STATE OF MINNESOTA
IN COURT OF APPEALS
Kraus-Anderson Construction Company,
David Carlson Companies, Incorporated, et al.,
Defendants (C3-98-688, C9-98-954)
Mutual Savings Bank,
Building Materials, Inc.,
West Star Electric, Inc.,
Respondent (C3-98-688, C0-98-941)
Berg Drywall, Inc.,
Respondent (C3-98-688, C0-98-941),
Electric Service Co. of Mpls., Inc.,
Anderson-Ladd, Inc., et al.,
Respondent (C3-98-688, C0-98-941),
Norgren Painting and Decorating, Inc.,
Doody Mechanical, Inc.,
Tony Bernardi, et al.,
Robert Johnson, et al.,
Verne C. Johnson, et al.,
Appellants (C3-98-688, C0-98-941),
John Anderson, et al.,
ADPC Corporation, intervenor,
Filed February 2, 1999
Affirmed; motion granted
Hennepin County District Court
File No. 9710200
Steven K. Champlin, Bricker L. Lavik, Erik W. Scharf, Dorsey & Whitney, LLP, Pillsbury Center South, 220 South Sixth Street, Minneapolis, MN 55402-1498 (for Kraus-Anderson)
Martha J. Keon, John J. Bowden, Maun & Simon, PLC, 2000 Midwest Plaza Building West, 801 Nicollet Mall, Minneapolis, MN 55402-2534; and
Katherine M. Bergenthal, Michael P. Coaty, Coleman, Hull & Van Vliet, PLLP, Suite 2110, 8500 Normandale Lake Boulevard, Minneapolis, MN 55437 (for Mutual Savings Bank)
Curt D. Smith, Vincent J. Fahnlander, Moss & Barnett, 4800 Norwest Center, 80 South Seventh Street, Minneapolis, MN 55402 (for Building Materials, Inc.)
James K. Sander, Wagner, Falconer & Judd, Ltd., 2650 IDS Center, 80 South Eighth Street, Minneapolis, MN 55402-2113 (for West Star Electric)
Deno W. Berndt, Warchol, Berndt & Hajek, P.A., Suite 110, 3433 Broadway Street, N.E., Minneapolis, MN 55413-1783 (for Berg Drywall)
Thomas W. Larkin, Saliterman & Siefferman, 1000 Northstar Center East, 608 Second Avenue South, Minneapolis MN 55402 (for Electric Service Company)
Lonny D. Thomas, Lonny D. Thomas, P.A., MidAmerica Bank Building, Suite 120, 6949 Valley Creek Road, Woodbury, MN 55125 (for Anderson-Ladd, Inc.)
Susan Dickel Minsberg, 225 Commerce at the Crossings, 250 Second Avenue South, Minneapolis, MN 55401 (for Creative Lighting)
Lawrence P. Marofsky, Boulevard Plaza Office Suites, 7022 Brooklyn Boulevard, Minneapolis, MN 55429 (for Norgren Painting and Decorating)
Joseph G. Springer, Fredrikson & Byron, P.A., 1100 International Centre, 900 Second Avenue South, Minneapolis, MN 55402 (for Doody Mechanical)
Scott G. Harris, Sandra K. Kensy, Skolnick & Harris, P.A., Suite 200, 510 Marquette Avenue South, Minneapolis, MN 55402 (for Tony Bernardi)
Timothy J. Grande, Mackall, Crounse & Moore, PLC, 1500 AT&T Tower, 901 Marquette Avenue, Minneapolis, MN 55402-2859 (for Robert Johnson)
James W. Rude, Fredrick R. Krietzman, Frommelt & Eide, Ltd., 580 International Centre, 800 Second Avenue South, Minneapolis, MN 55402 (for Verne C. Johnson, et al. and John Anderson, et al.)
Robert J. McGillivray, Oppenheimer, Wolff & Donnelly, Plaza VII, Suite 3400, Minneapolis, MN 55402-1609 (for ADPC Corporation)
Considered and decided by Willis, Presiding Judge, Halbrooks, Judge, and Holtan, Judge.
