136420

v Michigan Supreme Court Lansing, Michigan 

# Order

Clifford W. Taylor, December 12, 2008 Chief Justice
Michael F. Cavanagh Elizabeth A. Weaver Marilyn Kell y Maura D. Corrigan Robert P. Young, Jr. BIG L CORPORATION, Plaintiff-Appellant, Stephen J. Markman,
Justices SC: 136420 COA: 271880 Kent CC: 03-003563-CH COURTLAND CONSTRUC TION COMPANY, DAVID J. ZIOMKOWSKI, MARY K. ZIOMKOWSKI, MARK E. McDOWELL, AMANDA B. McDOWE LL, COUNTRYWIDE HOME LOANS, INC., MA RVIN J. BERKENPAS BUILDER, INC., MID-MI CHIGAN CEILINGS & DRYWALL, INC., and GRAND BANK MORTGAGE COMPANY, Defendants, and

HOMEOWNER CONSTRUCTION LIEN RECOVERY FUND, Defendant-Appellee.

________________ _________________________/

On order of the Court, the app lication for leave to appeal th e April 1, 2008 judgment of the Court of Appeals is consid ered and, pursuant to MCR 7. 302(G)(1), in lieu of granting leave to appeal, we VACATE that portion of the judgment of the Court of Appeals that cites Vugterveen Sys, Inc v Olde Millpond Corp , 454 Mich 119, 12 1 (1997), for the applicable rule of statutory interpretation. Although the Court of App eals correctly stated that the Construction Lien Act (CLA) is to be liberally construed to effect uate the purposes of the act and that substantial compliance is sufficien t, MCL 570.1302(1), it improperly relied on Vugterveen , rather than MCL 570.1302( 1), for those rules of statutory interpretation. Big L Corp v Courtland Constr Co , 278 Mich App 438, 441 (2008) . In all other respects, the application for leave to appeal is DENIED, because we are not persuaded that the questions presented should now be reviewed by this Court.

C ORRIGAN
, J. ( concurring in part an d dissenting in part ).

I concur in the order striking th e Court of Appeals’ citation of Vugterveen Sys, Inc v Olde Millpond Corp , 454 Mich 119, 121 (1997), for th e applicable rule of statutory interpretation. I dissent, however, because I do not think that elimin ating the requirement of notarization, rendering the statement furnished by the contractor in esse nce a mere notice, can be “substantial compliance” under MCL 570. 1110. The Legislat ure placed “notice” provisions and a sample notice in MCL 570.1109; it put sworn statement provisions in MCL2

570.1110. In MCL 570.1110, our Legislature mentioned “sworn statement” 33 times. It provides a sample “sworn stat ement” and creates penalties for making false sworn statements with intent to defraud. In concluding that swearing is no lo nger necessary under this section, we obliterate the distinction between notice in § 1109 and “sworn statemen t” in §1110 that the Legislature crafted. I do not think that either the familiar tenets of “liberal construction” or “substantial compliance” really allow us to go so far as to oblit erate the carefully crafted distinctions between notices in §1109 an d sworn statements in §1110.

The Construction Lien Ac t (CLA), MCL 570.1101 et seq ., which took effect on January 1, 1982, “was intended to protect the interests of co ntractors, workers, and suppliers through construction liens, while protec ting owners from excessive costs.” Vugterveen

, supra at 121. To that end, a contractor must submit a sworn statement to an owner when payment is due or demanded, identifying eac h subcontractor, supplier, a nd laborer and the amounts owed, and “the owner can rely on a sworn statemen t as a comprehensive list of potential lien claimants.” Vugterveen

, supra at 123; MCL 570.1110(1), (4). An owner or contractor may also rely on a sworn statement as a defense against a subcontract or’s claim of lien, unless the subcontractor has submitted a tim ely notice of furnishing. Id . at 123-124; MCL 570.1110(7). The Homeowner Construction Lien Recovery Fund was statutorily created “to provide payment to subcontractors or suppliers when a homeowner has already paid a contractor once in full for an impr ovement to his house but the contr actor misused or misappropriated the money without first paying the supplier.” Erb Lumber, Inc v Gidley , 234 Mich App 387, 391 (1999).

