Williams & Works, Inc. v. Springfield Corp., Docket Nos. 26617-26619

• Decision Date: 22 February 1978
• Docket Number: Docket Nos. 26617-26619,26625,26626 and 26628
• Parties: WILLIAMS & WORKS, INC., a Michigan Corporation, Plaintiff, v. SPRINGFIELD CORPORATION, Defendant, and Garno Brothers Heating and Cooling, Inc., Defendant-Appellee, and PPG Industries, Inc., Defendant-Appellee, and Shank, Coupland & Long Co., Defendant-Appellee, and Kelly Mortgage and Investment Company, Defendant-Appellant, and Bristol Square Properties Group, Defendant-Appellant.
• Court: Court of Appeal of Michigan — District of US

Page 328

265 N.W.2d 328

81 Mich.App. 355

WILLIAMS & WORKS, INC., a Michigan Corporation, Plaintiff, v. SPRINGFIELD CORPORATION, Defendant, and Garno Brothers Heating and Cooling, Inc., Defendant-Appellee,

and

PPG Industries, Inc., Defendant-Appellee,

and

Shank, Coupland & Long Co., Defendant-Appellee,

and

Kelly Mortgage and Investment Company, Defendant-Appellant,

and

Bristol Square Properties Group, Defendant-Appellant.

Docket Nos. 26617-26619, 26625, 26626 and 26628.

Court of Appeals of Michigan.

Feb. 22, 1978.

Released for Publication May 10, 1978.

Smith, Miro, Hirsch, Brody & Zweig by Martin C. Weisman and George G. Newman, Detroit, for Bristol Square Properties Group.

Russell, Ward, Hodgkins & Heaney by Paul A. Ward, Grand Rapids, for Kelly Mortg. & Inv. Co.

Brownell, Andrews & Philpott by Douglas M. Philpott, Flint, for all appellees.

Before R. B. BURNS, P. J., and ALLEN and MAHER, JJ.

R. B. BURNS, Presiding Judge.

The trial court entered judgments of foreclosure against the owner of an apartment project, appellant Bristol Square Properties Group, in favor of mechanics' lienors and appellees Shank, Coupland & Long Co., PPG Industries, Inc., and Garno Brothers Heating and Cooling, Inc., with priority over the mortgage held by appellant Kelly Mortgage and Investment Company. It is argued on appeal that appellees did not comply with the procedural requirements of the mechanics' lien act, M.C.L.A. § 570.1 et seq.; M.S.A. § 26.281 et seq.; that they waived whatever liens they had; that the liens are not entitled to priority; that the act is unconstitutional; and that the award of attorneys fees was excessive. We affirm.

The property which is the subject of foreclosure underwent several changes of ownership during construction of the apartment complex. It was originally owned by Kelly Mortgage and Investment Company with LAW Development Co., Inc., with Springfield Corporation as an optionee. Springfield is a close corporation wholly owned by its president, Robert L. Foote, and was at all times the general contractor on the project. Springfield subcontracted engineering work to Williams & Works, Inc., which did the first work on the project in June, 1972. On January 4, 1973, Kelly Mortgage and LAW conveyed the property to Springfield, which in turn executed mortgages to City National Bank and Kelly Mortgage. City National Bank subsequently conveyed its mortgage to Kelly Mortgage. On December 27, 1973, Springfield conveyed the property to Bristol Square Properties Group, a limited copartnership in which Mr. Foote and Springfield Corporation are the sole general partners. Appellees are subcontractors who began supplying labor or materials while the project was owned by Springfield Corporation, and completed their work after Springfield conveyed to Bristol Square Properties Group. At all times they dealt with Mr. Foote. William & Works, Inc., brought suit to foreclose its mechanics' lien, joining as defendants all persons with recorded interests in the property. See M.C.L.A. § 570.10; M.S.A. § 26.290. The validity of the mechanics' lien of Williams & Works, Inc., is not before this Court.

Most of the issues raised on appeal concern the alleged failure of appellees to comply with the procedural requirements of obtaining a mechanics' lien. Appellees argue that the requirements were inapplicable or substantially complied with.

