DIETZEN, Justice.
In this consolidated action, appellant KKE Architects, Inc. (KKE), seeks to foreclose its mechanic's lien, and respondents First Choice Bank and Riverview Muir Doran, LLC, seek to foreclose their mortgages on property that is part of a housing project located in Hennepin County. Respondents moved for partial summary judgment, seeking a determination on the validity of the mechanic's lien as well as the priority of their mortgages. The district court entered judgment in favor of KKE, concluding that respondents had actual notice of KKE's mechanic's lien under Minn.Stat. § 514.05 (2008), and therefore the lien has priority over the mortgages. The court of appeals reversed, and we granted review. We conclude that respondents' mortgages have priority over KKE's mechanic's lien, because respondents did not have actual notice of an existing lien that was unpaid at the time they recorded their mortgages, and therefore the lien did not attach against respondents. Thus, we affirm the court of appeals.
The material facts are undisputed. JADT Development Group, LLC (JADT), acquired property, Parcels I, II, and III, in Hennepin County to construct condominium units known as River View Homes (Project). At the request of JADT, KKE performed architectural services consisting of design development services and construction document services for the Project. On January 17, 2003, KKE made its first item of contribution to the improvement of Parcel I. KKE did not file notice of its mechanic's lien and performed the work for JADT without a written contract.
Before the closing, JADT had provided respondents and respondents' closing agent, Chicago Title Insurance Co., with 27 invoices issued between June 30, 2003, and January 31, 2005, from KKE to JADT for architectural services totaling $97,139.33 for the Project. Some of the invoices identified the percentage of work that had been completed to date for the Project.
Chicago Title used some of the loan proceeds to pay KKE for its work. On March 23, 2005, Chicago Title issued a check payable to KKE for $97,139.33, which was the total amount of the invoices furnished by JADT. According to the closer's affidavit, Chicago Title took these actions to ensure "the first priority position of First Choice Bank's mortgage and the second priority position of Riverview Muir Doran, LLC." Along with the check, Chicago Title mailed to KKE a Receipt and Waiver of Mechanic's Lien Rights (waiver document). On the waiver document, Chicago Title indicated that the payment was partial. Although the check amount was consistent with the total amount of the invoices presented at the closing, the check amount was less than the total value of services rendered by KKE up to the date the mortgages were recorded. There is nothing in the record to indicate, however, that respondents were aware of any other unpaid work performed by KKE for the Project. KKE signed the waiver document and returned it to Chicago Title on April 4, 2005. KKE endorsed and cashed the check.
On November 27, 2006, KKE recorded and served upon JADT a mechanic's lien for $235,996.34 for KKE's work on the Project.
JADT defaulted on its mortgages to respondents and did not satisfy the unpaid balance owed to KKE.
Riverview and First Choice commenced actions to foreclose their mortgages, and KKE commenced an action to foreclose its mechanic's lien. All three actions were consolidated by the district court. Subsequently, the parties filed a trial stipulation setting forth the facts admitted by the parties.
In an unpublished opinion, the court of appeals reversed, concluding that Minn. Stat. § 514.05 requires that respondents have actual notice of an unpaid lien prior to the recording of their mortgages for the mechanic's lien to take priority. Riverview Muir Doran, LLC v. JADT Dev. Grp., LLC, No. A09-1312, 2009 WL 2928770, at *5 (Minn.App. Sept. 15, 2009). Because respondents had paid the outstanding KKE invoices in full at the time of the closing, the court of appeals concluded that they did not have actual notice of an unpaid lien prior to recording their mortgages, and therefore the mortgages had priority over KKE's mechanic's lien. Id. Subsequently, we granted review.
KKE argues that respondents had actual notice of KKE's architectural work within the meaning of Minn.Stat. § 514.05, subd. 1, and therefore the mechanic's lien has priority. Section 514.05, subdivision 1, provides that as against a bona fide mortgagee "without actual or record notice, no lien shall attach prior to the actual and visible beginning of the improvement on the ground." The parties dispute whether the statute refers to actual notice of lienable work, or actual notice of an existing lien that was unpaid.
