Opinion
No. C2-00-1686.
Filed May 15, 2001.
Appeal from the District Court, Anoka County, File No. C59811350.
Richard S. Eskola, Moore, Halsey Eskola, L.L.C., (for appellants)
Steven H. Berndt, Zappia, Levahn Heuer, Ltd., (for respondents)
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2000).
UNPUBLISHED OPINION
Appellant sought to recover damages under a theory of unjust enrichment for improvements made to respondent's residential property subsequent to cancellation of the parties' contract for deed. The district court concluded that appellant proved his case for unjust enrichment, but rendered a decision in favor of respondent because appellant failed to seek his statutory remedy under the mechanic's lien statutes before seeking an equitable remedy. Because appellant also challenges the district court's denial of his motion for a new trial, we affirm.
FACTS
On March 6, 1989, appellant Jeffrey Magdik and his wife Karen Magdik purchased property from respondent Ivy Ridge Home Builders, Inc., pursuant to a contract for deed. The property consisted of a double lot upon which a farmhouse stood. The contract for deed provided for a purchase price of $58,000, with a $5,000 down payment, and monthly payments of $600.61. The contract required appellant to complete payment of principal and interest by February 25, 1992.
At the time of sale, the structure that stood on the property was an 800-900 square-foot farmhouse. Appellant and his wife decided to remodel the farmhouse soon after purchasing the property. Appellant, an experienced homebuilder, obtained a building permit on June 16, 1989, and began to remodel the house. He performed all of the initial remodeling himself. The couple planned for the house to be a 2,200 square-foot home when the remodeling was complete.
Appellant made his monthly payments pursuant to the contract for deed through May 1991, but made no payments thereafter. Appellant moved out of the property in the late summer or early fall of 1991. On February 1, 1992, respondent served appellant with a notice of cancellation of contract because of appellant's failure to make the required payments. The notice of cancellation gave appellant 60 days to cure his default, but appellant failed to cure by the April 2, 1992 deadline.
At the time appellant moved out of the home, the majority of the interior finish work had yet to be completed. The house was uninhabitable, and the total value of the property was estimated to be approximately $30,000.
In May of 1992, the parties entered into an oral agreement whereby respondent agreed to sell the property to appellant for $58,000, plus any accrued interest. At that time, respondent also consented to appellant's resumption of remodeling work. The evidence produced at trial established that appellant then made extensive improvements to the property, hiring subcontractors to help him complete the remodeling. In the process, appellant incurred significant personal debt and invested a great deal of his time and labor in the project. The substantial work done by appellant and his subcontractors made it possible for respondent to later sell the home for a large profit.
Upon completion of the work in late 1992, appellant moved back into the house. Appellant then attempted to obtain financing to purchase the property. In December 1992 or early January 1993, respondent's bookkeeper prepared a closing statement for the sale of the property to appellant. The closing date was to be January 12, 1993, with a sale price of $63,803. But respondent decided not to close.
On January 28, 1993, respondent served appellant with a summons and complaint in an unlawful detainer action due to his failure to make payments pursuant to the original contract for deed. Appellant moved out of the property in February 1993.
On February 6, 1993, appellant's then attorney filed a mechanic's lien against the subject property for improvements made to the property from May 1992 through December 1992. But the lien was prepared in the name of Excel Homes, rather than in appellant's name. Neither appellant nor his corporation, Excel Homes (now defunct) foreclosed this mechanic's lien. Appellant never filed a mechanic's lien in his own name. Following appellant's eviction, respondent finished the remodeling of the home, at a cost of $7,366. On December 3, 1993, respondent sold the property to a third party for $119,000, receiving $109,808 in net proceeds. As a condition of the sale, respondent agreed to bring proceedings subsequent to confirm that all of appellant's rights in the property pursuant to the original contract for deed were removed from the certificate of title. On August 17, 1996, respondent served appellant with an order to show cause in a proceedings subsequent action. Appellant failed to appear at the hearing. All rights of appellant and Excel Homes were subsequently removed from the property's certificate of title.
On August 26, 1998, appellant commenced an action against respondent for breach of contract and unjust enrichment. A bench trial was held on November 8 and 9, 1999. Prior to trial appellant Jeffrey Magdik's company, Excel Homes, dismissed any claims it had against respondents, and appellant dismissed any claims he might have had against respondent Roger Hokanson, the owner of respondent Ivy Ridge. The trial went forward involving only appellant Jeffrey Magdik's unjust enrichment claim against respondent Ivy Ridge. Appellant realized he could not have enforced the oral contract because of the Statute of Frauds. The district court concluded that respondent was unjustly enriched by $41,639 through its sale of the property. But the district court entered judgment in favor of respondent because appellant failed to avail himself of all of his legal remedies, and more specifically, he had failed to file a mechanic's lien, a legal remedy that was available to him.
Appellant subsequently brought motions for amended findings, for judgment not withstanding the verdict (JNOV), and for a new trial, which were all denied in an order dated August 3, 2000. This appeal now follows.
DECISION I.
