Ramsey County District Court File No. C5-02-9779.
Considered and decided by Stoneburner , Presiding Judge; Toussaint , Chief Judge; and Parker , Judge.
Minn. Stat. § 514.02 (2002), a mechanics' lien statute, does not provide a remedy against a third-party secured creditor who receives funds in the ordinary course of business and who is not in privity of contract with the party asserting a claim under the statute.
The opinion of the court was delivered by: Parker, Judge
In this action brought under Minn. Stat. § 514.02 (2002) of the mechanics' lien statute, appellant Associated Bank Minnesota, N.A. (bank), appeals from the district court's summary judgment in favor of respondent Siemens Building Technologies, Inc. (Siemens). Siemens sought to recover monies paid to defendant Peak Mechanical, Inc. (Peak), from the foreclosure of a mechanics' lien. The bank had a prior secured interest in the proceeds paid to Peak.
Because the clear language of Minn. Stat. § 514.02 does not apply to a third party who receives payment in the ordinary course of business, we reverse.
This matter arose out of the construction of the Grand Hotel/Minneapolis Athletic Club (the project). Siemens provided services to Peak, a subcontractor to Morcon Construction, Inc., general contractor on the project. In 2001, the project owners defaulted on their payments to the various contractors and subcontractors.
In October 2001, one subcontractor, Quality Drywall, Inc., began an action to foreclose its mechanics' lien against the project; Peak became a party to that lawsuit, asserting a claim that may have included the money it owed Siemens. See Quality Drywall, Inc. v. 679 East Third Street Investors Co., Henn. Cty. File No. 01-16319. In May 2002, the project owners and lien claimants settled this action for somewhat more than 50 cents on the dollar. As part of the settlement agreement, Peak received $215,088 of its claim for $383,000. Siemens was not a party to the mechanics' lien action.
The bank has held a perfected security interest in Peak's inventory, accounts, including accounts receivable, and proceeds since 1998. In November 2001, Peak defaulted on its loan payments to the bank. On February 20, 2002, prior to the mechanics' lien settlement, Peak entered into a voluntary surrender agreement with the bank and surrendered all right, title, and interest in its accounts receivable to the bank.*fn2
On May 24, 2002, as part of the mechanics' lien settlement agreement, a joint check was issued to Peak and the bank in the amount of $215,088. The bank issued payments to one of Peak's subcontractors who had been a party to the mechanics' lien lawsuit and to the attorneys who held an attorney's lien for the work done on the lien action. Both Peak and the bank were aware at this time that Peak owed Siemens ...