Burton Drywall, Inc. v. Kaufman

• Decision Date: 13 March 1978
• Docket Number: Nos. 17 and 18,s. 17 and 18
• Citation: 263 N.W.2d 249,402 Mich. 366
• Parties: BURTON DRYWALL, INC., a Michigan Corporation, Plaintiff-Appellant, v. Harry KAUFMAN, Ben Kaufman d/b/a Westland Park Apartments, a Michigan co- partnership, Kaufman Brothers Investment Company, and Citizens Mortgage Corporation, Defendants- Appellees, and Joseph Rickard et al., Defendants. In re CERTIFIED QUESTIONS FROM the UNITED STATES DISTRICT COURT FOR the EASTERN DISTRICT of Michigan, SOUTHERN DIVISION (the Chase Manhattan Bank v. Bonnie Investment Co. and Fine v. P. D. T., I 402 Mich. 366, 263 N.W.2d 249
• Court: Michigan Supreme Court

Page 249

263 N.W.2d 249

BURTON DRYWALL, INC., a Michigan Corporation Plaintiff-Appellant, v. Harry KAUFMAN, Ben Kaufman d/b/a Westland Park Apartments, a Michigan co- partnership, Kaufman Brothers Investment Company, and Citizens Mortgage Corporation Defendants- Appellees and Joseph Rickard et al., Defendants In re CERTIFIED QUESTIONS FROM the UNITED STATES DISTRICT COURT FOR the EASTERN DISTRICT of Michigan, SOUTHERN DIVISION (the Chase Manhattan Bank v. Bonnie Investment Co. and Fine v. P. D. T., I

Nos. 17 and 18.

402 Mich. 366, 263 N.W.2d 249

Supreme Court of Michigan.

March 13, 1978.

Hertzberg, Jacob & Weingarten, P. C. by Peter A. Nathan, Detroit, for plaintiff-appellant.

J. Laevin Weiner, Southfield, for defendants-appellees.

LEVIN, Justice.

The issue is whether, to preserve the right to a mechanic's lien, one who deals directly with an owner must give notice of intention to claim a lien.

In Mielis v. Everts, 264 Mich. 363, 249 N.W. 875 (1933), this Court held that notice was not required where the lien claimant and the owner dealt directly with each other.

The Court of Appeals, in Burton Drywall, Inc. v. Kaufman, 69 Mich.App. 85, 89, 90, 244 N.W.2d 367, 370 (1976), declared that Mielis "was erroneously decided," that if the decision were "examined today by the Supreme Court, it would be overruled," and held that notice of intention to claim a lien is required even when the claimant deals directly with the owner. We granted leave to appeal. ¹

Judges of the United States District Court for the Eastern District of Michigan, stating that a question of state law was raised by that declination to follow Mielis, "which had been understood as having established an exception for lien claimants dealing directly with owners," certified the following question: ²

"Must notice of intent to claim a lien as described by M.C.L. § 570.1; M.S.A. § 26.281, be given in order to perfect the lien of a lienor who dealt directly with the owner?" ³

This Court set oral argument and authorized interested parties to file briefs. ⁴

We adhere to Mielis. We reverse Burton Drywall and in Certified Questions respond that there is a direct dealing exception.

I

The statute provides generally that suppliers of labor and material shall have a mechanic's lien upon the premises. A proviso requires that persons desiring to claim a lien "shall within 90 days after furnishing the first of such material or performing the first of such labor or engineering or surveying services, or renting or leasing equipment for any contractor or subcontractor " serve on the owner written notice informing him

(i) of the nature of the materials being furnished or labor being performed, and a description of the premises where furnished,

(ii) a lien will be claimed on the premises for amounts unpaid, and

(iii) of his right to demand a statement under oath "from such contractor or subcontractor prior to payment of any money on such contract." (Emphasis supplied.)

The statute continues:

"No person shall have a right to claim a lien as in this act provided, unless and until he shall have served a notice as in this section provided * * *." ⁵

The requirements of (i) above are derived from a proviso in the statute as amended in 1893. ⁶ Those set forth in (ii) and (iii) and the condition precedent of service of notice of intention to claim a lien were added in 1929. ⁷

The 1893 proviso required that the notice be served within 10 days "after furnishing the first of such material, or performing the first of such labor to any contractor or subcontractor." The phrase "to any contractor or subcontractor" was printed as "or any contractor or subcontractor" in a 1941 amendment. ⁸ It became "for any contractor or subcontractor" in a 1958 amendment. ⁹ We do not perceive nor is it claimed that "for any contractor" has a meaning other than "to any contractor." (Emphasis supplied.) ¹⁰

II

In Mielis, decided under the statute as amended in 1929, this Court rejected a contention that a lien was invalid because notice of intention to claim a lien had not been served on the owners:

"It was not necessary. The lien claimants were dealing with the part-owner, not with a contractor. 1929 C.L. 13101; Smalley v. Ashland Brown-Stone Co., 114 Mich. 104, 72 N.W. 29 (1897)." Mielis v. Everts, supra, 264 Mich. p. 364, 249 N.W. p. 876.

