Camelot Excavating Co., Inc. v. St. Paul Fire and Marine Ins. Co.

• Decision Date: 20 March 1979
• Docket Number: Docket No. 78-1428
• Citation: 89 Mich.App. 219,280 N.W.2d 491
• Parties: CAMELOT EXCAVATING COMPANY, INC., a Michigan Corporation, Plaintiff-Appellee, v. ST. PAUL FIRE AND MARINE INSURANCE COMPANY, a Foreign Corporation, Defendant-Appellant, v. PRIESTLY CONTRACTING, INC., a Michigan Corporation, Darrel G. Priestly, and Charles L. Langs, jointly and severally, Third Party Defendants.
• Court: Court of Appeal of Michigan — District of US

Page 491

280 N.W.2d 491

89 Mich.App. 219

CAMELOT EXCAVATING COMPANY, INC., a Michigan Corporation, Plaintiff-Appellee, v. ST. PAUL FIRE AND MARINE INSURANCE COMPANY, a Foreign

Corporation, Defendant-Appellant, v. PRIESTLY CONTRACTING, INC., a Michigan Corporation, Darrel

G. Priestly, and Charles L. Langs, jointly and

severally, Third Party Defendants.

Docket No. 78-1428.

Court of Appeals of Michigan.

March 20, 1979.

Released for Publication July 12, 1979.

Landau, Hoffert, Shatzman & Litt, P. C., by Stephen M. Landau, Southfield, for defendant-appellant.

Richard A. Lenter, Southfield, for plaintiff-appellee.

Before DANHOF, C. J., and MAHER and RILEY, JJ.

DANHOF, Chief Judge.

This is an action by a subcontractor against a surety for payment pursuant to a private labor and materials payment bond. On April 8, 1973, Priestly Contracting, Inc., the general contractor for a private construction project, and defendant surety signed the bond in question. Priestly Contracting thereafter subcontracted work to plaintiff. However, Priestly Contracting permanently ceased work on the construction project in April, 1974, leaving sums still owing to plaintiff.

Plaintiff filed a complaint against defendant surety on August 26, 1976. ¹ Defendant filed a motion for accelerated judgment, alleging that plaintiff's claim was time barred by the following provision of the bond:

"No suit or action shall be commenced hereunder by any claimant:

"After the expiration of one (1) year following the date on which Principal ceased work on said Contract, it being understood, however, that if any limitation embodied in this bond is prohibited by any law controlling the construction hereof such limitation shall be deemed to be amended so as to be equal to the minimum period of limitation permitted by such law."

The trial court ruled that the language of the above provision was ambiguous, and that it could be construed to require interpolation of the general statutory six-year period of limitations for contract actions. ² M.C.L. § 600.5807(8); M.S.A. § 27A.5807(8); M.C.L. § 600.5813; M.S.A. § 27A.5813. Commenting further that shorter limitations on contractual actions are not to be favorably regarded, the trial court denied defendant's motion. Plaintiff was ultimately granted summary judgment under GCR 1963, 117.2(3) on its claim for payment pursuant to the bond. Defendant appeals from both dispositions.

We conclude that the trial court erred in ruling that the wording of the disputed contractual limitation clause is ambiguous. On the contrary, the bond clearly provides that suits thereunder must be brought within one year of the date on which the principal ceases work on the project covered, unless the controlling state law Prohibits such a contractual limitation on suits pursuant to a private construction bond. Michigan statutory law contains no such express prohibition. ³

Furthermore, Michigan precedent has condoned such contractual limitations on claims against private sureties, holding them to be valid, enforceable, and in accord with public policy. As the Michigan Supreme Court stated in Commissioner of Insurance v. Central West Casualty Co., 301 Mich. 427, 432, 3 N.W.2d 830 (1942):

"A statutory bond is one commanded or provided by statute. In such a bond, the existing law becomes a part of the bond, omitted conditions required by law are read into the bond and conditions contrary to the law are read out of it. The doctrine of 'what is omitted will be read in and what is in conflict will be read out' applies only to bonds required by statute. In such a bond the general statute of limitations becomes a part of the bond. In a common-law bond the parties may provide for a shorter time for bringing suit than is provided by the statute of limitations and, in general, are bound by their agreement." (Emphasis supplied.)

Forest Twp. v. American Bonding Co. of Baltimore, 187 Mich. 657, 154 N.W. 26 (1915), Ladies of the Modern Maccabees v. Illinois Surety Co., 196 Mich. 27, 163 N.W. 7 (1917). ⁴ See also more generally, Bashams v. Metro Mutual Insurance Co., 369 Mich. 141, 119 N.W.2d 622 (1963), Board of Governors of Wayne State University v. Building Systems Housing Corp., 62 Mich.App. 77, 85, 233 N.W.2d 195 (1975), Fulton v. Citizens Mutual Insurance Co., 62 Mich.App. 600, 233 N.W.2d 820 (1975). ⁵

Thus, unless defendant is for some reason estopped from asserting the one-year limitation on plaintiff's suit pursuant to the bond or unless plaintiff can show that Priestly Contracting did not cease work on the project in April, 1974, plaintiff's claim is time barred.

But plaintiff insists that a distinction must be made between the immediate parties to a contract, who should be bound by any limiting contractual provisions to which they agreed, and third parties seeking recovery under the surety contract, against whom it would be unreasonable to enforce the contractual limitation. ⁶ We find the distinction unpersuasive in the context of this private construction bond. There is nothing unreasonable about requiring a subcontractor to investigate...