Appellant argues that the district court erred in determining he was precluded from receiving unjust enrichment damages, an equitable remedy, because he had an adequate remedy at law. Appellant's first contention is that he was not entitled to file a mechanic's lien and, therefore, had no adequate remedy at law. He argues that, under Minn. Stat. § 514.01, he is precluded from filing a mechanic's lien because he had no contract for the improvements with the owner of the real estate or through its agent. Minn. Stat. § 514.01 (2000) provides, in relevant part, the following:
Whoever performs engineering or land surveying services with respect to real estate, or contributes to the improvement of real estate by performing labor, or furnishing skill, material or machinery for any of the purposes hereinafter stated, whether under contract with the owner of such real estate or at the instance of any agent, trustee, contractor or subcontractor of such owner, shall have a lien upon the improvement, and upon the land on which it is situated * * *.
Statutory construction is a question of law, which this court reviews de novo. Brookfield Trade Ctr., Inc. v. County of Ramsey, 584 N.W.2d 390, 393 (Minn. 1998).
Appellant's reliance on the language in section 514.01 alone is not supported by Minnesota law. Under mechanic's lien case law, no direct contractual relationship with the owner of the real estate is necessary; all that is required is that the improvement be made with the consent of owner. Korsunsky Krank Erickson Architects, Inc. v. Walsh, 370 N.W.2d 29, 31 (Minn. 1985) (citing Karl Krahl Excavating Co. v. Goldman, 296 Minn. 324, 327, 208 N.W.2d 719, 721 (1973)). Here, the district court found that respondent had consented to the continued remodeling. Notwithstanding this finding, consent may also arise by operation of law under Minn. Stat. § 514.06 (2000), which provides, in relevant part, the following:
When improvements are made by one person upon the land of another, all persons interested therein otherwise than as bona fide prior encumbrancers or lienors shall be deemed to have authorized such improvements, in so far as to subject their interests to liens therefor. Any person who has not authorized the same may protect that person's interest from such liens by serving upon the persons doing work or otherwise contributing to such improvement within five days after knowledge thereof, written notice that the improvement is not being made at that person's instance, or by posting like notice, and keeping the same posted, in a conspicuous place on the premises.
Therefore, based upon the evidence adduced at trial, appellant was entitled to file a mechanics lien on his own behalf. In addition, the district court correctly concluded that appellant could have filed mechanic's liens for the labor and materials provided by his subcontractors as well. Witcher Constr. Co. v. Estes II Ltd. Partnership, 465 N.W.2d 404, 407 (Minn.App. 1991), review denied (Minn. March 15, 1991).
Appellant argues in the alternative that, even if he was entitled to file a mechanic's lien, this should not preclude him from recovering under a theory of unjust enrichment. However,
relief under the theory of unjust enrichment is not available where there is an adequate legal remedy or where statutory standards for recovery are set by the legislature.
Southtown Plumbing, Inc. v. Har-Ned Lumber Co., Inc., 493 N.W.2d 137, 140 (Minn.App. 1992). The right of recovery for unjust enrichment is equitable. Lundstrom Constr. Co. v. Dygert, 254 Minn. 224, 231, 94 N.W.2d 527, 533 (1959). The equity powers of the court may not be invoked when a plaintiff has an adequate remedy at law. Borom v. City of St. Paul, 289 Minn. 371, 376, 184 N.W.2d 595, 598 (1971). "Equitable relief is granted only upon a showing of the inadequacy of any legal remedy." Zimmerman v. Lasky, 374 N.W.2d 212, 214 (Minn.App. 1985), review denied (Minn. Nov. 26, 1985) (citation omitted).
Despite this general principle that equitable relief is not available when there is an adequate legal remedy, appellant argues that this court's opinion in Anderson v. DeLisle, 352 N.W.2d 794 (Minn.App. 1984), establishes his right to relief under a theory of unjust enrichment. In Anderson, the defendant sold a piece of property to the plaintiff on a contract for deed. Id. at 795. He then watched as the plaintiff spent $25,000 of his own money improving the property. Id. The defendant knew that the plaintiff would be unable to make the required payments on the contract for deed. Id. After the plaintiff defaulted, the defendant foreclosed. Id. This court concluded that the defendant had acted immorally and had been unjustly enriched through plaintiff's improvements to the house, and awarded damages to the plaintiff. Id. at 796.
The facts here are distinguishable from those in Anderson. Here, appellant defaulted on the contract for deed before the subsequent oral contract to purchase the property, and before respondent granted permission to continue with the improvements. The Anderson record is silent as to whether there were any legal remedies available to Anderson at the time he sought equitable relief.
Because appellant had a legal remedy available through the use of the mechanic's lien statutes and chose not to enforce it, he cannot bring an equitable claim for unjust enrichment. Thus, the district court's decision rendering a verdict in favor of the respondent was proper.
II.