U N P U B L I S H E D O P I N I O N
These consolidated appeals are from a mechanics' lien foreclosure action on a condominium complex. The district court held that Mutual Savings Bank's mortgage was prior and superior to all mechanics' liens and that Kraus-Anderson's mechanics' liens were prior and superior to all other mechanics' liens. On appeal, appellants Verne and Carol Johnson contend that the trial court erred in its determination that Mutual's mortgage was superior to their interests in condominium unit 920; the Johnsons and appellant Donald McCourtney contend that Mutual knew that a garage unit was included with their purchase of condominium units 760 and 370; and Creative Lighting and Building Materials, Inc., contend that the trial court erred in its determination that Kraus-Anderson's mechanic's lien was superior to their mechanic's lien. We affirm.
The Normandale Lake Condominiums in Bloomington comprise three commercial units, forty-eight residential units, and seventy-two garage stalls. The developer of the complex is David Carlson Companies, Inc. (Carlson).
The Johnsons entered purchase agreements with Carlson to buy two condominium units. After closing on one unit, Carlson defaulted on its financial obligations. At about the same time as Mutual Savings Bank (Mutual) sought to foreclose its mortgage securing an $11.6 million loan to Carlson, Carlson's general contractor, Kraus-Anderson, sued to foreclose its mechanic's lien and to determine the priorities of the various entities holding interests in the property. In this priority proceeding, various entities claim priority over the Mutual mortgage. At the sale foreclosing the Mutual mortgage, ADPC Corporation (ADPC) bought the unit on which the Johnsons had not closed.
ADPC intervened in the priority action and the district court ruled, among other things, that (a) Mutual's mortgage had priority; (b) the Johnsons were entitled to judgment against Carlson for the earnest money paid for the unit; and (c) the Johnsons were entitled to an equitable lien on the unit. Claiming ADPC had purchased its interest in the unit on which the Johnsons had not closed, Mutual asserts it did not participate in the portion of the proceeding involving that parcel.
Unit 760 was purchased by the Johnsons by warranty deed in September 1996. Unit 370 was purchased by McCourtney by warranty deed in October 1996. These units were purchased with the understanding that they would be resold to other buyers at a later date. Specific garage units were not designated in the purchase agreements because it was contemplated that the eventual buyer would select the garage unit. Both Carlson and the purchasers understood that a garage unit was included in the purchase. But the space in the purchase agreement where the garage unit was to be designated was left blank. The collateral assignments of purchase agreement delivered to Mutual with the consent of the purchasers also contained blank spaces where specific garage units should have been designated. Exhibit D to the purchase agreement stated that a garage unit was included in the base price, and the Johnsons and McCourtney paid more than the base price for their units.
Mutual eventually foreclosed on the mortgage and held a foreclosure sale. Mutual bid on one of the residual parcels. It believed that 43 garage units were in that parcel. It is two of these units that the Johnsons and McCourtney wish to recover. In a separate action, the Johnsons sued Mutual to reform the deed for the unit on which they did close, asking that the deed include a garage space.
Grading work on the site first occurred in 1994. In early May 1995, Carlson entered into a standard form construction agreement with Kraus-Anderson. The mortgage with First Federal Bank was executed and recorded on May 22, 1995. Kraus-Anderson began construction in late May 1995, after the execution of the mortgage. The tower was certified to be substantially complete in September 1996. Creative Lighting and BMI did unit finish work on various units including the Johnsons' and McCourtney's. Kraus-Anderson filed its mechanic's lien statements on April 18, 1997. Creative Lighting filed its statements on May 16, 1997; BMI filed its lien statements on March 28, 1997.
D E C I S I O N
On appeal from summary judgment, this court asks two questions: (1) whether there are any genuine issues of material fact and (2) whether the lower court erred in its application of the law. State by Cooper v. French, 460 N.W.2d 2, 4 (Minn. 1990). While this court views the evidence in the light most favorable to the nonmoving party, the nonmovant must produce specific facts that create an issue for trial. Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S. Ct. 2548, 2553 (1986).
