Chris Nelson & Son, Inc. v. Michigan Corp.

• Court: Court of Appeal of Michigan
• Writing for the Court: V. J. BRENNAN
• Citation: Chris Nelson & Son, Inc. v. Michigan Corp., 269 N.W.2d 295, 84 Mich.App. 29 (Mich. App. 1978)
• Decision Date: 06 June 1978
• Docket Number: Docket No. 77-2427
• Parties: CHRIS NELSON & SON, INC., a Michigan Corporation, Plaintiff-Appellee, v. MICHIGAN CORPORATION, Defendant-Cross Defendant. RELIANCE INSURANCE COMPANY, a Foreign Corporation, Defendant-Cross Plaintiff-Third-Party Plaintiff-Appellant, v. CONSTRUCTION SERVICE, INC., a Michigan Corporation, et al., Third-Party Defendants. (Chris Nelson and Son, Inc., v. Atlas Concrete Pipe, Inc.)

Page 295

269 N.W.2d 295

84 Mich.App. 29

CHRIS NELSON & SON, INC., a Michigan Corporation, Plaintiff-Appellee, v. MICHIGAN CORPORATION, Defendant-Cross Defendant.

RELIANCE INSURANCE COMPANY, a Foreign Corporation, Defendant-Cross Plaintiff-Third-Party Plaintiff-Appellant, v. CONSTRUCTION SERVICE, INC., a Michigan Corporation, et al.,

Third-Party Defendants.

(Chris Nelson and Son, Inc., v. Atlas Concrete Pipe, Inc.)

Docket No. 77-2427.

Court of Appeals of Michigan.

June 6, 1978.

Released for Publication Sept. 7, 1978.

Moore, Sills, Poling, Wooster, Sinn & Taylor by Richard B. Poling, Birmingham, for appellant.

Hicks, Beltz, Behm & Nickola by C. Robert Beltz, Flint, for plaintiff-appellee.

Before ALLEN, P. J., and V. J. BRENNAN and CAVANAGH, JJ.

V. J. BRENNAN, Judge.

Defendant Reliance Insurance Company appeals from a June 2, 1977, order of Genesee County Circuit Court Judge Ollie B. Bivins, Jr., finding defendant Reliance liable to plaintiff Chris Nelsen and Son, Inc., in the amount of $403,204.35 plus interest and costs. This cause of action arises incident to contracts with the Genesee County Drain Commissioner for construction of a sewer project in Genesee County. Trial in the case was held on January 6, 1977, and Judge Bivins issued his opinion on January 28, 1977. Defendants' appeal is taken as of right under GCR 1963, 806.1.

We affirm the trial court's decision. Plaintiff was a third-party beneficiary of the performance bond for which defendant Reliance was surety. Hardware Dealers Mutual Ins. Co. v. R. H. Hidey, Inc., 349 Mich. 490, 84 N.W.2d 795 (1957). Clearly, defendant Atlas Concrete Pipe, Inc., as promisor, and defendant Reliance, as surety, agreed to assume the direct obligation of making timely deliveries of concrete pipe to plaintiff. The Genesee County Drain Commissioner, as promisee, by statute, only intended to protect himself. Regardless, plaintiff was a third-party beneficiary under the performance bond and could recover from defendants Atlas and Reliance. Guardian Depositors Corp. v. Brown, 290 Mich. 433, 287 N.W. 798 (1939); Talucci v. Archambault, 20 Mich.App. 153, 173 N.W.2d 740 (1969). Further, we find no express language in 1963 P.A. 213 which would cut off plaintiff's third-party beneficiary rights. As a third-party beneficiary, plaintiff could seek recovery from defendant Reliance.

Moreover, by what we find is a valid assignment, plaintiff acquired all of the Genesee County Drain Commissioner's rights on the bond. See 4 Corbin on Contracts, § 880, p. 539, 13 Couch on Insurance 2d, § 47:97. Couch states the following:

"A bond executed by a bonding company in business for profit, which guarantees the performance of a construction company contract in existence, is assignable where it contains no evidence that the right to have it performed shall not be assignable, but on the contrary, shows that it was the intent of the parties that it could, and would in all probability, be assigned before the time for its completion should arrive; and it is assignable along with the principal contract." (footnote omitted) See American Bonding & Trust Co. v. Baltimore & OSW R. Co., 124 F. 866, 878-879 (CA 6, 1903).

In short, we find no evidence that the parties intended to restrict assignment of defendant Atlas' performance bond by the Genesee County Drain Commissioner. We will infer no such intention on review. Thus, as the Commissioner had the power to make assignments, there is no such limitation to his assignment of rights upon the performance bond to plaintiff. M.C.L. § 280.5; M.S.A. § 11.1005. See also 1963 P.A. 213 (where no restriction concerning assignment of rights arising from a performance bond is specified). Further, we find the assignment was not an improper partial assignment of a chose in action or an assignment of a nonexistent cause of action.

Moreover, neither the assignment nor the Drain Commissioner's payment of retainage to defendant Atlas discharged defendant Reliance as surety; as required by M.C.L. § 129.202; M.S.A. § 5.2321(2) the governmental unit did...