Ryan Contracting Co. v. O'Neill & Murphy, LLP, A14–1472.

883 N.W.2d 236

RYAN CONTRACTING COMPANY, Respondent,

v.O'NEILL & MURPHY, LLP, et al., Appellants.

No. A14–1472.

Supreme Court of Minnesota.

Aug. 3, 2016.

Paul A. Sortland, Sortland Law Office, PLLC, Minneapolis, MN, for respondent.

Kay Nord Hunt and Phillip A. Cole, Lommen Abdo, P.A., 920 Second Avenue South, Minneapolis, MN, for appellants.

Considered and decided by the court.

OPINION

DIETZEN, Justice.

Ryan Contracting Company (Ryan) brought suit against O'Neill & Murphy, LLP (O'Neill) for legal malpractice arising out of O'Neill's representation of Ryan in a legal malpractice claim against Meagher & Geer, PLLP (MG) for alleged errors in the foreclosure of Ryan's mechanic's liens. O'Neill moved for summary judgment, arguing that Ryan could not establish that “but for” MG's alleged errors in filing the mechanic's liens, the underlying claims would have yielded a more favorable outcome. The district court granted the motion, concluding, among other things, that Ryan's error in not filing the pre-lien notice required by Minn.Stat. § 514.011 (2014) rendered all of the liens void; and that the mechanic's liens were not perfected, not because of MG's conduct, but because Ryan was unable to apportion the amount owed for each lot. The court of appeals affirmed in part, reversed in part, and remanded the case to the district court for further proceedings, concluding that Ryan was exempt from the pre-lien notice requirement under Minn.Stat. § 514.011, subd. 4c(c), and that there were genuine issues of material fact on the other issues. We subsequently granted review. For the reasons that follow, we affirm as modified.

This case arises out of the foreclosure of mechanic's liens by Ryan, which was a contractor on the project, for improvements it made to real property located in Wright County that was owned by Darrel A. Farr Development Corp. The development was known as the Kittredge Crossing Development Project. After Farr obtained the necessary zoning approvals from the City of Otsego, Farr and Ryan entered into two contracts in December 2003 and September 2004, which provided that Ryan would construct certain utility and street improvements on Phase I and Phase II of the development project for agreed-upon compensation. The work consisted of placing sewer lines, grading the streets, and then paving the streets with asphalt. Ryan did not serve Farr with a written pre-lien notice upon commencement of the work.

In July 2006, Ryan alleged that Farr failed to pay for the work performed on the development project and filed a notice to terminate the contracts. Thereafter, MG, acting on Ryan's behalf, filed 26 mechanic's lien statements, covering 289 lots, in the amount of $362,546 for each lot in the project. Throughout the litigation there has been a sharp dispute over whether Ryan was justified in filing for the total amount of the lien for each lot. Farr responded by filing an action in Wright County District Court alleging that Ryan breached the contracts with Farr and claimed damages. Ryan answered the complaint and commenced a separate action to foreclose on those mechanic's liens. At the time Ryan foreclosed the liens, 203 lots were still owned by Farr, and 86 lots had been sold to third parties.¹ The two cases were consolidated by the district court.

In June 2007, Ryan terminated MG, and substituted Wilkerson & Hegna, PLLP as its legal counsel in the Farr lawsuit. Both parties subsequently moved for summary judgment. With respect to the mechanic's lien foreclosure action, Ryan argued that Farr owed $356,079 pursuant to the contract for the work Ryan performed on the development project, that it was impossible to apportion the value of the improvements made to each particular lot, and therefore it was appropriate that Ryan had filed a lien for the total amount against each lot.² Farr claimed that the Ryan liens were invalid under the mechanic's lien statutes.

The district court granted Farr's motion for summary judgment as to the non-Farr-owned lots. The district court reasoned that because those lots were no longer owned by Farr, Minn.Stat. § 514.03, subd. 1(b) (2014), and limited the amount of the liens to “the reasonable value of the work done, and of the skill, material, and machinery furnished.” Because Ryan claimed it was impossible to apportion the value conferred to each particular lot, and “the value of the improvement made to each particular [l]ot” was, under the district court's view, “the only permissible lien amount under § 514.03,” the district court concluded that those liens were void because Ryan intentionally filed lien statements on the non-Farr-owned lots in excess of the amount justly due under Minn.Stat. § 514.74 (2014).

