interest in the property. See Fingerhut Corp. v. Suburban Nat’l Bank, 460 N.W.2d 63, 67 (Minn. App. 1990) (holding that constructive trust establishes equitable lien supporting filing of notice of lis pendens). Any party interested in exploring the matter could review the court files or contact MJSK’s counsel. Because the public was properly put on notice of the pending claim against Weede’s townhouse, we conclude that the proposed second amended complaint, which explicitly sought imposition of a constructive trust on the subject property, and the accompanying documents were sufficient and indeed fulfill the purposes of section 557.02
Rand also argues that, under the statute, the notice of lis pendens is not valid if the summons is not served within 90 days after the date the complaint is filed in district court. Minn. Stat. § 557.02. Rand argues that, here, the notice of lis pendens was rendered invalid by MJSK’s failure to serve the summons within 90 days after the complaint was filed. This argument is without merit because MJSK served the summons and complaint more than two months before the filing of the notice of lis pendens.
Because the notice of lis pendens was valid, we conclude that the district court properly denied Rand’s motion for partial summary judgment to discharge the notice of lis pendens.
Rand also contends that the district court abused its discretion in first granting MJSK leave to amend its complaint five days before the trial was scheduled and then granting summary judgment in MJSK’s favor.
“A party may amend a pleading once as a matter of course at any time before a responsive pleading is served.” Minn. R. Civ. P. 15.01. After that, a party who does not have written consent of the adverse party may amend a pleading “only by leave of court” or by consent of the adverse party. Id. But such “leave shall be freely given when justice so requires.” Id. The district court may deny the motion “where prejudice may result to the opposing party or where such amendment would serve no legal purpose.” Lumbermen’s Underwriting Alliance v. Tifco, Inc., 465 N.W.2d 580, 584 (Minn. App. 1991) (citation omitted), review denied (Minn. Apr. 1, 1991). The decision of whether to grant leave to amend a pleading is within the district court’s broad discretion and “will not be reversed absent a clear abuse of discretion.” Fabio v. Bellomo, 504 N.W.2d 758, 761 (Minn. 1993) (citation omitted).
While Rand argues that the district court abused its discretion by granting leave to amend five days before the scheduled trial, see Tomlinson Lumber Sales, Inc. v. J.D. Harrold Co., 263 Minn. 470, 474-75, 117 N.W.2d 203, 207 (1962) (finding no abuse of discretion in denying a belated motion to amend a counterclaim made at the close of a trial that had been in progress several weeks), it concedes that the subsequent grant of summary judgment if affirmed eliminated any potential prejudice associated with granting leave at that late stage in the proceedings.
The amended complaint and the second amended complaint were based on the same factual allegations. MJSK simply added a new theory of recovery — a claim for a constructive trust — in the second amended complaint. Further, as Rand concedes, any prejudice was eliminated by the district court’s grant of summary judgment to MJSK. On this record, the district court did not abuse its discretion in granting the motion to amend.
Rand also asserts that the district court erred in granting both leave to amend and summary judgment because Rand was deprived of the fundamental right to interpose a responsive defense. But Rand’s intervention challenged the notice of lis pendens, not the merits of MJSK’s action against Weede, and Rand made extensive arguments challenging the notice of lis pendens. Further, its pleadings and arguments presented only questions of law, and Rand has not proffered evidence creating factual issues that would render the matter inappropriate for summary judgment. Given the manner in which this case was presented, Rand has not demonstrated prejudice and the district court properly resolved the issues as a matter of law.
Finally, while MJSK argues that Rand has no standing to oppose the substance of MJSK’s claims against Weede, it is undisputed that Rand has standing to challenge the notice of lis pendens.
 Minn. Stat. § 609.53, subd. 4, provides that one injured by the crime of receipt of stolen property may bring a civil action for three times the damages sustained.