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T.E.C. INDUS. v. TAMA BEEF PACKING

Court of Appeals of Iowa
Dec 11, 2002
No. 1-811 / 01-0409 (Iowa Ct. App. Dec. 11, 2002)

Opinion

No. 1-811 / 01-0409.

Filed December 11, 2002.

Appeal from the Iowa District Court for Tama County, THOMAS KOEHLER, Judge.

Plaintiff appeals from a district court ruling granting the motions to dismiss filed by Tama Beef Packing and the City of Tama in its action to foreclose its mechanic's lien. AFFIRMED.

Ronald J. Pepples, Parkersburg, for appellant.

Robert M. Hogg of Elderkin Pirnie, P.L.C., Cedar Rapids, and Charles N. Nauen, Harry E. Gallaher and William A. Gengler of Lockridge Grindal Nauen P.L.L.P., Minneapolis, Minnesota, until withdrawal, and then Mark A. Roberts of Simmons, Perrine, Albright Ellwood, P.C., Cedar Rapids, for appellee Tama Beef Packing, Inc.

Robert M. Hogg of Elderkin Pirnie, P.L.C., Cedar Rapids, Charles N. Nauen, Harry E. Gallaher and William A. Gengler of Lockridge Grindal Nauen, P.L.L.P., Minneapolis, Minnesota, and Mark D. Lowe of Hopkins Huebner, P.C., Adel, until withdrawal of Hogg, Nauen, Gallaher, and Gengler, and then Lowe for appellee City of Tama.

Heard by VOGEL, P.J., and ZIMMER and HECHT, JJ.


T.E.C. Industrial, Inc. appeals from the district court's ruling granting the motions to dismiss for failure to state a claim upon which relief may be granted filed by Tama Beef Packing and the City of Tama in its action to foreclose its mechanic's lien. T.E.C. contends the trial court erred in dismissing its mechanic's lien foreclosure action (1) on the ground the real property was owned by a city, and (2) by concluding there was no express or implied contract to improve the real property. We affirm.

I. BACKGROUND FACTS.

This appeal stems from an action to establish and enforce a mechanic's lien against property owned by the City of Tama and leased to Tama Beef Packing, Inc. The City of Tama received the property involved here from IBP, Inc. by gift.

The City of Tama and Tama Beef entered into an agreement entitled "LEASE — BUSINESS PROPERTY" on June 19, 2000. The agreement provided that the City of Tama would lease the property to Tama Beef from July 1, 2000 until June 30, 2003, at which time Tama Beef would purchase the real estate and property from the City of Tama. Tama Beef had an option to purchase the property early, commencing one year prior to the expiration of the lease term. Pursuant to the contract terms, Tama Beef was to use and occupy the property for a slaughter plant and/or associated operations.

T.E.C. made substantial, permanent improvements to the slaughter facility operated by Tama Beef between August 21, 2000 and October 13, 2000. T.E.C. filed a mechanic's lien against the property at issue on October 27, 2000. The principal amount of the lien was $92,512.22 plus interest, costs, and attorney fees. The lien refers to Tama Beef leasing the premises and real property and further states that Tama Beef and the City of Tama are considered to be the owners of the premises and real property.

On December 1, 2000, T.E.C. filed a petition in equity to foreclose its mechanic's lien and later filed a first amendment and addendum to the petition. Tama Beef and the City of Tama responded by filing a joint motion to dismiss the petition in equity for failure to state a claim upon which relief could be granted. They alleged the property to which T.E.C. attached its lien was publicly-owned and thus not subject to a mechanic's lien, and that T.E.C. did not have a contract with the owner of the property or the owner's agent. The district court granted the motions to dismiss. T.E.C. appeals.

Our consideration of this appeal was stayed until recently by proceedings pending in bankruptcy court.

II. SCOPE OF REVIEW.

We review the district court's ruling on a motion to dismiss for the correction of errors at law. Henry v. Shober, 566 N.W.2d 190, 191 (Iowa 1997). Review is closely circumscribed on appeal from dismissal for failure to state a claim. Holsapple v. McGrath, 521 N.W.2d 711, 712 (Iowa 1994). We must assess the petition in the light most favorable to the claimant and resolve all doubts and ambiguities in claimant's favor. Id. We look to the pleadings to determine if they were so deficient that the opposing party was deprived of notice of the claims made. Haupt v. Miller, 514 N.W.2d 905, 909 (Iowa 1994).

