author: KONENKAMP, Justice.

text:
    2003 SD 94
    Craig SAIZ and Patty Saiz, Plaintiffs and Appellants, v. Rod HORN, d/b/a Horn Real Estate, Defendant and Appellee.
    No. 22570.
    Supreme Court of South Dakota.
    Considered on Briefs May 27, 2003.
    Decided Aug. 6, 2003.

      Matthew J. Kinney of Kinney & Koch, Spearfish, for plaintiffs and appellants.
    Thomas E. Brady of Brady Plunder, Spearfish, for defendant and appellee.
   KONENKAMP, Justice.

[¶ 1.] This is an action brought by hom-ebuyers against their realtor. After their purchase, the buyers found that the home they bought had substantial defects. They also learned that the seller had previously given other potential buyers a disclosure statement revealing these defects. The buyers sued their realtor for breach of agency and breach of fiduciary duty in failing to inform them that the seller had a statutory duty to provide them with a disclosure statement. The trial court granted summary judgment for the realtor, finding no duty on the part of the buyers’ agent. The court also ruled that the claim was barred by the six-year statute of limitations. Because realtors representing buyers have a duty, of ordinary care toward their clients, which includes the duty to disclose statutorily mandated procedures for home sales, we conclude that the realtor here had an obligation to inform his clients of the seller’s responsibility to provide a disclosure statement. We also hold that the six-year statute of limitations had not expired. Summary judgment for the realtor is reversed, and the case is remanded for trial.

Background

[¶ 2.] In 1995, plaintiffs Craig and Patricia Saiz were looking to rent a home in Belle Fourche, South Dakota. Patricia contacted Rod Horn, a real estate broker. Horn .suggested that they purchase a home located at 505 Kingsbury Street. Advising them that the price was very low, Horn stated that he would consider buying it himself as an investment property if they chose not to purchase it.

[¶ 8.] Plaintiffs had no previous experience in buying a house. They agreed that Horn would represent them as their agent. The home was owned by Marjorie Dailey, who was represented by Lookout Mountain Realty of Spearfish. Unknown to plaintiffs, Dailey had previously completed a seller’s property condition disclosure statement on February 18,1995. The statement had been given to earlier potential buyers. The disclosure statement revealed a history of water penetration problems and cracking. Horn never advised plaintiffs of the seller’s statutory duty to provide a disclosure statement.

[¶ 4.] On June 12, 1995, plaintiffs executed an offer and agreement to purchase the home for $39,500. Horn was listed as the selling salesperson for the purpose of a commission split with the seller’s broker. Horn continued to represent plaintiffs until the sale, closed on August 25, 1995. Plaintiffs were never offered and did not receive a seller’s property condition disclosure statement before making their written offer. However, plaintiffs’ lender obtained a home inspection report, which stated that the dwelling was structurally sound and in a state of good repair, with only trim and stain around windows, cellar door repair, and foundation fill necessary.

[¶5.] For a period after closing, the condition of the residence was unremarkable. In 1999, plaintiffs installed seven new windows and replaced two front doors. In 2000, they began to notice cracks in most rooms that successive repainting would not thwart. They also discovered that the walls and insulation contained significant moisture from water penetration occurring over a number of years. They spent thousands of dollars improving the home. Eventually, after consulting with a contractor in 2001, plaintiffs discovered that the house did not have a concrete foundation to stabilize the walls. In actuality, the foundation area was comprised of either cinder blocks or wood posts set into the soil.

[¶ 6.] On one side of the house, a large expanding sink hole caused a part of the house to pull to the west, gradually tearing the west side away from the rest of the structure. The lack of a concrete foundation and water intrusion caused various problems within the house, including shifting of walls, drywall cracks, peeling of paint, warping of the stairway railing and stairs, and gaps at wall joints. To avoid ground contraction or further erosion of ground support, contractors recommended a concrete foundation structure on part of the house, costing $15,000 to $20,000. Plaintiffs claim that had they been presented with a disclosure statement, they would have renegotiated the terms and conditions of sale or may have decided not to purchase the property.

[¶ 7.] On August 6, 2001, plaintiffs brought suit. The complaint alleged breach of agency contract and breach of fiduciary duty. The trial court granted summary judgment for Horn, concluding that SDCL 43-4-38 placed the duty to provide a disclosure statement on the seller and that the statute does not impose such a duty on the buyer’s agent. The court also ruled that plaintiffs’ claim is barred by the six-year statute of limitations in SDCL 15-2-13(1). The court reasoned that because the disclosure statement must be provided “before the buyer makes a written offer,” the fact that the agent continued to represent plaintiffs beyond that time was of no consequence. To the court, the cutoff date was June 12, 1995, when the purchase agreement was offered and accepted the next day. Plaintiffs appeal on the following issues: (1) “Whether the trial court erred by granting Horn’s motion for judgment on the pleadings and summary judgment by finding no breach of agency duty owed by Horn to Saiz.” (2) “Whether the trial court erred by granting Horn’s motion for judgment on the pleadings and summary judgment by finding the statute of limitations barred Saiz’ claim.”

Standard of Review

[¶ 8.] Summary judgment is appropriate under SDCL 15-6-56, when the entire record reveals that there is no genuine issue on any material fact and that the moving party is entitled to a judgment as a matter of law. Fisher v. Kakler, 2002 SD 30, ¶ 5, 641 N.W.2d 122, 124-25 (citations omitted). If there are genuine issues of material fact, then summary judgment is improper. Id. at ¶ 5, 641 N.W.2d at 125 (citation omitted). Disputed facts become material if they affect the outcome of a case under the law, “that is, if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Id. (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202, 212 (1986)). On review, we apply the same test as the trial court: we probe the record for material facts, resolve disputed facts in favor of the nonmoving party, and decide whether the moving party is entitled to a judgment as a matter of law. Id. (citing Sorrels v. Queen of Peace Hosp., 1999 SD 133, ¶5, 601 N.W.2d 606, 608.)

[¶9.] Liability in tort depends on the existence of a duty and a breach of that duty, and unless a statute creates a legal obligation, ascertaining a duty and defining its limitations remain a function of the courts. Id. (citing Tipton v. Town of Tabor, 1997 SD 96, ¶ 12, 567 N.W.2d 351, 357 (Tipton II)). A duty will not arise at the mere behest of those with grievances real or imagined. Id. at ¶ 6, 641 N.W.2d at 125. A duty originates either by legislation or through the common law. Id.

Analysis and Decision

1. Agency and Fiduciary Duties

[¶ 10.] This is an action against the buyers’ agent for breach of agency and fiduciary duties in failing to inform the buyers that a home seller must provide a disclosure statement. The trial court granted summary judgment for Horn, concluding that SDCL 43-4-38 imposes the duty only on the seller to provide a disclosure statement. SDCL 43-4-38 provides:

The seller of residential real property shall furnish to a buyer a completed copy of the disclosure statement before the buyer makes a written offer. If after delivering the disclosure statement to the buyer or the buyer’s agent and prior to the date of closing for the property or the date of possession of the property, whichever comes first, the seller becomes aware of any change of material fact which would affect the disclosure statement, the seller shall furnish a written amendment disclosing the change of material fact.

[¶ 11.] This statute, of course, imposes no duty on the buyers’ agent. Horn had no duty to uncover and disclose defects in the seller’s property. At issue in this case, however, is whether Horn, as the buyers’ agent, owed a duty to the buyers to inform them that, by law, the seller must give them a disclosure statement. We have previously recognized a fiduciary duty between a real estate agent and a principal. Hurney v. Lock, 308 N.W.2d 764, 768 (S.D.1981). Here, Horn acted as the buyers’ agent, and thus he owed a fiduciary duty to them.

[¶ 12.] Not unlike the requirement of other professionals to inform their clients, real estate agents are expected to advise their principals on the rules and procedures involved in a real estate transaction. Why have realty agents for buyers, if agents, supposedly knowledgeable in real estate transactions, have no obligation to tell clients that sellers are required by law to give a disclosure statement? Such disclosure is legally mandated for the protection of buyers. It can reveal matters that may materially influence a decision whether to purchase a home.

