Brown Plumbing & Heating, Inc v. Homeowner Construction Lien Recovery Fund

500 N.W.2d 733, 442 Mich. 179

• Court: Michigan Supreme Court
• Decided: May 18, 1993
• Docket: 92347, (Calendar No. 5)
• Status: Published

Opinions

Brickley, J.

We granted leave to determine whether the "substantial compliance” provision, § 302, of the Construction Lien Act, MCL 570.1101 et seq.; MSA 26.316(101) et seq., applies to § 203(3)(h) of the act, which requires that one who seeks recovery from the Homeowner Construction Lien Recovery Fund establish that the person with whom the claimant contracted is licensed if required to be licensed.

i

The facts of this case are not in dispute. On April 14, 1987, plaintiff Brown Plumbing and Heating, Inc., a properly licensed plumbing and heating contractor, entered a written contract with Primus Energy Homes, a general contractor in the business of building homes, to provide plumbing labor and materials on a residential construction job. Primus fraudulently informed plaintiff that it was licensed and provided a license number belonging to a licensed, but unrelated, construction company, Mayflower Construction.¹ Plaintiff never asked to see the license or an identification card.

When Primus became insolvent and failed to pay the subcontractors for the work completed, claims of lien were filed and foreclosure proceedings were begun on the property. The Homeowner Construction Lien Recovery Fund was named as a party. MCL 570.1203(4); MSA 26.316(203X4). The homeowners filed an affidavit stating that they paid Primus for the work completed, and thereby relieved themselves of liability. MCL 570.1203(l)(a); MSA 26.316(203)(l)(a).

Plaintiff then resorted to seek payment through the Recovery Fund. MCL 570.1201 et seq.; MSA 26.316(201) et seq. The fund refused to pay plaintiff because of plaintiff’s failure to show compliance with the prerequisites for recovery under the act, namely, that Primus was a licensed residential contractor as required under Michigan law.²

Both the plaintiff and the fund filed motions for summary disposition. The trial court granted the plaintiff’s motion, holding that the plaintiff had substantially complied with the act and, therefore, was entitled to recover from the fund.

The fund appealed.³ Noting that one of the dual purposes of the Construction Lien Act is to protect the rights of those who perform labor or provide materials for the improvement of real property, the Court of Appeals affirmed. The Court stated that because the act is remedial in nature, it should be liberally interpreted in favor of lien claimants. As a result, the court held that substantial compliance with § 203(3)(h) is sufficient to permit recovery from the fund. 190 Mich App 709, 714; 476 NW2d 657 (1991). We granted leave to appeal, 440 Mich 889 (1992), and we now reverse.

ii

Section 302 of the act provides:

This act is declared to be a remedial statute, and shall be liberally construed to secure the beneficial results, intents, and purposes of this act. Substantial compliance with the provisions of this act shall be sufficient for the validity of the construction liens provided for in this act, and to give jurisdiction to the court to enforce them. [Emphasis added.]

We find this provision to be clear and unambiguous.⁴ The express language provides that substantial compliance is only applicable in two aspects: 1) the perfection of the construction liens provided for in part 1, and 2) to give the court jurisdiction. Although the first sentence of the section states that the entire act is to be construed liberally, the language of the second sentence is qualified to apply in only the two instances described above and in no way suggests that substantial compliance is sufficient to collect from the fund.

We find it persuasive that the Legislature provided express language demonstrating its intention that the substantial compliance language should apply only to part 1 of the act. Part 1 of the act establishes the procedures to acquire an enforceable construction lien on a particular piece of property; in other words, part 1 establishes the procedures to acquire a "valid construction lien.” Part 2 creates the Homeowner Construction Lien Recovery Fund and enumerates the requirements that must be established to collect from the fund. Therefore, by not referring to the fund or recovery from the fund, and only referencing "the validity of the construction liens,” the actual language of § 302 expressly limits its application to part 1.

The plaintiff argues that the placement of § 302 in part 3 is evidence that the Legislature intended that § 302 apply to the entire act. It is also possible that the Legislature, with the addition of the recovery fund and the repositioning of the sections that made up the previous act, did not consider the application of current § 302.⁵ Where the Legislature placed § 302 may have been more a matter of utility. For example, in arranging the various provisions of a statute, particularly, as in this case, where former provisions become part of a greater statutory scheme, it is reasonable to put the substance of the statute in the beginning and place the interpretive provisions at the end.

If § 302 would have appeared in part 1, it would be beyond the pale of argument to which part it applies. The fact that § 302 is not found in part 1 should not defeat the unambiguous language. We think that in this case, where it is a question of the actual language versus where the language appears, the actual language is paramount.

