State v. Lunz
| Decision Date | 09 January 1979 |
| Docket Number | No. 76-667-CR,76-667-CR |
| Citation | 273 N.W.2d 767,86 Wis.2d 695 |
| Parties | STATE of Wisconsin, Plaintiff-Respondent, v. Michael R. LUNZ, Defendant-Appellant. |
| Court | Wisconsin Supreme Court |
Thomas M. Kells, Milwaukee, for defendant-appellant.
David J. Becker, Asst. Atty. Gen. (argued), for plaintiff-respondent; Bronson C. La Follette, Atty. Gen., on brief.
The defendant was convicted following a trial to the court, Circuit Judge Milton L. Meister, presiding, for violating sec. 943.25(1), Stats., when, with intent to defraud, Lunz conveyed real property without informing the grantees of his knowledge that the property was encumbered. Motions to set aside the judgment of conviction or alternatively for a new trial were brought on the defendant's behalf before Reserve Circuit Judge John K. Callahan. The motions were denied.
The defendant, Michael R. Lunz, is the secretary-treasurer of two corporations: Ripco, Inc., a real estate development firm of Milwaukee, and Superior Home Builders, Inc., a general contracting company, also of Milwaukee. The complainants in this action are Kenneth Leitheiser and Robert Puerling, officers and directors of K & R Carpet Service. K & R entered into several contracts with Ripco for the installation of carpeting at various construction sites and thus Ripco was indebted to K & R in an amount of approximately $6,000. In November, 1974 Ripco agreed to convey to K & R certain property under construction at 505 Robin Street, West Bend, Wisconsin. The Robin Street property was to be conveyed in satisfaction of Ripco's debt to K & R. The offer to purchase additionally required K & R to pay $21,000 in satisfaction of the outstanding mortgage on the property.
At the real estate closing Ripco was represented by one Scott Brockman, the real estate broker who drafted the offer to purchase. The buyers' attorney, Clement Conter reviewed and inserted into the offer an escrow clause calling for the safe keeping of the $21,000 until the designated escrow agent-title insurer issued a title policy insuring that the designated property was free and clear of all encumbrances. At the real estate closing it was agreed between the parties that if the conditions contained within the escrow agreement were not fulfilled within 45 days after the date of closing, the grantee could declare the transaction void and ownership transferred back to Ripco. In that case, the property was to be conveyed with a quit claim deed or alternatively the grantee could choose to satisfy any outstanding liens from the monies held in escrow. It was further agreed that the $21,000 referred to in the escrow agreement was to be considered a condition subsequent and thus separate from the deed that was delivered at the closing and subsequently recorded. At the trial K & R's attorney (Conter) testified that at the closing Scott Brockman, Ripco's broker, stated there were only three unpaid subcontractors (identities not involved in this appeal). Allegedly the attorney queried Lunz if these were the only unpaid subcontractors and Lunz reportedly replied in the affirmative. Lunz denies being asked this question or giving any similar information. Lunz denied any knowledge of whether at the time of closing there were any unpaid contractors other than those who had filed lien claims.
The day after the closing the broker secured the existing lien waivers from the defendant and had Lunz execute an affidavit which reads as follows:
"That the full waivers of lien of said prime contractor, subcontractor, or materialmen presented and delivered herewith to the Chicago Title Insurance Company are true, correct and genuine and are signed by the respective contractor, subcontractor or materialmen whose name appears thereon."
The lien waivers supplied by Lunz included those filed by Ed Mason Plumbing and Ernster Drywall Service. On November 20, 1974 the title insurer-escrow agent issued a preliminary report that stated a policy would be issued excepting from coverage any lien claims for which waivers had not been supplied. Relying on this report, K & R authorized the release of the $21,000 held in escrow.
Subsequently, the following four contractors, Falls Drywall, Inc., Schroeder Plumbing Co., Weyer and Becker Builders and Eastern Wisconsin Wholesale, filed notices of intent to file lien claims against the Robin Street property. Shortly thereafter, each of these four companies perfected its construction lien. These companies were in addition to the three unpaid contractors named at the closing. The criminal complaint issued against Lunz is based only upon the encumbrances created by the lien claims of Falls Drywall and Schroeder Plumbing. Lunz claimed that he took no part in the hiring of contractors for the Robin Street project and explained that this was done by Norman Schuman, a Superior Homes officer and expediter. Representatives of Falls Drywall and Schroeder Plumbing dispute Lunz's claims that he was not involved in their employment and subsequent dealings.
