The Big L Corporation v. Courtland Construction Company, et al.

In this action filed pursuant to the Construction Lien Act (CLA), MCL 570.1101 et seq.,
defendant Homeowner Construction Lien Recovery Fund appeals as of right the trial court's
June 29, 2006 judgment in favor of plaintiff The Big L Corporation. We reverse and remand.

In 2001, Mark and Amanda McDowell contracted with Courtland Construction Company
(Courtland) to build a house. Courtland, a general contractor, contracted with plaintiff, a
subcontractor,1 to supply material for the house. During construction, Courtland provided the
McDowells' bank with nine "Sworn Statements" listing the subcontractors Courtland contracted
with, the improvements they furnished, the total contract price, the amount already paid, and the
amount owed to each.2 These Sworn Statements were signed and dated by a Courtland officer as
the named "Deponent," but none were notarized. The McDowells' bank paid Courtland pursuant
to the statements. Although Courtland received the full contract price from the bank, Courtland
failed to pay plaintiff in full for the material it supplied. Courtland owed plaintiff a balance of
$19,000, including $4,901.11 for material furnished after February 19, 2002, the date of
Courtland's last Sworn Statement. On June 19, 2002, plaintiff provided its first notice of
furnishing and recorded a construction lien on the McDowells' house.

On appeal, defendant claims that because the McDowells' bank made payments to
Courtland pursuant to Courtland's Sworn Statements, plaintiff's right to a construction lien was
defeated by its failure to submit a timely notice of furnishing. According to defendant,
Courtland's unverified Sworn Statements substantially complied with the requirements of MCL
570.1110(4). Resolution of this issue involves the construction of the CLA. The proper
construction of a statute is a question of law, which we review de novo. Washburn v
Makedonsky, 271 Mich App 95, 98; 718 NW2d 842 (2006).

In Vugterveen Sys, Inc v Olde Millpond Corp, 454 Mich 119, 121; 560 NW2d 43 (1997),
our Supreme Court stated that the purpose of the CLA is "to protect the interests of contractors,
workers, and suppliers through construction liens, while protecting owners from excessive
costs." The Court further stated that the act "is to be liberally construed to effectuate these
purposes." Id. The CLA creates an exchange of information between the property owner, the
general contractor, and the subcontractors. Id. The owner must file a notice of commencement
before any improvement is made to the property and, in most cases, subcontractors must provide
a notice of furnishing to the owner and general contractor within 20 days of first furnishing labor
or material. MCL 570.1108(1); MCL 570.1109(1); Vugterveen, supra at 122. The purpose of
the notice of furnishing is to notify the owner that a subcontractor is improving the property and
to alert the owner to the possibility of a lien. Vugterveen, supra at 122, 131.

The CLA also provides owners with information by requiring general contractors to make
sworn statements itemizing their bills. MCL 570.1110(1); Vugterveen, supra at 123. A sworn
statement notifies the owner of each subcontractor, supplier, and laborer with whom the general
contractor contracted. MCL 570.1110(4). "Thus, the owner can rely on a sworn statement as a
comprehensive list of potential lien claimants." Vugterveen, supra at 123. The purpose of a
sworn statement is "to enable the homeowner to retain out of any money due or to become due to
the contractor an amount sufficient to pay the subcontractors," suppliers, and laborers. Alan
Custom Homes, Inc v Krol, 256 Mich App 505, 510; 667 NW2d 379 (2003) (internal quotations
and citation omitted). An owner may also use a "sworn statement . . . to avoid the claim of a
subcontractor, unless the subcontractor has provided a notice of furnishing." Vugterveen, supra
at 123-124. A subcontractor's failure to provide a timely notice of furnishing defeats its right to
a lien for labor and material furnished before the notice was provided, but only if the owner
made payments to the general contractor pursuant to the contractor's sworn statement or a waiver
of lien. MCL 570.1109(6); Vugterveen, supra at 122-123.