I. Unit 920
Respondent Mutual moves to dismiss the unit 920 appeal as moot because Mutual sold its interest in unit 920 to ADPC at the July 1997 foreclosure sale. See In re Inspection of Minn. Auto Specialties, Inc., 346 N.W.2d 657, 658 (Minn. 1984) ("If, pending an appeal, an event occurs which makes a decision on the merits unnecessary or an award of effective relief impossible, the appeal will be dismissed as moot."); In re Application of Minnegasco, 565 N.W.2d 706, 710 (Minn. 1997) (same). Because the foreclosure judgment was not entered until after the redemption period expired, and appellants redeemed solely to preserve their interest in unit 920--they did not redeem voluntarily or to settle their claims--appellants assert that the claim is not moot. But respondent Mutual counters that because there were no priority issues between Mutual and the Johnsons at trial, and Mutual did not defend any interest at trial, the argument is not properly before this court. See State v. Modern Recycling, Inc., 558 N.W.2d 770, 772 (Minn. App. 1997) (issues not raised at trial court will not be reviewed on appeal); Thiele v. Stich, 425 N.W.2d 580, 582 (Minn. 1988) (this court will not entertain new legal theories on appeal).
Furthermore, appellants have not demonstrated what remedy is possible under the circumstances. ADPC acquired all of Mutual's interest in unit 920 in the foreclosure sale. Appellants redeemed and own unit 920 free and clear of encumbrances. Without evidence of an appropriate remedy, appellants' legal claims are moot. See Minnegasco, 565 N.W.2d at 710.
Having determined that the Johnsons' claims are moot, we decline to reach the merits of their reformation action. But we do note that because the Johnsons did not raise an unjust enrichment claim at the trial court level, this claim is improperly before this court. See Thiele, 425 N.W.2d at 582.
II. Garage Stall
The Johnsons and McCourtney contend that Mutual knew that their units were to be conveyed with garage units notwithstanding that the spaces on the purchase agreements where a garage stall unit was to be noted were left blank. Appellants and respondents agree that Nichols v. Shelard Nat'l Bank, 294 N.W.2d 730 (Minn. 1980), is controlling of this case. In Nichols, the supreme court held that a written instrument can be reformed if the following test is met:
(1) there was a valid agreement between the parties expressing their real intentions; (2) the written instrument failed to express the real intentions of the parties; and (3) this failure was due to a mutual mistake of the parties, or a unilateral mistake accompanied by fraud or inequitable conduct by the other party.
Id. at 734. However, "[t]here is a heavy burden on one who would seek reformation of a contract." Theisen's, Inc. v. Red Owl Stores, Inc., 309 Minn. 60, 65, 243 N.W.2d 145, 148 (1976).
Reformation is generally allowed against the original parties to an instrument and those in privity with the original parties. The rule gives way, however, to the intervening rights of persons not parties to the contract.
Manderfeld v. Krovitz, 539 N.W.2d 802, 805 (Minn. App. 1995) (citations omitted), review denied (Minn. Jan. 25, 1996).
In his affidavit, David Carlson agrees that the parties had agreed that a garage unit was to be conveyed along with the two condominium units but that the garage unit numbers were inadvertently excluded from the purchase agreements. All of the other units were conveyed with garage units, and the Bloomington city ordinance required such condominiums to be conveyed with garage units or have off-street parking. Appellants also argue that Mutual knew that garage units were to be conveyed with units 370 and 760, and that the trial court erred in not using this as a basis for allowing the reformation of the contracts. But Mutual purchased the remaining garage stalls in the foreclosure sale with the belief that there were 43 stalls in the sale parcel, a number that included both the Johnsons' and McCourtney's desired stalls. This suggests that Mutual did not know of the intended conveyance of garage stalls with units 370 and 760.
Moreover, the Johnsons and McCourtney stipulated to the terms of the foreclosure sale, including that the garages for units 370 and 760 were to be sold in the foreclosure sale. Finally, appellants, relying on La Mourea v. Rhude, 209 Minn. 53, 295 N.W. 304 (1940), assert that reformation should have been allowed because there is privity between themselves and Mutual. But as the court in La Mourea points out, privity of contract "is but a descriptive term, designating effect rather than cause." Id. at 57, 295 N.W. at 307. Thus, the mere assertion that the parties may have been in privity does not, of itself, entitle appellants to relief.
