DAN VOS CONSTRUCTION CO INC V NEWAYGO RIVERBANK LLC
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STATE OF MICHIGAN
COURT OF APPEALS
ABONMARCHE CONSULTANTS, INC.,
UNPUBLISHED
November 19, 2009
Plaintiff-Appellant,
v
No. 285281
Newaygo Circuit Court
LC No. 07-019232-CH
MACATAWA BANK MORTGAGE CO.,
Defendant-Appellee,
and
NEWAYGO RIVERBANK, LLC, VISBEEN
ASSOCIATES, INC., and DAN VOS
CONSTRUCTION CO., INC.
Defendants.
DAN VOS CONSTRUCTION CO., INC.,
Plaintiff-Appellant,
v
No. 285283
Newaygo Circuit Court
LC No. 07-019233-CH
MACATAWA BANK MORTGAGE CO.,
Defendant-Appellee,
and
NEWAYGO RIVERBANK, LLC,
ABONMARCHE CONSULTANTS, INC., and
VISBEEN ASSOCIATES, INC.,
Defendants.
Before: Servitto, P.J., and Bandstra and Markey, JJ.
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PER CURIAM.
Plaintiffs Abonmarche Consultants (Abonmarche) and Dan Vos Construction Company
(Dan Vos) appeal as of right the trial court’s grant of summary disposition to Macatawa Bank
Mortgage Company (Macatawa) in this dispute over the priority of encumbrances on property
owned by Newaygo Riverbank LLC (Newaygo). We affirm.
Abonmarche and Dan Vos argue that the trial court erred by granting Macatawa’s motion
for summary disposition of their respective complaints to enforce construction liens. They claim
there were, at least, questions of fact regarding whether work performed by Abonmarche and
Dan Vos on the project to construct a mixed-use development for “high-end hunting, fishing and
resort purposes” on 214 acres owned by Newaygo, related back to earlier road repair work
performed by Terry Afton & Sons on an existing logging road on that same property. We
disagree.
This Court reviews a trial court’s decision on a motion for summary disposition de novo.
Dressel v Ameribank, 468 Mich 557, 561; 664 NW2d 151 (2003); Spiek v Dep’t of
Transportation, 456 Mich 331, 337; 572 NW2d 201 (1998); Rice v Auto Club Ins Ass’n, 252
Mich App 25, 30; 651 NW2d 188 (2002). This Court also reviews de novo questions of
statutory interpretation or application. Advanta Nat’l Bank v McClarty, 257 Mich App 113, 117;
667 NW2d 880 (2003); Oakland Co Bd of Co Rd Comm’rs v Michigan Prop & Cas Guaranty
Ass’n, 456 Mich 590, 610; 575 NW2d 751 (1998).
The priority of construction liens relative to other encumbrances on property is governed
by the Michigan construction lien act, MCL 570.1101, et seq. The construction lien act “was
intended to protect the interests of contractors, workers, and suppliers through construction liens,
while protecting owners from excessive costs.” Vugterveen Systems, Inc v Olde Millpond Corp,
454 Mich 119, 121-122; 506 NW2d 43 (1997); see also, MD Marinich, Inc v Michigan Nat’l
Bank, 193 Mich App 447, 453; 484 NW2d 738 (1992) (“It has long been recognized that the
construction lien laws serve two purposes: to protect the right of lien claimants to payment for
wages or materials and to protect owners from paying twice for such service.”). The act
continues to reflect the longstanding tradition of affording priority in the payment
of those laborers, contractors, and suppliers who provide building blocks and
whose physical efforts go into a construction project. The underlying intent and
purpose of the act is to protect the right of lien claimants to payment for wages or
materials when others have been provided with notice that there may be
outstanding liens against the property because construction work is in progress.
[Id. at 455.]
The act is also intended to protect mortgages from unknown lien claimants. Id. at 455-456. The
Legislature has declared the construction lien act to be remedial and has specifically provided
that it “shall be liberally construed to secure [its] beneficial results, intents and purposes.” MCL
570.1302(1); Vugterveen, supra at 121; Marinich, supra at 453.
Section 119 of the act, MCL 570.1119, provides:
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(3) A construction lien arising under this act shall take priority over all
garnishments, interests, liens or encumbrances which may attach to the building,
structure or improvement, or upon the real property on which the building,
structure or improvement is erected when the other interests, liens or
encumbrances are recorded subsequent to the first actual physical improvement.
(4) A mortgage, lien, encumbrance or other interest recorded before the first
actual physical improvement to real property shall have priority over a
construction lien arising under this act. The priority of the mortgage shall exist as
to all obligations secured by the mortgage except for indebtedness arising out of
advances made subsequent to the first actual physical improvement. An advance
made pursuant to the mortgage, but subsequent to the first actual physical
improvement shall have priority over a construction lien if, for that advance, the
mortgagee has received a contractor’s sworn statement as provided in [MCL
570.1110], has made disbursements pursuant to the contractor’s sworn statement,
and has received waivers of lien from the contractor and all subcontractors,
laborers, and suppliers who have provided notices of furnishing . . .