[¶ 13.] The applicable principles in any agency contract of this kind are well established. Witt v. John Blomquist, Inc., 249 Minn. 32, 34, 81 N.W.2d 265, 266 (1957). As we said in Humey:

Unless otherwise agreed, [real estate agents] owe their principals ... a duty to use reasonable efforts to fully, fairly and timely disclose information to their principals within their knowledge, which is or may be material to the subject matter of their agency. Material information depends on the facts and circumstances of each ease.

308 N.W.2d at 768-69 (citations omitted); Restatement (Second) of Torts § 299A. Real estate agents are bound to exercise reasonable care, skill, and diligence in performing the transactions entrusted to them and are responsible for loss proximately resulting from their failure to do so. Witt, 249 Minn, at 34, 81 N.W.2d at 266 (citations omitted). Any actions or omissions by agents in violation of the duties imposed upon them by their agency contract render them responsible to their principals for loss or damages. Id. (citing Lake City Flouring Mill Co. v. McVean, 32 Minn. 301, 20 N.W. 233 (1884); Restatement, Agency, §§ 385, 399.)

[¶ 14.] Here, plaintiffs stated that they would not have proceeded with the purchase of the house on the negotiated terms had they known about the revelations in the disclosure statement. The circuit court erred in ruling that Horn had no duty as the buyers’ agent to inform them that the seller was legally required to provide a disclosure statement.

2. Statute of Limitations

[¶ 15.] The trial court ruled that plaintiffs’ claim is barred by the six-year statute of limitation in SDCL 15-2-13(1). Reasoning that the statute of limitations began to run on June 12, 1995, the date plaintiffs executed their offer to purchase, the trial court ruled that because the disclosure statement must be provided “before the buyer makes a written offer” the fact that the agent continued to represent plaintiffs beyond that time was of no consequence. See SDCL 43-4-38.

[¶ 16.] SDCL 43-1-38 requires that the disclosure statement be furnished before the buyer makes a written offer. In this case, no disclosure statement was furnished to plaintiffs. Horn’s representation continued until the closing date in August. Even if the disclosure statement had been given late, it may have prompted further inquiry or a modification of the agreement. In fact, SDCL 43-4-39 provides for instances where a disclosure statement is not delivered until after the buyer has made a written offer. A buyer has the right to “terminate” an offer within three to six days after receiving a late disclosure statement or an amended disclosure statement. Because even a late disclosure can alert buyers to problems that may cause the purchase agreement to be modified or terminated, Horn’s obligation to advise his clients continued until the closing date. Thus, August 25, 1995, the date of closing, is the date on which the limitations period began to run. The complaint was served on August 6, 2001. The claim is not barred by the six-year statute of limitations.

[¶ 17.] Reversed and remanded for trial.

[¶ 18.] GILBERTSON, Chief Justice, and SABERS, ZINTER, and MEIERHENRY, Justices, concur.

      . If there was a signed representation agreement, it was not entered in the record.

      . The disclosure statement showed an "X” in the "Yes” box by the question, "Have you experienced any water penetration problems in the walls, windows, doors, basement, or crawl space?” An "X” was also placed in the "Yes” box by the question, "Are there any interior cracked walls or floors, or cracks or defects in exterior driveways, sidewalks, patios or other hard surface areas?”

      .These repairs are mentioned in the offer and agreement to purchase.

      . It should be noted that in 1998, the Legislature enacted SDCL 36-21A-138:
      No licensee acting as a buyer's ... agent owes any fiduciary duty or obligation to a customer. A licensee shall provide disclosure of all adverse material facts known by the licensee to any customer....
      No one suggests that this statute retroactively applies here.

      . The Restatement (Second) of Torts § 299A provides:
      Unless he represents that he has greater or less skill or knowledge, one who undertakes to render services in the practice of a profession or trade is required to exercise the skill and knowledge normally possessed by members of that profession or trade in good standing in similar communities.

      . See also SDCL 36-21A-136 (enacted in 1998) (buyer’s agent has duty to exercise reasonable skill and care for the client).

      . SDCL 43 — 4-39 provides:
      If the disclosure statement or a material amendment to the disclosure statement is delivered to the buyer after the buyer has made a written offer, the buyer may termi-note the offer by delivering a written notice of termination to the seller or the seller’s agent within three days after the disclosure statement or amendment is delivered in person or within six days after the disclosure statement or amendment is delivered by deposit in the mail.

      (Emphasis added.)


source: Caselaw Access Project

author: Paul H. Anderson Associate Justice

license: Public Domain

text:
    In re Petition for DISCIPLINARY ACTION AGAINST Richard S. ESKOLA, a Minnesota Attorney, Registration No. 123699.
    No. A03-404.
    Supreme Court of Minnesota.
    Aug. 21, 2003.
   ORDER

The Director of the Office of Lawyers Professional Responsibility has filed a petition for disciplinary action alleging that respondent Richard S. Eskola has committed professional misconduct warranting public discipline, namely, that respondent misappropriated fees belonging to his law firm in violation of Minn. R. Prof. Conduct 8.4(c). Respondent and his former partners have agreed to a restitution amount and one of respondent’s former partners is holding funds sufficient to satisfy the restitution obligation.

Respondent admits his conduct violated the Rules of Professional Conduct, waives his rights under Rule 14, Rules on Lawyers Professional Responsibility (RLPR), and has entered into a stipulation with the Director in which the parties jointly recommend (1) that the appropriate discipline is a 30 day suspension from the practice of law under Rule 15, RLPR; (2) that respondent successfully complete the professional responsibility portion of the state bar examination within one year; (3) that respondent comply with Rule 26, RLPR; (4) that respondent pay $900 in costs under Rule 24(a), RLPR; and (5) that respondent may be reinstated at any time after 30 days upon the filing of an affidavit with the Clerk of the Appellate Courts and the Director’s Office establishing that respondent is current with Continuing Legal Education and has complied with Rules 24 and 26, RLPR.

This court has independently reviewed the file and approves the jointly recommended disposition.

Based upon all the files, records and proceedings herein,

IT IS HEREBY ORDERED that respondent Richard S. Eskola is suspended from the practice of law for 30 days subject to the agreed-upon conditions set forth above effective September 1, 2003. Respondent shall pay costs in the amount of $900 under Rule 24, RLPR.

BY THE COURT:

Paul H. Anderson Associate Justice


author: /s/ Paul H. Anderson Associate Justice

text:
    In re Petition for DISCIPLINARY ACTION AGAINST James J. BOYD, a Minnesota Attorney, Registration No. 1039x.
    No. A03-676.
    Supreme Court of Minnesota.
    Sept. 5, 2003.
   ORDER

On July 16, 2003, this court suspended respondent James J. Boyd from the practice of law for a period of six months with all but 30 days stayed. The order provided for reinstatement by affidavit under Rule 18(f), Rules on Lawyers Professional Responsibility.

The Director of the Office of Lawyers Professional Responsibility has filed with this court an affidavit certifying that respondent has filed an affidavit of compliance indicating that respondent has complied with the suspension order, that respondent is current with continuing legal education requirements, and that the Director does not object to reinstatement.

Based upon all the files, records and proceedings herein,

IT IS HEREBY ORDERED that respondent James J. Boyd is reinstated to the practice of law in the State of Minnesota effective immediately and is placed on probation subject to the terms and conditions set forth in the July 16, 2003, order. BY THE COURT:

/s/ Paul H. Anderson Associate Justice


author: LANSING, Judge.

text:
    STATE of Minnesota, Respondent, v. Tyrone S. McCOY, Appellant.
    No. C4-02-1788.
    Court of Appeals of Minnesota.
    Sept. 9, 2003.

      Mike Hatch, Attorney General, and Susan Gaertner, Ramsey County Attorney, Dawn Burlingame, Assistant County Attorney, St. Paul, MN, for Respondent.
    John M. Stuart, State Public Defender, Roy G. Spurbeck, Assistant Public Defender, Minneapolis, MN, for Appellant.
    Considered and decided by WRIGHT, Presiding Judge, LANSING, Judge, and PETERSON, Judge.
   OPINION

LANSING, Judge.