In this case, plaintiff subcontractor filed suit, seeking recovery from defendant Homeowner Construction Lien Recovery Fund . The trial court granted a judgment for plaintiff, ruling that the contract or’s “sworn statements,” whic h provided notice of the identity of the subcontractors, suppliers, and laborers , and the amounts owed to each, did not substantially comply with th e CLA, MCL 570.1110(4), becau se they were not notarized. Therefore, plaintiff’s late filing of a claim of lie n did not defeat its right to a lien. The Court of Appeals reversed in a published opinion. Big L Corp v Courtla nd Construction Co , 278 Mich App 438 (2008). The panel held that the “sworn statements” substantially complied with the CLA even tho ugh they were not notarized. It obs erved that because the statements were signed and dated, they fulfilled the statut e’s “sworn statement” requirement by providing the owner with no tice of the identity of the subcontractors, suppli ers, and laborers and the amount owed to each for mat erials and labor. It conclude d that because the “sworn statements” substantially comp lied with MCL 570.1 110(4), plaintiff’s claim of lien for materials furnished before the da te of its notice was defeated b ecause the notice was untimely. Big L

, supra at 444-445.

In ruling that an unsworn statement was not in substa ntial compliance with MCL 570.1110, the trial court properl y looked to the statutory lan guage itself. It compared MCL 570.1110, which requires cont ractors and subcontractors to fu rnish a “sworn statement,” under certain circumstances, with MCL 57 0.1109, which governs the requirement of subcontractors and laborers to provide a “notice of furnishing .” MCL 570.1110 provides, in part:3

(1) A contractor shall provide a sworn statement to the owner or lessee in each of the followi ng circumstances:

(a) When payment is due to the c ontractor from the owner or lessee or when the contractor requests paym ent from the own er or lessee.

(b) When a demand for the sworn statement has been made by or on behalf of the owner or lessee.

(2) A subcontractor shall provide a sworn statement to the owner or lessee when a demand for the sworn statement has been made by or on behalf of the owner or lessee and, if applicable, th e owner or lessee has complied with the requirements of subsection (6).

(3) A subcontractor shall provide a sworn statement to the contractor when payment is due to the subc ontractor from the contractor or when the subcontractor requests payment from the contractor.

(4) A sworn statement shall list each subcontract or and supplier with whom the person issuing the sworn statement has contracted relativ e to the improvement to the real property. The sworn statement shall contain a list of laborers with whom the person issuing the sworn statement has contracted relative to the improvement to the real property and fo r whom payment for wages or fringe benefits and withholdings are due but un paid and the itemized amount of such wages or fringe benefits and withholdings. The sworn statement shall be in substantially the following form:

Sworn Statement State of Michigan ) ) ss. County of ................ )

................ (deponent), being sworn , states the following: ................ is the (contractor)(subcontractor) fo r an improvement to the following real property in ................ County, Michigan, described as follows:

............................................................ ....................................... (insert legal descri ption of property) The following is a statement of each subcontractor and supplier, and laborer for whom payment of wages or fringe ben efits and withholdings is due but unpaid, with whom the (contractor)(subcontract or) has (contracted)(subcontracted) for performance under the contract with the owner or lessee of the property, and the4

amounts due to the persons as of the date of this statement are correctly and fully set forth opposite their names:

Name, Amount of address, and laborer telephone fringe number of Amount of benefits and subcontractor Type of Total Amount Amount Balance to laborer withholdings supplier, or improvement contract alread y currently complete wages due due but laborer furnished price paid owing (optional) but unpaid unpaid

.................................................................................................................................. Totals (Some columns are not applicable to all persons listed)

The contractor has not procured materi al from, or subcontracted with, any person other than those set forth and ow es no money for th e improvement other than the sums set forth.

I make this statement as the (contract or) (subcontractor) or as .......... of the (contractor) (subcontractor) to represent to the owner or lessee of the property and his or her agents that the property is free from claims of construction liens, or the possibility of construction liens, excep t as specifically set forth in this statement and except for claims of cons truction liens by la borers that may be provided under section 109 of the co nstruction lien act, 19 80 PA 497, MCL 570.1109.

