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

• Decision Date: 24 July 2014
• Docket Number: Docket No. 314195.
• Citation: 306 Mich.App. 203,854 N.W.2d 744
• Parties: RONNISCH CONSTRUCTION GROUP, INC. v. LOFTS ON THE NINE, LLC.
• Court: Court of Appeal of Michigan — District of US

306 Mich.App. 203

854 N.W.2d 744

RONNISCH CONSTRUCTION GROUP, INC.

v.LOFTS ON THE NINE, LLC.

Docket No. 314195.

Court of Appeals of Michigan.

Submitted July 17, 2014, at Detroit.

Decided July 24, 2014, at 9:00 a.m.

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

Seyburn Kahn, Southfield (by Joel H. Serlin, Ronald L. Cornell, Jr., and Gregory M. Krause ), for Lofts on the Nine, LLC.

Before: JANSEN, P.J., and SAAD and DONOFRIO, JJ.

Opinion

DONOFRIO, J.

Plaintiff appeals as of right¹ the circuit court's order denying its request for attorney fees under the Construction Lien Act, MCL 570. 1101 et seq. Because the circuit court erroneously concluded that it was precluded from considering awarding attorney fees under MCL 570.1118(2), we vacate the portion of the order dealing with attorney fees and remand the case.

I. BASIC FACTS

This case arises from a construction contract that was entered into between plaintiff and defendant Lofts on the Nine, L.L.C., in May 2007.² The contract called for the construction of a loft-style condominium building in Ferndale, Michigan, for the price of approximately $6 million and provided that “[a]ny Claim arising out of or related to the Contract” was to be submitted to arbitration. Plaintiff last provided labor or materials on April 24, 2009. Defendant had paid plaintiff almost $5.5 million, resulting in a deficiency of $626,163.73. As a result, plaintiff filed a claim of lien in the Oakland County Register of Deeds in June 2009.

Because of the deficiency, on November 25, 2009, plaintiff filed a complaint against defendant in circuit court, alleging three counts: breach of contract, foreclosure of lien, and unjust enrichment. Additionally, because the contract required that claims be submitted to arbitration, the parties stipulated to stay the proceedings at circuit court and proceeded with arbitration. At arbitration, defendant asserted claims of its own, alleging that it had incurred between $1.1 million and $1.5 million in damages because of faulty or incomplete work done by plaintiff.

On January 26, 2012, the arbitrator issued his ruling. The arbitrator awarded plaintiff $626,163.72³ for “[d]irect damages for work performed under the Construction Contract” and $9,895 for “[r]eimbursement for additional Faucet Claim.” Thus, the total awarded on plaintiff's claims was $636,058. 72. However, the arbitrator specifically declined to address plaintiff's request for attorney fees as a prevailing lien claimant under MCL 570.1118(2) and expressly “reserved for the Circuit Court” that issue. On defendant's counterclaims, the arbitrator awarded defendant $185,238.36, resulting in a net award of $450,820.36 to plaintiff. Defendant shortly thereafter paid the net award amount plus interest to plaintiff.

On February 21, 2012, plaintiff filed a motion to lift the stay and confirm the arbitration award and requested attorney fees and costs under MCL 570.1118(2). Plaintiff asserted that it was a prevailing lien claimant and was entitled to attorney fees and costs totaling $310,125.25.

Defendant filed a response and argued that the motion should be denied in total because, at the outset, it already had satisfied the arbitration award by paying plaintiff shortly after the arbitrator made his ruling. Furthermore, defendant argued that no attorney fees were warranted because once plaintiff's breach-of-contract claim was settled, it rendered plaintiff's lien-foreclosure claim moot. Defendant also argued that plaintiff could not be considered as prevailing in arbitration because defendant had reasonably disputed paying the final 10% of the contract price because of numerous contract breaches on plaintiff's behalf. Defendant noted that the $450,820.36 plaintiff ultimately was awarded was less than 70% of what plaintiff had claimed was owed in the claim of lien.⁴

The circuit court denied plaintiff's motion in an opinion and order issued on April 24, 2012. With respect to the request for attorney fees, the circuit court reasoned as follows:

As [defendant] paid [plaintiff] the amount [defendant] owed pursuant to the Arbitration Award on February 16, 2012 and [plaintiff's] lien foreclosure claim was not adjudicated by this Court or the Arbitrator ..., [plaintiff] cannot be deemed to be a prevailing lien claimant in this matter. Therefore, the Court does not have the discretion to award [plaintiff] its attorney fees and costs under the Michigan Construction Lien Act.