III. MERITS.

T.E.C. argues the trial court erred in determining a mechanic's lien may not be enforced against a municipality. It contends that there is a limited public exemption from execution pursuant to Iowa Code section 627.18 (1999), and that exemption does not include the slaughterhouse at issue here. T.E.C. also maintains the lease/purchase contract between Tama Beef and the City of Tama was an executory purchase agreement for all the real property and improvements covered by T.E.C.'s mechanic's lien, and an equitable conversion occurred with Tama Beef "becoming the owner of the property and the real interest therein." It further argues a contract between the City of Tama and Tama Beef requiring Tama Beef to improve the real property bound either party's interest in the property to the mechanic's lien.

Iowa Code section 572.2 provides for a mechanic's lien for anyone who furnishes materials or labor upon any building or land for improvement, alteration, or repair. Under Iowa law, "[p]ublic buildings owned by the . . . city . . . necessary and proper for carrying out the general purpose for which such corporation is organized, are exempt from execution." Iowa law does not allow mechanic's liens to attach to public buildings. See Cities Serv. Oil Co. v. Longerbone, 232 Iowa 850, 853, 6 N.W.2d 325, 326-27 (1942). Here, the building and land at issue were owned by the City of Tama. IBP, Inc. gave the property to the City, and the City leased it to Tama Beef with the intent of Tama Beef purchasing it. The City's ownership of the property was "necessary and proper for carrying out the general purpose for which the [City] is organized." We find it inconsequential that the public property was leased to a nonpublic entity, Tama Beef. See 56 C.J.S. Mechanics' Liens, § 11, at 44 (1992). We conclude that T.E.C.'s mechanic's lien could not attach to the property.

Accordingly, even if an equitable conversion took place, as T.E.C. alleges, it would not be entitled to appellate relief. If a mechanic's lien attached to the property under the application of the equitable conversion doctrine, it would attach to the interests of both Tama Beef and the City of Tama. See Schaffer v. Frank Moyer Constr., Inc., 628 N.W.2d 11, 17 (Iowa 2001) (stating that an "owner" for the purposes of section 572.2 includes both the buyer and the seller under an executory contract). We have concluded mechanic's liens cannot attach to public buildings, and thus it cannot attach to the property at issue here. Furthermore, because of the public nature of this property, no mechanic's lien could attach to the property, even if the City of Tama had contracted for the improvements at issue. We affirm the trial court's ruling dismissing this action for failure to state a claim upon which relief could be granted.

When parties enter into an executory real estate contract, equity treats the contract as a conversion. Pierce v. Farm Bureau Mut. Ins. Co., 548 N.W.2d 551, 555 (Iowa 1996). Under the doctrine of equitable conversion, the purchaser of the real estate has equitable ownership of the property, and the vendor retains legal title, holding it as trustee for the purchaser. Id. We conclude that we need not decide whether the parties' agreement is an executory real estate contract. Even if it is, no mechanic's lien may attach against the interest of the City of Tama, which is still an "owner" under the mechanic's lien statute. Schaffer v. Frank Moyer Constr., Inc., 628 N.W.2d 11, 17 (Iowa 2001).

IV. CONCLUSION.

We conclude the trial court correctly dismissed T.E.C.'s petition for failure to state a claim upon which relief could be granted.

AFFIRMED.


Summaries of

T.E.C. INDUS. v. TAMA BEEF PACKING

Court of Appeals of Iowa
Dec 11, 2002
No. 1-811 / 01-0409 (Iowa Ct. App. Dec. 11, 2002)
Case details for

T.E.C. INDUS. v. TAMA BEEF PACKING

Case Details

Full title:T.E.C. INDUSTRIAL, INC., a Minnesota Corporation, Plaintiff-Appellant, v…

Court:Court of Appeals of Iowa

Date published: Dec 11, 2002

Citations

No. 1-811 / 01-0409 (Iowa Ct. App. Dec. 11, 2002)