In a recent unpublished decision, the Michigan Court of Appeals held that the clear, unambiguous language contained in a mechanic’s lien exclusion of a title insurance policy will be sufficient to sustain a motion for summary judgment when the purpose of the mortgage is for acquisition and the subject construction lien is recorded post-policy. The case, Pullum Window Corp v Randy M Deprez Custom Builder, Inc, No. 294335, 2010 WL 5175404 (Mich Ct App December 21, 2010), involves a construction lien claim submitted to Chicago Title Company by its lender insured Fidelity Bank. Fidelity Bank loaned $1,907,600 to Deprez-Pascoe Investments, Inc. for the purpose of purchasing 17 condominium units. Deprez-Pascoe conveyed a mortgage of the 17 condo units to Fidelity Bank. Fidelity Bank received a lender’s policy of title insurance from Chicago Title, dated December 6, 2005.
Thereafter, four separate companies recorded construction liens against one of the units secured by the Fidelity Bank mortgage. Fidelity Bank submitted a claim to Chicago Title that was denied based on a mechanic’s lien exclusion in the policy and the post-policy exclusion. Fidelity Bank chose to settle the dispute with the construction lien claimants. In August 2008, a separate action to foreclose a construction lien was filed by Pullum Window Corp. Pullum’s construction lien was recorded August 15, 2007. Fidelity Bank submitted another claim to Chicago Title based on the Pullum construction lien. Again, Chicago Title denied the claim citing the same policy provisions. Fidelity Bank filed a third-party complaint against Chicago Title in which it alleged breach of contract, promissory estoppel, specific performance, and declaratory judgment. The trial court granted summary judgment in favor of Chicago Title, after which, Fidelity Bank settled with Pullum Window.
On appeal, the court was asked to determine whether summary judgment in favor of Chicago Title was appropriate. The court found that when the language of the policy is clear and unambiguous – such as the mechanic’s lien exclusion in this case – then the policy language controls. In reaching that conclusion, the court relied on the language of the mechanic’s lien exclusion which stated:
6. Any statutory lien for services, labor or materials (or the claim of priority of any statutory lien for services, labor or materials over the lien of the insured mortgage) arising from an improvement or work related to the land which is contracted for and commenced subsequent to Date of Policy and is not financed in whole or in part by proceeds of the indebtedness secured by the insured mortgage which at Date of Policy the insured has advanced or is obligated to advance.
Fidelity Bank argued, under the Michigan Construction Lien Act, MCL 570.1119(4), the Pullum Window lien related back to the first work on the project, which occurred May 13, 2003 or thereabout. The court rejected that argument based on the notion that Fidelity Bank’s complaint alleged a breach of contract; therefore, the court’s analysis was limited to the terms of the policy and should not include analysis of the Construction Lien Act. This decision stands for the proposition that the mechanic’s lien exclusion acts to limit mechanic’s lien liability exposure in lender’s policies issued to the acquisition lender, and that disputes involving similar facts can be decided on summary disposition.