This appeal from a misdemeanor domestic-violence conviction presents the question of whether Minn.Stat. § 634.20 (2002) as applied to abrogate the clear-and-convincing-evidence requirement of Minn. R. Evid. 404(b) violates the separation-of-powers doctrine of the Minnesota Constitution. We conclude that the legislature did not intend to abrogate the clear-and-convincing-evidence requirement and that section 634.20 does not conflict with rule 404(b). Because the district court admitted evidence of similar prior conduct without determining whether that conduct was proved by clear and convincing evidence, we reverse and remand for a new trial.

FACTS

Tyrone McCoy was charged with one count of interference with an emergency call and one count of misdemeanor domestic violence following an incident in which he allegedly struck Jamie McCoy, his spouse, with a belt and initially prevented her from calling for help. Before trial, Jamie McCoy informed the state that she had fabricated the alleged assault because she was angry about a relationship McCoy had been having with another woman.

At the opening of trial, the state sought permission to introduce a police report and medical records to show that McCoy had assaulted Jamie McCoy in 1997. The state contended that evidence of the 1997 incident was admissible under Minn.Stat. § 634.20 (2002), which permits the court to admit evidence of similar prior conduct between the defendant and another household member in domestic-abuse cases. According to the state, admissibility under section 634.20 hinges solely on whether the offered evidence is of similar prior conduct and whether its probative value outweighs the danger of unfair prejudice.

McCoy objected to the evidence on grounds that the state could not prove the prior conduct by clear and convincing evidence, as required under the rules of evidence and governing case law. McCoy argued that to the extent that section 634.20 admitted prior-conduct evidence without clear and convincing evidence that the prior incident occurred, the statute unconstitutionally impinged upon the power of the judiciary to regulate evidentiary procedures.

The district court admitted the evidence of the 1997 incident. It ruled that the admissibility of similar-conduct evidence in a domestic-abuse prosecution is governed by Minn.Stat. § 634.20, and not the rules of evidence or case law, and that the statute does not require proof by clear and convincing evidence.

Jamie McCoy testified at trial and maintained that McCoy had not struck her with the belt as she had initially claimed. On direct examination the state asked Jamie McCoy about the 1997 incident, which she said she could not remember. The state also asked McCoy about the incident, and he, too, denied it. The state did not introduce the police report or the medical records. The jury convicted McCoy of the domestic-violence charge but acquitted him of the interference-with-an-emergency-call charge. McCoy appeals his conviction.

ISSUE

Does Minn.Stat. § 634.20 (2002) permit the state to present similar-conduct evidence in a domestic-abuse prosecution without proving the conduct by clear and convincing evidence?

ANALYSIS

McCoy contends that Minn.Stat. § 634.20 (2002), as applied by the district court, violates the separation-of-powers doctrine of the Minnesota Constitution because the statute constitutes an attempt by the legislature to regulate an evidentiary matter within the province of the judiciary. Minnesota statutes are presumed constitutional, and the power of the appellate courts to declare a statute unconstitutional “should be exercised with extreme caution and only when absolutely necessary.” In re Haggerty, 448 N.W.2d 363, 364 (Minn.1989) (citation omitted).

The Minnesota Constitution divides the powers of government among three branches of government and prohibits members of one branch from exercising a power “properly belonging to either of the others,” except as provided in the constitution. Minn. Const, art. Ill, § 1. The power to establish rules of evidence lies within the inherent authority of the judiciary. State v. Willis, 332 N.W.2d 180, 184 (Minn.1983). The courts have nevertheless enforced “reasonable statutory rule's of evidence as a matter of comity when the rules were not in conflict with the Minnesota Rules of Evidence.” State v. Larson, 453 N.W.2d 42, 46 n. 3 (Minn.1990). We must therefore begin our analysis by determining whether section 634.20 conflicts with rule 404(b).

Rule of evidence 404(b) provides that

[e]vidence of another crime, wrong, or act is not admissible to prove the character of a person in order to show action in conformity therewith. It may however, be admissible for other purposes, such as proof of motive, opportunity, intent, preparation, plan, knowledge, identity, or absence of mistake or accident. In a criminal prosecution, such evidence shall not be admitted unless the other . crime, wrong, or act and the participation in it by a relevant person are proven by clear and convincing evidence.

Minn. R. Evid. 404(b) (emphasis added). MinmStat. § 634.20 addresses the admissibility of similar-conduct evidence offered in domestic-abuse prosecutions:

Evidence of similar conduct by the accused against the victim of domestic abuse, or against other family or household members, is admissible unless the probative value is substantially outweighed by the danger of unfair prejudice, confusion of the issue, or misleading the jury, or by considerations of undue delay, waste of time, or needless presentation of cumulative evidence.

Unlike rule 404(b), section 634.20 does not specify an evidentiary standard by which the other conduct must be proved.

In construing section 634.20 to admit similar-conduct evidence without proof by clear and convincing evidence, the district court interpreted the legislature’s silence on the required standard of proof to be an abrogation of the clear-and-convincing-evidence requirement of rule 404(b). Although McCoy does not challenge the district court’s reading of the statute, our duty to interpret statutes to avoid constitutional defects requires us independently to review the district court’s application of the statute. See Hince v. O’Keefe, 632 N.W.2d 677, 582 (Minn.2001) (stating that courts should interpret statutes to avoid constitutional problems). The standard of proof applicable to evidence admitted under section 634.20 is a question of first impression.

The supreme court addressed the standard of proof under section 634.20 in a footnote in State v. Cross, 577 N.W.2d 721 (Minn.1998), a case in which the court was required to decide whether the state had to prove a prior act of domestic abuse by clear and convincing evidence when evidence of that act was offered to prove an element of the charge of first-degree domestic-abuse homicide. In support of its conclusion that prior conduct offered to prove an element of a crime need not be proven by clear and convincing evidence, the court made the following observation:

We note that the legislature has expressed an intent to remove evidence of “similar prior conduct” in domestic abuse (non-homicide) prosecutions from the “clear and convincing” standard of Rule 404(b). See Minn.Stat. § 634.20 (1996). If this section is relevant to the admissibility of evidence in domestic abuse crimes not resulting in death of the victim, it would follow that a heightened standard would not apply to domestic abuse homicide cases.

Cross, 577 N.W.2d at 726 n. 2. Because the standard of proof under section 634.20 was not at issue in Cross, and because the supreme court provided no support for its finding of legislative intent, we believe the court’s statement in Cross is dicta by which we are not bound. See State v. Hanson, 543 N.W.2d 84, 87 (Minn.1996) (stating that court is not bound by higher court’s statement in dicta, but only by its holding); cf. In re Estate of Bush, 302 Minn. 188, 207, 224 N.W.2d 489, 501 (1974) (ascribing weight to dicta that contains strong expression of court’s opinion).

When interpreting statutes, our goal “is to ascertain and effectuate the intention of the legislature.” Minn.Stat. § 645.16 (2002). The search for legislative intent ordinarily begins with the language of the statute. Id. (stating that extrinsic evidence of legislative intent is to be considered “[wjhen the words of a law are not explicit”). In this case, however, it is the legislature’s silence, rather than its words, which we must interpret. In these circumstances, the appellate courts turn to the legislative history of the statute for guidance. See Burkstrand v. Burkstrand, 632 N.W.2d 206, 210 (Minn.2001) (examining legislative history to ascertain intent from legislative silence); see also In the Matter of N. States Power Co., 563 N.W.2d 302, 308 (Minn.App.1997) (considering legislative history to discern intent from legislative silence), review denied (Minn. July 10, 1997).

Transcripts of legislative committee meetings provide significant insight into the legislature’s intent in adopting section 634.20. In introducing the bill, the bill’s chief author in the house indicated that its purpose was to permit the admission of prior acts of domestic abuse against the same victim. Hearing on H.F. 800 Before the House Comm, on Crime & Fam. Law (Mar. 29, 1985). After making preliminary comments on the bill, the chief author invited a prosecutor from the Hennepin County Attorney’s Office to address the committee. The prosecutor informed committee members that his office had brought the need for the bill to the attention of the chief author in order to address an anomaly in the use of prior-conduct evidence in prosecutions of sexual assault, child sex abuse, and domestic violence. Hearing on H.F. 800 Before the House Comm, on Crime & Fam. Law (Mar. 29, 1985) (statement of Bill Neiman). According to the prosecutor, the courts had become comfortable admitting evidence of prior sexual assaults committed against third parties and evidence of prior sexual abuse against the same victim in a child sexual-abuse case, but were often reluctant to admit evidence of prior acts of domestic abuse against the same person in a domestic-abuse prosecution. Id.