We review a district court's summary judgment decision de novo. See Kratzer v. Welsh Cos., 771 N.W.2d 14, 18 (Minn.2009). In doing so, we determine whether the district court properly applied the law and whether there are genuine issues of material fact that preclude summary judgment. Id. Here, the material facts are undisputed,
"Mechanics liens are purely creatures of statutes and the rights of the parties are governed by the language of the statutes." M.E. Kraft Excavating & Grading Co. v. Barac Constr. Co., 279 Minn. 278, 283, 156 N.W.2d 748, 751 (1968). The mechanic's lien statutes are set forth
Section 514.05 governs when a mechanic's lien attaches and provides for potentially different dates of attachment depending upon whether the person is the owner of the property, or a purchaser, mortgagee, or encumbrancer. The first sentence of section 514.05 provides that a mechanic's lien generally attaches and takes effect against a property owner when "the first item of material or labor is furnished upon the premises." Minn.Stat. § 514.05, subd. 1.
The second sentence—the sentence at issue here—applies to purchasers, mortgagees, and encumbrancers, and provides a different rule:
Minn.Stat. § 514.05, subd. 1.
We have construed the words "without notice" in earlier versions of the statute to mean without notice of an existing mechanic's lien. See, e.g., Jadwin v. Kasal, 318 N.W.2d 844, 849 (Minn.1982) (interpreting Minn.Stat. § 514.05 (1980)); Reuben E. Johnson Co. v. Phelps, 279 Minn. 107, 116, 113, 156 N.W.2d 247, 253 (1968) (interpreting Minn.Stat. § 514.05 (1962)); Landers-Morrison-Christenson Co. v. Ambassador Holding Co., 171 Minn. 445, 448, 214 N.W. 503, 505 (1927) (interpreting Gen. St.1923 § 8494). In 1987, the statute was amended to specify "without actual or record notice." Act of May 13, 1987, ch. 95, § 1, 1987 Minn. Laws 175, 175-76 (codified at Minn.Stat. § 514.05 (2008)). Thus, the amendments clarify that notice is limited to actual or record notice.
We turn next to respondents' argument that "without actual notice" means without
Respondents also rely on M.E. Kraft Excavating & Grading Co. v. Barac Constr. Co., 279 Minn. 278, 284, 156 N.W.2d 748, 752 (1968), and Reuben E. Johnson Co. v. Phelps, 279 Minn. 107, 116, 156 N.W.2d 247, 253 (1968), to argue that "actual notice" encompasses unpaid, lienable services already performed. Both M.E. Kraft and Johnson, however, were concerned with tacking; specifically, additional mechanic's lien claimants, such as electricians and lumber suppliers, were trying to tack their mechanic's lien back to the date of the first lienable services performed so that their liens had priority over mortgages that were recorded before their work was ever performed. See M.E. Kraft, 279 Minn. at 282, 156 N.W.2d at 751; Johnson, 279 Minn. at 111, 156 N.W.2d at 250. Thus, M.E. Kraft and Johnson do not answer the question before us.
Consistent with our prior case law, when there has been no actual and visible beginning of the improvement on the ground, the priority of a lien claimant and mortgagee under section 514.05, subdivision 1, depends upon whether the mortgagee had notice of an existing lien. See, e.g., Jadwin, 318 N.W.2d at 849. We conclude that an existing lien under section 514.05 contemplates past, lienable services for which a lien claimant has not been paid. See Kirkwold, 513 N.W.2d at 244 (explaining that purchaser and mortgagee had "`actual notice' of the possibility that a mechanic's lien would attach" when they had actual knowledge of unpaid, lienable work); M.E. Kraft, 279 Minn. at 281, 156 N.W.2d at 750 (noting that mortgagee "had no knowledge that the architect had not been paid for his services"). In contrast, when a mortgagee has paid all known, outstanding invoices for lienable services at the time the mortgage is recorded, the mortgagee
Respondents were aware that KKE had performed lienable work, but chose to pay KKE's outstanding invoices at the time they recorded their mortgages. The purpose of paying KKE's invoices was to obtain priority. There is nothing in Minn. Stat. § 514.05, subd. 1, which prohibits a mortgagee from paying the outstanding invoices of a lien claimant to protect its interest in the property and thereby subordinate the interest of the lien claimant as to services performed before the actual and visible beginning of the improvement on the ground. See Home Lumber Co. v. Kopfmann Homes, Inc., 535 N.W.2d 302, 304 (Minn.1995) (noting that the "statutory scheme is intended to protect the prior mortgagee").
