STRUCTURAL ENGINEERING SOLUTIONS V VISION DEVELOPMENT PROPERTIES
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STATE OF MICHIGAN
COURT OF APPEALS
STRUCTURAL ENGINEERING SOLUTIONS,
LLC,
UNPUBLISHED
November 19, 2009
Plaintiff/Counter-DefendantAppellant,
v
VISION DEVELOPMENT PROPERTIES &
RENTALS, LLC, JAMES HYSEN, CARROLL
STRANGE, KENNETH M. SWEENEY,
MICHAEL J. DEMASI, HOLLY L. DEMASI,
GERALD J. CADREAU, LAURA K. CADREAU,
RICHARD L. ADORYAN, DEBORAH M.
ADORYAN, MARTIN P. RYMARZ, LORI L.
RYMARZ, ERIK B. ROBINSON, AMY
KELLEY, JEFFREY J. NATHAN KELLEY,
WILLIAM J. REESE, SUSAN M. REESE,
CHRISTOPHER MANNINEN, KIMBERLY
MANNINEN, MICHAEL FURLINE, JAMIE L.
FURLINE, MICHELLE STEELMAN, MARCUS
S. ROYALTY, SANDRA C. ROYALTY,
MICHAEL COUCH, MELINDA COUCH, and
AMERICA’S WHOLESALE LENDER,
Defendants-Appellees,
and
ECHELON ENTERPRISES, LLC,
Defendant/Counter-Plaintiff/ThirdParty Plaintiff-Appellee,
and
STEVEN KYZIMA
Third-Party Defendant-Appellee.
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No. 286492
Genesee Circuit Court
LC No. 06-084562-CH
Before: Shapiro, P.J., and Jansen and Beckering, JJ.
PER CURIAM.
Plaintiff Structural Engineering Solutions, LLC filed this action against defendants,
including, among others, multiple individual condominium owners, to foreclose on a
construction lien and to recover the balance owed for materials supplied to defendant Echelon
Enterprises, LLC (“Echelon”), the builder of the condominium development. The trial court
granted summary disposition of plaintiff’s construction lien claim and dismissed the individual
property owners pursuant to MCR 2.116(C)(8), on the ground that plaintiff did not have an
enforceable construction lien. The case proceeded to trial against Echelon and its owners,
defendants Carroll Strange and James Hysen. Following a bench trial, the trial court determined
that Echelon was liable for breach of contract for failing to pay the full amount owed for
materials furnished by plaintiff, but that Echelon was also entitled to various credits against the
amount owed, resulting in a net judgment for plaintiff of $14,552.98. The court dismissed all
remaining claims and counterclaims against all remaining parties. Plaintiff appeals as of right.
We affirm.
I. Summary Disposition
Plaintiff first argues that the trial court erred in dismissing its claim against the property
owners for foreclosure of its construction lien. Although we agree that summary disposition of
this claim was improper under MCR 2.116(C)(8), we conclude that reversal is not required
because the property owners also requested summary disposition under MCR 2.116(C)(10) and
summary disposition was appropriate under that subrule.1
This Court reviews a trial court’s summary disposition decision de novo. Spiek v Dep’t
of Transportation, 456 Mich 331, 337; 572 NW2d 201 (1998). A motion under MCR
2.116(C)(8) tests the legal sufficiency of a plaintiff’s complaint by the pleadings alone. Id.;
Patterson v Kleiman, 447 Mich 429, 432; 526 NW2d 879 (1994). All well-pleaded factual
allegations are accepted as true, as well as any reasonable inferences or conclusions that can be
drawn from the allegations. Peters v Dep’t of Corrections, 215 Mich App 485, 486; 546 NW2d
668 (1996). The motion should be granted only if a claim is so clearly unenforceable as a matter
1
To the extent that plaintiff argues, as it did below, that the property owners lack standing to
challenge the validity of its lien, we reject that argument for lack of merit. Contrary to what
plaintiff argues, it is immaterial that the property owners did not have an interest in their
properties at the time plaintiff’s construction lien was recorded. Rather, because it is undisputed
that the property owners had an interest in the properties at the time plaintiff filed this action for
foreclosure of the construction lien, they were required to be joined as parties pursuant to MCL
570.1117(4). See Advanta Nat’l Bank v McClarty, 257 Mich App 113, 117-123; 667 NW2d 880
(2003). As such, and because their property interests were subject to divestiture or impairment
by foreclosure of the lien, the property owners had standing to challenge the validity of that
claim.
