Ryan Contracting, Inc. v. JAG INVESTMENTS

• Decision Date: 11 October 2001
• Docket Number: No. C5-99-1688.,C5-99-1688.
• Citation: Ryan Contracting, Inc. v. JAG INVESTMENTS, 634 N.W.2d 176 (Minn. 2001)
• Parties: RYAN CONTRACTING, INC., Respondent, v. JAG INVESTMENTS, INC., et al., Petitioners, Appellants, Metro Home Insulation, Inc., et al., Defendants, GMH Asphalt Corporation, Respondent.
• Court: Minnesota Supreme Court

634 N.W.2d 176

RYAN CONTRACTING, INC., Respondent, v.JAG INVESTMENTS, INC., et al., Petitioners, Appellants,Metro Home Insulation, Inc., et al., Defendants,GMH Asphalt Corporation, Respondent.

No. C5-99-1688.

Supreme Court of Minnesota.

October 11, 2001.

Kay Nord Hunt, James M. Lockhart, Lommen, Nelson, Cole & Stageberg, PA, Minneapolis, for appellants.

Jeffrey C. Paulson, David D. Hammargren, Hammargren, Meyer & Paulson, PA, Minneapolis, for respondent.

Patrick J. Neaton, Neaton & Puklich, PLLP, Wayzata, for respondent.

Heard, considered, and decided by the court en banc.

OPINION

LANCASTER, Justice.

AppellantJAG Investments, Inc. appeals from the court of appeals' decision affirming the district court's denial of JAG's motion for summary judgment.JAG asks us to reverse the court of appeals' holding that respondentRyan Contracting, Inc. effectively served JAG in a mechanics' lien action even though Ryan failed to serve JAG within the one-year time limit imposed by Minn.Stat. § 514.12, subd. 3(2000).JAG also contends that the court of appeals erred when it failed to dismiss respondentGMH Asphalt Corporation's cross-claim against JAG because Ryan never effectively served JAG and because GMH's cross-claim does not stand on independent jurisdictional grounds.In short, JAG asks this court to reverse the court of appeals' decision and dismiss respondents' mechanics' lien actions for lack of personal jurisdiction.We agree that the district court lacked personal jurisdiction over JAG and reverse.

In April 1997, Jagodzinski Development Corporation(JDC) hired Ryan to perform clearing, grading, sewer and water main installation, and street construction for the Fairway Hills residential development project in Chaska, Minnesota.JDC is a Minnesota corporation whose president and sole shareholder is Joe Jagodzinski.JAG is a Minnesota investment company that owned much of the Fairway Hills property that JDC planned to develop.¹Jim Jagodzinski is JAG's sole shareholder and Joe Jagodzinski's father.Ryan subcontracted with GMH to perform street and paving work.

On April 8, 1998, Ryan served and filed a mechanics' lien against the Fairway Hills property to recover amounts allegedly due from JDC.The lien listed Ryan's last day of work as December 16, 1997.Ryan, however, claims that it performed additional work after the lien was filed and that its actual last day of work was September 13, 1998.

On December 4, 1998, Ryan filed a lawsuit to foreclose on its lien.²Ryan personally served JDC on the same day by serving the summons and complaint on Joe Jagodzinski.Ryan did not personally serve JAG at this point.³Nonetheless, JAG served Ryan with an answer on December 23, 1998, and raised the affirmative defense of lack of personal jurisdiction, asserting that Ryan failed to serve JAG within the one-year time limit imposed by section 514.12, subd. 3, of the mechanics' lien statutes.According to JAG, the one-year limit expired on December 16, 1998, because Ryan stated in its lien statement that it last performed work on December 16, 1997.On December 28, 1998, GMH, also named as a defendant in Ryan's complaint, filed its answer and asserted a cross-claim against JAG in an attempt to foreclose its own mechanics' lien.⁴GMH mailed a copy of its answer to JAG's attorney on December 28, 1998.

On July 15, 1999, JAG, JDC, and other defendants filed a motion for summary judgment.In the memorandum of law supporting that motion, JAG argued for the dismissal of Ryan's complaint and release of JAG's property from Ryan's and GMH's mechanics' liens based on lack of personal jurisdiction.JAG also argued for summary judgment based on the merits of the claim.In August 1999, Ryan personally served JAG.

We note that both Ryan and JAG seem to agree that JAG, not JDC, was the owner of the Fairway Hills property.Ryan alleged as much in its complaint and JAG admitted so in its answer.However, in Ryan's mechanics' lien statement, it alleged that JAG, JDC, and Joe Jagodzinski were the "present owners of the [p]remises," and in two other documents submitted to the court attached to Joe Jagodzinski's affidavit, JDC was designated as the owner of the premises.For purposes of this appeal, however, we will assume that JAG is the owner of the property; as owner, JAG is an essential defendant to Ryan's lien action because mechanics' liens attach to property interests.Dunham Assocs. v. Group Invs., Inc.,301 Minn. 108, 118, 223 N.W.2d 376, 383(1974).Whether JDC may have a property interest in Fairway Hills is a question properly left to the district court in Ryan's and GMH's claims against JDC; it was not raised to this court and JDC is not a party to this appeal.

