First Union Nat. Bank v. RPB 2, LLC, 20030021.

• Decision Date: 28 January 2004
• Docket Number: No. 20030021.,20030021.
• Citation: 2004 ND 29,674 N.W.2d 1
• Parties: FIRST UNION NATIONAL BANK as Indenture Trustee, Plaintiff and Appellee v. RPB 2, LLC, a Colorado Limited Liability Company, d/b/a Palace Arms Hotel and Bismarck Hotel; Robert P. Brown; WML Services Corporation; David Schumacher; Alexandra K. Johnson; Mariner Construction, Inc.; Dakota Boys Ranch; Workforce Safety & Insurance; North Dakota State Tax Commissioner; United States of America; Bismarck Capital, LLC; Robert J. Pepe and Claire Pepe; Don Hermanson, dba Able Painting & Contracting; any person in possession; and all persons unknown, claiming any estate or interest in, or lien or encumbrance upon, the real estate described in the Complaint, Defendants. Don Hermanson, dba Able Painting & Contracting, Defendant and Appellant.
• Court: North Dakota Supreme Court

674 N.W.2d 1

2004 ND 29

FIRST UNION NATIONAL BANK as Indenture Trustee, Plaintiff and Appellee v. RPB 2, LLC, a Colorado Limited Liability Company, d/b/a Palace Arms Hotel and Bismarck Hotel; Robert P. Brown; WML Services Corporation; David Schumacher; Alexandra K. Johnson; Mariner Construction, Inc.;

Dakota Boys Ranch; Workforce Safety & Insurance; North Dakota State Tax Commissioner; United States of America; Bismarck Capital, LLC; Robert J. Pepe and Claire Pepe; Don Hermanson, dba Able Painting & Contracting; any person in possession; and all persons unknown, claiming any estate or interest in, or lien or encumbrance upon, the real estate described in the Complaint, Defendants.

Don Hermanson, dba Able Painting & Contracting, Defendant and Appellant.

No. 20030021.

Supreme Court of North Dakota.

January 28, 2004.

Lawrence R. Klemin (argued), and Steven M. Bitz (appeared), third-year law student, Bucklin, Klemin & McBride, Bismarck, ND, for plaintiff and appellee First Union National Bank.

Michael J. Maus, Hardy, Maus & Nordsven, P.C., Dickinson, ND, for defendant and appellant Don Hermanson, dba Able Painting & Contracting.

KAPSNER, Justice.

[¶ 1] Don Hermanson, doing business as Able Painting and Contracting ("Hermanson"), appeals the district court's summary judgment dismissal of his mechanic's lien. The district court concluded the plain language of the statute did not require consideration to waive a lien and Hermanson signed an effective lien waiver. We conclude the district court did not err when it dismissed Hermanson's claim of a mechanic's lien on the Palace Arms Hotel ("hotel") located in Bismarck, North Dakota, because Hermanson signed a valid lien waiver.

[¶ 2] On February 14, 2000, Hermanson began renovation work in the hotel pursuant to a series of eleven contracts signed by Hermanson and Robert Brown, doing business as RPB 2, LLC ("Brown"). Hermanson continued work on the hotel through October 20, 2001. During this time, Hermanson received no payment from Brown for work on the project, although Brown promised future payment to Hermanson with funds to be secured through refinancing efforts or sale of the hotel.

[¶ 3] Brown purchased the hotel subject to a mortgage which was later assigned to First Union National Bank ("First Union"), the plaintiff in this action claiming priority over Hermanson. First Union's mortgage was filed on March 26, 2001.

[¶ 4] On September 13, 2001, Hermanson filed a Notice of Intention to Claim a Mechanic's Lien on the hotel. Shortly thereafter, Brown asked Hermanson to sign a mechanic's lien release so Brown could secure refinancing or sell the hotel and pay Hermanson from the proceeds. Hermanson filed a Release of Notice of Intention to File Mechanic's Lien on October 5, 2001. The release, in pertinent part, stated, "Hermanson ... releases the hereinafter described property from potential claim to a Mechanic's Lien for any services arising prior to the date of this Release." Closing on the financing never occurred and Brown defaulted on the mortgage to First Union. First Union filed foreclosure proceedings on December 14, 2001.

[¶ 5] On November 23, 2001, Hermanson filed a Notice of Intent to File a Mechanic's Lien and he filed an Amended Notice of Intent to File Mechanic's Lien on December 14, 2001. On January 16, 2002, Hermanson again filed a mechanic's lien against the hotel. He now claims priority over First Union's mortgage because visible improvements to the hotel began before First Union filed its mortgage and the mechanic's lien release he filed on October 5, 2001, was invalid due to failure of consideration.

[¶ 6] The district court found Hermanson could not re-assert his mechanic's lien. The district court found Hermanson signed a valid lien release, and it did not require consideration to be valid because the plain language of the North Dakota statute does not require consideration. We agree.

I.