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of law that no factual development could justify recovery. Spiek, supra at 337. Conversely, a
motion under MCR 2.116(C)(10) tests the factual support for a claim. Babula v Robertson, 212
Mich App 45, 48; 536 NW2d 834 (1995). The court must consider the pleadings, affidavits,
depositions, admissions, and other documentary evidence submitted by the parties. MCR
2.116(G)(5). Summary disposition should be granted if there is no genuine issue of material fact
“and the moving party is entitled to judgment as a matter of law.” Babula, supra at 48.
Plaintiff’s complaint alleged that it supplied labor and materials for the condominium
project between February 2005 and August 1, 2005, and that it was owed $76,136.84 by the
builder, Echelon, and the developer, defendant Vision Development Properties & Rentals, L.L.C.
(“Vision”).2 Plaintiff alleged that it filed a notice of furnishing on August 18, 2005, and
recorded its lien for $70,000 on August 18, 2005. A copy of the lien was served on Vision on
August 24, 2005. Plaintiff alleged that it had an enforceable lien under the Construction Lien
Act (“CLA”), MCL 570.1101 et seq., and sought to foreclose on that lien.
The property owners moved for summary disposition on the ground that plaintiff did not
timely provide a notice of furnishing under MCL 570.1109, which provides, in relevant part:
(1) Except as otherwise provided in sections 108, 108a, and 301, [MCL
570.1108, 570.1108a, and 570.1301] a subcontractor or supplier who contracts to
provide an improvement to real property shall provide a notice of furnishing to
the designee and the general contractor, if any, as named in the notice of
commencement at the address shown in the notice of commencement, either
personally or by certified mail, within 20 days after furnishing the first labor or
material. If a designee has not been named in the notice of commencement, or if
the designee has died, service shall be made upon the owner or lessee named in
the notice of commencement. If service of the notice of furnishing is made by
certified mail, service is complete upon mailing. A contractor is not required to
provide a notice of furnishing to preserve lien rights arising from his or her
contract directly with an owner or lessee.
***
(6) The failure of a lien claimant, to provide a notice of furnishing within
the time specified in this section shall not defeat the lien claimant’s right to a
construction lien for work performed or materials furnished by the lien claimant
before the service of the notice of furnishing except to the extent that payments
were made by or on behalf of the owner or lessee to the contractor pursuant to
either a contractor’s sworn statement or a waiver of lien in accordance with this
act for work performed or material delivered by the lien claimant. . . .
Thus, under MCL 570.1109(6), a subcontractor’s failure to provide a notice of furnishing within
the 20-day period does not defeat its right to a lien, but the value of the lien is reduced by any
2
Plaintiff dismissed its claims against Vision, with prejudice, before trial.
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payments made by the owner for the subcontractor’s work, if they were made pursuant to a
contractor’s sworn statement or waiver of lien. Vugterveen Systems, Inc v Olde Millpond Corp,
454 Mich 119, 122-123; 560 NW2d 43 (1997).
Although the property owners argued that plaintiff did not provide a notice of furnishing
to the owner and general contractor until it filed its complaint, plaintiff produced evidence that it
provided the notice of furnishing to Vision in August 2005. The property owners did not show
that plaintiff was also required to provide the notice of furnishing to Echelon. See MCL
570.1109(1).
