may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (1996)
STATE OF MINNESOTA
IN COURT OF APPEALS
Marksman Construction Company, Inc.,
Mall of America Company, et al.,
Retired judge of the Minnesota Court of Appeals, serving by appointment pursuant to Minn. Const. art. VI, § 10.
File No. 9611374
Gary A. Van Cleve, Daniel W. Voss, Larkin, Hoffman, Daly & Lindgren, Ltd., 1500 Norwest Financial Center, 7900 Xerxes Avenue South, Bloomington, MN 55431-1194 (for respondents)
Considered and decided by Randall, Presiding Judge, Norton, Judge, and Forsberg, Judge.
Appellant Marksman Construction Company performed improvements to property leased by respondent Mall of America to Chicken Stampede (tenant). Marksman completed its work on May 28, 1993, and filed a mechanic's lien on July 22, 1993. Tenant vacated the Mall's premises on or about January 1, 1994, without paying the final $56,000 it owed Marksman for the improvements.
Marksman claims that Mall representatives agreed to pay Marksman for the improvements and, based on that agreement, Marksman allowed the one-year statute of limitations to expire on its lien. When it was not paid, Marksman initiated a breach of contract action against the Mall. Marksman appeals the district court's entry of summary judgment for the Mall. The Mall filed a notice to review that part of the district court's judgment denying the Mall's motion for attorney fees. We affirm.
An owner of property is not subject to a mechanic's lien for improvements contracted by another if the owner gives adequate notice of the owner's intent not to be bound. See Minn. Stat. § 514.06 (1996); accord Master Asphalt Co. v. Voss Constr. Co., 535 N.W.2d 349 (Minn. 1995). The Mall gave notice of its intent not to be responsible for improvements by requiring Marksman to sign the following acknowledgement:
Contractor acknowledges * * * that any mechanic's lien which it may hereafter file * * * (i) shall attach only to Tenant's interest in the Lease Premises under the Lease.
According to this acknowledgement, the parties limited any lien that Marksman acquired to tenant's leasehold interest. See Moorehead Lumber Co. v. Remington Packing Co., 165 Minn. 411, 413, 206 N.W. 653, 654 (1925) (recognizing that lien may attach to leasehold interest of tenant).
The parties do not dispute that tenant's lease with the Mall terminated upon tenant's abandonment of the premises. Nevertheless, Marksman alleges that its lien survived. However,
[a] lien upon land is a mere hold or claim thereon as security for some debt or charge of the lienor. * * * A lien is [in] no sense an estate or interest in the land.
Gau v. Hyland, 230 Minn. 235, 240, 41 N.W.2d 444, 448 (1950). Marksman's lien claim was limited to the tenant's interest under the lease, and that interest terminated when the lease terminated. See Provident Mut. Life Ins. v. Tachtronic Instruments, Inc., 394 N.W.2d 161, 164 (Minn. App. 1986) (leasehold interest terminates upon abandonment of premises). The district court correctly ruled that Marksman's lien also terminated when the only interest it attached to terminated. See Moorehead Lumber, 206 Minn. at 414, 206 N.W. at 654 (looking to parties' lease to determine what interest lien attached to); cf. Gau, 230 Minn. at 241, 41 N.W.2d at 449 (holding old-age assistance lien attached to recipient's joint tenant interest terminated upon that joint tenant's death and did not attach to interest acquired by surviving joint tenant); accord Maurice T. Brunner, Annotation, Enforceability of Mechanic's Lien Attached to Leasehold Estate Against Landlord's Fee, 74 A.L.R. 3d 330, §3[a] (1976) (general rule is that lien attached to leasehold interest terminates with lease).
Alternatively, Marksman argues that even if the lien had already terminated at the time of the parties' alleged agreement, their agreement was nevertheless enforceable because it was supported by consideration. Settlement of a disputed claim can be consideration. See Peterson v. Hegna, 158 Minn. 289, 197 N.W. 484, 487 (Minn. 1924) (utterly baseless claim cannot support compromise agreement, but claim that is disputed or in doubt can).
[I]t must appear that the claim or controversy settled, though perhaps not in fact valid in law, was presented and demanded in good faith and upon reasonable grounds for inducing the belief that it was enforceable.
Hillmeyer v. Watz, 415 N.W.2d 89, 92 (Minn. App. 1987). However, an agreement to resolve a baseless claim lacks consideration. Id.
Here, Marksman acknowledged that its lien was limited to the tenant's leasehold interest. Marksman did not dispute that the lease terminated upon tenant's abandonment of the premises. In light of these undisputed facts, no reasonable grounds existed to induce the parties to believe the lien was enforceable after the lease terminated. Accordingly, settlement of the lien claim could not provide consideration for the alleged agreement. See id.
A district court has broad discretion to order attorney fees, and an appellate court will not reverse that decision absent an abuse of discretion. Radloff v. First Am. Nat'l Bank of St. Cloud, N.A., 470 N.W.2d 154, 156 (Minn. App. 1991). The Mall based its claim for fees on Minn. Stat. § 549.21 (1996), Minn. R. Civ. P. 11, and the indemnity provision contained in the parties' acknowledgment of lien rights. The district court ruled that Marksman's arguments did not justify the imposition of attorney fees.