The Court of Appeals, in Burton Drywall, stated that Mielis' reliance on Smalley "was misplaced" because:

Smalley had found that notice under the statute, as amended in 1893, "was for the protection of the subcontractor, materialman or laborer to preserve its claim against the owner, and as such, was not a condition precedent to the lien attaching"

"it apparently escaped the attention of the Mielis Court" that the statute had been amended to state that there was no right of lien "unless and until" notice was served. ¹¹

Webster v. Cooper Development Co., 266 Mich. 505, 507, 254 N.W. 186 (1934), construed "unless and until" as requiring notice as a condition precedent to the perfection of a mechanic's lien. Smalley, accordingly, "was overruled sub silentio by Webster. Therefore the Mielis exception is grounded on authority no longer of precedential value." ¹²

the statement in Wallich Lumber Co. v. Golds, 375 Mich. 323, 328, 134 N.W.2d 722, 725 (1965), that "notice is not required of a person who contracts directly with the owner. Mielis v. Everts, 264 Mich. 363, 364, 249 N.W. 875," was obiter dictum. ¹³

Webster did not "overrule" Smalley. It stated only that the statute had been subsequently changed. Webster held that by reason of amendments of the statute, compliance with the 1929 notice proviso "is a condition precedent to the acquisition of the lien." ¹⁴

In Webster, the lien claimant, who had furnished materials to a contractor, failed to file with the Register of Deeds proof of service of notice of intention to claim a lien. Since the claimant had dealt with a contractor, Webster did not consider the direct dealing exception recognized in Mielis.

It may be, as stated by the Court of Appeals, that the Mielis Court overlooked the 1929 amendments and that those amendments superseded the holding in Smalley that service of notice was not prerequisite. ¹⁵ Another hypothesis is that the Court in Mielis was aware of the significance of the 1929 amendments and Smalley was cited because it inferentially recognized that the proviso has no application to one dealing directly with the owner.

Smalley stated that the function of notice under the 1893 proviso ¹⁶ was to protect a subcontractor against a failure of the contractor with whom he dealt to list him in the sworn statement furnished the owner. A person dealing directly with the owner would have no need to protect himself against such an omission, and therefore would have no occasion to avail himself of the opportunity to serve notice pursuant to the proviso. ¹⁷

III

The direct dealing exception is not "judicially created." ¹⁸ It is, rather, inherent in the language of the statute itself. ¹⁹ From its inception the proviso has applied only to a claimant furnishing labor or material "to (for) any contractor or subcontractor." A claimant dealing directly with the owner does not furnish labor or material to or for a contractor.

Since the proviso, as originally adopted, only required claimants to inform the owner that they were furnishing materials or performing labor and a description of the premises, it would have been pointless to require a claimant dealing directly with the owner to inform him that the claimant is furnishing materials or labor to him or to describe the premises.

The 1929 amendments do indeed add two additional requirements:

notice to the owner of the materialman's or laborer's intention to claim a lien (see (ii) supra ), ²⁰ and

notice that he has a right to demand a sworn statement "from such contractor or subcontractor" before paying any moneys (see (iii) supra ). ²¹

Nevertheless, the proviso by its terms still applies only to a person furnishing labor or material "to (for) a contractor or subcontractor."

A person dealing directly with an owner is not, therefore, required to provide either the 1893 notice of furnishing materials or labor or the 1929 notices of intention to claim a lien and of the owner's right to demand a sworn statement from the contractor.

Since the proviso does not apply to a person dealing directly with the owner, such a person is not required to serve "a notice as in this section provided." Hence, that language, relied on in Webster and in Burton Drywall, does not support the result reached by the Court of Appeals.

The Mielis construction was anticipated in treatises, apparently reflecting the understanding of the profession, written after the 1929 amendments were adopted and before that case was decided. ²²

The rationale of the direct dealing exception is stated in Wallich :

"The reason for the notice requirement and the distinction between one who deals directly with the owner and a subcontractor, materialman, or laborer who does not, is that in the first situation the owner knows there is a claim against him, but in the second case he may be unaware of a claim without such notice." Wallich Lumber Co. v. Golds, supra, 375 Mich. pp. 328-329, 134 N.W.2d p. 725.

IV

After Burton Drywall was decided the amount owing to the lien claimant in that case was adjudicated in a separate action and tendered to it. After leave to appeal was granted we denied a motion to dismiss the appeal. The motion was renewed and now is again denied.

The decision of the Court of Appeals created uncertainty concerning the law. The matter is of sufficient ongoing importance both to the lien claimant in that case and to the jurisprudence to warrant resolution at this time. There is the requisite adversariness that provides some assurance that the issues are properly presented. ²³

Our disposition makes it unnecessary to consider the other issues considered in the...