First Minnesota Bank v. RTS Development LLC

• Decision Date: 25 September 2008
• Docket Number: No. 27-CV-08-15629.,27-CV-08-15629.
• Parties: First Minnesota Bank, a Minnesota, bank corporation, Plaintiff, v. RTS Development LLC, Earthwork Technology, et al. Defendants.
• Court: Minnesota District Court

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First Minnesota Bank, a Minnesota, bank corporation, Plaintiff, v. RTS Development LLC, Earthwork Technology, et al. Defendants.

No. 27-CV-08-15629.

District Court of Minnesota, Fourth Judicial District, Hennepin County.

September 25, 2008.

ORDER DENYING DEFENDANT AND PLAINTIFF'S MOTIONS FOR SUMMARY JUDGMENT AND MEMORANDUM OF LAW

Gary Larson, Judge of District Court.

The above-entitled matter came before the Honorable Gary Larson, Judge of Hennepin County District Court, on September 25, 2008, on Plaintiff and Defendant Earthwork's cross motions for summary judgment.

Heather Marks, Esq., appeared for and on behalf of First Minnesota Bank and Kristine Kubes, Esq., appeared for and on behalf of Defendant, Earthwork Technology.

Based upon the files and proceedings herein, the Court makes the following:

ORDER

1. Defendant and Plaintiff's Motions for Summary Judgment are DENIED.

2. The attached memorandum is incorporated herein.

MEMORANDUM

I. FACTUAL BACKGROUND

This case was originally an action by First Minnesota Bank ("Plaintiff") against a number of Defendants. The claims against all other Defendants have been resolved and the only remaining issue is lien priority between Plaintiff and Defendant Earthwork Technologies ("Earthwork").

In 1994, NW Ventures purchased property in the City of Brooklyn Park, Hennepin County, Minnesota. Earthwork was hired to clear and grub wooded area on the property. This work was done from July to October of 2005. On November 17, 2005, NW Ventures signed an authorization of work directing Earthwork to install piezometers on the north portion of the property.

Earthwork installed the piezometers and put up fencing around each of the wells on November 22-23, 2005. Plaintiff provided Earthwork a $200,000 line of credit to perform this work and other work related to the wetland restoration. Earthwork sent an invoice to NW Ventures in December 2005, indicating that the work was complete. Aerial photographs, taken by the Hennepin County Department of Property Records, in April 2006, showed the visible piezometers.

On April 27, 2006, NW Ventures sold the southern portion of the property to RTS. Plaintiff loaned RTS $4,000,000, pursuant to a loan agreement. To secure the repayment of the Loan Note, on the same day, RTS executed and delivered to Plaintiff a Combination Mortgage, Security Agreement, and Fixture Financing Statement, pursuant to which RTS granted Plaintiff a first lien, mortgage, and security interest in and to real property located in Hennepin County, Minnesota. The mortgage to RTS was recorded in the Office of the Hennepin County Recorder on April 27, 2006.

On October 30, 2006, Earthwork recorded a mechanic's lien on the southern portion of the property for work already performed. Earthwork similarly recorded a mechanics lien on the northern portion of the property on November 15, 2007. Both liens indicate that Earthwork's first date of work on the property was June 14, 2006. Earthwork, however, claims that its first work was done in November 2005. The parties dispute whether Earthwork's work was lienable work and whether Plaintiff satisfied its duty of due diligence to discover visible work on the property and when Earthwork completed its work on the property and whether it recorded the first mechanic's lien within the statutory period. Both Plaintiff and Defendant brought motions for summary judgment on the issue of lien priority.

II. LEGAL ANALYSIS

A. Standard of review.

When considering a motion for summary judgment, the district court must determine if genuine issues of material fact exist. Nord v. Herreid, 305 N.W.2d 337, 339 (Minn. 1981). Whether there are genuine issues of material fact is to be determined by a close review of the pleadings, depositions, answers to interrogatories and admissions on file, together with any affidavits. Minn. R. Civ. P. 56.03. A fact is material only if its resolution will affect the outcome of the case. "A material fact is one of such a nature as will affect the result or outcome of the case depending on its resolution." Zappa v. Fahey, 245 N.W.2d 258, 259-60 (Minn. 1976).

B. Genuine issues of material fact exist.

Summary judgment is not appropriate where genuine issues of material fact exist. In this case, several issues of material fact are present. The first is whether the work done by Earthwork constituted a preliminary or permanent improvement to the land. Whether work performed constitutes an improvement within the scope of Minnesota Statute § 514.01 (defining when a mechanic's lien is established) is a mixed question of fact and law. Kloster-Madsen, Inc. v. Tafi's, Inc., 226 N.W.2d 603, 607 (1975); NW Wholesale Lumber, Inc. v. Citadel Co., 457 N.W.2d 244, 249 (Minn. Ct. App. 1990).

Case law defines an improvement as "a permanent addition to or betterment of real property that enhances its capital value and that involves the expenditure of labor or money and is designed to make the property more useful or valuable as distinguished from ordinary repairs. To such definition must be added its implicit definition in § 514.01." Kloster-Madsen, 226 N.W.2d at 607 (internal citation omitted). "In essence, this statute makes any contribution to real property of labor, skill, material,...