E R ZEILER EXCAVATING INC V VALENTI TROBEC & CHANDLER INC
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STATE OF MICHIGAN
COURT OF APPEALS
E.R. ZEILER EXCAVATING, INC.,
Plaintiff-Appellant/Cross-Appellee,
v
FOR PUBLICATION
April 18, 2006
9:10 a.m.
No. 257447
Monroe Circuit Court
LC No. 04-017485-CK
VALENTI TROBEC CHANDLER INC.,
Defendant,
and
NAS SURETY GROUP a/k/a NORTH
AMERICAN SPECIALTY INSURANCE,
Official Reported Version
Defendant-Appellee,
and
DOMA PROPERTIES LIMITED PARTNERSHIP,
Defendant-Appellee/CrossAppellant.
Before: Hoekstra, P.J., and Neff and Owens, JJ.
NEFF, J.
In this action under the Construction Lien Act (CLA),1 plaintiff E.R. Zeiler Excavating,
Inc. (Zeiler), appeals as of right an order of the trial court granting summary disposition in favor
of defendant NAS Surety Group2 (NAS) and defendant DOMA Properties Limited Partnership
(DOMA) on the grounds that the statute of limitations barred Zeiler's surety bond claim against
defendants. DOMA cross-appeals the trial court's denial of its request for attorney fees under
1
MCL 570.1101 et seq.
2
Also known as North American Specialty Insurance.
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MCL 570.1118(2). We reverse the grant of summary disposition for NAS and remand this
matter for further proceedings. We affirm the grant of summary disposition for DOMA and
affirm the denial of DOMA's request for attorney fees.
I
This case presents a narrow issue of first impression to determine whether the one-year
limitations period for filing an action to enforce a construction lien, MCL 570.1117(1), governs
an action to enforce a surety bond pursuant to MCL 570.1116. Because the one-year period of
limitations under MCL 570.1117 expressly applies to "[p]roceedings for the enforcement of a
construction lien and the foreclosure of any interests subject to the construction lien," which are
enforcement proceedings independent of and distinct from an action on a bond under the CLA,
we hold that the one-year period of limitations does not govern plaintiff 's action on the bond.
II
This action arises from a construction lien claim filed by Zeiler, a subcontractor, for
amounts due for excavating and underground services in the construction of a subdivision in
Frenchtown Township for property owner and developer DOMA. In May 1999, Zeiler entered
into an excavating contract with Robertson Builders, Inc. (Robertson), the general contractor
retained by DOMA for the subdivision project. According to Zeiler, on June 2, 2000, either
Robertson or DOMA decided to terminate Zeiler's services. Zeiler alleged that Robertson owed
Zeiler $216,259 for work performed under the contract.
On June 28, 2000, Zeiler filed a demand for mandatory binding arbitration pursuant to its
contract with Robertson. Zeiler also filed a claim of lien under the CLA on July 7, 2000.
Shortly after, on August 1, 2000, Robertson filed a bond to discharge the construction lien on
DOMA's property.3 The bond named Zeiler as obligee, NAS as surety, and Robertson as
principal.4
When Zeiler subsequently received an arbitration award in its favor three years later and
obtained a judgment against Robertson for $159,125, Zeiler pursued payment from NAS under
the surety bond. NAS declined to pay. NAS asserted that because Zeiler failed to take action
against NAS within one year of the lien claim, any action by Zeiler on the bond was time-barred.
Zeiler filed this action, alleging that under the CLA provisions for discharging a claim of
lien by filing a bond, MCL 570.1116, NAS was liable for payment of the $159,125. In the
3
As explained in part IV(B), in accordance with MCL 570.1116, a surety bond releases the
property encumbered by a construction lien from potential liability and instead exposes the
surety, in this case NAS, to potential liability.
4
Defendant Valenti Trobec Chandler Inc. acted as the agent of NAS in securing the bond for the
benefit of Robertson and DOMA. By stipulation of the parties, Valenti was later dismissed with
prejudice from this lawsuit and is not involved in this appeal.
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alternative, Zeiler requested reinstatement of the construction lien in the event that the bond that
discharged the lien was invalid. Immediately after filing its complaint, Zeiler filed a motion for
summary disposition under MCR 2.116(C)(10), arguing that (1) under the bond, NAS was
obligated to pay for any successful claim against Robertson and that no other conditions appear
in the bond or are permitted under the CLA and (2) MCL 570.1116, which governs surety bonds
under the CLA, does not contain a one-year enforcement limitation.
