Summary
stating that complaints made to the Department of Commerce are absolutely privileged
Summary of this case from Willis v. Centennial Mortgage Funding, Inc.Opinion
No. C5-00-1570
Filed May 1, 2001
Appeal from the District Court, Hennepin County, File No. CT9610411.
Jeffrey C. Thompson (for respondents BK Decorating, FS Ceramic Tile, Robb Gass Construction and Trimpac)
Blake R. Nelson (for respondent Saturn Electric)
Robert E. Lieske (for appellants)
Considered and decided by Schumacher, Presiding Judge, Kalitowski, Judge, and Stoneburner, Judge.
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2000).
UNPUBLISHED OPINION
Appellants Frank and Ann Dropps (Dropps) raise multiple issues on appeal following a bench trial of consolidated actions arising out of their contract with respondent Robb Gass Construction, Inc. (RGC) for construction of a house. (1) Because respondent-subcontractors BK Decorating (BK) and Trimpac, Inc., (Trimpac) failed to file timely pre-lien notices and the district court erred by applying the "good faith" exception, we reverse the trial court's grant of mechanic's liens and judgments against Dropps in favor of BK and Trimpac. (2) Because there is evidence in the record to support the district court's determination that respondent-subcontractor FS Ceramic Tile (FS) filed a timely pre-lien notice, we affirm the judgment for FS on its mechanic's lien claim including the attorney fees award. (3) Because a stipulated settlement agreement unambiguously provided that respondent-subcontractor Saturn Electric, Inc., (Saturn) would be awarded judgment against RGC, we reverse the district court's award of judgment for Saturn against Dropps and remand for entry of judgment against RGC in the agreed-upon settlement amount. (4) Because statements by Dropps to the Department of Commerce, even if defamatory, were absolutely privileged, judgment for RGC against Dropps on RGC's defamation claim is reversed. (5) Because the record supports the amount awarded to Dropps for defects in construction, we affirm that award. (6) Because RGC is no longer the prevailing party in this action, we reverse the award of costs and disbursements to RGC.
FACTS
On August 19, 1995, Dropps contracted with RGC for construction of a home in Maple Grove. All work was to be substantially completed on November 29, 1995 and RGC was to pay a penalty of $100 per day for each day the home remained under construction after December 29, 1995.
In December 1995, Dropps called the Minnesota Department of Commerce (DOC) asserting numerous complaints against RGC and Robb Gass, including a claim of a fraudulent signature on a lien waiver. The DOC started an investigation.
The home was not completed by the contract deadline. By January 1996, each party claimed that the other had breached the contract and the relationship was terminated. Subcontractors BK, FS, Saturn, Trimpac and others not parties to this lawsuit had not been paid in full at the time the contract was terminated.
At the end of January 1996, the DOC convened an investigative/settlement meeting to address Dropps's claims against Gass and RGC. The meeting resulted in settlement of several subcontractors' claims but left unresolved the breach of contract claims and the claims of subcontractors BK, FS, Saturn and Trimpac.
Dropps completed construction on February 20, 1996, but asserted that there were many defects in the construction caused by RGC. On May 6, 1996, RGC sued Dropps for breach of contract, fraud and slander. Dropps answered and counterclaimed for breach of contract.
On September 23, 1996, Dropps wrote a two-page letter to the DOC expressing their frustration with the DOC's investigation. Dropps referred to the fact that Robb Gass was suing them for slander and that prior to their complaint people had been threatened with slander lawsuits by George Barr for filing complaints with the DOC. This letter was made part of the DOC's public file concerning the RGC/Gass investigation.
Barr is a former contractor whose license was revoked and who was convicted for unethical acts as a residential contractor in an unrelated case.
On October 14, 1996, Saturn sued Dropps, RGC, BK, FS and Trimpac, asserting a mechanic's lien. BK, FS and Trimpac cross-claimed, asserting mechanic's liens. The cases were consolidated.
The DOC closed its investigation file on August 28, 1997 with a memorandum stating that there was insufficient evidence to substantiate the Dropps's claims that subcontractors were not being paid or that lien waivers contained fraudulent signatures. The DOC concluded that the matter "boil[ed] down to simply, was the home completed on time * * * " an issue that was in litigation.
