Standard Elec. Co. v. Markee Elec.

1

STANDARD ELECTRIC COMPANY, Plaintiff-Appellant, v. MARKEE ELECTRIC, INC., RICHARD MARKEE, COOLIDGE PARK COMMERCIAL, LLC, COOLIDGE PARK LIMITED DIVIDEND HOUSING ASSOCIATION LIMITED PARTNERSHIP, SIWEK CONSTRUCTION COMPANY, and WESTERN SURETY COMPANY, Defendants-Appellees.

No. 359028

Court of Appeals of Michigan

December 22, 2022

UNPUBLISHED

Genesee Circuit Court LC No. 20-114839-CB

Before: M.J. Kelly, P.J., and Cameron and Hood, JJ.

Per Curiam.

Plaintiff Standard Electric Company (Standard Electric), appeals as of right the trial court's order granting summary disposition in favor of defendants, Markee Electric, Inc. (Markee Electric), Richard Markee, Coolidge Park Commercial LLC (CP LLC), Coolidge Park Limited Dividend Housing Association Limited Partnership (CP Partnership), Siwek Construction Company (Siwek), and Western Surety Company (Western), and dismissing Standard Electric's claims against them.^[1] Standard Electric additionally challenges the court's prior order setting aside a default judgment entered against Western. We affirm.

I. BACKGROUND

This case arises from a contract for the development of a plot of real property. The initial contract was between the CP defendants, the developers, and Siwek, the general contractor. Siwek subcontracted with the Markee defendants for supplies and labor for the project's electrical work, and the Markee defendants then contracted with Standard Electric for electrical supplies. Western was the surety, and Siwek was its principal. In this capacity, Western issued the performance and payment bonds on the development project.

This litigation arose from Standard Electric's allegation that the Markee defendants failed to pay any of the money that they owed to Standard Electric for electrical supplies Standard Electric provided related to the project. Standard Electric furnished electrical supplies to Markee, pursuant to a contract between Markee and Standard Electric. The last invoices between Standard Electric and Markee are dated July 5, 2019. On July 9, 2019, Siwek terminated Markee's subcontract because Markee went out of business. Pursuant to a different contract, Standard Electric continued to furnish electrical supplies to the subcontractor that replaced Markee on the project through October 2019.

Standard Electric sent a claim against the payment bond to Western on September 9, 2019, which, after review, Western denied on November 14, 2019. On November 15, 2019, Standard Electric filed a claim of lien on the project for the same amount stated in its claim against the payment bond, but stating it last provided materials on October 7, 2019.

Standard Electric filed a complaint alleging five counts, two of which are at issue here: (1) foreclosure of a construction lien, and (2) reliance on payment bond. Standard Electric subsequently filed an amended complaint in which it added Western as a defendant. Western failed to timely respond to the amended complaint, and the trial court, upon motions from Standard Electric, entered a default followed by a default judgment. Western promptly brought a motion to set aside the default, which the trial court granted over Standard Electric's objection. Western then successfully moved for summary disposition, arguing that Standard Electric failed to timely file its claim and that Western complied with the terms of the bonds. This appeal followed.^[2]

II. STANDARDS OF REVIEW

This Court reviews de novo a trial court's decision on a motion for summary disposition. El-Khalil v Oakwood Healthcare Inc, 504 Mich. 152, 159; 934 N.W.2d 665 (2019). A motion under MCR 2.116(C)(10) "tests the factual sufficiency of a claim." El-Khalil, 504 Mich. at 160 (citation and emphasis omitted). In considering a motion under MCR 2.116(C)(10), the trial court "must consider all evidence submitted by the parties in the light most favorable to the party opposing the motion." Id. (citation omitted). Such a motion "may only be granted when there is no genuine issue of material fact." Id. (citation omitted). "A genuine issue of material fact exists when the record leaves open an issue upon which reasonable minds might differ." Id. (quotation marks and citation omitted). Summary disposition is appropriate under MCR 2.116(C)(7) if, among other possible reasons, the applicable limitations period expired before commencement of the action. Frank v Linkner, 500 Mich. 133, 140; 894 N.W.2d 574 (2017). "When it grants a motion under MCR 2.116(C)(7), a trial court should examine all documentary evidence submitted by the parties, accept all well-pleaded allegations as true, and construe all evidence and pleadings in the light most favorable to the nonmoving party." Clay v Doe, 311 Mich.App. 359, 362; 876 N.W.2d 248 (2015) (quotation marks and citation omitted).