Most significantly for the issue in this case, the prosecutor made clear that the bill, if enacted, would not alter the standard of proof governing prior-acts evidence:

The court still must permit in prior incidents, it must be convinced of the prior incidents by clear and convincing evidence, and if you try and introduce evidence of prior assaults or other issues of that type [and] you have no corroboration [in] some respects [you] weaken your case if you try and present that to the jury because they wonder why in fact no one else knew or no one observed the injuries.

Id. (emphasis added).

The intention to leave the standard of proof unaltered is also evidenced by a written statement prepared for legislators by the prosecutor and contained in the legislative record. Hearing on S.F. 588 Before the Senate Judiciary Comm. (Mar. 29, 1985) (written statement of Bill Neiman, entitled Domestic Violence Evidence). The report explains that the bill would codify State v. Volstad, 287 N.W.2d 660 (Minn.1980), in which the supreme court affirmed a district court’s decision to allow a victim of a sexual assault to testify to prior acts of violence committed against her by the defendant. The appellant had challenged admission of the prior-acts evidence, arguing that the district court had not made a elear-and-convincing determination as required by State v. Matteson, 287 N.W.2d 408 (Minn.1979) (holding that whether evidence of other crimes is clear and convincing is for the court to determine as a matter of admissibility). The court turned away the challenge on the grounds that the appellant had not raised the issue before the district court and that, in any event, he was not prejudiced because the victim’s testimony “clearly and positively pointed to [his] guilt of the prior misconduct.” Volstad, 287 N.W.2d at 662. Because Volstad implicitly applied the clear-and-convincing standard, a bill that codified that decision would not alter that standard.

Because the legislative history of section 634.20 makes clear that the legislature did not intend to abrogate the clear-and-convincing-evidence requirement, we conclude that section 634.20 does not conflict with rule 404(b). Absent any demonstrated conflict between the statute and the rule, it is unnecessary for us to decide McCoy’s challenge to the constitutionality of the statute.

Having concluded that the district court erred in admitting evidence that McCoy abused Jamie McCoy in 1997 without first determining whether the state could prove the incident by clear and convincing evidence, we must next consider the proper disposition of this appeal. Both this court and the supreme court have in prior cases independently assessed the weight of prior-conduct evidence, when the strength of the evidence allowed the court to rule as a matter of law that the prior conduct was clearly and convincingly proved. See, e.g., Volstad, 287 N.W.2d at 662; State v. Yang, No. C4-02-754, 2008 WL 1874740 (Minn.App. April 15, 2003). But in those cases, evidence of the prior-conduct included in-court testimony by the victim. In this case, in contrast, the prior-conduct evidence did not include the testimony of Jamie McCoy, who during the trial could not remember that the incident occurred. Because the only other evidence of the prior conduct mentioned by the state — the police and medical reports — was based entirely on information provided by Jamie McCoy, a determination of the weight of that evidence requires an assessment of her credibility. This is a task for which the district court is best suited. We therefore reverse McCoy’s conviction and remand for a new trial.

DECISION

The district court misapplied Minn.Stat. § 634.20 (2002) when it admitted evidence of similar prior conduct without determining whether that conduct was proved by clear and convincing evidence. Because the weight of the similar-conduct evidence offered by the state rests largely on the credibility of a witness, we are unable to determine as a matter of law whether the evidence satisfied the clear-and-convincing-evidence standard. We therefore reverse and remand for a new trial.

Reversed and remanded.


author: RANDALL, Judge.

text:
    STATE of Minnesota, Respondent v. Steven Allen BENNIEFIELD, Appellant.
    No. C1-02-1991.
    Court of Appeals of Minnesota.
    Sept. 9, 2003.

      Mike Hatch, Attorney General, Thomas R. Ragatz, Assistant Attorney General, St. Paul, MN, for respondent.
    Raymond F. Schmitz, Olmsted County Attorney, Rochester, MN, for respondent.
    John M. Stuart, State Public Defender, Roy G. Spurbeck, Assistant State Public Defender, Minneapolis, MN, for appellant.
    Considered and decided by RANDALL, Presiding Judge; HALBROOKS, Judge; and HUDSON, Judge.
   OPINION

RANDALL, Judge.

On appeal from his conviction and sentence for third-degree controlled-substance offense, appellant challenges the district court’s refusal to appoint a substitute public defender or to inquire into whether special circumstances warranted appointment of substitute counsel. Appellant also challenges the constitutionality of the statute punishing possession of a controlled substance in a school zone more harshly than similar possession outside a school zone. Appellant also challenges the district court’s failure to instruct the jury on intent or to allow appellant to argue lack of intent as a defense. Finally, appellant challenges the district court’s refusal to apply a downward departure to his sentence, and then argues that his criminal history score was improperly calculated. We affirm the conviction. However, appellant’s criminal history score was improperly calculated. We remand to the district court so that appellant may be sentenced according to a criminal history score of two, rather than three.

FACTS

Late in the evening of December 17, 2001, Rochester police officer John Fish-baugher saw a man he recognized as appellant Steven Benniefield walking on the street. Fishbaugher called dispatch and found that appellant had outstanding warrants. Fishbaugher stopped appellant and arrested him. At the time Fishbaugher first noticed appellant, appellant was 61 feet from the edge of Riverside Elementary School’s property line. During an initial search of appellant’s person, Fish-baugher found a homemade crackpipe in appellant’s pocket.

Appellant was taken to the Olmstead County Detention Center and strip-searched. The searching officer thought he noticed something in appellant’s mouth, and ordered him to spit it out. Appellant insisted he did not have anything in his mouth, but made an exaggerated swallowing motion. Pursuant to normal procedure, appellant was taken to a local emergency room to ensure that he had not swallowed anything harmful.

At the emergency room, appellant was x-rayed and found not to have swallowed anything. On examination of the patrol ear in which he was transported, however, a baggie containing a chunky, off-white substance was found on the floor near where appellant had been seated. The baggie itself was moist, as if it had been inside appellant’s mouth. The off-white substance was determined to be 1.1 grams of crack cocaine.

Appellant was charged with third-degree controlled-substance offense: possession of cocaine in a school zone. A public defender was appointed to represent appellant. At the omnibus hearing, the public defender indicated to the court that appellant wished to discharge him because of a disagreement over the representation. The court explained to appellant that if he discharged the public defender appointed to represent him, his options would be to hire a private attorney or to represent himself, because the court would not appoint a new public defender. Appellant expressed his desire to be represented by counsel, but insisted that he did not want to be represented by his current public defender. At a number of hearings before trial, appellant reiterated that he did not feel competent to represent himself, and did not want the first appointed public defender to represent him. The court explained to appellant that the discharged public defender was one of the most experienced in the area, and that appellant had shown “no good reason” for discharging him.

A jury trial was held May 15 and 16, 2002. Appellant represented himself. The district court had appellant’s former public defender present as advisory counsel. The state presented the testimony of all the officers involved in appellant’s arrest and search. Appellant did not present any witnesses, and chose not to testify in his own behalf. The jury returned a guilty verdict.

On May 22, 2002, appellant filed a motion for new trial, arguing that he had not properly waived representation by counsel and that he had not possessed enough cocaine to warrant a third-degree charge. This motion was denied. Appellant became upset, began arguing with the court, and had to be removed from the courtroom.

Appellant was sentenced to 87 months in prison, based on the low end of the guideline range for the crime for an offender with three criminal history points. This appeal follows. Appellant challenges both his conviction and his sentence.

