HA Smith Lumber & Hardware Co. v. Decina
| Decision Date | 10 November 2003 |
| Docket Number | Docket No. 238521. |
| Citation | 258 Mich. App. 419,670 N.W.2d 729 |
| Parties | H.A. SMITH LUMBER & HARDWARE COMPANY, Plaintiff/Counterdefendant-Appellee, v. John DECINA, Defendant/Cross-Defendant-Appellant, and John Decina Development Company, Third-Party Defendant/Cross-Defendant/Counterplaintiff-Appellant, and Linas P. Gobis and Lydia K. Gobis, Defendants/Cross-Defendants/Cross-Plaintiffs/Counterdefendants-Appellees, and William Gardella, d/b/a Williams Glass Company, Defendant/Counterplaintiff/Cross-Plaintiff/Third-Party Plaintiff-Appellee. |
| Court | Court of Appeal of Michigan — District of US |
Jerome & Austin, P.C. (by James R. Austin), Northville, for H.A. Smith Lumber & Hardware Company.
Jonas Sniokaitis, Livonia, for Linas and Lydia Gobis. Rosati Associates, P.C. (by A.D. Rosati), West Bloomfield, for John Decina and John Decina Development Company.
Before: TALBOT, P.J., and NEFF and KRISTEN FRANK KELLY, JJ.
In this construction contract case, John Decina (Decina) and John Decina Development Company (Decina Co.), appeal as of right a judgment, entered following a bench trial, ordering Decina to pay $9,233 in damages plus $9,000 in attorney fees to H.A. Smith Lumber and Hardware Company (Smith), and $5,355 in damages plus $3,000 in attorney fees to William Gardella, doing business as Williams Glass Company (Williams). Decina and Decina Co. also appeal the trial court's order denying their request for mediation sanctions against Linas and Lydia Gobis. We affirm in part, reverse in part, and remand for further proceedings.
In May 1997, the Gobises entered into a contract with Decina Co. to construct a custom home. The construction contract allowed for the purchase of various interior fixtures. The Gobises were to pay the difference if the cost exceeded the amount allowed. The Gobises understood that if the cost was less than the amount allowed, the balance would be subtracted from the last payment. A construction loan agreement between the Gobises and First Chicago NBD Mortgage Company provided that Decina Co. would receive five payments, in the form of draws on the bank, totaling $365,400.
During construction, Decina subcontracted with Smith and Williams to provide materials and labor. A certificate of occupancy was secured on March 1, 1999. However, the Gobises withheld the final payment because of uncompleted tasks and unexpended allowances. Decina, however, demanded the final payment, as well as additional money on the basis of unwritten amendments to the contract. It is uncontested that Decina did not pay subcontractors Smith and Williams for the labor and materials they provided.
In June 1999, Smith filed a complaint against Decina and the Gobises. Against the Gobises, Smith alleged quantum meruit and sought foreclosure of a construction lien on the Gobises' property for the amount owed on the contract with Decina, under the Construction Lien Act (CLA) M.C.L. § 570.1101 et seq. Against Decina, Smith alleged breach of contract and violation of the Michigan Builders Trust Fund Act (MBTFA), M.C.L. § 570.151 et seq. Smith later amended the complaint to add Williams as a defendant after learning that Williams also had a construction lien on the Gobises' property.
The Gobises filed a cross-claim against Decina, alleging breach of contract and seeking indemnification against Smith's claims. Williams filed a third-party complaint against Decina Co., a countercomplaint against Smith, and a cross-claim against the Gobises. Williams alleged breach of contract, quantum meruit, and promissory estoppel against Decina Co., violation of the MBTFA against Decina and Decina Co., and sought foreclosure on its lien against the Gobises' property. After Decina Co. was named a third-party defendant, the Gobises filed a cross-claim against the company alleging breach of contract and seeking indemnification against Smith's claims. Decina Co. filed a counterclaim against the Gobises, alleging that amendments to the contract required payment of an additional $38,700 above the contract price and that the Gobises owed $36,380 under the original contract.
On May 5, 2000, a mediation panel determined that the Gobises should pay $8,000 to Smith and $4,500 to Williams. With respect to all other claims, including the Gobises' cross-claims, the panel rendered an evaluation of no cause of action. The Gobises rejected the evaluation. Decina, Decina Co., Smith, and Williams accepted.