"A trial court's decision regarding a motion to set aside a default judgment is reviewed for an abuse of discretion." Lawrence M Clarke, Inc v Richco Constr, Inc, 489 Mich. 265, 272; 803 N.W.2d 151 (2011). "An abuse of discretion occurs when the court's decision results in an outcome that falls outside the range of principled outcomes." Epps v 4 Quarters Restoration LLC, 498 Mich. 518, 528; 872 N.W.2d 412 (2015). This Court reviews "de novo the interpretation and application of a statute . . . ." Boyle v Gen Motors Corp, 468 Mich. 226, 229; 661 N.W.2d 557 (2003). "When construing a court rule, this Court employs the legal principles governing the application and construction of statutes." Lawrence M Clarke, Inc, 489 Mich. at 272.

III. SUMMARY DISPOSITION

A. CONSTRUCTION LIEN ACT CLAIM

Standard Electric argues that the trial court erred by granting summary disposition because it misapplied the Construction Lien Act (CLA), MCL 570.1101 et seq. We disagree.

A construction lien is a security interest that a participant on a construction project takes in real property as security for their payment expectations. See MCL 570.1103; 570.1107(1). Construction liens are governed by the CLA." 'Construction lien' means the lien of a contractor, subcontractor, supplier, or laborer, as described in [MCL 570.1107]." MCL 570.1103. MCL 570.1107(1) states in relevant part:

Each contractor, subcontractor, supplier, or laborer who provides an improvement to real property has a construction lien upon the interest of the owner or lessee who contracted for the improvement to the real property, . . . the interest of an owner who has subordinated his or her interest to the mortgage for the improvement of the real property, and the interest of an owner who has required the improvement. . . . [MCL 570.1107(1).]

Construction liens have two periods of limitations: a threshold period of limitations for recording the lien, and a period for filing suit to foreclose the lien. See MCL 570.1111(1) (providing a 90-day threshold period of limitations for recording a lien); MCL 570.1117(1) (providing a one-year period of limitations for filing suit to foreclose interest subject to the lien). The right to a construction lien "shall cease to exist unless, within 90 days after the lien claimant's last furnishing of labor or material" on the improvement, pursuant to the lien claimant's contract, the lien claimant records a claim of lien with the register of deeds in the county in which the property is located. MCL 570.1111(1). In general, "[p]roceedings for the enforcement of a construction lien and the foreclosure of any interests subject to the construction lien shall not be brought later than 1 year after the date the claim of lien was recorded." MCL 570.1117(1).

But if a surety properly files a payment bond with the lien claimant as an obligee, the lien may be vacated or discharged. See MCL 570.1116(1) ("The claim of lien of a contractor, subcontractor, supplier, or laborer may at any time be vacated and discharged if a bond, with the lien claimant as obligee, is filed with the county clerk for the county in which the property covered by the lien is located . . . ."). A copy must also be given to the obligee lien claimant. See id. When a surety bond supplants a construction lien, "the six-year period of limitations for contract actions, MCL 600.5807(8), applies to" the claim instead of the one-year period of limitations for construction liens. E R Zeiler Excavating, Inc v Valenti Trobec Chandler, Inc, 270 Mich.App. 639, 645-646; 717 N.W.2d 370 (2006). Like any contract, the parties may agree to a shorter limitations period for filing suit. See Rory v Continental Ins Co, 473 Mich. 457, 467-470; 703 NW23 (2005) (holding such unambiguous agreements are enforceable as long as they are not contrary to public policy).

Standard Electric raises two arguments related to the trial court's application of the CLA, and we limit the scope of our review to the specific questions raised. It first argues that the trial court erred by applying the incorrect period of limitations to find that its claim of lien was not timely. Standard Electric argues that the existence of the payment bond, which the trial court viewed as legitimate, rendered the CLA's period of limitations inapplicable. Critically Standard Electric does not argue that the claim of lien was timely; rather, it argues that the timing of the claim of lien did not matter because the payment bonds were subject to the six-year limitations period for contracts. This argument, however, conflates Standard Electric's construction lien foreclosure claim with its payment bond claim. Regarding the payment bond claim, nothing in the record suggests that the trial court dismissed the claim on the basis of timeliness concerns. Instead, the court concluded that Western had properly performed under the terms of the bond. Regarding, the construction lien claim, the court correctly found that the existence...