Sejasmi Industries Inc v. A+ Mold Inc ( 2016 )


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  •                           STATE OF MICHIGAN
    
                                COURT OF APPEALS
    
    
    
    SEJASMI INDUSTRIES, INC.,                                            UNPUBLISHED
                                                                         April 5, 2016
                   Plaintiff/Counter-Defendant-
                   Appellee,
    
    v                                                                    No. 328292
                                                                         Macomb Circuit Court
    A+ MOLD, INC., d/b/a TAKUMI                                          LC No. 2014-004273-CB
    MANUFACTURING COMPANY,
    
                   Defendant/Cross-Defendant,
    and
    
    QUALITY CAVITY, INC.,
    
                   Defendant/Counter-Plaintiff/Cross-
                   Plaintiff/Third-Party Plaintiff-
                   Appellant,
    and
    
    NKL MANUFACTURING, INC.,
    
                   Third-Party Defendant.
    
    
    Before: STEPHENS, P.J., and HOEKSTRA and SERVITTO, JJ.
    
    PER CURIAM.
    
            Defendant, Quality Cavity, Inc. (hereinafter “Quality”), appeals as on leave granted the
    July 1, 2015 opinion and order by the trial court, on reconsideration, finding Quality’s liens on
    certain molds were extinguished and dismissing Quality’s motion for possession. We affirm in
    part, but remand for further fact finding.
    
            In broad terms, this matter concerns the interpretation and application of the molder’s lien
    act, MCL 445.611 et seq., pertaining to “ownership rights in dies, molds, and forms for use in the
    fabrication of plastic parts under certain conditions,” along with the establishment of liens on
    “certain dies, molds, and forms.” 
    2002 PA 17
    . Specifically, this appeal involves liens asserted
    by Quality for molds or tools made and sold to defendant, Takumi Manufacturing Company
    (“Takumi”), which were being used and in the possession of plaintiff, Sejasmi Industries, Inc.
    
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    (“Sejasmi”). Thus, in accordance with the definitions provided in MCL 445.611, the
    relationships and status of the parties were as follows:
    
           1. Takumi was a “customer” having “cause[d] a moldbuilder to fabricate, cast or
           otherwise make a die, mold, or form for use in the manufacture, assembly, or
           fabrication of plastic parts, or a person who causes a molder to use a die, mold, or
           form to manufacture assemble, or fabricate a plastic product.” [MCL 445.611(a).]
    
           2. Quality is a “moldbuilder” because it “fabricates, casts, or otherwise makes,
           repairs, or modifies a die, mold, or form for use in the manufacture, assembly, or
           fabrication of plastic parts.” [MCL 445.611(b).]
    
           3. Sejasmi is a “molder” because it “uses a die, mold, or form to manufacture,
           assemble, or fabricate plastic parts.” [MCL 455.611(c).]
    
            Quality contends the trial court erred in determining that its liens for the various molds
    now being used and in the possession of Sejasmi were extinguished and in denying its request for
    possession of the molds. Specifically, Quality contests the factual findings of the trial court in
    determining that Sejasmi served the requisite verified statement on Takumi and the propriety of
    finding that all five molds at issue were encompassed by the lien release. Quality also takes
    issue with the trial court’s application and reading of MCL 445.619(5)(b), asserting that the
    statutory provision must include a requirement of payment to the moldbuilder to both effectuate
    the statute’s purpose and in order to obtain a logical rather than absurd result.
    
           Issues of statutory interpretation comprise issues of law, which are subject to de novo
    review. Tyra v Organ Procurement Agency of Mich, 
    498 Mich. 68
    , 78; 869 NW2d 213 (2015);
    New Properties, Inc v George D Newpower, Jr, Inc, 
    282 Mich. App. 120
    , 138; 762 NW2d 178
    (2009). A circuit court’s findings of fact are reviewed for clear error. CG Automation &
    Fixture, Inc v Autoform, Inc, 
    291 Mich. App. 333
    , 337; 804 NW2d 781 (2011). “Clear error exists
    when the reviewing court is left with a definite and firm conviction that a mistake has been
    made.” Massey v Mandell, 
    462 Mich. 375
    , 379; 614 NW2d 70 (2000). This Court reviews a trial
    court’s decision on a motion for reconsideration for an abuse of discretion. Woods v SLB
    Property Mgt, LLC, 
    277 Mich. App. 622
    , 629; 750 NW2d 228 (2008).
    
           The statutory provision relevant to this appeal is MCL 445.619, which states:
    
           (1) A moldbuilder shall permanently record on every die, mold, or form that the
           moldbuilder fabricates, repairs, or modifies the moldbuilder’s name, street
           address, city, and state.
    