II. STANDARD OF REVIEW

This Court reviews a circuit court's decision on whether to award attorney fees under the Construction Lien Act for an abuse of discretion. C.D. Barnes Assoc., Inc. v. Star Heaven, LLC, 300 Mich.App. 389, 425, 834 N.W.2d 878 (2013). An abuse of discretion occurs when the decision results in an outcome falling outside the range of principled outcomes. Woodard v. Custer, 476 Mich. 545, 557, 719 N.W.2d 842 (2006). Likewise, a court abuses its discretion when it makes an error of law. In re Waters Drain Drainage Dist., 296 Mich.App. 214, 220, 818 N.W.2d 478 (2012).

This Court also reviews issues of statutory interpretation de novo. The primary goal of judicial interpretation of statutes is to discern the intent of the Legislature by examining the plain language of the statute. The starting point in every case involving construction of a statute is the language itself.... The court must consider the object of the statute in light of the harm it is designed to remedy and apply a reasonable construction that best accomplishes the purposes of the statute. [C.D. Barnes, 300 Mich.App. at 407–408, 834 N.W.2d 878 (citations omitted).]

III. ANALYSIS

Generally, attorney fees are not recoverable unless a statute, court rule, or common-law exception to this general prohibition exists. Dessart v. Burak, 470 Mich. 37, 42, 678 N.W.2d 615 (2004).

Plaintiff sought to recover attorney fees under the Construction Lien Act. Specifically, MCL 570.1118(2) provides, in relevant 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.

The Construction Lien Act is remedial in nature and “sets forth a comprehensive scheme aimed at ‘protecting the rights of lien claimants to payment for expenses and ... the rights of property owners from paying twice for these expenses.’ ” Stock Bldg. Supply, LLC v. Parsley Homes of Mazuchet Harbor, LLC, 291 Mich.App. 403, 406–407, 804 N.W.2d 898 (2011) (citation omitted). As such, it is to be “liberally construed to secure the beneficial results, intents, and purposes of this act.” MCL 570.1302(1).

The circuit court determined that it could not award attorney fees under this statute because plaintiff could not be considered a prevailing lien claimant. The court relied on the belief that the lien-foreclosure claim was not adjudicated by it or the arbitrator and concluded that it did “not have the discretion to award [plaintiff] its attorney fees and costs under the Michigan Construction Lien Act.” We disagree.

We conclude that this case is analogous to the situation presented in Bosch v. Altman Constr. Corp., 100 Mich.App. 289, 298 N.W.2d 725 (1980), in which this Court affirmed the award of attorney fees under the mechanics' lien act.⁵ In Bosch, the plaintiff filed a lien for $8,215.08 for money owed on a construction contract. Id. at 292, 298 N.W.2d 725. A year later, the plaintiff filed an action in the circuit court to foreclose on the lien. Id. A few months after that, the plaintiff filed another suit against the defendant in the district court—this time alleging breach of contract. Id. at 293, 298 N.W.2d 725. Following a jury trial on the breach-of-contract claim, judgment was entered in favor of the plaintiff for $6,013.67. Id. After this judgment, the defendant tendered payment, but the plaintiff refused because he thought he was entitled to attorney fees as well. Id.

The Bosch circuit court then ordered the plaintiff to execute a discharge of the lien upon payment of the district court judgment, and on the morning of the circuit court trial, the defendant tendered a check to the plaintiff in the amount of the district court judgment plus interest. Consequently, the plaintiff signed a satisfaction of judgment and a discharge of the lien. In the circuit court, the plaintiff still asserted that he was owed attorney fees. The defendant argued that, because the lien was satisfied before trial commenced, the circuit court lacked the authority to award any attorney fees. Id. This Court disagreed with the defendant and stated:

We believe it would clearly violate the spirit of the mechanics' lien statute to permit a lienee to force a lienor to accept payment of a lien claim just before the commencement of a lien foreclosure trial and thereby avoid a possible assessment for attorney fees. Under such a rule, a lienee could drag a lienor through costly pretrial proceedings in the hope of gaining a beneficial settlement without putting himself in jeopardy of paying the attorney fees of the lienor.

Many a materialman, lacking in deep financial resources, would be seriously hampered in pursuing his legal remedies. The purpose of MCL 570.12 [the predecessor of MCL 570.1118(2) ] is to avoid such a situation. [Id. at 296, 298 N.W.2d 725 (citation omitted).]

The facts in the instant case are remarkably similar to those in Bosch. Like the Bosch plaintiff, plaintiff here filed both a breach-of-contract claim and a claim for foreclosure of a lien against defendant. And as in Bosch, the amount that was owed under the contract/lien was established in a proceeding distinct from any actual lien-foreclosure proceeding. Notably, in both Bosch and our case, the amount finally...