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National Dispatchers, Inc. v. Hastings Motel Ltd. Liability Partnership

July 15, 2003

NATIONAL DISPATCHERS, INC., RESPONDENT,
v.
HASTINGS MOTEL LIMITED LIABILITY PARTNERSHIP, ET AL., DEFENDANTS, CASS MOTEL CORPORATION, A NORTH DAKOTA CORPORATION, ET AL., APPELLANTS.



Affirmed Minge, Judge Dakota County District Court File Nos. C9987377, C2989603, C1999067

Considered and decided by Harten, Presiding Judge, Stoneburner, Judge, and Minge, Judge.

The opinion of the court was delivered by: Minge, Judge

UNPUBLISHED OPINION

Appellants challenge an order of the district court upholding the foreclosure of multiple mechanics' liens. Because we conclude that the district court had jurisdiction to address the mechanics' lien question, did not misapply the law in doing so, and did not otherwise abuse its discretion, either in resolving the merits of this complex dispute or in awarding attorney fees, we affirm.

FACTS

The effort of Hastings Motel, L.L.P. (Hastings) and Cass Motel Corp., one of its partners, to build a motel led to financial problems, more than five years of litigation, and Hastings's bankruptcy. This appeal involves various challenges to ten of the more than 30 mechanic's liens originally involved in the case.

By 1996, Hastings had a parcel of land, plans, financing and a general contractor. As a part of its financing, Hastings mortgaged the parcel, except the east 117 feet. Construction began with the actual structure being confined to the mortgaged premises; not the east 117 feet. During construction, Hastings had financial problems. In January 1998, Hastings mortgaged the east 117 feet of the land to one of its partners other than Cass. In February, the general contractor filed a mechanic's lien for the benefit of the subcontractors on the portion of the property covered by the original mortgage, not the east 117 feet. Several of the subcontractors filed their own mechanic's liens, (in some cases on the whole parcel including the east 117 feet). At about this time, the original general contractor was replaced by Great North Construction Co., Hastings defaulted on the original mortgage, and the entity to which that mortgage had been assigned, National Dispatchers, Inc., started to foreclose that mortgage, which did not cover the east 117 feet.

Incident to the foreclosure, National Dispatchers initiated litigation requesting the appointment of a receiver for the mortgaged property (not for the east 117 feet) and for other relief. Hastings answered, seeking a determination of the amount and priority of the mechanics' liens. While these proceedings were pending, (a) National Dispatchers, the mortgagee, bought the mortgaged property at the foreclosure sale; (b) the mechanics' lien claimants, in the receivership proceeding, sought to foreclose their liens; (c) National Dispatchers sought, and the parties, including Great North, stipulated to consolidation of its receivership action with various other related suits; (d) the period to redeem from the mortgage foreclosure was extended; (e) the mechanic's lienors filed notices of intent to redeem the property; and (f) after a series of transactions, Great North acquired the east 117 feet of the property.

On July 20, 1999, the district court ruled, among other things, that with respect to that portion of the property subject to the original mortgage, the mortgage had priority over the mechanics' liens, that the mechanics' liens encumbered the entire property including the east 117 feet, and that it could not address other mortgage-related requests for relief. On the day the mortgage redemption period would have expired, Hastings filed bankruptcy. Although the bankruptcy extended the redemption period, the bankruptcy court rejected Hastings' challenge to the foreclosure, the redemption period expired, and the bankruptcy was dismissed. No party redeemed the property.

In a series of motions in the state district court receivership proceeding, Great North as the owner of the east 117 feet then (a) moved to have the attempts to foreclose the mechanic's lien declared invalid because they had been initiated in the receivership proceeding; (b) noted that the receivership proceeding involved only the property covered by the original mortgage and argued that the district court lacked authority to address the east 117 feet of the property; and (c) moved to have the amounts of the mechanics' liens apportioned between the mortgaged portion of the property and the east 117 feet of the property. The district court rejected Great North's argument that the mechanics' liens were invalid, stating that if the mechanics' liens were ruled defective, the lienors would not recover on their claims because the statutory period for starting mechanic's lien foreclosure actions had passed. In a series of other rulings, the district court also determined that it had authority to address the east 117 feet of the property, denied the motion to apportion the amounts of the mechanics' liens between the mortgaged portion of the land and the east 117 feet, found that the mechanics' liens were valid against the east 117 feet of the property, and found that the liens all had the same priority and could be foreclosed. Cass, Great North, and Duane Rogne, one of Great North's principals, appeal.

DECISION

I.

Because the mechanics' liens were foreclosed in an action that began as National Dispatcher's receivership proceeding, the first issue is whether the foreclosure of the mechanics' liens was invalid for failure to comply with Chapter 514 of the Minnesota Statutes. Appellants raise two subsidiary issues under this general issue: (a) whether a proceeding under Minn. Stat. ยงยงรก514.10-.12 ...


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