Dakota County District Court File Nos. 19-C2-08-006770, 19HA-CV-08-1760.
David D. Hammargren, Jason C. Tarasek, Hammargren & Meyer, P.A., Bloomington, Minnesota (for appellant)
Katherine M. Melander, Jeffrey A. Scott, Brian W.Varland, Coleman, Hull & Van Vliet, PLLP, Bloomington, Minnesota (for respondent)
Considered and decided by Hooten, Presiding Judge; Cleary, Judge; and Chutich, Judge.
In this consolidated foreclosure action, the district court initially ruled that appellant-lienor's interest in the property had priority over the mortgage interest of respondent-bank but, after the supreme court issued Riverview Muir Doran, LLC v. JADT Dev. Grp., 790 N.W.2d 167 (Minn. 2010), the district court ruled that the mortgage interest had priority, that lienor no longer had a right to redeem the property, and that the lienor's interest had been extinguished. We affirm.
This dispute involves a land redevelopment project (the project) located on the bluffs of the Mississippi River at the intersection of Interstate I-35E and Sibley Memorial Highway. Mendota Homes, Inc. (Mendota) was the project developer. Mendota hired appellant Collaborative Design Group, Inc. (Collaborative) in 2005 to perform engineering and architectural-design services for the project. Collaborative began its work in September 2005 and continued to perform services through February 2006. On January 30, 2006, Lilydale Commons, LLC (Lilydale) executed a promissory note secured by a mortgage in favor of respondent bank Highland Bancshares, Inc. (Highland) in order to finance acquisition of the project property. Highland recorded the mortgage on February 27, 2006. On April 10, 2007, Collaborative recorded a mechanic's lien against the project property in the amount of $301, 872.55.
In February 2008, Collaborative filed a complaint seeking to foreclose its mechanic's lien. In June 2008, Highland filed a complaint seeking to foreclose its mortgage and in which it asserted that its mortgage was senior to all other creditor interests in the property, including Collaborative's lien. In July 2008, the district court issued an order and partial judgment wherein it (1) ordered that Highland's mortgage was paramount and superior to all liens or interest against the property except for Collaborative's interest,  (2) granted default judgment against all creditors except Collaborative, and (3) consolidated Highland and Collaborative's foreclosure actions.
In early 2009, the district court heard the parties' cross-motions for summary judgment on the issue of priority. Pursuant to an order filed in April 2009, the district court determined that Collaborative's lien attached when it began performing work for Mendota on the project in September 2005. The district court denied both parties' motions for summary judgment, however, and made no specific ruling on priority.
In an order filed in February 2010, the district court determined that the consolidated matter would proceed to trial to determine the amount of Collaborative's lien. In the same order, and because the parties had questioned whether the priority of Collaborative's lien was still an issue for trial, the district court clarified the April 2009 order and explained that "[b]ecause Collaborative did not have knowledge of Highland's mortgage at the time its lien attached in September of 2005, Collaborative's lien has priority over Highland's mortgage." The issue of priority would not proceed to trial, which was held on March 22–25 and May 17–18, 2010.
In June 2010, before the district court issued its trial order, Highland proceeded with its foreclosure-by-action sale of the mortgage. At the foreclosure sale, Highland purchased the property for $5 million. In an order dated June 16, 2010, the district court entered an order confirming the foreclosure sale. This order set Lilydale's redemption period to expire on December 16, 2010. The order also provided that if neither Lilydale nor any creditors otherwise having a lien on the property redeemed within the six-month redemption period in accordance with Minn. Stat. § 581.10 (2010) and the statutes cited therein, Highland would become the fee owner of the property
subject to a mechanic's lien ("Lien") in favor of [Collaborative] recorded on April 10, 2007 . . . . The priority of the Lien was determined by Court Order [filed] February 2, 2010 ("Priority Order"). The Priority Order, and the priority of the Lien as established therein, is subject to any and all appeal rights held by ...