WARNING TO OWNER OR LESS EE: AN OWNER OR LESSEE OF THE PROPERTY SHALL NOT RELY ON THIS SWORN STATEMENT TO AVOID THE CLAIM OF A SUBCONTR ACTOR, SUPPLIER, OR LABORER WHO HAS PROVIDED A NOTICE OF FURNISHING OR A LABORER WHO MAY PROVIDE A NOTICE OF FURNISHING UNDER SECTION 109 OF THE CONSTRUCTION LIEN ACT, 1980 PA 497, MCL 570.1109, TO THE DESIGNEE OR TO THE OWNER OR LESSEE IF THE DESIGNEE IS NOT NAMED OR HAS DIED.

IF THIS SWORN STATEMENT IS IN REGARD TO A RESIDENTIAL STRUCTURE, ON RECEIPT OF THE SWORN STATEMENT , THE OWNER OR LESSEE, OR THE OWNER'S OR LESSEE'S DESIGNEE, MUST GIVE NOTICE OF ITS RECEIPT, EITHER IN WRITING, BY TELEPHONE, OR PERSONALLY, TO EACH SUBC ONTRACTOR, SUPPLIER, AND LABORER WHO HAS PROVIDED A NOTICE OF FURNISHING UNDER SECTION 109 OR, IF A NOTICE OF FURNISHING IS EXCUSED UNDER SECTION 108 OR 108A, TO EACH SUBCONTRAC TOR, SUPPLIER, AND LABORER NAMED IN THE SWORN STATEMENT . IF A SUBCONTRACTOR, SUPPLIER, OR LABORER WHO IS ENTITLED TO NOTICE OF RECEIPT OF THE SWORN STATEMENT MAKES A REQUEST, THE OWNER, LESSEE, OR DE SIGNEE SHALL PROVIDE THE5

REQUESTER A COPY OF THE SWORN STATEMENT WITHIN 10 BUSINESS DAYS AFTER RECEIVING THE REQUEST.

................. Deponent

WARNING TO DEPONENT: A PERSON WHO GIVES A FALSE SWORN STATEMENT WITH INTENT TO DEFRAUD IS SUBJECT TO CRIMINAL PENALTIES AS PROVIDE D IN SECTION 110 OF THE CONSTRUCTION LIEN ACT, 1980 PA 497, MCL 570.1110.

Subscribed and sworn to before me on .......... (DATE)

_______ _________________________ Notary Public,........County, Michigan. My commission expires: .......................

(5) The contractor or subcontractor is not required to list in the sworn
statement material furnished by the contractor or subcontract or out of his or her own inventory that was not purchased specifically for performing the contract.

(6) On receipt of a sworn statement regarding an improvement to a residential structure, the own er, lessee, or designee shal l give notice of its receipt, either in writing, by telephon e, or personally, to each subcontractor, supplier, and laborer who has provided a notice of furnis hing under section 1 09 or, if a notice of furnishing is excused under secti on 108 or 108a, to each subcontractor, supplier, and laborer named in the sworn statement . If a subcontractor, supplier, or laborer entitled to noti ce under this subsection requests a copy of the sworn
statement , the owner, lessee, or designee shall provide the requester a copy within 10 business days after receiving the request.

(7) After the contractor or subcontractor provides the sworn statement , the owner or lessee may withhold or, upon written demand from the contractor, shall withhold from the amount du e or to become due to the contractor or to the subcontractor for work already performed an amount sufficient to pay all sums due to subcontractors, suppliers, or laborers, as shown by the sworn statement , or due to lien claimants who ha ve provided a notice of furnishing under section 109.

(8) An owner, lessee, designee, mortgagee, or contractor may rely on a

sworn statement prepared by a party other than himself or herself to avoid the claim of a subcontractor, supplier, or la borer unless the subcontractor, supplier, or laborer has provided a notice of furn ishing as required under section 109 or unless the notice of furnishing is excused under section 108 or 108a.

(9) If a contractor fails to provide a sworn statement to the owner or lessee before recording the contractor's claim of lien, the contractor's construction lien6

is not invalid. However, the contractor is not entitled to any payment, and a complaint, cross-claim, or counterclaim may not be filed to enforce the construction lien, until the sworn statement has been provided.

