Premier Bank v. Becker Dev., LLC, Nos. A08-1252, A08-1700.

• Court: Minnesota Supreme Court
• Writing for the Court: DIETZEN
• Citation: Premier Bank v. Becker Dev., LLC, 785 N.W.2d 753 (Minn. 2010)
• Decision Date: 22 July 2010
• Docket Number: Nos. A08-1252, A08-1700.
• Parties: PREMIER BANK, Appellant, v. BECKER DEVELOPMENT, LLC, et al., Respondents, Nancy C. Buehler, et al., Respondents, Pamela J. Noll, Respondent, Bauerly Brothers, Inc., Respondent, Kuechle Underground, Inc., Respondent, John Oliver & Associates, Inc., Respondent, and Premier Bank, Appellant, v. Boone Builders, Inc., et al., Respondents, Kuechle Underground, Inc., Respondent, John Oliver & Associates, Inc., defendant and third-party plaintiff, Respondent, v. Boone Family Investments, LLC, et al., third-party defendants, Respondents.

785 N.W.2d 753

PREMIER BANK, Appellant,

v.BECKER DEVELOPMENT, LLC, et al., Respondents,Nancy C. Buehler, et al., Respondents,Pamela J. Noll, Respondent,Bauerly Brothers, Inc., Respondent,

Kuechle Underground, Inc., Respondent,

John Oliver & Associates, Inc., Respondent,

and

Premier Bank, Appellant,

v.Boone Builders, Inc., et al., Respondents,Kuechle Underground, Inc., Respondent,John Oliver & Associates, Inc., defendant and third-party plaintiff, Respondent,

v.Boone Family Investments, LLC, et al., third-party defendants, Respondents.

Nos. A08-1252, A08-1700.

Supreme Court of Minnesota.

July 22, 2010.

Syllabus by the Court

1. When a lien claimant elects to file a blanket lien pursuant to Minn.Stat. § 514.09 (2008), one lien is created that encumbers the whole area improved, and the amount of the lien is spread pro rata against each lot subject to the lien.

2. A blanket lien created under section 514.09 must be enforced as one lien against the whole area improved for theentire amount of the lien. Conversely, the lien claimant may not enforce a blanket lien against less than all of the property subject to the lien.

Katherine M. Melander, Stephen F. Buterin, Coleman, Hull & van Vliet, PLLP, Minneapolis, MN; and Scott S. Payzant, Thomas C. Atmore, Leonard, O'Brien, Spencer, Gale & Sayre, Ltd., Minneapolis, MN, for appellant Premier Bank.

Aaron A. Dean, Jesse R. Orman, Fabyanske, Westra, Hart & Thomson, PA, Minneapolis, MN, for respondent Kuechle Underground, Inc.

Bradley N. Beisel, David J. Krco, Beisel & Dunlevy, PA, Minneapolis, MN, for amicus curiae Minnesota Land Title Association.

OPINION

DIETZEN, Justice.

In this consolidated action, appellant Premier Bank brought a lawsuit to foreclose its development mortgage (development mortgage action), and another lawsuit to foreclose three construction mortgages (construction mortgage action) arising out of a residential development project. The general contractor, respondent Kuechle Underground, Inc. (Kuechle), filed a blanket mechanic's lien under Minn.Stat. § 514.09 (2008), against the 59 lots of the project, and sought to foreclose the lien against the three model-home lots of the project upon which it enjoyed a first-priority lien. Both parties moved for summary judgment and the district court, among other things, granted Premier Bank a decree of foreclosure in the development mortgage action and for the 59 lots in the construction mortgage action, except for the three model-home lots. The district court granted Kuechle a decree of foreclosure against the three model-home lots, concluding that section 514.09 allowed Kuechle to foreclose its entire lien against the three model-home lots.¹ The court of appeals affirmed the district court's ruling that section 514.09 allowed Kuechle to foreclose its blanket mechanic's lien against less than the 59 lots that are property subject to the lien. Subsequently, we granted review. Because we conclude that section 514.09 does not allow a lien claimant to foreclose a blanket lien against less than all of the property subject to the lien, we reverse and remand.

The material facts are undisputed. River Bend is a residential housing development located on 40 acres in Becker, Minnesota. The project originally contemplated developing the property into approximately 150 lots in three phases.

In September 2005, Premier Bank entered into a loan agreement with Becker Development, LLC (Becker), in which Premier Bank agreed to lend Becker $3.2 million for the purchase of the land and the cost of the site work required to develop the land. Becker executed a promissory note in favor of Premier Bank, and Becker and Boone Family Investments, LLC, jointly executed a mortgage to secure the loan. The mortgage was recorded in September 2005.

In February 2006, Premier Bank entered into three loan agreements with Boone Builders, Inc., for the construction of three model homes, each on its own lotin the project, in the amounts of $233,000, $243,000 and $252,000. Boone Builders executed three mortgages in favor of Premier Bank, one mortgage for each lot. One mortgage was recorded in February 2006 and the other two mortgages were recorded in April 2006.

