Ronnisch Constr. Grp., Inc. v. Lofts On the Nine, LLC.

• Court: Michigan Supreme Court
• Writing for the Court: VIVIANO, J.
• Citation: Ronnisch Constr. Grp., Inc. v. Lofts On the Nine, LLC., 499 Mich. 544, 886 N.W.2d 113 (Mich. 2016)
• Decision Date: 26 July 2016
• Docket Number: Calendar No. 4.,Docket No. 150029.
• Parties: RONNISCH CONSTRUCTION GROUP, INC., v. LOFTS ON THE NINE, LLC.

499 Mich. 544

886 N.W.2d 113

RONNISCH CONSTRUCTION GROUP, INC.,

v.LOFTS ON THE NINE, LLC.

Docket No. 150029.

Calendar No. 4.

Supreme Court of Michigan.

Argued Nov. 5, 2015.

Decided July 26, 2016.

Deneweth, Dugan & Parfitt, PC, Troy (by Ronald A. Deneweth and Mark D. Sassak ), for Ronnisch Construction Group, Inc.

Seyburn Kahn, Southfield (by Ronald L. Cornell, Jr., David F. Hansma, and Jonathan H. Schwartz ) for Lofts on the Nine, LLC.

VIVIANO, J.

At issue in this case is whether plaintiff, Ronnisch Construction Group (RCG), can seek attorney fees under § 118(2), MCL 570.1118(2), of the Construction Lien Act (CLA) from defendant Lofts on the Nine, LLC (LOTN),¹ given that plaintiff received a favorable arbitration award on its related breach of contract claim but did not obtain a judgment on its construction lien claim. We hold that the trial court may award attorney fees to RCG because RCG was a lien claimant who prevailed in an action to enforce a construction lien through foreclosure. Therefore, we affirm the judgment of the Court of Appeals and remand to the trial court for further proceedings not inconsistent with this opinion.

I. FACTS AND PROCEDURAL HISTORY

On May 25, 2007, RCG entered into a construction contract with LOTN to construct a condominium building. RCG last provided labor and materials on April 24, 2009. LOTN withheld payment of a portion of the contract amount, maintaining that RCG breached the contract by providing defective construction, dishonestly charging LOTN, and failing to complete the project on time. On June 2, 2009, RCG recorded its Claim of Lien, claiming a construction lien in the amount of $626,163.73, subject to interest on late payments in accordance with the contract. RCG also filed a notice of lis pendens against the subject property.

On November 25, 2009, RCG filed this suit against LOTN, seeking foreclosure of the lien and raising claims for breach of contract and unjust enrichment.² RCG sought a judgment in the amount of $626,163.73, together with interest, costs, and attorney fees. However, the parties agreed to stay the proceedings to pursue contractually mandated arbitration. Following arbitration, the arbitrator awarded $636,058.72 to RCG and awarded $185,238.36 to LOTN on its recoupment defense and counterclaims, resulting in a net award of $450,820.36 in RCG's favor.

The arbitrator did not address RCG's claim for attorney fees and costs and instead reserved the issue for the trial court.

A few weeks later, LOTN paid the arbitration award in full. Thereafter, RCG filed a motion requesting that the trial court lift the stay of proceedings, confirm the arbitration award, and award RCG its actual attorney fees and costs under § 118(2). The trial court denied RCG's motion, determining that RCG's lien foreclosure claim had not been adjudicated by the arbitrator or the trial court and that RCG's lien was satisfied when it voluntarily accepted LOTN's tender of payment. Thus, the trial court held that RCG was not a prevailing lien claimant under the CLA, a necessary predicate to the recovery of attorney fees under § 118(2), and that the court therefore did not have the discretion to award attorney fees to RCG.

On appeal, the Court of Appeals vacated the portion of the trial court's order denying RCG's request for attorney fees and remanded for further proceedings.³ The Court of Appeals held that, having brought both a contract claim and a foreclosure of lien claim, the fact that RCG “substantially prevail[ed] on the amounts it sought under the claim of lien made it a prevailing party” under the CLA.⁴ The Court of Appeals also distinguished this Court's order in H A Smith Lumber & Hardware Co. v. Decina,⁵ noting that, unlike the instant case, the subcontractors in Decina did not prevail on their lien claims because their liens could not legally attach to the property.⁶ Accordingly, the Court of Appeals concluded that the trial court had discretion under § 118(2) to award attorney fees.⁷

