Mill City Heating & Air Conditioning Co. v. Nelson

• Decision Date: 13 July 1984
• Docket Number: No. CX-83-599,CX-83-599
• Citation: 351 N.W.2d 362
• Court: Minnesota Supreme Court
• Parties: MILL CITY HEATING & AIR CONDITIONING CO., a Minnesota corporation, Appellant, v. Robert P. NELSON, Vicky Ann Nelson, Banco Mortgage Company, an Iowa corporation, Trans America Life Insurance and Annuity Company, a California corporation, Bartholomew J. Baker, d/b/a Baker Electric, Zagar Construction Co., Inc., a Minnesota corporation, Respondents, Thompson Lumber Company, a Minnesota corporation, Appellant.

Page 362

351 N.W.2d 362

MILL CITY HEATING & AIR CONDITIONING CO., a Minnesota

corporation, Appellant, v. Robert P. NELSON, Vicky Ann Nelson, Banco Mortgage Company,

an Iowa corporation, Trans America Life Insurance and

Annuity Company, a California corporation, Bartholomew J.

Baker, d/b/a Baker Electric, Zagar Construction Co., Inc., a

Minnesota corporation, Respondents,

Thompson Lumber Company, a Minnesota corporation, Appellant.

No. CX-83-599.

Supreme Court of Minnesota.

July 13, 1984.

Syllabus by the Court

1. A purchaser of registered land under an unrecorded purchase agreement and not in possession is not an "owner" entitled to the prelien notice of the mechanics lien law.

2. If the subcontractor-materialman knows of the ownership interest of a purchaser of registered land under an unrecorded purchase agreement, even though the purchaser is not in possession, the purchaser qualifies as an "owner" to whom the subcontractor-materialman must give a prelien notice.

Sidney L. Brennan, Jr., Minnetonka, for Mill City.

Patrick J. McLaughlin, Minneapolis, for Thompson Lumber Co.

Michael D. Quayle, Minneapolis, for respondents.

Considered and decided by the court en banc without oral argument.

SIMONETT, Justice.

This appeal raises again the issue of who is an "owner" entitled to the prelien notice in our mechanics lien law. In this case involving registered land, we hold that a purchaser not in possession under an unrecorded purchase agreement is not an owner and reverse, but remand on the issue of whether prelien notice should still have been given because the materialmen knew of the unregistered purchaser's interest.

Zagar Construction Co., Inc., was the registered owner of a lot in Beaverwood Addition, Minnetonka. In September 1979, it entered into an agreement with defendant-respondents Robert P. Nelson and Vicky Ann Nelson to construct a house on the lot and sell the premises to the Nelsons. The purchase agreement was not filed for record.

Shortly thereafter Zagar started construction. At the request of Zagar, plaintiff-appellant Mill City Heating & Air Conditioning Co. and defendant-appellant Thompson Lumber Company furnished materials for the house. Thompson Lumber furnished its first items on November 29, 1979; Mill City furnished its first items on January 3, 1980. Neither served a prelien notice on the Nelsons. Thompson Lumber completed its work in May 1980 and thereafter timely filed its mechanics lien statement for $39,702.26. Mill City completed its work in April 1980 and timely filed its mechanics lien statement for $7,077.

During the construction period, Zagar closed its sale agreement with Mr. and Mrs. Nelson. On February 22, 1980, the Nelsons registered their warranty deed from Zagar. Also registered was Nelsons' mortgage to defendant-respondent Banco Mortgage Company. Consequently, when the materialmen filed their mechanics liens in May and June, the Nelsons appeared as registered owners of the property and the lien claimants so indicated in their lien statements.

In October 1980, plaintiff-appellant Mill City commenced this action to foreclose its mechanics lien. Thompson Lumber, made a party defendant to the action, also sought foreclosure of its lien. Defendants Nelson, Banco Mortgage Company, and Trans America Life Insurance and Annuity Company (assignee of the mortgage) moved for summary judgment on the grounds that the mechanics liens were invalid for failure of the materialmen to have served prelien notices on the Nelsons. The trial court, "with reservations," granted summary judgment, believing the rationale of Dolder v. Griffin, 323 N.W.2d 773 (Minn.1982), was controlling. The two materialmen appeal.

A subcontractor, such as Mill City or Thompson Lumber Company here, must "cause to be given to the owner or his authorized agent" a prelien notice within 45 days after the subcontractor has first furnished materials. Minn.Stat. § 514.011, subd. 2 (1982). ¹ The prelien notice is "a necessary prerequisite to the validity of any claim or lien." Id. The notice advises the owner of the materialman's identity and that the materialman may file a lien if not paid by the contractor.

The issue, then, is whether a purchaser under an unrecorded purchase agreement for registered land is an "owner" within the terms of Minn.Stat. § 514.011 (1982), the prelien notice statute, and thereby entitled to a prelien notice.

In Dolder, we held that purchasers under an unrecorded purchase agreement for unregistered land were "owners" and were entitled to a prelien notice. We are now told in this appeal that the real estate in Dolder was, in fact, registered land. Even so, this fact was not presented to us in Dolder and, therefore, Dolder did not decide the issue before us now.

Registered land stands on a different footing than unregistered land.

The purpose of the Torrens law is to establish an indefeasible title free from any and all rights or claims not registered with the registrar of titles, with certain unimportant exceptions, to the end that anyone may deal with such property with the assurance that the only rights or claims of which he need take notice are those so registered.

In re Juran, 178 Minn. 55, 58, 226 N.W. 201, 202 (1929). To carry out this purpose the Torrens law provides:

No voluntary instrument of conveyance purporting to convey or affect registered land, except a will, and a lease for a term...