ISSUES

I. Did the district court abuse its discretion by refusing to appoint substitute counsel?

II. Does MinmStat. § 152.023, subd. 2(4) (2002) violate appellant’s right to equal protection under the law?

III. Did the district court err by refusing to allow appellant to argue lack of intent and by failing to instruct the jury on intent?

IV. Did the district court abuse its discretion by refusing to depart downward from the sentencing guidelines?

ANALYSIS

I. Appointment of substitute counsel

Appellant argues that the district court abused its discretion by refusing to appoint substitute counsel when he discharged his public defender. A district court has discretion when deciding whether to appoint substitute counsel. State v. Gillam, 629 N.W.2d 440, 449 (Minn.2001). A district court should only appoint substitute counsel in the face of exceptional circumstances, because the right to counsel does not guarantee an indigent defendant the “unbridled right to be represented by counsel of his own choosing.” State v. Fagerstrom, 286 Minn. 295, 299, 176 N.W.2d 261, 264 (1970). What constitutes an “exceptional circumstance” may vary, but generally includes those situations that “affect a court-appointed attorney’s ability or competence to represent the client.” Gillam, 629 N.W.2d at 449. What is clear is that “general dissatisfaction or disagreement with appointed counsel’s assessment of the case” does not constitute exceptional circumstances. State v. Worthy, 583 N.W.2d 270, 279 (Minn.1998).

At the omnibus hearing, appellant’s discharged public defender informed the court that he and appellant had a disagreement over representation, but did not elaborate. Appellant confirmed that he wished to discharge the attorney, but did not explain why. In a letter directed to the court later, appellant expressed dissatisfaction with the way the attorney had been handling his case, and stated that he wanted an attorney who was “willing to fight [appellant’s] case in my best interest.”

To the extent that the district court’s comments may have suggested that it could not appoint substitute counsel, it was incorrect. See State v. Lamar, 474 N.W.2d 1, 3 (Minn.App.1991), review denied (Minn. Sept. 13, 1991). But here, the record shows that the district court found that appellant did not present any “exceptional circumstances” that would warrant appointment of substitute counsel. Appellant expressed mere dissatisfaction with Ms attorney’s representation, and did not show that his attorney was incompetent or otherwise unable to adequately represent him. Appellant was extensively warned of the consequences of discharging Ms public defender and Mformed that the responsibility of finding new counsel would fall on him. Also, the district court appointed standby counsel who was available to appellant throughout trial. While appellant may not have wished to represent himself, he unambiguously chose to discharge his appointed attorney, failed to show the court “exceptional circumstances” to justify the appointment of another public defender, and then failed to retain alternative counsel. The district court did not err, on these facts, when it refused to appoint another public defender after appellant made it clear he did not want to be represented by the public defender initially appointed.

II. Equal Protection

Appellant argues that Minn.Stat. § 152.023, subd. 2(4) (2002), under which he was convicted, violates the equal protection guarantee of the Minnesota Constitution because there is no genuine and substantial distmction between those who possess cocaine in a school zone and those who possess cocaine outside a school zone. Appellant failed to make this constitutional argument before the district court. But, this court will consider the claim in the Mterests of justice. See State v. Licari, 659 N.W.2d 248, 256 (Minn.2003). TMs court reviews the constitutionality of a statute de novo. State v. Frazier, 649 N.W.2d 828, 832 (Minn.2002). A defendant claimmg unconstitutionality bears the burden of showing that the statute is unconstitutional beyond a reasonable doubt. Scott v. Minneapolis Police Relief Ass’n, 615 N.W.2d 66, 73 (Minn.2000). Because the statute in question involves neither a suspect classification nor a fundamental right, tMs court reviews the challenge under a rational basis standard to determine whether the classification drawn is rationally related to a legitimate state interest. Id. at 74.

Under Minn.Stat. § 152.023, subd. 2(4) (2002), it is a third-degree controlled-substance offense to possess any amount of cocaine (a schedule II narcotic) in a school zone. “School zone” is defined as school property or the surrounding area up to 300 feet or one city block (whichever is greater) from the edge of school property. MMmStat. § 152.01, subd. 14a (2002). Appellant was seen carrying 1.1 grams of crack cocaine 61 feet from school property. Had he not been in a school zone, he would have been charged with a fifth-degree violation. MMmStat. § 152.025, subd. 2(1) (2002).

Appellant concedes that numerous federal cases have upheld the constitutionality of the federal “school-house drug statute.” 21 U.S.C. § 860 (West 2003). This federal statute provides enhanced penalties for the distribution, possession with Mtent to distribute, and manufacture of controlled substances within 1,000 feet of a school. Id. Federal courts have held that penalizing those who sell drugs M a school zone more harsMy is a rational way to acMeve the legitimate goal of protecting children from drugs. See, e.g. United States v. Agilar, 779 F.2d 123, 125-26 (2d Cir.1985). Appellant concedes in his brief that Minn.Stat. § 152.023, subd. 2(4) also has the goal of protectmg children agamst illicit drugs.

Appellant argues that section 152.023, subd. 2(4) differs from the federal statute in that it penalizes mere possession in a school zone, even without Mtent to distribute. Appellant argues that this difference renders the classification arbitrary, and that the statute no longer reasonably furthers the goal of protectMg children against the sale of drugs. We note that courts in other jurisdictions have held that the purpose of “school-zone” laws is to eliminate all dangers drugs pose to children in schools. See State v. Jenkins, 15 S.W.3d 914, 916 (Tenn.Crim.App.1999); Polk v. State, 683 N.E.2d 567, 571 (Ind.1997). In Polk, the Indiana Supreme Court upheld the constitutionality of penalizing mere possession in a school zone more severely. Polk, 683 N.E.2d at 571. The court explained that it is the “legislature’s prerogative to determine that a drug-free zone deters possible spillover effects” of controlled substance violations in proximity to schools. Id. We agree with these courts that drug offenders pose risks to children in schools beyond just the sale of drugs. Syringes, pipes and paraphernalia, as well as dropped or discarded drugs could threaten children if left in a schoolyard even if, like appellant, the offender entered the area at night when no children were present. It is legitimate for the legislature to guard against these dangers.

Appellant also argues that he merely crossed the school zone in transit, and that penalizing offenders for merely passing through a school zone is not rational. We think the Indiana court is persuasive when it said, “[njothing forces drug offenders to drive within the drug-free zone created by the legislature. To the contrary, they pass there at their own peril and in jeopardy of their own penal interests.” Polk, 683 N.E.2d at 572. Appellant chose to walk through a school zone with crack cocaine in his possession. In doing so, he assumed a risk that he would be stopped and arrested. The legislature has chosen stiffer penalties for possession or sale in school zones to protect children against drugs around their schools. Appellant has not shown that this statute is unconstitutional beyond a reasonable doubt.

III. Element of intent

Appellant next argues that the district court erred in ruling that the state did not have to prove that appellant intended to be in, or had knowledge that he was in, a school zone, and by refusing to allow appellant to argue his lack of intent to the jury. Questions of statutory interpretation are questions of law, and are reviewed de novo. State v. Loge, 608 N.W.2d 152, 155 (Minn.2000). Where the language of a statute is clear and unambiguous, the courts must give effect to the plain meaning of that language. Id. (citing Minn.Stat. § 645.16 (1998)).

Minn.Stat. § 152.023, subd. 2(4) (2002) states that a person is guilty of third-degree controlled substance offense if:

on one or more occasions within a 90 day period the person unlawfully possesses any amount of a schedule I or II narcotic drug * * * in a school zone ⅜ * *.

This language does not indicate an intent requirement as to location. The only intent indicated here is that the person have “unlawfully possessed” the cocaine. A person is guilty of unlawful possession if he knows the nature of the substance and either physically or constructively possesses it. State v. Florine, 303 Minn. 103, 226 N.W.2d 609, 610 (1975). Appellant does not dispute that he possessed cocaine or that he knew it was cocaine. Rather, he asks this court to read an additional intent element into the statute, requiring that the state prove that he knew he was in, or intended to be in, a school zone. We decline to do so. The language of the statute is clear, and does not require that a defendant know he is, or intend to be in, a school zone when he possesses cocaine.

