Mechanics liens are often broadly construed. This means that when courts are assessing whether work is lienable, they will often afford some leeway or a small benefit of the doubt to the party claiming a lien. However, mechanics lien laws can only stretch so far. A recent case tested the boundaries of Minnesota lien law and determined that the removal of waste from an ethanol plant did not constitute lienable work.
Check out this post for a quick look at important Minnesota lien law considerations.
Limit to Minnesota Lien Laws
Let’s start with the facts of the case. The property in question is an ethanol plant in Minnesota. Due to its old and worn down condition, the plant produced an excessive amount of byproduct called “thin stillage.” Stillage is not completely useless- in fact, the plant arranged for stillage to be delivered to a nearby farm to feed cattle (remember – ethanol is made from corn, so the cows were just being fed a corn byproduct). The plant’s owner hired M & G to remove the stillage and deliver it to the farm.
The owner of the plant decided to sell, and M & G exchanged lien waivers for payments prior to closing. The new property owner kept M & G on board to remove and distribute the waste. Eventually, though, M & G went unpaid and filed a lien on the property for labor and materials. Despite the lien, payments were still not made, so M & G sued to foreclose the lien.
The district court sided with M & G. It found that M & G’s work constituted an improvement to the property. The court also found that because M & G’s work was continuous and ongoing from the prior owner, the lien related back to a time before the new owner’s mortgage was filed and had priority over the mortgage. The court ordered the foreclosure of the lien and awarded attorney fees to M & G. The new owner appealed.
On appeal, the court looked to determine whether the removal of thin stillage constituted lienable work. While acknowledging that Minnesota mechanics liens should be broadly construed, the appellate court took issue with the lower court’s interpretation. The appellate court found that M & G’s removal of stillage equated to periodic removal of business waste, likening the situation to a hospital disposing of hazardous waste or a restaurant having its garbage taken away. Thus, the court found, the periodic removal of waste did not constitute an “alteration” or “repair” to real property. Minnesota lien laws did not apply.
This isn’t necessarily earth-shattering news, but it should catch the eye of some waste removal services. It appears that the Minnesota lien laws will not protect a claimant if waste removal is needed regularly as an ongoing business concern. However, this decision would not likely extend to waste removal related to the construction or repair of property. With the hospital and restaurant analogies, this court made clear that its reason for disallowing this lien was that the removal of chemical byproduct was an ongoing concern of the business. Because regular waste removal does not constitute an improvement to real property, this lien claim failed. Removal of construction-related waste and debris would likely be treated differently.