The property owners also argued that Vision complied with MCL 570.1109(6) because it
made payments to Echelon pursuant to sworn statements and, because plaintiff’s contract to
supply materials was with Echelon only, and not Vision as the property owner, the lien was not
valid. The property owners contended that Vision had fully paid Echelon for the materials that
plaintiff supplied, relying on full unconditional waivers of lien signed by plaintiff as proof that
Vision had paid in full for the work performed. Plaintiff argues, however, that the waivers of
lien were not valid because it signed the waivers in exchange for Echelon’s payment by check,
which Echelon subsequently stopped payment on.
MCL 570.1109(6) requires that an owner make payment pursuant to a waiver of lien or
sworn statement before a lien will be deemed unenforceable. Whether a waiver of lien is valid is
generally a question of fact. See Horton v Verhelle, 231 Mich App 667, 677; 588 NW2d 144
(1998), overruled in part on other grounds in Smith v Globe Life Ins Co, 460 Mich 446, 455-456
n 2; 597 NW2d 28 (1999). The burden of proof is on the party seeking to show a valid waiver of
lien. Id. at 676.
Here, the evidence showed that Echelon stopped payment on the check after it learned
that plaintiff had not paid its own supplier, who in turn threatened to place a lien on the
development. Echelon then paid the supplier directly so work could continue. We conclude that
these circumstances do not affect the validity of the waivers of lien. MCL 570.1115(4) provides
that “[a] partial conditional waiver of lien or a full conditional waiver of lien shall be effective
upon payment of the amount indicated in the waiver.” MCL 570.1115(6) further provides that
“[a] waiver of lien under this section shall be effective when a person makes payment relying on
the waiver unless at the time payment was made the person making the payment has written
notice that the consideration for the waiver has failed.” This statute provides the only basis for
showing that a waiver of lien is invalid for failure of consideration.
The CLA is remedial in nature and is to be construed liberally to “secure the beneficial
results, intents, and purposes of this act.” MCL 570.1302(1); Solution Source, Inc v LPR Assoc
Ltd Partnership, 252 Mich App 368, 373; 652 NW2d 474 (2002). “The act is designed to protect
the rights of lien claimants to payment for expenses and to protect the rights of property owners
from paying twice for these expenses.” Id. at 373-374.
In Poole-Dickie Lumber Co v Strother, 60 Mich App 321, 322-323; 230 NW2d 420
(1975), a case decided under the former mechanics lien laws, the plaintiff signed a waiver of lien
after receiving a promissory note and a check, each for $3,400, to cover the full amount due of
$6,800. The plaintiff later learned that the consideration for the waiver was worthless and tried
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to rescind the waiver of lien. Id. at 323. This Court held that although the consideration for the
waiver failed, the waiver of lien was still valid, explaining:
The situation that plaintiff finds itself in was created by plaintiff. It is
undisputed that plaintiff executed the waiver of lien voluntarily in anticipation of
receiving full payment of its account from the proceeds of Bratko’s check and
promissory note. That these instruments proved to be worthless is unfortunate for
plaintiff, but it should not and does not affect the validity of the waiver of lien.
As stated in Pittsburgh Plate Glass Co v Art Centre Apartments, 253 Mich 501,
506-507; 235 NW 234, 235 (1931):
“but carelessness or inadvertence on the part of one executing a written
instrument does not justify courts in decreeing its nullification in whole or in part.
* * * If once waived, a mechanic’s lien cannot be revived in the absence of an
express agreement binding upon those whose interests are adversely affected.”
This record contains no agreement, express or otherwise, by the Strothers
or National Bank of Detroit to revive plaintiff’s lien. The fact that the waiver of
lien ran to Bratko alone is of no consequence. The waiver described the property
as it was described in the sales agreement between plaintiff and Bonar and Bratko,
the deed to the Strothers and their mortgage to National Bank of Detroit, and the
statement of account and lien filed by plaintiff. There is no question that the
waiver applied to the lien plaintiff asserted on the premises of the Strothers.
