Williams & Works, Inc. v. Springfield Corp.

• Decision Date: 24 June 1980
• Docket Number: Docket No. 61180,No. 9,9
• Citation: 293 N.W.2d 304,408 Mich. 732
• Parties: WILLIAMS & WORKS, INC., a Michigan Corporation, Plaintiff, v. SPRINGFIELD CORPORATION, Defendant, and Garno Brothers Heating and Cooling, Inc., PPG Industries, Inc., and Shank Coupland & Long Company, Defendants-Appellees, and Kelly Mortgage and Investment Company and Bristol Square Properties Group, Defendants-Appellants. Calendar
• Court: Michigan Supreme Court

Page 304

293 N.W.2d 304

408 Mich. 732

WILLIAMS & WORKS, INC., a Michigan Corporation, Plaintiff, v. SPRINGFIELD CORPORATION, Defendant and Garno Brothers Heating and Cooling, Inc., PPG Industries Inc., and Shank Coupland & Long Company Defendants-Appellees and Kelly Mortgage and Investment Company and Bristol Square Properties Group, Defendants-Appellants.

Docket No. 61180.

Calendar No. 9.

Supreme Court of Michigan.

Argued Oct. 3, 1979.

Decided June 24, 1980.

Brownell, Andrews, Philpott & Piper by Douglas M. Philpott, Flint, for defendants-appellees.

Russell, Ward & Hodgkins, Paul A. Ward, James W. Batchelor, Grand Rapids, for Kelly Mortgage and Investment Co.

Hammond Ziegelman Sotiroff & Fishman, Steven J. Fishman, Malcolm D. Brown, Detroit, for amicus curiae.

WILLIAMS, Justice (For Reversal).

This case concerns the sole question whether off-site engineering services rendered before the beginning of actual, on- site construction qualify, pursuant to § 9(3) of the Michigan Mechanics' Lien Law, as "the commencement of said building or buildings, erection, structure or improvement" ¹ so as to give priority to mechanics' liens over a mortgage recorded after the provision of such services but prior to the beginning of any visible, on-site construction. ²

Long established Michigan precedent ³ in line with that in most American jurisdictions ⁴ requires a visible, on-site "commencement" for the purpose of fixing priorities under § 9(3) of the Mechanics' Lien Law. Plaintiffs in this case, however, claim the Legislature intended to change by indirection this traditional rule based on § 9(3) "commencement of said building or buildings, erection, structure or improvement" by amending the list of lienable items in § 1 ⁵ of the Mechanics' Lien Law to include engineering and surveying services and by adding to the definition of "improvement" ⁶ found in § 1 the language, "designs or engineering plans for the improvement of any lot."

In view of the overwhelming weight of historical precedent, whose rationale and policy underpinnings remain vital today, we find that such non-visible, off-site engineering services as those rendered in the instant case, although lienable under Michigan law, do not signal the "commencement" of a building, erection, structure, or improvement for the purpose of fixing priority under Michigan's Mechanics' Lien Law. Accordingly, since the appellant mortgagee recorded its mortgage prior to any visible, on-site construction which could be said to "commence" the building, erection, structure or improvement, the trial court and Court of Appeals improperly accorded priority to the appellee mechanic lienors. We therefore reverse.

I. FACTS

Springfield Corporation ("Springfield") desired to erect a multifamily apartment building complex on certain land located in Genesee County, Michigan, and owned by LAW Development Company and appellant Kelly Mortgage and Investment Company ("Kelly"). In pursuance of this desire, Springfield contacted Williams & Works ("W & W") about May 16, 1972 in regard to using its engineering services for the contemplated development. Thereafter, on June 8, 1972, Robert Foote, President of Springfield, met two representatives of W & W at the contemplated development site for discussions and a preliminary view of the premises. Then, near the end of June, 1972, W & W and Springfield entered into a formal written contract, under which W & W was to perform certain engineering services for the contemplated development. The contract was divided into three parts or phases with Springfield reserving the right to terminate the contract at the end of any phase. Phase I called for W & W to undertake and complete initial feasibility studies which included soil borings, drainage studies, topographical and boundary surveys, preliminary utility plans, cost estimates and plan approvals (Tr 175-178). Phase II called for W & W to finalize all plans for site development, including final drafting of the construction plans (Tr 175-178). Phase III involved the actual construction of the project and required W & W to supervise and direct parts of the construction work (Tr 175-178).

By September, 1972, Phase I was substantially completed (Tr 78). The only on-site work done by W & W during Phase I consisted of certain soil borings, which were taken on August 29, 1972, when two workers drilled twelve holes into the ground, each approximately 6 in diameter (Tr 152, 160, 178).