Numerous state and federal cases construing similar statutes have held that strict liability attaches, and that it falls on offenders to find out where school zones are and to steer clear of them. See, e.g. United States v. Dimas, 3 F.3d 1015, 1022 (7th Cir.1993) (federal school-zone law does not require mens rea, citing other federal eases with similar holding); Polk, 683 N.E.2d at 570 (noting that law is clear that no mens rea is required). Because MinmStat. § 152.028, subd. 2(4) (2002) does not require knowledge or intent as to the location element, the district court did not err by refusing to allow appellant to argue his lack of intent or by failing to instruct the jury as to intent.

IV. Sentencing

Finally, appellant challenges the district court’s refusal to depart downward from the sentencing guidelines. A district court has discretion to depart from the sentencing guidelines only if aggravating or mitigating circumstances are present. State v. Best, 449 N.W.2d 426, 427 (Minn.1989). Only in rare cases will this court overturn a district court’s refusal to depart from a presumptive sentence. State v. Kindem, 313 N.W.2d 6, 7-8 (Minn.1981) (supreme court upholding district court’s refusal to depart downward where a guideline sentence was imposed). A district court may consider the defendant’s conduct at all stages of the case, including sentencing, in weighing sentencing options. State v. Hough, 585 N.W.2d 393, 397 (Minn.1998).

Appellant may be correct that his conduct was less serious than that of a typical offender convicted of possessing cocaine in a school zone. Appellant was in a school zone at night (well after school hours), and appears to have been walking through the zone on his way home from work. The district court indicated after trial that it might consider a downward departure. Then, at a hearing on appellant’s motion for new trial, appellant became angry and entered into a confrontation with the court. Ultimately, appellant was removed from the courtroom and given 30 days for contempt of court. At the sentencing hearing, the prosecutor revealed that appellant had refused to cooperate with the presentence investigation. Based on all the information presented, the district court imposed a sentence of 37 months, a sentence at the low end of the presumptive range. The court recommended that appellant be eligible for the Challenge Incarceration Program (Boot Camp), which if completed successfully, could reduce appellant’s incarceration time.

A district court “may depart from the presumptive sentence.” Minn. Sent. Guidelines II.D. A district court is not obligated to depart downward from the guidelines, even if a mitigating factor is present. State v. Wall, 343 N.W.2d 22, 25 (Minn.1984). The same is true of aggravating factors. A district court is never obligated to depart upward. The presumptive sentence remains the presumptive sentence. The district court here, considering appellant’s behavior both during the commission of the offense and during the criminal proceedings, did not err in determining that a downward departure, although it could have been given, was not mandated.

Appellant argues, and respondent concedes, that appellant’s criminal history score was miscalculated. The erroneous inclusion of two prior misdemeanors resulted in appellant receiving a score of three. Those two misdemeanors had decayed by the time appellant committed the current offense, and should not have been included in appellant’s criminal history score calculation. We remand to the district court to resentence appellant with a criminal history score of two to something less than 37 months. It would not be due process to move to the high end of the presumptive range to negate appellant’s successful appeal on calculating his criminal history score.

DECISION

The district court did not err by refusing to appoint appellant substitute counsel after he discharged his public defender. The district court correctly determined that Minn.Stat. § 152.023, subd. 2(4) (2002) does not violate the Equal Protection component of the Minnesota Constitution, and does not require that appellant intend to be or know that he is in a school zone to be convicted of a third-degree controlled-sub-stanee offense. Finally, the district court did not abuse its discretion by refusing to depart downward from the sentencing guidelines after considering appellant’s behavior both during and after trial. Because appellant’s criminal history score was miscalculated, we remand for resen-tencing consistent with this decision.

Affirmed in part, reversed in part, and remanded.


text:
    LANGFORD TOOL & DRILL CO., d/b/a Mason-Cutters, Plaintiff, v. PHENIX BIOCOMPOSITES, LLC, et al., Defendants, Cooperative Centrale Raiffeissen-Boerenleenbank & Rabobank Nederland, et al., Respondents, O’Rourke Electric, Inc., et al., Appellants, and PBL Investments, LLP, Appellant, v. Phenix Manufacturing Co., Inc., et al., Third-Party Defendants.
    No. C2-02-2146.
    Court of Appeals of Minnesota.
    Sept. 9, 2003.

      Kenneth R. White, Law Office of Kenneth R. White, P.C., Mankato, MN, for appellants O’Rourke Electric Inc., O’Rourke Electric of Faribault Inc., Schwickert, Inc., Schwickert Company and PBL Investments, LLP.
    Bradley N. Beisel, Hoeschler & Beisel, Minneapolis, MN, for respondents Rabo-bank and Dougherty.
    Considered and decided by SCHUMACHER, Presiding Judge, RANDALL, Judge, and KALITOWSKI, Judge.
   OPINION

RANDALL, Judge.

On appeal from the district court’s order granting respondent’s mortgage priority over appehant’s mechanic’s hen, appellant argues (1) the project was not abandoned in April 1997, thus giving appellant’s mechanic’s hen priority; (2) appehant did not release its hens by signing the sworn construction statement; and (3) a new trial is warranted because the district court improperly admitted and rehed on hearsay evidence. Respondents also filed a notice of review of the order denying their motion for partial summary judgment. On appeal, respondents argue the district court erred by finding (1) that the project consisted of a single improvement to the real estate rather than multiple improvements; and (2) Phenix and PBL are separate entities. Because we find that the project was abandoned in April 1997, we affirm the district court’s order granting respondent’s mortgage priority, and because we find no error, we affirm the district court’s denial of respondent’s motion for partial summary judgment.

FACTS

Prior to 1994, Phenix Biocomposites, LLC (Phenix) secured the rights to an industrial process for turning agricultural waste into various particleboard products. This process required custom-made equipment and a building to house that equipment. Phenix located and chose a site in Mankato, Minnesota as the location for the manufacturing plant. The plant was specifically designed to meet the needs of the production equipment, and construction began in December 1996. This plant in Mankato is the subject of this litigation.

In the spring of 1997, Phenix ran into financial problems, and by April, construction of the manufacturing facility virtually halted. Although various projects were completed after April 1997, such as projects to secure the building from the elements and to ensure that work already accomplished was not damaged, the projects were relatively minor, and were substantially completed by May or June of 1997. In the meantime, Phenix sought additional financing for the project.

A few months after Phenix ran out of capital, Phenix began negotiating with respondent Rabobank, a Dutch-owned bank, for a loan. The negotiations considered a condition that required Rabobank to receive from appellant, Schwickert, sworn construction statements containing Schwic-kert’s representations regarding the amount of work it had yet to do on its contracts for the project, and concerning the total amounts of money due on its contracts. The statements, dated February 6, 1998, contained the following language:

In the event of any such increase, no orders or claims will be made to said company until such deposits shall have been completed; that the purpose of said statement is to induce said company to pay out the proceeds of a loan of the amount to be determined accrued by a mortgage on said property; and that upon payment of the specific unpaid items listed herein, the undersigned contractor agrees to waive all claims of priority to said mortgage and both parties herein will hold such company harmless as to any other claims of priority of lien for any labor or material, furnished or to be furnished, for completion of construction.

The Rabobank, mortgage closed on April 17, 1998, and was filed on April 20, 1998. In December 1997, additional financing was also obtained from respondent, Dougherty Funding. The financing enabled construction to resume on the project.

By early 1999, Phenix was in default on its repayment obligations to Rabobank. Phenix was unable to pay the contractors and the contractors subsequently filed liens to protect their interests. Shortly thereafter, one of the lienholders initiated this action against Phenix to enforce its lien. Rather than simply relying on its mechanic’s lien rights, Central Mechanical also pursued a money judgment against Phenix. On February 11, 2000, Central Mechanical obtained a money judgment against Phenix Entities in the amount of $686,105.66. Soon thereafter, Central Mechanical threatened to pursue collection remedies, including levying on Phehix’s bank accounts.

On February 18, 2000, Phenix entered into a forbearance agreement with Central Mechanical. The agreement provided that Central Mechanical would refrain from exercising its collection remedies against Phenix until June 30, 2000, in exchange for Phenix’s promise to pay the judgment by that time. The agreement was secured by the personal guarantees of eleven individuals, each of whom had some personal stake in the success of the business of the Phe-nix Entities.

