Opinion ID: 1802140
Heading Depth: 3
Heading Rank: 1

Heading: The Difference Between the Original Contract Price and the Final Cost of Completion

Text: Olde Millpond argues that Vugterveen's lien is invalid under M.C.L. § 570.1107(6); M.S.A. § 26.316(107)(6), which provides: If the real property of an owner or lessee is subject to construction liens, the sum of the construction liens shall not exceed the amount which the owner or lessee agreed to pay the person with whom he or she contracted for the improvement as modified by any and all additions, deletions, and any other amendments, less payments made by or on behalf of the owner or lessee, pursuant to either a contractor's sworn statement or a waiver of lien, in accordance with this act. [M.C.L. § 570.1107(6); M.S.A. § 26.316(107)(6).] This subsection was designed to protect an owner from excessive liens by allowing an owner to rely on the price set forth in its contract with the general contractor. See McAlpine & Keating, supra, § 2.10, pp. 2-11. Olde Millpond argues that this subsection is unambiguous and directly applies in this case. It asserts it cannot be required to pay any outstanding liens because it has already paid more than the original contract price to complete the project. However, this subsection is ambiguous when applied to this case. The phrase person with whom [the owner] contracted does not explicitly address situations where there is more than one general contractor, or where a general contractor and its subcontractors are fired and replaced. Further, Olde Millpond's analysis allows an owner to cut off liens held by subcontractors by merely firing them and hiring successor contractors. Under this reading, an owner would be able to assert subsection 107(6) as a defense to all liens held by subcontractors on the first general contract whenever the owner pays the successor contractors amounts which, when added to the payments already made on the first general contract, exceed the price of the first general contract. This is clearly contrary to the act's stated purpose of protecting the rights of such parties. Thus, this reading must be rejected. We conclude, however, that this subsection can and should be interpreted so as to give full effect to the act's purpose of protecting the interests of builders as well as owners. The act is to be liberally construed in the face of ambiguity so as to effectuate its purposes. M.C.L. § 570.1302(1); M.S.A. § 26.316(302)(1), Brown Plumbing & Heating, supra at 183, 500 N.W.2d 733. The purposes of the act are served only if the phrase payments made in subsection 107(6) refers to payments made on the specific contract between the owner and the person with whom the owner contracted. Thus, Olde Millpond may use all payments made on the contract with Vander Wall as a defense to Vugterveen's lien because Vugterveen was a subcontractor on the contract between Olde Millpond and Vander Wall. Olde Millpond may not use payments made on the second general contract as a defense to Vugterveen's lien because these payments were not made on the relevant contract. Olde Millpond will have a defense to Vugterveen's lien if it can show that the sum of payments made pursuant to sworn statements and waivers of lien under the Vander Wall contract plus Vugterveen's claim of lien exceed the price of the Vander Wall contract. M.C.L. § 570.1107(6); M.S.A. § 26.316(107)(6). While the trial court did determine the contract price and the actual cost of completion, it did not find how much Olde Millpond had paid on the Vander Wall contract. [2] Further, the record in this case does not allow this Court to make that determination. Thus, it is necessary to remand this case to the trial court to determine the amount of payments made on the Vander Wall contract as attested by sworn statements or waivers of lien. Vugterveen has a valid lien to the extent that the lien and the payments made by Olde Millpond on the Vander Wall contract do not exceed the price of the contract between Olde Millpond and Vander Wall.