Bc Tile & Marble Co. Inc. v. Multi Bldg. Co. Inc.

• Decision Date: 08 June 2010
• Docket Number: Docket No. 289258.
• Citation: 288 Mich.App. 576,794 N.W.2d 76
• Court: Court of Appeal of Michigan — District of US
• Parties: BC TILE & MARBLE CO., INC., Plaintiff–Appellant,v.MULTI BUILDING CO., INC., Defendant/Cross–Defendant,andAdriano Paciocco, Defendant–Appellee,andIrfan Haddad, Maisa Haddad and Washington Mutual Bank, Defendants/Cross–Plaintiffs,andMaybury Park, L.L.C., Walmar, Inc., D. West Construction, Inc., and Metropolitan Title Co., Defendants.

288 Mich.App. 576

794 N.W.2d 76

BC TILE & MARBLE CO., INC., Plaintiff–Appellant,

v.MULTI BUILDING CO., INC., Defendant/Cross–Defendant,andAdriano Paciocco, Defendant–Appellee,andIrfan Haddad, Maisa Haddad and Washington Mutual Bank, Defendants/Cross–Plaintiffs,andMaybury Park, L.L.C., Walmar, Inc., D. West Construction, Inc., and Metropolitan Title Co., Defendants.

Docket No. 289258.

Court of Appeals of Michigan.

Submitted April 6, 2010, at Detroit.Decided April 13, 2010.Approved for Publication June 8, 2010, at 9:05 a.m.

Abramson Law Offices, PLLC (by Jay A. Abramson), for BC Tile & Marble Co., Inc.Jaffe, Raitt, Heuer & Weiss, PC (by Peter M. Alter and James W. Rose), for Adriano Paciocco.Before: WHITBECK, P.J., and METER and FORT HOOD, JJ.PER CURIAM.

In this action brought pursuant to the Michigan builders' trust fund act (MBTFA),¹ plaintiff, BC Tile & Marble Co., Inc., appeals as of right the trial court's denial of its motion for summary disposition and the trial court's order granting summary disposition to defendant Adriano Paciocco. We affirm in part and reverse in part.

I. BASIC FACTS AND PROCEDURAL HISTORY

Plaintiff BC Tile supplies and installs tile and marble materials in construction projects. Defendant Paciocco is the president and resident agent of defendant Multi Building Co., Inc. Paciocco is also a member and resident agent of defendant Maybury Park, L.L.C.

In 2006, BC Tile provided labor and materials and made improvements to the property located at 20838 Maybury Park Drive (Unit 5) in Novi, Michigan, which at the time was owned by Maybury Park. In January 2006, BC Tile sent an invoice to Multi Building for its labor and materials in the amount of $33,813, but the invoice was not paid. Consequently, in November 2006, BC Tile recorded a lien in the amount of $33,813 on Unit 5, delivering a copy of the lien and a notice of furnishing to defendant Metropolitan Title Company on November 9, 2006. On November 13, 2006, Maybury sold Unit 5 to defendants Irfan and Maisa Haddad for $946,366.72. Paciocco, Multi Building, and Maybury received funds from the sale of Unit 5.

In September 2007, BC Tile filed a complaint against Multi Building, Maybury, Paciocco, the Haddads, Walmar, Inc., D. West Construction, Inc., and Washington Mutual Bank. BC Tile alleged claims for account stated, breach of contract, breach of implied contract, quantum meruit and unjust enrichment, promissory estoppel, violation of the MBTFA, and conversion. The crux of BC Tile's claims was that defendants owed BC Tile money for the labor, materials, and improvements that it made to Unit 5. Subsequently, a default was entered against Multi Building, and Maybury, the Haddads, Walmar, D. West Construction, and Washington Mutual Bank were all dismissed from the action.

BC Tile moved for partial summary disposition against Paciocco, pursuant to MCR 2.116(C)(9) and (10), arguing that there was no genuine issue of material fact that Paciocco had violated the MBTFA when he failed to pay BC Tile the $33,813 owed even after Unit 5 was sold to the Haddads. BC Tile argued that, as an officer of Multi Building, Paciocco was personally liable for the amount owed. BC Tile contended that, under the MBTFA, a contractor was required to pay laborers and suppliers before making any other payments, but Multi Building violated this requirement by instead first paying for other costs and expenses.