On July 1, 2000, the day after the expiration of the payment deadline under the forbearance agreement, the guarantors entered into an “Investment Partnership Agreement” under which PBL Investments LLP (PBL) was formed. On July 31, 2000, Central Mechanical executed assignments of the mechanic’s lien statement and amended mechanic’s lien statement in favor of PBL. These assignments were given pursuant to an assignment agreement dated July 28, 2000, between Central Mechanical, PBL and the Guarantors. Under the terms of the agreement, Central Mechanical in no way represented, warranted, or covenanted that the mechanic’s liens would be enforceable by PBL. On September 11, 2000, PBL Investments was substituted for Central Mechanical in this litigation.

Respondent moved for partial summary judgment seeking to dismiss the PBL Investments LLP (PBL) lien on the grounds that it was a lien by the owner against its own land. Essentially, respondent argued that Phenix and PBL are the same entity. The district court determined that they are not the same entity and denied the motion. A bifurcated trial was held with only priority issues decided. The district court held that the project had been abandoned in April of 1997 and thus respondents, Rabobank and Dougherty’s mortgages were prior to appellant’s mechanic’s liens. Appellant appealed the district court’s decision and respondent filed a motion for review of the order denying their motion for partial summary judgment.

ISSUES

I. Was the project abandoned in April of 1997, giving respondents’ mortgages priority over the mechanic’s liens?

II. Did appellant release its liens by signing the sworn construction statement?

III. Did the district court improperly admit hearsay evidence, thereby warranting a new trial?

IV. Did the district court err by finding that the project consisted of a single improvement to the real estate rather than multiple improvements?

V.Did the district court properly deny the respondent’s motion for partial summary judgment?

ANALYSIS

I.

Appellant argues that neither the law nor the facts support the district court’s ruling that the project had been abandoned, and thus the district court’s decision should be reversed to establish the lienholders as the parties with priority. Whether a project has been “abandoned” is a mixed question of law and fact. When reviewing mixed questions of law and fact, “we will correct erroneous applications of law, but accord the trial court discretion in its ultimate conclusions and review such conclusions under an abuse of discretion standard.” Rehn v. Fischley, 557 N.W.2d 328, 333 (Minn.1997).

Minn.Stat. § 514.05, subd. 1 (2000) states that all liens:

* * * shall attach and take effect from the time the first item of material or labor is furnished upon the premises for the beginning of the improvement, and shall be preferred to any mortgage or other encumbrance not then of record, unless the lienholder had actual notice thereof. As against a bona fide purchaser, mortgagee, or encumbrancer without actual or record notice, no lien shall attach prior to the actual and visible beginning of the improvement on the ground, but a person having a contract for the furnishing of labor, skill, material, or machinery for the improvement, may file for record with the county recorder of the county within which the premises are situated, or, if claimed under section 514.04, with the secretary of state, a brief statement of the nature of the contract, which statement shall be notice of that person’s lien only.

The statute purports to determine a definite point at which the hen takes effect, while balancing the interests of mortgage and hen holders. Reuben E. Johnson Co. v. Phelps, 279 Minn. 107, 112-13, 156 N.W.2d 247, 251 (Minn.1968). Where there is an abandonment of a project and a subsequent recommencement of work, mechanic’s hens arising from the new work do not relate back to the original start of construction. See City of Ortonville v. Geer, 93 Minn. 501, 503, 101 N.W. 963, 964 (Minn.1904) (stating that where the erection of a buhding is one continuous undertaking, without anything suggesting an abandonment of the work, a mortgage executed after the commencement of the construction is subordinate to the hen claims of those who have contributed to the completion of the work).

Appehant argues that the project was not abandoned because, based upon a hberal construction of Minn.Stat. § 514.05, subd. 1, the engineering work and similar activities performed by appehant between April 1997, and April 1998, put respondents on notice that lienable activity was being performed at the site. We agree that hens in place are to be construed liberally in favor of the hen holders. But the evidence supports the district court’s determination that the project was abandoned. The work on the project had stopped, the place was barricaded, and there were no trespassing signs posted on the property. The new lenders wanted to be sure ah former hens were paid off, which they did. If the project were one continuous project, the process of paying off ah former hens would hkely not have taken place.

The district court’s ruling is supported by appellant’s concession that the hens in question were not filed prior to refinancing. Had the hens been filed before the refinancing, they would have been hens of record and would have been paid off in full with all the former hens of record. The hens at issue are for work admittedly completed after the refinancing. It is only because Phenix had a secondary round of financial troubles that appehants now want their post-financing work to have a priority over the two financing lenders, arguing that it does not matter when their work occurred because everything should relate back to the 1996 beginning of the project.

The record shows that respondent’s attorney surveyed the project site and concluded that the project had been abandoned before the deal for the loan was closed. The two lenders wanted to be sure they started with a “clean slate,” meaning no old hens before they put up new money.

We understand appellant’s argument that there was just an 11-12 month cessation of work. But, the district court was aware of that limited time differential. The court took everything into account and weighed the facts of abandonment. We cannot find that the district court abused its discretion by concluding that the site had been abandoned.

Appehant also contends the project was not abandoned because “abandonment” requires a subjective intent to abandon the project. When determining what constitutes abandonment, there are competing rules of thought as to whether the intent to abandon is necessary. One view, known as the “Kansas rule,” states that abandonment, is to be determined by the actual cessation of work, and not by the secret purposes of the owners. Chicago Lumber Co. v. Merrimack River Sav. Bank, 52 Kan. 410, 34 P. 1045, 1045-46 (1893).

In Chicago Lumber, the plaintiff argued that it was entitled to priority on a hen because abandonment does not take place until the owners arrive at the mental conclusion that they cannot proceed with the work. Id. at 1045. In considering the plaintiffs claim that abandonment requires the “intent” to abandon a project, the court noted that:

Perhaps the most common reason for the abandonment of work on improvements of all sorts is the want of means or ability to go on. Probably, in a majority of instances, the owner still desires and intends, if possible, to complete his project. He abandons actual operations, not of his own volition, but from the force of circumstances he cannot control.

Id. at 1046. But, the court stated that it would be a matter of very great difficulty to keep track of the mental operations of the owners. Id. at 1045. The court held that abandonment of work is a physical, visible condition, to be determined from an inspection of the premises, and thus when the owners ceased to do anything towards the completion of their building they abandoned the project. Id. at 1045-46.

In contrast to the “Kansas rule,” the “Oregon rule” states that a finding of abandonment requires the “intent” to abandon the project as well as a cessation of labor. Tri-City Bldg. Center, Inc. v. Wagner, 274 Or. 581, 548 P.2d 961, 964 (1976); Eastern & Western Lumber Co. v. Williams et al., 129 Or. 1, 276 P. 257, 259 (1929). The issue in Eastern also concerned what exactly constituted abandonment. The court stated that a mere cessation of labor is not an abandonment. Id. The court found that the lack of money caused a cessation of work, but was unaccompanied with a conclusion to abandon the project. Id. Therefore court concluded that there was no abandonment equivalent to completion. Id.

Despite the objectivity of the “Kansas rule,” and the apparent subjectivity of the “Oregon rule,” the rules are really very similar for purposes of the current appeal. Under the “Kansas rule,” if there is a cessation of work, the project is abandoned. But, although the “Oregon rule” requires a decision to abandon as well as a cessation of work, even under the “Oregon rule,” the mental intent to abandon can be inferred from the physical actions. Thus, under both rules, the actual termination of work can trigger an abandonment.

Here, the respondents concluded the project was abandoned, and the evidence supports this determination. Appellants passed on the chance before the refinancing to record their hens, so that there never would be any mistake as to their intentions. The physical, visible condition, to be determined from an inspection of the premises, is an essential element as part of determining whether a project has been abandoned (if there are prior valid hens of record, the inspection could be moot — we just have this case because there were no filed hens of record as to appellant and there is a claimed abandonment).