The act defines an “actual physical improvement” as “the actual physical change in or
alteration of, real property as a result of labor provided, pursuant to a contract, by a contractor,
subcontractor or laborer which is readily visible and would alert a person upon reasonable
inspection of the existence of an improvement.” MCL 570.1103(1). Of particular note here,
subsequent to the 1982 amendment of the act, “[a]ctual physical improvement does not include
that labor which is provided in preparation for that change or alteration, such as surveying, soil
boring and testing, architectural or engineering planning, or the preparation of other plans or
drawings of any kind or nature.” Id.
It is undisputed that neither Abonmarche nor Dan Vos made any “actual physical
improvement” to the property at any time. Thus, to paraphrase this Court in Marinich, supra at
456, the question is whether the Afton road repair work was the “the first actual physical
improvement made for this project,” such that the Abonmarche and Dan Vos construction liens
“related back to” that work and thus, “under the Construction Lien Act, [those] lien[s were]
superior to [Macatawa’s] mortgage[s]” on the property. We conclude, as did the trial court, that
the Afton road repair work was not part of the project for which Abonmarche and Dan Vos
rendered services to Newaygo, and thus, that the Macatawa mortgages had priority over the
construction liens at issue.
In Marinich, supra at 449, 451, this Court was faced with the question whether the
construction lien of a successor general contractor, hired “to take over and complete” a
construction project in place of the initial general contractor, related back to the date of
commencement of construction by the initial general contractor, so as to have priority over a
mortgage recorded after the commencement of construction by the initial general contractor but
before the successor general contractor was hired. Notably, there was no dispute in Marinich
that the initial general contractor and the successor general contractor were hired to perform
work on the same project, nor that the first actual physical improvement for that project occurred
before the mortgage was recorded. Following an evidentiary hearing, the trial court concluded
that the lien of the successor general contractor did relate back to the first actual physical
improvement on the property by the initial general contractor, thus giving the lien priority over
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the subsequently recorded mortgage. This Court affirmed. In so doing, it first provided an
overview of the historical development of Michigan law regarding mechanic’s liens:
The development of this area of the law before 1958 was discussed by the
Michigan Supreme Court in Williams & Works, Inc v Springfield Corp, 408 Mich
732, 740-743; 293 NW2d 304 (1980). Under prior statutes and case law, the
commencement of a building provided notice to all parties of the existence of
mechanics’ liens emanating from work performed in the construction of the
building. Id. at 742. In Kay v Towsley, 113 Mich 281, 283; 71 NW 490 (1897),
the Court held that mechanics’ liens had priority over mortgages that attached
after the commencement of the building “though no part of the labor performed or
materials furnished for which the lien is claimed was done or performed until
after the execution and recording of the mortgage.” Id. at 283.
It is held that, under such a provision, liens attach as of the
date of the commencement of the building, erection, or other
improvement, regardless of the time when, or the person by whom,
the particular work was done or the materials furnished for which a
lien is claimed. [Id.]
It was this “visible notice” when the first permanent work was done on the
land that fixed a “date to which all mechanics’ liens related back, even if other
contractors started their work weeks or months later.” Williams & Works, supra
at 743. The physical work began on a building or land where the building would
sit provided prospective lenders or purchasers constructive notice of potential
liens. Id. at 742. Inequities that would otherwise result if a mortgagee were
allowed to assert its lien against property for a construction loan to secure
repayment by the sale of materials or work supplied by lien claimants were
remedied by construction or mechanics’ lien statutes so “that those who make
loans after the work on the building has been commenced must take subject to
valid mechanics’ liens acquired incident to such construction.” Winkworth Fuel
& Supply Co v Bloomsbury Corp, 266 Mich 298, 302; 253 NW 304 (1934). [Id.
at 452-453.]
Thus, this Court noted, historically, the commencement of construction on a project affords to all
liens resulting from work performed as part of that project priority over any subsequently
recorded encumbrances. Id.
The Marinich Court also observed that “[o]ur Legislature enacted the Construction Lien
Act . . . in order to remedy many of the problems associated with a preceding act, the Mechanics’
Lien Act of 1891,” and that “[i]n order to ascertain and give effect to legislative intent, the
changes in the act must be construed in light of the preceding statutes and the historical legal
development of mechanics’ or construction liens.” Id. at 452-453. The Court explained that it
found “nothing in the Construction Lien Act that indicates that the Legislature intended to
change how construction liens traditionally relate back to the date when construction
commenced.” Id. at 454-455. And, it further observed that the only limits on construction liens
it could “discern from the act are that the amount of a claim cannot exceed the amount of a
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contract, MCL 570.1107(1), (6), and the improvements made must relate to the project as
referred to in the notice of commencement, MCL 570.1108(1) . . .” Id. at 457.