(10) If a subcontractor fails to provide a sworn statement under subsection (2) to the owner or lessee before recording the subcontract or's claim of lien, the subcontractor's construction lie n is valid. However, a complaint, cross-claim, or counterclaim may not be filed to enforce the construc tion lien until the sworn
statement has been provided.

(11) A contractor or subcontractor who desires to draw money and gives or causes to be given to any owner or lessee a sworn statement required by this section that is false, with intent to defrau d, is guilty of a crime as follows: . . . . [Emphasis added.]

In contrast, MCL 570.1109 provides, in part:

(1) Except as otherwise provided in sections 108, 108a, and 301, a subcontractor or supplier who contracts to provide an impr ovement to real property shall provide a notice of furnis hing to the design ee and the general contractor, if any, as named in the noti ce of commencement at the address shown in the notice of commencemen t, either personally or by certified mail, within 20 days after furnishing the first labor or material.

(2) Except as otherwise provided in sections 108 and 108a, a laborer who contracts to provide an impr ovement to real property shall provide a notice of furnishing to the designee an d the general contractor, if any, as named in the notice of commencement at the address shown in the notice of commencement, either personally or by mail, within 30 days after wages were contractually due but were not paid.

(3) Except as otherwise provided in sections 108 and 108a, a laborer who provides an improvement to real property shall provide a notice of furnishing to the designee and the general contractor , if any, named in the notice of commencement at the addre ss shown in the notice of commencement, either personally or by certified mail, by the fifth day of the s econd month following the month in which fringe benefits or withholdings from wages were contractually due but were not paid.

(4) The notice of furnishing, if not given on the form attached to the notice of commencement, shall be in substantially the following form:

NOTICE OF FURNISHING7

To: ..............................

..................................................................... ........................

............................................................................... ........................... ...................... (address from notice of commencement)

Please take notice that the undersigne d is furnishing to .......................

..................

......................................................................................................... ...................... ... (name and address of ot her contracting party) certain labor or material for

.............................................................. ......................, (describe type of work) in connection with the improvement to the real propert y described in the notice of commencement recorded in liber ................. .........., on page .........,

............................................................................................................ .........records, (name of county)

......................................................................................................... ...................... ... or (a copy of which is attached hereto)

WARNING TO OWNER : THIS NOTICE IS RE QUIRED BY THE MICHIGAN CONSTRUCTION LIEN ACT. IF YOU HAVE QUESTIONS ABOUT YOUR RIGHTS AND DUTIES UNDER THIS ACT, YOU SHOULD CONTACT AN ATTORNEY TO PROTECT YOU FROM THE POSSIBILITY OF PAYING TWICE FOR THE IMPROVEMENTS TO YOUR PROPERTY.

................................................ (name and address of lien claimant)

By............................................. (name and capacity of party signing for lien claimant)

................................................ (address of party signing)

Date: ................................

(5) The failure of a lien claimant to provide a notice of furnishing within the time specified in this section shall not defeat the lien claimant's right to a construction lien for work performed or ma terials furnished by the lien claimant after the service of the notice of furnishing.

(6) The failure of a lien claimant, to provide a notice of furnishing within the time specified in this section shall not defeat the lien claimant's right to a construction lien for work performed or ma terials furnished by the lien claimant before the service of the notice of furnishing except to the extent that payments8

were made by or on behalf of the owner or lessee to th e contractor pursuant to either a contractor's sworn statement or a waiver of lien in accordance with this act for work p erformed or material delivered by the lien claimant. This subsection does not apply to a laborer.

(7) The failure of a laborer to prov ide a notice of fu rnishing to the designee as required by subsection (2) sh all defeat the laborer's lien for those wages for which the notice of furnishing is required.

(8) The failure of a laborer to prov ide a notice of fu rnishing to the designee as required by subsection (3) sh all defeat the laborer's lien for those fringe benefits and withholdings for which the notice of furnishing is required.