After the completion of Phase I, W & W began Phase II and throughout the latter part of 1972, it submitted various construction specifications to Springfield. It was also established that during this period Kelly knew of W & W's work since Kelly had actually written W & W requesting that all correspondence dealing with W & W's work to date be forwarded to Kelly since it would be handling the project for Mr. Foote. In late December, 1972, after substantial completion of the Phase II drawings, Springfield decided to go forward with the construction of the apartment building project. Thereafter, on January 4, 1973, Springfield purchased the land from LAW Development and Kelly and executed a mortgage on the property to City National Bank ("CNB") which was recorded in Genesee County and which was subsequently assigned from City National Bank to Kelly (Tr 113-114). On January 9, 1973, Springfield executed a second mortgage to Kelly, which was also recorded in Genesee County. Almost one year later, Springfield conveyed its fee interest in the premises to Bristol Square Properties Group, a limited copartnership in which Mr. Foote and Springfield are the sole general partners, by deed dated December 27, 1973 (Tr 115).

It is undisputed that building operations on the premises did not begin until February, 1973, almost one full month after the mortgages were recorded by CNB and Kelly (Tr 100). The initial Phase III work, consisting of staking, began on February 10, 1973 and building operations commenced sometime thereafter (Tr 100). The project went into default in 1974 and this mechanics' lien foreclosure action followed.

This suit was commenced on March 25, 1974, in the Genesee Circuit Court. The Complaint alleges that the plaintiff, W & W, had a mechanics' lien upon the project property and prayed for its foreclosure. Numerous other parties were joined as defendants or intervened, and several cross-claims were filed by various other contractors, alleging mechanics' liens against the property. Kelly, the mortgagee in the instant proceeding, as well as other defendants aligned in interest, answered the various mechanics' lien claims, denying the validity of the claims and asserting that the mortgage interest in the property was superior and paramount to the interest of the various mechanics' liens.

After pretrial and trial proceedings concluded, the trial court entered judgments of foreclosure against the owner of the apartment project, Bristol Square Properties Group, in favor of W & W and the instant appellee mechanics lienors (Shank, Coupland and Long, Co., PPG Industries, Inc., and Garno Brothers Heating and Cooling, Inc., all subcontractors who began supplying labor and materials while the project was owned by Springfield, and completed their work after Springfield conveyed to Bristol Square Properties Group). The trial court also ruled that all mechanics' liens were prior to the mortgage interest of Kelly in the property because it found W & W's services to have been "improvements", as that term is defined in § 1, M.C.L. § 570.1; M.S.A. § 26.281, which were "commenced" before the mortgage was recorded.

The Court of Appeals affirmed the trial court's conclusion that, in the instant case, "commencement", for purposes of priority, meant when engineering services were first performed, and not when actual construction on the site was begun. 81 Mich.App. 355, 362-363, 265 N.W.2d 328 (1978).

We granted leave to appeal on March 5, 1979 limited to the issue of priority between the mortgage and the mechanics' liens under § 9(3), M.C.L. § 570.9 (third); M.S.A. § 26.289 (third).

II. DISCUSSION

A. Michigan's Mechanics' Lien Law Pre-1958

The term "commencement of a building" had a well-established meaning in most states when Michigan incorporated that term into its own mechanics' lien law. As illustrative of this meaning, and in order not to belabor the point, we quote from one such case, while citing the reader to others which preceded or were contemporaneous with Michigan's statute:

"The commencement of a building is the doing of some act upon the ground upon which the building is to be erected, and in pursuance of a design to erect, the result of which act should make known to a person viewing the premises, from observation alone, that the erection of a building upon that lot or tract of land has been commenced." James v. Van Horn, 39 N.J.L. 353, 363 (1877). (Emphasis supplied.)

Accord, Brooks v. Lester, 36 Md. 65 (1872); Kansas Mortgage Co. v. Weyerhaeuser, 48 Kan. 335, 29 P. 153 (1892); Fitzgerald v. Walsh, 107 Wis. 92, 82 N.W. 717 (1900); Conrad & Ewinger v. Starr, 50 Iowa 470 (1879).

Likewise, early Michigan case law espoused this same idea of keying the concept of "commencement" in its priority section to some actual, visible work on the land such that it was apparent to all that a building was being erected or improvements were being made. In Kay v. Towsley, 113 Mich. 281, 283, 71 N.W. 490, 491 (1897), this Court, in ruling that two materialmens' liens were prior to that of a mortgagee who had recorded his mortgage prior to the furnishing of the materials but subsequent to the erection of the foundation wall, stated:

"This provision (the priority provision in the Mechanics' Lien Law) has been passed upon frequently by the courts, and it has been uniformly held that the lien has priority over a mortgage executed upon the land or premises after the actual commencement of the building, though no part of the labor...