[Poole-Dickie Lumber, supra at 323-324.]
Poole-Dickie Lumber is consistent with MCL 570.1115(4) and (6). Once payment is
made to obtain a waiver of lien, the waiver is not thereafter rendered ineffective unless the
person making the payment had written notice that the consideration provided for the waiver was
lacking. This is consistent with the act’s purpose of protecting not only contractors providing
services and materials, but also property owners from having to pay twice. Accordingly, the
waivers of lien here precluded plaintiff from asserting its construction lien against the property
owners.
But because the waivers of lien were not part of the pleadings, it was improper to grant
summary disposition under MCR 2.116(C)(8). Nonetheless, the waiver of liens established that
there was no genuine issue of material fact with respect to the enforceability of plaintiff’s
construction lien against the property owners, so the property owners were entitled to summary
disposition under MCR 2.116(C)(10). Accordingly, we affirm the trial court’s order dismissing
the property owners from this action.3
3
On appeal, defendants argue that summary disposition was proper under MCR 2.116(C)(8)
because plaintiff’s construction lien was “overly broad,” in that it was filed against multiple
properties in the condominium development, and was, therefore, invalid and unenforceable.
Given our conclusion that the property owners were entitled to summary disposition under MCR
2.116(C)(10), we need not address this issue.
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II. Bench Trial Verdict
Plaintiff also argues that the trial court erred in finding that Strange and Hysen were not
individually liable for violating the Michigan builders’ trust fund act (“MBTFA”), MCL 570.151
et seq., and that plaintiff was not entitled to treble damages. A trial court’s findings of fact at a
bench trial are reviewed by this Court under the clearly erroneous standard. MCR 2.613(C);
Carrier Creek Drain Drainage Dist v Land One, LLC, 269 Mich App 324, 329; 712 NW2d 168
(2005). A finding of fact is clearly erroneous when “the reviewing court is left with a definite
and firm conviction that a mistake has been made.” Id. at 329-330.
The trial court found that Echelon breached its contract with plaintiff by failing to pay the
balance owed for materials supplied by plaintiff, but that Echelon was entitled to various credits
against the amount owed pursuant to the terms of the parties’ agreement, and also because
Echelon had paid plaintiff’s undisputed debt to a third party. However, the trial court found that
the evidence did not support plaintiff’s claim for treble damages under the MBTFA or for
conversion.
Plaintiff argues that it established a violation of the MBTFA, relying on MCL 570.151,
MCL 570.152, and MCL 570.153, which respectively provide:
In the building construction industry, the building contract fund paid by
any person to a contractor, or by such person or contractor to a subcontractor,
shall be considered by this act to be a trust fund, for the benefit of the person
making the payment, contractors, laborers, subcontractors or materialmen, and the
contractor or subcontractor shall be considered the trustee of all funds so paid to
him for building construction purposes. [MCL 570.151.]
***
Any contractor or subcontractor engaged in the building construction
business, who, with intent to defraud, shall retain or use the proceeds or any part
therefor, of any payment made to him, for any other purpose than to first pay
laborers, subcontractors and materialmen, engaged by him to perform labor or
furnish material for the specific improvement, shall be guilty of a felony in
appropriating such funds to his own use while any amount for which he may be
liable or become liable under the terms of his contract for such labor or material
remains unpaid, and may be prosecuted upon the complaint of any persons so
defrauded, and, upon conviction, shall be punished by a fine of not less than 100
dollars or more than 5,000 dollars and/or not less than 6 months nor more than 3
years imprisonment in a state prison at the discretion of the court. [MCL
570.152.]
***
The appropriation by a contractor, or any subcontractor, of any moneys
paid to him for building operations before the payment by him of all moneys due
or so to become due laborers, subcontractors, materialmen or others entitled to
payment, shall be evidence of intent to defraud. [MCL 570.153.]
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Plaintiff also argues that it is entitled to treble damages pursuant to MCL 600.2919a, for the
alleged violation of the MBTFA.