           (2) A moldbuilder shall file a financing statement in accordance with the
           requirements of section 9502 of the uniform commercial code, 
    1962 PA 174
    ,
           MCL 440.9502.
    
           (3) A moldbuilder has a lien on any die, mold, or form identified pursuant to
           subsection (1). The amount of the lien is the amount that a customer or molder
           owes the moldbuilder for the fabrication, repair, or modification of the die, mold,
           or form. The information that the moldbuilder is required to record on the die,
    
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           mold, or form under subsection (1) and the financing statement required under
           subsection (2) shall constitute actual and constructive notice of the moldbuilder’s
           lien on the die, mold, or form.
    
           (4) The moldbuilder’s lien attaches when actual or constructive notice is received.
           The moldbuilder retains the lien that attaches under this section even if the
           moldbuilder is not in physical possession of the die, mold, or form for which the
           lien is claimed.
    
           (5) The lien remains valid until the first of the following events takes place:
    
           (a) The moldbuilder is paid the amount owed by the customer or molder.
    
           (b) The customer receives a verified statement from the molder that the molder
           has paid the amount for which the lien is claimed.
    
           (c) The financing statement is terminated.
    
           (6) The priority of a lien created under this act on the same die, mold, or form
           shall be determined by the time the lien attaches. The first lien to attach shall have
           priority over liens that attach subsequent to the first lien.
    
            It is undisputed that Quality, as the moldbuilder, has perfected liens on four molds or
    tools currently within the possession and use of the molder, Sejasmi, but for which Quality has
    not been fully paid by Takumi as its “customer,” MCL 445.611(a). See MCL 445.619(1) and
    (2). While the lower court record reveals certain discrepancies in the amount claimed to be
    outstanding or owed to Quality, MCL 445.619(3) defines the “amount of the lien” as “the
    amount that a customer or molder owes the moldbuilder for the fabrication, repair, or
    modification of the die, mold, or form.”
    
            Notice of the moldbuilder’s lien is accomplished through “[t]he information that the
    moldbuilder is required to record on the die, mold, or form under subsection (1) and the
    financing statement required under subsection (2).” These two items “shall constitute actual and
    constructive notice of the moldbuilder’s lien on the die, mold, or form.” MCL 445.619(3).
    Quality’s lien as the moldbuilder “attache[d] when actual or constructive notice is received,” and
    is not dependent on Quality’s retention of possession of the mold. MCL 445.619(4).1
    
            Although subsections (1) through (4) of MCL 445.619 are accepted by the litigants as
    having been fulfilled or complied with and are undisputed, it seems necessary to clarify one
    factual discrepancy reflected by the April 30, 2015 and July 1, 2015 opinions and orders, which
    
    
    
    
    1
      Because the priority of Quality’s liens is not addressed or pleaded by the parties as an issue,
    this Court will not discuss MCL 445.619(6).
    
    
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    indicate Quality’s retention of liens on four and five molds, respectively.2 On November 17,
    2014, Sejasmi and Quality entered into a stipulated order regarding the two-cavity mold
    (identified as Job Number 13107), which was in Quality’s possession to effectuate repairs. In
    accordance with the stipulated order, in exchange for Sejasmi’s payment of $65,000 to Quality,
    Quality was to “release the tooling” and assist Sejasmi in “loading the tooling” for transport to
    Sejasmi’s location. Quality was to provide to Sejasmi “CAD tool drawings and designs related
    to the Tooling” and verification that the “Tooling is production ready.” In addition, “Quality
    also represents that it has no lien on the Tooling and that it shall not at any time place a lien on
    the Tooling.” Given the existence of this stipulated order, the current dispute is, therefore,
    focused on the remaining four molds.
    
          Given that the fulfillment of (1) through (4) of MCL 445.619 concerning the four molds
    is undisputed, the disagreement involves MCL 445.619(5). In accordance with MCL
    445.619(5), Quality’s lien “remains valid until the first of the following events takes place:
    
           (a) The moldbuilder is paid the amount owed by the customer or molder.
    
           (b) The customer receives a verified statement from the molder that the molder
           has paid the amount for which the lien is claimed.
    
           (c) The financing statement is terminated.”
    
    For purposes of this appeal, MCL 445.619(5)(a) and (c) are not implicated because it is
    undisputed that Quality has not been “paid the amount owed by the customer or molder” and
    Quality’s financing statement under the UCC has not been “terminated.” Hence, the
    determination of whether Quality’s liens for the four molds have been extinguished is contingent
    on whether, under MCL 445.619(5), Takumi, as the “customer”, “receive[d] a verified statement
    from” Sejasmi as “the molder”, “that [Sejasmi] has paid the amount for which the lien is
    claimed.”
    
