ERB LUMBER INC V COASTAL CONSTRUCTION CO
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STATE OF MICHIGAN
COURT OF APPEALS
ERB LUMBER, INC.,
UNPUBLISHED
January 18, 2002
Plaintiff-Appellee,
v
STATE OF MICHIGAN, CONSUMER &
INDUSTRIAL SERVICES, BUREAU OF
OCCUPATIONAL & PROFESSIONAL
REGULATION, and HOMEOWNER
CONSTRUCTION LIEN RECOVERY FUND,
No. 220048
Van Buren Circuit Court
LC No. 98-044138-CH
Defendants-Appellants,
and
JULIE MAYNE and RANDALL MAYNE,
Defendants.
ERB LUMBER, INC.,
Plaintiff-Appellee,
v
JOHN MARK BUILDERS LIMITED, JOHN
MARK DAVIDSON, and 45 Individually Named
Defendants,
Defendants,
and
STATE OF MICHIGAN, CONSUMER &
INDUSTRIAL SERVICES, BUREAU OF
OCCUPATIONAL & PROFESSIONAL
REGULATION, and HOMEOWNER
-1-
No. 220710
Kent Circuit Court
LC No. 98-004003-CH
CONSTRUCTION LIEN RECOVERY FUND,
Defendants-Appellants.
ERB LUMBER, INC.,
Plaintiff-Appellee,
v
No. 221013
Cheboygan Circuit Court
LC No. 98-006406-CH
COSTAL CONSTRUCTION COMPANY and
COMPLETE PAINT & SUPPLY, INC.,
Defendants,
and
DOUGLAS E. SPOONNER, EMIL F. MUCCINO,
SUSAN J. MUCCINO,
Defendants/Counter-Defendants,
and
FIRST CHICAGO NBD MORTGAGE
COMPANY and WOLOHAN LUMBER
COMPANY,
Defendants/Counter-Plaintiffs,
and
HOMEOWNER CONSTRUCTION LIEN
RECOVERY FUND,
Defendant/Counter-DefendantAppellant.
ERB LUMBER,
Plaintiff-Appellee,
v
No. 225449
Emmet Circuit Court
-2-
COASTAL CONSTRUCTION COMPANY and
FIRST COMMUNITY BANK,
LC No. 98-004731-CH
Defendants,
and
DOUGLAS E. SPOONER, WILLIAM A.
WALDRON, JR., and JACQUELINE H.
WALDRON,
Defendants/Cross-Defendants,
and
WOLOHAN LUMBER COMPANY,
Defendant/Cross-Plaintiff,
and
HOMEOWNER CONSTRUCTION LIEN
RECOVERY FUND,
Defendant/Cross-DefendantAppellant.
ERB LUMBER, INC.,
Plaintiff/Counter-DefendantAppellee,
v
DOUGLAS E. SPOONER, COMPLETE PAINT &
SUPPLY, INC., and DANIELS PIG & DIG, INC.,
Defendants,
and
COASTAL CONSTRUCTION COMPANY,
LAWRENCE HABER, and BARBARA HABER,
Defendants/Cross-Defendants,
-3-
No. 225450
Emmet Circuit Court
LC No. 98-004732-CH
and
GREAT LAKES PLUMBING & HEATING OF
NORTHERN MICHIGAN, INC.,
Defendant/Cross-Plaintiff,
and
HOMEOWNERS CONSTRUCTION LIEN
RECOVERY FUND,
Defendant/Cross-DefendantAppellant.
ERB LUMBER, INC.,
Plaintiff/Counter-DefendantAppellee,
v
COASTAL CONSTRUCTION COMPANY, OLD
KENT BANK, and DANIELS PIG & DIG, INC.,
Defendants,
and
DOUGLAS E. SPOONER,
Defendant/Cross-Defendant,
and
DANIEL A. BABCOCK, d/b/a/ DANIEL
BABCOCK BUILDER and WOLOHAN
LUMBER COMPANY,
Defendants/Cross-Plaintiffs,
and
MICHAEL S. BARNETT and VICKY L.
-4-
No. 225451
Emmet Circuit Court
LC No. 98-004733-CH
BARNETT,
Defendants/Counter-Plaintiffs/
Cross-Defendants,
and
HOMEOWNER CONSTRUCTION LIEN
RECOVERY FUND,
Defendant/Cross-DefendantAppellant.
ERB LUMBER, INC.,
Plaintiff/Counter-Defendant-
Appellee,
v
COASTAL CONSTRUCTION COMPANY,
DOUGLAS E. SPOONER, OLD KENT BANK,
CASEY ALLEN, d/b/a K.C. CONSTRUCTION,
DAN RAVITO, d/b/a RAVITO DRYWALL,
COMPLETE PAINT & SUPPLY, INC., and
DANIELS PIG & DIG, INC.,
Defendants,
and
PAUL J. GRAY and TERESA O’NEIL GRAY,
Defendant/Cross-Defendant,
and
DANIEL A. BABCOCK, d/b/a DANIEL A.
