Grand Blanc Cement Products, Inc. v. Insurance Co. of North America

• Decision Date: 19 August 1997
• Docket Number: Docket No. 186152
• Citation: 571 N.W.2d 221,225 Mich.App. 138
• Parties: GRAND BLANC CEMENT PRODUCTS, INC., Plaintiff-Appellee/Cross-Appellant, v. INSURANCE COMPANY OF NORTH AMERICA, Defendant-Appellant/Cross-Appellee, and Artco Contracting, Inc., Defendant-Cross-Appellee, and J. Moye Masonry, Inc., Defendant.
• Court: Court of Appeal of Michigan — District of US

Page 221

571 N.W.2d 221

225 Mich.App. 138

GRAND BLANC CEMENT PRODUCTS, INC., Plaintiff-Appellee/Cross-Appellant, v. INSURANCE COMPANY OF NORTH AMERICA, Defendant-Appellant/Cross-Appellee and Artco Contracting, Inc., Defendant-Cross-Appellee and J. Moye Masonry, Inc., Defendant.

Docket No. 186152.

Court of Appeals of Michigan.

Submitted June 3, 1997, at Detroit.

Decided Aug. 19, 1997, at 9:15 a.m.

Released for Publication Nov. 6, 1997.

Winegarden, Shedd, Haley, Lindholm & Robertson, P.L.C. by Alan F. Himelhoch, Flint, for Plaintiff-Appellee/Cross-Appellant.

Harvey, Kruse, Westen & Milan, P.C. by John F. Milan and Maurice A. Borden, Troy, for Insurance Company of North America and Artco, Contracting, Inc.

Before TAYLOR, P.J., and RICHARD ALLEN GRIFFIN and SAAD, JJ.

RICHARD ALLEN GRIFFIN, Judge.

Defendant Insurance Company of North America (INA) appeals as of right a circuit court's order granting summary disposition in favor of plaintiff with respect to plaintiff's claim for recovery under a payment bond issued by INA pursuant to the public works bond act, M.C.L. § 129.201 et seq.; M.S.A. § 5.2321(1) et seq. (bond act). Plaintiff cross appeals the measure of damages and the trial court's order granting summary disposition in favor of defendant Artco Contracting, Inc. We affirm in part and reverse in part. We hold, inter alia, that subcontractors or materialmen that have failed to comply with M.C.L. § 129.207; M.S.A. § 5.2321(7) regarding a prior contract are not barred from protection under the bond act for labor and materials supplied pursuant to a second and independent contract for the same project if the general contractor is notified in accordance with the statute within thirty days of the claimant supplying labor or materials under the new contract.

I

Pursuant to the bond act, INA issued a payment bond to Artco, the general contractor on a construction project at Detroit Metropolitan Airport. On December 9, 1992, plaintiff began supplying masonry materials to defendant J. Moye Masonry, one of Artco's subcontractors. Because of nonpayment, plaintiff terminated its contract and stopped supplying Moye on March 1, 1993. After negotiations and an agreement for payment of the past due amount, a new supply contract was entered into on March 30, 1993. In what plaintiff has characterized as a "three-way contract," ¹ plaintiff agreed to supply materials in exchange for payment by Artco in the form of checks issued jointly to plaintiff and Moye. Artco made payment for materials supplied by plaintiff by joint checks dated June 14 and July 2, 1993.

Earlier, on April 8, 1993, plaintiff notified Artco, Moye, and INA's local agent that it was relying on the payment bond as security for materials supplied under the second contract. ² In August 1993, plaintiff terminated the second contract for nonpayment. Plaintiff notified defendants of the payment lapse in a letter dated August 13, 1993.

Plaintiff filed suit against INA under the payment bond. Plaintiff also sued Moye and Artco alleging contract-related claims as well as claims against Artco of negligence, promissory estoppel, and quantum meruit. The trial court entered a default judgment against Moye. The trial court also granted plaintiff's motion for summary disposition pursuant to MCR 2.116(C)(10) with respect to plaintiff's claim against INA under the payment bond. The trial court ruled that plaintiff had satisfied M.C.L. § 129.207; M.S.A. § 5.2321(7) and perfected its claim under the bond act by notifying defendants within thirty days of when it began supplying materials under the second contract. The trial court also granted summary disposition in favor of Artco pursuant to MCR 2.116(C)(10) on the basis that plaintiff's judgment against INA fully satisfied plaintiff's claims against Artco.

II

On appeal, defendant INA contends that the trial court erred in granting summary disposition for plaintiff with respect to its payment bond claim. We disagree. We review the trial court's ruling on a motion for summary disposition pursuant to MCR 2.116(C)(10) de novo to determine whether the pleadings or the uncontroverted documentary evidence establish that defendant is entitled to judgment as a matter of law. MCR 2.116(I)(1); Kennedy v. Auto Club of Michigan, 215 Mich.App. 264, 266, 544 N.W.2d 750 (1996); Porter v. Royal Oak, 214 Mich.App. 478, 484, 542 N.W.2d 905 (1995). The existence of either circumstance merits summary disposition. Kennedy, supra at 266, 544 N.W.2d 750; Porter, supra at 484, 542 N.W.2d 905.