The Saturn claim was settled on December 11, 1997, and the remaining claims were tried to the district court beginning in December 1997. The trial lasted 24 days spread over two years. The district court issued findings of fact, conclusions of law and order for judgment, followed by two amendments. The district court denied Dropps's motion for amended findings and conclusions of law or a new trial. Judgment based on the district court's second amended findings of fact, conclusions of law and order for judgment was entered on July 11, 2000. Dropps appeal, challenging the award of mechanic's liens to BK, FS and Trimpac; entry of judgment for Saturn against Dropps; the award of defamation damages including attorney fees and costs to RGC; the award of out-of-pocket disbursements to RGC; the amount of damages awarded to them for construction defects; and the amount of costs and disbursements awarded to RGC.
DECISION 1. Mechanic's Liens
A subcontractor is entitled to a mechanic's lien against the owner of improved property, but if the subcontractor is not under direct contract with the owner:
[The subcontractor] must, as a necessary prerequisite to the validity of the claim or lien, cause to be given to the owner or the owner's authorized agent, either by personal delivery or by certified mail, not later than 45 days after the lien claimant has first furnished labor, skill or materials for the improvement, a written notice * * *.
Minn. Stat. § 514.011, subd. 2(a) (2000). "Failure to give the notice defeats the mechanic's lien." Merle's Constr. Co. v. Berg, 442 N.W.2d 300, 302 (Minn. 1989) (citation omitted). Notice requirements are strictly construed. Bendiske Concrete Masonry, Inc. v. Barthel Constr., Inc., 515 N.W.2d 95, 97 (Minn.App. 1994). The burden is on the contractor to prove compliance with the statute. See, e.g., Diethelm v. Cavanaugh, 349 N.W.2d 608, 610 (Minn.App. 1984).
a. Pre-lien notices of BK and Trimpac
Effective August 1, 1989, the legislature provided that a subcontractor otherwise entitled to a lien "does not lose the right to the lien for failure to strictly comply [with the notice requirements] if a good faith effort is made to comply, unless the owner or another lien claimant proves damages as a direct result of the failure to comply." 1989 Minn. Laws ch. 161, § 2, 5; Minn. Stat. § 514.01, subd. 2(b) (2000).
The district court found that BK's and Trimpac's pre-lien notices were not filed within 45 days of the first date of work at the property as required by Minn. Stat. § 514.011, subd. 2, but found that each subcontractor "made a good faith effort to comply with the statutory pre-lien notice requirement."
Whether the subcontractors have made a good-faith effort to comply with the pre-lien notice requirement is a question of law when the underlying facts are not in dispute. A reviewing court need not defer to the district court's application of the law where the material facts are not in dispute. Hubred v. Control Data Corp., 442 N.W.2d 308, 310 (Minn. 1989).
The district court treated the issue of whether Trimpac and BK made a good-faith effort to comply with the notice requirements as a question of fact. Even if we were to review this as a fact question, the district court's finding of a good-faith effort by BK and Trimpac is clearly erroneous, because it is unsupported by any evidence. See Minn.R.Civ.P. 52.01 (stating findings of fact will not be set aside unless clearly erroneous).
The statute does not define what constitutes a good-faith effort to comply with the pre-lien notice requirement and no cases have been decided on this issue. In other contexts, "good faith" has been defined to mean something more than a mere lack of negligence. C ulberson v. Chapman, 496 N.W.2d 821, 825 (Minn.App. 1993). But, we need not define what constitutes a good-faith effort because here there is no evidence in the record of any efforts by Trimpac or BK to comply with the time requirements of the pre-lien-notice statute. Without any evidence of an effort to comply with the time requirements of the pre-lien statute, BK and Trimpac, as a matter of law have not shown that they made a good-faith effort to comply. BK and Trimpac failed to file timely pre-lien notices and are therefore not entitled to mechanic's liens against Dropps's property.
The judgment entered was for monetary judgment against Dropps rather than for mechanic's liens. These judgments must be vacated, because the subcontractors sued to establish mechanic's liens and were not entitled to a monetary judgment against Dropps.
b. Pre-lien notice of FS
The parties presented conflicting evidence at trial concerning the date FS made its first contribution to the project. FS's Mechanic's Lien Statement, prepared at the direction of Frank Smith, Jr., the FS employee who actually performed the work at Dropps's property, represents that the first day of work for FS was December 18, 1995. At trial, Smith could not recall the date of first work by FS at Dropps's property, but he testified that he reviewed the lien statement when it was prepared and that he did not note any inaccuracies. Dropps submitted into evidence a detailed record of work on the home they maintained during construction, which stated that an FS tile-setter worked at the property for approximately one hour on December 12. The district court found that the date of first contribution was December 18, 1995 and that FS's pre-lien notice, served on January 30, 1996, was timely. The district court awarded FS a mechanic's lien in the amount of $3,055.25 and attorney fees of $6,493.10.