Finally, appellant argues that having two levels of priority on one project is contrary to statute. In situations where a project has been abandoned, the crucial issue is whether the mortgagee has actual notice of prior hens. In Kirkwold Const, v. M.G.A. Const. Inc., 518 N.W.2d 241, 244 (Minn.1994), the court stated that the plain language of MinmStat. § 514.05 provides that “only a bona fide purchaser or mortgagee without actual notice shall be given priority over mechanics hens.” Id.

Here, the district court found that the project had been abandoned and that respondent did not have notice of appellant’s lien. The facts of the case support the district court’s findings. The mechanic’s hen statute does not prohibit spht priority of mechanic’s hen claimants on a single project where the project has been abandoned and the mortgagee does not have actual notice of the prior lien. We con-elude the district court did not err by finding that respondent’s mortgages have priority over the mechanic’s liens.

II.

Next, appellant argues that the district court’s finding that the sworn construction statement constituted a lien waiver is unsupported by evidence because (1) the statement is not signed by any party; (2) the record fails to support any assertion that respondent insisted on lien waivers as a condition of issuing the mortgage; and (3) the statement was secured without consideration. Both parties do not dispute the applicable law, but rather the facts that support the district court’s decision. The district court’s “ultimate” findings must be affirmed in the absence of a demonstrated abuse of the court’s broad discretion. Maxfield v. Maxfield, 452 N.W.2d 219, 221 (Minn.1990).

First, appellant’s argument that the statement is invalid because it was not signed by any party is without merit. The evidence demonstrates that the statement was notarized by one of appellant’s employees and delivered to the closing to be relied on by respondent. Second, appellant’s argument that the record does not support any assertion that respondent insisted on the sworn construction statement as a condition of issuing the mortgage, fails. The record reveals that Scott Taylor, a loan officer for respondent Rabo-bank, testified that obtaining the sworn construction statement was a condition of issuing the mortgage. Kent Schwickert, one of the principals of appellant, Schwic-kert, Inc., also testified that it was his understanding that it was necessary for appellant to submit the sworn construction statement in connection with the securing of the additional financing that Phenix needed to continue the project. Third, the record shows that appellant received an additional $1,451,441 after the project resumed, demonstrating that the sworn construction statement was given in consideration of respondent issuing the mortgage to Phenix. The consideration, stated on the documents themselves, was “to induce [Rabobank] to pay out the proceeds of a loan of the amount to be determined accrued by a mortgage on the property.” Appellant testified at trial that the consideration was respondent’s agreement to make the loan from which appellant would be paid. The mortgage essentially provided the proceeds from which appellant was paid. Because the statement was signed and given for consideration, the district court did not abuse its discretion by finding that appellant subordinated its lien rights by signing the sworn construction statement.

III.

Appellant argues that the district court improperly admitted the affidavits of Timothy Engel, the Vice President of Phenix Manufacturing, and Tom Supre-nant, an employee of Stahl Construction, and pleadings from the Phenix v. Stang Construction case. Absent erroneous interpretation of law, the question of whether to admit or exclude evidence is within the district court’s discretion. Kroning v. State Farm Auto. Ins. Co., 567 N.W.2d 42, 45-46 (Minn.1997). “Entitlement to a new trial on grounds of improper evidentiary rulings rests upon the complaining party’s ability to demonstrate prejudicial error.” Id. (quoting Uselman v. Uselman, 464 N.W.2d 130, 138 (Minn.1990)).

Appellant contends the evidence was improperly admitted under the admission by a party opponent exception to the hearsay rule because Phenix was not a party to this action and thus the affidavits and pleadings do not constitute admissions. The admission by a party opponent exception provides that a statement is not hearsay if it is a party’s statement and offered against the party. Minn. R. Evid. 801(d)(2). Although we question the district court’s decision to admit the evidence, a thorough review of the file demonstrates that the outcome of the case would not have changed had the evidence been excluded. We conclude that a new trial on this issue is not warranted. Cf. Minn. R. Civ. P. 61 (stating harmless error must be ignored).

IV.

Respondent contends that the evidence submitted at trial compels the conclusion that, for mechanic’s hen priority purposes, there were two separate improvements; one improvement, the “shell” improvement was for the construction of the building; and the other improvement, a “process” improvement, was the installation of the equipment used for a manufacturing process itself. Both parties agree that the question of whether labor performed was part of a separate improvement or part of one continuous improvement is a question of fact. Factual determinations are reversible only if they are clearly erroneous. Morgan v. Illinois Farmers Ins. Co., 392 N.W.2d 37, 39 (Minn.App.1986), review denied (Minn. Oct. 22, 1986).

In Witcher Const. Co. v. Estes II Limited Partnership, 465 N.W.2d 404, 406 (Minn.App.1991), review denied (Minn. Mar. 15, 1991), this court was asked to determine whether a project consisted of one single improvement or two separate improvements. The project in Witcher involved two separate contracts, one for building renovation, and one for improvements to tenant areas. Witcher Const. Co., 465 N.W.2d at 405. The court began by stating that the mere existence of separate contracts for stages of a project does not create separate improvements. Id. at 406. The court stated that construction work is considered a single improvement “if it is done for the same general purpose, or if the parts, when gathered together, form a single improvement.” Id. at 407 (citing Kahle v. McClary, 255 Minn. 239, 241, 96 N.W.2d 243, 245 (Minn.1959)). The court noted that if there is little or no interrelationship between the contracts under which the project was performed, the project consists of separate improvements. Id. The court held that the project was a single improvement because the separate contracts included tasks relating to both phases, and the mortgage financing provided by the appellant covered both phases of the renovation. Id.

Here, the district court found that the people involved with the project described it as a single project. Phenix never contemplated construction of a warehouse, or other building, followed by some later decision to add the warehouse to hold the process equipment. All of the improvements for which the liens are asserted related to the construction of the particleboard manufacturing facility itself. The goal at the beginning of the project was to improve the real estate by building a fiberboard processing facility, and the purpose of obtaining the financing from respondent was to finish the original project. These factual findings are supported by the record, and the district court’s finding that the project consisted of a single improvement is not clearly erroneous.

y.

Respondent also contends that the district court erred by denying its motion for partial summary judgment. When certified questions arise from a denial of summary judgment, the summary judgment standard applies; therefore this court must determine whether there are any genuine issues of fact and whether the district court erred in its application of the law. Molloy v. Meier, 660 N.W.2d 444, 450 (Minn.App.2003), review granted (Minn. Jul. 15, 2003). A review of the record of a denial of summary judgment is viewed in the light most favorable to the nonmoving party. Fabio v. Bellomo, 504 N.W.2d 758, 761 (Minn.1993).

Respondent argues that Phe-nix and PBL are the same entity, and thus the district court’s denial of partial summary judgment was improper. Minnesota law states that a subordinate corporation which has no purpose or existence apart from the operation of its cooperative owners may be considered merely an agency or arm of the parent. Community Hosp. Linen Svcs., Inc., v. Comm’r. of Taxation, 309 Minn. 447, 456, 245 N.W.2d 190, 195 (1976). An owner of real property may not enforce a mechanic’s lien against property that it owns. Nelson v. Nelson, 415 N.W.2d 694, 697 (Minn.App.1987).

Here, the evidence supports the district court’s denial of summary judgment on this issue. Appellant claims that PBL and Phenix are separate entities. PBL and Phenix have limited common ownership. PBL members owned only 8.7 percent of Phenix, and thus neither entity had control over the other. In addition, the two entities have different purposes. Phenix existed to develop a particleboard manufacturing plant and to sell that product. Phenix had no interest in the Central Mechanical lien, other than to try to dispose of the lien. In contrast, PBL was interested solely in collecting the lien from Phenix. Furthermore, no Phenix funds were used to purchase the Central Mechanical hen, and the debt was paid with funds whohy unrelated to the respondent’s loan. There were simply no inequitable or inappropriate conditions created. Respondent has not shown that, on this record, Phenix and PBL are the same entity, and the district court’s denial of summary judgment was appropriate.

DECISION

The district court did not err by finding that the project had been abandoned and thus respondent’s mortgages have priority over appellant’s mechanic’s liens.

Affirmed.