LOTN sought leave to appeal in this Court. We granted leave to appeal, asking the parties to address:

whether the Court of Appeals erred in holding that the plaintiff contractor, who filed a claim of lien under the Construction Lien Act (CLA), MCL 570.1101 et seq., and then filed a circuit court action against the defendant property owner, alleging breach of contract, foreclosure of lien, and unjust enrichment claims, was entitled to an award of attorney fees as a “prevailing party” under MCL 570.1118(2), when the plaintiff prevailed in binding arbitration on its contract claim, but neither the arbitrator nor the circuit court resolved the plaintiff's foreclosure of lien claim. See HA Smith Lumber & Hardware Co. v. Decina, 480 Mich. 987, 742 N.W.2d 120 (2007).⁸

II. STANDARD OF REVIEW

We review a trial court's award of attorney fees and costs for an abuse of discretion.⁹ An abuse of discretion occurs when the trial court's decision is outside the range of reasonable and principled outcomes.¹⁰ A trial court necessarily abuses its discretion when it makes an error of law.¹¹

Questions of statutory interpretation are reviewed de novo.¹² In interpreting § 118(2), our goal is to give effect to the Legislature's intent, focusing first on the statute's plain language.¹³ In doing so, we examine the statute as a whole, reading individual words and phrases in the context of the entire legislative scheme.¹⁴ When a statute's language is unambiguous, the Legislature must have intended the meaning clearly expressed, and the statute must be enforced as written.¹⁵

III. ANALYSIS

The CLA is “intended to protect the interests of contractors, workers, and suppliers through construction liens, while protecting owners from excessive costs.”¹⁶ The fundamental purpose of the CLA with respect to contractors, workers, and suppliers is to provide a method to secure payment for their labor and materials.¹⁷ The Legislature has declared that the CLA is “a remedial statute ... [that] shall be liberally construed to secure the beneficial results, intents, and purposes of th[e] act.”¹⁸ Accordingly, when interpreting the CLA, we should always be mindful of the CLA's intended purpose.¹⁹

In this case, RCG sued to recover the unpaid amount on its contract and, after receiving a favorable arbitration award, sought attorney fees under § 118(2) of the CLA, which reads in pertinent part:

In an action to enforce a construction lien through foreclosure, the court shall examine each claim and defense that is presented and determine the amount, if any, due to each lien claimant or to any mortgagee or holder of an encumbrance and their respective priorities. The court may allow reasonable attorneys' fees to a lien claimant who is the prevailing party. ²⁰

Application of § 118(2) in this case requires us to determine whether RCG was (1) a lien claimant, (2) in an action to enforce a construction lien through foreclosure, (3) who was the prevailing party.

A. RCG WAS A LIEN CLAIMANT

The first inquiry in determining whether a party may seek attorney fees under the CLA is whether the party is a lien claimant. Under § 118(2), the trial court has discretion to award attorney fees to “a lien claimant who is the prevailing party.” The CLA defines a “lien claimant” as “a person having a right to a construction lien under [the] act.”²¹ RCG had a valid claim of lien that attached to LOTN's interest in the property.²² Further, it is undisputed that LOTN did not tender full payment to RCG on the contract amount before the arbitration award. Therefore, when RCG received its arbitration award, it was a lien claimant because it possessed “a right to a construction lien” under the CLA.²³

Our conclusion that RCG was a lien claimant makes the instant case distinguishable from this Court's order in Decina. LOTN's argument that Decina controls the outcome of this case overlooks the crucial distinction between the two—RCG was a lien claimant under § 118(2) when it received a favorable determination on its contract claim whereas the subcontractors in Decina were not.

The litigation in Decina stemmed from a construction contract dispute between homeowners, their general contractor, and two subcontractors.²⁴ The dispute arose after the homeowners withheld final payment to the general contractor and after the general contractor did not pay the subcontractors for the labor and materials they provided.²⁵ Pertinent to this case, the subcontractors brought lien foreclosure claims against the homeowners and breach of contract claims against the general contractor.²⁶

Following a bench trial, the trial court ruled that the homeowners had paid the entire contract amount to the general contractor and that the subcontractors' liens therefore did not attach to the property because the homeowners had paid the contract amount in full.²⁷ But the trial court ruled in favor of the subcontractors on their breach of contract claims and subsequently ordered the general contractor to pay their attorney fees.²⁸ The Court of Appeals affirmed, holding that the subcontractors were a prevailing party because they had prevailed on “a claim brought in the alternative for the same injury or loss raised in the CLA claim.”²⁹

This Court reversed by order and vacated the trial court's order granting attorney fees. This Court stated that to be a “prevailing party” under § 118(2), the party “must prevail on the lien foreclosure action.”³⁰ This Court then held that the subcontractors lost on their lien claim and therefore could not recover attorney fees, stating:

In this case, the unpaid subcontractors filed a lien foreclosure action against the property owners and a breach of contract action against the general contractor. The subcontractors lost on their lien claim but prevailed on the breach of contract claim. While the statute allows a lien claimant to bring an underlying contract action at the same time as the lien foreclosure action, it does not preclude the option of bringing the two actions

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