Findings of fact made by the district court in a bench trial "shall not be set aside unless clearly erroneous, and due regard shall be given to the opportunity of the trial court to judge the credibility of witnesses." Minn.R.Civ.P. 52.01. The district court should not be reversed merely because the appellate court views the evidence differently. Rogers v. Moore, 603 N.W.2d 650, 656 (Minn. 1999). Rather, the findings must be "manifestly contrary to the weight of the evidence or not reasonably supported by the evidence as a whole." Id. (quotation omitted). "If there is reasonable evidence to support the district court's findings, we will not disturb them." Id. (citation omitted). Because there is evidence in the record to support the district court's finding that FS made its first contribution on December 18, the district court's finding that the pre-lien notice was timely and the award of a mechanic's lien to FS against Dropps's property is not clearly erroneous.
The Dropps do not dispute the amount of the lien, but challenge the award of attorney fees as excessive. We will not reverse an award of attorney fees absent an abuse of discretion. Becker v. Alloy Hardfacing Eng'g Co., 401 N.W.2d 655, 661 (Minn. 1987); see Automated Bldg. Components, Inc. v. New Horizon Homes, Inc., 514 N.W.2d 826, 831 (Minn.App. 1994) (affirming attorney fees award in absence of specific findings relating to award because record contained detailed time reports and explanatory affidavit which supported amount of award), review denied (Minn. June 15, 1994).
Reasonable attorney fees may be awarded to a successful claimant under Minn. Stat. § 514.14 (2000), as part of its foreclosure costs. Obraske v. Woody, 294 Minn. 105, 108, 199 N.W.2d 429, 431 (1972); Automated Bldg. Components., 514 N.W.2d at 831. The award is within the district court's discretion if it has given due consideration to the evidence and made observations of services rendered. Obraske, 294 Minn. at 109, 199 N.W.2d at 432. The factors to consider in awarding attorney fees are
time and effort required, novelty or difficulty of the issues, skill and standing of the attorney, value of the interest involved, results secured at trial, loss of opportunity for other employment, taxed party's ability to pay, customary charges for similar services, and certainty of payment.
Jadwin v. Kasal, 318 N.W.2d 844, 848 (Minn. 1982). The amount of the award should be reasonably related to the amount of the judgment. Northwest Wholesale Lumber, Inc. v. Citadel Co., 457 N.W.2d 244, 251 (Minn.App. 1990). Nevertheless, fees are not excessive solely because they exceed the amount of the mechanic's lien. Kirkwold Constr. Co. v. M.G.A. Constr., Inc., 498 N.W.2d 465, 470 (Minn.App. 1993), aff'd 513 N.W.2d 241 (Minn. 1994).
An affidavit in the record details the attorney's time. The district court significantly reduced the fees claimed and did not abuse its discretion in awarding attorney fees. On remand, however, the judgment shall be amended to reflect that FS is awarded a mechanic's lien against Dropps's property in the amount of $9,548.35 (value of the unpaid work found by the district court in the amount of $3,055.25 plus attorney fees in the amount of $6,493.10) and the judgment for that amount entered against Dropps shall be vacated. FS is entitled to a lien on the property, not a personal judgment against Dropps.
The affidavit claimed attorney fees in the amount of $31,044.50 for F S.
2. Saturn's Claim
Prior to trial, Dropps, RGC and Saturn settled Saturn's claim by stipulation for the total amount of $4,000. The stipulation unambiguously provided that if RGC and Dropps were awarded offsetting judgments against each other, "Saturn shall be awarded judgment against RGC in the amount of $4,000." The district court awarded offsetting judgments, but entered judgment for Saturn against Dropps in the amount of $4,000 plus attorney fees and costs and disbursements in the amount of $8,795.42. The parties agree that the judgment should have been entered against RGC and do not dispute that the total settlement amount is $4,000.
"Stipulations are treated and interpreted as binding contracts." Emerick ex rel. Howley v. Sanchez, 547 N.W.2d 109, 112 (Minn.App. 1996). A contract provision is unambiguous when its meaning can be ascertained "without any guide other than knowledge of the facts on which the language depends for meaning." VanderLeest v. VanderLeest, 352 N.W.2d 54, 57 (Minn.App. 1984) (citations omitted). A court cannot interpret language in a stipulation or a contract that is plain and unambiguous. Starr v. Starr, 312 Minn. 561, 562-63, 251 N.W.2d 341, 342 (Minn. 1977). The district court erroneously entered the judgment for Saturn against Dropps and erred by adding fees and costs to the stipulated settlement amount.