BABCOCK BUILDER,
Defendant/Cross-Plaintiff,
and
GREAT LAKES PLUMBING & HEATING OF
-5-
No. 225452
Emmet Circuit Court
LC No. 98-004734-CH
NORTHERN MICHIGAN, INC.,
Defendant/Cross-Plaintiff/CounterPlaintiff,
and
WOLOHAN LUMBER COMPANY,
Defendant/Counter-Plaintiff,
and
HOMEOWNER CONSTRUCTION LIEN
RECOVERY FUND,
Defendant/Counter-DefendantAppellant.
Before: Griffin, P.J., and Gage and Meter, JJ.
PER CURIAM.
In these seven consolidated cases, defendant Homeowner Construction Lien Recovery
Fund (“the Fund”) appeals as of right from final orders in various trial courts awarding payments
to plaintiff under the Michigan Construction Lien Act, MCL 570.1101, et seq. In each case,
homeowners hired contractors to perform residential construction and fully paid the contractors
under their individual contracts. The contractors, however, did not fully pay for the construction
materials supplied by plaintiff. Most of the contractors became uncollectable, leaving the Fund
as plaintiff’s recourse. The Fund paid the cost of materials in every case, but disputed the trial
courts’ findings that it was obligated to pay the “time-price differential” of 1.7 percent a month
(essentially a service charge for late payment) that was part of plaintiff’s standard agreement with
the contractors. We affirm each case.
A directly analogous situation, again involving plaintiff Erb Lumber, existed in Erb
Lumber Co v Homeowner Construction Lien Recovery Fund, 206 Mich App 716; 522 NW2d
917 (1994). In Erb, this Court held that the time-price differential charged by plaintiff to builders
for late payments was recoverable. Id. at 720-721. The Court reasoned that because a provision
regarding the time-price differential was included in the contract between plaintiff and the
general contractor, and because “the amount of the lien is calculated by taking the lien claimant’s
contract price, less the amount already paid on it,” see MCL 570.1107, plaintiff was entitled to
recover the time-price differential from the Fund. Id.
-6-
Under MCR 7.215(I)(1), we are obligated to follow Erb unless it has “been reversed or
modified by the Supreme Court, or by a special panel of the Court of Appeals. . . .” The Fund
contends that a modification of Erb occurred in Vugterveen Systems v Olde Millpond, 454 Mich
119; 560 NW2d 43 (1997).
In Vugterveen, the property owner fired both his general contractor and subcontractor
after a portion of the work had been done on two condominium projects. Vugterveen, supra at
125-126. The owner then hired others to complete construction. Id. When the subcontractor
filed a foreclosure action on its construction lien, the owner defended by showing that he had
paid more to complete the projects than he had agreed to pay the original general contractor. Id.
at 126-127.
The Vugterveen Court considered whether MCL 570.1107(6) invalidated the
subcontractor’s lien. That section states:
If the real property of an owner or lessee is subject to construction liens,
the sum of the construction liens shall not exceed the amount which the owner or
lessee agreed to pay the person with whom he or she contracted for the
improvement as modified by any and all additions, deletions, and any other
amendments, less payments made by or on behalf of the owner or lessee, pursuant
to either a contractor’s sworn statement or a waiver of lien, in accordance with
this act. [MCL 570.1107(6).]
The Court noted that the act’s purpose was to protect both property owners and builders and that
no specific language in the act provided for a situation in which an owner hired a second general
contractor to complete a job and ended up paying more than the original contract price. Id. at
128-129. The Court further noted that the act is to be liberally construed to effectuate its
purposes and that to invalidate an otherwise valid subcontractor’s lien under the circumstances
would not give effect to the purpose of protecting builders. Id. The Court held that the owner
“may not use payments made on the second general contract as a defense to [the subcontractor’s]
lien because the payments were not made on the relevant contract.” Id. at 129.
The Court further held, however, that the owner could use payments made on the first
general contract as a defense to the subcontractor’s lien. The Court noted that the owner “will
have a defense to [the subcontractor’s] lien if it can show that the sum of payments made
pursuant to sworn statements and waivers of lien under the [original] contract plus [the
subcontractor’s] claim of lien exceed the price of the [original] contract.” Id. The Fund contends
that under this language, it need not pay the time-price differential at issue in the instant case,
because including the time-price differential essentially holds the owner responsible for more
than that for which he contracted. The Fund contends that “[t]he Vugterveen [C]ourt’s
recognition of the way in which a lien is limited – in favor of the homeowner – necessarily
dictates that a homeowner cannot be held responsible, via a construction lien, for the time-price
differential which seeks only to increase the contract amount for which the homeowner will
ultimately be responsible.”
-7-
We cannot agree that Vugterveen modified the holding of Erb. Indeed, Vugterveen
addressed a different issue from that raised in Erb. It considered whether a homeowner can be
held responsible, by way of liens, for a total price that exceeds the original contract amount.
That consideration is not the issue in the instant case. Vugterveen did not address whether a
subcontractor could recover a time-price differential from the Fund. Accordingly, Erb remains
precedential on the issue and squarely resolves the issues raised in the appeals. The trial courts
did not err in ruling that plaintiff could recover the disputed charges.
Each case is affirmed.
/s/ Richard Allen Griffin
/s/ Hilda R. Gage
/s/ Patrick M. Meter
-8-
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