The trial court denied Zeiler's motion for summary disposition, granted the motion of
NAS for summary disposition under MCR 2.116(C)(7) and (10), and granted summary
disposition to DOMA under MCR 2.116(I)(2). The court denied DOMA's request for attorney
fees. The court held that the period of limitations for enforcing a claim of lien under MCL
570.1117 also applied to this action, and thus Zeiler's rights lapsed one year after Zeiler recorded
its claim of lien. Citing MCL 570.1302(2), the court reasoned that Zeiler was entitled to bring a
separate action on the contract, which would have tolled the limitations period pending the
outcome of arbitration. The court concluded that Zeiler's failure to do so barred any action
against defendants for the enforcement of the arbitration award.
III
This Court reviews de novo a trial court's denial of summary disposition to determine
whether the moving party was entitled to judgment as a matter of law. Maiden v Rozwood, 461
Mich 109, 118; 597 NW2d 817 (1999). Statutory interpretation and whether a period of
limitation applies in particular circumstances are questions of law, which we also consider de
novo on appeal. Eggleston v Bio-Medical Applications of Detroit, Inc, 468 Mich 29, 32; 658
NW2d 139 (2003); Detroit v 19675 Hasse, 258 Mich App 438, 444; 671 NW2d 150 (2003).
Summary disposition under MCR 2.116(C)(10) is properly granted when there is no
genuine issue of material fact and the movant is entitled to judgment as a matter of law. The
court considers the pleadings, affidavits, depositions, admissions, and other documentary
evidence in the light most favorable to the nonmoving party. Smith v Globe Life Ins Co, 460
Mich 446, 454; 597 NW2d 28 (1999). The moving party must specifically identify the
undisputed factual issues and has the initial burden of supporting its position with documentary
evidence. Id. at 455; Maiden, supra at 120. The responding party must then present legally
admissible evidence to demonstrate that a genuine issue of material fact remains for trial. Id.;
Smith, supra at 455 and n 2.
Summary disposition under MCR 2.116(C)(7) is proper when a claim is barred by the
statute of limitations. Maiden, supra at 118 and n 3. In determining whether summary
disposition was properly granted under MCR 2.116(C)(7), this Court "consider[s] all
documentary evidence submitted by the parties, accepting as true the contents of the complaint
unless affidavits or other appropriate documents specifically contradict them." Fane v Detroit
Library Comm, 465 Mich 68, 74; 631 NW2d 678 (2001).
IV
Plaintiff argues that the CLA contains no express or implied provision under MCL
570.1116 for a one-year period of limitations on the enforcement of surety bonds, as it does for
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the enforcement of construction liens. Accordingly, the trial court erred in holding that
plaintiff 's action was time-barred. We agree.
A
The primary goal of judicial interpretation of statutes is to ascertain and give effect to the
intent of the Legislature. Gladych v New Family Homes, Inc, 468 Mich 594, 597; 664 NW2d
705 (2003). The first criterion in determining intent is the specific language of the statute.
Halloran v Bhan, 470 Mich 572, 577; 683 NW2d 129 (2004). The fair and natural import of the
terms employed, in view of the subject matter of the law, governs. In re Wirsing, 456 Mich 467,
474; 573 NW2d 51 (1998).
"If the statute is unambiguous, the Legislature is presumed to have intended the meaning
expressed and judicial construction is neither required nor permitted. However, if reasonable
minds can differ concerning the meaning of a statute, judicial construction of the statute is
appropriate." Solution Source, Inc v LPR Assoc Ltd Partnership, 252 Mich App 368, 373; 652
NW2d 474 (2002) (citation omitted).
B
Although the facts and proceedings in this case are complicated, the legal analysis is
straightforward. MCL 570.1116 is silent concerning any period of limitations for an action on a
bond. Although MCL 570.1117 expressly provides for a one-year period of limitations, the
provision applies by its plain language to the enforcement of construction liens and foreclosure
on them. We find no basis for extending the one-year period of limitations to actions on bonds
filed under MCL 570.1116 contrary to the express statutory scheme established by the
Legislature. We agree with Zeiler that the six-year period of limitations for contract actions,
MCL 600.5807(8), applies to its claim against NAS.
The plain language of the CLA undermines defendants' assertion that the Legislature, by
its silence, intended a one-year limitation under MCL 570.1116. A more reasonable conclusion
is that the Legislature intended a short period of limitations only for construction liens, primarily
on the basis of important operative differences between such liens and surety bonds.