3. Defamation
To establish a defamation claim, a plaintiff must show "a statement, communicated by the defendant to someone other than the plaintiff, *.*.* was false and harmed the plaintiff's reputation." Kellar v. VonHoltum, 568 N.W.2d 186, 191 (Minn.App. 1997) (citing Stuempges v. Parke, Davis Co., 297 N.W.2d 252, 255 (Minn. 1980)), review denied (Minn. Oct. 31, 1997). Statements may be divided into three categories: (1) those that cannot possibly have a defamatory meaning; (2) those that are reasonably susceptible to a defamatory meaning; and (3) those that are clearly defamatory on their face. Harman v. Heartland Food Co., 614 N.W.2d 236, 240 (Minn.App. 2000) (citing Church of Scientology v. Minnesota State Med. Ass'n Found., 264 N.W.2d 152, 155 (Minn. 1978)). A statement that tends to injure the credit, property, or business of a corporation is defamatory per se. Advanced Training Sys. v. Caswell Equip. Co., 352 N.W.2d 1, 10 (Minn. 1984).
Whether a statement reasonably conveys a defamatory meaning is a question of law. Kellar, 568 N.W.2d at 191. "Whether a defamatory meaning is conveyed is dependent upon how an ordinary person understands `the language used in the light of surrounding circumstances.'" Harman, 614 N.W.2d at 240 (quoting Gadach v. Benton County Co-op. Ass'n, 236 Minn. 507, 510, 53 N.W.2d 230, 232 (1952)). Defamatory statements which cannot be proven false or which cannot reasonably be interpreted as stating facts are not actionable. Huyen v. Driscoll, 479 N.W.2d 76, 80 (Minn.App. 1991), review denied (Minn. Feb. 10, 1992).
RGC's complaint identifies as defamatory claims by Ann Dropps that RGC had tendered a forged lien waiver to Dropps and that Robb Gass had forged the lien waiver. The complaint does not set out any statements verbatim nor does it make any reference to statements contained in Dropps's September 23, 1996 letter as being defamatory.
The district court found that Dropps:
[M]ade false statements both verbally and in writing which were reported to and made a part of the publicly accessible file of the Minnesota Department of Commerce. The false statements included and claimed [sic] that RGC was responsible for forging lien waivers and/or for the preparation and the submission of fraudulently prepared lien waivers. The Dropps affirmed these statements in a letter sent to the Department of Commerce, which the Dropps knew would become a part of the Department of Commerce's public file and thus of the public record. That letter likened RGC and Robb Gass to George Barr, a contractor whom the Dropps knew had been criminally prosecuted, and who had lost his contractor's license for unethical behavior.
The Court finds that the statements were made by the Dropps and to the Department of Commerce and to others, including all members of the general public who in particular would include interested potential customers of RGC.
The Court finds that the Dropps made these false statements to Michael Happ of the Department of Commerce in a letter making false and harmful allegations about RGC. The Dropps intended by the sending of this letter to prompt the Department of Commerce to initiate administrative or criminal prosecutions of RGC, with the hope that RGC's contractor's license would be suspended, forfeited or lost, thus damaging RGC and its reputation.
The Court specifically finds that the verbal and written comments and allegations made by the Dropps were of a nature which did and will continue to harm RGC's reputation and lower the reputation of RGC within the City of Maple Grove and within the contractor and potential residential home owner communities.
Based upon the actions and the conduct of the Dropps, the Court finds defamation per se. Therefore, RGC is not required to prove actual or specific damages as a result of the defamation and such damages are presumed.
The district court awarded $125,000 damages to RGC based on its determination that allegations in the public file would cause RGC to lose a $25,000 profit from at least one customer every other year for ten years.
The district court also awarded attorney fees to RGC on the defamation claim. The parties agree there is no legal basis for this award.
Although the district court found that Dropps made statements to the DOC "and others," there is no evidence in the record that the statements were communicated by Dropps to anyone other than the DOC. The fact that the DOC's files are open to the public is the only evidence that the statements were, or may be, communicated to "others."
