Dakota County District Court File No. 19HA-CV-09-4183
Marvin T. Fabyanske, Jesse R. Orman, Jeffrey A. Wieland, Nathan R. Sellers, Fabyanske, Westra, Hart & Thomson, P.A., Minneapolis, Minnesota (for co-appellant Bright Star Systems Corporation and respondent Gresser Companies, Inc.)
Andrew J. Holly, Erin Davenport, Shannon Bjorklund, Dorsey & Whitney LLP, Minneapolis, Minnesota (for appellants and respondents on notice of related appeal MN Theaters 2006, LLC, et al.)
Considered and decided by Bjorkman, Presiding Judge; Ross, Judge; and Kirk, Judge.
In these appeals involving a mechanic's lien action, appellants, who are also respondents on notice of related appeal, argue that the district court erred by (1) determining that respondent established its right to a mechanic's lien on the property, and (2) granting partial summary judgment to respondent and dismissing appellants' counterclaim for liquidated damages. In the related appeal, co-appellant argues that (3) the district court erred by determining that it did not provide lienable improvements to the property, and (4) in the alternative, the district court abused its discretion by determining that co-appellant failed to meet its burden of proof on its claim of unjust enrichment. We affirm.
This case arises out of the construction of a 15-screen movie theater complex in Burnsville. Defendants Midwest Theaters Corporation d/b/a CineMagic Theaters (CineMagic) owned real estate in Burnsville where the movie theater complex was later built. CineMagic sold the real estate to appellants and respondents on notice of related appeal MN Theaters 2006, LLC (MN Theaters), which is a wholly owned subsidiary of iStar Financial, Inc. (iStar) and was created solely for the purpose of owning the property. CineMagic then entered into a complex lease agreement with MN Theaters to lease the real estate for an extended period of time. Under the terms of the agreement, MN Theaters agreed to loan money to CineMagic to construct a movie theater complex on the property. In return, CineMagic made lease payments to MN Theaters. CineMagic also agreed to act as a construction manager and oversee the construction of the movie theater complex.
CineMagic/MN Theaters' contract with Gresser
In April 2007, Engelsma Construction Inc. entered into a contract with MN Theaters to serve as the general contractor for the construction of the movie theater complex. After a bidding process, Engelsma selected respondent Gresser Companies, Inc., as a subcontractor to perform concrete and masonry work. Gresser agreed to complete three tasks that are relevant to this appeal: construct insulated-concrete-form (ICF) walls and footings; install a masonry veneer on the exterior of the movie theater complex; and install concrete flatwork.
Gresser began working on the ICF walls in June 2007. The parties do not dispute that several delays unrelated to Gresser's actions slowed Gresser's work on the ICF walls, including rain and a substantial revision in the structural drawings. Gresser substantially completed the ICF walls in September after 12 weeks of work, which was slightly longer than the 10 weeks Gresser had proposed. After it completed the ICF walls, the next phase of Gresser's work was to install the masonry veneer on the exterior walls. The project specifications required Gresser to use a specific stone veneer product, called Coronado Stone, which Gresser was responsible for ordering.
On August 21, 2007, Gresser's project manager, Tim Selken, requested a quote from the seller of Coronado Stone, which he received on August 31. On September 6, Selken sent an email to Engelsma's project manager, Brent Lindstrom, stating that Gresser had some concerns about the Coronado Stone product. Specifically, Selken stated that Gresser had recently experienced issues with the product not adequately adhering to a building. Following Selken's email, several emails were exchanged between Engelsma, CineMagic, and the architect. After communicating with the manufacturer of Coronado Stone, the architect approved the use of the product on September 27. Gresser submitted an order form for the stone veneer on September 28, although Selken did not submit a signed form until October 2. Gresser expected the stone veneer to arrive in eight to ten days, but it was not delivered until October 30.