In April 2006, Kuechle and Becker entered into a written contract in which Kuechle agreed to serve as the general contractor for the project, and perform the site work for the project consisting of initial grading, and street and sewer work. Previously, the parties had entered into an oral agreement that was consistent with the written contract and Kuechle had begun its first visible work on the project in October 2005.

In October 2006, Premier Bank and Becker, together with Boone Family Investments, entered into a loan modification agreement that extended the maturity date of the promissory note. As part of that agreement, Premier Bank released its mortgages on the three model-home lots. The site work for the first phase of the project was completed, and the property improved consisted of 52 lots and 7 outlots. Becker paid Kuechle $817,108, which left an unpaid balance of $266,623.² In February 2007, Kuechle served and filed its mechanic's lien statement for the unpaid amount against all 59 lots in the project.

Becker defaulted on its $3.2 million development loan, and Boone Builders defaulted on its three construction loans. Premier Bank then commenced two separate foreclosure actions. In the first action, Premier Bank sought to foreclose the $3.2 million development mortgage (development mortgage action). It alleged that Becker was in default, that its mortgage had first priority, and that it was entitled to foreclose and a decree of foreclosure. In the second action, Premier Bank sought to foreclose its three mortgages securing the three construction loans to Boone Builders for the construction of the three model homes (construction mortgage action). Premier Bank named Kuechle and other lien claimants as defendants in both actions. In each action, Kuechle asserted various claims and sought to foreclose its mechanic's lien.

The district court consolidated the two actions, and Premier Bank and Kuechle brought cross-motions for summary judgment. In the development mortgage action, the court ruled, among other things, that Premier Bank's mortgage was prior and superior to Kuechle's lien. Also, the court denied Kuechle's lien-foreclosure claim against the non-model-home lots because the bank's mortgage was recorded before the first visible improvement to the project. Thus, the district court granted Premier Bank a decree of foreclosure in the development mortgage action and entered judgment against Becker for the full amount of the loan. In the construction mortgage action, the court granted Kuechle's motion for summary judgment reasoning that Kuechle's mechanic's lien had priority over Premier Bank's construction mortgages as to the three model-home lots released by the loan modification agreement. The court concluded that Kuechle could foreclose its entire lien claim against the three model-home lots because Minn.Stat. § 514.09 did not require the lien to be foreclosed against all 59 lots.

In a published opinion the court of appeals reversed the district court and concluded, among other things, that under Minn.Stat. § 514.09 a mechanic's lienholder who has perfected a blanket lien mayforeclose the entire amount against less than all of the property subject to the lien. Premier Bank v. Becker Dev., LLC, 767 N.W.2d 691, 702 (Minn.App.2009). Thus, the court determined that Kuechle could foreclose the entire amount of its lien in the construction mortgage action against the three model-home lots. Id. Subsequently, we granted review.

I.

Premier Bank argues that the court of appeals erred in concluding that Minn.Stat. § 514.09 allows a lien claimant to foreclose the full amount of its lien against less than all of the lots subject to the lien. It contends that when a lien claimant files a blanket lien under section 514.09 against all the property improved by its work on a project, the statute requires that the lien claimant foreclose its lien as a single lien against all of the lots improved.³ Kuechle argues that the court of appeals' decision should be affirmed because section 514.09 allows a lien claimant to file a blanket lien against all lots of a project and foreclose its lien on less than all of the lots encumbered by the lien.

A. Standard of Review

We review a decision to grant or deny summary judgment de novo. Kratzer v. Welsh Cos., 771 N.W.2d 14, 18 (Minn.2009). In doing so, we determine if the law was properly applied and whether there were genuine issues of material fact that precluded summary judgment. Id. Here, the material facts are undisputed and the question presented turns on the interpretation of section 514.09, which is a question of law that we also review de novo. Eischen Cabinet Co. v. Hildebrandt, 683 N.W.2d 813, 815 (Minn.2004).

Minnesota's mechanic's lien statute allows a person or entity that contributes to the improvement of property through labor, skill, material, or machinery to place a lien against the property improved.⁴ See Minn.Stat. § 514.01 (2008). But a lien claimant must follow the statutory procedures to perfect a mechanic's lien. Generally, a lien claimant must (1) provide notice to the owner of the work or materials provided within 45 days after the work or materials are provided, Minn.Stat. § 514.011 (2008); (2) file a proper statement of claim within 120 days of the last work or materials provided, Minn.Stat. § 514.08 (2008); and (3) file a lis pendens notice and commence an action against the owner within one year after the last work or materials provided, Minn.Stat. § 514.12 (2008). In re Zachman Homes, Inc., 47 B.R. 496, 514-15 (Bankr.D.Minn.1984).

Kuechle argues that section 514.09 must be liberally construed in favor of mechanic's lien claimants because the statute is silent, and therefore ambiguous, as to whether Kuechle may foreclose the full amount of its blanket...