On September 21, 1999, the district court held that it had personal jurisdiction over JAG even though it concluded that it is "undisputed that [Ryan] never served [JAG] * * * individually with the Summons and Complaint during" the one-year time limit of section 514.12, subd. 3.The court noted that December 16, 1997, was Ryan's last day of work and therefore Ryan had until December 16, 1998, to serve JAG.Ryan served JDC by the deadline, but did not individually serve JAG until August 1999.

In deciding that Ryan effectively served JAG and that JAG was "properly `made a party'" to Ryan's lien action, the district court relied on an alternative theory of service:

[B]oth [Ryan] and GMH Asphalt argue that the lien foreclosures are still valid.[JAG] has appeared and participated in every aspect of this case.In addition, Defendant JDC and [JAG] are undertaking the development of the subject property as a "joint venture" and * * * the attorney representing all of the JAG, [et al.]Defendants was served and did file answers and responsive papers on behalf of his clients.Furthermore, the action itself, which names [JAG as a party], was commenced within the required time period.For these reasons, [Ryan] and GMH argue that property owners have been made party to the action.

The Court agrees and finds that, based on all the reasons just discussed, [JAG is a] legitimate part[y] to this action.* * * Thus, [JAG is] subject to judgment on the foreclosure of the mechanic's liens and the motion for summary judgment on this point is denied.

In a published opinion, the court of appeals agreed with the district court's analysis.It held that "[s]ervice of process on JAG was effective because JAG's joint-venture partner was properly served, JAG received actual notice, and JAG was not prejudiced."Ryan Contracting, Inc. v. JAG Invs., Inc.,609 N.W.2d 642, 647(Minn. App.2000).The court of appeals held that, because the district court had personal jurisdiction over JAG in Ryan's lien action, the district court also had personal jurisdiction over JAG in GMH's lien action.⁵Id. at 646 n. 3.JAG appealed.

Generally, an order denying a motion for summary judgment is not appealable.McGowan v. Our Savior's Lutheran Church,527 N.W.2d 830, 832(Minn.1995).However, there are exceptions to that general rule; for instance, a denial of a motion for summary judgment based on lack of personal jurisdiction is immediately appealable.Id.On appeal from a denial of summary judgment, we determine whether any genuine issues of material fact remain and whether the district court erred in applying the law.SeeZank v. Larson,552 N.W.2d 719, 721(Minn.1996).Specifically, this case requires us to consider whether service of process was effectuated and therefore whether the district court had personal jurisdiction over JAG.Whether personal jurisdiction exists is a question of law, which we review de novo.Patterson v. Wu Family Corp.,608 N.W.2d 863, 866(Minn.2000).In this case, whether personal jurisdiction exists will depend in part on a construction of the mechanics' lien statutes.Statutory construction is also a question of law which we review de novo.State v. Ambaye,616 N.W.2d 256, 258(Minn.2000).

The mechanics' lien statutes set forth the requirements for commencing a lien action, including a time limit within which the action must be commenced.The lien statutes govern the procedural requirements for initiating and maintaining a mechanics' lien action insofar as they are inconsistent with or in conflict with the Minnesota Rules of Civil Procedure.Minn. R. Civ. P. 81.01(a) & App. A.Under the lien statutes, an action may be commenced

by any lienholder who has filed a lien statement for record and served a copy thereof on the owner pursuant to section 514.08, and all other such lienholders shall be made defendants therein.The summons shall state that the complaint has been filed with the court administrator and shall be of no effect unless such complaint be in fact so filed.

Minn.Stat. § 514.11.The mechanics' lien statutes also provide a one-year time limit on the commencement of the action:

No lien shall be enforced in any case unless the holder thereof shall assert the same, either by filing a complaint or answer with the court administrator, within one year after the date of the last item of the claim as set forth in the recorded lien statement; and, no personshall be bound by any judgment in such action unless made a party thereto within the year * * *.

Minn.Stat. § 514.12, subd. 3(emphasis added).This one-year time limit is at the center of this dispute.

I. Joint-Venture Service

Ryan and GMH urge us to adopt the lower courts' conclusions that Ryan properly served JAG through its "joint venture partner," JDC.Ryan argues that its service on JDC within the one-year time limit should be effective as to JAG because JDC and JAG are engaged in a joint venture.We have not decided whether service on one joint-venture member satisfies service as to another joint-venture member, and no rule expressly permits such service.

Both lower courts assumed, without analysis, that a joint venture exists between JAG and JDC.JAG protests the lower courts' decisions because they are...