Action Mechanical v. Deadwood Historic
| Decision Date | 02 October 2002 |
| Docket Number | No. 22160.,22160. |
| Court | South Dakota Supreme Court |
| Parties | ACTION MECHANICAL, INC., a South Dakota Corporation, Plaintiff and Appellee, v. The DEADWOOD HISTORIC PRESERVATION COMMISSION; Mitch Peck, d/b/a Temperature Control; Ronald Digges; Dennis Digges; Donna Digges, Pepsi Cola Bottling Company; RC Western Meats; and the State of South Dakota Department of Revenue, Defendants, and H & N Electric, Defendant and Appellee, and Damon Reel, Donna Wynia, Dwight Thomas, and Randy Beckman, d/b/a Four Square Partnership, a South Dakota General Partnership, Defendants and Third Party Plaintiffs and Appellants, v. Iron Horse Inn, Inc., Third Party Defendant. |
Barton R. Banks of Banks, Johnson, Colbath, Sumner & Kappelman, Rapid City, South Dakota, Attorneys for appellee Action Mechanical.
Robert A. Martin, Rapid City, South Dakota, Attorney for appellee, H & N Electric.
Brad P. Gordon and Michelle K. Percy of Fuller, Tellinghuisen, Gordon and Percy, Lead, South Dakota, Attorneys for appellants.
[¶ 1.] Four Square Partnership (Four Square) appeals the judgment of the trial court in favor of Action Mechanical, Inc. (Action Mechanical) and H & N Electric, Inc. (H & N). Four Square claims principles of equity preclude Action Mechanical and H & N from prevailing. We affirm.
[¶ 2.] Action Mechanical is a family owned corporation located in Rapid City, South Dakota. The president of Action Mechanical is Dale Sheesley. H & N, also located in Rapid City, is an electrical contracting corporation. The president of H & N is Harlan Nielsen. Four Square Partnership is a general partnership in Deadwood, South Dakota. The partners are Damon Reel, Donna Wynia, Dwight Thomas and Randy Beckman.
[¶ 3.] In 1989 Four Square bought a building in Deadwood for $75,000 for use as an auto parts store. The development of Deadwood gambling soon made the area too congested for a retail store. In August 1994, Four Square entered into a lease with Lana Coffman. There were discussions about starting a hotel and casino on Four Square's land. Later in April 1995, a corporation called Iron Horse Inn (Iron Horse) was formed with the intent to start a hotel and casino. Members of the new corporation included Damon Reel (a partner in Four Square), Dale Sheesley (president of Action Mechanical), Harlan Nielsen (president of H & N), Larry Lamb, Lana Coffman and others. Four Square then novated its lease with Coffman and named Iron Horse the new lessee.
[¶ 4.] The lease required Iron Horse to make not less than $200,000 in improvements to the property. The lease also prohibited Iron Horse from allowing liens to attach to the property. Under the lease, Four Square retained the right to post notices of non-liability for labor and materials furnished and the right of approval on all construction plans. Four Square then appointed Iron Horse as its attorney in fact to acquire necessary zoning and building permits.
[¶ 5.] At the first shareholder's meeting of the newly formed corporation, Iron Horse Inn, all shareholders were appointed as directors. Damon Reel was elected treasurer. Lana Coffman was elected president and Larry Lamb was named construction manager. The shareholders also signed the Smith Block Agreement allowing shareholders and investors to contribute cash or services in exchange for stock.
[¶ 6.] After taking over the lease, Iron Horse solicited bids to begin construction on the hotel and casino. Action Mechanical was the low bidder on plumbing and other work in the amount of $339,000.1 Action Mechanical's president, Sheesley, agreed to a reduction of the bid by $50,000 in exchange for 50,000 shares of stock. H & N agreed to provide electrical services. H & N's president, Nielsen, also agreed that payment for the first $50,000 of electrical work would be in the form of 50,000 shares of stock.
[¶ 7.] As work started on the hotel and casino, Action Mechanical made periodic requests for payment. Iron Horse obtained a low-interest loan through the Deadwood Historical Society in the amount of $250,000. Out of that loan, Action Mechanical was paid $213,800. Iron Horse eventually went into default on this loan and Four Square has since taken it over.
[¶ 8.] Iron Horse was unable to attract more investors to obtain new capital. The corporation was unable to pay its monthly lease payments and, subsequently, Four Square started issuing default notices. However, each time a default notice was issued, Four Square would allow Iron Horse an extension on the project. On four separate occasions, Four Square accepted 15,000 shares of penalty stock in lieu of delinquent rent, which eventually totaled 60,000 shares. Four Square gave Iron Horse a total of nine extensions.