(9) The failure of a labo rer to provide a notice of furnishing to the general contractor within the time sp ecified in subsection (2) or (3) shall not defeat the laborer's right to a construction lien, but the laborer shall be liable for any actual damages sustained by the general c ontractor as a result of the failure. (10) One or more laborers may author ize an agent to prepare and serve a notice of furnishing in the manner provided in this section. Notice of furnishing under this section may contain the notice of furnishing of more than 1 laborer and shall contain the information required in subsection (4) as to each laborer for whom it is prepared. The no tice of furnishing of each lien claimant under this subsection shall be considered by the court on its own merits.

The trial court compared MCL 570.1110 wi th MCL 570.1109 and observed that where the Legislature contemplated a notice requirement only, it simply used the word “notice.” In contrast to MCL 570.1110, in wh ich the words “sworn statement” appear mo re than 30 times, MCL 570.1109 contains no mention of sworn stat ements or notarization, and speaks only in terms of notice. In addition, MCL 570.1109(4) pr ovides a sample “Notice of Furnishing” form, which includes spaces fo r the names and addresses of the contracting parties, descriptions of the work to be performed and the pr operty, and for the si gnature of the lien claimant. This is in contrast to the jurat provid ed in MCL 570.1110(4). As the trial court also noted, both MCL 570.1109 a nd MCL 570.1110 took effect on January 1, 1982. The differences between the language of these provi sions and the sample forms they provide suggest that the Legislature specifically intended to requi re a notarized statement in MCL 570.1110 and that submission of an unsworn statement ca nnot constitute substantial compliance with that requirement.

In light of the deliberate differences between these two provisions, I cannot agree with the Court of Appeals that a contractor substan tially complies with the requirements of MCL 570.1110 when its unsworn “swo rn” statement gives the owner notice of the identity of the subcontractors, suppliers, a nd labors, and the amount owed to each, but is not notarized. This Court has recognized in other c ontexts that swearing an oath b efore a notary means more than establishing one’s identity. For example, as the Court of Appeals noted in Horton v Verhelle

, 231 Mich App 667, 676 (1998), overruled on other grounds Smith v Globe Life Ins Co , 460___________________________ ______________ 9

Mich 446 (1999), this Court has held that an affidavit that is neither signed nor sworn is not valid. Prussing v Gen Motors Corp , 403 Mich 366, 369-370 (1978); People v Burns , 161 Mich 169, 173 (1910).

I would also grant leave to appeal because the published Court of Appeals decision chooses between two prior conflic ting Court of Appeals cases. In Horton, supra at 148

, the Court held that “a contractor’s statement that is neither signed nor sworn is not a ‘sworn’ statement as required by su bsection 110(4).” In Alan Custom Homes, Inc v Krol , 256 Mich App 505, 510 (2003), the Court de termined that an unverified statement substantially complied with the notice requirement of MCL 570.1110(8), because it ga ve the owner notice of the identity of the subcontractors, suppliers, and laborers, and the am ount owed to each for labor and materials. Aside from noting that Alan Custom Homes was the more recent case, the Court did not explain its reasons for disregarding the reasoning in Horton

. Big L

, supra at 443-444.

Finally, I do not think footnote 4 of the Court of Appeals opinion, id. at 444 n 4, supports the Court’s argument. In the footno te, the Court rejected plaintiff’s argument that contractors will be more likely to submit false stat ements if they are not required to notarize their “sworn statements ” because they w ill no longer be subjected to prosecution. The panel concluded that MCL 570.1110( 11), which provides that a c ontractor who submits a false sworn statement is guilty of a crime , would “sufficiently deter general contractors from submitting false sworn statements even absent th e threat of prosecution for perjury.” Big L

, supra at 444 n 4. I do not see how. If a contractor submits an unnotarized statement, the statement is not “sworn.” The contractor coul d not be subject to the penalties under MCL 570.1110(11) because a crucial element of the offense is missing.

Accordingly, I dissent from this Court’s ord er denying plaintiff’s application for leave to appeal.

W EAVER , J., would deny leave to a ppeal because she is not p ersuaded that the questions presented should be rev iewed by this Court.

C AVANAGH and K ELLY , JJ., join the statement of W EAVER , J.

I, Corbin R. Davis, Clerk of the Michigan Supreme Court, certify that the foregoing is a true and complete copy of the order entered at the di rection of the Court.

December 12, 2008
1209 Clerk