The attorney for K & R testified that in late 1974 or early 1975 he confronted the defendant with the actual drywall and plumbing claims and allegedly the defendant replied "We should not have done that." The record reflects a dispute as to whether the Mason plumbing and Ernster drywall companies, the names supplied by Lunz in the lien waivers, had performed any work or services at the Robin Street property. Robert Puerling, an owner of K & R and the buyer of the property, testified that in the spring of 1975, when he confronted the defendant with the discrepancies in the identity of the subcontractors named in the lien waivers, the defendant remarked, "Well, we did something we should not have done and we did not think you would catch up to us so quick."
There are 5 issues on appeal:
1. Under sec. 943.25(1), Stats., does the existence of an unperfected construction lien at the time of transfer constitute an encumbrance?
2. What effect, if any, does the existence of an escrow agreement have on the defendant's intent to defraud?
3. Was the evidence at trial sufficient to sustain the conviction?
4. Is sec. 943.25(1), Stats., so indefinite and unclear as to be in violation of due process?
5. Is the defendant entitled to a new trial in the interest of justice by virtue of trial court error in refusing to allow the defendant additional time to obtain counsel for the trial?
The defendant was convicted of violating sec. 943.25(1), Stats. (1975) Transfer of Encumbered Property, which reads:
"Whoever, with intent to defraud, conveys real property which he knows is encumbered, without informing the grantee of the existence of the encumbrance may be fined not more than $5,000 or imprisoned not more than 3 years or both." 1
It is contended by the defendant that at the time of the real estate closing and thereafter the property at 505 Robin Street, West Bend was not encumbered. This argument is premised upon the belief that the subcontractors named in the criminal complaint failed to comply with the formal filing requisites of ch. 289, Liens, and therefore the construction lien claims forming the basis for the criminal complaint are not valid. It is maintained that the lien claims of Falls Drywall, Inc. and Schroeder Plumbing Co. were waived since they did not comply with the filing requirements of sec. 289.02(2), Stats., by filing a notice of intention to file claim for construction lien within 60 days from the commencement of the work or from the time materials were supplied.
It is true that a construction lien is waived unless the provisions of ch. 289 are complied with and recited in Carl Miller Lumber Co. v. Elfers, 164 Wis. 215, 159 N.W. 814 (1916); Visser v. Koenders, 6 Wis.2d 535, 95 N.W.2d 363 (1959); Fullerton Lumber Co. v. Korth, 23 Wis.2d 253, 127 N.W.2d 1 (1964) and Mortgage Associates, Inc. v. Monona Shores, Inc., 47 Wis.2d 171, 177 N.W.2d 340 (1970). However, the defendant's arguments are not persuasive as we hold the notice provisions of sec. 289.02(2) are inapplicable in this case. Sec. 289.02(1)(e) provides that sec. 289.02(2) notice filing is not required of a lien claimant under the following circumstances:
"By any lien claimant, other than a prime contractor, who furnishes labor or materials for an improvement on a project on which the prime contractor is not required to give notice under this section."
The legislature in enacting sec. 289.02(1)(d) has adopted construction lien filing requirements in accordance with accepted business practice in the construction trades. Consequently, sec. 289.02(1)(d) does not require a prime contractor to give lien notice in factual situations analogous to this case. The statute recites the following language:
"By any prime contractor who is himself an owner of the land to be improved, by any corporate prime contractor of which an owner of the land is an officer or controlling shareholder, by any prime contractor who is an officer or controlling shareholder of a corporation which is an owner of the land or by any corporate prime contractor managed or controlled by substantially the same persons who manage or control a corporation which is an owner of the land." 2
It is evident from a review of the record that the owner of the property, Ripco, Inc., and the prime contractor, Superior Home Builders, Inc., were controlled by "substantially the same persons." The defendant's brother, James Lunz, testified that the officers of Ripco were as follows: James Lunz, President; Ingeboard De Mario, Vice President and Assistant Secretary; Michael Lunz, Secretary-Treasurer; and the principal officers for Superior Homes were: James Lunz, President; Norman Schuman, Vice President; Michael Lunz, Secretary-Treasurer. Thus, pursuant to the statutes recited above, sec. 289.02(1)(e) and sec. 289.02(1)(d) and the evidence, Ripco, the property owner, and Superior Homes, the prime contractor, were...
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...535 A.2d 1060, appeal denied, 520 Pa. 582, 549 A.2d 915 (1988); State v. Flake, 83 S.D. 655, 165 N.W.2d 55 (1969); State v. Lunz, 86 Wis.2d 695, 273 N.W.2d 767 (1979). See generally 18B Am.Jur.2d Corporations § 1896 Moreover, as explained by the Virginia Supreme Court in Bourgeois v. Common......
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