[¶ 9.] By March 28, 1996, the hotel and casino project was 90 percent complete. Everyone involved from Four Square to Iron Horse to Action Mechanical and H & N knew the financial condition of the project was not good. Action Mechanical and H & N felt that if they did not complete their respective work the hotel and casino would not open and they would not get paid.
[¶ 10.] By April 1996 the situation became worse. Four Square stopped granting extensions on the lease agreement. In November, Four Square retook possession of the completed hotel and casino. Ultimately, Action Mechanical and H & N concluded that compensation for their services would not be forthcoming and they both filed respective mechanic's liens which precipitated the current dispute.
[¶ 11.] Action Mechanical sued to foreclose its mechanic's lien and for unjust enrichment. The suit named all parties who claimed an interest in the Iron Horse Inn property. H & N's mechanic's lien was dismissed because it was not filed within 120 days after the date of last service on the project. Following a court trial, Action Mechanical was awarded a judgment against Four Square foreclosing its mechanic's lien and for unjust enrichment in the amount of $174,267.02. The trial court also awarded H & N a judgment against Four Square for unjust enrichment in the amount of $109,259.60. Four Square appeals. We affirm.
[¶ 12.] Findings of fact will not be set aside unless they are clearly erroneous. SDCL 15-6-52(a). A finding of fact is clearly erroneous if we are left with a definite and firm conviction that a mistake has been made. In re Dokken, 2000 SD 9, ¶ 10, 604 N.W.2d 487, 490-491. We review a trial court's conclusions of law de novo, giving no deference to the trial court's conclusions. Osloond v. Osloond, 2000 SD 46, ¶ 6, 609 N.W.2d 118, 121.
[¶ 13.] Foreclosure of a mechanic's lien is an action in equity. Franksen v. Crossroads Joint Venture, 245 Neb. 863, 515 N.W.2d 794, 798 (Neb.1994); Schumacher Elec., Inc. v. DeBruyn, 604 N.W.2d 39, 41 (Iowa 1999); Dane Const. v. Royal's Wine & Deli, 192 Mich.App. 287, 480 N.W.2d 343, 345 (Mich.App.Ct.1991). An action to recover for unjust enrichment is an action in equity. Himrich v. Carpenter, 1997 SD 116, ¶ 21, 569 N.W.2d 568, 573.
[¶ 14.] This Court's standard of review for cases in equity is abuse of discretion. Mattson v. Rachetto, 1999 SD 51, ¶ 9, 591 N.W.2d 814, 817 (citations omitted). "`We determine that an abuse of discretion occurred only if no judicial mind, in view of the law and the circumstances of the particular case, could reasonably have reached such a conclusion.'" Id. (quoting Gilkyson v. Wheelchair Express, Inc., 1998 SD 45, ¶ 6, 579 N.W.2d 1, 3). Accord, Dacy v. Gors, 471 N.W.2d 576, 580 (S.D.1991)
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[¶ 15.] Whether principles of equity preclude the award of judgments to Action Mechanical and H & N.
[¶ 16.] Four Square appeals the trial court's award of damages to Action Mechanical and H & N. Four Square argues the judgments should be set aside under the equity doctrines of unclean hands and equitable estoppel. The trial court found that Action Mechanical was entitled to a judgment foreclosing its mechanic's lien and based on unjust enrichment. It also found that H & N had failed to perfect its lien, but Four Square would be unjustly enriched if it were allowed to retain the benefits conferred by H & N.
[¶ 17.] South Dakota allows persons who provide labor and materials to file mechanic's liens to ensure that they get paid. See SDCL ch. 44-9. "The purpose of mechanic's lien laws is to provide security or protection to persons who improve the property of others by furnishing materials and labor." Lytle v. Morgan, 270 N.W.2d 359, 361 (S.D.1978) (citations omitted). In South Dakota, a mechanic's lien not only attaches to the actual structure, but to the land upon which the structure is located. Amert Const. Co. v. Spielman, 331 N.W.2d 307, 311 (S.D.1983) (citing Atlas Lumber Co. v. Semmler, 48 S.D. 541, 205 N.W. 376 (1925)). It also allows owners to protect themselves against the filing of mechanic's liens by posting notices of non-liability.2
[¶ 18.] The lease provided that the tenant, Iron Horse, would prevent the attachment of any mechanic's lien. However, parties to contracts can waive certain contractual provisions.
The doctrine of waiver is applicable where one in possession of any right, whether conferred by law or by contract, and with full knowledge of the material facts, does or forbears the doing of something inconsistent with the exercise of the right. To support the defense of waiver, there must be a showing of a clear, unequivocal and decisive act or acts showing an intention to relinquish the...
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