Appellants first argue that Garno Brothers Heating and Cooling, Inc. and PPG Industries, Inc. failed to provide Bristol Square Properties Group with written notice of their intent to claim liens within 90 days of first furnishing labor or materials. M.C.L.A. § 570.1; M.S.A. § 26.281. However, the owner of the property at the time both appellees first started work or supplied materials was Springfield Corporation. Notice is not required where the lien claimants deal directly with the owner. Wallich Lumber Co. v. Golds, 375 Mich. 323, 328-329, 134 N.W.2d 722 (1965); Mielis v. Everts, 264 Mich. 363, 364, 249 N.W. 875, 876 (1933); J. Altman Companies, Inc. v. Saginaw Plumbing & Heating Supply Co., 42 Mich.App. 747, 753-754, 202 N.W.2d 707, 711 (1972). In Burton Drywall, Inc. v. Kaufman, 69 Mich.App. 85, 244 N.W.2d 367 (1976), lv. granted, 399 Mich. 875 (1977), a panel of this Court declined to follow the above cases, reasoning that Mielis was wrongly decided. Your author dissented because we are bound to follow Supreme Court precedent. In P. H. I. Construction Co. v. Riverview Commons Associates, 80 Mich.App. 518, 264 N.W.2d 50 (1978), another panel declined to follow Burton Drywall, also explaining that it was bound by Supreme Court precedent, and observing that it would be inconsistent with the purpose of the act to permit an owner who has actual notice of the claim to defeat a lien on the basis that he did not receive statutory notice. The decision of the Supreme Court in Spartan Asphalt Paving Co. v. Grand Ledge Mobile Home Park, 400 Mich. 184, 253 N.W.2d 646 (1977), that the act is to be construed liberally as to the determination of whether a lien has attached strengthens the P. H. I. Construction Co. analysis, since a basic premise of the Burton Drywall decision was that the act must be construed strictly until the lien has attached. We therefore follow Mielis and Wallich and hold that notice of intent to claim a lien was unnecessary. The fact that ownership of the property changed within the 90-day period within which PPG Industries, Inc., was to provide notice cannot be the basis for defeating the lien, particularly where both of the general partners in Bristol Square Properties Group were themselves dealing directly with appellee. See Williams & Works, Inc. v. Springfield Corp., 76 Mich.App. 541, 549, 257 N.W.2d 160, 164 (1977).

All of the appellees filed their statements of account and lien within 90 days of completing their work. M.C.L.A. § 570.5; M.S.A. § 26.285. However, appellants argue that all appellees failed to properly serve the statements upon the owner, Bristol Square Properties Group. M.C.L.A. § 570.6; M.S.A. § 26.286. The service statute specifically exempts those persons dealing directly with the owner or part owner of the premises. M.C.L.A. § 570.6; M.S.A. § 26.286. Since appellees were dealing directly with Mr. Foote, they were as a practical matter dealing directly also with Springfield Corporation and Bristol Square Properties Group. To fail to hold that appellees were dealing directly with the owner, Bristol Square Properties Group, or the part owners, Mr. Foote and Springfield Corporation, would be to elevate form over substance so as to defeat the purpose of the statute. M.C.L.A. § 570.27; M.S.A. § 26.307; Williams & Works, Inc. v. Springfield Corp., supra.

Appellants next argue that if Springfield Corporation and Bristol Square Properties Group are to be treated as the same entity for the purpose of notice, then Springfield Corporation should be treated as the owner under M.C.L.A. § 570.4; M.S.A. § 26.284. This statute provides that an original contractor who desires to draw money from an owner must give the owner a statement under oath listing his subcontractors and the amounts due them. It is appellants' theory that, if Springfield Corporation is treated as the owner, then appellees are original contractors. This however ignores the fact that Springfield Corporation was wearing two hats throughout much of the construction, as owner and general contractor. Appellees were subcontractors of Springfield Corporation, general contractor. As such they were not original contractors and M.C.L.A. § 570.4; M.S.A. § 26.284 is inapplicable.

During the course of construction Shank, Coupland & Long Co. and Garno Brothers Heating and Cooling, Inc., executed waiver forms supplied by Burton Abstract & Title Company, disbursement agent for Kelly Mortgage and Investment Company, whenever they received partial payment. These forms provided that appellees waived any claims of lien which they "now have or may have hereafter * * * ".

"Before one entitled to a lien under the statute should be declared to have waived it, it ought clearly and unequivocally to appear that he has expressly waived it." Saginaw Lumber Co. v. Wilkinson, 266 Mich. 661, 665, 254 N.W. 240, 242 (1934), see Williams & Works, Inc. v. Springfield Corp., supra.

The waiver form was ambiguous, ¹ and parol evidence was properly admitted to determine the intent of the parties. See, e. g., In re Landwehr's Estate, 286 Mich. 698, 703, 282 N.W. 873, 875 (1938). The trial court's determination that the parties understood the payment and waiver procedure to waive any right to a lien only on work already completed is amply supported by the record. GCR 1963, 517.1. These liens were not waived.

It is next argued that the mortgages held by Kelly Mortgage and Investment Company have priority over the mechanics' liens held by appellees. M.C.L.A. § 570.9; M.S.A. § 26.289 provides that mechanics' liens have priority over all encumbrances recorded subsequent to the "commencement" of building. Appellants argue that "commencement" means actual construction and actual construction did not start until after Kelly Mortgage and City National Bank had recorded their mortgages. We cannot accept appellants' interpretation. Included within the act are engineering services. M.C.L.A. § 570.1; M.S.A. § 26.281. Unless "commencement" means when engineering services are first performed, engineering firms will not be protected and receive all of the benefits of the act. The act must be liberally construed to carry out its intended purpose of benefiting subcontractors. M.C.L.A. § 570.27; M.S.A. § 26.307; Spartan Asphalt Paving Co. v. Grand Ledge Mobile Home Park, 400 Mich. at 188, 253 N.W.2d at 649. See Bankers Trust Co. v. El Paso Pre-Cast Co., Colo., 560 P.2d 457, 460-461 (1977). Williams & Works, Inc. commenced work prior to the recording of the mortgages. Appellees' liens are therefore entitled to priority over the...