Gresser began installing the stone veneer on October 31. On November 15, Gresser was still installing the stone veneer when the external temperature became cold enough to require Gresser to "heat and cover" in order to proceed with the installation. "Heat and cover" is a process of covering an area to raise the temperature so that the product can be installed at the temperature specified by the manufacturer. Gresser submitted a proposal to Engelsma for heat and cover costs of $2.62 per square foot. Lindstrom, Engelsma's project manager, immediately forwarded the information to MN Theaters and CineMagic, stating, "I think it's a good idea that you approve this as well to keep them moving forward." Bryan Sieve, a CineMagic executive, responded to Lindstrom's email and stated that he was concerned that Gresser could have installed the stone veneer earlier and avoided heat and cover costs. There is no evidence in the record that CineMagic or MN Theaters communicated to Engelsma or Gresser, at that time, whether it approved or denied Gresser's request for heat and cover costs. Gresser proceeded to install the stone veneer using heat and cover. Engelsma's on-site superintendent signed off on a form that Gresser submitted with the hours it worked and the materials it used for heat and cover. Gresser completed the installation of the stone veneer in January 2008.
Gresser completed most of its work at the movie theater complex by the summer of 2008. In October, Engelsma issued a "punch list, " which is a list that describes the items that need to be completed on a project. The punch list included one item that Gresser was required to address—a crack in a floor slab next to double exterior doors; Gresser repaired the crack. Shortly afterward, Engelsma asked Gresser to complete another item: a concrete step had separated from the building outside the double exterior doors where Gresser had repaired the crack. On November 26, Gresser fixed the stairs, and it is uncontested that this is the last work Gresser did on the property. On March 26, 2009, Gresser filed a mechanic's lien against the property for $343, 982.30.
CineMagic's oral agreement with Bright Star
In late 2007, CineMagic entered into an oral agreement with co-appellant Bright Star Systems Corporation, a movie theater supply and service company, to provide equipment for the movie theater. In the spring of 2008, Bright Star provided CineMagic with speakers, movie screens, and lenses. A Bright Star technician also performed work on site, including wiring the sound system and connecting it with the projection system. From April until July 2008, Bright Star issued invoices totaling $442, 445.46 that named both MN Theaters and CineMagic. CineMagic paid some of the invoices and MN Theaters paid some of the invoices. According to MN Theaters, the payments it made were advancements on a short-term loan to CineMagic. CineMagic and MN Theaters paid $294, 462.35 to Bright Star; $147, 983.11 remains unpaid. The majority of the unpaid balance includes payments for lenses, screens, speakers, and some labor.
Bright Star supplied three different types of speakers to CineMagic: surround, subwoofers, and main screen channel. The surround speakers are relatively small and are bolted onto brackets that are attached to walls throughout each of the theaters, and the subwoofer speakers are large and typically sit on the floor behind the movie screen. The main screen channel speakers are also large, weighing approximately 265 pounds, and are mounted on platforms approximately 12 to 14 feet off the floor. All three types of speakers are connected to wiring that typically runs in piping along the walls and through the ceiling. Bright Star did not install the piping at the Burnsville movie theater complex, but a Bright Star installer performed connection wiring between the sound equipment and the piping and connected the speakers to the projection system.
Bright Star also supplied pre-manufactured, steel screens for the movie theater complex. The screens were built based on the dimensions of each theater and were then assembled on site and anchored to the floors and walls using Slinky-like coils. Bright Star did not install the screens at the Burnsville movie theater complex. Sieve, a CineMagic executive, testified that one movie screen was later removed from the wall and put back on its roll form. Finally, Bright Star performed repair work on, and supplied parts for, used film projectors that CineMagic purchased from other sources.
Bright Star's president and co-owner, Mel Hopland, testified that the equipment Bright Star provided to CineMagic was removable, but not easily removable. In particular, he testified that the speakers come in specialized packaging and, if the packaging is discarded, it is harder to move the speakers without damaging them. Hopland also testified that there is a market for reselling items such as speakers but it is difficult to resell screens. Hopland testified that the equipment Bright Star provided is an integral part of the theater.
On September 29, 2008, Bright Star filed a mechanic's lien against the property for $165, 027.85. After the lien was partially satisfied in June 2009, the amount of the lien was lowered to $147, 983.11.
On June 29, 2009, Bright Star and Gresser filed a complaint against MN Theaters and CineMagic, among others, seeking foreclosure of their mechanic's liens and alleging breach of contract. Bright Star and Gresser also sought to recover the amount of the claimed mechanic's liens under an unjust-enrichment theory. MN Theaters and
CineMagic filed a counterclaim against Gresser, alleging breach of contract and seeking liquidated damages. Gresser subsequently moved for partial summary judgment.
Following a hearing, the district court granted partial summary judgment to Gresser and dismissed MN Theaters' and CineMagic's counterclaims for ...