Applying Marinich here, we agree with the trial court that Abonmarche and Dan Vos
failed to submit sufficient evidence to create a genuine issue of material fact as to whether the
Afton road repair work was part of the same construction project for which these parties
performed work for Newaygo. There is no reference to the road repair work in any
documentation generated by Abonmarche, Dan Vos or Newaygo, the road was not going to serve
as the construction entrance for the project, and seemingly, neither Abonmarche nor Dan Vos
were aware of the road repair work until after this litigation commenced. The only assertion that
Abonmarche and Dan Vos have made to support the conclusion that the Afton road repair work
related to the development project is that the repaired road corresponds to approximately 1000
feet of the road layout for the finished project. However, especially considering the scope of the
project, this information, without more, does not suffice to establish a genuine question of
material fact on this issue.
While Macatawa’s motion for summary disposition was pending, Dan Vos filed a motion
to hold the proceeds of the foreclosure sale of the property in escrow pending resolution of the
priority of the parties’ liens. In response to that motion and in further support of its own motion
for summary disposition, Macatawa filed an affidavit from John Afton describing the timing and
extent of the road repair work at the property. On appeal, Abonmarche and Dan Vos challenge
the trial court’s decision to consider that affidavit before ruling on Macatawa’s motion, asserting
that the affidavit was required to be served on them at least 21 days before the hearing on
Macatawa’s motion for summary disposition, pursuant to MCR 2.116(G)(1)(a)(ii), because the
affidavit represented a “change in course” from the arguments asserted in Macatawa’s motion for
summary disposition. We disagree.
The Afton affidavit was attached to Macatawa’s response to Dan Vos’s motion. The
court rules provide that a response to a motion is to be served at least three days before the
hearing on the motion if hand delivered to the opposing party or to its attorney. MCR
2.119(C)(2)(b). Macatawa complied with these requirements. Thus, the trial court was
permitted to consider the Afton affidavit.
Next, Abonmarche and Dan Vos assert that, because no notice of commencement was
recorded by Newaygo, Macatawa cannot now argue that the Afton road work differed from the
project on which Abonmarche and Dan Vos were working, and that absent a notice of
commencement, the nature and scope of the “project” for purposes of evaluating the construction
liens at issue, is “at minimum” a question of fact. Again, we disagree.
Macatawa was not required to record a notice of commencement – that duty falls to the
property owner or lessee contracting for the improvements. MCL 750.1108. Pursuant to the
construction lien act, “[b]efore the commencement of any actual physical improvements to real
property,”1 Newaygo was required to record a notice of commencement in the office of the
1
Macatawa comments that “[t]here is no notice of commencement for the Project because the
(continued…)
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county register of deeds, to post the notice of commencement at the property, and to provide a
copy to the general contractor, as well as to any contractor, subcontractor, supplier or laborer
requesting a copy. MCL 570.1108(2), (5), (8), (9). The notice of commencement is not required
to include any description of the project. Thus, its absence here has no bearing on the definition
of the project for purposes of determining the priority of the Abonmarche or Dan Vos liens.
And, while the failure to record a notice of commencement or to provide a copy upon request in
accordance with the act extends the time during which a notice of furnishing may be submitted
and may entitle a contractor to reimbursement of costs incurred in obtaining the notice of
commencement from the owner, MCL 570.1108(10)-(13), it does not affect the priority of liens
on the property in any manner relevant here. Further, considering their respective roles in the
project, Abonmarche and Dan Vos would certainly be aware of all construction work that was
within the scope of the project. That they apparently were unaware of the Afton road work until
after litigation commenced, and that they are unable to point to anything, other than the fact that
the repaired road coincides for a relatively brief stretch with the intended road layout for the
development, to establish that the Afton repair work was part of the project is telling.
Finally, Abonmarche and Dan Vos also assert that Macatawa failed to establish that its
mortgages secured prior indebtedness, and not future advances, so to afford the mortgages with
priority over the construction liens under MCL 570.119(4). However, it is undisputed that,
except for the Afton road repair work, no physical improvement was undertaken at that property
at any time before the foreclosure. Thus, because the Afton Road repair work was not part of the
same project for which Abonmarche and Dan Vos were hired by Newaygo, Macatawa’s
mortgages have priority over claims by Abonmarche and Dan Vos regardless when the funds
underlying them were actually disbursed to Newaygo. Further, the purpose of the Macatawa’s
mortgages was to fund the purchase of the four individual parcels that would comprise the
property; Newaygo in fact purchased those parcels. This purchase is sufficient to establish that
the funds were advanced to Newaygo in advance of, or simultaneous with, the execution of the
mortgage.
Because we find that the trial court’s decision granting Macatawa’s motion for summary
disposition was appropriate, we also conclude that its decision denying Abonmarche’s and Dan
Vos’s motions for reconsideration of that decision was not an abuse of the trial court’s discretion.
Woodard v Custer, 476 Mich 545, 557; 719 NW2d 842 (2006); Maldonado v Ford Motor Co,
476 Mich 372, 388; 719 NW2d 809 (2006); Cason v Auto Owners Ins Co, 181 Mich App 600,
609; 450 NW2d 6 (1989).
We affirm. Macatawa, being the prevailing party, may tax costs pursuant to MCR 7.219.
/s/ Deborah A. Servitto
/s/ Richard A. Bandstra
/s/ Jane E. Markey
(…continued)
Project was never begun.”
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