Paciocco responded to BC Tile's partial motion for summary disposition, contending that BC Tile's work was defective and that attempts to have it corrected had delayed the closing on Unit 5. According to Paciocco, the Haddads received a closing credit of approximately $22,000, largely to account for BC Tile's defective workmanship. Paciocco asserted that Multi Building incurred damages totaling not less than $47,000 as a result of BC Tile's defective workmanship. Paciocco further contended that the true balance due was only $10,000, not $33,813. Therefore, Paciocco argued that BC Tile's argument under MCR 2.116(C)(9) (failure to state a valid defense) was without merit. Paciocco also argued that to hold a principal of a corporate contractor liable under the MBTFA, there must be evidence that the principal knew about or approved the alleged violation; however, there was no such evidence in this case. Accordingly, Paciocco requested that the trial court deny BC Tile's motion and instead grant Paciocco summary disposition under MCR 2.116(I)(2).

After hearing oral arguments on the motion, the trial court ruled:

As it pertains to your—to [BC Tile's] summary disposition Motion, there's certainly a question of fact established on whether [BC Tile] is entitled to the money based upon the allegations that there is delay and bad work, defective work. However, I'm also going to respond to Paciocco's Motion pursuant to the Court Rules. And when Paciocco provides me an affidavit saying he didn't make any decisions about what to do with the money received, didn't misappropriate the funds, that it was his partner who made all the decisions, and I'm not given any evidence to contradict that, I'm going—based on that, I'm going to grant Paciocco's summary disposition Motion.

Accordingly, the trial court entered an order denying BC Tile's motion for summary disposition and granting summary disposition in favor of Paciocco, pursuant to MCR 2.116(I)(2).

BC Tile then moved for reconsideration of the order granting summary disposition in favor of Paciocco. BC Tile argued that the trial court committed palpable error by ruling that BC Tile had failed to provide evidence rebutting Paciocco's affidavit, which was not required by law, and by accepting Paciocco's argument that he did not personally violate the MBTFA. The trial court responded in a written opinion and order, relying on this Court's decision in James Lumber Co., Inc. v. J & S Constr., Inc.,² that a corporate principal “could not be held personally liable under MCL 570.151 et seq. , without proof of knowledge or approval of the misuse of the money received by the construction company.” Accordingly, the trial court denied BC Tile's motion for reconsideration. BC Tile now appeals.

II. BC TILE'S MOTION FOR SUMMARY DISPOSITION

A. STANDARD OF REVIEW

BC Tile argues on appeal that the trial court erred by denying its motion for summary disposition because it presented sufficient evidence to establish a prima facie case of a violation of the MBTFA.

A summary disposition motion under MCR 2.116(C)(9) tests the sufficiency of a defendant's pleadings by accepting all well-pleaded allegations as true. Summary disposition is proper if the defenses are so clearly untenable as a matter of law that no factual development could possibly support a plaintiff's right to recovery.³ “ ‘[A] motion for summary disposition under MCR 2.116(C)(9) is tested solely by reference to the parties' pleadings.’ ” ⁴ In this case, however, the trial court considered Paciocco's affidavit and other documentary evidence presented by the parties. “Where the parties rely on documentary evidence, appellate courts proceed under the standards of review applicable to a motion made under MCR 2.116(C)(10).” ⁵

A motion for summary disposition under MCR 2.116(C)(10) tests the factual sufficiency of the complaint. ⁶ This Court reviews “a motion brought under MCR 2.116(C)(10) by considering the pleadings, admissions, and other evidence submitted by the parties in the light most favorable to the nonmoving party.” ⁷ Moreover, the Court considers only “what was properly presented to the trial court before its decision on the motion.” ⁸ Summary disposition “is appropriate if there is no genuine issue regarding any material fact and the moving party is entitled to judgment as a matter of law.” ⁹ “There is a genuine issue of material fact when reasonable minds could differ on an issue after viewing the record in the light most favorable to the nonmoving party.” ¹⁰

This Court reviews de novo a trial court's decision on a motion for summary disposition.¹¹

B. ANALYSIS

BC Tile brought this suit under the MBTFA, which “imposes a trust on funds paid to contractors and subcontractors for products and services provided under construction contracts.” ¹² Because the MBTFA is a remedial statute, designed to protect people of the state from fraud in the construction industry, it should be construed liberally for the advancement of the remedy. ¹³ The MBTFA is a penal statute, but the Michigan Supreme Court has recognized that a civil cause of action may be brought for its violation.¹⁴

MCL 570.151 provides:

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 570.152 provides:

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 [sic], 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. ¹⁵

And MCL 570.153 provides:

The appropriation by a contractor,...