ANTON, SOWERBY & ASSOCIATES, INC., Plaintiff/Counter-Defendant-Appellant,
MR. C'S LAKE ORION, L.L.C., Defendant/Counter-Plaintiff-Appellee, and FLAGSTAR BANK, Defendant-Appellee.
Oakland Circuit Court LC No. 2013-132761-CH
Before: Gleicher, P.J., and Cavanagh and Fort Hood, JJ.
The Commercial Real Estate Broker's Lien Act, MCL 570.581 et seq., was enacted to protect the right of commercial real estate brokers to collect their contractually-negotiated commissions. The plaintiff commercial real estate broker complied with the act by placing a lien against property over which it had entered an exclusive listing agreement, which had been sold surreptitiously. Plaintiff subsequently violated the act's clear directive to release its lien once the buyer and seller funded an escrow account with an amount sufficient to cover the broker's claim. Plaintiff's continued refusal to release the lien created an invalid cloud on the buyer's title.
Plaintiff sought relief under the act but failed to name as a party defendant the seller who agreed to the listing agreement. As a result, plaintiff's challenges to the commission amount (and thereby the escrow account) could not be resolved by the circuit court. And plaintiff never clearly stated any objection that could be raised against the seller. Accordingly, the circuit court's summary dismissal of plaintiff's claims under the act and the denial of its motion to amend the complaint are supported by the record. The circuit court also properly granted summary disposition in the buyer's favor on its slander-of-title action. Moreover, plaintiff's legal challenges to the special damages awarded to the buyer lack merit. We therefore affirm.
Plaintiff Anton, Sowerby & Associates is a licensed commercial real estate brokerage firm. Plaintiff entered a listing agreement with nonparty GAM Properties, L.L.C., providing plaintiff the exclusive rights to "sell, lease or exchange" property at 720 S. Lapeer Road in Lake Orion. The contract promised plaintiff 5 to 6% of the ultimate sale or lease price depending on certain factors. Plaintiff located a potential buyer for the property-defendant Mr. C's Lake Orion-and introduced Mr. C's agent to GAM. Plaintiff alleges that Mr. C's and GAM thereafter engaged in secret negotiations in an attempt to avoid paying plaintiff's commission.
During this period of secret negotiations, GAM defaulted on its mortgage and its lender secured the appointment of a receiver to continue the sale of the subject property. Mr. C's ultimately agreed to lease the property for $5, 000 monthly with an option to buy. Mr. C's exercised its purchase option almost immediately and promised to pay $1, 200, 000, with a mortgage loan through defendant Flagstar Bank, and the receiver offered to settle plaintiff's commission dispute. A resolution was not reached, however, and plaintiff recorded a broker's lien of $60, 000 (5% of the purchase price) against the property pursuant to the Michigan Commercial Real Estate Broker's Lien Act (CREBLA), MCL 570.581 et seq. Specifically, MCL 570.584(1) permits a commercial real estate broker to record a lien against the property if the broker is entitled to a commission under a written agreement. The receiver and Mr. C's proceeded with the sale, created an escrow account funded with $75, 000 to satisfy plaintiff's claim, and requested that plaintiff release its lien in accordance with MCL 570.585. Subsection (3) of that statute mandates a broker's release of a lien if the parties to a sale escrow "an amount sufficient to satisfy" the lien. Plaintiff contends that neither Mr. C's nor the receiver informed it of the escrow account until after it filed suit. Accordingly, plaintiff refused to release its lien.
In its complaint, plaintiff asserted that it "requested documentation concerning the purchase price for the Property paid by Mr. C's. . . . That information has not been forthcoming. Therefore, the exact amount of the Lien will abide discovery of that information in this litigation." Plaintiff contended that it wanted to foreclose upon its lien. Notably, plaintiff filed suit against Mr. C's and Flagstar, but not GAM or its receiver. Mr. C's in turn filed a countercomplaint to quiet title in the property and accusing plaintiff of slandering its title.
Mr. C's subsequently sought summary dismissal of plaintiff's action and judgment in its favor on the countercomplaint, and requested special damages. Mr. C's contended that the plain language of the CREBLA required plaintiff to release its lien upon the creation of the escrow account and no exception existed. Plaintiff retorted that its claim actually sounded in breach of contract regarding the underlying exclusive listing agreement and therefore the CREBLA did not control its duty to release the lien. In response, Mr. C's emphasized that plaintiff had not joined the proper parties for a breach of contract action; plaintiff's contract was with GAM alone and yet plaintiff did not name that entity as a defendant. Plaintiff pointed to GAM's financial difficulties and the receivership to support its decision not to include GAM as a party defendant.
Ultimately, based on the plain language of the CREBLA, the circuit court summarily extinguished plaintiff's lien over the property. The court ordered that Mr. C's funds remain in escrow as the account was required under the statute to protect the commercial real estate broker. However, the court ruled that plaintiff had to file suit against GAM in order to collect the escrowed funds. The court thereafter rejected plaintiff's reconsideration motions and requests to amend its complaint to add claims against GAM's receiver.
II. SUMMARY DISPOSITION IN RELATION TO THE ESCROW ACCOUNT
Plaintiff contends that the circuit court erred in concluding that the escrow agreement between Mr. C's and the receiver discharged plaintiff's lien. Accordingly, plaintiff continues, the court erred in summarily dismissing plaintiff's claim for recovery. We review de novo a lower court's summary disposition ruling. Rambin v Allstate Ins Co, 495 Mich. 316, 325; 852 N.W.2d 34 (2014). The propriety of the circuit court's ruling centers on its interpretation and application of the CREBLA, a question of law that we review de novo. Tomecek v. Bavas, 482 Mich. 484, 490; 759 N.W.2d 178 (2008). When interpreting a statute, a court's objective is to discern and give effect to the Legislature's intent based on the statute's plain and unambiguous language. Wurtz v Beecher Metro Dist, 495 Mich. 242, 250; 848 N.W.2d 121 (2014).
Historically, real estate brokers had no guarantee of payment of their commissions. Brokers attempting to secure payment by encumbering the property were informed "that the equities of those who furnished the money [for the purchase] are far superior to those of the broker." Biddle v Biddle, 202 Mich. 160, 166; 168 N.W. 92 (1918). This was true until the enactment of the CREBLA by 2010 PA 201.
A commercial real estate broker licensed in accordance with the Michigan Real Estate Broker's Act, MCL 339.2501 et seq., may file a lien over property in accordance with the CREBLA. MCL 570.583. A commercial real estate broker's lien attaches to real estate if the broker has a written commission agreement under which the broker is entitled to a commission, and the broker records its lien before the property is actually conveyed. ...