Courts have recognized a civil cause of action for violation of the MBTFA. DiPonio
Constr Co, Inc v Rosati Masonry Co, Inc, 246 Mich App 43, 48; 631 NW2d 59 (2001). As
explained in DiPonio:
The prima facie elements of a civil cause of action brought under the act
include (1) the defendant is a contractor or subcontractor engaged in the building
construction industry, (2) a person paid the contractor or subcontractor for labor
or materials provided on a construction project, (3) the defendant retained or used
those funds, or any part of those funds, (4) for any purpose other than to first pay
laborers, subcontractors, and materialmen, (5) who were engaged by the
defendant to perform labor or furnish material for the specific project. [Id. at 49.]
The intent of the act is to prevent contractors from juggling funds between unrelated projects, for
instance, by paying suppliers on older projects with funds received for more current operations,
possibly leaving some suppliers unpaid if the builder became insolvent. Id.
In Livonia Bldg Materials Co v Harrison Constr Co, 276 Mich App 514, 519-521; 742
NW2d 140 (2007), this Court stated:
Officers of a corporation may be held individually liable when they
personally cause their corporation to act unlawfully. People v Brown, 239 Mich
App 735, 739-740; 610 NW2d 234 (2000). “‘[A] corporate employee or official
is personally liable for all tortious or criminal acts in which he participates,
regardless of whether he was acting on his own behalf or on behalf of the
corporation.’” Id., quoting Attorney General v Ankersen, 148 Mich App 524,
557; 385 NW2d 658 (1986). If a defendant personally misappropriates funds
after they are received by the corporation, he or she can be held personally
responsible under the MBTFA. Brown, supra at 743-744.
***
And this Court has further explained that “a reasonable inference of appropriation
arises from the payment of construction funds to a contractor and the subsequent
failure of the contractor to pay laborers, subcontractors, materialmen, or others
entitled to payment.” People v Whipple, 202 Mich App 428, 435; 509 NW2d 837
(1993). In Whipple, this Court held that the prosecutor in a criminal matter need
not “prove ‘what the defendant did with the money’ if a reasonable inference of
appropriation is present.” Id. at 436.
Plaintiff argues that the evidence established a violation of the MBTFA because it
showed that Echelon did not retain funds to pay all of its invoices, yet paid other business
expenses and made distributions to its owners, Strange and Hysen. At the time plaintiff
submitted its invoices, Echelon was receiving draws from its lender, and that money was
required to be paid to materialmen, suppliers, and laborers first. As the trial court found,
however, the evidence showed that Echelon did not pay plaintiff ’s invoices because of a
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legitimate belief that plaintiff had improperly marked up its prices and had not given Echelon
credits against the amounts due in accordance with the parties’ agreement.
Further, contrary to what plaintiff argues, Strange did not admit that he used funds that
should have been held in trust to pay other business expenses. Rather, Strange only admitted that
Echelon paid other expenses from the funds it received. According to Strange, however,
Echelon’s source of funds was not limited to draws for this project. Strange also testified that the
project was losing money and that he contributed additional, personal money to keep the project
going. Plaintiff did not show that any funds that were supposed to be held in trust were not used
to pay other materialmen, laborers, or suppliers, and instead were used for other expenses.
Accordingly, the trial court did not clearly err in finding that plaintiff failed to establish a
violation of the MBTFA.
Plaintiff also failed to show that either Hysen or Strange received distributions of any
money that should have been paid to contractors or materialmen. In fact, there was testimony
that the project was losing money and that Strange contributed additional funds of his own to
keep the project going. Therefore, the trial court did not clearly err in finding that neither Hysen
nor Strange were individually liable.
Absent a violation of the MBTFA, plaintiff is not entitled to treble damages.
Affirmed.
/s/ Douglas B. Shapiro
/s/ Kathleen Jansen
/s/ Jane M. Beckering
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