The dissent indicates that parts 1 and 3 of the act borrow substantially from the former mechanics’ lien act. In fact, "[virtually all of the sections of the former mechanics’ lien act are now contained within parts 1 and 3 of the Construction Lien Act.” Post at 190. Part 2 was a new creation with the enactment of this statute. The dissent quotes the original version of the current § 302 from the mechanics’ lien act of 1897. Post at 193. The fact that that section has remained essentially the same for almost a century demonstrates that its meaning has not changed. Because parts 1 and 3 are taken from the former mechanics’ lien act, it is obvious that § 302 applies to those parts. The question is whether § 302 applies to part 2, which enumerates specific criteria for recovering from the fund. We think it can be argued with equal force that if the Legislature had intended to apply § 302 to the newly created part 2, it would have amended the language that has existed for nearly one hundred years to expressly provide for its new application.⁶ The fact that the Legislature did not amend the language confirms that its meaning and application have not changed, and, therefore, § 302 only applies to parts 1 and 3.

Because of our conclusion that the substantial compliance provision of § 302 does not apply to part 2, the question now becomes whether the decision by the Court of Appeals can be based on the first sentence of § 302. While we acknowledge that the liberal construction language of the first sentence applies to the entire act, we nonetheless find that liberality cannot and should not nullify a clear and unambiguous requirement._

We take notice of the actual language of § 203(3)(h):

A person who seeks recovery from the fund shall establish all of the following: . . . That the contractor or the subcontractor, with whom the person claiming the construction lien contracted with, is licensed if required by law to be licensed. [Emphasis added.]

One cannot liberally construe this provision to provide relief to this particular plaintiff without destroying the meaning of the statute. There is nothing in the record to indicate that the general contractor was licensed at any time during the relationship between the parties. The provision does not say that the claimant shall take steps to determine if, or that he subjectively believe that, the other party is licensed.⁷ Therefore, we hold that a liberal construction of § 203(3)(h) does not save the plaintiff’s claim.

iii

In conclusion, because part 2 of the act does not deal with the validity of construction liens, its provisions cannot be tested by a substantial compliance standard. Accordingly, we reverse the decision of the Court of Appeals.

Levin, Boyle, Riley, and Griffin, JJ., concurred with Brickley, J.

1 Cruz Ortiz, a co-owner of Primus, misrepresented to the homeowners that he had a builder’s license and used the license number belonging to Mayflower Construction to obtain building permits for the job. Leonard Ortiz, the other co-owner, filed sworn statements with a bank, alleging that Mayflower was the general contractor. Additionally, Cruz and Leonard Ortiz misrepresented themselves to others as "Primus Energy Homes in association with Mayflower Construction, Builder’s License # 43237 . . . .”

2 Kesidential builders are required to be licensed before they may provide services. MCL 339.601(1); MSA 18.425(601X1); MCL 339.2401(a); MSA 18.425(2401)(a).

The specific prerequisites to recover from the fund are found in § 203(3), which provides in part:

Subject to section 204, a person who has recorded a claim of lien and who is precluded from recovering a construction lien under subsection (1) may recover from the fund the amount for which the lien is established. A person who seeks recovery from the fund shall establish all of the following:

(h) That the contractor or the subcontractor, with whom the person claiming the construction lien contracted with, is licensed if required by law to be licensed. [MCL 570.203(3)(h); MSA 26.316(203)(3)(h).]

3 We note the defendant did not preserve the issue whether there was substantial compliance with the requirements for reimbursement from the lien recovery fund, in spite of the fact that the general contractor was not licensed as required by § 203(3)(h). Thus, we do not address this issue.

4 The dissent points out that legislative intent must be derived from the actual language of a statute, and when the language is clear and unambiguous, no further interpretation is necessary. Post at 188. (Citing Storey v Meijer, Inc, 431 Mich 368, 376; 429 NW2d 169 [1988].)

5 The recovery fund was not part of this statute’s predecessor, the former mechanics’ lien act. Part 2 of the current act was a new addition with the enactment of this statute in 1982.

6 The dissent states:

If the Legislature intended that §302 only apply to the procedures for perfecting a construction lien under part 1, then it would have placed § 302 in part 1 of the act or provided language expressly limiting the application of § 302 to part 1. [Post at 191.]

7 Some provisions of the act do lend themselves to a liberal construction, particularly where there .is a question of degree. The following sections provide an example: § 203(l)(c) (cooperating in the defense of the fund), § 203(3)(a) (entitled to a construction lien), § 203(3)(e) (not colluding to obtain payment from the fund), and §203(3)(g) (making a reasonable effort to obtain payment from the contractor or subcontractor).