HomeStar Property Solutions, LLC v. Safeguard Properties, LLC

Background

HomeStar Property Solutions, LLC provided property-preservation, repair, and construction services as an independent contractor for Safeguard Properties, LLC. HomeStar alleged that Safeguard failed to pay, or underpaid, it for the work, contributing to HomeStar’s financial difficulties and eventual closure. Safeguard denied that account and asserted a contract counterclaim based on mechanics’ liens filed by HomeStar and its subcontractors.

The contract required HomeStar to waive mechanics’ liens and obtain lien waivers from its subcontractors. It also required HomeStar to indemnify Safeguard—that is, reimburse Safeguard for specified losses and expenses—resulting from liens placed by HomeStar or its subcontractors. HomeStar filed mechanics’ liens on properties in multiple states after it believed Safeguard had not timely paid it. Sixteen subcontractors also filed or threatened liens, and Safeguard paid those subcontractors $203,401.73 over 22 payments to avoid disputes with Safeguard’s clients.

Safeguard moved for summary judgment, which is judgment without a trial when no material facts are genuinely disputed, on HomeStar’s breach-of-contract, unjust-enrichment, promissory-estoppel, and account-stated claims. The court denied that motion from the bench on September 20, 2018; the opinion states that a written explanation of that denial would be issued later. The court took under advisement Safeguard’s motion for summary judgment on its counterclaim and Bank of America’s motion for summary judgment on HomeStar’s unjust-enrichment claim.

Safeguard’s Counterclaim

The court ruled that the contract’s lien-waiver provision was unenforceable in Connecticut, Florida, Georgia, Illinois, Indiana, Kentucky, Maryland, Massachusetts, Minnesota, and New York because those states prohibit the relevant lien waivers. As a result, HomeStar did not breach the contract merely by filing liens concerning properties in those states, and Safeguard could not obtain indemnification for attorney fees or costs related to those liens.

The court reached a different result for properties in Alabama, Idaho, Iowa, New Hampshire, Ohio, Pennsylvania, Texas, and Wisconsin, where parties may contract away the right to file a mechanics’ lien. The court held that HomeStar breached the lien-waiver provision concerning liens in those states. It also held that HomeStar was contractually required to indemnify Safeguard for attorney fees incurred in removing HomeStar’s liens and for amounts Safeguard paid to remove subcontractors’ liens in those states.

Based on the parties’ submissions, the court stated that 26 of HomeStar’s liens were filed in lien-waivable states and that Safeguard paid $60,187.39 to subcontractors for liens in those states. The court noted that Safeguard would have an opportunity to correct its accounting if necessary. HomeStar argued that Safeguard had breached its own payment obligations first, but the court found that HomeStar offered only generalized assertions rather than specific evidence showing nonpayment on the work orders at issue.

The court therefore granted in part Safeguard’s motion for summary judgment on its breach-of-contract counterclaim. Safeguard had to file an affidavit detailing the costs it believed it was entitled to recover. The court stated that it would consider a later motion for reasonable attorney fees under the case’s prior scheduling order.

Bank of America’s Motion

Bank of America hired Safeguard to perform property-preservation work, and Safeguard hired HomeStar. HomeStar invoiced Safeguard; Safeguard reviewed and adjusted the invoices under its contract with HomeStar and then invoiced Bank of America. Bank of America paid Safeguard the amounts Safeguard invoiced, and Safeguard was contractually required to indemnify Bank of America for litigation-related costs.

The court granted Bank of America’s motion for summary judgment on HomeStar’s unjust-enrichment claim. Under Minnesota law, unjust enrichment requires proof that the defendant knowingly received something of value for which it should pay in fairness. The court found no evidence that Bank of America knowingly received unpaid services from HomeStar. It also concluded that allowing the claim to proceed could result in an improper double recovery because any payment dispute arising from Safeguard’s invoice adjustments was between HomeStar and Safeguard, not HomeStar and Bank of America.

Order

The court ordered that Safeguard’s motion for summary judgment on its breach-of-contract counterclaim was granted in part and that Bank of America’s motion for summary judgment was granted. The order did not resolve the separate primary summary judgment motion that had already been denied from the bench.