This ruling implicitly found the parties' indemnity provision inapplicable, and the Mall provides no support for its argument that attorney fees in this breach of contract action arose from Marksman's failure to limit its lien to tenant's interest. The district court's refusal to order fees under the indemnity agreement was not an abuse of discretion.
The Mall's main argument is that Marksman should be sanctioned for filing a baseless claim. An objective standard of reasonableness applies to determine if a claim is sanctionable. Uselman v. Uselman, 464 N.W.2d 130, 143 (Minn. 1990). An award of fees is not justified by a trial court's disagreement with a party's legal theories. Id. Sanctions are not appropriate merely because a party does not prevail on the merits. Radloff, 470 N.W.2d at 157. These same standards apply whether a claim for fees is based on section 549.21 or rule 11. Spicer, Watson v. Minnesota Lawyers Mut. Ins. Co., 502 N.W.2d 400, 405 (Minn. App. 1993), review denied (Minn. Sept. 30, 1993).
The district court did not abuse its discretion by refusing to sanction Marksman simply because its claim was unsuccessful. See Radloff, 470 N.W.2d at 157.
RANDALL, Judge (dissenting).
I respectfully dissent. As the majority points out, on appeal from summary judgment, evidence must be viewed in the light most favorable to the party opposing summary judgment. Lubbers v. Anderson, 539 N.W.2d 398, 401 (Minn. 1995). Viewing the evidence most favorable to Marksman here, I conclude summary judgment is inappropriate.
Regardless of whether the mechanic's lien survived when the tenant's lease ended, Marksman may have made an enforceable agreement with the Mall. A compromise and settlement, where there is an offer and acceptance, form a contract. Hillmeyer v. Watz, 415 N.W.2d 89, 92 (Minn. App. 1987). Settlement of a good faith dispute may constitute consideration. Id. It is not necessary for the claim to be legally valid; rather, the claim need only be "presented and demanded in good faith and upon reasonable grounds for inducing the belief that it was enforceable." Id.; see also Nybladh v. People's State Bank, 247 Minn. 88, 96, 76 N.W.2d 492, 498 (Minn. 1956) (stating "good faith, not color of right is the primary test" for determining whether comprise settlement constituted consideration).
Here, it is evident that Marksman had a good faith belief that its mechanic's lien survived the termination of the tenant's lease. Despite the fact that Marksman may not ultimately prevail on legal grounds, Marksman's alleged agreement with the Mall to forbear could constitute valid consideration. The president of Marksman alleged in his affidavit that after "Chicken Stampede" vacated the Mall he entered into negotiations with Mall representatives to lease the space himself. He insists vigorously that the Mall agreed to waive the up-front fees to cover the amount owed to Marksman for improvements. These negotiations eventually ended, he explained, but he and a representative of a subcontractor for the project both alleged in their affidavits that they were then informed by Mall representatives that Marksman would be paid out of funds received from a new tenant moving into the space. An owner of The Healthy Gourmet restaurant that leased the space stated in his affidavit that he was informed the space had mechanic's liens on it and that The Healthy Gourmet paid $75,000 in up-front money with the understanding that the liens would be satisfied, and then some, with this money. This tenant also alleged he attempted to buy the liens from Marksman at a discount, but was told by a Mall representative, "It's our deal. If there's a discount, it's ours." Taken as true for the purposes of summary judgment, these affidavits support a finding that Marksman acted with a good faith belief that its mechanic's lien was valid against the Mall. Also, taken as true, these affidavits support a legal argument that the Mall is estopped from claiming that the time to enforce the lien has run out. This is so because the statements, taken as true, could support the legal conclusion that the Mall acted fraudulently when inducing Marksman not to enforce its lien within the prescribed time period, and thus should be estopped from now using a statute of limitations defense.
Viewing the evidence in the light most favorable to Marksman, as we must, affidavits introduced to the district court indicate there was some form of agreement entered into by Marksman and agents of the Mall. On the one hand, the Mall insists no agreement was ever made with Marksman. The Mall notes that Marksman's president and the subcontractor representative submitted supplemental affidavits. The Mall argues these affiants altered their original statements that the agreement was formed in summer of 1994, to reflect that the agreement was made prior to the expiration of any possible mechanic's lien in May 1994. This material dispute presents a pure factual issue based on the credibility of witnesses.
The existence of an agreement to forbear lien foreclosure between Marksman and the Mall is a material question of fact. The date of any such agreement is a material fact question. Although "[t]he construction and effect of a contract are questions of law for the court," Turner v. Alpha Phi Sorority House, 276 N.W.2d 63, 66 (Minn. 1979), summary judgment is inappropriate where a genuine issues of material fact are at issue. State by Cooper v. French, 460 N.W.2d 2, 4 (Minn. 1990). Here, material issues of fact are sorely in need of resolution by a factfinder. Therefore, I would reverse the district court's summary judgment and remand for trial.