[¶ 7] This is an appeal from summary judgment. This Court reviews summary judgment de novo on the entire record. Collette v. Clausen, 2003 ND 129, ¶ 9, 667 N.W.2d 617. Summary judgment is a "procedural device for promptly and expeditiously disposing of an action without a trial if either party is entitled to judgment as a matter of law and no dispute exists as to either the material facts or the reasonable inferences to be drawn from undisputed facts, or if resolving the factual disputes will not alter the result." Northern Plains Alliance v. Mitzel, 2003 ND 91, ¶ 8, 663 N.W.2d 169 (citing Skjervem v. Minot State Univ., 2003 ND 52, ¶ 4, 658 N.W.2d 750). The moving party must establish there is no genuine issue of material fact and he is entitled to judgment as a matter of law. Mitzel, at ¶ 8. The court will view the evidence in a light most favorable to the nonmoving party. Id. The court gives the benefit of all favorable inferences which can reasonably be drawn from the evidence to the nonmoving party. Id. Summary judgment is appropriate when a party fails to establish the existence of a factual dispute he would have to prove at trial. Id.

II.

[¶ 8] A party entitled to a mechanic's lien may waive that right by a signed writing. N.D.C.C. § 35-27-02. A party may also be estopped from asserting a mechanic's lien by conduct constituting estoppel. See Peterson Mech., Inc. v. Nereson, 466 N.W.2d 568, 571 (N.D.1991)

(citing Sussel Co. v. First Fed. Sav. and Loan Ass'n of St. Paul, 304 Minn. 433, 232 N.W.2d 88 (1975)). The facts of this case do not present an estoppel situation. This Court has previously held that a lien waiver is the voluntary and intentional relinquishment of a known right or privilege. Peterson, at 571. The presence of a valid lien waiver precludes the assertion of a mechanic's lien. Id.

[¶ 9] The issue is whether consideration is required for an effective lien waiver. The district court concluded, as a matter of law, the plain language of the North Dakota mechanic's lien statute did not require consideration for a valid lien waiver. The applicable North Dakota statute provides:

Any person who improves real estate by the contribution of labor, skill, or materials, whether under contract with the owner of such real estate or under contract with any agent, trustee, contractor, or subcontractor of the owner, has a lien upon the improvement and upon the land on which it is situated or to which it may be removed for the price or value of such contribution. Provided, however, that the amount of the lien is only for the difference between the price paid by the owner or agent and the price or value of the contribution. If the owner or agent has paid the full price or value of the contribution, no lien is allowed. Provided further that if the owner or an agent of the owner has received a waiver of lien signed by the person who improves the real estate by the contribution of labor, skill, or materials, no lien is allowed.

Any person who extends credit or makes a contract with any agent, trustee, contractor, or subcontractor of the owner for the improvement of real estate, shall, upon demand, have the right to request and secure evidence of the legal description of the real estate upon which the improvement is located, including the name of the title owner of the real estate.

N.D.C.C. § 35-27-02 (emphasis added).

[¶ 10] This is a case of first impression. This Court has not yet ruled on whether consideration is required for a valid lien waiver. This Court first determines if a statute is ambiguous, and if so, we look to construction aids. N.D.C.C. § 1-02-39. The statute does not state consideration is required for a lien waiver. N.D.C.C. § 35-27-02. To the extent the statute can be considered ambiguous because of this omission, the legislative history is not helpful. Legislative history on this issue does not directly state whether consideration for a lien waiver was contemplated at the time the current mechanic's lien statute legislation was proposed or subsequently modified. Hearing on S.B. 2300 Before the Comm. on Industry, Business and Labor, 46th N.D. Legis. Sess. (January 31, 1979); Hearing on S.B. 2300 Before the Comm. on Industry, Business and Labor, 46th N.D. Legis. Sess. (March 12, 1979).

[¶ 11] Hermanson argues North Dakota should read into the statute that consideration is necessary for an effective lien waiver, because Minnesota requires consideration for an effective lien waiver. We disagree. Minnesota's lien statute is distinct from North Dakota's statute, both in language and prior interpretive case law.

[¶ 12] Historically, Minnesota law requires consideration for a mechanic's lien waiver to be valid. See Sussel Co. v. First Fed. Sav. and Loan Ass'n of St. Paul, 304 Minn. 433, 232 N.W.2d 88, 90 (1975)

. Minnesota's lien statute does not specifically state consideration is required for a valid waiver. Minn.Stat. § 514.07. However, Minnesota has substantial case law on the subject and has long held consideration is required for a valid lien waiver. Sussel, 232 N.W.2d at 90; McLellan v. Hamernick, 264 Minn. 345, 118 N.W.2d 791 (1962); Project Plumbing Co. v. St. Croix Prop., Inc., 297 Minn. 409, 211 N.W.2d 873 (1973); Cook v. Metal Bldg. Prod., Inc., 297 Minn. 330, 211 N.W.2d 371 (1973); Abbott v. Nash, 35 Minn. 451, 29 N.W. 65 (1886). North Dakota has no such history requiring consideration for a valid lien waiver.

[¶ 13] In contrast to Minnesota's case law in which consideration is required, Wisconsin's statute does not require consideration for an agreement to be binding.¹ Wisconsin's mechanic's lien statute provides:

Any document signed by a lien claimant or potential claimant and purporting to be a waiver of construction lien rights under this subchapter, is valid and binding as a waiver whether or not consideration was paid therefor and whether the document was signed before or after the labor or material was furnished or contracted for. Any ambiguity in such document shall be construed against the person signing it.

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