The Gobises filed a motion for summary disposition against Smith, Williams, and Decina Co. under MCR 2.116(C)(8) and (C)(10), arguing that subcontractors cannot recover against a homeowner on the basis of a contract between a subcontractor and the general contractor. The Gobises also argued, under the Michigan residential builders act, M.C.L. § 339.2401 et seq., that Decina Co. could not recover compensation because it was not a licensed builder.2 The trial court granted the Gobises' motion and dismissed the breach of contract claims asserted by Smith, Williams, and Decina Co. The trial court later granted Smith and Williams' motions for reconsideration but denied a similar motion by Decina Co.
After a bench trial, the trial court ruled that the Gobises did not have a cause of action against Decina and Decina Co., but found that the Gobises had paid the entire contract amount to Decina Co. The trial court also found that Smith and Williams had valid liens, but they did not attach to the Gobises' property because the Gobises paid Decina Co. in full. The trial court awarded Smith $9,233 in damages plus $9,000 in attorney fees against Decina. It also awarded Williams $5,333 in damages plus $3,000 in attorney fees against Decina. Decina and Decina Co. moved for a new trial and for mediation sanctions against the Gobises. The trial court denied these motions, leading to this appeal.
Decina, Decina Co., and Smith argue that the trial court erred in limiting Decina's testimony about amendments to the contract between Decina and the Gobises because the evidence was relevant to their defense against the Gobises' cross-claims. We do not have jurisdiction over this issue. This Court only has jurisdiction over appeals filed by an "aggrieved party." MCR 7.203(A); Kocenda v. Archdiocese of Detroit, 204 Mich.App. 659, 666, 516 N.W.2d 132 (1994). Here, the trial court entered a judgment of no cause of action against Decina and Decina Co. on the Gobises' cross-claims. Similarly, the trial court awarded Smith the full amount of damages it sought. Because the final orders are in the defendants' favor, they are not "aggrieved" and are not entitled to an appeal as of right. Id.
Decina and Decina Co. argue that the trial court erred in finding that they violated the MBTFA because there was no evidence that Decina used the Gobises' payments to pay subcontractors on other projects. We disagree.
A trial court's factual findings are reviewed for clear error. Christiansen v. Gerrish Twp., 239 Mich.App. 380, 387, 608 N.W.2d 83 (2000). A finding is clearly erroneous when, although there is evidence to support it, the reviewing court is left with a definite and firm conviction that a mistake was made. Id.
To establish a civil cause of action under the MBTFA, a plaintiff must show:
(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. M.C.L. § 570.151 et seq. [DiPonio Constr. Co., Inc. v. Rosati Masonry Co., Inc., 246 Mich.App. 43, 48-49, 631 N.W.2d 59 (2001).]
The MBTFA further provides:
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. [M.C.L. § 570.153.]
The trial court did not err in finding that Decina and Decina Co. violated the MBTFA. "[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 N.W.2d 837 (1993). Although Whipple involved a criminal prosecution for violation of the MBTFA, we find that reliance on the same inference is appropriate in a civil action under the MBTFA. At trial, there was evidence that Decina completed construction on the house and received payment from the Gobises. It is undisputed that Decina failed to pay Smith and Williams for materials and work they provided. This evidence supports a reasonable inference of appropriation.
Decina next argues that the trial court erred in finding that Decina was personally liable on the contract with Smith. We disagree.
We review the trial court's findings of fact for clear error. Christiansen, supra at 387, 608 N.W.2d 83. Under general agency rules, an agent contracting for an undisclosed principal is personally liable for contractual obligations. Penton Publishing, Inc. v. Markey, 212 Mich.App. 624, 626, 538 N.W.2d 104 (1995). "[A] principal is considered undisclosed unless a party transacting with the principal's agent has notice that the agent is acting for the principal and notice of the principal's...
To continue reading
Request your trial
-
Reed v. Reed
... ... Smith v. Globe Life Ins. Co., 460 Mich. 446, 455, 597 N.W.2d 28 (1999) ... 474 (2002), but questions of law are reviewed de novo, HA Smith Lumber & Hardware Co. v. Decina, 258 Mich.App. 419, 429, 670 N.W.2d 729 (2003) ... ...
- Epps v. 4 Quarters Restoration LLC., Docket No. 147727.
- Ronnisch Constr. Grp., Inc. v. Lofts On the Nine, LLC.
-
BJ'S & SONS CONST. CO., INC. v. Van Sickle
... ... HA Smith Lumber & Hardware Co. v. Decina, 258 Mich.App. 419, 429, 670 N.W.2d 729 ... ...