But the court denied summary judgment as to the Farr-owned lots based upon section 514.74 because there were fact issues regarding whether Ryan made an intentional demand in excess of the amount due as to these lots. The district court also rejected Farr's argument that Ryan's liens were void for failure to comply with Minn.Stat. § 514.09 (2014), which addresses liens filed based upon improvements to adjoining lots. Although the court agreed that Ryan's liens failed to comply with section 514.09, the court reasoned that the language of that statute is permissive, making strict compliance unnecessary. The court denied the remaining aspects of the motion on the ground that genuine issues of fact existed.

Ryan and Farr subsequently settled the two lawsuits. The terms of the agreement required Ryan to release its mechanic's liens on the Farr-owned lots and its contract claims against Farr in exchange for a payment of $280,000. Ryan, however, reserved any claims it had against third parties, including MG, for damages arising out of the foreclosure of Ryan's mechanic's liens.

Ryan, now represented by O'Neill, brought suit against MG for legal malpractice arising out of MG's allegedly defective filing and foreclosure of Ryan's mechanic's liens on the development project. MG moved to dismiss the lawsuit on the ground that O'Neill failed to timely file expert witness affidavits as required by Minn.Stat. § 544.42, subd. 4 (2014). The district court granted the motion and dismissed Ryan's lawsuit against MG.

In the current lawsuit, Ryan, which is now represented by Sortland Law Office, sued O'Neill for legal malpractice arising out of O'Neill's representation of Ryan in the MG lawsuit. O'Neill moved for summary judgment, arguing that Ryan is unable to establish causation. Specifically, O'Neill argues that Ryan cannot establish that “but for” MG's alleged errors in filing the mechanic's liens, the underlying lien claims would have yielded a more favorable outcome than the $280,000 settlement with Farr. The district court granted the motion, concluding, among other things, that Ryan's failure to serve pre-lien notice on Farr, as required by Minn.Stat. § 514.011, rendered all of Ryan's liens void, and that MG was not responsible for Ryan's failure to secure the liens on the non-Farr owned properties.

The court of appeals affirmed in part, reversed in part, and remanded the case to the district court for further proceedings. The court concluded that Ryan was exempt from the pre-lien notice requirement under Minn.Stat. § 514.011, subd. 4c(c), and that there were genuine issues of material fact regarding whether Ryan would have been able to enforce its mechanic's liens and whether Ryan would have been able to recover more than $280,000. Ryan Contracting Co. v. O'Neill & Murphy, LLP, 868 N.W.2d 473 (Minn.App.2015). We granted O'Neill's petition for review.

I.

On appeal, O'Neill argues that the court of appeals erred in concluding that Ryan: (1) was not required under Minn.Stat. § 514.011, subd. 4, to give pre-lien notice to the property owner to enforce its mechanic's liens; (2) may have been able to apportion the value of the improvements between lots pursuant to Minn.Stat. § 514.03, subd. 1 (b); and (3) was not barred by the Farr settlement from pursuing the present action. We will discuss each issue in turn.

O'Neill first argues that Ryan was required under Minn.Stat. § 514.011 to provide pre-lien notice to the owner of the property in order to enforce its mechanic's liens. According to O'Neill, Ryan's failure to do so voided all of the mechanic's liens it filed, and therefore mandated dismissal of the legal malpractice claim, because any error by O'Neill did not cause damage to Ryan.

We review the district court's summary judgment decision de novo. Premier Bank v. Becker Dev., LLC, 785 N.W.2d 753, 758 (Minn.2010) ; Riverview Muir Doran, LLC v. JADT Dev. Group, LLC, 790 N.W.2d 167, 170 (Minn.2010). Our role is to “determine whether the district court properly applied the law and whether there are genuine issues of material fact that preclude summary judgment.” Riverview Muir Doran, 790 N.W.2d at 170. Statutory interpretation is a question of law that we review de novo. In re Welfare of J.J.P., 831 N.W.2d 260, 264 (Minn.2013). The goal of all statutory interpretation is to ascertain and effectuate the intent of the Legislature. Minn.Stat. § 645.16 (2014). When interpreting a statute, we give words and phrases their plain and ordinary meaning. Staab v. Diocese of St. Cloud, 813 N.W.2d 68, 72 (Minn.2012). Further, we read the statute as a whole and give effect to all of its provisions. Id.

To prevail in an action for legal malpractice the plaintiff must show: “(1) the existence of an attorney-client relationship; (2) acts constituting negligence or breach of contract; (3) that such acts were the proximate cause of the plaintiff's damages; and (4) that but for defendant's conduct, the plaintiff would have been successful in the prosecution or defense of the action.” Blue Water Corp., Inc. v. O'Toole, 336 N.W.2d 279, 281–82 (Minn.1983). A plaintiff must provide sufficient evidence to satisfy each of these elements. Id. at 282. The primary focus of O'Neill's motion for summary judgment is on the fourth element....