MCL 570.1110(4) requires that a sworn statement be in "substantially the following
form" as set forth in the statute. Pursuant to the statute's exemplar form, the sworn statement
must list: (1) the name of each subcontractor, supplier, and laborer with whom the general
contractor contracted; (2) the type of improvement furnished by each; (3) the total contract price;
(4) the amount already paid to each; and (5) the amount currently owing to each.3 MCL
570.1110(4). It must also be subscribed and sworn to before a notary public. Id.

This Court has previously ruled that a general contractor's sworn statement need only
substantially comply with MCL 570.1110(4). See Alan Custom Homes, supra at 510 (finding
that "the CLA's ‘substantial compliance' provision is applicable to the notice requirement in
MCL 570.1110(8)," which is currently subsection (9)); Horton v Verhelle, 231 Mich App 667,
675; 588 NW2d 144 (1998), overruled on other grounds Smith v Globe Life Ins Co, 460 Mich
446; 597 NW2d 28 (1999) (stating that a sworn statement must be in substantially the same form
as outlined in MCL 570.1110(4)). "It is a cardinal rule of statutory construction that a clear and
unambiguous statute warrants no further interpretation and requires full compliance with its
provisions, as written." Northern Concrete Pipe, Inc v Sinacola Cos-Midwest, Inc, 461 Mich
316, 320; 603 NW2d 257 (1999). In the CLA, however, the Legislature provided an exception to
this rule by way of the "substantial compliance" provision, MCL 570.1302(1). Id. at 320-321.

While this provision is limited in its application, notice provisions such as MCL 570.1110(4) are
well suited to a "substantial compliance" application. Id. at 321-323; Alan Custom Homes, supra
at 510. Moreover, failure to apply the "substantial compliance" provision to a sworn statement
would violate the plain language of MCL 570.1110(4). The Legislature only required that a
sworn statement be in substantially the same form as outlined in MCL 570.1110(4). See
Robinson v Detroit, 462 Mich 439, 459; 613 NW2d 307 (2000) ("Each word of a statute is
presumed to be used for a purpose, and, as far as possible, effect must be given to every clause
and sentence.").

We agree with defendant that the unverified Sworn Statements Courtland provided to the
McDowells' bank substantially complied with the requirements of MCL 570.1110(4). All nine
of Courtland's statements were completely compliant with the form outlined in MCL
570.1110(4), including being signed and dated, except that they were not sworn to before a
notary. In Horton, supra at 676, this Court found that "a contractor's statement that is neither
signed nor sworn is not a ‘sworn' statement as required by subsection 110(4)." The statement in
that case was also not dated. More recently, however, this Court found that an unverified
statement that is otherwise adequate substantially complies with "the statutory notice
requirement of MCL 570.1110(8)," which is currently subsection (9), because it "still gives the
owner notice of who the subcontractors[, suppliers, and laborers] are and the amount owing to
each for the materials and labor supplied." Alan Custom Homes, supra at 510-511. "That a
statement is not sworn before a notary does not defeat the notice purpose of the statement." Id.
at 510. Because Courtland's statements were signed and dated by a Courtland officer, and
provided notice of who the subcontractors, suppliers, and laborers were and the amounts owed to
each, the statements substantially complied with MCL 570.1110(4).4 Therefore, plaintiff's
failure to provide a notice of furnishing until after February 19, 2002, the date of Courtland's last
Sworn Statement, defeats its claim of lien for materials furnished prior to that date. MCL
570.1109(6).

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http://courtofappeals.mijud.net/documents/OPINIONS/FINAL/COA/20080401_C271880_35_271880.OPN.PDF

Because the trial court held that an unverified statement does not substantially comply
with MCL 570.1110(4), we reverse the court’s June 29, 2006 judgment in favor of plaintiff. But
because defendant has agreed to pay plaintiff $4,901.11 for material furnished after February 19,
2002, we remand for entry of judgment in this amount against defendant.
Reversed and remanded. We do not retain jurisdiction.

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