A defamatory statement is absolutely privileged if published in the course of a judicial or quasi-judicial proceeding and it is relevant to the proceedings. Cole v. Star Tribune, 581 N.W.2d 364, 369 (Minn.App. 1998) (holding that Minnesota Board of Pardons is quasi-judicial entity and communications to board were relevant to proceedings and absolutely privileged); Kellar, 568 N.W.2d at 192 (holding DOC proceedings on application for bank charter were quasi-judicial and statements made within or incident to hearing were absolute privileged). The privilege includes anything that may be pertinent to the proceeding, and all doubts are resolved "in favor of relevancy and pertinency." Cole, 581 N.W.2d at 369 (quoting Matthis v. Kennedy, 243 Minn. 219, 225, 67 N.W.2d 413, 418 (1954)). "The doctrine of privileged communication rests in that of public policy." Matthis, 243 Minn. at 222, 67 N.W.2d at 417.
Dropps argue that the Noerr-Pennington doctrine (immunizing individuals from liability for petitions to the government for a redress of grievances) as adopted in Kellar, should apply in this case. But, in Kellar, the doctrine was not applied to defamatory statements and the court held only that the doctrine was not limited to antitrust suits. 568 N.W.2d at 193. The court did not announce the adoption of the doctrine in Minnesota. Id. Because we find the statements are absolutely privileged, we need not reach this issue.
In this case, the DOC did not hold a hearing but conducted an investigation, convened a settlement meeting, and made a determination that there was insufficient evidence to substantiate Dropps's allegations regarding fraudulent signatures on lien waivers. Investigation is a critical part of the DOC's enforcement process and is part of the quasi-judicial powers granted to the DOC in connection with its regulation of residential contractors. See Minn. Stat. § 326.91, subd. 2 (2000) (incorporating Minn. Stat. § 45.027 (2000) for any action taken by Commissioner in connection with administration of Minn. Stat. §§ 326.83 — 329.991 (2000)). The issues the agency investigates regarding residential contractors have public policy implications. See Minn. Stat. § 326.91, subd. 1 (2000) (stating the commissioner may order, deny, suspend, or revoke any license and may impose a civil penalty if it finds that the order is in the public interest). Without reports from homeowners, the DOC would not be able to investigate the practices of contractors and could not execute its regulatory responsibilities. Dropps's communications to the DOC that initiated the investigation are absolutely privileged.
The district court found that Dropps made the statements to the DOC for the purpose of harming the reputations of Gass and RGC, implying bad faith or malice. The statements are nonetheless privileged. Defamatory statements made in the course of judicial or quasi-judicial proceedings will not support a civil action for defamation even when made maliciously and with knowledge of falsehood. Matthis, 243 Minn. at 223, 67 N.W.2d at 417. RGC concedes that Dropps's initial complaints to the DOC may be absolutely privileged but argues that statements in the September 23, 1996 letter, after Dropps knew the DOC was not going to pursue further action against RGC, were not made in connection with the investigation and therefore are not privileged.
Despite lack of reference to these statements in the complaint, the parties do not dispute that the specific language in the September 23, 1996 letter targeted as defamatory by the district court consists of three rhetorical questions alluding to the inability of the DOC to protect consumers:
Why [does the DOC] let the builders go so far before you do anything to them (i.e. George Barr, Robb Gass, . . .)? How many people have to be financially ruined before any action is taken? We now know people that were threatened with a slander law suit by George Barr from information and the complaint they filed with your office. This is the same tactic that Robb Gass is using against us. Have both builders came [sic] to this approach on their own or did they get help?
Even if we accept the district court's finding that this language is defamatory, the letter has a sufficient nexus with the investigation to be absolutely privileged. The letter was placed in the investigatory file, indicating it was considered by the DOC to be part of proceeding. The DOC did not officially close its file until almost a year after this letter was sent. The statements in the September 23, 1996 letter are absolutely privileged and the district court erred in awarding a defamation judgment to RGC based on those statements.
4. Award of out-of-pocket disbursements to RGC
Dropps assert that the district court erred in awarding $22,954.78 to RGC for out-of-pocket disbursements without making any findings to support the award. Because no findings support the award and the record does not support the award, we reverse the award of out-of-pocket disbursements to RGC.
5. Award of damages to Dropps
Dropps argue that they were entitled to 10% overhead and 10% profit on the amount awarded to them for curing defects. Because there is no authority to support Dropps's theory of recovery and the record supports the district court's determination of damages for defects in the construction, we affirm the amounts as determined by the district court.
6. Costs and disbursements
Because RGC is no longer the prevailing party in this litigation, we reverse the award of costs and disbursements to RGC.