A

The issue on appeal is whether a claimant that had failed to satisfy M.C.L. § 129.207; M.S.A. § 5.2321(7) regarding an earlier contract to provide materials for a public construction project is afforded bond act protection for materials supplied pursuant to a second and independent contract regarding the same project when proper notification to the general contractor is given within thirty days of supplying materials under the new contract. In addressing this question of first impression, we are mindful that " '[t]he fundamental purpose of any rule of statutory construction, of course, is to assist the court in discovering and giving effect to the intent of the Legislature.' " Terzano v. Wayne Co., 216 Mich.App. 522, 526-527, 549 N.W.2d 606 (1996), quoting In re Certified Question, 433 Mich. 710, 722, 449 N.W.2d 660 (1989). Once discovered, the Legislature's intent must prevail over any existing rule of construction to the contrary. Ansell v. Dep't of Commerce (On Remand), 222 Mich.App. 347, 355, 564 N.W.2d 519 (1997); Terzano, supra at 527, 549 N.W.2d 606. Where reasonable minds may differ about the meaning of a statute, we look to the objective of the statute and the harm it is designed to remedy and apply a reasonable construction that best accomplishes the Legislature's purpose. Ansell, supra at 355, 564 N.W.2d 519; Terzano, supra at 527, 549 N.W.2d 606; People v. Ward, 211 Mich.App. 489, 492, 536 N.W.2d 270 (1995). "[L]iteral constructions that produce unreasonable and unjust results that are inconsistent with the purpose of the act should be avoided." Rowell v. Security Steel Processing Co., 445 Mich. 347, 354, 518 N.W.2d 409 (1994); Salas v. Clements, 399 Mich. 103, 109, 247 N.W.2d 889 (1976).

B

The bond act requires principal contractors to provide performance bonds assuring payment to subcontractors and materialmen furnishing supplies, labor, or equipment for public construction projects. W T Andrew Co., Inc. v. Mid-State Surety Corp., 450 Mich. 655, 658, 545 N.W.2d 351 (1996); Thomas Industries, Inc. v. C & L Electric, Inc., 216 Mich.App. 603, 606, 550 N.W.2d 558 (1996). To qualify for this statutory protection, M.C.L. § 129.207; M.S.A. § 5.2321(7) provides:

A claimant not having a direct contractual relationship with the principal contractor shall not have a right of action upon the payment bond unless (a) he has within 30 days after furnishing the first of such material ... served on the principal contractor a written notice, which shall inform the principal of the nature of the material being furnished or to be furnished, ... and identifying the party contracting for such ... materials and the site for the ... delivery of such materials....

Although this notice requirement is strictly enforced, Tempco Heating & Cooling, Inc. v. A Rea Constr., Inc., 178 Mich.App. 181, 190, 443 N.W.2d 486 (1989); Charles W Anderson Co. v. Argonaut Ins. Co., 62 Mich.App. 650, 651-654, 233 N.W.2d 691 (1975), the remedial bond act is "liberally construed" to "protect contractors and materialmen in the public sector." W T Andrew Co, supra at 659, 545 N.W.2d 351; see also Adamo Equipment Rental Co. v. Mack Development Co., Inc., 122 Mich.App. 233, 236, 333 N.W.2d 40 (1982).

In drafting M.C.L. § 129.207, M.S.A. § 5.2321(7), the Legislature did not specify whether the thirty-day period is particular to each individual contract or whether it commences once and for all when the claimant begins performing its first contract to work for the public project. INA contends that, even if the initial contract to work on the public project is unrelated to the subsequent agreement, a subcontractor's or materialman's failure to serve notice within thirty days of beginning performance of the first contract precludes it from achieving bond act protection on any subsequent contract. Plaintiff argues that the thirty-day notice requirement is particular to each new endeavor to provide materials or labor to the project. Plaintiff thus contends that subcontractors or materialmen that fail to notify the principal regarding an earlier contract may gain bond act protection by notifying the principal within thirty days of providing materials or labor pursuant to a new or independent contract to work on the public project.

C

To ensure that "principal contractors [have] knowledge regarding any possible claims to which their bonds might later be subjected," M.C.L. § 129.207; M.S.A. § 5.2321(7) requires subcontractors and materialmen to "inform the principal of the nature of the material being furnished or to be furnished ... and identifying ... the site for ... delivery of such materials." Pi-Con, Inc. v. A.J. Anderson Constr. Co., 435 Mich. 375, 383-384, 458 N.W.2d 639 (1990). Subcontractors or materialmen lacking a contractual relationship with the principal are accorded bond act protection only for "such material" or "such labor" that is identified in the notification. Absent this specificity requirement, the principal could be unaware of the nature of the materials or labor for which subcontractors or materialmen may claim recoupment under the payment bond. Thus, as opposed to simply requiring the claimant to notify the principal of its general affiliation with the project, subcontractors and materialmen must specifically identify the kind of materials or labor for which they seek bond act protection.

It follows from this particularity requirement that subcontractors...