Ronnisch Const. Group v. Lofts On The Nine, LLC
Docket No. 150029
Trial-Lawyers’ Bottom Line: A company can prevail in an action to enforce a construction lien through foreclosure, even if it doesn’t win on the construction lien claim.
Two parties each claimed breach of a construction contract. The construction company claimed a construction lien for over $600K. At arbitration, the arbitrator awarded the construction company that amount, but also awarded the purchaser $185K. The purchaser paid the amount in full, which the construction company accepted.
The Construction Lien Act (CLA), MCL 570.1118, grants a court discretion to award attorney’s fees to “a lien claimant who is the prevailing party” in “an action to enforce a construction lien through foreclosure.” The question is whether the construction company “prevail[ed]” when it won on a breach of contract claim and accepted a full payment mandated by an arbitrator.
The Court first reasoned that the construction company was a lien claimant because the company was “a person having a right to a construction lien under [the CLA].” Even though the construction company received an arbitration award for the breach-of-contract claim, it still had the right to a construction lien because the arbitrator did not determine the issue in arbitration.
Next, the majority distinguished between “action” and “claim” to hold that the construction company prevailed in an action to enforce a construction lien through foreclosure. Section 118(2) of MCL 570.1118 starts with “In an action to enforce a construction lien through foreclosure, the court shall examine each claim and defense that is presented and determine the amount, if any, due to each lien claimant . . . .” An action is broader than a claim; the action encompasses the claims asserted. The majority says the text of the statute focuses on whether the lien claimant is a prevailing party in the action—the entirety of the judicial proceeding. Thus, the majority says, a party can win the action, yet lose one of the claims.
The majority states that the contract is a necessary prerequisite to a construction lien. Because the claims are integrally related, if a party prevails on its breach-of-contract claim, it has still prevailed in the “action to enforce a construction lien through foreclosure.” Under the CLA, a lien claimant becomes the prevailing party “when the rights and obligations of the parties that are at the heart of its lien claim are conclusively determined in its favor.” The majority stated that the contract claim necessarily required determinations to be made regarding each party’s rights and obligations stemming from the underlying contract—just like the lien foreclosure claim.
The dissent argued that the construction company should have refused the arbitration award in order to continue litigating its foreclosure claim. The dissent, authored by Chief Justice Young and joined by Justices Zahra and Larsen, believed that the CLA only permits parties that prevail on a construction lien to recover attorney’s fees. The dissent went on to say that the construction company had extinguished any claim lien by accepting full payment.