Re: Bank of the Thumb – Lien Priority
I am writing to apprise you of a recent development and issue with our client, Bank of the Thumb. I have summarized the relevant facts, issues, applicable law, and my opinion as to how we may advise our client.
Facts & Issues
The Bank of the Thumb recorded a mortgage on a property for Caseville Commons on March 15, 2011. The loan amount was for two million dollars ($2,000,000) for the development of a commercial shopping center.
Prior to the recording of the aforementioned mortgage held by the Bank of the Thumb, Caseville Commons hired Jones Drilling as a contractor. Jones Drilling’s duty was to perform well testing, to make sure the water met the standards of the Huron County Water Department. Pursuant the contract, Jones Drilling dug eight separate wells on the Caseville Commons property, with PVC pipes installed at each of the locations, extending five feet above the surface of the land. That work was completed in February 2011.
Jones Drilling did not receive a payment for any of the work they performed, including the digging of the eight wells and the installation of the PVC pipes. Jones Drilling filed a construction lien on the property on March 25, 2011, for the amount of seventy five thousand dollars ($75,000) it claims it was owed.
As you may be aware, property values in Michigan have been on a precipitous decline, and assuming that the value of Caseville Commons is less than two million dollars, the Bank of the Thumb is concerned that Jones Drilling may have a construction lien that has priority over the Bank of the Thumb’s mortgage since the first physical improvement to the property was completed in February 2011, prior to the recording of the Bank’s mortgage. The Bank of the Thumb has sought our opinion on these issues.
Based on the Michigan Construction Lien Act, MCL 570.1103 Definitions, section 103 (1) states:
“Actual physical improvement” means the actual physical change in,...