            Quality seeks the interpretation of the statutory language for MCL 445.619(5)(b) and
    asserts the language implies that the provision must be read to indicate that “the molder has paid
    the amount for which the lien is claimed” to the moldbuilder. “The primary goal of statutory
    interpretation is to ascertain the legislative intent that may reasonably be inferred from the
    statutory language.” Krohn v Home-Owners Ins Co, 
    490 Mich. 145
    , 156; 802 NW2d 281 (2011)
    (quotation omitted). “Unless statutorily defined, every word or phrase of a statute should be
    accorded its plain and ordinary meaning, taking into account the context in which the words are
    used.” Id. (citation omitted). “If the plain and ordinary meaning of the language of the statute is
    clear, judicial construction is inappropriate.” Lakeland Neurocare Ctrs v State Farm Mut Auto
    Ins, 
    250 Mich. App. 35
    , 37; 645 NW2d 59 (2002). “When construing a statute, a court must read
    it as a whole.” Klooster v City of Charlevoix, 
    488 Mich. 289
    , 296; 795 NW2d 578 (2011). “In
    
    
    2
      The molds are identified as follows: (a) Job No. 13107 – a two-cavity mold, (b) Job 13108 – an
    eight-cavity mold, and (c) Job Nos. 13109, 13110, and 13111 – each job number pertaining to a
    separate one-cavity mold.
    
    
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    reviewing the statute’s language, every word should be given meaning, and we should avoid a
    construction that would render any part of the statute surplusage or nugatory.” Omelenchuk v
    City of Warren, 
    466 Mich. 524
    , 528; 647 NW2d 493 (2002), quoting Wickens v Oakwood
    Healthcare Sys, 
    465 Mich. 53
    , 60; 631 NW2d 686 (2001).
    
            Quality seeks to have this Court read into the statutory provision language that is absent.
    To comply with this request would be contrary to the rules of statutory interpretation. “Nothing
    will be read into a statute that is not within the manifest intention of the Legislature as gathered
    from the act itself.” In re Schnell, 
    214 Mich. App. 304
    , 309; 543 NW2d 11 (1995). Only “literal
    constructions that produce unreasonable and unjust results that are inconsistent with the purpose
    of the act [are to] be avoided.” Rowell v Security Steel Processing Co, 
    445 Mich. 347
    , 354; 518
    NW2d 409 (1994). Contrary to Quality’s position, enforcement of MCL 445.619(5)(b), as
    written, and without the additional language proposed by Quality, does not render other
    provisions within the subsection nugatory, specifically subsection (5)(a). Clearly, in accordance
    with subsection (5)(a), a lien is extinguished if either the customer or molder pays the
    moldbuilder. To require, as suggested by Quality, that the verified statement in subsection (5)(b)
    submitted by the molder to the customer must indicate that the molder paid the moldbuilder
    would be merely a duplication of and an additional step effectuating subsection (5)(a) rather than
    a separate and distinct mechanism to invalidate the lien (i.e. both 5(a) and 5(b) would simply
    indicate payment by the molder).
    
            Instead, the reading of the statute as indicated by the trial court in its most recent opinion
    and order would suggest consistency with the purpose of the statute–to protect moldbuilders.
    The molder’s lien statute provides different scenarios to permit moldbuilders to obtain and
    perfect liens on their products to facilitate receipt of payment or obtain security for such
    payment, along with enforcement options. While the intent of the statute is to protect
    moldbuilders such as Quality, it cannot be commensurately assumed that this statutory intent
    should be at the expense of molders such as Sejasmi that have remitted payment to customers
    and place them under the economic hardship of paying twice, in full, for the same product.
    Subsection (5)(b) only invalidates the lien when there has been a demonstration of payment,
    albeit by submission of a verified statement to the customer rather than the moldbuilder. The
    invalidation of the lien does not preclude a moldbuilder from pursuing other contractual
    remedies against the customer without interrupting or negatively affecting commercial
    production. In this instance, it is undisputed that Takumi was the entity contractually obligated
    to Quality. There is evidence that Sejasmi paid Takumi for the molds prepared at its behest but
    that Takumi failed to remit or share the proceeds of those payments with Quality. While MCL
    445.619 is intended as a protection for moldbuilders, it is not a cure all for every possible wrong
    within a commercial interaction. In other words, although the molder’s lien act is a shield for
    moldbuilders, Quality is attempting to use it as a sword.
    
