Earlier today we wrote about a Minnesota Court of Appeals decision holding that minor repair work could be considered when calculating the mechanics lien deadline. The case’s discussion of mechanics lien law was even broader than this providing a lengthy explanation of what work is and is not lieanble.
General Minnesota Rule About What Is Lienable Work
The question of what is and is not lienable in Minnesota has been a bit controversial lately. A little more than two years ago the Minnesota courts gave mixed signals about whether “site work” constituted lienable services. In a decision last month, Bright Star Systems Corporation v. MN Theaters 2006, LLC, the Minnesota Court of Appeals handed down an unpublished decision evaluating whether certain furnishings were “fixtures” or “trade fixtures,” with the right to file a mechanics lien hanging in the balance.
Here is what Minnesota considers lienable:
Under Minnesota law, a contractor who “contributes to the improvement of real estate by performing labor, or furnishing skill, material or machinery . . . for the erection, alteration, repair, or removal of” a “fixture” is entitled to a lien against the real estate. A fixture is a thing that is annexed to the realty so as to become a part of it.
This, of course, depends on the definition of a “fixture,” and Minnesota law has this to say on that topic:
In contrast to fixtures, trade fixtures are not encompassed by the mechanic’s lien statute. In determining whether an article is a fixture, courts consider several factors: (1) “the fact and character of annexation”; (2) “the nature of the thing annexed” and “the adaptability of the thing to the use of the land”; and (3) “the intent of the party in making the annexation” and the party’s relation to the freehold.
Another factor that can be considered is the amount of damage to the building that would be caused if the item were removed.
If a party furnishes fixtures or furnishes equipment to install fixtures the work is lienable. If the furnishing is or contributes to the installation of trade fixtures the work is not lienable. This was the issue in the Bright Star Systems Corp. case, and for the reasons discussed in the next section, the court determined that the work was not lienable.
Speakers, Screens, Lenses In Theater Are Not Fixtures and Not Lienable
At issue in the Bright Star Systems Corp. case were the furnishing and installation of “speakers, screens, and lenses.” The court found that these were not lienable because “[They] could easily be removed from the theater, and the lenses used in the theater’s projectors are not connected to the building at all.”
The court came to this conclusion after evaluating each of the above listed factors, which are discussed here in turn.
Removability of Fixtures A Factor, But No Clear Line In How Removable Something Must Be
While the differences between a 6,000 lb boiler and a 250 lb speaker is obvious, it’s not as obvious how a really heavy removable boiler is any different from a kind of heavy removable speaker. Where exactly does the court draw a line for mechanics lien claimants in the state? Citing previous cases where a “removable” 4,000 – 6,000 pound refrigerator and 6,000 pound boiler was considered a lienable fixture installation, the installing party (Bright Star) argued that the furnishing of these items should be included as they were also quite large and substantial (i.e. speakers were over 250 pounds). The court, however, rejected the analogy stating that “there is a vast difference between those speakers and the boiler.”
While the differences between a 6,000 lb boiler and a 250 lb speaker is obvious, it’s not as obvious how a really heavy removable boiler is any different from a kind of heavy removable speaker. Where exactly does the court draw a line for mechanics lien claimants in the state?
Unfortunately, the answer appears to be that the court won’t draw a line. Instead, they will refer lien claimants to a series of convoluted legal decisions and details, and pledge to make future decisions ad hoc.
Attachment and Integration of Movie Screens and Speakers, Surprisingly, Not Quite Enough
The fixtures v. trade fixtures argument in this case regarding the installation of speakers and movie screens in the construction of a movie theater. The court was called upon to decide whether the huge movie screen and heavy speakers, all tied together through electrical wires and installed throughout the facility, was “attached” enough to graduate from a “trade fixture” to a “fixture.” The appeals court ruled that they were trade fixtures and not lienable.
This is a pretty surprising conclusion.
This is a pretty surprising conclusion. Installing a TV set inside of a restaurant is one thing and is clearly a trade fixture, but installing an entire movie screen and the integrated speaker system is substantially different from this. Sure the speakers and screen could technically be removed, but so can nearly everything else in the facility: The seats, the carpet, the counters, etc.
Nevertheless, the court ruling is that the movie screen and the speakers within the facility were not attached enough to constitute lienable work and materials. Again, this leaves claimants searching for a reliable rule, but being left only with details and a future of confusing ad hoc decisions from the courts.
Nature of Things Annexed – Aren’t Movie Screens Integral to a Movie Theater?
Minnesota courts will look to the nature of the things installed and the place where it is installed to determine the connectivity of the two. Bright Star argued that the items installed at the movie theater – movie screens, speakers and lenses – are integral to the place where they were installed.
The court disagreed, however, saying that the items were “not adapted or modified to fit a particular space.” Insofar as consideration of the building’s purpose, the court dismissed this as just one factor to consider in determining the nature of the furnishing.
Conclusion: Fine Line Between Lienable and Non-Lienable Work
Unfortunately, many potential claimants or construction attorneys may be scratching their head at this decision. Of course it is possible to understand scenarios where “speakers” and “lenses” are not lienable furnishings, but under the facts of this case, it seems a bit out of line to rule that the fairly deep integration of a movie screen and movie speakers were not enough to be considered integrated into the building and a lienable fixture.
The result itself is one thing, but the bigger problem is that the court reached the result without leaving claimants, attorneys, and judges much guidance.
Determining whether or not something is lienable in Minnesota still requires a bit of guess work in some circumstances, and if your company finds itself in this gray zone, just be careful not to spend too much in attorney fees.