III. Creative Lighting/BMI
BMI and Creative Lighting assert that because grading for the project had begun before Carlson and First Federal entered into their mortgage, all the mechanics' liens for the project should have been found to be superior to the mortgage, pursuant to Minn. Stat. § 514.05 (1998). Grading work first occurred on the condominium site in 1994. The trial court found that this grading work was done as part of an attempt to prepare the neighboring townhouse site for construction, not to start construction on the condominium tower involved in this case. Relying on E.H. Renner & Sons v. Sherburne Homes, Inc., 458 N.W.2d 177, 179 (Minn. App. 1990), the trial court reasoned that the grading work, because it did not bear directly on the construction of the building--especially since construction began nearly a year later and the site was regraded before commencement of construction--could not be the first actual and visible improvement on the ground.
Creative Lighting and BMI do not directly challenge the trial court's determinations that grading was done primarily for the benefit of the neighboring townhouse construction project. But they assert that the grading was also done, in part, to bring the condominium tower site into compliance with the elevation approved by the City of Bloomington.
The trial court determined that the work of the unit finish subcontractors was separate from the work done by Kraus-Anderson. BMI and Creative Lighting contend that all of the work was part of a single improvement notwithstanding various separate contracts. BMI and Creative Lighting rely on Witcher Construction Co. v. Estes II Ltd. Partnership, 465 N.W.2d 404 (Minn. App. 1991), to support their argument.
We find no error in the trial court's determination that Kraus-Anderson's completion of the physical structure and the unit finishers' work within the individual units were separate projects in light of the fact that BMI and Creative Lighting filed separate lien statements for each unit.
Finally, BMI and Creative Lighting contend that the trial court's determination that they failed to comply with statutory prelien notice requirements was erroneous. BMI admits that it is covered by the prelien notice requirements of Minn. Stat. § 514.011, subd. 2 (1998). But BMI contends that one of the exceptions to the prelien notice rule should apply. It contends that either subdivision 4b (requiring no notice for multiple dwellings of more than four units) or 4c (requiring no notice for improvements to real property that is partially or wholly nonresidential in use) should apply.
The trial court determined that these exceptions are inappropriate where the liens are asserted against individual units. Here, finish work was contracted for on a unit-by-unit basis, making the multiple dwelling exception and the nonresidential use exception inapplicable.
Creative Lighting contends that whether the Johnsons and McCourtney were "owners"(1) entitled to prelien notice was a disputed fact, making summary judgment inappropriate. A holder of a recorded purchase agreement of registered land is an owner. See Dolder v. Griffin, 323 N.W.2d 773 (Minn. 1982). But see Mill City Heating & Air Conditioning Co. v. Nelson, 351 N.W.2d 362, 365 (Minn. 1984) ("We hold * * * that a purchaser of registered land under an unrecorded purchase agreement who is not in possession is not an 'owner' for the purposes of the prelien notice under the mechanics lien statute").
In any event, Creative Lighting agrees that it would have been required to give notice if it knew of the Johnsons' and McCourtney's purchase agreements. See, e.g., Mill City, 351 N.W.2d at 365 ("We see no reason, * * * when a subcontractor-materialman knows that a person has a purchaser's interest in registered land, that the subcontractor should not be required to give that person a prelien notice."). The trial court determined that Creative Lighting had actual knowledge of the purchase agreements. Facts in the record that support the trial court's conclusion are that some of the buyers were included on the shipping invoices, Creative Lighting admitted that bids were made directly to the Johnsons and McCourtney, and Creative Lighting's sales associates were aware that the units had purchasers and that Creative Lighting would not be paid until closing.
We find no error in the trial court's determination that, as unit finish contractors, Creative Lighting's and BMI's interests were junior to the Johnsons' and McCourtney's interests.
Affirmed; motion granted.
* Retired judge of the district court, serving as judge of the Minnesota Court of Appeals by appointment pursuant to Minn. Const. art. VI, § 10.
1. Minn. Stat. § 515.011, subd. 5 (1998), defines owners as:
[T]he owner of any legal or equitable interest in real property whose interest in the property (1) is known to one who contributes to the improvement of the real property, or (2) has been recorded or filed for record if registered land, and who enters into a contract for the improvement of the real property.