The CLA governs the rights of the parties and provides:
Each contractor, subcontractor, supplier, or laborer who provides an
improvement to real property shall have a construction lien upon the interest of
the owner or lessee who contracted for the improvement to the real property, . . .
the interest of an owner who has subordinated his or her interest to the mortgage
for the improvement of the real property, and the interest of an owner who has
required the improvement. A construction lien acquired pursuant to this act shall
not exceed the amount of the lien claimant's contract less payments made on the
contract. [MCL 570.1107(1).]
A construction lien "shall attach to the entire interest of the owner or lessee who contracted for
the improvement, including any subsequently acquired legal or equitable interest." MCL
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570.1107(2). Accordingly, a construction lien is an encumbrance on the title to the property and
encourages payment to resolve disputes regarding services performed on the property and acts as
security for contractors who perform the services.
A construction lien may be discharged if a bond is recorded with the county clerk. MCL
570.1116(1). The bond must name the lien claimant as the obligee and must "be in the penal
sum of twice the amount for which the lien is claimed and shall be conditioned on the payment
of any sum for which the obligee in the bond may obtain judgment on the claim for which the
claim of lien was filed." Id. "The bond may be either a cash bond executed by a principal, or a
surety bond executed by a principal and a surety company authorized to do business in this
state." Id. The bond at issue in this case is the latter.
"In an action brought in connection with the claim of the obligee" of a surety bond, the
court may reduce the amount of the bond, order other or additional surety, or "[g]rant any other
relief the court considers to be equitable." MCL 570.1116(3). MCL 570.1116 is silent on the
period of limitations for bringing such a claim. In the case of construction liens, MCL 570.1117
is not silent: "Proceedings for the enforcement of a construction lien and the foreclosure of any
interests subject to the construction lien shall not be brought later than 1 year after the date the
claim of lien was recorded." MCL 570.1117(1). If a proceeding to enforce a construction lien is
not brought within one year, a person with an interest in the real property affected by the lien
may secure a certificate verifying that fact from the county clerk, and the certificate may be
recorded with the register of deeds, after which the claim of lien is of no effect. MCL 570.1128.
The county clerk issued such a certificate in this case.
The parties offer competing interpretations of the silence of MCL 570.1116 with regard
to any period of limitations. Zeiler contends that the Legislature, by its silence, did not intend
the same one-year period of limitations for surety bond claims as that it expressly set forth in
MCL 570.1117. Instead, it argues that the six-year period of limitations for breach of contract
under MCL 600.5807(8) should apply. Defendants assert that this Court should interpret the two
provisions in harmony, and thus subject to the same period of limitations of one year.
We agree with Zeiler's argument and reasoning. In light of the detailed CLA statutory
scheme, we conclude that the Legislature, by its silence, did not intend the same one-year period
of limitations for surety claims as that it expressly provided for enforcement of construction liens
through foreclosure proceedings.
MCL 570.1128 explicitly provides an administrative mechanism for certifying that a
proceeding under a construction lien has not commenced after one year, "after which the
statement or claim of lien shall have no effect." No corresponding provision exists with regard
to a surety bond pursuant to which no claims were filed within one year.
More importantly, the differences between construction liens and surety bonds convince
us that the Legislature, in accordance with the plain language expressed, intended a shorter
period of limitations for the former, but not the latter. Construction liens expose real property to
liability. The public has a "substantial interest in the certainty of land titles." Northern Concrete
Pipe, Inc v Sinacola Cos-Midwest, Inc, 461 Mich 316, 322; 603 NW2d 257 (1999). The
Legislature therefore had good reason to require a short period of limitations for construction
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lien claims. Otherwise, stale claims would cloud title to real property for extended periods, and
early settlement of disputed claims would not be encouraged.
A surety bond, on the other hand, releases the real property from potential liability. From
plaintiff 's perspective, the bond acts in the nature of an insurance contract giving the contractor
security by way of an action to enforce the contract against a surety up to twice the amount of
the original lien. MCL 570.1116(1). The bond, which has either the cash backing of a principal
or the institutional reliability of a licensed surety, id., removes the need for leverage over the real
property. Therefore, the risks and the rights at stake are materially different under construction
liens and surety bonds. The bond does not merely replace the lien with something of equal
value. A short period of limitations for liens is aimed not at "how much" is to be recovered, but
"how" recovery may be obtained. Surety bonds do not bring with them the prospect of
foreclosure actions that the Legislature took care to see settled quickly in the interest of the
public.
The trial court erred in concluding that a one-year period of limitations applied to Zeiler's
claim. Accordingly, as Zeiler contends, the six-year limitations period for breach of contract,
MCL 600.5807(8), applies.