           While not necessary to resolve the portion of the issue pertaining to the language and
    application of MCL 445.619(5)(b), the trial court bolstered its ruling on this aspect by citing to
    the construction lien act (CLA), MCL 570.1101 et seq. as a corollary to the molder’s lien act.
    MCL 570.1107 of the CLA authorizes persons or entities providing labor or materials and
    equipment for the improvement of real property to obtain liens to ensure payment. Consistent
    with the molder’s lien act, the CLA also provides a statutory mechanism to extinguish the liens
    available under MCL 570.1107. See MCL 570.1118a(1). This Court has interpreted the
    
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    predecessor to this statutory provision, MCL 570.1203, to not only “provide for the payment of
    subcontractors and suppliers, but also protect homeowners from paying twice for improvements
    to their property where the contractor took the payment from the homeowners but did not pay the
    subcontractor or supplier.” Erb Lumber, Inc v Gidley, 
    234 Mich. App. 387
    , 393-394; 594 NW2d
    81 (1999). This appears to be the most reasonable approach to such problems to avoid unfairly
    burdening persons or entities that have not engaged in any wrongdoing.
    
            This does not, however, fully resolve this matter. While not disputing that a verified
    complaint suffices as a “verified statement” for purposes of MCL 455.619(5)(b), Quality asserts
    that Sejasmi’s verified complaint is deficient in that it did not reference all of the liens and was
    not properly served or received by the customer, Takumi. Sejasmi appears to acknowledge that
    its complaint did not reference all of the liens, but contends that because it affixed copies of work
    orders pertaining to all of the liens, that Quality’s assertion is without merit. Quality ignores that
    Sejasmi’s complaint indicated payment of a sum that exceeds the amounts claimed by Quality as
    due and owing, thereby meeting the requirement of MCL 455.619(5)(b) that the “verified
    statement” indicate or reflect “that the molder has paid the amount for which the lien is claimed.”
    
            Problematic is the issue of whether Takumi, as the customer, received the verified
    statement. Quality contends that the absence of a proof of service for the verified complaint for
    Takumi or NKL in the lower court record obviates any claim of receipt. Contrary to Quality’s
    assertion regarding the absence of a proof of service, the trial court, in its April 1, 2015 opinion
    and order, stated: “Further, the verified complaint was served on Defendant Takumi, a
    ‘customer’ under [the molder’s lien act.]” The trial court, in its July 1, 2015 opinion and order,
    repeated and referenced the earlier assertion as contained in the April 1, 2015 opinion and order,
    indicating: “Finally, as the Court previously held Defendant Takumi, a customer under the
    [molder’s lien act], received a copy of the verified complaint, as is evidenced by the proof of
    service.” (Footnote omitted.) We thus find that a question of fact remains regarding whether
    Sejasmi, as the molder, served a verified statement on the customer, Takumi.
    
            Initially, a review of the register of actions and electronic record submitted by the
    Macomb Circuit Court does not evidence a proof of service of Sejasmi’s verified complaint on
    Takumi, or NKL as its successor in interest. Proofs of service are available for A+ Mold and
    Quality. In addition, premised on the failure of Sejasmi to have effectuated service of process of
    the verified complaint on NKL, Quality requested the trial court’s permission to file a third-party
    complaint against NKL, which was granted by stipulated order. A default has been subsequently
    entered against NKL for having failed to file an answer to the third-party complaint. In addition,
    throughout these proceedings, although A+ Mold has appeared, it has consistently denied that it
    is a proper party or a successor in interest to Takumi and A+ Mold filed a motion for summary
    disposition, seeking its dismissal from the litigation premised on its lack of affiliation with
    Takumi’s actual successor in interest, NKL. A+ Mold argued that it was not incorporated until
    after the events forming the basis for Sejasmi’s claim took place and was not liable for NKL’s
    activities. Subsequently, the trial court granted A+ Mold’s motion for summary disposition, with
    regard to Sejasmi’s breach of contract claim in its verified complaint, finding that A+ Mold was
    not incorporated until June 2014, after the mold invoices concerning the molds at issue were
    generated (from February to October 2013) and after any of Sejasmi’s payments concerning the
    molds were made. The trial court further found: “While Defendant Molds [sic] has assumed the
    Takumi DBA Plaintiff has failed to present any evidence that Defendant Molds [sic] has
    
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    assumed any of the obligations Defendant NKL incurred under the Takumi DBA.” This calls
    into question whether Takumi received a verified statement from Sejasmi as required by MCL
    445.619(5)(b), sufficient to invalidate Quality’s liens.
    
            Because this matter is before the Court on an interlocutory basis and issues remain to be
    resolved in the lower court, we remand the matter to the trial court for further fact finding on the
    issue of whether the customer received a verified statement from the molder, but affirm the trial
    court’s reading and application of MCL 445.619(5)(b). We do not retain jurisdiction.
    
    
    
                                                                 /s/ Cynthia Diane Stephens
                                                                 /s/ Deborah A. Servitto
    
    
    
    
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