Ryan Contracting Company v. O'Neill & Murphy, LLP
2016 Minn. LEXIS 483
| Minn. | 2016Background
- Ryan Contracting performed street and utility improvements on the Kittredge Crossing development under contracts with developer Farr; Ryan did not serve pre-lien notice to Farr before work began.
- After payment disputes, Ryan (through counsel Meagher & Geer) filed many mechanic’s lien statements covering 289 lots, seeking the contract amount per lot; some lots had already been sold to third parties when liens were filed.
- Farr sued Ryan for breach; Ryan counterclaimed and separately sought foreclosure of the liens; the actions were consolidated and later settled: Ryan released liens against Farr-owned lots for $280,000 but reserved claims against third parties and counsel for alleged malpractice in lien filing.
- Ryan sued its original counsel (MG) for malpractice; that suit was dismissed on procedural grounds. Ryan then sued subsequent counsel (O’Neill) for malpractice for their handling of the MG claim; O’Neill moved for summary judgment arguing lack of causation because Ryan’s liens were void.
- The district court granted summary judgment for O’Neill on grounds including Ryan’s failure to give required pre-lien notice and inability to apportion lien amounts for non-Farr lots; the court of appeals reversed in part, concluding Ryan fell within a pre-lien notice exception and that material fact issues remained. This Court granted review.
Issues
| Issue | Plaintiff's Argument (Ryan) | Defendant's Argument (O’Neill) | Held |
|---|---|---|---|
| Whether pre-lien notice was required under Minn. Stat. §514.011 | Ryan: Exception in §514.011 subd.4c(c) applies because land was nonresidential (vacant/development) when lien attached | O’Neill: "in use" means active use; raw/vacant land had no use so exception doesn't apply and liens are void | Held: "in use" covers active and passive uses at time lien attaches; vacant non-agricultural land satisfied subd.4c(c), so no pre-lien notice required |
| Whether Ryan could validly file a blanket lien and later pro rata apportion amounts under Minn. Stat. §514.09 | Ryan: Could file a single blanket lien for the whole area and spread the contract amount pro rata even if unable to apportion at filing | O’Neill: §514.03(1)(b) and inability to apportion preclude blanket lien enforcement on sold lots | Held: §514.09 permits a blanket lien when work is under one general contract; §514.03(1)(a) (contract amount) and §514.09 are compatible—blanket lien and pro rata spread are allowed; apportionment can occur later |
| Whether Ryan is judicially estopped or precluded by prior Farr litigation findings from asserting the blanket-lien theory | Ryan: Prior admission that apportionment was impossible is consistent with electing a blanket lien and later pro rata allocation | O’Neill: Ryan’s earlier position that it couldn’t apportion bars a contrary position now | Held: Not estopped—positions are not inconsistent; the Farr court even noted a blanket lien was available; prior findings do not foreclose the blanket-lien theory |
| Whether Ryan’s settlement with Farr bars the malpractice claim (settle-and-sue concern; causation) | Ryan: Settlement reserved claims against third parties (including MG); causation and damages (whether Ryan would have recovered more) remain fact issues | O’Neill: Settlement recovered full value; Ryan can’t settle and then sue counsel claiming greater recovery | Held: Settlement language reserved third-party claims; Glenna/Rouse do not automatically bar malpractice claims arising from malpractice in lien-filing (but plaintiff must still prove the "case-within-a-case" causation standard) |
Key Cases Cited
- Premier Bank v. Becker Dev., LLC, 785 N.W.2d 753 (Minn. 2010) (blanket-lien enforcement as one lien pro rata across improved lots)
- Riverview Muir Doran, LLC v. JADT Dev. Group, LLC, 790 N.W.2d 167 (Minn. 2010) (when a mechanic’s lien attaches; statutory mechanics of liens)
- S.M. Hentges & Sons, Inc. v. Mensing, 777 N.W.2d 228 (Minn. 2010) (interpretation of pre-lien notice exceptions; canons of construction)
- Rouse v. Dunkley & Bennett, P.A., 520 N.W.2d 406 (Minn. 1994) (legal-malpractice causation: plaintiff must show would have survived summary judgment on underlying claim)
- Glenna v. Sullivan, 245 N.W.2d 869 (Minn. 1976) (limits on permitting malpractice recovery solely because a settlement may have been less than a jury award)