Riverview Muir Doran, LLC v. JADT Development Group, LLC
2010 Minn. LEXIS 678
| Minn. | 2010Background
- In a consolidated action, KKE Architects seeks to foreclose its mechanic’s lien while First Choice Bank and Riverview Muir Doran seek to foreclose their mortgages on a River View Homes project in Hennepin County.
- JADT Development Group owned Parcels I, II, and III; KKE provided design development and construction document services; first KKE work item was on Parcel I on January 17, 2003, without a written contract or lien notice at that time.
- On March 23, 2005, JADT granted and recorded mortgages totaling $20,358,550 against Parcels I–III; Chicago Title prepared the closing payments and provided a waiver of lien that was incomplete as to total project charges.
- Respondents paid KKE’s invoices at closing; KKE signed and cashed a March 23, 2005 check for $97,139.33 accompanied by a waiver indicating partial payment; no unpaid work remained known to respondents at that time.
- KKE recorded a mechanic’s lien on November 27, 2006 for $235,996.34 and an amended lien for $358,028.34 on December 29, 2006; construction had not commenced and no visible beginning occurred due to JADT’s default.
- The district court ruled that respondents had actual notice of the lien under Minn. Stat. § 514.05, and thus their mortgages were subordinate to KKE’s lien; the court of appeals reversed, and the supreme court granted review.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Meaning of 'without actual or record notice' in 514.05(1) | KKE argues 'without actual or record notice' means without notice of lienable work. | Respondents argue it means without notice of an existing unpaid lien against them. | Actual notice means notice of an existing lien; record notice not required here. |
| Effect of paying known invoices before recording mortgages | KKE contends payment does not negate actual notice; lien attached if work existed. | Respondents argue payment of all known invoices before recording resolves actual notice of an unpaid lien. | Paying known, outstanding invoices forecloses actual notice of an unpaid lien; liens do not attach against such mortgagees. |
| Priority outcome between mortgages and KKE's lien | KKE asserts lien priority against bona fide mortgagees with no actual or record notice of unpaid lien. | Respondents claim their mortgages have priority because there was no unpaid lien attached against them. | Mortgages have priority over the lien; KKE’s lien did not attach against respondents. |
Key Cases Cited
- Jadwin v. Kasal, 318 N.W.2d 844 (Minn. 1982) (interprets 'without notice' as excluding existing lien notice)
- Kirkwold Constr. Co. v. M.G.A. Constr., Inc., 513 N.W.2d 241 (Minn. 1994) (actual notice of unpaid lien status may affect priority)
- M.E. Kraft Excavating & Grading Co. v. Barac Constr. Co., 279 Minn. 278 (Minn. 1968) (tacking and lien priority concepts; not directly controlling here)
- Reuben E. Johnson Co. v. Phelps, 279 Minn. 107 (Minn. 1968) (tacking doctrines; distinguishes lien origins)
- Lamoreaux v. Andersch, 128 Minn. 261 (Minn. 1915) (early lien attachment principles for architectural services)
- Landers-Morrison-Christenson Co. v. Ambassador Holding Co., 171 Minn. 445 (Minn. 1927) (ownership vs. mortgagee attachment timing)
- Korsunsky Krank Erickson Architects, Inc. v. Walsh, 370 N.W.2d 29 (Minn. 1985) (architectural lien considerations under 514.01)