In summary, we conclude that the Legislature carved out a rule of priority in Minn.Stat. § 514.05, subd. 1, which protects the interests of bona fide purchasers, mortgagees, and encumbrancers without record notice and without actual notice of an existing, unpaid lien for services performed before the actual and visible beginning of an improvement on the ground. Here, respondents paid for all lienable services of which they had actual notice. Therefore, they were bona fide mortgagees "without actual notice" of an existing lien for architectural services and their mortgages enjoy priority over KKE's mechanic's lien.
Affirmed.
PAGE, J., took no part in the consideration or decision of this case.
STRAS, J., not having been a member of this court at the time of the argument and submission, took no part in the consideration or decision of this case.
ANDERSON, Paul H., Justice (dissenting).
I respectfully dissent. I do so because I conclude that the court has failed to apply the plain language of Minn.Stat. § 514.05 (2008) and added language to the statute that the legislature has not seen fit to enact.
The sole issue presented on appeal is the interpretation of Minn.Stat. § 514.05, subd. 1 (2008), which in pertinent part reads as follows:
(Emphasis added.) The question before us is what a bona fide mortgagee of real property must have "actual" notice of in order for a mechanic's lien to "attach prior to the actual and visible beginning of the improvement on the ground." See id.
The court acknowledges that appellant KKE Architects, Inc., could have preserved its mechanic's lien by providing record notice. Indeed, the statute is clear that KKE could have provided record notice of its lien by filing nothing more than "a brief statement of the nature of the contract." Minn.Stat. § 514.05, subd. 1. Had KKE filed "a brief statement of the nature of the contract,"
The court's interpretation of Minn.Stat. § 514.05, subd. 1, in essence adds words to the statute so it now effectively reads as follows: "As against a bona fide purchaser, mortgagee, or encumbrancer without actual notice of past, lienable services for which the lien claimant has not been paid or record notice of the nature of the lien claimant's contract." (Additions emphasized.) What the court has done is add language to the statute that the Legislature has not seen fit to enact. Adding such language is contrary to the principles of statutory construction we have so often espoused. See, e.g., Green Giant Co. v. Comm'r of Revenue, 534 N.W.2d 710, 712 (Minn.1995) (in construing statutes, courts are not to supply that which the Legislature purposefully omits).
When interpreting statutes, we are to begin with the language of the statute and, if that language is plain and unambiguous, we are to follow it. Munger v. State, 749 N.W.2d 335, 338 (Minn.2008) (citing Minn. Stat. § 645.16 (2006)).
I respectfully dissent.
(Emphasis added.) The court interprets the emphasized language to mean that no contract—whether written or oral, express or implied—is required between the mechanic's lien claimant and anyone—whether owner or the owner's agent, trustee, contractor, or subcontractor. I can do no more than reiterate my point: if there is no contract—no written, oral, express, or implied contract—between the mechanic's lien claimant and any other person or entity—not the owner, not the owner's agent, trustee, contractor, or subcontractor—then the mechanic's lien claimant has no right to payment.
The court also suggests that "[i]f a contract were a necessary precondition" to the existence of a mechanic's lien, then the reference to "contract" in section 514.05, subdivision 1, and elsewhere in chapter 514 "would be superfluous." But section 514.05, subdivision 1, provides for the preservation of the right to a mechanic's lien by the filing of "a brief statement of the nature of the contract" prior to the actual and visible beginning of the improvement on the ground. The whole point of the provision would therefore appear to be that a contractor or subcontractor can preserve its right to a mechanic's lien once work begins, by filing notice of nothing more than the existence of its contract before work begins. Indeed, before its work begins, what more could a contractor file notice of?
Finally, the court suggests that my interpretation of section 514.05 cannot stand because it is contrary to our court's interpretation of the provision "for over 80 years." But we have not been asked to interpret section 514.05 since 1982, and more importantly not since the language of the statute changed—in ways that I consider to be significant. In light of the Legislature's amendment of the statute, the length of the time between this case and our prior case law should impress no one.