Zeiler further contends on appeal that it is entitled to a grant of summary disposition in its
favor. However, while it appears that Zeiler's position is correct, because the trial court
erroneously granted summary disposition on the basis that Zeiler's claim against NAS was timebarred and did not reach the issue of liability, we remand this action for decision by the trial
court in the first instance.
V
With regard to DOMA, although the court adopted the wrong rationale, it did not err in
dismissing the claim against DOMA. Zeiler's claim against DOMA was stated as an alternative
to the claim against NAS on the bond. In the event recovery could not be obtained on the bond,
Zeiler requested that the court exercise its equitable powers and reinstate the construction lien
against DOMA. MCL 570.1116(3) permits the court to grant any other relief the court considers
to be equitable:
In an action brought in connection with the claim of the obligee, the court
may do 1 or more of the following:
(a) Order the amount of the bond to be reduced.
(b) Order other or additional surety to be provided.
(c) Grant any other relief the court considers to be equitable.
Zeiler states that its claim against DOMA encompassed only the equitable request for
reinstatement of its claim of lien and that no request is made in the instant action to enforce a
construction lien in a foreclosure proceeding under MCL 570.1118. Zeiler further states that the
inclusion of DOMA as a defendant was a direct result of the position taken by NAS that any
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obligation on the bond pertains only to a judgment "against the property" for the enforcement of
the lien, a condition that may render the bond invalid under MCL 570.1116. Zeiler thus sought
reinstatement of the claim of lien in the event the bond was declared invalid or inconsistent with
the CLA.
The arguments and record before us indicate no basis for declaring the bond invalid or
inconsistent with the CLA. Zeiler's alternative claim against DOMA thus appears to be no
longer at issue. DOMA is therefore entitled to summary disposition with regard to Zeiler's claim
for equitable relief.
VI
On cross-appeal, DOMA argues that the trial court erred in denying its request for
attorney fees under MCL 570.1118(2) on the ground that Zeiler's claim against DOMA was not
vexatious.5 We disagree.
MCL 570.1118(2) provides:
In each action in which enforcement of a construction lien through
foreclosure is sought, the court shall examine each claim and defense that is
presented, and determine the amount, if any, due to each lien claimant or to any
mortgagee or holder of an encumbrance, and their respective priorities. The court
may allow reasonable attorneys' fees to a lien claimant who is the prevailing
party. The court also may allow reasonable attorneys' fees to a prevailing
defendant if the court determines the lien claimant's action to enforce a
construction lien under this section was vexatious. Attorneys' fees allowed under
this section shall not be paid from the homeowner construction lien recovery fund
created under part 2. [Emphasis added.]
The trial court found that Zeiler's complaint was not devoid of legal merit. The court
noted that Zeiler established an arguable legal position in good faith concerning the applicable
construction lien jurisprudence because the CLA sets forth no specific limitations period for an
action under MCL 570.1116, and counsel was thereby acting in the best interests of the client.
Contrary to DOMA's argument, the court's reasoning was not erroneously confined to the claim
against NAS. The court's general reasoning applies to Zeiler's claim against DOMA.
A court's decision whether to award attorney fees under the CLA is reviewed for an
abuse of discretion. Vugterveen Systems, Inc v Olde Millpond Corp, 210 Mich App 34, 46; 533
NW2d 320 (1995), aff 'd in part and vacated in part 454 Mich 119 (1997); Superior Products Co
v Merucci Bros, Inc, 107 Mich App 153, 159; 309 NW2d 188 (1981). "A trial court's finding
5
Given our conclusion that the claim clearly was not vexatious, we do not address the parties'
additional arguments concerning the scope or applicability of the attorney fee provision.
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that a claim is frivolous or vexatious is reviewed for clear error." Dillon v DeNooyer Chevrolet
Geo, 217 Mich App 163, 169; 550 NW2d 846 (1996).
As relevant to this case, a "vexatious proceeding" is defined in the appellate context as a
proceeding undertaken "without any reasonable basis for belief that there was a meritorious issue
to be determined on appeal[.]"6 MCR 7.216(C)(1)(a). Zeiler's alternative claim for equitable
relief cannot be said to be vexatious. Given the absence of authority applying or interpreting the
CLA provisions at issue, and the express provision for equitable relief in an action connected to
the claim of the bond obligee, MCL 570.1116(3)(c), Zeiler's pursuit of its claim against DOMA
was reasonably based on a belief in its legal merits.
Affirmed in part, reversed in part, and remanded for further proceedings consistent with
this opinion. We do not retain jurisdiction.
/s/ Janet T. Neff
/s/ Joel P. Hoekstra
/s/ Donald S. Owens
6
The appellate definition encompasses additional circumstances not applicable here.
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