Appellant argues that respondent did not plead the affirmative defense of appellant's failure to avail himself of his legal remedies, and therefore should not have been able to rely on said affirmative defense at trial. Minn.R.Civ.P. 8.03 provides, in relevant part:
in pleading to a preceding pleading, a party shall set forth affirmatively accord and satisfaction, arbitration and award, assumption of risk, contributory negligence, discharge in bankruptcy, duress, estoppel, failure of consideration, fraud, illegality, injury by fellow servant, laches, license, payment, release, res judicata, statute of frauds, statute of limitations, waiver, and any other matter constituting an avoidance or affirmative defense.
But Minn.R.Civ.P. 15.02 states:
When issues not raised by the pleadings are tried by express or implied consent of the parties, they shall be treated in all respects as if they had been raised in the pleadings.
Thus, issues litigated by consent are treated as though they were raised in the pleadings. Roberge v. Cambridge Coop. Creamery Co., 243 Minn. 230, 234, 67 N.W.2d 400, 403 (1954).
Here, respondent raised the issue before trial in his motion to dismiss the claim for unjust enrichment. The district court decided to hear the evidence and allowed respondent to renew the motion following trial:
I will hear the evidence without any prejudice whatsoever to the [respondent] being able to renew that kind of an argument or motion that the [appellant] is precluded from going forward on the unjust enrichment claim because of the mechanic's lien that he filed.
At the close of appellant's case in chief, the motion to dismiss was renewed. Respondent raised the defense of appellant's adequate remedy at law in his trial memorandum provided to the court following a court trial. In its post-trial memorandum, the district court found that plaintiff litigated the issue of an adequate remedy at law by consent.
Notwithstanding this finding, appellant argues that Melbo v. Rinn, 280 Minn. 72, 157 N.W.2d 842 (1968), supports, his position. But in Melbo, the court, in concluding that the plaintiff had no opportunity to meet the defense of usury, stated that
[n]owhere in the pleadings, the testimony, or in the discussions of counsel with the court was usury mentioned until the case was ready for submission to the jury.
Id. at 75, 157 N.W.2d at 845. Here, there was a bench trial. There also was a motion to dismiss prior to trial, a renewed motion to dismiss, and a post-trial memorandum, all referring to the defense of an adequate remedy at law, and all in the presence of the judge and appellant's counsel. No objection was made until appellant's post-trial motion papers.
The decision to allow amendment of pleadings is within the discretion of the trial court and should not be reversed absent a clear abuse of discretion. Warrick v. Giron, 290 N.W.2d 166, 169 (Minn. 1980). Here, the district court implicitly allowed an amendment to the pleadings by allowing respondent's adequate remedy defense. The district court was within its discretion in doing so.
III.
Appellant argues he is entitled to a new trial pursuant to Minn.R.Civ.P. 59.01(g) because the district court's decision was not supported by the evidence and was contrary to law. When the district court exercises its discretion in deciding whether to grant a new trial, that decision will not be disturbed absent an abuse of that discretion. Halla Nursery, Inc. v. Baumann-Furrie Co., 454 N.W.2d 905, 910 (Minn. 1990). On appeal from the denial of a new trial motion, the judgment will not be upset unless it is manifestly and palpably contrary to the evidence viewed in the light most favorable to the judgment. ZumBerge v. Northern States Power Co., 481 N.W.2d 103, 110 (Minn.App. 1992), review denied (Minn. Apr. 29, 1992). Because we conclude that the district court's decision is supported by the record and is not contrary to law, the district court did not abuse its discretion in denying appellant's motion for a new trial.
Appellant also contends he is entitled to a new trial because Roger Hokanson's deposition testimony, taken approximately nine months prior to trial, constitutes newly discovered evidence of respondent's having posted notice on his property, thereby disclaiming appellant's improvements to it. See Minn. Stat. § 514.06 (2000) (posting would nullify appellant's right to file a mechanic's lien).
Minn.R.Civ.P. 59.01(d) provides that a new trial may be granted, provided there exists newly discovered material evidence, "which with reasonable diligence could not have been found and produced at the trial." In denying appellants motion for a new trial, the district court concluded that the deposition testimony could not be characterized as evidence that was not known to the appellant, or that could not have been discovered through reasonable diligence.
Appellant states that he did not offer this evidence at trial because of respondent's failure to plead the defense of appellant's adequate remedy at law, which he maintains led him to believe he could prevail without it. But this argument finds no support in the caselaw.
The law is well settled that before a new trial can be granted on the ground of newly discovered evidence the party seeking the same must show affirmatively by his affidavits on the motion not only that such evidence was not discovered until after trial, but also that it could not have been discovered before trial by the exercise of reasonable diligence.
LeNeau v. Nessett, 292 Minn. 242, 247, 194 N.W.2d 580, 583-84 (1972) (quotation omitted). Appellant does not meet this standard, which is also reflected in Rule 59.01(d). Here, we must defer to the district court's broad discretion in deciding whether to grant a new trial. See Maloney v. Ketter, 408 N.W.2d 865, 868 (Minn.App. 1987) (stating "[d]enial of a new trial based on grounds other than error of law is within the broad discretion of the trial court"), review denied (Minn. Sept. 18, 1987).
Affirmed.